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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------------
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997
COMMISSION FILE NUMBER: 1-1511
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FEDERAL-MOGUL CORPORATION
(Exact name of Registrant as specified in its charter)
MICHIGAN
(State or other jurisdiction of
incorporation or organization)
26555 NORTHWESTERN HIGHWAY
SOUTHFIELD, MICHIGAN
(Address of principal executive office)
38-0533580
(IRS Employer Identification No.)
48034
(Zip Code)
Registrant's telephone number including area code: (248) 354-7700
Securities registered pursuant to Section 12(b) of the Act:
TITLE OF EACH CLASS
Common Stock and Rights to
Purchase Preferred Shares
NAME OF EACH EXCHANGE ON
WHICH REGISTERED
New York Stock Exchange
and Pacific Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: NONE
Indicate by check mark whether the Registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of the voting stock held by non-affiliates of
the Registrant was approximately $1,984,081,618 as of February 27, 1998 based on
the reported last sale price as published for the New York Stock Exchange --
Composite Transactions for such date.
The Registrant had 40,439,468 shares of common stock outstanding as of
February 27, 1998.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's definitive Proxy Statement for its 1998 Annual
Meeting of Shareholders to be filed with the Securities and Exchange Commission
pursuant to Regulation 14A not later than April 30, 1998, are incorporated by
reference in Part III (Items 10, 11, 12 and 13) of this Report.
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FORWARD-LOOKING STATEMENTS
CERTAIN STATEMENTS CONTAINED OR INCORPORATED IN THIS ANNUAL REPORT ON FORM
10-K, WHICH ARE NOT STATEMENTS OF HISTORICAL FACT CONSTITUTE "FORWARD-LOOKING
STATEMENTS" WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT
OF 1995 (THE "ACT"). SUCH STATEMENTS ARE MADE IN GOOD FAITH BY FEDERAL-MOGUL
PURSUANT TO THE "SAFE HARBOR" PROVISIONS OF THE ACT. FORWARD-LOOKING STATEMENTS
MAY INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER FACTORS, WHICH MAY
CAUSE THE ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS OF FEDERAL-MOGUL TO DIFFER
MATERIALLY FROM ANY FUTURE RESULTS, PERFORMANCE OR ACHIEVEMENTS EXPRESSED OR
IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. SUCH RISKS, UNCERTAINTIES AND OTHER
FACTORS INCLUDE, WITHOUT LIMITATION, THOSE RELATING TO THE COMPLETION OF THE
ACQUISITION OF T&N AND THE COMBINATION OF FEDERAL-MOGUL'S BUSINESS WITH THOSE OF
T&N AND FEL-PRO AND THE ANTICIPATED SYNERGIES AND OPERATING EFFICIENCIES AND
RESTRUCTURING CHARGES IN CONNECTION THEREWITH, CONDITIONS IN THE AUTOMOTIVE
COMPONENTS INDUSTRY, CERTAIN GLOBAL AND REGIONAL ECONOMIC CONDITIONS AND OTHER
FACTORS DETAILED HEREIN AND FROM TIME TO TIME IN THE DOCUMENTS INCORPORATED BY
REFERENCE HEREIN. MOREOVER, FEDERAL-MOGUL'S PLANS, OBJECTIVES AND INTENTIONS ARE
SUBJECT TO CHANGE BASED ON THESE AND OTHER FACTORS, SOME OF WHICH ARE BEYOND
FEDERAL-MOGUL'S CONTROL.
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PART I
ITEM 1. BUSINESS.
OVERVIEW
Federal-Mogul Corporation founded in 1899 and incorporated in Michigan in
1924 (referred to herein as "Federal-Mogul" or the "Company"), is a global
manufacturer and distributor of a broad range of precision parts, primarily
vehicular components for automobiles and light trucks, heavy duty trucks, farm
and construction vehicles and industrial products. The Company manufactures
engine bearings, sealing systems, fuel systems, lighting products, pistons and
chassis products. The Company engineers and manufactures products for original
equipment ("OE") manufacturers, principally, the world's major manufacturers of
automobiles, light trucks, heavy duty trucks, farm and construction vehicles,
and industrial products. Federal-Mogul also manufactures and supplies its
products and related parts to the aftermarket (replacement parts).
During the first quarter of 1997, the Company announced the details of a
restructuring plan developed in 1996, which was intended to realign the
Company's growth strategy behind its core competencies of manufacturing,
engineering and distribution. Included as part of the restructuring plan was the
sale of 132 international retail operations throughout the world and the
consolidation of various manufacturing facilities, customer support functions
and European replacement market management functions.
As of December 31, 1997, the Company had completed substantially all of its
planned restructuring program, including the sale of a significant majority of
its international retail operations. With the restructuring behind it, the
Company has pursued its growth strategy by focusing efforts and resources on
complimentary acquisitions of manufacturing companies that will enhance its
product base and expand its global reach. Federal-Mogul has made a commitment to
expand its manufactured products to offer OE customers systems and modules. The
Company also intends to expand the global reach of its manufacturing operations
to follow the expansion of OE manufacturers into Latin America, Eastern Europe
and the Asian markets. The Company intends to couple its expansion of OE
business in new geographic markets with growth in global aftermarket sales.
In October 1997, the Company announced it made a cash offer to acquire all
of the outstanding common stock of T&N plc ("T&N") for 260 pence per share. The
offer valued T&N's issued share capital at approximately $2.4 billion. The
completion of this acquisition remains subject to applicable regulatory
approvals in the United States and Europe; however, the Company expects that the
closing will occur in March 1998. T&N, based in Manchester, England,
manufactures and supplies high technology engineered automotive components and
industrial materials including pistons, friction products, bearings, composites,
camshafts and sealing products. In 1997, T&N had sales of approximately $2.9
billion and operated 200 manufacturing locations in 24 countries, employing
approximately 28,000 people.
On February 24, 1998, the Company acquired Fel-Pro Incorporated
("Fel-Pro"), a privately-owned manufacturer headquartered in Skokie, Illinois,
for total consideration of $720 million, which included $225 million in equity
and $495 million in cash. In 1997, Fel-Pro had sales of approximately $500
million. Fel-Pro employs more than 2,700 people in 16 locations organized into
four business units; Gaskets, FP Diesel, FP Chemical Products, and FP
Performance. Gaskets is the largest business unit with approximately $350
million in sales in 1997.
The Fel-Pro acquisition and pending T&N acquisition are major steps toward
Federal-Mogul's strategic goal of developing global engine and sealing systems
for its OE customers. With the T&N acquisition, the Company will also acquire a
friction products line of business, which it views as another platform for
product expansion.
The Company's integrated operations are conducted under four operating
units: Powertrain Systems; Sealing Systems; General Products; and Worldwide
Aftermarket. The major product categories in Powertrain Systems include engine
bearings and piston products; Sealing Systems include dynamic seals and gaskets;
General Products include friction products, lighting products, fuel system
components, chassis products,
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composites, camshafts, heat transfer products, powder metal products and
protective sleeving products; and Worldwide Aftermarket includes virtually all
automotive products sold in the aftermarket.
Federal-Mogul maintains technology centers in Europe and North America to
develop and provide advanced materials, products and manufacturing processes for
all of its manufacturing units.
The following table sets forth the Company's net sales by market segment
and geographic region as a percentage of total net sales.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
------------------------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Original Equipment
Americas.................................................. 25% 22% 22%
International............................................. 9 9 9
Aftermarket
United States and Canada.................................. 39 37 39
International............................................. 27 30 27
Other(1)
United States and Canada.................................. -- -- 1
International............................................. -- 2 2
--- --- ---
100% 100% 100%
=== === ===
</TABLE>
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(1) Sales of these products -- air bearing spindles, heavy-wall bearings, and
precision forged powdered metal parts -- are accounted for by the Company
primarily as OE sales for financial reporting purposes. The precision forged
powdered metal parts operation was sold in April 1995. In January 1997, the
Company sold its heavy-wall bearing divisions in Germany and Brazil.
The Company is now redirecting its efforts and resources to expand its core
competencies in manufacturing and distribution by growing the manufacturing base
globally while capitalizing on the aftermarket distribution network. Some of the
growth in connection with the new strategy is expected to come through
acquisitions which the Company will be exploring on an ongoing basis.
MANUFACTURED PRODUCTS
The Company manufactures the following vehicular and industrial components:
Engine Bearings -- The Company manufactures engine bearings, bushings and
washers, including bimetallic and trimetallic journal bearings (main, connecting
rod, thrust and tilting pad), bimetallic and trimetallic bushings and washers,
valve plates and labyrinth seals. These products are used in automotive and
light truck, heavy duty, industrial, marine, agricultural, and power generation
applications. These products are marketed under the brand names Federal-Mogul(R)
and Glyco(R).
Sealing Systems -- The Company manufactures a line of sealing products
consisting of oil seals, high technology precision gaskets, valve stem seals,
air conditioning compression seals, crank shaft seal carrier assemblies and
unipistons. Sealing products are used in the automotive and light truck, heavy
duty truck, agricultural, off-highway, railroad and industrial applications.
These products are marketed under the brand names National(R), Mather(R), and
Seal Technology Systems(R)(STS).
Lighting Products -- The Company manufactures lighting and safety products
consisting of clearance marker lamps, front, side and rear signal lamps, stop,
tail and turn lights, emergency lighting, turn signal switches and back-up
lamps. Lighting products are used in automotive, medium through heavy duty truck
and trailer, off-road, industrial and emergency applications. These products are
marketed under the brand name Signal-Stat(R).
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Fuel System Components -- The Company manufactures a full line of fuel
pumps including mechanical fuel pumps, diesel lift pumps, electric fuel pumps,
electric fuel modules and hanger assemblies. These products are used in
automotive and light truck, heavy duty truck, marine, agricultural and
industrial applications. These products are marketed under the brand name
Carter(R).
Pistons -- The Company manufactures cast aluminum pistons for automotive,
light duty diesel and air-cooled engines. These products are marketed under the
brand name Sterling(R).
Chassis Products -- The Company manufactures chassis products including
clutch bearings, king pins and universal joints for automotive and light truck
applications. These products are marketed under the brand name Federal-Mogul(R).
ORIGINAL EQUIPMENT
The Company supplies OE customers with a wide variety of precision
engineered parts including engine bearings, oil seals, fuel system components,
lighting products, and pistons. The Company manufactures all of the products
that it sells to OE customers.
Customers consist primarily of automotive, heavy duty vehicle and farm and
industrial equipment manufacturers. In 1997, approximately 13% of the Company's
net sales were to the three major automotive manufacturers in the United States,
with General Motors Corporation accounting for approximately 6% of the Company's
net sales, Ford Motor Company accounting for approximately 5% of the Company's
net sales and Chrysler Corporation accounting for approximately 2% of the
Company's net sales. In addition, the Company sells OE products to most of the
major automotive manufacturers headquartered outside the United States. The
Weisbaden facility in Germany sells OE products to Volkswagen, Daimler-Benz and
BMW. The Company also sells Federal-Mogul engine bearings to Renault and Peugeot
in France and to Fiat in Italy. In addition, the Company sells a small amount of
OE products to certain Japanese manufacturers, including Nissan, certain Toyota
operations in the United States and Komatsu in Japan.
AFTERMARKET
The Company supplies a wide variety of aftermarket products, including
engine and transmission products (engine bearings, pistons, piston rings,
valves, camshafts, valve lifters, valvetrain parts, timing components and engine
kits, bushings and washers), ball and roller bearings, sealing devices (gaskets
and oil seals and other high performance specialty seals), lighting and
electrical components, and automotive fuel pumps, water pumps, oil pumps and
related systems. The Company also sells steering and suspension parts which
include such items as tie rod ends, ball joints, idler and pitman arms, center
links, constant velocity parts, rack and pinion assemblies, coil springs,
universal joints, engine mounts and alignment products.
Federal-Mogul sells aftermarket products under its own brand names such as
Federal-Mogul(R), Glyco(R), National(R), Mather(R), Carter(R), Sterling(R),
Signal-Stat(R) and Seal Technology Systems(R) (STS), as well as under brand
names for which it has long-term licenses such as TRW(R) and Sealed Power(R). It
also packages its products under third-party private brand labels such as
NAPA(R) and CARQUEST(R).
The Company's aftermarket business supplies approximately 150,000 part
numbers to almost 10,000 customers. Federal-Mogul's customers are located in
more than 90 countries around the world. For 1997, aftermarket net sales in the
United States and Canada represented 59% of total aftermarket net sales, with
net sales outside of the United States and Canada representing 41% of such
sales.
Domestic customers include independent warehouse distributors who
redistribute products to local parts suppliers called jobbers, industrial
bearing distributors, distributors of heavy duty vehicular parts, engine
rebuilders and retail parts stores. Internationally, the Company sells
aftermarket products to jobbers, local retail parts stores and independent
warehouse distributors. Aftermarket sales to jobbers and local retail parts
stores comprise a larger proportion of total international aftermarket sales
than of total domestic aftermarket sales.
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Federal-Mogul's North American distribution centers in Jacksonville,
Alabama, LaGrange, Indiana, and Maysville, Kentucky (the "Distribution
Centers"), serve as the core of the Company's domestic aftermarket distribution
network. Products are shipped from these Distribution Centers to service centers
in the United States and Canada. For Latin American sales, products are shipped
through a facility in Weston, Florida to two international regional distribution
centers and 15 Latin American branches. For European sales, products are shipped
through Federal-Mogul's facility in Kontich, Belgium.
RESEARCH AND DEVELOPMENT
The Company's expertise in engineering and research and development ensures
that the latest technologies, processes and materials are considered in solving
problems for customers. Federal-Mogul provides its customers with real-time
engineering capabilities and design development in their home countries.
Research and development activities are conducted at the Company's major
research centers in Ann Arbor, Michigan; Wiesbaden; Germany; Logansport,
Indiana; Malden, Missouri; Cardiff, Wales; Hoisdorf, Germany; and Minoshima,
Japan. Each of the Company's operating units is engaged in various engineering
and research and development efforts working side by side with customers to
develop custom solutions unique to their needs.
Total expenditures for research and development activities were
approximately $13.1 million in 1997, $14.4 million in 1996 and $15.1 million in
1995. Expenditures for research and development have declined due to
consolidation of the lighting and fuel research centers and the sale of the
United States ball bearings manufacturing operations.
RECENT ACQUISITIONS AND DIVESTITURES
Acquisitions
On February 24, 1998, the Corporation announced the completion of its
acquisition of Fel-Pro Incorporated ("Fel-Pro"), a privately-owned manufacturer
headquartered in Skokie, Illinois for $720 million. The transaction involved
$225 million in equity and $495 million in cash. Fel-Pro is the premier gasket
manufacturer for the North American aftermarket and OE heavy duty market. In
1997, Fel-Pro had sales of approximately $500 million. The Company has more than
2,700 employees in 16 locations organized into four business units: Gaskets, FP
Diesel, FP Chemical Products, and FP Performance. Gasket sales for 1997 were
approximately $350 million and included cylinder head and molded rubber gaskets,
and marine and performance gaskets marketed under various brand names including
Permatorque Blue(R), Fel-Coprene(R), Print-O-Seal(R) and PermaDry Plus(R).
On October 16, 1997, the Corporation announced the terms of a recommended
cash offer by Federal-Mogul of 260 pence per share for all of the outstanding
common stock of T&N plc ("T&N"). The offer valued T&N's issued share capital at
approximately $2.4 billion. Management believes that Federal-Mogul's acquisition
of T&N will:
- create a highly competitive Tier I automotive supplier worldwide;
- expand its manufactured product portfolio to offer systems and
modules;
- enhance Federal-Mogul's position as a supplier of engine and
transmission products worldwide;
- reinforce Federal-Mogul's ability to provide a high quality service
to both its original equipment and aftermarket customers;
- extend Federal-Mogul's international reach and accelerate its
worldwide aftermarket growth; and
- create an organization that builds on the strength of the
leadership, expertise and working practices of both companies to further
improve efficiencies.
The T&N transaction is subject to regulatory approval and is expected to
close in March of 1998.
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Divestitures and Closings
On February 10, 1998, the Company announced the divestiture of its minority
interest in Dichtungstechnik G. Bruss GmbH & Co. KG, a German manufacturer of
seals and gaskets. As part of this transaction, the Company increased its
ownership in a related U. S. partnership to 100%.
In Venezuela, Federal-Mogul has sold six retail stores to local companies,
closed two stores and is in negotiations with prospective buyers for the
remaining seven stores.
In Ecuador, Federal-Mogul is in negotiations with two parties for the sale
of three retail stores.
In Puerto Rico, two retail stores have been closed and other actions have
been taken to improve profitability. The Company will continue through 1998 to
pursue the sale of this operation while managing it for positive economic value
added ("EVA").
In December 1997, the U.S. service center network was streamlined to gain
greater value from Federal-Mogul's product distribution capabilities in the
aftermarket.
In December 1997, Federal-Mogul also completed the sale of its four retail
stores and one central distribution center in Chile to Inversiones Federal,
S.A., a Chilean corporation headquartered in Santiago, Chile. Federal-Mogul
entered into a supply and distribution arrangement with the buyer to serve the
Chilean market in the future.
In November 1997, Federal-Mogul announced the closure of aftermarket
distribution centers in Malaysia and Singapore. The Company also closed its
distribution center in Taiwan. Federal-Mogul will continue to maintain sales
offices in Singapore and Taiwan.
The Company withdrew from a retail-related joint venture initiative in
Russia during the fourth quarter of 1997 and expects to complete its withdrawal
from another joint venture in Israel by the end of the first quarter of 1998.
During 1997, the Company closed its aftermarket operations in Turkey,
Australia and South Africa.
SUPPLIERS
Federal-Mogul sells its manufactured parts as well as parts manufactured by
other manufacturers to the aftermarket. The products not manufactured by
Federal-Mogul are supplied by over 600 companies. In 1997, no outside supplier
of the Company provided products that accounted for more than 5% of the
Company's net sales.
In connection with the acquisition of the automotive aftermarket business
of TRW, Inc. ("TRW") in 1992, the Company and TRW entered into a Supply
Agreement for an initial term of 15 years (the "Supply Period"), pursuant to
which TRW agreed to supply the Company with parts manufactured by TRW and
distributed by the Company. During the first five years of the Supply Period
(the "Exclusive Period"), the Company is an exclusive distributor of such TRW
parts and thereafter will be a nonexclusive distributor for the remaining term
of the Supply Agreement, subject to certain exceptions. Thereafter, both the
Exclusive Period and the Supply Period are automatically renewable for one-year
periods and are terminable upon one year's notice by either party.
EMPLOYEE RELATIONS
On December 31, 1997, the Company had approximately 13,300 full-time
employees, of whom approximately 7,700 were employed in the United States.
Approximately 54% of the Company's United States employees are represented
by 4 unions. Approximately 44% of the Company's foreign employees are
represented by various unions. Each of the Company's unionized manufacturing
facilities has its own contract with its own expiration date, and as a result,
no contract expiration date affects more than one facility. The Company believes
its labor relations to be good.
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ENVIRONMENTAL REGULATIONS
The Company's operations, in common with those of industry generally, are
subject to numerous existing and proposed laws and governmental regulations
designed to protect the environment, particularly regarding plant wastes and
emissions and solid waste disposal. Capital expenditures for property, plant and
equipment for environment control activities did not have a material impact on
the Company's financial position or results of operations in 1997 and are not
expected to have a material impact on the Company's financial position or
results of operations in 1998 or 1999.
RAW MATERIALS
The Company does not normally experience supply shortages of raw materials.
Certain of the Company's relationships with its long-term suppliers are
contractual. No outside supplier of the Company provided more than 5% of
products purchased.
BACKLOG
The majority of the Company's products are not on a backlog status. They
are produced from readily available materials and have a relatively short
manufacturing cycle. For products supplied by outside suppliers, the Company
generally purchases products from more than one source. The Company expects to
be capable of handling the anticipated 1998 sales volumes.
PATENTS AND LICENSES
The Company is committed to protecting its technology investments and
market share through an active and growing international patent portfolio. The
international patent portfolio is composed of a large number of foreign (non
U.S.) patents and pending patent applications which relate to a wide variety of
products and processes. In the aggregate, the Company's international patent
portfolio is of material importance to its business; however, the Company does
not consider any international patent or group of international patents relating
to a particular product or process to be of material importance when judged from
the standpoint of the business as a whole.
COMPETITION
The global vehicular parts business is highly competitive. The Company
competes with many of its customers that produce their own components as well as
with independent manufacturers and distributors of component parts in the United
States and abroad. In general, competition for such sales is based on price,
product quality, customer service and the breadth of products offered by a given
supplier. The Company has attempted to meet these competitive challenges through
more efficiently integrating its manufacturing and distribution operations,
expanding its product coverage within its core businesses, and expanding its
worldwide distribution network.
INFORMATION ABOUT INTERNATIONAL AND DOMESTIC OPERATIONS AND EXPORT SALES
The Company has both manufacturing and distribution facilities for its
products, principally in the United States, Europe, Latin America, Mexico and
Canada. Certain of these products, primarily engine bearings and oil seals, are
sold to international original equipment manufacturers and vehicular aftermarket
customers.
International operations are subject to certain risks inherent in carrying
on business abroad, including expropriation and nationalization, currency
exchange rate fluctuations and currency controls, and export and import
restrictions. The likelihood of such occurrences and their potential effect on
the Company vary from country to country and are unpredictable.
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Original equipment and aftermarket sales by major geographical regions
were:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
(MILLIONS OF DOLLARS)
<S> <C> <C> <C>
Original Equipment
Americas.................................................. $ 451.4 $ 449.1 $ 465.4
International............................................. 170.3 219.5 222.7
Aftermarket
United States and Canada.................................. 699.1 759.8 780.8
International............................................. 485.8 604.3 530.9
-------- -------- --------
Total Sales............................................ $1,806.6 $2,032.7 $1,999.8
======== ======== ========
</TABLE>
Detailed results of operations and assets by geographic area for each of
the years ended December 31, 1997, 1996 and 1995 appear in Note 17 of Notes to
Consolidated Financial Statements contained in Item 8 of this Report.
EXECUTIVE OFFICERS OF THE REGISTRANT
The executive officers of the Company are its elected officers, other than
its assistant officers. Set forth below are the names, ages, positions and
offices held, and a brief account of the business experience during the past 5
years of each executive officer.
RICHARD A. SNELL (56). Chairman of the Board, Chief Executive Officer and
President, Federal-Mogul Corporation. Mr. Snell has served as Chairman of the
Board, Chief Executive Officer and President and a director of the Corporation
since November 1996. He also serves as Chairman of the Executive and Finance
Committee and as a member of the Pension Committee. Mr. Snell was previously
employed by Tenneco, Inc., from November 1987 to November 1996, most recently
having served as President and Chief Executive Officer of Tenneco Automotive
from September 1993 until he was employed by the Corporation.
KEVIN W. BAIRD (36). Vice President -- Distribution and Logistics of the
Company since July 1996. Prior thereto, Mr. Baird was employed by the Company as
Vice President -- Worldwide Aftermarket Operations from October 1995 to July
1996; Plant Manager of the Company's Frankfort, Indiana and Van Wert, Ohio
plants from September 1993 to October 1995; and Product Line Manager for the
Company's Van Wert, Ohio and Summerton, South Carolina plants from September
1990 to September 1993. He first became an executive officer in 1996.
DAVID A. BOZYNSKI (43). Vice President and Treasurer since April 1996.
Prior thereto, Mr. Bozynski was employed by Unisys Corporation as Vice President
and Assistant Treasurer, from October 1994 to April 1996; Vice President,
Finance -- Lines of Business from April 1993 to September 1993; and Vice
President, Corporate Business Analysis, March 1992 to April 1993. He first
became an executive officer in 1996.
JAMES B. CARANO (48). Vice President and General Manager -- Latin America
since 1995; Vice President and Controller, December 1992 to March 1995;
International Distribution Manager -- Port Everglades, Florida, February 1990 to
November 1992. He first became an executive officer in 1992.
ROBERT F. EGAN (51). Vice President, Distributor Sales -- Aftermarket since
October 1996; Vice President, Automotive Sales -- Aftermarket from December 1993
to October 1996; Vice President, Automotive Sales -- Worldwide Aftermarket
Operation, November 1992 to December 1993; National Sales Manager, Automotive
Aftermarket -- Worldwide Aftermarket Operation May 1985 to November 1992. He
first became an executive officer in 1993.
CHARLES B. GRANT (53). Vice President -- Corporate Development since
December 1992; Vice President and Controller, May 1988 to December 1992. He
first became an executive officer in 1985.
ALAN C. JOHNSON (49). Executive Vice President since February 1997; Vice
President and President, Operations from April 1996 to February 1997; Vice
President and President, Worldwide Operations from January 1996 to April 1996;
Vice President and President, Worldwide Manufacturing Operation from
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February 1995 until January 1996; Vice President, Powertrain Operations --
Americas from December 1993 until February 1995; Vice President and General
Manager -- Seal Operations, November 1992 to December 1993; General Manager --
Oil Seal Operations, January 1990 to November 1992. He first became an executive
officer in 1993.
DIANE L. KAYE (47). Vice President, General Counsel and Secretary since
April 1995. Prior thereto, Divisional Counsel, Buick Motor Division and Cadillac
Motor Car Division, General Motors Corporation from April 1990 to April 1995.
She first became an executive officer in 1995.
JEFF J. O'NEILL (41). Vice President -- Marketing since July 1997. Prior
thereto Mr. O'Neill served as business director -- Quaker Snacks with The Quaker
Oats Company. During his 17 years with The Quaker Oats Company he worked both in
the U.S. and Canada. He first became an executive officer at Federal-Mogul in
1997.
RICHARD P. RANDAZZO (54). Vice President -- Human Resources since January
1997. Prior thereto, Senior Vice President -- Human Resources of Nextel
Communications, Inc. from December 1994 to December 1996, and Senior Vice
President, Human Resources -- Americas Region of Asea Brown Boveri, Inc.,
December 1990 to December 1994. He first became an executive officer in 1997.
THOMAS W. RYAN (51). Senior Vice President and Chief Financial Officer
since February 1997. Prior thereto, Chief Financial Officer of Tenneco
Automotive, a division of Tenneco, Inc. from January 1995 to February 1997, and
Vice President, Treasurer and Controller of A. O. Smith Corporation from March
1985 to January 1995. He first became a Federal-Mogul executive officer in 1997.
WILHELM A. SCHMELZER (57). Vice President and Group Executive -- Engine and
Transmission Products since April 1995; Vice President and Group Executive -- E
& T Products -- Europe, April 1993 to April 1995; Vice President and Group
Executive -- Engine and Transmission Products Group -- Europe, January 1992 to
April 1993. He first became an executive officer in 1992.
MICHAEL L. SCHULTZ (50). Vice President and General Manager -- North
American Aftermarket Sales and Marketing since December 1995; Vice President,
Marketing -- Worldwide Aftermarket, December 1994 to December 1995; Eastern Zone
Sales Manager, November 1992 to December 1994. Mr. Schultz was Vice President of
Sales, North America for TRW Inc. before joining the Company in 1992. He first
became an executive officer in 1995.
KENNETH P. SLABY (46). Vice President and Controller since April 1996.
Prior thereto, Manager -- Financial Operations for the global silicones business
of General Electric Company, November 1990 to April 1996. He first became an
executive officer in 1996.
JAMES J. ZAMOYSKI (51). Vice President -- Strategic Planning since June
1997; Vice President and General Manager, April 1995 to June 1997; Worldwide
Aftermarket Operation -- International, November 1993 to April 1996; General
Manager, Worldwide Aftermarket -- Distribution and Logistics, August 1991 to
November 1993. He first became an executive officer in 1980.
Generally, officers of the Company are elected at the time of the Annual
Meeting of Shareholders, but the Board also elects officers at various other
times during the year. Each officer holds office until his or her successor is
elected or appointed or until his or her resignation or removal.
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ITEM 2. PROPERTIES.
The Company conducts its business from its World Headquarters complex in
Southfield, Michigan, which is leased pursuant to a sale/leaseback arrangement.
The principal manufacturing and other materially important physical properties
of the Company at December 31, 1997, are listed below. All properties are owned
in fee except where otherwise noted.
A. Manufacturing Facilities.
<TABLE>
<CAPTION>
NO. OF SQ. FT.
FACILITIES AT 12/31/97
---------- -----------
<S> <C> <C>
NORTH AMERICAN MANUFACTURING FACILITIES
Frankfort, Indiana.......................................... 1 179,350
Milan, Michigan............................................. 1 80,800
Van Wert, Ohio.............................................. 1 195,864
Blacksburg, Virginia........................................ 1 226,000
Greenville, Michigan........................................ 1 210,000
Logansport, Indiana......................................... 1 166,000
Malden, Missouri(1)......................................... 1 123,280
Mooresville, Indiana........................................ 1 65,944
St. Johns, Michigan......................................... 1 262,000
Puebla, Mexico.............................................. 1 100,571
Mexico City, Mexico......................................... 2 153,136
Juarez, Mexico(1)........................................... 1 102,885
Summerton, South Carolina................................... 1 136,000
-- ---------
14 2,001,830
-- ---------
INTERNATIONAL MANUFACTURING FACILITIES
Cuorgne, Italy.............................................. 1 114,900
Gonnet, Argentina........................................... 1 49,252
San Martin, Argentina....................................... 1 5,638
Orleans, France............................................. 1 130,046
Wiesbaden, Germany.......................................... 1 837,900
Cardiff, Wales.............................................. 1 151,200
San Luis, Argentina......................................... 2 6,400
-- ---------
8 1,295,336
-- ---------
Total Manufacturing Facilities......................... 22 3,297,166
== =========
</TABLE>
- -------------------------
(1) Leased by the Company and accounted for as an operating lease. The Company
believes that these leases could be renewed or comparable facilities could
be obtained without materially affecting operations.
All owned and leased properties are well maintained and equipped for the
purposes for which they are used. The Company believes that its facilities
are suitable and adequate for the operations involved.
B. Aftermarket Warehouses. The Company operates 82 warehouses and
distribution centers of which 62 are leased. In addition, 2 warehouses are
financed and leased through the issuance of industrial revenue bonds. Certain of
these warehouses will be closed or consolidated in connection with the
integration of T&N and Fel-Pro.
C. Retail Properties. The Company leases 13 facilities in Venezuela, 6
facilities in Panama, 41 facilities in Puerto Rico and 3 facilities in Ecuador.
The Company expects to dispose of or close these facilities in connection with
the completion of its planned sales of its international retail operations.
All owned and leased properties are well maintained and equipped for the
purposes for which they are used. The Company believes that its facilities are
suitable and adequate for the operations involved.
9
<PAGE> 12
ITEM 3. LEGAL PROCEEDINGS
The Company is one of a large number of defendants in a number of lawsuits
brought by claimants alleging injury due to exposure to asbestos. The Company is
defending all such claims vigorously and believes that it has substantial
defenses to liability and adequate insurance coverage for its defense costs.
While the outcome of litigation cannot be predicted with certainty, after
consulting with the office of the Company's general counsel, management believes
that asbestos claims pending against Federal-Mogul as of December 31, 1997 will
not have a material effect on the Company's financial position.
The Company is involved in various other legal actions and claims. After
taking into consideration legal counsel's evaluation of such actions, management
is of the opinion that their outcomes are not reasonably likely to have a
material adverse effect on the Company's financial position.
For information respecting lawsuits concerning environmental matters to
which the Company is a party, see "Item 7. Management's Discussion and Analysis
of Financial Condition and Results of Operations -- Environmental and Legal
Matters".
There were no material legal proceedings which were terminated during the
fourth quarter of 1997.
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS.
No matter was submitted to a vote of security holders through the
solicitation of proxies or otherwise during the fourth quarter of 1997.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
The Company's common stock is listed on the New York Stock Exchange and the
Pacific Exchange under the trading symbol FMO. The approximate number of
shareholders of record of the Company's common stock at February 27, 1998 was
9,207. The following table sets forth the high and low sales prices of the
Company's common stock for each calendar quarter as reported on the New York
Stock Exchange-Composite Tape for the last two years:
<TABLE>
<CAPTION>
1997 1996
---------------- ----------------
QUARTER HIGH LOW HIGH LOW
------- ---- --- ---- ---
<S> <C> <C> <C> <C>
First......................................... $26.75 $21.63 $20.88 $17.38
Second........................................ 35.38 24.50 19.88 17.88
Third......................................... 39.94 32.75 22.50 16.25
Fourth........................................ 47.63 36.75 24.50 20.38
</TABLE>
The closing price of the Company's common stock as reported on the New York
Stock Exchange-Composite Tape on February 27, 1998 was $49.063.
Quarterly dividends of $.12 per common share were declared during 1997 and
1996. In February 1998, the Company's Board of Directors declared a quarterly
dividend of $.12 per common share. This was the 248th consecutive quarterly
dividend declared by the Company. The Company's dividend policy is under
consideration, and there can be no assurance that dividends at the current rate,
or that any dividends, will be paid in the future.
10
<PAGE> 13
ITEM 6. SELECTED FINANCIAL DATA
The following table presents information from the Company's consolidated
financial statements for the five years ended December 31, 1997. This
information should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations," and the "Financial
Statements and Supplementary Data."
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
(MILLIONS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA
Net sales................................. $ 1,806.6 $ 2,032.7 $ 1,999.8 $ 1,889.5 $ 1,575.5
Costs and expenses........................ (1,703.7)(1) (2,258.0)(2) (2,000.7)(3) (1,795.5) (1,523.1)(4)
Other income (expense).................... (3.4) (3.4) (2.4) (2.5) 4.0
Income tax (expense) benefit.............. (27.5) 22.4 (2.5) (31.8) (19.5)
--------- --------- --------- --------- ---------
Net earnings (loss) before extraordinary
item.................................... 72.0 (206.3) (5.8) 59.7 36.9
Extraordinary item -- loss on early
retirement of debt, net of applicable
income tax benefit...................... (2.6) -- -- -- --
--------- --------- --------- --------- ---------
Net earnings (loss)....................... $ 69.4 $ (206.3) $ (5.8) $ 59.7 $ 36.9
========= ========= ========= ========= =========
COMMON SHARE SUMMARY (DILUTED)
Average shares and equivalents outstanding
(in thousands).......................... 41,854 34,659 34,642 41,800 33,900
Earnings (loss) per share:
Before extraordinary item............... $ 1.67 $ (6.20) $ (.42) $ 1.38 $ 1.02
Extraordinary item -- loss on early
retirement of debt, net of applicable
income
tax benefit........................... (.06) -- -- -- --
--------- --------- --------- --------- ---------
Net earnings (loss) per share............. $ 1.61 $ (6.20) $ (.42) 1.38 1.02
========= ========= ========= ========= =========
Dividends declared per share.............. $ .48 $ .48 $ .48 $ .48 $ .48
========= ========= ========= ========= =========
CONSOLIDATED BALANCE SHEET DATA
Total assets.............................. $ 1,802.1 $ 1,455.2 $ 1,701.1 $ 1,481.7 $ 1,300.2
Short-term debt(5)........................ 28.6 280.1 111.9 74.0 39.2
Long-term debt............................ 273.1 209.6 481.5 319.4 382.5
Shareholders' equity...................... 369.3 318.5 550.3 588.5 366.0
OTHER FINANCIAL INFORMATION
Net cash provided from (used by) operating
activities.............................. $ 215.7 $ 149.0 $ (34.7) $ 24.3 $ 43.5
Expenditures for property, plant,
equipment and other long term assets.... 49.7 54.2 78.5 74.9 60.0
Depreciation and amortization expense..... 52.8 63.7 61.0 55.7 50.7
</TABLE>
- -------------------------
(1) Includes $1.1 million for a net restructuring credit, a $2.4 million charge
for an adjustment of assets held for sale to fair value and other long lived
assets, a $1.6 million credit for reengineering and other related charges,
and a $10.5 million net charge related to the British pound currency option.
(2) Includes $57.6 million for a restructuring charge, $151.3 million for
adjustment of assets held for sale to fair value and other long lived assets
and $11.4 million relating to reengineering and other related charges.
(3) Includes $26.9 million for restructuring charges, $51.8 million for
adjustment of assets held for sale to fair value and other long lived assets
and $13.9 million relating to reengineering and other related charges.
(4) Includes $19.2 million for a restructuring charge.
(5) Includes current maturities of long-term debt (see Note 10 to the
consolidated financial statements).
11
<PAGE> 14
MANAGEMENT'S DISCUSSION AND ANALYSIS
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Overview
Federal-Mogul Corporation (the Company) is a global manufacturer and
distributor of a broad range of non-discretionary parts primarily for
automobiles, light trucks, heavy trucks, farm and construction vehicles. During
1997, the Company initiated an action plan to expand its manufacturing product
offerings in related product lines to provide system approaches and to grow
internationally to supply its original equipment customers in new markets.
Significant components of the Company's action plan include the divestiture of
under-performing assets and the pursuit of synergistic acquisitions that will
build on core product lines.
T&N plc Transaction
In October 1997, the Company announced it made a cash offer to acquire all
the outstanding common stock of T&N plc (T&N) for 260 pence per share. The offer
valued T&N's issued share capital at approximately $2.4 billion. On January 6,
1998, the Company's offer to acquire all of the outstanding common stock of T&N
was declared unconditional as to acceptances. By the second closing date under
the offer, January 2, 1998, valid acceptances of the offer had been received for
approximately 95% of the entire issued share capital of T&N.
T&N, based in Manchester, England, manufactures and supplies high
technology engineered automotive components and industrial materials including
pistons, friction products, bearings, composites, camshafts and sealing
products. In 1997, T&N had sales of approximately $2.9 billion and operated 200
manufacturing locations in 24 countries, employing approximately 28,000 people.
The Company will fund the T&N transaction through a bridge facility
provided by a reputable financial institution. Subsequent to the planned T&N
acquisition, the Company intends to put in place a permanent capital structure
with an appropriate combination of equity and debt.
The offer is subject to various conditions customary in the United Kingdom,
including the receipt of all applicable regulatory approvals in the United
States and Europe. As part of the acquisition process, certain financing,
professional and other related fees approximating $28 million had been
capitalized as of December 31, 1997. Management expects the T&N transaction to
close in the first quarter of 1998; however, in the event the acquisition is not
completed, these fees would be charged to operations and would materially impact
earnings at that time. In addition, the Company may elect to accelerate payment
of certain portions of the bridge facility, which would result in an
extraordinary charge due to the write-off of the financing costs associated with
the early retirement of debt. In addition, the Company purchased a foreign
currency option to cap the effect of potential unfavorable fluctuations in the
British pound/U.S. dollar exchange rate (see Foreign Currency and Commodity
Contracts, described later in this section).
Fel-Pro Incorporated Transaction
In addition on February 24, 1998 the Company acquired Fel-Pro Incorporated
(Fel-Pro), a privately-owned manufacturer headquartered in Skokie, Illinois, for
total consideration of $720 million, which includes $225 million in equity and
$495 million in cash. The $495 million in cash was primarily provided through
available borrowings on the $350 million multicurrency revolver. The remaining
consideration paid was through the issuance of promissory notes.
In 1997, Fel-Pro had sales of approximately $500 million. Fel-Pro employs
more than 2,700 people in 16 locations organized into four business units:
Gaskets, FP Diesel, FP Chemical Products and FP Performance. Gaskets is the
largest business unit with approximately $350 million in sales in 1997.
12
<PAGE> 15
MANAGEMENT'S DISCUSSION AND ANALYSIS -- CONTINUED
Management believes the planned acquisition of T&N and the acquisition of
Fel-Pro will:
- create a highly competitive Tier 1 automotive supplier worldwide;
- expand its manufactured product portfolio to offer systems and
modules;
- enhance the Company's position as a supplier of engine and
transmission products worldwide;
- reinforce the Company's ability to provide a high quality service to
both its original equipment and aftermarket customers; and
- extend the Company's international reach and accelerate its
worldwide aftermarket growth.
Upon completion of the T&N and Fel-Pro acquisitions, the Company expects to
have annual sales of approximately $5 billion.
Unless otherwise indicated, the remainder of the discussion and analysis
pertains only to the results of operations the Company had in place as of
December 31, 1997.
Restructuring Actions Update
During 1997, the following actions related to the significant 1996
restructuring plan, described later in this section, were completed. The
Company:
- sold its aftermarket operations in Turkey, Australia, South Africa
and Chile. The Company also closed international aftermarket distribution
centers in Malaysia and Singapore. In total, the Company divested 72
international retail aftermarket operations and sold or restructured 25
wholesale aftermarket operations. Net sales for international aftermarket
operations divested in 1997 approximated $70 million, $186 million and $193
million in 1997, 1996 and 1995, respectively;
- closed its Leiters Ford, Indiana manufacturing facility and
consolidated its lighting products operations in Juarez, Mexico;
- consolidated certain of its North American warehouse facilities;
- consolidated its customer support functions previously housed in
Phoenix, Arizona into the Company's Southfield headquarters;
- consolidated its European aftermarket management functions in
Geneva, Switzerland into the Wiesbaden, Germany manufacturing headquarters;
and
- streamlined certain of its administrative and operational staff
functions worldwide.
Primarily due to the planned 1998 acquisitions of T&N and Fel-Pro, the
Company elected not to fully implement the following actions under the 1996
restructuring plan:
- Reductions to the operational and administrative staff were not made
to the extent originally planned;
- Reconfiguration of the North American distribution network was
altered to accommodate the planned integration of T&N and Fel-Pro
aftermarket operations;
- Relocation of certain European manufacturing product lines to lower
cost areas within Europe and related workforce reductions did not take
place. Management of the Company decided not to pursue this action
primarily in anticipation of the integration of future acquisitions.
By the end of the first quarter of 1998, the Company expects to have
successfully exited all of its retail businesses, except for Puerto Rico where
the Company continues to seek a buyer.
The Company expects to incur additional restructuring charges in the future
to implement its corporate strategy, specifically related to the planned
acquisition of T&N and the acquisition of Fel-Pro, although the
13
<PAGE> 16
MANAGEMENT'S DISCUSSION AND ANALYSIS -- CONTINUED
specific actions have not been determined and the precise amounts have not been
established. While the charges relating to these restructuring actions will
decrease net income in the year incurred, these restructuring actions are
projected to decrease operating costs, thereby enhancing the profitability of
the Company in future years. The restructuring charges expected to be incurred
in 1998 are anticipated to be in excess of $100 million for T&N and in excess of
$15 million for Fel-Pro.
RESULTS OF OPERATIONS
Net Sales
Consolidated net sales decreased 11.1% in 1997, primarily due to the
divestiture of certain international retail and wholesale operations, the sale
of the heavy wall bearings operations in Brazil and Germany, the sale of the
United States ball bearing business and continued softness in the North American
aftermarket business. These decreases were partially offset by certain volume
increases primarily in the original equipment business.
Original equipment and aftermarket sales were:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
(MILLIONS OF DOLLARS)
<S> <C> <C> <C>
ORIGINAL EQUIPMENT:
Americas.................................................. $ 451.4 $ 449.1 $ 465.4
International............................................. 170.3 219.5 222.7
AFTERMARKET:
United States and Canada.................................. 699.1 759.8 780.8
International............................................. 485.8 604.3 530.9
-------- -------- --------
Total sales............................................ $1,806.6 $2,032.7 $1,999.8
======== ======== ========
</TABLE>
Original equipment business sales in the Americas were flat in 1997 as
compared to 1996. However, excluding the effect of the Company's divestitures of
its electrical products business in September 1996 and its United States ball
bearing operations in November 1996, net sales increased 15.7% in 1997 compared
to 1996. Management attributes this increase primarily to strong 1997 sales in
its sealing products division. Sales decreased in 1996 as compared to 1995 due
to the sale of the Precision Forged Products Division in April 1995 and the 1996
sales of the electrical products business and the United States ball bearings
manufacturing operations, offset slightly by the acquisition of Seal Technology
Systems Limited in September 1995. Excluding the effect of these acquisitions
and divestitures, sales increased 2.7% in 1996.
International original equipment business sales decreased in 1997 as
compared to 1996 due to the effects of exchange rate fluctuations and the
divestiture of the heavy wall bearing operations in Germany and Brazil completed
on January 2, 1997. Excluding the effects of exchange rate fluctuations and the
divestiture, sales increased 11.7%. Management attributes this increase to
strong customer demand for sputter bearings and Glycodur material products. In
1996, sales decreased as compared to 1995 due to the Company's decision to exit
some conventional engine bearing business that did not meet appropriate
profitability levels.
North American aftermarket sales decreased in 1997 as compared to 1996 due
to continued weak sales in engine products. Sales decreased in 1996 as compared
to 1995 primarily due to the elimination of special extended payment terms.
International aftermarket business sales in 1997 as compared to 1996
decreased primarily due to the effects of foreign exchange fluctuations and the
1997 divestitures of Turkey, Australia, South Africa and Chile. Excluding the
effects of exchange and 1997 divestitures, sales were essentially flat. In 1996,
sales increased as compared to 1995 due to the full year impact of the
acquisitions of Bertolotti in June 1995 and Centropiezas in September 1995, and
to a lesser extent, volume and pricing increases in Mexico, increased sales
volume in Australia and new local operations in Brazil. These increases were
partially offset by
14
<PAGE> 17
MANAGEMENT'S DISCUSSION AND ANALYSIS -- CONTINUED
$21 million resulting from the devaluation of the South African rand and a
decrease in Venezuela due to a recession.
Original equipment sales as a percentage of total sales of the Company
increased to 34.4% in 1997 from 32.8% in 1996, with a corresponding decrease in
aftermarket sales. This shift in 1997 reflects the Company's pursuit and
implementation of its strategy to focus on manufacturing and distribution, as
demonstrated by the previously discussed 1997 divestitures and planned
acquisitions. Previously, as the Company was implementing its retail growth
strategy, original equipment sales as a percentage of total sales of the Company
decreased to 32.8% in 1996 from 34.4% in 1995, with a corresponding increase in
aftermarket sales.
Cost of Products Sold
Cost of products sold as a percent of net sales decreased to 76.5% in 1997
compared to 81.7% for 1996. The decrease is primarily due to the 1997
divestitures of less profitable operations and productivity improvements in the
North American aftermarket and the Americas original equipment business. In
addition, a portion of the 1997 decrease is attributable to 1996 third and
fourth quarter charges incurred of $8 million for customer incentive programs
and $13 million for excess and obsolete inventory (see Changes in Accounting
Estimates, described later in this section).
Cost of products sold as a percent of net sales increased to 81.7% in 1996
compared to 80.2% in 1995. The increase is primarily attributable to 1996 third
and fourth quarter charges incurred of $8 million for customer incentive
programs and $13 million for excess and obsolete inventory (see Changes in
Accounting Estimates).
Selling, General and Administrative Expenses
Selling, general and administration (SG&A) expenses as a percent of net
sales decreased to 15.8% for 1997 compared to 16.4% for 1996. In contrast, SG&A
expenses as a percent of net sales increased to 16.4% for 1996 compared to 15.0%
for 1995. The 1997 decrease and 1996 increase in SG&A as a percent of net sales
is primarily attributable to bad debt expense, customer incentive programs and
environmental and legal matters (see Changes In Accounting Estimates of $3
million for bad debt expense, $8 million for customer incentive programs and $9
million for environmental and legal matters) incurred in the third and fourth
quarters of 1996. In addition, the 1996 increase was partially due to higher
SG&A costs in the international aftermarket business.
Changes in Accounting Estimates
In 1996, the Company made certain changes in accounting estimates totaling
$51 million in the third and fourth quarters attributable to 1996 events and new
information becoming available. The changes in accounting estimates included the
following:
Customer Incentive Programs: The increase in the provision for customer
incentive programs of $18 million resulted from contractual changes implemented
primarily in the third and fourth quarters of 1996 with certain customers, new
sales programs, additional customer participation in these programs and current
experience with these programs.
Excess and Obsolete Inventory: Business volume growth remained below
expectations in 1996, principally in the third and fourth quarters, causing a
build up of certain inventories beyond anticipated demand. In addition, the
Company's strategic initiative to focus on its manufacturing business and divest
its retail and certain aftermarket businesses and the sale of the U.S. ball
bearings operations in the fourth quarter adversely affected the utility of the
North American aftermarket business inventory. As a result, the Company recorded
an additional $13 million provision for excess and obsolete inventory.
Bad Debts: The increase in the bad debt provision of $3 million was
principally attributable to the deterioration of account balances of numerous
low volume customers and termination of business with certain North American
aftermarket customers during 1996.
15
<PAGE> 18
MANAGEMENT'S DISCUSSION AND ANALYSIS -- CONTINUED
Environmental and Legal Matters: The environmental and legal provision was
increased by $9 million due to the completion of environmental studies and
related analyses, new issues arising and changes in the status of other legal
matters.
Other: The remaining $8 million of changes in accounting estimates is
comprised of $1 million for changes in the workers' compensation reserve based
on worsening experience in outstanding claims in certain older policy years, $3
million for interest capitalization, $2 million to adjust estimates of
inventoriable costs and $2 million for other items.
Sales of Businesses
During 1997, the Company received $73.6 million in net cash proceeds from
the sale of its aftermarket operations in South Africa, Australia, and Chile,
and its heavy wall bearing operations in Germany and Brazil.
During 1996, the Company received $42.0 million in net cash proceeds from
the sale of its United States ball bearings and electrical products
manufacturing operations.
Except for the sale of the electrical products manufacturing operations,
sales of businesses in 1997 and 1996 relate to assets previously adjusted to
fair value (see Adjustment of Assets Held for Sale to Fair Value and Other Long
Lived Assets, described later in this section). Accordingly, no gain or loss was
recognized on the date of sale related to these transactions. In addition, no
gain or loss was recognized related to the sale of the electrical products
manufacturing operations.
During 1995, the Company sold its equity interest in Westwind Air Bearings,
Limited, recognizing a pretax gain of $16.2 million and its Precision Forged
Products Division for a pretax gain of $7.8 million.
Restructuring Charges
Primarily as a result of the amendments to the 1996 restructuring plan,
described previously in this section, the Company's 1997 operating results were
increased by $23.1 million for the reversal of previously recognized 1996 and
1995 restructuring charges. Offsetting this reversal is a $22.0 million charge
for new 1997 restructuring programs. The net impact on 1997 operations, as a
result of the restructuring activities, was a credit of $1.1 million. The 1997
charge includes $3.1 million for exiting certain European aftermarket product
lines and the related employment reductions, $6.8 million for termination of
certain European administrative and support personnel, $7.5 million for
additional exit and severance costs related to the Puerto Rican retail
operations, $2.6 million for consolidation and reconfiguration of the North
American aftermarket service branch network and $2.0 million for other actions.
The Company anticipates that the actions related to the 1997 restructuring plan
will be complete by the end of 1998, and that most of the severance and exit
costs will be paid in 1998.
In the fourth quarter of 1996, the Company recognized a restructuring
charge of $57.6 million for costs associated with employee severance, exit and
consolidation costs for 132 international retail operations and 30 wholesale
aftermarket operations, rationalization of European manufacturing operations,
consolidation of lighting products, consolidation or closure of certain North
American warehouse facilities, consolidation of customer support functions in
the United States and streamlining of administrative and operational staff
functions worldwide. The charge consists of $22.7 million for the sale of 132
international retail aftermarket and 30 wholesale aftermarket operations, $14.7
million for corporate employee severance costs, $7.7 million for the
rationalization of European manufacturing operations, $5.3 million for
consolidation or closure of certain North American warehouse facilities, $2.8
million for consolidation of customer support functions in the United States,
$2.5 million for closure of the Leiters Ford facility and $1.9 million for other
miscellaneous actions, including the consolidation of the European after market
market management function into the European manufacturing headquarters. The
Company's 1997 progress and actual implementation of the 1996 restructuring plan
resulted in 1997 operating results being increased by $20.8 million for
severance and
16
<PAGE> 19
MANAGEMENT'S DISCUSSION AND ANALYSIS -- CONTINUED
$1.4 million of exit and consolidation costs being reversed. The Company expects
to pay out most of the remaining 1996 severance and exit costs in 1998.
Results of operations in the second and fourth quarters of 1995 include
restructuring charges of $6.1 million and $20.8 million, respectively. These
charges were comprised of $20.1 million for employee severance and $6.8 million
for exit costs and consolidation of certain facilities. The workforce reductions
and consolidation of facilities were completed as of December 31, 1996.
Operating results for 1997 were increased by $0.9 million relating to 1995 exit
costs being reversed. The Company expects to pay out the remaining 1995 exit
costs in 1998.
Reengineering and Other Related Charges
Operating results for 1997 include a credit of $1.6 million relating to
1996 reengineering and other related charges being reversed.
In 1996, the Company initiated an extensive effort to strategically review
its businesses and focus on its competencies manufacturing, engineering and
distribution. As a result of this process, the Company recognized a charge of
$11.4 million for professional fees and personnel costs related to the strategic
review of the Company and changes in management and related costs.
In 1995, the Company recognized a charge of $13.9 million for reengineering
and other costs. These costs included $7.0 million for professional fees and
personnel costs, and $6.9 million primarily for certain other non-recurring
costs relating to brand consolidation at the customer level of the Company's
Federal-Mogul(R), TRW(R) and Sealed Power(R) branded engine parts.
Adjustment of Assets Held for Sale to Fair Value and Other Long Lived Assets
The Company continually reviews all components of its businesses for
possible improvement of future profitability through acquisition, divestiture,
reengineering or restructuring. The Company also continually reviews and updates
its impairment reserves related to the divestiture of its remaining
international retail aftermarket operations and adjusts the reserve components
to approximate their net fair value.
In the fourth quarter of 1997, the Company recognized a charge of $2.4
million to write-down certain long lived assets to fair value. As of December
31, 1997, assets held for sale primarily include retail aftermarket operations
in Puerto Rico, Ecuador, Venezuela and Panama. By the end of the first quarter
of 1998, the Company expects to have successfully exited all of its retail
aftermarket businesses, except for Puerto Rico where the Company continues to
seek a buyer.
During 1996, management designed a restructuring plan to aggressively
improve the Company's cost structure, streamline operations and divest the
Company of underperforming assets. As part of this plan, the Company decided to
sell 132 international retail aftermarket operations, sell or restructure 30
wholesale aftermarket operations and consolidate a North American manufacturing
operation. The carrying value of assets held for sale was reduced to fair value
based on estimates of selling values less costs to sell. Selling values used to
determine the fair value of assets held for sale were determined using market
prices (i.e. valuation multiples) of comparable companies from other 1996
transactions. The resulting adjustment of $148.5 million to reduce assets held
for sale to fair value was recorded in the fourth quarter of 1996. As previously
described in this section, the Company made significant progress related to the
implementation of the 1996 restructuring plan. Also in 1996, based upon the
final sale, the Company recognized an additional writedown of $2.8 million to
the net asset value of the United States ball bearings operations. In 1995, the
Company decided to sell the ball bearings operations and reduced the carrying
value by $17.0 million to record assets held for sale at fair value.
In 1995, the Company also decided to sell its heavy wall bearing operations
in Germany and Brazil. The Company estimated the fair value of the businesses
held for sale based on discussions with prospective buyers, adjusted for selling
costs. The Company reduced its carrying value by $17 million to record assets
held for sale
17
<PAGE> 20
MANAGEMENT'S DISCUSSION AND ANALYSIS -- CONTINUED
at fair value. The heavy wall bearing operations were sold in January 1997 for
net proceeds of $8.9 million, which approximated the carrying value of the
assets at December 31, 1996.
In addition, in 1995, the Company reduced the carrying value of certain
other impaired long-lived assets by $17.8 million to record them at fair value.
No further fair value adjustments were recorded for these assets in 1996 or
1997.
Net sales for all assets held for sale and adjusted to fair value
approximated $114 million, $335 million, and $322 million in 1997, 1996 and
1995, respectively. Net sales for the remaining retail aftermarket operations
held for sale at December 31, 1997 approximated $44 million, $48 million and $22
million in 1997, 1996 and 1995, respectively.
Interest Expense
Interest expense decreased $10.6 million in 1997 to $32.0 million. The
decrease was primarily due to a $188 million reduction of debt which resulted
from improvements in working capital and the sale of the South African and
Australian businesses. Although the Company decreased its debt by $104 million
from 1995 to 1996, interest expense increased $5.3 million in 1996 primarily due
to a higher average debt level than in 1995. Excluding the U.S. and European
revolving credit facilities, which were classified as short-term debt during
1996 and as long-term debt during 1995, the weighted average interest rate for
short-term debt increased to 10.9% for 1996 from 9.5% for 1995. The interest
rate on the U.S. and European revolving credit facilities at December 31, 1996
and 1995 was 6.1% and 6.2%, respectively.
Income Taxes
At December 31, 1997, the Company had deferred tax assets, net of a $44.4
million valuation allowance, of $140.5 million and deferred tax liabilities of
$75.9 million.
The net deferred tax asset of $64.6 million included the tax benefits of
$58.2 million related to the Company's postretirement benefit obligation at
December 31, 1997. The Company expects to realize the benefits associated with
this obligation over a period of 35 to 40 years.
The difference between the 1997 effective income tax rate and the statutory
tax rate is principally due to utilization of losses on foreign investment and
an income tax benefit related to the sales of the South African and Australian
businesses (refer also to Note 16 of the Consolidated Financial Statements).
LIQUIDITY AND CAPITAL RESOURCES
Cash flow from operations of $215.7 million in 1997 increased significantly
during 1997 primarily due to increased earnings. The Company also reduced
inventory from operations by $59.9 million in 1997. Inventory reductions in the
North American aftermarket business were primarily responsible for the decrease.
The decrease in North America aftermarket inventory is attributable to reduced
lead times while still maintaining availability of products and modifying safety
stock levels.
Cash flow used by investing activities of $5.5 million in 1997 include
$28.1 million for the British pound currency option, described later in this
section, and $2.4 million for other professional fees paid in anticipation of
the T&N acquisition. In addition, cash flows used by investing activities
include the receipt of $73.6 million in net proceeds from the 1997 divestitures.
Capital expenditures, excluding the T&N and Fel-Pro transactions, are
anticipated to be approximately $65 million in 1998, primarily for enhanced
manufacturing capabilities and process improvements.
Cash flow from 1997 financing activities were $298.1 million, an increase
of $420.9 million from 1996. The following events were primarily responsible for
the net increase for 1997:
Issuance of Preferred Securities of Affiliate: In December 1997, the
Company's financing trust completed a $575 million private issuance of
11,500,000 shares of 7% Trust Convertible Preferred Securities. The
18
<PAGE> 21
MANAGEMENT'S DISCUSSION AND ANALYSIS -- CONTINUED
convertible preferred securities are redeemable at the Company's option, in
whole or in part, on or after December 6, 2000. All outstanding convertible
securities are required to be redeemed no later than December 1, 2027. The
Company intends to use the proceeds, net of $17.2 million in related fees, to
finance a portion of the proposed T&N transaction.
Issuance of Senior Notes: In April 1997, the Company issued a fully
subscribed $125 million debt offering of ten year 8.8% senior notes. Proceeds
from the offering were used to reduce the Company's short-term debt and the
early extinguishment of the private placement debt.
Extinguishment of Private Placement Debt: In the second quarter of 1997,
the Company retired $64.7 million in private placement debt. The early
retirement of this debt eliminated high coupon debt and potentially restrictive
covenants giving the Company greater financial flexibility in the future. In
addition, the early retirement of this debt involved a make whole payment that
resulted in a $4.1 million pretax ($2.6 million after tax) extraordinary loss.
Accounts Receivable Securitization: During 1997, the Company replaced an
existing accounts receivable securitization program with a new program which
provides up to $100 million of financing. On an ongoing basis, the Company sells
certain accounts receivable to a subsidiary of the Company, which then sells
such receivables, without recourse, to a master trust. Amounts sold under this
arrangement were $63.2 million as of December 31, 1997, and have been excluded
from the balance sheet. During 1997, cash payments totaling $31.8 million were
made to the master trust related to the Company's accounts receivable
securitization. These cash payments effectively increased the Company's
investment in the accounts receivable securitization.
Multicurrency Revolver: In June 1997, the Company entered into a new $350
million multicurrency revolving credit facility with a consortium of
international banks which matures in June 2002. The multicurrency revolving
credit facility replaced the existing U.S. and European revolving credit
facilities. The multicurrency revolving credit facility contains restrictive
covenants that, among other matters, require the Company to maintain certain
financial ratios. As of December 31, 1997, there were no borrowings outstanding
against the multicurrency revolving credit facility.
In December 1997, the Company entered into a $3.25 billion committed bank
facility with a reputable financial institution related to the proposed T&N
acquisition. The facility provides for up to $2.75 billion of senior debt and up
to $500 million of subordinated debt. This facility is contingent upon the
acquisition of T&N, and accordingly no amounts are outstanding as of December
31, 1997. Certain fees relating to this facility have been incurred and paid as
of December 31, 1997. Subsequent to the planned T&N acquisition, the Company
intends to put in place a permanent capital structure with an appropriate
combination of equity and debt.
The Company believes that cash flow from operations will continue to be
sufficient to meet its ongoing working capital requirements.
ENVIRONMENTAL MATTERS
The Company is a party to lawsuits filed in various jurisdictions alleging
claims pursuant to the Comprehensive Environmental Response Compensation and
Liability Act of 1980 (CERCLA) or other state or federal environmental laws. In
addition, the Company has been notified by the Environmental Protection Agency
and various state agencies that it may be a potentially responsible party (PRP)
for the cost of cleaning up certain other hazardous waste storage or disposal
facilities pursuant to CERCLA and other federal and state environmental laws.
PRP designation requires the funding of site investigations and subsequent
remedial activities. Although these laws could impose joint and several
liability upon each party at any site, the potential exposure is expected to be
limited because at all sites other companies, generally including many large,
solvent public companies, have been named as PRPs. In addition, the Company has
identified certain present and former properties at which it may be responsible
for cleaning up environmental contamination.
19
<PAGE> 22
MANAGEMENT'S DISCUSSION AND ANALYSIS -- CONTINUED
The Company is actively seeking to resolve these matters. Although difficult to
quantify based on the complexity of the issues, the Company has accrued the
estimated cost associated with such matters based upon current available
information from site investigations and consultants. The environmental and
legal reserve was approximately $11 million at December 31, 1997 and $12 million
at December 31, 1996. Management believes that such accruals will be adequate to
cover the Company's estimated liability for its exposure in respect of such
matters.
FOREIGN CURRENCY AND COMMODITY CONTRACTS
In connection with the proposed T&N acquisition, the Company purchased for
$28.1 million a foreign currency option with a notional amount of $2.5 billion
to cap the effect of potential unfavorable fluctuations in the British
pound/U.S. dollar exchange rate. The cost of the option and its change in fair
value has been reflected in the results of operations in the fourth quarter of
1997. At December 31, 1997 the Company has recognized a net loss on this
transaction of $10.5 million.
The Company is subject to exposure to market risks from changes in foreign
exchange rates and raw material price fluctuations, derivative financial
instruments are utilized by the Company to reduce those risks. Except for the
British pound currency option discussed above, the Company does not hold or
issue derivative financial instruments for trading purposes.
Other than the British pound currency option discussed above, the Company
does not have foreign exchange forward or currency option contracts outstanding
at December 31, 1997.
In the first quarter of 1998, the Company settled the British pound
currency option, resulting in a pretax loss of $17.3 million. Also in the first
quarter of 1998, the Company entered into a forward contract to purchase 1.5
billion British pounds for a notional amount approximating $2.45 billion. The
forward contract expires in the first quarter of 1998.
OTHER MATTERS
Conversion of Series D Convertible Exchangeable Preferred Stock
In August 1997, the Company announced a call for the redemption of all its
outstanding $3.875 Series D Convertible Exchangeable Preferred Stock. These
preferred stockholders elected to convert each preferred share into 2.778 shares
of common stock. The Company issued 4.4 million shares of common stock in
exchange for all of the outstanding Series D convertible exchangeable preferred
stock.
Year 2000 Costs
The Year 2000 issue is the result of computer programs being written using
two digits rather than four to define the applicable year. The Company has
established a team that has completed an awareness program and assessment
project to address the Year 2000 issue. In addition, the Board of Directors has
received status reports related to the Company's progress in addressing the Year
2000 issue. The Company has determined that it will be required to modify or
replace portions of its software so that its computer systems will properly
utilize dates beyond December 31, 1999. The Company has initiated remediation,
and is implementing the action plan to address the Year 2000 issue. The Company
presently believes that with modifications to existing software and conversions
to new software, the Year 2000 issue can be mitigated. However, if such
modifications and conversions are not made, or are not completed timely, the
Year 2000 issue could have a material impact on the operations of the Company.
The Company has initiated formal communications with a substantial majority
of its significant suppliers and large customers to determine their plans to
address the Year 2000 issue. While the Company expects a successful resolution
of all issues, there can be no guarantee that the systems of other companies on
which the Company's systems rely will be converted in a timely manner, or that a
failure to convert by a supplier or customer, or a conversion that is
incompatible with the Company's systems, would not have a material adverse
20
<PAGE> 23
MANAGEMENT'S DISCUSSION AND ANALYSIS -- CONTINUED
effect on the Company. The Company has determined it has no exposure to
contingencies related to the Year 2000 issue for the products it has sold.
The Company has contracts in place with external resources and has
allocated internal resources to reprogram or replace, and test the software for
Year 2000 modifications. The Company plans to complete the Year 2000 project
within one year. The total cost of the Year 2000 project is estimated to be $17
million and is being funded through operating cash flows. Of the total project
cost, approximately $11 million is attributable to the purchase of new software
which will be capitalized. The remaining $6 million represents maintenance and
repair of existing systems and will be expensed as incurred. The Company expects
a substantial majority of the costs will be incurred in 1998, and any remaining
costs incurred in 1999 are expected to be immaterial. As of December 31, 1997,
the Company had incurred and expensed approximately $0.7 million related to the
completed awareness program and assessment project and the implementation of
their remediation plan.
The costs of the project and the date which the Company plans to complete
the Year 2000 modifications are based on management's best estimates, which were
derived utilizing numerous assumptions of future events including the continued
availability of certain resources, third party modification plans and other
factors. However, there can be no guarantee that these estimates will be
achieved and actual results could differ materially from those plans. Specific
factors that might cause such material differences include, but are not limited
to, the availability and cost of personnel trained in this area, the ability to
locate and correct all relevant computer codes and similar uncertainties.
As a result of the Company's due diligence related to the proposed T&N
acquisition and the Fel-Pro acquisition, the Company expects costs to address
the Year 2000 issue for Fel-Pro to be immaterial, and T&N costs for repair and
maintenance of existing systems are expected to approximate $8 million.
Divestiture of Minority Interest
In February 1998, the Company announced the divestiture of its minority
interest in G. Bruss GmBH & Co. KG, a German manufacturer of seals and gaskets.
As part of the divestiture agreement, the Company increased their ownership to
100% in the Summerton, South Carolina gasket business. The Company also received
cash and recognized a gain as a result of these transactions. The gain
recognized is not expected to be significant to 1998 first quarter operating
results.
Customer Reorganization
On February 2, 1998, APS Holding Corporation (APS), filed for
reorganization protection under Chapter 11 of the United States Bankruptcy Code.
As of the date of the Chapter 11 filing, the Company's total receivables with
APS approximated $10 million. APS has received a capital line of credit from a
reputable financial institution and is continuing business operations. The
Company continues to do business with APS on a cash in advance basis. Although
difficult to quantify based upon the uncertainty of the financial condition of
APS, the Company believes that net uncollectible receivables, if any, from APS
will be immaterial.
In addition, APS is a customer of Fel-Pro. The Company believes that the
allowance established by Fel-Pro prior to the acquisition of Fel-Pro related to
receivables from APS is adequate to cover any uncollectible amounts.
Effect of Accounting Pronouncements
In 1997, the Financial Accounting Standards Board issued Statement No. 130,
Reporting Comprehensive Income. This Statement establishes standards for the
reporting and display of comprehensive income and its components in a full set
of general purpose financial statements. Statement 130 is effective for fiscal
years beginning after December 15, 1997. Beginning in 1998, the Company will
provide the information relating to comprehensive income to conform to the
Statement 130 requirements.
21
<PAGE> 24
MANAGEMENT'S DISCUSSION AND ANALYSIS -- CONTINUED
Also in 1997, the Financial Accounting Standards Board issued Statement No.
131, Disclosures about Segments of an Enterprise and Related Information. The
statement supersedes Financial Accounting Standards Board Statement No. 14 and
establishes standards for the way public business enterprises report selected
information about operating segments in annual reports and interim financial
reports issued to shareholders. Statement 131 is effective for fiscal years
beginning after December 15, 1997. For the year ended 1998, the Company will
provide financial and descriptive information about its reportable operating
segments to conform to the Statement 131 requirements. Management plans to
report the requirements of Statement 131 for the following operating segments:
sealing systems, powertrain systems and general products.
22
<PAGE> 25
CONSOLIDATED STATEMENTS OF OPERATIONS
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
--------------------------------
1997 1996 1995
---- ---- ----
(MILLIONS OF DOLLARS,
EXCEPT PER SHARE AMOUNT)
<S> <C> <C> <C>
Net sales................................................... $1,806.6 $2,032.7 $1,999.8
Cost of products sold....................................... 1,381.8 1,660.5 1,602.2
-------- -------- --------
Gross margin................................................ 424.8 372.2 397.6
Selling, general and administrative expenses................ (286.2) (333.8) (299.3)
Gain on sales of businesses................................. -- -- 24.0
Restructuring (charges) credits............................. 1.1 (57.6) (26.9)
Reengineering and other related (charges) credits........... 1.6 (11.4) (13.9)
Adjustment of assets held for sale to fair value and other
long lived assets......................................... (2.4) (151.3) (51.8)
Interest expense............................................ (32.0) (42.6) (37.3)
Interest income............................................. 7.1 2.9 9.6
International currency exchange losses...................... (0.6) (3.7) (2.9)
British pound currency option cost, net..................... (10.5) -- --
Other expense, net.......................................... (3.4) (3.4) (2.4)
-------- -------- --------
Earnings (loss) before income taxes and extraordinary
item.............................................. 99.5 (228.7) (3.3)
Income tax expense (benefit)................................ 27.5 (22.4) 2.5
-------- -------- --------
Net Earnings (Loss) before Extraordinary Item........ 72.0 (206.3) (5.8)
======== ======== ========
Extraordinary item -- loss on early retirement of debt, net
of applicable income tax benefit.......................... (2.6) -- --
-------- -------- --------
Net Earnings (Loss).................................. 69.4 (206.3) (5.8)
Preferred dividends......................................... 5.5 8.7 8.9
-------- -------- --------
Net Earnings (Loss) Available to Common
Shareholders...................................... $ 63.9 $ (215.0) $ (14.7)
======== ======== ========
EARNINGS (LOSS) PER COMMON SHARE:
Income (loss) before extraordinary item................... $ 1.81 $ (6.20) $ (.42)
Extraordinary item........................................ (.07) -- --
-------- -------- --------
Net Earnings (Loss) Per Common Share................. $ 1.74 $ (6.20) $ (.42)
======== ======== ========
EARNINGS (LOSS) PER COMMON SHARE ASSUMING DILUTION:
Income (loss) before extraordinary item................... $ 1.67 $ (6.20) $ (.42)
Extraordinary item........................................ (.06) -- --
-------- -------- --------
Net Earnings (Loss) Per Common Share Assuming
Dilution.......................................... $ 1.61 $ (6.20) $ (.42)
======== ======== ========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
23
<PAGE> 26
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31
----------------------
1997 1996
---- ----
(MILLIONS OF DOLLARS)
<S> <C> <C>
ASSETS
Cash and equivalents........................................ $ 541.4 $ 33.1
Accounts receivable......................................... 158.9 204.3
Investment in accounts receivable securitization............ 48.7 27.0
Inventories................................................. 277.0 417.0
Prepaid expenses and income tax benefits.................... 113.2 81.5
-------- --------
Total current assets................................... 1,139.2 762.9
Property, plant and equipment............................... 313.9 350.3
Goodwill.................................................... 143.8 154.0
Other intangible assets..................................... 48.4 63.1
Business investments and other assets....................... 156.8 124.9
-------- --------
Total Assets........................................... $1,802.1 $1,455.2
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Short-term debt............................................. $ 28.6 $ 280.1
Accounts payable............................................ 102.3 142.7
Accrued compensation........................................ 36.8 37.6
Accrued customer incentives................................. 22.4 20.3
Restructuring reserves...................................... 31.5 55.2
Other accrued liabilities................................... 108.0 127.9
-------- --------
Total current liabilities.............................. 329.6 663.8
Long-term debt.............................................. 273.1 209.6
Postemployment benefits..................................... 190.9 207.1
Other accrued liabilities................................... 64.2 56.2
-------- --------
Total liabilities...................................... 857.8 1,136.7
Minority interest -- preferred securities of affiliate...... 575.0 --
SHAREHOLDERS' EQUITY
Series D preferred stock.................................... -- 76.6
Series C ESOP preferred stock............................... 49.0 53.1
Common stock................................................ 201.0 175.7
Additional paid-in capital.................................. 332.6 283.5
Accumulated deficit......................................... (123.6) (193.0)
Unearned ESOP compensation.................................. (21.8) (28.4)
Currency translation and other.............................. (67.9) (49.0)
-------- --------
Total Shareholders' Equity............................. 369.3 318.5
-------- --------
Total Liabilities and Shareholders' Equity............. $1,802.1 $1,455.2
======== ========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
24
<PAGE> 27
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-----------------------------
1997 1996 1995
---- ---- ----
(MILLIONS OF DOLLARS)
<S> <C> <C> <C>
CASH PROVIDED FROM (USED BY) OPERATING ACTIVITIES
Net earnings (loss)....................................... $ 69.4 $(206.3) $ (5.8)
Adjustments to reconcile net earnings (loss) to net cash
provided from (used by) operating activities:
Depreciation and amortization.......................... 52.8 63.7 61.0
Gain on sales of businesses............................ -- -- (24.0)
Restructuring charges (credits)........................ (1.1) 57.6 26.9
Reengineering and other related charges (credits)...... (1.6) 11.4 13.9
Adjustment of assets held for sale to fair value and
other long lived assets.............................. 2.4 151.3 51.8
Vesting of restricted stock............................ 9.0 0.4 0.1
Loss on early retirement of debt....................... 4.1 -- --
British pound currency option cost, net................ 10.5 -- --
Deferred income taxes.................................. 13.0 (27.8) (16.2)
Postemployment benefits................................ (7.7) (2.0) 1.8
Decrease (increase) in accounts receivable............. 7.6 46.5 (5.0)
Decrease (increase) in inventories..................... 59.9 54.5 (103.9)
Increase (decrease) in accounts payable................ (19.5) (25.5) 7.2
Payments against restructuring and reengineering
reserves............................................. (26.2) (17.6) (19.4)
Increase (decrease) in current liabilities and other 43.1 42.8 (23.1)
------- ------- -------
Net Cash Provided From (Used By) Operating
Activities........................................... $ 215.7 $ 149.0 $ (34.7)
======= ======= =======
CASH PROVIDED FROM (USED BY) INVESTING ACTIVITIES
Expenditures for property, plant and equipment and other
long-term assets....................................... $ (49.7) $ (54.2) $ (78.5)
Acquisitions of businesses................................ -- (.3) (72.1)
Payments for rationalization of acquired businesses....... -- -- (7.3)
Proceeds from sales of business investments............... 73.6 42.0 48.5
Fees paid in anticipation of business acquisition......... (30.5) -- --
Other..................................................... 1.1 -- --
------- ------- -------
Net Cash Used By Investing Activities.................. $ (5.5) $ (12.5) $(109.4)
======= ======= =======
CASH PROVIDED FROM (USED BY) FINANCING ACTIVITIES
Issuance of common stock.................................. $ 14.2 $ .6 $ .2
Repurchase of common stock................................ -- -- (9.0)
Proceeds from issuance of long-term debt.................. 179.6 -- 166.2
Principal payments on long-term debt...................... (127.4) (29.4) (24.9)
Increase (decrease) in short-term debt.................... (235.8) (61.4) 33.7
Fees for early retirement of debt......................... (4.1) -- --
Fees paid for debt issuance............................... (25.6) -- --
Investment in accounts receivable securitization.......... (31.8) -- --
Issuance of preferred securities of affiliate............. 575.0 -- --
Fees paid for issuance of preferred securities of
affiliate.............................................. (17.2) -- --
Dividends................................................. (24.8) (26.9) (27.3)
Other..................................................... (4.0) (5.7) (.4)
------- ------- -------
Net Cash Provided From (Used By) Financing
Activities........................................... 298.1 (122.8) 138.5
------- ------- -------
Increase (Decrease) In Cash And Equivalents............ 508.3 13.7 (5.6)
Cash and equivalents at beginning of year................... 33.1 19.4 25.0
------- ------- -------
Cash and Equivalents at End of Year.................... $ 541.4 $ 33.1 $ 19.4
======= ======= =======
</TABLE>
See accompanying Notes to Consolidated Financial Statements
25
<PAGE> 28
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
SERIES C RETAINED
SERIES C ESOP ADDITIONAL EARNINGS UNEARNED CURRENCY
PREFERRED PREFERRED COMMON PAID-IN (ACCUMULATED ESOP TRANSLATION
STOCK STOCK STOCK CAPITAL DEFICIT) COMPENSATION AND OTHER TOTAL
--------- --------- ------ ---------- ------------ ------------ ----------- -----
(MILLIONS OF DOLLARS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31,
1994....................... $76.6 $59.1 $174.9 $277.8 $ 73.3 $(39.8) $(33.4) $ 588.5
Net loss..................... (5.8) (5.8)
Net issuance of restricted
stock...................... 2.2 6.5 (7.7) 1.0
Exercise of stock options.... .2 .2
Repurchase of common stock... (1.9) (5.3) (7.2)
Retirement of Series C ESOP
preferred stock............ (2.3) (2.3)
Amortization of unearned ESOP
compensation............... 5.5 5.5
Dividends.................... (27.3) (27.3)
Preferred dividend tax
benefits................... 1.6 1.6
Currency translation......... (1.5) (1.5)
Pension adjustment........... (2.4) (2.4)
----- ----- ------ ------ ------- ------ ------ -------
BALANCE AT DECEMBER 31,
1995....................... $76.6 $56.8 $175.2 $280.8 $ 40.2 $(34.3) $(45.0) $ 550.3
===== ===== ====== ====== ======= ====== ====== =======
Net loss..................... (206.3) (206.3)
Net issuance of restricted
stock...................... .3 .9 (1.2) --
Exercise of stock options.... .2 .4 .6
Retirement of Series C ESOP
preferred stock............ (3.7) (3.7)
Amortization of unearned ESOP
compensation............... 5.9 5.9
Dividends.................... (26.9) (26.9)
Preferred dividend tax
benefits................... 1.4 1.4
Currency translation effect
on assets held for sale.... 20.1
Currency translation......... (24.4)
Pension adjustment........... 1.5 1.5
----- ----- ------ ------ ------- ------ ------ -------
BALANCE AT DECEMBER 31,
1996....................... $76.6 $53.1 $175.7 $283.5 $(193.0) $(28.4) $(49.0) $ 318.5
===== ===== ====== ====== ======= ====== ====== =======
Net earnings................. 69.4 69.4
Conversion of Series D
preferred stock............ (76.6) 22.3 54.3 --
Net repurchase of restricted
stock...................... (.4) (1.1) 1.5 --
Vesting of restricted
stock...................... 5.0 5.2 10.2
Exercise of stock options.... 3.4 10.8 14.2
Retirement of Series C ESOP
preferred stock............ (4.1) (4.1)
Amortization of unearned ESOP
compensation............... 6.6 6.6
Dividends.................... (24.8) (24.8)
Preferred dividend tax
benefits................... 4.9 4.9
Currency translation......... (27.4) (27.4)
Pension adjustment........... 1.8 1.8
----- ----- ------ ------ ------- ------ ------ -------
BALANCE AT DECEMBER 31,
1997....................... $ -- $49.0 $201.0 $332.6 $(123.6) $(21.8) $(67.9) $ 369.3
===== ===== ====== ====== ======= ====== ====== =======
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
26
<PAGE> 29
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ACCOUNTING POLICIES
ORGANIZATION -- Federal-Mogul Corporation (the Company) is a global
manufacturer and distributor of a broad range of non-discretionary parts
primarily for automobiles, light trucks, heavy trucks, farm and construction
vehicles. The Company was founded in 1899.
PRINCIPLES OF CONSOLIDATION -- The consolidated financial statements
include the accounts of the Company and its majority-owned subsidiaries.
Intercompany accounts and transactions have been eliminated in consolidation.
CASH AND EQUIVALENTS -- The Company considers all highly liquid investments
with maturities of 90 days or less from the date of purchase to be cash
equivalents.
INVENTORIES -- Inventories are stated at the lower of cost or market. Cost
determined by the last-in, first-out (LIFO) method was used for 55% and 48% of
the inventory at December 31, 1997 and 1996, respectively. The remaining
inventories are costed using the first-in, first-out (FIFO) method. If
inventories had been valued at current cost, amounts reported at December 31
would have been increased by $44.5 million in 1997 and $49.4 million in 1996.
Inventory quantity reductions resulting in liquidations of certain LIFO
inventory layers increased net earnings by $3.2 million and $3.1 million ($.08
and $.09 per diluted share) in 1997 and 1996, respectively. There was no effect
on operations for 1995.
At December 31, inventories consisted of the following:
<TABLE>
<CAPTION>
1997 1996
---- ----
(MILLIONS OF
DOLLARS)
<S> <C> <C>
Finished products........................................... $254.6 $417.0
Work-in-process............................................. 21.8 28.0
Raw materials............................................... 15.7 20.0
------ ------
292.1 465.0
Reserve for inventory valuation............................. (15.1) (48.0)
------ ------
$277.0 $417.0
====== ======
</TABLE>
The $32.9 million decrease in the reserve for inventory valuation resulted
primarily from the Company's initiative to dispose of fully reserved slow moving
and obsolete inventory, and the sales of certain international retail and
wholesale businesses.
GOODWILL AND OTHER INTANGIBLE ASSETS -- Intangible assets, which result
principally from acquisitions, consist of goodwill, trademarks, non-compete
agreements, patents and other intangibles. Intangible assets are periodically
reviewed for impairment based on an assessment of future cash flows, or fair
value for assets held for sale, to ensure that they are appropriately valued.
Intangible assets are amortized on a straight-line basis over their estimated
useful lives, generally ranging from three to fifteen years for other intangible
assets and generally forty years for goodwill. Goodwill and other intangible
assets reflected in the consolidated balance sheets are net of accumulated
amortization of $20.0 million and $18.7 million for goodwill and $28.9 million
and $22.1 million for other intangible assets at December 31, 1997 and 1996,
respectively. Impairment charges recorded in 1997, 1996 and 1995 related
primarily to assets held for sale. Management believes that the remaining
intangible assets, which relate only to the core manufacturing and distribution
businesses, are not impaired, and their remaining amortization periods are
appropriate.
REVENUE RECOGNITION -- The Company recognizes revenue and returns from
product sales and the related customer incentive and warranty expense when goods
are shipped to the customer.
27
<PAGE> 30
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
RESEARCH AND DEVELOPMENT AND ADVERTISING COSTS -- The Company expenses
research and development costs as incurred. Research and development expense was
$13.1 million, $14.4 million and $15.1 million for 1997, 1996 and 1995,
respectively.
Costs associated with advertising and promotion are expensed as incurred.
Advertising and promotion expense was $31.8 million, $34.0 million and $19.1
million for 1997, 1996 and 1995, respectively.
CURRENCY TRANSLATION -- Exchange adjustments related to international
currency transactions and translation adjustments for subsidiaries whose
functional currency is the United States dollar (principally those located in
highly inflationary economies) are reflected in the consolidated statements of
operations. Translation adjustments of international subsidiaries for which the
local currency is the functional currency are reflected in the consolidated
financial statements as a separate component of shareholders' equity.
EARNINGS PER SHARE -- In 1997, the Financial Accounting Standards Board
issued Statement No. 128, Earnings Per Share. Statement 128 replaced the
calculation of primary and fully-diluted earnings per share with basic and
diluted earnings per share. Unlike primary earnings per share, basic earnings
per share excludes any dilutive effects of options, warrants and convertible
securities. Diluted earnings per share is similar to the previously reported
fully diluted earnings per share. All earnings per share amounts for all periods
have been presented, and where appropriate, restated to conform to the Statement
128 requirements (refer to Note 13).
EFFECT OF ACCOUNTING PRONOUNCEMENT -- In 1997, the Financial Accounting
Standards Board issued Statement No. 130, Reporting Comprehensive Income. This
Statement establishes standards for the reporting and display of comprehensive
income and its components in a full set of general purpose financial statements.
Statement 130 is effective for fiscal years beginning after December 15, 1997.
Beginning in 1998, the Company will provide the information relating to
comprehensive income to conform to the requirements.
ENVIRONMENTAL LIABILITIES -- The Company recognizes estimated environmental
liabilities when a loss is probable. Such liabilities are generally not subject
to insurance coverage.
Each environmental obligation is estimated by engineering and legal
specialists within the Company based on current law and existing technologies.
Such estimates are based primarily upon the estimated cost of investigation and
remediation required and the likelihood that other potentially responsible
parties will be able to fulfill their commitments at the sites where the Company
may be jointly and severally liable with such parties (refer to Note 18).
The Company regularly evaluates and revises its estimates for environmental
obligations based on expenditures against established reserves and the
availability of additional information.
USE OF ESTIMATES -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.
RECLASSIFICATIONS -- Certain items in the prior year financial statements
have been reclassified to conform with the presentation used in 1997.
28
<PAGE> 31
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
2. RESTRUCTURING CHARGES
The following is a summary of restructuring charges and related activity
for 1995, 1996 and 1997 (in millions of dollars):
<TABLE>
<CAPTION>
1995 RESTRUCTURING 1996 RESTRUCTURING 1997 RESTRUCTURING
PROVISION PROVISION PROVISION
------------------- ------------------- --------------------
SEVERANCE EXIT SEVERANCE EXIT SEVERANCE EXIT TOTAL
--------- ---- --------- ---- --------- ---- -----
<S> <C> <C> <C> <C> <C> <C> <C>
1995 restructuring charge.......... $ 20.1 $ 6.8 $ -- $ -- $ -- $ -- $ 26.9
Payments against restructuring
reserves......................... (16.2) -- -- -- -- -- (16.2)
------ ----- ------ ----- ----- ---- ------
Balance of restructuring reserves
at December 31, 1995............. 3.9 6.8 -- -- -- -- 10.7
1996 restructuring charge.......... -- -- 42.8 14.8 -- -- 57.6
Payments against restructuring
reserves......................... (3.9) (3.4) (4.8) (1.0) -- -- (13.1)
------ ----- ------ ----- ----- ---- ------
Balance of restructuring reserves
at December 31, 1996............. -- 3.4 38.0 13.8 -- -- 55.2
1997 restructuring charge.......... -- -- -- -- 16.7 5.3 22.0
Adjustment to restructuring
reserves......................... -- (.9) (20.8) (1.4) -- -- (23.1)
------ ----- ------ ----- ----- ---- ------
1997 restructuring charges (net)... -- (.9) (20.8) (1.4) 16.7 5.3 (1.1)
Payments against restructuring
reserves......................... -- (1.7) (14.0) (3.7) (.1) -- (19.5)
------ ----- ------ ----- ----- ---- ------
Balance of restructuring reserves
at December 31, 1997............. $ -- $ 0.8 $ 3.2 $ 8.7 $16.6 $5.3 $ 34.6
====== ===== ====== ===== ===== ==== ======
</TABLE>
1997
The Company's total restructuring reserves at December 31, 1997 of $34.6
million include $3.1 million of severance which will be paid over the next two
years and has been classified as noncurrent other accrued liabilities in the
balance sheet.
Results of operations in the fourth quarter of 1997 include a $22.0 million
charge for 1997 severance and exit costs. The restructuring actions are designed
to improve the Company's cost structure, streamline operations and divest the
Company of underperforming assets. The majority of the 1997 charge is expected
to be paid out during 1998.
Employee severance costs for 1997 result from the planned termination of
approximately 500 employees, in various business operations of the Company. The
severance costs were based on the minimum levels that will be paid to the
affected employees pursuant to the Company's workforce reduction policies and
certain foreign governmental regulations.
Exit costs for 1997 principally include lease termination costs for certain
North American distribution service branches and retail aftermarket operations
in Puerto Rico, and the consolidation of certain European distribution, and
North American and European manufacturing operations.
1996
Primarily due to the T&N and Fel-Pro transactions (refer to Note 20), the
Company elected not to fully implement the following actions under the 1996
restructuring plan:
- Reductions to the operational and administrative staff were not made
to the extent that was originally planned.
29
<PAGE> 32
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
- Reconfiguration of the North American distribution network was
altered to accommodate the planned integration of T&N and Fel-Pro
aftermarket operations;
- Relocation of certain European manufacturing product lines to lower
cost areas within Europe and related workforce reductions did not take
place. Management of the Company decided not to pursue this action
primarily in anticipation of the integration of future acquisitions.
Primarily as a result of actions not fully implemented under the 1996
restructuring plan, the Company's 1997 operating results were increased by $23.1
million for the reversal of previously recognized 1996 and 1995 restructuring
charges.
Results of operations in the fourth quarter of 1996 include a restructuring
charge of $57.6 million for severance and exit costs for certain facilities.
As of December 31, 1997, employee severance costs related to the 1996
charge have resulted in the termination of approximately 600 employees,
primarily in the international retail aftermarket and wholesale aftermarket
operations, the North American distribution business and a closed manufacturing
operation. The Company expects to pay out most of the remaining 1996 severance
charge in 1998.
Exit costs for 1996 principally include lease termination costs of
international retail aftermarket stores and certain international wholesale
aftermarket operations, the consolidation of certain North American distribution
facilities and the closing of a North American manufacturing operation. The
Company expects to pay out most of the remaining 1996 exit costs in 1998.
1995
Results of operations in the second and fourth quarters of 1995 include
restructuring charges of $6.1 million and $20.8 million, respectively, for
employee severance and exit costs for certain facilities.
Employee severance costs for 1995 resulted from the termination of
approximately 750 employees, primarily in Argentina, the United States and
Europe. Exit costs for 1995 include efforts to consolidate and restructure
selected operations primarily in the United States including costs for certain
aftermarket and related facilities consolidated after the acquisition of SPX
Corporation's Sealed Power Replacement aftermarket business. Operating results
for 1997 were increased by $0.9 million relating to 1995 exit costs being
reversed.
3. ADJUSTMENT OF ASSETS HELD FOR SALE TO FAIR VALUE AND OTHER LONG LIVED ASSETS
The Company continually reviews all components of its businesses for
possible improvement of future profitability through acquisition, divestiture,
reengineering or restructuring.
The Company also continually reviews and updates its impairment reserves
related to the divestiture of its remaining international retail/wholesale
aftermarket operations and other long lived assets and adjusts the reserve
components to approximate their net fair value.
In the fourth quarter of 1997, the Company recognized a charge of $2.4
million to write-down certain long lived assets to fair value. As of December
31, 1997, assets held for sale primarily include retail aftermarket operations
in Puerto Rico, Ecuador, Venezuela and Panama. The Company expects to complete
the actions related to those assets to be disposed of in 1998.
During 1996, management designed and implemented a restructuring plan to
aggressively improve the Company's cost structure, streamline operations and
divest the Company of underperforming assets. As part of this plan, the Company
decided to sell 132 international retail aftermarket operations, sell or
restructure 30 wholesale aftermarket operations and consolidate a North American
manufacturing operation. The carrying value of the assets held for sale was
reduced to fair value based on estimates of selling values less costs to sell.
Selling values used to determine the fair value of assets held for sale were
determined using
30
<PAGE> 33
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
market prices (i.e. valuation multiples) of comparable companies from other 1996
transactions. The resulting adjustment of $148.5 million to reduce assets held
for sale to fair value was recorded in the fourth quarter of 1996. During 1997,
the Company completed the following actions related to the 1996 restructuring
plan; 1) divested 72 international retail aftermarket operations, 2) sold or
restructured 25 wholesale aftermarket operations, and 3) consolidated a North
American manufacturing operation (refer to Note 7). In 1996, the Company also
recorded an additional writedown of $2.8 million to the net asset value of the
United States ball bearings manufacturing operations. In 1995, the Company
decided to sell the ball bearings operations and reduced the carrying value by
$17.0 million to record assets held for sale at fair value.
In 1995, the Company decided to sell its heavy wall bearing operations in
Germany and Brazil and certain other non-strategic assets. The Company estimated
the fair value of the businesses held for sale based on discussions with
prospective buyers, adjusted for selling costs. The Company reduced its carrying
value by $17.0 million to record assets held for sale at fair value.
In addition, in 1995, the Company reduced the carrying value of certain
other impaired long-lived assets by $17.8 million to record them at fair value.
No further significant fair value adjustments were recorded for these assets in
1996 or 1997.
The carrying value of net assets held for sale as of December 31, 1997 and
1996 are as follows:
<TABLE>
<CAPTION>
1997 1996
---- ----
(MILLIONS OF
DOLLARS)
<S> <C> <C>
Accounts receivable......................................... $ 5 $ 38
Inventory................................................... 27 88
Noncurrent assets........................................... 3 11
Accounts payable............................................ (4) (29)
Other net current liabilities............................... (2) (1)
--- ----
Total....................................................... $29 $107
=== ====
</TABLE>
Net sales for all assets held for sale and adjusted to fair value
approximated $114 million, $335 million and $322 million in 1997, 1996 and 1995,
respectively. Net sales for the remaining retail aftermarket operations held for
sale at December 31, 1997 approximated $44 million, $48 million and $22 million
in 1997, 1996 and 1995, respectively.
4. REENGINEERING AND OTHER RELATED CHARGES
Operating results for 1997 include a credit of $1.6 million relating to the
reversal of certain 1996 reengineering and other related charges.
In 1996, the Company initiated an extensive effort to strategically review
its businesses and focus on its competencies of manufacturing, engineering and
distribution. As a result of this process, the Company incurred $11.4 million
for professional fees and personnel costs related to the strategic review of the
Company and changes in management and related costs.
In 1995, the Company recognized $13.9 million for reengineering and other
costs. These costs included $7.0 million in professional fees and personnel
costs to reengineer the business on a Company-wide basis and $6.9 million
primarily for certain other non-recurring costs relating to brand consolidation
at the customer level of the Company's Federal-Mogul(R), TRW(R) and Sealed
Power(R) branded engine parts.
5. CHANGES IN ACCOUNTING ESTIMATES
During the third and fourth quarters of 1996, the Company made certain
changes in accounting estimates totaling $51 million ($34 million after tax,
$.98 per share) attributable to 1996 events and new information
31
<PAGE> 34
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
becoming available. The changes in accounting estimates included increasing the
provision for customer incentive programs and related sales initiatives by $18
million, increasing the provision for excess and obsolete inventory by $13
million, increasing the provision for bad debts by $3 million, increasing the
provision for environmental and legal matters by $9 million and increasing
various other provisions by approximately $8 million.
6. ACQUISITIONS OF BUSINESSES
The Company accounted for the following acquisitions as purchases, and
accordingly, the purchase prices have been allocated to the acquired assets and
assumed liabilities based on their estimated fair values as of the acquisition
date. The consolidated statements of operations include the operating results of
the acquired businesses from the acquisition dates.
In September 1995, the Company completed its acquisition of the
Centropiezas group, a chain of retail stores in Puerto Rico.
Also in September 1995, the Company purchased United Kingdom-based Seal
Technology Systems Ltd., a leading designer and manufacturer of a specialized
range of seals and gaskets for the automotive sector and other industrial
markets.
In June 1995, the Company acquired Bertolotti Pietro e Figli, S.r.1.
(Bertolotti), a distributor of premium brand European auto and truck parts
throughout Italy.
7. SALES OF BUSINESSES
Results of operations have been included through the applicable date of
sale for the following transactions:
During 1997, the Company received $73.6 million in net cash proceeds for
sales of their aftermarket operations in South Africa, Australia, and Chile and
their heavy wall bearing operations in Germany and Brazil.
During 1996, the Company received $42 million in net cash proceeds for
sales of their United States ball bearings and electrical products manufacturing
operations.
Except for the sale of the electrical products manufacturing operations,
sales of businesses in 1997 and 1996 relate to assets previously adjusted to
fair value (refer to Note 3). Accordingly, no gain or loss was recognized on the
date of sale related to these transactions. In addition, no gain or loss was
recognized related to the sale of the electrical products manufacturing
operations.
In December 1995, the Company sold its equity interest in Westwind Air
Bearings, Ltd. in the United Kingdom and its affiliated operations in the United
States and Japan for $20.5 million. The Company recognized a pretax gain on the
sale of $16.2 million.
In April 1995, the Company completed the sale of the operations and
substantially all of the assets of its Precision Forged Products Division to
Borg-Warner Automotive, Inc. The Company received $28.0 million in cash and
retained customer receivables while Borg-Warner assumed certain liabilities. The
Company recognized a pretax gain on the sale of $7.8 million.
8. FINANCIAL INSTRUMENTS
Foreign Exchange Risk and Commodity Price Management
In connection with the proposed T&N plc acquisition (refer to Note 20) the
Company purchased a British pound currency option for $28.1 million with a
notional amount of $2.5 billion to cap the effect of potential unfavorable
fluctuations in the British pound/U.S. dollar exchange rate. The cost of the
option and its change in fair value has been reflected in the results of
operations in the fourth quarter of 1997. At
32
<PAGE> 35
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
December 31, 1997, the Company recognized a net loss on this transaction of
$10.5 million. The option was settled in the first quarter of 1998 resulting in
a loss of $17.3 million (refer to Note 20).
The Company is subject to exposure to market risks from changes in foreign
exchange rates and raw material price fluctuations. Derivative financial
instruments are utilized by the Company to reduce those risks. Except for the
British pound currency option discussed above, the Company does not hold or
issue derivative financial instruments for trading purposes.
Other than the British pound currency option discussed above, the Company
does not have foreign exchange forward or currency option contracts outstanding
at December 31, 1997. As of December 31, 1996, the Company had foreign exchange
forward contracts principally for Japanese yen and South African rand totaling a
notional amount of $6.6 million. At December 31, 1996, there was no deferred
gain or loss related to foreign exchange forward contracts.
The Company has entered into copper contracts to hedge against the risk of
price increases. These contracts are expected to offset the effects of price
changes on the firm purchase commitments for copper and expire in 1998. Under
the agreements, the Company is committed to purchase 7.3 million pounds of
copper. The net unrealized loss on these firm purchase commitments at December
31, 1997 is $0.7 million.
Deferred gains and losses are included in other assets and liabilities and
recognized in operations when the future purchase or sale occurs, or at the
point in time when the purchase or sale is no longer expected to occur.
Accounts Receivable Securitization
During 1997, the Company replaced an existing accounts receivable
securitization program with a new program which provides up to $100 million of
financing. On an ongoing basis, the Company sells certain accounts receivable to
Federal-Mogul Funding Corporation (FMFC), a wholly-owned subsidiary of the
Company, which then sells such receivables, without recourse, to a master trust.
Amounts sold under these arrangements were $63.2 million and $95 million at
December 31, 1997 and 1996 respectively, and have been excluded from the balance
sheets. The Company's retained interest in the accounts receivable sold to FMFC
is included in the balance sheet caption Investment in Accounts Receivable
Securitization.
Concentrations of Credit Risk
Financial instruments which potentially subject the Company to
concentrations of credit risk consist primarily of accounts receivable and cash
investments. The Company's customer base includes virtually every significant
global automotive manufacturer and a large number of distributors and installers
of automotive aftermarket parts. The Company's credit evaluation process,
reasonably short collection terms and the geographical dispersion of sales
transactions help to mitigate any concentration of credit risk. The Company
requires placement of investments in financial institutions evaluated as highly
creditworthy.
The Company does not generally require collateral for its trade accounts
receivable or those assets included in the investment in accounts receivable
securitization. The allowance for doubtful accounts of $18.7 million and $16.3
million at December 31, 1997 and 1996 is based upon the expected collectibility
of trade accounts receivable.
Fair Value of Financial Instruments
The carrying amounts of certain financial instruments such as cash and
equivalents, accounts receivable, accounts payable, British pound currency
option, and short-term debt approximate their fair values. The carrying amounts
and estimated fair values of the Company's long term debt were $273.1 million
and $286.1 million at December 31, 1997. The fair value of the long-term debt is
estimated using discounted cash flow analysis and the Company's current
incremental borrowing rates for similar types of arrangements.
33
<PAGE> 36
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
9. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost and include expenditures
which materially extend the useful lives of existing buildings, machinery and
equipment.
Depreciation is computed principally by the straight-line method for
financial reporting purposes and by accelerated methods for income tax purposes.
Depreciation expense for the years ended December 31, 1997, 1996 and 1995, was
$42.6 million, $49.8 million and $48.3 million, respectively.
At December 31, property, plant and equipment consisted of the following:
<TABLE>
<CAPTION>
ESTIMATED
USEFUL LIFE 1997 1996
----------- ---- ----
(MILLIONS OF DOLLARS)
<S> <C> <C> <C>
Land............................................. -- $ 29.1 $ 32.1
Buildings and building improvements.............. 40 yrs. 124.0 144.1
Machinery and equipment.......................... 3-12 yrs. 363.4 378.8
------- -------
516.5 555.0
Accumulated depreciation......................... (202.6) (204.7)
------- -------
$ 313.9 $ 350.3
======= =======
</TABLE>
The Company leases various facilities and equipment under both capital and
operating leases. Net assets subject to capital leases were not significant at
December 31, 1997 and 1996.
The balance of the deferred gain resulting from the 1988 sale and leaseback
of a portion of the corporate headquarters complex was $7.1 million at December
31, 1997. The deferred gain is being amortized over the term of the lease as a
reduction of rent expense. Future minimum payments under noncancelable operating
leases with initial or remaining terms of more than 1 year are, in millions:
1998 -- $20.3; 1999 -- $16.8; 2000 -- $13.8; 2001 -- $11.8; 2002 -- $10.6 and
thereafter $42.0. Future minimum lease payments have been reduced by
approximately $26.2 million for amounts to be received under sublease
agreements.
Total rental expense under operating leases was $29.1 million in 1997,
$33.8 million in 1996 and $34.0 million in 1995, exclusive of property taxes,
insurance and other occupancy costs generally payable by the Company.
10. DEBT
In December 1997, the Company entered into a $3.25 billion committed bank
facility with a reputable financial institution related to the proposed T&N plc
acquisition (refer to Note 20). The facility provides for up to $2.75 billion of
senior debt and up to $500 million of subordinated debt. This facility is
contingent upon the acquisition of T&N plc. Accordingly no amounts are
outstanding as of December 31, 1997.
In June 1997, the Company entered into a new $350 million multicurrency
revolving credit facility with a consortium of international banks which matures
in June 2002. The multicurrency revolving credit facility replaced the existing
U.S. and European revolving credit facilities. The multicurrency revolving
credit facility contains restrictive covenants that, among other matters,
require the Company to maintain certain financial ratios. As of December 31,
1997, there were no borrowings outstanding against the multicurrency revolving
credit facility. As of December 31, 1996, the Company had $185 million borrowed
against the U.S. revolver and $9 million borrowed against the European revolver,
both of which were included in short-term debt. Short-term debt also includes
international subsidiaries local credit arrangements that have terms in
accordance with local customary practice. The weighted average interest rate for
the Company's short-term debt was 9.9% and 7.9% as of December 31, 1997 and
1996, respectively.
34
<PAGE> 37
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
Long-term debt at December 31 consists of the following:
<TABLE>
<CAPTION>
1997 1996
---- ----
(MILLIONS OF
DOLLARS)
<S> <C> <C>
Medium-term notes........................................... $125.0 $125.0
Senior notes................................................ 124.6 --
Private placement debt...................................... -- 64.7
ESOP obligation............................................. 21.9 28.0
Other....................................................... 11.8 17.8
------ ------
283.3 235.5
Less current maturities included in short-term debt......... 10.2 25.9
------ ------
$273.1 $209.6
====== ======
</TABLE>
In April 1997, the Company issued $125.0 million of ten-year 8.8% senior
notes.
During the second quarter of 1997, the Company retired $64.7 million in
private placement debt. The early retirement of the debt required a make-whole
payment of $4.1 million, which was recognized as an extraordinary item of $2.6
million, net of the related tax benefit.
In August 1994, the Company initiated a medium-term note program for up to
$200 million. Notes were issued in maturities ranging from five to ten years.
The average interest rate was approximately 8.4%.
The ESOP obligation represents the unpaid principal balance on an 11 year
loan entered into by the Company's ESOP in 1989. Proceeds of the loan were used
by the ESOP to purchase the Company's Series C ESOP preferred stock. Payment of
principal and interest on the notes is unconditionally guaranteed by the
Company, and therefore, the unpaid principal balance of the borrowing is
classified as long-term debt. Company contributions and dividends on the
preferred shares held by the ESOP are used to meet semi-annual principal and
interest obligations.
The original ESOP obligation bore an annual interest rate of 11.5%. The
obligation was refinanced on June 30, 1995 at a fixed interest rate of 7.2%. The
ESOP obligation matures in December 2000.
Aggregate maturities of long-term debt for each of the years following 1998
are, in millions: 1999 -- $29.2; 2000 -- $31.8; 2001 -- $45.0; 2002 -- $6.0 and
thereafter $161.1.
Interest paid in 1997, 1996 and 1995 was $30.7 million, $43.5 million and
$37.1 million, respectively.
11. CAPITAL STOCK AND PREFERRED SHARE PURCHASE RIGHTS
The Company's articles of incorporation authorize the issuance of
60,000,000 shares of common stock, of which 40,196,603 shares, 35,130,359 shares
and 35,044,859 shares were outstanding at December 31, 1997, 1996 and 1995,
respectively.
In August 1997, the Company announced a call for the redemption of all its
outstanding $3.875 Series D Convertible Exchangeable Preferred Stock. These
preferred stockholders elected to convert each preferred share into 2.778 shares
of common stock. The Company issued 4.4 million shares of common stock in
exchange for all of the outstanding Series convertible exchangeable preferred
stock.
The Company's ESOP covers substantially all domestic salaried employees and
allocates Series ESOP Convertible Preferred Stock to eligible employees based on
their contributions to the Salaried Employees' Investment Program and their
eligible compensation. There were 773,351, 835,898 and 892,620 shares of Series
C ESOP preferred stock outstanding at December 31, 1997, 1996 and 1995,
respectively. The Series C ESOP preferred shares are nonvoting and pay dividends
at a rate of 7.5%. The Company repurchased and retired 62,547 Series C ESOP
preferred shares valued at $4.0 million during 1997 and 56,722 Series C ESOP
35
<PAGE> 38
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
preferred shares valued at $3.6 million during 1996, all of which were forfeited
by participants upon early withdrawal from the plan.
The Series C ESOP preferred stock is convertible into shares of the
Company's common stock at a rate of two shares of common stock for each share of
preferred stock. The Series C ESOP preferred stock may be issued only to a
trustee acting on behalf of an employee stock ownership plan or other employee
benefit plan of the Company. These shares are automatically converted into
shares of common stock in the event of any transfer to any person other than the
plan trustee. The Series C ESOP preferred stock is redeemable, in whole or in
part, at the option of the Company.
The charge to operations for the cost of the ESOP was $5.2 million in 1997,
$4.2 million in 1996 and $4.4 million in 1995. The Company made cash
contributions to the plan of $8.1 million in 1997 and 1996, and $8.5 million in
1995, including preferred stock dividends of $3.8 million in 1997, $4.1 million
in 1996 and $4.3 million in 1995. ESOP shares are released as principal and
interest on the debt is paid. The ESOP Trust uses the preferred dividends not
allocated to employees to make principal and interest payments on the debt.
Compensation expense is measured based on the fair value of shares committed to
be released to employees. Dividends on ESOP shares are treated as a reduction of
retained earnings in the period declared. The number of allocated shares and
suspense shares held by the ESOP were 532,817 and 240,534 at December 31, 1997,
and 504,435 and 331,463 at December 31, 1996, respectively. There were no
committed-to-be-released shares at December 31, 1997 and December 31, 1996. Any
repurchase of the ESOP shares is strictly at the option of the Company.
In 1988, the Company's Board of Directors authorized the distribution of
one Preferred Share Purchase Right (Right) for each outstanding share of common
stock of the Company. Each Right entitles shareholders to buy one-half of
one-hundredth of a share of a new Series of preferred stock at a price of $70.
As distributed, the Rights trade together with the common stock of the
Company. They may be exercised or traded separately only after the earlier to
occur of: (i) ten days following a public announcement that a person or group of
persons has obtained the right to acquire 10% or more of the outstanding common
stock of the Company (20% in the case of certain institutional investors), or
(ii) ten business days (or such later date as may be determined by action of the
Board of Directors) following the commencement or announcement of an intent to
make a tender offer or exchange offer which would result in beneficial ownership
by a person or group of persons of 10% or more of the Company's outstanding
common stock. Additionally, if the Company is acquired in a merger or other
business combination, each Right will entitle its holder to purchase, at the
Right's exercise price, shares of the acquiring Company's common stock (or stock
of the Company if it is the surviving corporation) having a market value of
twice the Right's exercise price.
The Rights may be redeemed at the option of the Board of Directors for
$.005 per Right at any time before a person or group of persons acquires 10% or
more of the Company's common stock. The Board may amend the Rights at any time
without shareholder approval. The Rights will expire by their terms on November
14, 1998.
12. MINORITY INTEREST -- PREFERRED SECURITIES OF AFFILIATE
In December 1997, the Company's wholly-owned financing trust ("Affiliated")
completed a $575 million private issue of 11.5 million shares of 7.0% Trust
Convertible Preferred Securities ("TCP Securities") with a liquidation value of
$50 per convertible security. The net proceeds from the TCP Securities were used
to purchase an equal amount of 7.0% Convertible Junior Subordinate Debentures
("Debentures") of the Company. The TCP Securities represent an undivided
interest in the Affiliate's assets, with a liquidation preference of $50 per
security.
Distribution on the TCP Securities are cumulative and will be paid
quarterly in arrears at an annual rate of 7.0%, and are included in the
consolidated statement of operations as a component of Other Expense, Net.
36
<PAGE> 39
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
The Company has the option to defer payment of the distributions for an
extension period of up to 20 consecutive quarters if the Company is in
compliance with the terms of the TCP Securities.
The shares of the TCP Securities are convertible, at the option of the
holder, into the Company's common stock at an equivalent conversion price of
approximately $51.50 per share, subject to adjustment in certain events. The TCP
Securities and the Debentures will be redeemable, at the option of the Company,
on or after December 6, 2000 at a Redemption Price, expressed as a percentage of
principal which is added to accrued and unpaid interest. The Redemption Price
range is from 104.2% on December 6, 2000 to 100.0% after December 1, 2007. All
outstanding TCP Securities and Debentures are required to be redeemed by
December 1, 2027.
37
<PAGE> 40
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
13. EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted
earnings per share (in millions, except per share data):
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Numerator:
Net earnings (loss) after extraordinary item.............. $69.4 $(206.3) $ (5.8)
Extraordinary item -- loss on early retirement of debt net
of applicable tax benefit.............................. (2.6) -- --
----- ------- ------
Net earnings (loss) before extraordinary item............. 72.0 (206.3) (5.8)
Series C preferred dividend requirement................... (2.4) (2.5) (2.7)
Series D preferred dividend requirement................... (3.1) (6.2) (6.2)
----- ------- ------
Numerator for basic earnings per share -- income (loss)
available to common shareholders before extraordinary
item................................................... $66.5 $(215.0) $(14.7)
Effect of dilutive securities:
Series C preferred dividend requirement................ 2.4 -- --
Series D preferred dividend requirement................ 3.1 -- --
Additional required ESOP contribution.................. (1.9) -- --
----- ------- ------
Numerator for diluted earnings per share -- income (loss)
available to common shareholders after assumed
conversions, before extraordinary item................. $70.1 $(215.0) $(14.7)
----- ------- ------
Numerator for basic earnings per share -- income (loss)
available to common shareholders after extraordinary
item...................................................... $63.9 $(215.0) $(14.7)
Numerator for diluted earnings per share -- income (loss)
available to common shareholders after extraordinary
item...................................................... $67.5 $(215.0) $(14.7)
Denominator:
Denominator for basic earnings per share -- weighted
average shares......................................... 36.6 34.7 34.6
Effect of dilutive securities:
Dilutive stock options outstanding..................... 0.4 -- --
Nonvested stock........................................ 0.3 -- --
Conversion of Series C preferred stock................. 1.6 -- --
Conversion of Series D preferred stock................. 3.0 -- --
----- ------- ------
Dilutive potential common shares.......................... 5.3 -- --
Denominator for dilutive earnings per share -- adjusted
weighted average shares and assumed conversions....... 41.9 34.7 34.6
===== ======= ======
Basic earnings (loss) per share before extraordinary item... $1.81 $ (6.20) $(0.42)
===== ======= ======
Basic earnings (loss) per share after extraordinary item.... $1.74 $ (6.20) $(0.42)
===== ======= ======
Diluted earnings (loss) per share before extraordinary
item...................................................... $1.67 $ (6.20) $(0.42)
===== ======= ======
Diluted earnings (loss) per share after extraordinary
item...................................................... $1.61 $ (6.20) $(0.42)
===== ======= ======
</TABLE>
For additional disclosures regarding the Series C and Series D preferred
stock, the employee stock options and nonvested stock shares, refer to Notes 11
and 14.
Convertible preferred securities (refer to Note 12) redeemable for 11.5
million shares of common stock were outstanding for a portion of 1997 but were
not included in the computation of diluted earnings per share because the effect
would be antidilutive.
38
<PAGE> 41
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
14. INCENTIVE STOCK PLANS
The Company's shareholders adopted stock option plans in 1976 and 1984 and
performance incentive stock plans in 1989 and 1997. These plans provide
generally for awarding restricted shares or granting options to purchase shares
of the Company's common stock. Restricted shares entitle employees to all the
rights of common stock shareholders, subject to certain transfer restrictions
and to forfeiture in the event that the conditions for their vesting are not
met. Options entitle employees to purchase shares at an exercise price not less
than 100% of the fair market value on the grant date and expire after a five or
ten year period as determined by the Board of Directors.
Under the plans, awards vest from 6 months to 5 years after their date of
grant, as determined by the Board of Directors at the time of grant. At December
31, 1997, there were 934,245 shares available for future grants under the plans.
In October 1997, the Company met certain share price performance criteria
under the 1989 Long-Term Incentive Plan which resulted in the recognition of
$5.4 million in compensation expense relating to the vesting of restricted stock
awards. The total compensation cost that has been charged to operations for
vesting of restricted stock awards was $9.0 million, $0.4 million and $0.1
million in 1997, 1996 and 1995, respectively.
The Company has elected to follow Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees" (APB 25) and related
interpretations in accounting for its employee stock awards. Accordingly, no
compensation cost has been recognized for its stock option grants, as the
exercise price of the Company's employee stock options equals the underlying
stock price on the date of grant. Had compensation cost for the Company's
stock-based compensation plans been determined based on the fair value at the
grant dates for awards under those plans consistent with the method of Financial
Accounting Standards Board Statement No. 123 "Accounting for Stock Based
Compensation," the Company's net earnings (loss), in millions, and earnings
(loss) per share would have been adjusted to the pro forma amounts indicated
below:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Net earnings (loss) as reported............................. $69.4 $(206.3) $(5.8)
Pro forma................................................... $70.7 $(207.1) $(6.0)
Basic earnings (loss) per share as reported................. $1.74 $ (6.20) $(.42)
Pro forma................................................... $1.78 $ (6.22) $(.43)
Diluted earnings (loss) per share as reported............... $1.61 $ (6.20) $(.42)
Pro forma................................................... $1.64 $ (6.22) $(.43)
</TABLE>
Pro forma information regarding net income and earnings per share is
required by Statement 123 as if the Company had accounted for its employee stock
options under the fair value method. The fair value for options is estimated at
the date of grant using a Black-Scholes option pricing model with the following
weighted-average assumptions for 1997, 1996 and 1995, respectively: risk-free
interest rates of 6.5%; dividend yields of 1.5%, 2.3% and 2.4%; volatility
factors of the expected market price of the Company's common stock of 27.2%,
11.2% and 8.1% and a weighted average expected life of the option of five years.
The fair value of nonvested stock awards is equal to the market price of the
stock on the date of the grant.
Since the above pro forma disclosures of results are only required to
consider grants awarded in 1995 and thereafter, the pro forma effects during
this initial phase-in period may not be representative of the effects on the
reported results for future years.
The weighted average fair value and the total number (in millions) of
options granted was $9.99, $3.34 and $3.09, and 0.9, 0.3 and 0.1 for 1997, 1996
and 1995, respectively. The weighted average fair value and total number of
nonvested stock awards granted was $24.47, $18.90 and $18.38 and 0.1, 0.2 and
0.4 for 1997, 1996 and 1995, respectively. All options and stock awards that are
not vested at December 31, 1997, vest solely on employees' rendering additional
service.
39
<PAGE> 42
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
The following table summarizes the activity relating to the Company's
incentive stock plans:
<TABLE>
<CAPTION>
NUMBER OF SHARES WEIGHTED-AVERAGE
(IN MILLIONS) PRICE
---------------- ----------------
<S> <C> <C>
Outstanding at January 1, 1995.............................. 2.4 $22.98
Options/stock granted..................................... .5 18.72
Options/stock lapsed or canceled.......................... (.3) 23.69
---- ------
Outstanding at December 31, 1995............................ 2.6 22.02
Options/stock granted..................................... .5 22.08
Options exercised......................................... -- --
Options/stock lapsed or canceled.......................... (.6) 22.32
---- ------
Outstanding at December 31, 1996............................ 2.5 22.03
Options/stock granted..................................... 1.0 31.74
Options exercised/stock vested............................ (1.0) 21.94
Options/stock lapsed or canceled.......................... (0.3) 22.29
---- ------
Outstanding at December 31, 1997............................ 2.2 $26.46
==== ======
Options exercisable at December 31, 1997.................. 0.9 $23.07
==== ======
Options exercisable at December 31, 1996.................. 1.3 $22.50
==== ======
Options exercisable at December 31, 1995.................. 1.5 $21.50
==== ======
</TABLE>
The following is a summary of the range of exercise prices for stock
options that are outstanding and the amount of nonvested stock awards at
December 31, 1997:
<TABLE>
<CAPTION>
WEIGHTED AVERAGE
OUTSTANDING -----------------------
RANGE AWARDS PRICE REMAINING LIFE
----- ----------- ----- --------------
<S> <C> <C> <C>
Options:
$15.69 to $23.50.............................. 0.8 $21.63 4 years
$23.50 to $41.28.............................. 1.2 $31.26 5 years
Nonvested stock............................... 0.2 -- --
---
Total......................................... 2.2
===
</TABLE>
15. POSTEMPLOYMENT BENEFITS
The Company maintains several defined benefit pension plans which cover
substantially all domestic employees and certain employees in other countries.
Benefits for domestic salaried employees are based on compensation, age and
years of service, while hourly employees' benefits are primarily based on
negotiated rates and years of service. International plans maintained by the
Company provide benefits based on years of service and compensation.
The Company's funding policy is consistent with funding requirements of
federal and international laws and regulations. Plan assets consist primarily of
listed equity securities and fixed income instruments.
Net periodic pension cost for the Company's defined benefit plans in 1997,
1996 and 1995 consists of the following:
40
<PAGE> 43
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
UNITED STATES PLANS
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
(MILLIONS OF DOLLARS)
(INCOME)/EXPENSE
<S> <C> <C> <C>
Service cost -- benefits earned during the period..... $ 7.8 $ 9.0 $ 7.3
Interest cost on projected benefit obligation......... 14.0 15.0 15.0
Actual return on plan assets.......................... (61.8) (30.8) (51.6)
Net amortization and deferral......................... 33.4 3.3 28.6
Curtailment loss...................................... -- 3.7 .5
------ ------ ------
Net periodic pension (income) cost.................... $ (6.6) $ .2 $ (.2)
====== ====== ======
</TABLE>
INTERNATIONAL PLANS
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
(MILLIONS OF DOLLARS)
(INCOME)/EXPENSE
<S> <C> <C> <C>
Service cost -- benefits earned during the period........... $ .3 $ .4 $ .4
Interest cost on projected benefit obligation............... 1.9 2.5 2.7
---- ---- ----
Net periodic pension cost................................... $2.2 $2.9 $3.1
==== ==== ====
</TABLE>
41
<PAGE> 44
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
The following table sets forth the funded status for the Company's defined
benefit plans at December 31:
UNITED STATES PLANS
<TABLE>
<CAPTION>
PLANS WITH ASSETS PLANS WITH
IN EXCESS OF ACCUMULATED
ACCUMULATED BENEFITS IN EXCESS
BENEFITS OF ASSETS
------------------ -------------------
1997 1996 1997 1996
---- ---- ---- ----
(MILLIONS OF DOLLARS)
<S> <C> <C> <C> <C>
Actuarial present value of benefit obligations:
Vested benefit obligation................................ $129.9 $ 96.2 $45.8 $ 88.8
====== ====== ===== ======
Accumulated benefit obligation........................... 139.1 102.1 55.5 106.4
====== ====== ===== ======
Projected benefit obligation............................. 140.8 104.0 56.4 107.1
------ ------ ----- ------
Plan assets at fair value................................ 243.8 177.8 49.9 84.8
------ ------ ----- ------
Plan assets in excess of (less than) projected benefit
obligation............................................. 103.0 73.8 (6.5) (22.3)
Unrecognized net (asset) liability at transition......... (2.7) (5.8) .7 .5
Unrecognized prior service cost.......................... 3.7 .5 6.0 10.0
Unrecognized net (gain) loss............................. (54.7) (23.2) (5.6) 3.2
------ ------ ----- ------
Accrued pension asset (liability) included in the
consolidated balance sheets............................ $ 49.3 $ 45.3 $(5.4) $ (8.6)
====== ====== ===== ======
</TABLE>
INTERNATIONAL PLANS
<TABLE>
<CAPTION>
ACCUMULATED BENEFITS
EXCEED ASSETS
---------------------
1997 1996
---- ----
(MILLIONS OF DOLLARS)
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested benefit obligation................................. $ 25.3 $ 32.9
------ ------
Accumulated benefit obligation............................ 26.6 34.5
------ ------
Projected benefit obligation.............................. 26.6 34.5
------ ------
Plan assets less than projected benefit obligation.......... (26.6) (34.5)
Unrecognized net loss....................................... 2.8 4.0
------ ------
Accrued pension liability included in the consolidated
balance sheet............................................. $(23.8) $(30.5)
====== ======
</TABLE>
The assumptions used in computing the above information are as follows:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Discount rates.............................................. 7 1/2% 7 1/2% 7 1/2%
Rates of increase in compensation levels.................... 4 1/2% 4 1/2% 4 1/2%
Expected long-term rates of return on assets................ 10 % 10 % 10 %
</TABLE>
The Company's minimum liability adjustment was $1.3 million and $13.4
million for United States plans at December 31, 1997 and 1996, respectively, and
$2.7 million and $3.5 million for international plans at December 31, 1997 and
1996, respectively.
The Company also provides health care and life insurance benefits for
certain domestic retirees covered under company-sponsored benefit plans.
Participants in these plans may become eligible for these benefits if they reach
normal retirement age while working for the Company. The Company's policy is to
fund benefit costs as they are provided, with retirees paying a portion of the
costs.
42
<PAGE> 45
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
The components of net periodic postretirement benefit costs are as follows
as of December 31:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
(MILLIONS OF DOLLARS)
<S> <C> <C> <C>
Service cost............................................. $ 2.5 $ 2.8 $ 2.3
Interest cost............................................ 10.5 10.8 10.4
Curtailment gain......................................... -- (7.5) (1.0)
Amortized gains.......................................... (.5) (.5) (1.1)
----- ----- -----
Net periodic postretirement benefits cost................ $12.5 $ 5.6 $10.6
===== ===== =====
</TABLE>
The following schedule reconciles the funded status of the Company's
postretirement benefit plans to the amounts recorded in the Company's balance
sheets as of December 31:
<TABLE>
<CAPTION>
1997 1996
---- ----
(MILLIONS OF
DOLLARS)
<S> <C> <C>
Accumulated postretirement benefit obligation (APBO):
Retirees.................................................... $107.6 $103.9
Active plan participants.................................... 42.8 46.9
------ ------
150.4 150.8
Unrecognized net gain (loss)................................ 3.8 (1.4)
Unrecognized prior service cost............................. 3.5 4.1
------ ------
Accrued postretirement benefits liability................... $157.7 $153.5
====== ======
</TABLE>
The discount rate used in determining the APBO was 7.5% at December 31,
1997 and 1996.
At December 31, 1997, the assumed annual health care cost trend used in
measuring the APBO approximated 7.5% in 1997 declining to 7.1% in 1998 and to an
ultimate rate of 5.5% estimated to be achieved in 2009.
At December 31, 1996, the assumed annual health care cost trend used in
measuring the APBO approximated 7.5% in 1996, declining to 7.1% in 1997 and to
an ultimate annual rate of 5.5% estimated to be achieved in 2008.
Increasing the assumed cost trend rate by 1% each year would have increased
the APBO by approximately 8.3% and 8.4% at December 31, 1997 and 1996,
respectively. Aggregate service and interest costs would have increased by
approximately 9.4% for 1997 and 1996, and 12.9% for 1995.
In 1991, the Company established a retiree health benefits account (as
defined in Section 401(h) of the Internal Revenue Code) within its domestic
salaried employees' pension plan. Annually, the Company may elect to transfer
excess pension plan assets (subject to defined limitations) to the 401(h)
account for purposes of funding current salaried retiree health care costs. The
Company transferred excess pension plan assets of $4.4 million in 1997, $4.2
million in 1996 and $4.2 million in 1995 to the 401(h) account to fund salaried
retiree health care benefits.
The Company sponsors two defined contribution retirement saving plans
covering substantially all domestic employees. Matching Company contributions
for the Salaried Employees' Investment Program are provided through the ESOP
(refer to Note 11). In addition, the Company provided matching contributions to
eligible employees based upon their contributions to the Employee Investment
Program of approximately $1.5 million, $1.6 million, and $1.2 million for 1997,
1996, and 1995, respectively.
43
<PAGE> 46
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
16. INCOME TAXES
Under the liability method, deferred tax assets and liabilities are
determined based on differences between financial reporting and tax bases of
assets and liabilities and are measured using the enacted tax rates and laws
that will be in effect when the differences are expected to reverse. The
components of earnings (loss) before income taxes and extraordinary item
consisted of the following:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
(MILLIONS OF DOLLARS)
<S> <C> <C> <C>
Domestic.................................................... $50.1 $ (88.3) $ 7.9
International............................................... 49.4 (140.4) (11.2)
----- ------- ------
$99.5 $(228.7) $ (3.3)
===== ======= ======
</TABLE>
Significant components of the provision for income taxes (tax benefit) are
as follows:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
(MILLIONS OF DOLLARS)
<S> <C> <C> <C>
Current:
Federal................................................... $ 9.6 $ (4.0) $ 12.7
State and local........................................... 0.2 2.3 1.2
International............................................. 6.6 6.3 9.3
----- ------ ------
Total current........................................ 16.4 4.6 23.2
Deferred:
Federal................................................... 6.1 (25.2) (9.0)
State and local........................................... 0.7 (1.8) (.9)
International............................................. 4.3 -- (10.8)
----- ------ ------
Total deferred....................................... 11.1 (27.0) (20.7)
----- ------ ------
$27.5 $(22.4) $ 2.5
===== ====== ======
</TABLE>
The reconciliation of income taxes (tax benefits) computed at the United
States federal statutory tax rate to income tax expense (benefit) is:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
(MILLIONS OF DOLLARS)
<S> <C> <C> <C>
Income taxes (tax benefits) at United States statutory
rate...................................................... $34.9 $(80.1) $(1.1)
Tax effect from:
Tax credits, state income taxes and other................. 2.1 1.8 (2.3)
Tax benefit related to the sale of South African and
Australian businesses.................................. (6.8) -- --
Losses on international operations without tax benefits
and foreign tax rate differences....................... (2.7) 55.9 5.9
----- ------ -----
$27.5 $(22.4) $ 2.5
===== ====== =====
</TABLE>
The following table summarizes the Company's total provision for income
taxes/(tax benefits):
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
(MILLIONS OF DOLLARS)
<S> <C> <C> <C>
Income tax expense (benefit)................................ $27.5 $(22.4) $ 2.5
Allocated to equity:
Currency translation...................................... (3.6) (4.9) 5.3
Preferred dividends....................................... (1.3) (1.5) (1.6)
Investment securities..................................... (0.6) .8 --
Other..................................................... 1.2 .7 .8
----- ------ -----
$23.2 $(27.3) $ 7.0
===== ====== =====
</TABLE>
44
<PAGE> 47
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
Significant components of the Company's deferred tax assets and liabilities
as of December 31 are as follows:
<TABLE>
<CAPTION>
1997 1996
---- ----
(MILLIONS OF DOLLARS)
<S> <C> <C>
Deferred tax assets:
Postretirement benefits..................................... $ 58.2 $ 57.2
Net operating loss carryforwards of international
subsidiaries.............................................. 45.0 68.1
Loss on foreign investment.................................. 23.2 49.0
Restructuring costs......................................... -- 8.3
Inventory basis............................................. 10.3 12.0
Allowance for doubtful accounts............................. 11.3 7.0
Other temporary differences................................. 36.9 27.6
------ ------
Total deferred tax assets.............................. 184.9 229.2
Valuation allowance for deferred tax assets................. (44.4) (89.4)
------ ------
Net deferred tax assets................................ 140.5 139.8
------ ------
Deferred tax liabilities:
Fixed asset basis differences............................. (50.5) (55.0)
Pension................................................... (17.3) (12.4)
Restructuring costs....................................... (8.1) --
------ ------
Total deferred tax liabilities......................... (75.9) (67.4)
------ ------
$ 64.6 $ 72.4
====== ======
</TABLE>
Deferred tax assets and liabilities are recorded in the consolidated
balance sheets as follows:
<TABLE>
<CAPTION>
1997 1996
---- ----
(MILLIONS OF
DOLLARS)
<S> <C> <C>
ASSETS:
Prepaid expenses and income tax benefits.................... $46.6 $54.6
Business investments and other assets....................... 26.7 21.9
LIABILITIES:
Other current accrued liabilities........................... (4.2) (3.6)
Other long-term accrued liabilities......................... (4.5) (.5)
----- -----
$64.6 $72.4
===== =====
</TABLE>
Income taxes paid in 1997, 1996 and 1995 were $2.6 million, $6.7 million
and $19.4 million, respectively.
Undistributed earnings of the Company's international subsidiaries amounted
to approximately $39 million at December 31, 1997. No taxes have been provided
on approximately $30 million of these earnings, which are considered by the
Company to be permanently reinvested.
45
<PAGE> 48
CONSOLIDATED BALANCE SHEETS
Upon distribution of these earnings, the Company would be subject to United
States income taxes and foreign withholding taxes. Determining the unrecognized
deferred tax liability on the distribution of these earnings is not practicable
as such liability, if any, is dependent on circumstances existing when
remittance occurs.
The Company has a $67 million German net operating loss carryforward at
December 31, 1997 that has no expiration date. The Company has $50 million of
additional foreign operating losses with various expiration dates through 2003.
17. OPERATIONS BY INDUSTRY SEGMENT AND GEOGRAPHIC AREA
The Company is a global manufacturer and distributor of a broad range of
non-discretionary parts, primarily vehicular components for automobiles, light
trucks, heavy duty trucks, farm and construction vehicles. The Company sells
parts to original equipment manufacturers, principally the major automotive
manufacturers in the United States and Europe. Through its worldwide
distribution network, the Company also sells replacement parts in the vehicular
replacement market. All of these activities constitute a single business
segment. Canadian operations are aggregated with the U.S. operations as they are
not significant under the materiality thresholds of Financial Accounting
Standards Board Statement No. 14.
Financial information, summarized by geographic area, is as follows:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
(MILLIONS OF DOLLARS)
<S> <C> <C> <C>
Net sales:
United States and Canada.................................. $1,132.2 $1,224.7 $1,280.6
Europe.................................................... 372.3 436.0 382.8
Other international....................................... 302.1 372.0 336.4
-------- -------- --------
$1,806.6 $2,032.7 $1,999.8
======== ======== ========
Operating earnings (loss):
United States and Canada.................................. $ 114.3 $ (53.2) $ 57.5
Europe.................................................... 20.6 11.8 (13.2)
Other international....................................... 31.9 (112.8) 13.2
-------- -------- --------
166.8 (154.2) 57.5
Corporate expenses and other................................ (27.9) (27.7) (27.8)
-------- -------- --------
$ 138.9 $ (181.9) $ 29.7
======== ======== ========
Identifiable assets:
United States and Canada.................................. $1,240.4 $ 775.5 $ 893.5
Europe.................................................... 467.0 451.0 493.9
Other international....................................... 94.7 228.7 322.7
-------- -------- --------
$1,802.1 $1,455.2 $1,710.1
======== ======== ========
</TABLE>
Transfers between geographic areas are not significant, and when made, are
recorded at prices comparable to normal unaffiliated customer sales.
The information presented above was prepared in accordance with Statement
14. In 1997, the Financial Accounting Standards Board issued Statement No. 131,
Disclosures about Segments of an Enterprise and Related Information. The
statement supersedes Statement 14 and establishes standards for the way public
business enterprises report selected information about operating segments in
annual reports and interim financial reports issued to shareholders. Statement
131 is effective for fiscal years beginning after December 15, 1997. For the
year ended 1998, the Company will provide financial and descriptive information
about its reportable operating segments to conform to the requirements.
46
<PAGE> 49
CONSOLIDATED BALANCE SHEETS -- CONTINUED
18. LITIGATION AND ENVIRONMENTAL MATTERS
The Company is one of a large number of defendants in a number of lawsuits
brought by claimants alleging injury due to exposure to asbestos. The Company is
defending all such claims vigorously and believes it has substantial defenses to
liability and adequate insurance coverage for its defense costs. The Company is
also involved in various other legal actions and claims. While the outcome of
litigation cannot be predicted with certainty, after consulting with counsel for
the Company, management believes that these matters will not have a material
effect on the Company's consolidated financial statements.
The Company is a party to lawsuits filed in various jurisdictions alleging
claims pursuant to the Comprehensive Environmental Response Compensation and
Liability Act of 1980 (CERCLA) or other state or federal environmental laws. In
addition, the Company has been notified by the Environmental Protection Agency
and various state agencies that it may be a potentially responsible party (PRP)
for the cost of cleaning up certain other hazardous waste storage or disposal
facilities pursuant to CERCLA and other federal and state environmental laws.
PRP designation requires the funding of site investigations and subsequent
remedial activities. Although these laws could impose joint and several
liability upon each party at any site, the potential exposure is expected to be
limited because at all sites other companies, generally including many large,
solvent public companies, have been named as PRPs. In addition, the Company has
identified certain present and former properties at which it may be responsible
for cleaning up environmental contamination. The Company is actively seeking to
resolve these matters. Although difficult to quantify based on the complexity of
the issues, the Company has accrued the estimated cost associated with such
matters based upon current available information from site investigations and
consultants. The environmental and legal reserve was approximately $11 million
at December 31, 1997 and $12 million at December 31, 1996 and is included in
other long-term accrued liabilities. Management believes these accruals, which
have not been reduced by any anticipated insurance proceeds, will be adequate to
cover the Company's estimated liability for these exposures.
47
<PAGE> 50
MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL REPORTING
19. QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
FIRST SECOND(1) THIRD FOURTH(2) YEAR
----- --------- ----- --------- ----
(MILLIONS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1997:
Net sales...................................... $485.6 $481.8 $424.2 $415.0 $1,806.6
Gross margin................................... 112.1 115.3 102.8 94.6 424.8
Net earnings before extraordinary item......... 13.9 28.5 17.4 12.2 72.0
Extraordinary item - loss on early retirement
of debt, net of tax benefit.................. -- (2.6) -- -- (2.6)
Net earnings................................... 13.9 25.9 17.4 12.2 69.4
Diluted earnings per share(5).................. .32 .61 .40 .28 1.61
</TABLE>
<TABLE>
<CAPTION>
FIRST SECOND THIRD(3) FOURTH(4) YEAR
----- ------ -------- --------- ----
(MILLIONS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1996:
Net sales...................................... $522.9 $536.6 $492.4 $480.8 $2,032.7
Gross margin................................... 113.2 117.5 83.2 58.3 372.2
Net earnings (loss)............................ 11.2 15.9 (12.6) (220.8) (206.3)
Diluted earnings (loss) per share(5)........... .25 .36 (.43) (6.43) (6.20)
</TABLE>
- -------------------------
(1) Includes an income tax benefit of $6.8 million related to the sales of the
South African and Australian businesses.
(2) Includes $1.1 million for a net restructuring credit, a $2.4 million charge
for an adjustment of assets held for sale to fair value, a $1.6 million
credit for reengineering and other related charges, and a $10.5 million net
charge related to the British pound currency option.
(3) Net loss includes a pretax charge of $38.5 million primarily relating to
changes in estimates, adjustment of assets held for sale to fair value and
other related charges.
(4) Net loss includes a pretax charge for restructuring of $57.6 million,
adjustment of assets held for sale to fair value of $144.9 million and $61.7
million primarily relating to changes in estimates, and other related
charges.
(5) The 1996 and first three quarters of 1997 earnings per share amounts have
been restated to comply with Statement 128, Earnings Per Share.
<TABLE>
<CAPTION>
1997 1996
---------------- ----------------
QUARTER HIGH LOW HIGH LOW
------- ---- --- ---- ---
<S> <C> <C> <C> <C>
First....................................................... $26.75 $21.63 $20.88 $17.38
Second...................................................... 35.38 24.50 19.88 17.88
Third....................................................... 39.94 32.75 22.50 16.25
Fourth...................................................... 47.63 36.75 24.50 20.38
</TABLE>
Quarterly dividends of $.12 per common share were declared for 1997 and
1996. In February 1998, the Company's Board of Directors declared a quarterly
dividend of $.12 per common share. This was the 248th consecutive quarterly
dividend declared by the Company.
20. SUBSEQUENT EVENTS
T&N PLC Transaction
On October 16, 1997, the Company announced it made a cash offer to acquire
all the outstanding common stock of T&N plc (T&N) for 260 pence per share. The
offer valued T&N's issued share capital at approximately $2.4 billion. T&N,
headquartered in Manchester, England, had 1997 net sales of approximately $2.9
billion. On January 6, 1998, the Company's offer to acquire all of the
outstanding common stock of T&N
48
<PAGE> 51
MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL REPORTING -- CONTINUED
was declared unconditional as to acceptances. By the second closing date under
the offer, January 2, 1998, valid acceptances of the offer had been received for
approximately 95% of the entire issued share capital of T&N. The Company will
finance the acquisition through a committed bank facility from a reputable
financial institution. The Company's intention is to put in place a permanent
capital structure with an appropriate combination of equity and debt financing.
The offer is subject to various conditions customary in the United Kingdom
and the receipt of all applicable regulatory approvals in the United States and
Europe. As part of the acquisition process, certain financing, professional and
other related fees have been incurred in 1997. These fees have been capitalized
as incurred and will be accounted for as direct acquisition or financing costs
once the transaction closes. Management fully expects the acquisition to close
in the first quarter of 1998, however, in the event the acquisition is not
completed, these fees would be charged to operations and would materially impact
earnings at that time. As of December 31, 1997, the Company had capitalized $28
million of these fees. In addition, the Company may elect to accelerate payment
of certain portions of the bank facility which would result in an extraordinary
charge due to the write-off of the financing cost associated with the early
retirement of debt.
The British pound currency option (refer to Note 8) was settled by the
Company in the first quarter of 1998 resulting in a $17.3 million pretax loss.
Also in the first quarter of 1998, the Company entered into a forward contract
to purchase 1.5 billion British pounds for a notional amount of approximately
$2.45 billion. The forward contract expires in the first quarter of 1998.
Fel-Pro Incorporated Transaction
On February 24, 1998, the Company acquired Fel-Pro Incorporated, a
privately owned manufacturer, headquartered in Skokie, Illinois, with net sales
of approximately $500 million for total consideration of $720 million which
includes $225 million in equity and $495 million in cash. The $495 million in
cash was primarily provided through available borrowings on the $350 million
multicurrency revolver. The remaining consideration paid was through the
issuance of promissory notes.
Divestiture of Minority Interest
In February 1998, the Company announced the divestiture of its minority
interest in G. Bruss GmbH & Co. KG, a German manufacturer of seals and gaskets.
As part of the divestiture agreement the Company increased their ownership to
100% in the Summerton, South Carolina gasket business. The Company also received
cash and recognized a gain as a result of these transactions. The gain
recognized is not expected to be significant to 1998 first quarter results.
49
<PAGE> 52
MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL REPORTING -- CONTINUED
TO OUR SHAREHOLDERS:
The management of Federal-Mogul has the responsibility for preparing the
accompanying financial statements and for their integrity and objectivity. The
financial statements were prepared in accordance with generally accepted
accounting principles and include amounts based on the best estimates and
judgments of management. Management also prepared the other financial
information in this report and is responsible for its accuracy and consistency
with the financial statements. Federal-Mogul has retained independent auditors,
ratified by election by the shareholders, to audit the financial statements.
Federal-Mogul maintains internal accounting control systems which are
adequate to provide reasonable assurance that assets are safeguarded from loss
or unauthorized use and which produce records adequate for preparation of
financial information. The system, controls and compliance are reviewed by a
program of internal audits. There are limits inherent in all systems of internal
accounting control based on the recognition that the cost of such a system not
exceed the benefits derived. We believe Federal-Mogul's system provides this
appropriate balance.
The Audit Committee of the Board of Directors, comprised of four outside
directors, performs an oversight role related to financial reporting. The
Committee periodically meets jointly and separately with the independent
auditors, internal auditors and management to review their activities and
reports, and to take any action appropriate to their findings. At all times the
independent auditors have the opportunity to meet with the Audit Committee,
without management representatives present, to discuss matters related to their
audit.
Dick Snell
Chairman and Chief Executive Officer
Tom Ryan
Senior Vice President and
Chief Financial Officer
50
<PAGE> 53
REPORT OF INDEPENDENT AUDITORS
TO THE SHAREHOLDERS AND BOARD OF DIRECTORS, FEDERAL-MOGUL CORPORATION:
We have audited the accompanying consolidated balance sheets of
Federal-Mogul Corporation and subsidiaries as of December 31, 1997 and 1996, and
the related consolidated statements of operations, shareholders' equity, and
cash flows for each of the three years in the period ended December 31, 1997.
Our audit also included the financial statement schedule listed in Item 14(a).
These financial statements are the responsibility of the company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Federal-Mogul Corporation and subsidiaries at December 31, 1997 and 1996, and
the consolidated results of their operations and their cash flows for each of
the three years in the period ended December 31, 1997, in conformity with
generally accepted accounting principles. Also, in our opinion, the related
financial statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.
Detroit, Michigan
January 30, 1998
except for Note 20, as
to which the date is
February 24, 1998
51
<PAGE> 54
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information required by this item will appear (a) under the caption
"Nominees for Election as Directors" in the Company's definitive Proxy Statement
to be dated not later than April 30, 1998 relating to its 1998 Annual Meeting of
Shareholders (the "1998 Proxy Statement") (except for the information appearing
under the caption "Compensation of Directors"), which information is
incorporated herein by reference; (b) under the caption "Information on
Securities -- Compliance with Section 16(a) of the Exchange Act" in the 1998
Proxy Statement, which information is incorporated herein by reference; and (c)
under the caption "Executive Officers of the Company" at the end of Part I of
this Annual Report.
ITEM 11. EXECUTIVE COMPENSATION.
The information required by this item will appear under the caption
"Information on Executive Compensation" in the 1998 Proxy Statement (excluding
the information appearing under the captions "Certain Related Transactions" and
"Compensation Committee Report on Executive Compensation") and under the caption
"Compensation of Directors" in the 1998 Proxy Statement and is incorporated
herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information required by this item will appear under the caption
"Information on Securities -- Stock Ownership of Management" and "Other
Beneficial Owners" in the 1998 Proxy Statement and is incorporated herein by
reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information required by this item will appear under the caption
"Certain Related Transactions" in the 1998 Proxy Statement and is incorporated
herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) The following documents are filed as part of this report:
1. Financial Statements: Financial statements filed as part of this Annual
Report on Form 10-K are listed under Part II, Item 8 hereof.
2. Financial Statement Schedules:
Schedule II -- Valuation and Qualifying Accounts
FINANCIAL STATEMENTS AND SCHEDULES OMITTED:
Schedules other than those listed above are omitted because they are not
required under instructions contained in Regulation S-X or because the
information called for is shown in the financial statements and notes thereto.
Individual financial statements of subsidiaries of the Company have been
omitted as the Company is primarily an operating Company and all subsidiaries
included in the consolidated financial statements filed, in the aggregate, do
not have minority equity interests and/or indebtedness to any person other than
the Company or its consolidated subsidiaries in amounts which together exceed 5%
of the total assets of the Company as shown by the most recent year-end
Consolidated Balance Sheet.
52
<PAGE> 55
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
FEDERAL-MOGUL CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
-------- ------------ ---------------------------- ----------- ----------
ADDITIONS
----------------------------
BALANCE AT CHARGED TO CHARGED TO BALANCE AT
BEGINNING COSTS AND OTHER ACCOUNTS- DEDUCTIONS- END OF
DESCRIPTION OF PERIOD EXPENSES DESCRIBE DESCRIBE PERIOD
----------- ---------- ---------- --------------- ----------- ----------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Year Ended December 31, 1997:
Valuation allowance for trade
receivable......................... $16.3 $ 3.5 $ -- $ 1.1(1) $18.7
Valuation allowance for note
receivable......................... 0.5 -- -- -- 0.5
Reserve for inventory valuation....... 48.0 1.5 -- 34.4(5) 15.1
Valuation allowance for deferred tax
assets............................. 89.4 -- -- 45.0(6) 44.4
Year Ended December 31, 1996:
Valuation allowance for trade
receivable......................... 18.7 10.9 -- 13.3(1) 16.3
Valuation allowance for note
receivable......................... 0.5 -- -- -- 0.5
Reserve for inventory valuation....... 25.2 22.8 -- -- 48.0
Valuation allowance for deferred tax
assets............................. 23.7 65.7 -- -- 89.4
Year Ended December 31, 1995:
Valuation allowance for trade
receivable......................... 17.1 6.7 0.4(2) 5.5(1) 18.7
Valuation allowance for note
receivable......................... 0.7 -- -- 0.2(3) 0.5
Reserve for inventory valuation....... 25.7 0.7 5.3(2) 6.5(4) 25.2
Valuation allowance for deferred tax
assets............................. 20.9 2.8 -- -- 23.7
</TABLE>
- -------------------------
(1) Uncollectible accounts charged off net of recoveries.
(2) Increase to reserve due to acquisition of automotive aftermarket businesses.
(3) Decrease to reserve due to change in market value of note.
(4) Reduction in inventory reserves for inventory disposed of during the year.
(5) Decrease due to the disposal of certain foreign subsidiaries and the
disposal of slow moving and obsolete inventory that was fully reserved.
(6) Disposition of certain international retail operations plus utilization of
foreign net operating loss carryforwards.
53
<PAGE> 56
EXHIBITS
<TABLE>
<C> <S>
*2.1 Recommended Cash Offer for T&N plc, dated as of November 13,
1997.
*2.2 Equity Purchase Agreement between the Company and The
Sellers with respect to the acquisition of Fel-Pro
Incorporated, dated as of January 9, 1998.
3.1 The Company's Second Restated Articles of Incorporation, as
amended. (Incorporated by reference to Exhibit 3.1 to the
Company's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1992.)
*3.2 The Company's Bylaws, as amended.
4.1 Rights Agreement (the "Rights Agreement") between the
Company and National Bank of Detroit, as Rights Agent, with
The Bank of New York as successor Rights Agent.
(Incorporated by reference to Exhibit 1 to the Company's
Registration Statement on Form 8-A, dated November 7, 1988.)
4.2 Amendment, dated July 25, 1990, to the Rights Agreement.
(Incorporated by reference to Exhibit 4.5 to the Company's
Quarterly Report on Form 10-Q for the quarter ended June 30,
1990.)
4.3 Amendment, dated January 1, 1993, to the Rights Agreement.
(Incorporated by reference to Exhibit 10.30 to the Company's
Quarterly Report on Form 10-Q for the quarter ended June 30,
1993.)
4.4 Amendment, dated September 23, 1992, to the Rights
Agreement. (Incorporated by reference to Exhibit 4.4 to the
Company's Annual Report on Form 10-K for the year ended
December 31, 1992 (the "1992 10-K").)
4.5 Reference is made to Exhibits 10.11, 10.12 and 10.13 hereto,
which contain provisions defining the rights of holders of
certain long-term debt securities of the Company. Other
instruments defining the rights of holders of the long-term
debt securities of the Company and any of its subsidiaries
for which consolidated or unconsolidated financial
statements are required to be filed, have not been filed
because in each case the total amount of long-term debt
permitted thereunder does not exceed 10% of the Company's
consolidated assets and the Company hereby agrees to furnish
such instruments to the Securities and Exchange Commission
upon its request.
*4.6 Purchase Agreement for 10,000,000 Trust Convertible
Preferred Securities of Federal-Mogul Financing Trust, dated
as of November 24, 1997.
*4.7 Registration Rights Agreement, dated as of December 1, 1997
by and among the Company, Federal-Mogul Financing Trust and
Morgan Stanley & Co. Inc. as Initial Purchaser.
*4.8 Indenture between the Company and The Bank of New York,
dated as of December 1, 1997 with respect to the
Subordinated Debentures.
*4.9 First Supplemental Indenture between the Company and The
Bank of New York, dated as of December 1, 1997 with respect
to the Subordinated Debentures.
*4.10 Registration Agreement, dated as of January 9, 1998 by and
among the Company and the Investors identified on Schedule 1
thereto relating to the Series E Mandatory Exchangeable
Preferred Stock.
*4.11 Certificate of Designations of Series E Mandatory
Exchangeable Preferred Stock.
10.1 The Company's 1976 Stock Option Plan, as last amended.
(Incorporated by reference to Exhibit 10.1 to the Company's
Annual Report on Form 10-K for year ended December 31, 1994
(the "1994 10-K").)
10.2 The Company's 1984 Stock Option Plan, as last amended.
(Incorporated by reference to Exhibit 10.2 to the Company's
1994 10-K.)
</TABLE>
54
<PAGE> 57
<TABLE>
<C> <S>
10.3 The Company's 1977 Supplemental Compensation Plan, as
amended and restated. (Incorporated by reference to Exhibit
10.27 to the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1994.)
10.4 The Company's Supplemental Compensation Retirement Trust
Agreement. (Incorporated by reference to Exhibit 10.4 to the
Company's 1994 10-K.)
10.5 Form of Executive Severance Agreement between the Company
and certain executive officers (Incorporated by reference to
Exhibit 10.5 to the Company's Annual Report on Form 10-K for
the year ended December 31, 1996 (the "1996 10-K).)
10.6 Amended and Restated Deferred Compensation Plan for
Corporate Directors. (Incorporated by reference to Exhibit
10.7 to the Company's Annual Report on Form 10-K for the
year ended December 31, 1990 (the "1990 10-K").)
10.7 Supplemental Executive Retirement Plan, as amended.
(Incorporated by reference to Exhibit 10.10 to the Company's
1992 10-K.)
10.8 Description of Umbrella Excess Liability Insurance for the
Senior Management Team. (Incorporated by reference to
Exhibit 10.11 to the Company's 1990 10-K.)
10.9 Federal-Mogul Corporation 1989 Performance Incentive Stock
Plan, as amended. (Incorporated by reference to Exhibit
10.14 to the Company's 1994 10-K.)
10.10 Supply Agreement, dated as of October 20, 1992, between the
Company, TRW Inc. and the TRW Subsidiaries (as defined
therein). (Incorporated by reference to Exhibit 10.15 to the
Company's 1992 10-K.)
10.11 Note Agreement, dated December 1, 1990, between the Company
and various financial institutions listed therein (the "Note
Agreement"). (Incorporated by reference to Exhibit 10.17 to
the Company's Annual Report Form 10-K for year ended
December 31, 1991.)
10.12 First Amendment dated as of December 11, 1992, to the Note
Agreement. (Incorporated by reference to Exhibit 10.27 to
the Company's 1992 10-K.)
10.13 Second Amendment, dated s of July 14, 1995, to the Note
Agreement. (Incorporated by reference to Exhibit 10.29 to
the Company's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1995.)
10.14 Pooling and Servicing Agreement, dated as of June 1, 1992
(the "Pooling and Servicing Agreement"), among Federal-Mogul
Funding Corporation ("FMFC"), as Seller, the Company, as
Servicer, and The Chase Manhattan Bank (formerly named
Chemical Bank), as Trustee. (Incorporated by reference to
Exhibit 10.21 to the Company's Quarterly Report on Form 10-Q
for the quarter ended March 31, 1993.)
10.15 Series 1992-1 Supplement, dated as of June 1, 1992, to the
Pooling and Servicing Agreement. (Incorporated by reference
to Exhibit 10.22 to the Company's Quarterly Report on Form
10-Q for the quarter ended June 30, 1992.)
10.16 Series 1993-1 Supplement, dated as of March 1, 1993, to the
Pooling and Servicing Agreement. (Incorporated by reference
to Exhibit 10.29 to the Company's Quarterly Report on Form
10-Q for the quarter ended March 31, 1993.)
10.17 Receivables Purchase Agreement, dated as of June 1, 1992,
between the Company and FMFC. (Incorporated by reference to
Exhibit 10.23 to the Company's 1992 10-K.)
10.18 Federal-Mogul Corporation Executive Loan Program.
(Incorporated by reference to Exhibit 10.26 to the Company's
Quarterly Report on Form 10-Q for the quarter ended March
31, 1994.)
10.19 Federal-Mogul Corporation Non-Employee Director Stock Plan.
(Incorporated by reference to Exhibit 4 to the Company's
Registration Statement on Form S-8 (Registration No.
33-54301).)
</TABLE>
55
<PAGE> 58
<TABLE>
<C> <S>
10.20 Revolving Credit and Competitive Advance Facility Agreement
dated as of June 30, 1994, among the Company, the Lenders
(as defined therein), Chemical Bank, as Administrative Agent
and as CAF Advance Agent, and the Co-Agents (as defined
therein) (the "Revolving Credit Agreement"). (Incorporated
by reference to Exhibit 4.11 to the Company's Pre-Effective
Amendment No. 1 to Registration Statement on Form S-3
(Registration No. 33-54717).)
10.21 First Amendment, dated as of December 18, 1995, to the
Revolving Credit Agreement. (Incorporated by reference to
Exhibit 10.28 to the Company's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1996.)
10.22 Second Amendment, dated as of October 21, 1996, to the
Revolving Credit Agreement. (Incorporated by reference to
Exhibit 10.29 to the Company's Quarterly Report on Form 10-Q
for quarter ended September 30, 1996.)
10.23 Employment Agreement, dated as of December 1, 1996, between
the Company and R. A. Snell. (Incorporated by reference to
Exhibit 10.23 to the Company's 1996 10-K.)
10.24 Severance Agreement, dated as of December 27, 1996, between
the Company and D. J. Gormley (Incorporated by reference to
Exhibit 10.24 to the Company's 1996 10-K.)
10.25 Severance Agreement, dated as of December 1, 1996, between
the Company and W. G. Smith (Incorporated by reference to
Exhibit 10.25 to the Company's 1996 10-K.)
10.26 Federal-Mogul Corporation 1997 Long-Term Incentive Plan, as
adopted by the Shareholders of the Company on April 23, 1997
(Incorporated by reference to Exhibit 10.01 to the Company's
Quarterly Report on Form 10-Q for the quarter ended March
31, 1997.)
10.27 Executive Severance Agreement, dated as of February 21,
1997, between the Company and Thomas W. VanHimbergern
(Incorporated by reference to Exhibit 10.2 to the Company's
Quarterly Report on Form 10-Q for the quarter ended March
31, 1997.)
10.28 Third Amendment, dated as of January 13, 1997, to Revolving
Credit and Competitive Advance Facility Agreement, dated as
of June 30, 1994, among the Company, various banks, and The
Chase Manhattan Bank (formerly Chemical Bank), as
Administrative Agent. (Incorporated by reference to Exhibit
10.3 to the Company's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1997.)
10.29 Form of Amended and Restated Pooling and Servicing Agreement
("Pooling and Servicing Agreement") among Federal-Mogul
Funding Corporation ("FMFC"), as Seller, the Company, as
Servicer, and The Chase Manhattan Bank, as Trustee
(Incorporated by reference to Exhibit 10.4 to the Company's
Quarterly Report on Form 10-Q for quarter ended March 31,
1997.)
10.30 Form of Series 1997-1 Supplement to the Pooling and
Servicing Agreement (Incorporated by reference to Exhibit
10.5 to the Company's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1997.)
10.31 Form of Amended and Restated Receivables Purchase Agreement
between the Company and FMFC. (Incorporated by reference to
Exhibit 10.6 to the Company's Quarterly Report on Form 10-Q
for the quarter ended March 31, 1997.)
10.32 Form of Certificate Purchase Agreement among FMFC as Seller,
Falcon Asset Securitization Corporation, as Purchaser, The
Liquidity Providers Named Therein, as Liquidity Providers,
and The First National Bank of Chicago, as Program Agent.
(Incorporated by reference to Exhibit 10.7 to the Company's
Quarterly Report on Form 10-Q for the quarter ended March
31, 1997.)
10.33 $350,000,000 Revolving Credit, Competitive Advance and
Multicurrency Facility dated as of June 16, 1997.
(Incorporated by reference to Exhibit 10 to Company's
Quarterly Report on Form 10-Q for the quarter ended June 30,
1997).
*10.34 Amended and Restated Declaration of Trust of Federal-Mogul
Financing Trust, dated as of December 1, 1997.
</TABLE>
56
<PAGE> 59
<TABLE>
<C> <S>
*10.35 Common Securities Guarantee Agreement, dated as of December
1, 1997 among the Company and Federal-Mogul Financing Trust.
*10.36 Second Amended and Restated Credit Agreement, dated as of
December 18, 1997 in the amount of $2,750,000,000 among the
Company, The Foreign Subsidiary Borrowers, the Lenders and
The Chase Manhattan Bank.
*10.37 Amended and Restated Senior Subordinated Credit Agreement,
dated as of December 18, 1997 in the amount of $500,000,000
among the Company, the Lenders and The Chase Manhattan Bank.
*10.38 First Amendment, dated as of January 20, 1998 to the Second
Amended and Restated Credit Agreement, dated as of December
18, 1997.
11 Statement Re Computation of Per Share Earnings.
(Incorporated by reference to Amendment 1 to the Company's
1996 10-K/A, dated August 18, 1997.)
*21 Subsidiaries of the Registrant.
*23.1 Consent of Ernst & Young LLP.
23.2 Consent of Nancy S. Shilts, Esq. (Incorporated by reference
to Exhibit 23.2 to the Company's 10-K/A, dated August 18,
1997.)
*24 Powers of Attorney.
*27 Financial Data Schedule.
</TABLE>
- -------------------------
* Filed Herewith
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:
On October 16, 1997, the Company filed a Current Report on Form 8-K to
announce its recommended cash offer for T&N plc.
On December 8, 1997, the Company filed a Current Report on Form 8-K to
report its sale of 10,000,000 Trust Convertible Preferred Securities.
On January 12, 1998, the Company filed a Current Report on Form 8-K to
report its agreement to purchase Fel-Pro Incorporated.
57
<PAGE> 60
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON
ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED.
FEDERAL-MOGUL CORPORATION
By: /s/ THOMAS W. RYAN
------------------------------------
Thomas W. Ryan
Senior Vice President and Chief
Financial Officer
Dated: March 2, 1998
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THEIR CAPACITIES.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
/s/ RICHARD A. SNELL Chairman of the Board, Chief Executive Officer and
- ------------------------------------------ President
Richard A. Snell
/s/ THOMAS W. RYAN Senior Vice President and Chief Financial Officer
- ------------------------------------------ (Principal Financial Officer)
Thomas W. Ryan
/s/ KENNETH P. SLABY Vice President and Controller (Principal Accounting
- ------------------------------------------ Officer)
Kenneth P. Slaby
* Director
- ------------------------------------------
Roderick M. Hills
* Director
- ------------------------------------------
John J. Fannon
* Director
- ------------------------------------------
Antonio Madero
* Director
- ------------------------------------------
Robert S. Miller, Jr.
* Director
- ------------------------------------------
John C. Pope
* Director
- ------------------------------------------
Dr. H. Michael Sekyra
*By: /s/ DIANE L. KAYE
------------------------------------
Diane L. Kaye
Attorney-in-Fact
</TABLE>
58
<PAGE> 1
EXHIBIT 2.1
[FEDERAL MOGUL LOGO]
- --------------------------------------------------------------------------------
RECOMMENDED CASH OFFER
FOR
T&N PLC
- --------------------------------------------------------------------------------
[T&N LOGO]
<PAGE> 2
THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. IF YOU ARE IN
ANY DOUBT ABOUT THE ACTION YOU SHOULD TAKE, YOU ARE RECOMMENDED TO SEEK YOUR OWN
FINANCIAL ADVICE FROM YOUR STOCKBROKER, BANK MANAGER, SOLICITOR, ACCOUNTANT OR
OTHER PROFESSIONAL ADVISER AUTHORISED UNDER THE FINANCIAL SERVICES ACT 1986.
If you have sold or otherwise transferred all of your T&N Ordinary Shares, you
should send this document, together with the accompanying Form of Acceptance and
reply-paid envelope, at once to the purchaser or transferee, or to the
stockbroker, bank or other agent through or to whom the sale or transfer was
effected, for transmission to the purchaser or transferee. HOWEVER, SUCH
DOCUMENTS SHOULD NOT BE FORWARDED OR TRANSMITTED IN OR INTO CANADA.
The Offer referred to in this document is not being made, directly or
indirectly, in or into Canada and neither this document nor the accompanying
Form of Acceptance is being mailed or otherwise distributed or sent in or into
Canada.
Any person (including nominees, trustees and custodians) who would, or otherwise
intends to, forward this document or the Form of Acceptance to any jurisdiction
outside the United Kingdom should read the further details in this regard which
are set out in paragraph 6 of Part B and paragraph (b) of Part C of Appendix I
to this document before taking any action.
This document should be read in conjunction with the accompanying Form of
Acceptance.
- --------------------------------------------------------------------------------
RECOMMENDED CASH OFFER
BY
MORGAN STANLEY & CO. LIMITED
ON BEHALF OF
FEDERAL-MOGUL GLOBAL GROWTH LIMITED
A WHOLLY-OWNED INDIRECT SUBSIDIARY OF
FEDERAL-MOGUL CORPORATION
TO ACQUIRE THE WHOLE OF THE ISSUED ORDINARY SHARE CAPITAL
OF
T&N PLC
- --------------------------------------------------------------------------------
A letter of recommendation from Sir Colin Hope, the Chairman of T&N, appears on
pages 5 to 7.
ACCEPTANCES SHOULD BE DESPATCHED AS SOON AS POSSIBLE, BUT IN ANY EVENT SO AS TO
BE RECEIVED BY THE RECEIVING AGENT NO LATER THAN 3:00 P.M. (LONDON TIME) ON 12
DECEMBER 1997. THE PROCEDURE FOR ACCEPTANCE IS SET OUT ON PAGES 14 TO 18 OF THIS
DOCUMENT AND IN THE ACCOMPANYING FORM OF ACCEPTANCE.
Morgan Stanley, which is regulated by The Securities and Futures Authority
Limited, is acting for Federal-Mogul and the Offeror and no one else in
connection with the Offer and will not be responsible to anyone other than
Federal-Mogul and the Offeror for providing the protections afforded to
customers of Morgan Stanley or for providing advice in relation to the Offer.
Rothschilds, which is regulated by The Securities and Futures Authority Limited,
is acting for T&N and no one else in connection with the Offer and will not be
responsible to anyone other than T&N for providing the protections afforded to
customers of Rothschilds or for providing advice in relation to the Offer.
<PAGE> 3
CONTENTS
DEFINITIONS 3
LETTER FROM THE CHAIRMAN OF T&N 5
LETTER FROM MORGAN STANLEY 8
APPENDIX I TERMS AND CONDITIONS OF THE OFFER 20
Part A: Conditions of the Offer 20
Part B: Further terms of the Offer 25
Part C: Form of Acceptance 31
APPENDIX II FINANCIAL INFORMATION ON FEDERAL-MOGUL 34
APPENDIX III FINANCIAL INFORMATION ON T&N 60
APPENDIX IV ADDITIONAL INFORMATION 91
2
<PAGE> 4
DEFINITIONS
The following definitions apply throughout this document, unless the context
requires otherwise:
<TABLE>
<CAPTION>
<S> <C>
"Canada" Canada, its provinces and territories and all areas subject
to its jurisdiction or any political subdivision thereof
"certificated" or in "certificated a share or other security which is not in uncertificated
form" form
"City Code" the City Code on Takeovers and Mergers
"CREST" the relevant system (as defined in the Regulations) in
respect of which CRESTCo is the Operator (as defined in the
Regulations)
"CRESTCo" CRESTCo Limited
"CREST member" a person who has been admitted by CRESTCo as a system-member
(as defined in the Regulations)
"CREST participant" a person who is, in relation to CREST, a system-participant
(as defined in the Regulations)
"CREST sponsor" a CREST participant admitted to CREST as a CREST sponsor
"CREST sponsored member" a CREST member admitted to CREST as a sponsored member
"Economic Value Added" a measure that takes a company's after-tax operating profit
and compares it with its cost of capital, which includes its
cost of debt and cost of equity; positive economic value
added represents the amount by which after-tax operating
profit exceeds the cost of capital
"Escrow Agent" The Royal Bank of Scotland plc in its capacity as a CREST
participant under ID 3RA32
"Federal-Mogul" Federal-Mogul Corporation
"Federal-Mogul Group" Federal-Mogul and its subsidiary undertakings
"Form of Acceptance" or "Form" the form of acceptance and authority accompanying this
document
"GAAP" Generally Accepted Accounting Principles
"London Stock Exchange" London Stock Exchange Limited
"member account ID" the identification code or number attached to any member
account in CREST
"Morgan Stanley" Morgan Stanley & Co. Limited
"Offer" the recommended offer made by Morgan Stanley, on behalf of
the Offeror, to acquire all the T&N Ordinary Shares on the
terms and subject to the conditions set out in this document
including, where the context so requires, any subsequent
revision, variation, extension or renewal of such offer
"Offeror" Federal-Mogul Global Growth Limited, a wholly-owned indirect
subsidiary of Federal-Mogul
"Official List" the Daily Official List of the London Stock Exchange
"Panel" the Panel on Takeovers and Mergers
"participant ID" the identification code or membership number used in CREST
to identify a particular CREST member or other CREST
participant
"Receiving Agent" The Royal Bank of Scotland plc, Registrars Department, New
Issues Section, which has been engaged by Federal-Mogul to
receive Forms of Acceptance from T&N Shareholders
"Regulations" the Uncertificated Securities Regulations 1995 (SI 1995 No.
95/3272)
</TABLE>
3
<PAGE> 5
<TABLE>
<CAPTION>
<S> <C>
"Rothschilds" N M Rothschild & Sons Limited
"Securities Act" United States Securities Act of 1933 (as amended)
"T&N" T&N plc
"T&N Dividend" the third interim dividend which the directors of T&N have
declared in respect of the year ending 31 December 1997
"T&N Group" T&N and its subsidiary undertakings
"T&N Ordinary Shares" (1) the existing unconditionally allotted or issued and
fully paid ordinary shares of 40 pence each in T&N, (2) any
further such shares which may be issued or unconditionally
allotted while the Offer remains open for acceptance or,
subject to the provisions of the City Code, such earlier
date as Federal-Mogul may decide and (3) shares issued or
unconditionally allotted pursuant to the exercise of any
options under the T&N Share Option Schemes
"T&N Ordinary Share Capital" the T&N Ordinary Shares in issue on 13 November 1997 and
assuming the exercise of all outstanding options under the
T&N Share Option Schemes and the issue on 14 November 1997
of 9,711,876 T&N Ordinary Shares pursuant to the scrip
alternative to the second interim dividend
"T&N Shareholders" holders of T&N Ordinary Shares
"T&N Share Option Schemes" the T&N UK Share Option Scheme, the T&N Overseas Share
Option Scheme, the T&N 1995 Executive Share Option Scheme
and the T&N UK Savings-Related Share Option Scheme
"TFE instruction" a Transfer from Escrow instruction (as defined by the CREST
manual issued by CRESTCo)
"TTE instruction" a Transfer to Escrow instruction (as defined by the CREST
manual issued by CRESTCo)
"UK" or "United Kingdom" the United Kingdom of Great Britain and Northern Ireland
"uncertificated" or in a share or other security which is for the time being
"uncertificated form" recorded on the relevant register of the share or security
concerned as being held in uncertificated form in CREST, and
title to which, by virtue of the Regulations, may be
transferred by means of CREST
"United States" or "US" the United States of America, its territories and
possessions, any state of the United States of America and
the District of Columbia
"Wider Federal-Mogul Group" Federal-Mogul and the subsidiaries and subsidiary
undertakings of Federal-Mogul and associated undertakings
(including any joint venture, partnership, firm or company
in which any member of the Federal-Mogul Group is interested
or any undertaking in which Federal-Mogul and such
undertakings (aggregating their interests) have a material
interest)
"Wider T&N Group" T&N and the subsidiaries and subsidiary undertakings of T&N
and associated undertakings (including any joint venture,
partnership, firm or company in which any member of the T&N
Group is interested or any undertaking in which T&N and such
undertakings (aggregating their interests) have a material
interest).
</TABLE>
For the purposes of this document, "subsidiary" and "subsidiary undertaking"
have the respective meanings given by the Companies Act 1985.
Terms defined in the CREST manual shall, unless the context otherwise requires,
bear the same meanings where used herein.
4
<PAGE> 6
[T&N PLC Logo]
Registered No.163992 (England & Wales)
Registered Office:
Manchester International Office Centre
Styal Road
Manchester
M22 5TN
13 November 1997
To T&N Shareholders and, for information only, to participants in the T&N Share
Option Schemes
Dear Shareholder,
RECOMMENDED CASH OFFER
On 26 September 1997 the board of T&N announced that it had received an approach
from Federal-Mogul. Following a series of discussions between T&N and
Federal-Mogul, it was announced on 16 October 1997 that the boards of T&N and
Federal-Mogul had reached agreement on the terms of a recommended cash offer for
T&N.
I am now writing to you to explain why your directors consider the terms of the
Offer to be fair and reasonable and are unanimously recommending you to accept
the Offer, as they have undertaken to do in respect of their own beneficial
shareholdings, together with the T&N Ordinary Shares to be issued pursuant to
the second interim dividend.
The formal Offer is set out in the letter from Morgan Stanley on pages 8 to 19
of this document.
THE RECOMMENDED CASH OFFER
The Offer is 260 pence in cash for each T&N Ordinary Share and values the T&N
Share Capital at approximately Pound 1.5 billion. The Offer is subject
to a number of conditions, including regulatory consents and confirmations
being obtained, both in the US and in a number of European countries. As
explained in the letter from Morgan Stanley, the parties are confident that, in
the absence of unforeseen regulatory requirements, the Offer will not lapse for
lack of regulatory consents or confirmations.
T&N Shareholders on the register on 12 December 1997 will also be entitled to
receive the T&N Dividend of 3 pence (net) per T&N Ordinary Share, declared on 6
November 1997, details of which are set out below.
BACKGROUND TO AND REASONS FOR RECOMMENDING THE OFFER
Over the years, T&N has developed to become one of the world's leading
suppliers of high technology automotive components, engineered products and
industrial materials, with annual turnover of almost Pound 2 billion and over
28,000 employees worldwide.
With the increasing international dimension of our business and trends towards
consolidation to meet the demands of customers, your company has considered how
to grow to meet the challenges presented. In this context, the combination of
Federal-Mogul and T&N has considerable industrial and market logic. In
particular, the combined industry expertise of the
5
<PAGE> 7
two companies creates an opportunity which will provide ongoing benefits in
terms of high quality service to both original equipment and aftermarket
customers.
Against this background, your board is particularly conscious of the need to
deliver shareholder value. Despite securing a Pound 500 million layer
of insurance cover in respect of potential asbestos liability claims in 1996,
your company has continued to underperform in the stock market. Bearing this
stock market performance in mind, your board unanimously believes that the
Offer is at a level which can be recommended to shareholders.
In particular, your board is recommending the Offer on the basis that:
- the Offer represents premia of 65.1 per cent and 73.6 per cent to T&N's
average share price in the one month and three months, respectively, prior
to 25 September 1997, the last dealing day prior to the announcement that
T&N had received an approach from Federal-Mogul,
- the Offer represents a premium of 42.9 per cent to T&N's share price at
the close of business on 25 September 1997,
- the Offer represents an exit price earnings multiple of 17.6 times, based
on the published earnings per T&N ordinary share (before asbestos-related
costs) of 14.8 pence for the financial year ended 31 December 1996.
Your attention is drawn to the tables set out in paragraph 6 of the letter from
Morgan Stanley showing the financial effects of acceptance of the Offer.
BOARD, MANAGEMENT AND EMPLOYEES
Federal-Mogul has stated that it attaches great importance to the skills and
experience of the existing management and employees and that it believes that as
a result of the acquisition there will be greater opportunities within the
Federal-Mogul Group.
Federal-Mogul has also given assurances to the board of T&N that the existing
rights of employees, including pension rights, will be fully safeguarded.
Details regarding the arrangements entered into with the executive directors of
T&N in the event that their contracts of employment are terminated following the
Offer becoming unconditional in all respects are set out in paragraph 6 of
Appendix IV to this document.
I have agreed to become an international adviser to Federal-Mogul for up to two
years from the completion of the acquisition. In addition, two non-executive
directors of T&N, Paul Lewis and Sir Geoffrey Whalen, have been invited to join
the board of Federal-Mogul.
I should like to take this opportunity to thank all of our staff for their
contribution to T&N's success over the years.
IRREVOCABLE UNDERTAKINGS
The directors of T&N have given irrevocable undertakings to accept the Offer in
respect of their own beneficial shareholdings, together with the T&N Ordinary
Shares to be issued pursuant to the second interim dividend, amounting to
201,232 T&N Ordinary Shares, representing approximately 0.03 per cent. of the
T&N Ordinary Share Capital. The irrevocable undertakings cease to be binding
only in the event that the Offer lapses or is withdrawn.
THE T&N DIVIDEND
On 6 November 1997, the directors of T&N declared a third interim dividend of 3
pence (net) per T&N Ordinary Share in respect of the year ending 31 December
1997. The T&N Dividend will be paid (whether or not the Offer becomes
unconditional in all respects) on 30 January 1998 to T&N Shareholders on the
register at the close of business on 12 December 1997 and may be
6
<PAGE> 8
retained by all such T&N Shareholders. The ex-entitlement date for the T&N
Dividend will be 8 December 1997. There will be no scrip alternative.
T&N SHARE OPTION SCHEMES
The Offer extends to any T&N Ordinary Shares which are unconditionally allotted
or issued before the date on which the Offer closes, whether as a result of the
exercise of options under the T&N Share Option Schemes or otherwise.
Once the Offer becomes or is declared wholly unconditional in all respects,
appropriate proposals will be made to the holders of options under the T&N Share
Option Schemes which remain unexercised.
The attention of participants in the T&N UK Share Option Scheme and the T&N 1995
Executive Share Option Scheme is drawn to the letter addressed to holders of
options under such schemes and the attention of participants in the T&N UK
Savings-Related Share Option Scheme is drawn to the letter addressed to holders
of options under this scheme.
ACTION TO BE TAKEN TO ACCEPT THE OFFER
The detailed procedure for acceptance is set out in paragraph 10 of the letter
from Morgan Stanley and in the Form of Acceptance.
TO ACCEPT THE OFFER YOU SHOULD RETURN YOUR COMPLETED FORM OF ACCEPTANCE, WHETHER
OR NOT YOUR T&N ORDINARY SHARES ARE IN CREST, IN ACCORDANCE WITH THESE
INSTRUCTIONS AS SOON AS POSSIBLE TO THE RECEIVING AGENT AND, IN ANY EVENT, SO AS
TO BE RECEIVED NO LATER THAN 3:00 P.M. (LONDON TIME) ON 12 DECEMBER 1997. A
REPLY-PAID ENVELOPE, FOR USE IN THE UK ONLY, IS ENCLOSED FOR YOUR CONVENIENCE.
IF YOU REQUIRE FURTHER ASSISTANCE ON HOW TO COMPLETE THE FORM OF ACCEPTANCE,
PLEASE CALL THE ROYAL BANK OF SCOTLAND, REGISTRARS DEPARTMENT, THE RECEIVING
AGENT TO THE OFFER, ON 0117 937 0672. PLEASE NOTE THAT THE RECEIVING AGENT WILL
BE UNABLE TO ADVISE YOU WHETHER OR NOT TO ACCEPT THE OFFER.
RECOMMENDATION
THE BOARD OF T&N, WHICH HAS BEEN SO ADVISED BY ROTHSCHILDS, CONSIDERS THE TERMS
OF THE OFFER TO BE FAIR AND REASONABLE. IN PROVIDING ADVICE TO THE BOARD OF T&N,
ROTHSCHILDS HAS TAKEN INTO ACCOUNT THE COMMERCIAL ASSESSMENTS OF THE DIRECTORS
OF T&N. ACCORDINGLY, THE DIRECTORS OF T&N UNANIMOUSLY RECOMMEND T&N SHAREHOLDERS
TO ACCEPT THE OFFER, AS THEY HAVE UNDERTAKEN TO DO IN RESPECT OF THEIR OWN
BENEFICIAL SHAREHOLDINGS, TOGETHER WITH THE T&N ORDINARY SHARES TO BE ISSUED
PURSUANT TO THE SECOND INTERIM DIVIDEND, AMOUNTING IN AGGREGATE TO 201,232 T&N
ORDINARY SHARES.
YOURS FAITHFULLY
Colin L.N. Hope
SIR COLIN HOPE
CHAIRMAN
7
<PAGE> 9
MORGAN STANLEY
MORGAN STANLEY & CO. LIMITED
REGISTERED OFFICE:
25 CABOT SQUARE
CANARY WHARF
LONDON E14 4QA
REGISTERED IN ENGLAND, NO. 2164628
REGULATED BY THE SECURITIES AND
FUTURES AUTHORITY LIMITED
13 November 1997
To T&N Shareholders and, for information only, to participants in the T&N Share
Option Schemes
Dear Shareholder,
RECOMMENDED CASH OFFER FOR T&N
ON BEHALF OF FEDERAL-MOGUL GLOBAL GROWTH LIMITED
1. INTRODUCTION
On 16 October 1997 the boards of T&N and Federal-Mogul announced a recommended
cash offer to be made by Morgan Stanley on behalf of Federal-Mogul Global Growth
Limited, a wholly-owned indirect subsidiary of Federal-Mogul, to acquire the
whole of the issued ordinary share capital of T&N. This letter constitutes the
formal Offer for your T&N Ordinary Shares and should be read in conjunction with
the Form of Acceptance.
The Offer values each T&N Ordinary Share at 260 pence and the T&N Ordinary Share
Capital at approximately Pound 1.5 billion.
YOUR ATTENTION IS DRAWN TO THE LETTER FROM SIR COLIN HOPE, CHAIRMAN OF T&N, ON
PAGES 5 TO 7 OF THIS DOCUMENT, WHICH SETS OUT THE REASONS WHY THE T&N BOARD OF
DIRECTORS, WHO HAVE BEEN SO ADVISED BY ROTHSCHILDS, CONSIDER THE TERMS OF THE
OFFER TO BE FAIR AND REASONABLE. THEY ARE UNANIMOUSLY RECOMMENDING YOU TO ACCEPT
THE OFFER, AS THEY HAVE UNDERTAKEN TO DO IN RESPECT OF THEIR OWN BENEFICIAL
SHAREHOLDINGS, TOGETHER WITH THE T&N ORDINARY SHARES TO BE ISSUED PURSUANT TO
THE SECOND INTERIM DIVIDEND.
Irrevocable undertakings to accept the Offer have been received by Federal-Mogul
from the directors of T&N in respect of an aggregate of 201,232 T&N Ordinary
Shares (representing approximately 0.03 per cent. in aggregate, of the T&N
Ordinary Share Capital). These irrevocable undertakings cease to be binding only
in the event that the Offer lapses or is withdrawn.
2. THE OFFER
On behalf of the Offeror, Morgan Stanley hereby offers to acquire, on the terms
and subject to the conditions set out or referred to in this document and in the
Form of Acceptance, all of the T&N Ordinary Shares on the following basis:
FOR EACH T&N ORDINARY SHARE 260 PENCE IN CASH
The Offer represents a premium of 42.9 per cent. to T&N's share price at the
close of business on 25 September 1997, the last dealing day prior to the
announcement that T&N had received an
8
<PAGE> 10
approach from Federal-Mogul. The Offer represents premia of 65.1 per cent.
and 73.6 per cent. to T&N's average share price in the one month and
three months, respectively, prior to 25 September 1997.
TO ACCEPT THE OFFER YOU SHOULD COMPLETE AND RETURN THE FORM OF ACCEPTANCE,
WHETHER OR NOT YOUR T&N ORDINARY SHARES ARE IN CREST, AS SOON AS POSSIBLE TO THE
RECEIVING AGENT AND, IN ANY EVENT, SO AS TO BE RECEIVED NO LATER THAN 3:00 P.M.
(LONDON TIME) ON 12 DECEMBER 1997. THE PROCEDURE FOR ACCEPTANCE IS SET OUT IN
SECTION 10 OF THIS LETTER AND IN THE FORM OF ACCEPTANCE.
T&N Ordinary Shares will be acquired by the Offeror fully paid and free from all
liens, equities, charges, encumbrances and other interests of any nature
whatsoever and together with all rights now or hereafter attaching thereto,
including the right to receive and retain all dividends and other distributions
declared, made or paid after 16 October 1997, other than the right to receive
and retain the second interim dividend of 3.2 pence (net) per T&N Ordinary Share
payable on 14 November 1997, or the scrip alternative to such dividend, and the
T&N Dividend of 3 pence (net) per T&N Ordinary Share.
The Offer will extend to any T&N Ordinary Shares which are unconditionally
allotted or issued before the date on which the Offer closes (or such earlier
date, not being earlier than the date on which the Offer becomes unconditional
as to acceptances or, if later, 12 December 1997, as Federal-Mogul may, subject
to the City Code, decide) as a result of the exercise of options under the T&N
Share Option Schemes or otherwise.
Your attention is drawn to the conditions and further terms of the Offer set out
in Appendix I to this document.
3. INFORMATION RELATING TO FEDERAL-MOGUL
Federal-Mogul manufactures and distributes worldwide a broad range of precision
parts, primarily vehicular components for automobiles and light trucks, heavy
duty trucks, farm and construction vehicles and industrial products. The company
manufactures sealing systems, fuel systems, engine bearings, lighting products,
pistons and chassis products. The company engineers and manufactures products
for original equipment manufacturers, principally the major automotive
manufacturers in the United States and Europe, and also provides these and
related products to aftermarket customers. Federal-Mogul has a worldwide network
of distribution points to service its aftermarket customers. The group has 90
manufacturing locations in 16 countries and employs approximately 15,700 people
worldwide.
For the twelve months to 30 June 1997, Federal-Mogul's results under US GAAP
comprised consolidated net income before exceptional items of US$52.6
million (Pound 32.9 million) on net revenues of US$1,939 million (Pound 1,212
million). As at 30 June 1997, Federal-Mogul had net assets of US$335 million
(Pound 209 million) and net borrowings of US$327 million (Pound 204 million).
Federal-Mogul's common stock is traded on the New York Stock Exchange, with a
current equity market capitalisation of US$1,781 million (Pound 1,113 million).
Further financial information relating to Federal-Mogul, including financial
information for the nine months ended 30 September 1997, is set out in Appendix
II to this document.
The Offeror is a UK company, wholly-owned indirectly by Federal-Mogul, which has
been incorporated to make the Offer on behalf of Federal-Mogul. Further
information relating to the Offeror is set out in paragraph 2(d) of Appendix IV
to this document.
4. INFORMATION RELATING TO T&N
T&N is a major supplier of high technology automotive components, engineered
products and industrial materials, with about 80 per cent. of its sales relating
to the world automotive industry. The group is strategically focused on the
transportation, marine and power generation markets.
9
<PAGE> 11
T&N is structured into six global product groups: Piston Products, Bearings,
Friction Products, Composites and Camshafts (incorporating Powder Metal
Products), Sealing Products and Engine Parts Aftermarket. T&N is also a leading
regional producer of Heat Transfer Products in South Africa for domestic and
export markets. T&N operates in around 200 locations in 24 countries, employs
over 28,000 people worldwide and serves customers in more than 150 countries. It
also has technical centres in the UK and Germany and a North American facility
which opened in 1997.
For the twelve months to 30 June 1997, T&N's results under UK GAAP
comprised consolidated net income before exceptional items of Pound 94.7
million (US$151.5 million) on net revenues of Pound 1,837 million (US$2,939
million). As at 30 June 1997, T&N had net assets of Pound 142 million (US$228
million) and net borrowings of Pound 256 million (US$410 million).
Further financial information relating to T&N is set out in Appendix III to this
document.
5. BACKGROUND TO AND STRATEGIC RATIONALE FOR THE OFFER
In his address to shareholders, customers and employees in Federal-Mogul's 1996
annual report, Chairman and Chief Executive Officer, Dick Snell, stated that the
company was moving forward in a new direction, focusing on profitable growth
with an emphasis on enhancing systems and modules capabilities and expanding
internationally in both the original equipment manufacturers and aftermarket
segments. This objective was to be achieved through a combination of organic
growth and an aggressive acquisition strategy. The acquisition of T&N represents
a significant step in meeting the second part of this objective.
Although no agreements have been entered into with respect to material
acquisitions other than the Offer, Federal-Mogul is currently exploring
acquisitions of several companies that could result in substantial transactions
for Federal-Mogul.
The acquisition of T&N will create a highly competitive Tier I automotive
systems supplier worldwide.
The combined companies would have had combined revenues for 1996 of US$5,160
million, over 43,700 employees, extensive operations in North America, Europe
and the rest of the world and a broad customer base.
Federal-Mogul's management believes that, as a result of combining complementary
products on a worldwide basis, Federal-Mogul will have the scale, reach,
financial strength and technological capabilities to achieve strong growth and
to participate in the consolidation of the automotive sector worldwide.
Given the expected synergies and increased market opportunities created through
this combination, Federal-Mogul's management believes the acquisition will be
beneficial to shareholders, customers and employees.
- - PRODUCTS
The combined product range will position Federal-Mogul as a strong worldwide
supplier of engine and transmission parts with highly competitive market
positions in sealing products, engine bearings, piston rings and pistons.
Federal-Mogul believes that the acquisition will:
- - enhance systems capability through the ability to offer customers engine and
transmission parts;
- - provide Federal-Mogul with full piston systems capabilities;
- - enhance Federal-Mogul's sealing systems capabilities by complementing its oil
seals business with T&N's strong European position in gaskets; and
10
<PAGE> 12
- - allow Federal-Mogul to gain entry into valvetrain systems through T&N's
camshaft and powdered metal business.
Based on combined historical 1996 revenues, Federal-Mogul's revenues for engine
systems and for sealing systems would have been US$2,950 million and US$720
million respectively (representing increases of 243% and 140% respectively, over
Federal-Mogul's standalone figures for that year). On the same basis,
Federal-Mogul's friction products would have had revenues of US$525 million.
- - GEOGRAPHIC PROFILE
Federal-Mogul's reach will be enhanced by the complementary geographic profile
of T&N. Prior to the acquisition, 60% of Federal-Mogul's revenues were generated
in North America, 22% in Europe and 18% in the rest of the world. The geographic
profile of the two companies combined, based on historical 1996 revenues, would
have been 42% North America, 44% Europe and 14% rest of the world. In addition,
Federal-Mogul will gain access to many new markets.
- - CUSTOMERS
The acquisition will enable Federal-Mogul to bring systems solutions to original
equipment manufacturers for a broad range of hard engine products and to meet
their increasing demands for continuous product and cost improvement.
The acquisition strengthens Federal-Mogul's position as an aftermarket supplier
by combining Federal-Mogul's leading position in the North American engine parts
aftermarket with T&N's attractive position in this sector, where it is present
in Europe, North America, Mexico, South America, South Africa and South East
Asia.
- - RESEARCH AND DEVELOPMENT
The acquisition will enhance Federal-Mogul's material development and research
and development capabilities and will position the company as a significant
force in patented technology products and processes
- - FINANCIAL BENEFITS
Federal-Mogul expects significant synergies and operating efficiencies to be
achieved from the integration of the two businesses. Major synergies are
expected to arise from consolidating the aftermarket operations in North America
and Europe and from improved efficiencies in working practices. Other synergies
are expected in the areas of purchasing, production, research and development,
working capital efficiencies and in the form of reduced capital expenditures.
Based on the information currently available to it, Federal-Mogul is
anticipating annual pre-tax synergies to reach in excess of US$100 million
starting from the second full year following the acquisition.
Achieving these benefits will require a once-off restructuring charge in the
first year following the acquisition of an amount approximately equal to the
annual level of synergy benefits achieved in the second year. This charge will
be of an amount at least equal to any synergy benefits achieved in the first
year following the acquisition.
Federal-Mogul expects that the acquisition will be modestly accretive to
earnings per share in 1998 and more accretive to earnings per share in 1999.
This statement should not be interpreted to mean that the future earnings per
share of Federal-Mogul will necessarily be greater than the earnings per share
of Federal-Mogul for the financial year ended 31 December 1996.
Federal-Mogul also expects that the acquisition will provide positive Economic
Value Added and have a positive cash flow impact.
11
<PAGE> 13
Federal-Mogul intends to maintain T&N's Pound 500 million insurance
policy in respect of asbestos. In addition, Federal-Mogul will book an
incremental Pound 367 million asbestos provision. No charge to future earnings
is anticipated for asbestos.
- - COMPETITION REGULATION
The Offer is subject to regulatory consents and confirmations being obtained,
both in the US and in a number of European countries. Federal-Mogul and T&N are
committed to working together to obtain the regulatory approvals within the
normal City Code timetable. Federal-Mogul has agreed with T&N that divestitures
of at least some thin wall bearings assets may be required. Federal-Mogul is
confident that any such divestitures will not materially affect the underlying
strategic rationale for the acquisition. The parties hope that it will not be
necessary to extend the normal City Code timetable, but Federal-Mogul has agreed
to apply for extensions from the Panel if necessary. The parties are confident
that, in the absence of unforeseen regulatory requirements, the Offer will not
lapse for lack of regulatory consents or confirmations.
Federal-Mogul and T&N agree that the acquisition should assist the combined
entity to compete in the intensely competitive automotive components industry.
In order to re-inforce Federal-Mogul's commitment in relation to the obtaining
of relevant regulatory approvals, Federal-Mogul has agreed, in the event that
the Offer were to lapse as a result solely of Federal-Mogul invoking any of
conditions (b) to (d) inclusive as set out in Part A of Appendix I to this
document, at the option of T&N to either subscribe Pound 50 million for ordinary
shares in T&N worth Pound 40 million or to pay Pound 10 million in cash to T&N.
- - FINANCING
The cash required by Federal-Mogul to satisfy the consideration payable to T&N
shareholders under the Offer will be provided from a bank facility, including
long term components and bridge components, under two credit agreements between
Federal-Mogul, The Chase Manhattan Bank and Chase Securities, Inc.
It is Federal-Mogul's intention to put in place a permanent capital structure
that reflects its financial goals. To this end, Federal-Mogul intends in due
course to refinance the funds provided from the bridge components of this
facility with an appropriate combination of equity and debt financing.
Federal-Mogul is commencing a placement of a convertible preferred security, to
be issued through a financing trust in the United States to "qualified
institutional buyers" (as defined in Rule 144A under the Securities Act) and to
certain non-US persons in compliance with Regulation S under the Securities Act.
It is anticipated that the proceeds of such placement, if such placement is
completed, will be used to reduce the amount of the senior bank debt utilised to
finance the Offer. The financing of the Offer is in no way contingent on the
completion of such placement.
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<PAGE> 14
6. FINANCIAL EFFECTS OF ACCEPTANCE
The following tables set out, for illustrative purposes only and on the bases
and assumptions set out below, the financial effects of acceptance on capital
value and gross income for a holder of one T&N Ordinary Share accepting the
Offer if the Offer becomes or is declared unconditional in all respects:
<TABLE>
<CAPTION>
A. INCREASE IN CAPITAL VALUE NOTES PENCE
<S> <C> <C>
Cash consideration 260
Market value of one T&N Ordinary Share (i) 182
--------
Increase in capital value 78
--------
This represents an increase of 42.9%
B. INCREASE IN GROSS INCOME
Gross income from cash consideration (ii) 17.4
Gross dividend income from one T&N Ordinary Share (iii) 7.5
--------
Increase in gross income 9.9
--------
This represents an increase of 132%
</TABLE>
Notes:
(i) Based on the closing middle-market quotation of 182 pence per T&N
Ordinary Share, as derived from the London Stock Exchange Daily
Official List, on 25 September 1997, the last dealing day prior to the
announcement that T&N had received an approach from Federal-Mogul.10
(ii) The gross income from the cash consideration has been calculated on the
assumption that the cash is reinvested to yield 6.58 per cent. per
annum, being the gross yield shown by the FTSE Actuaries average gross
redemption yield for medium coupon British Government securities of
maturities of five to fifteen years on 10 November 1997 as published in
the Financial Times on 11 November 1997, the latest practicable date
prior to the posting of this document.
(iii) The gross dividend income from T&N Ordinary Shares is based on
aggregate dividends of 6.0 pence (net) per T&N Ordinary Share being the
total of the 3.0 pence (net) interim dividend for the six months ended
30 June 1996 and the 3.0 pence (net) special first interim dividend, in
lieu of the final dividend for the financial year ended 31 December
1996, paid on 11 July 1997, together with an associated tax credit of
20/80ths of the amount paid. As a result of provisions contained in the
Finance (No. 2) Act 1997, pension funds cannot claim repayment of tax
credits on dividends paid on or after 2 July 1997.
(iv) In assessing the financial effects of acceptance, no account has been
taken of the T&N Dividend and save as disclosed in note (iii) above, no
account has been taken of any liability to taxation.
7. BOARD, MANAGEMENT AND EMPLOYEES
Federal-Mogul attaches great importance to the skills and experience of the
existing management and employees of T&N and believes that as a result of the
acquisition there will be greater opportunities within the Federal-Mogul Group.
Federal-Mogul has given assurances to the directors of T&N that the existing
rights of employees of T&N, including pension rights, will be fully safeguarded.
If the Offer becomes wholly unconditional Sir Colin Hope and Ian Much will
resign as directors and employees of T&N. Sir Colin will become an international
adviser to Federal-Mogul for up to two years. In addition, two non-executive
directors of T&N, Paul Lewis and Sir Geoffrey Whalen, have been invited to join
the board of Federal-Mogul.
Arrangements are also in place in relation to David Harding, Allan Welsh and
Alister McWilliam, details of which are set out in Appendix IV to this document.
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<PAGE> 15
8. T&N SHARE OPTION SCHEMES
The Offeror will make appropriate proposals to holders of options under the T&N
Share Option Schemes, to the extent that options are not exercised, once the
Offer becomes or is declared unconditional in all respects. The attention of
participants in the T&N UK Share Option Scheme and the T&N 1995 Executive Share
Option Scheme is drawn to the letter addressed to holders of options under such
schemes and the attention of participants in the T&N UK Savings-Related Share
Option Scheme is drawn to the letter addressed to holders of options under this
scheme.
9. UNITED KINGDOM TAXATION
The following paragraphs, which are intended as a general guide only, are based
on current legislation and Inland Revenue practice. They summarise certain
limited aspects of the UK taxation treatment of the acceptance of the Offer, and
they relate only to the position of T&N Shareholders who hold their T&N Ordinary
Shares beneficially as an investment and who are resident in the UK for taxation
purposes. If you are in any doubt as to your taxation position or if you are
subject to taxation in any jurisdiction other than the UK, you should consult an
appropriate professional adviser immediately.
(A) UK TAXATION ON CHARGEABLE GAINS
Acceptance of the Offer by a T&N Shareholder will constitute a disposal, or
part disposal, of his/her T&N Ordinary Shares for the purposes of UK
taxation on chargeable gains which may, depending on the shareholder's
individual circumstances (including the availability of exemptions and
allowable losses), give rise to a liability to UK taxation on chargeable
gains.
(B) OTHER DIRECT TAX MATTERS
Special tax provisions may apply to T&N Shareholders who have acquired or
acquire their T&N Shares by exercising options under the T&N Share Option
Schemes including provisions imposing a charge to income tax when such an
option is exercised.
(C) STAMP DUTY AND STAMP DUTY RESERVE TAX ("SDRT")
No stamp duty or SDRT will be payable by T&N Shareholders as a result of
accepting the Offer.
10. PROCEDURE FOR ACCEPTANCE
This section should be read in conjunction with the notes on the Form of
Acceptance.
(A) COMPLETION OF FORM OF ACCEPTANCE
If you hold T&N Ordinary Shares in both certificated and uncertificated form
you should complete a separate Form of Acceptance for each holding. In
addition, you should complete a separate Form of Acceptance for T&N Ordinary
Shares held in uncertificated form, but under different member account IDs,
and for T&N Ordinary Shares held in certificated form but under different
designations. ADDITIONAL FORMS OF ACCEPTANCE ARE AVAILABLE FROM THE
RECEIVING AGENT (TELEPHONE NUMBER 0117 937 0672).
(i) To Accept The Offer
To accept the Offer in respect of all your T&N Ordinary Shares, you must
complete Boxes 1 and 3 and, if your T&N Ordinary Shares are in CREST, Box
4. In all cases you must sign Box 2 of the enclosed Form of Acceptance in
the presence of a witness, who should also sign in accordance with the
instructions printed thereon.
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<PAGE> 16
(ii) To accept the offer in respect of less than all your T&N Ordinary
Shares
To accept the Offer in respect of less than all your T&N Ordinary Shares,
you must insert in Box 1 on the enclosed Form of Acceptance such lesser
number of T&N Ordinary Shares in respect of which you wish to accept the
Offer in accordance with the instructions printed thereon. You should
then follow the procedure set out in (i) above in respect of such lesser
number of T&N Ordinary Shares. If you do not insert a number, or you
insert a number greater than your entire holding of T&N Ordinary Shares
in Box 1, your acceptance will be deemed to be in respect of all of the
T&N Ordinary Shares held by you.
IF YOU HAVE ANY QUESTIONS AS TO HOW TO COMPLETE THE FORM OF ACCEPTANCE, PLEASE
TELEPHONE THE RECEIVING AGENT ON TELEPHONE NUMBER 0117 937 0672. PLEASE NOTE
THAT THE RECEIVING AGENT WILL BE UNABLE TO ADVISE YOU WHETHER OR NOT TO ACCEPT
THE OFFER.
(B) RETURN OF FORM OF ACCEPTANCE
To accept the Offer, the completed Form of Acceptance should be returned
whether or not your T&N Ordinary Shares are in CREST. THE COMPLETED FORM OF
ACCEPTANCE SHOULD BE RETURNED BY POST, OR BY HAND, TO THE RECEIVING AGENT,
THE ROYAL BANK OF SCOTLAND PLC, REGISTRARS DEPARTMENT, NEW ISSUES SECTION,
PO BOX 859, CONSORT HOUSE, EAST STREET, BEDMINSTER, BRISTOL BS99 1XZ OR, BY
HAND ONLY DURING NORMAL BUSINESS HOURS, TO THE ROYAL BANK OF SCOTLAND PLC,
REGISTRARS DEPARTMENT, NEW ISSUES SECTION, PO BOX 633, 5-10 GREAT TOWER
STREET, LONDON EC3R 5ER TOGETHER (SUBJECT TO PARAGRAPH (D) BELOW) WITH THE
RELEVANT SHARE CERTIFICATE(S) AND/OR OTHER DOCUMENT(S) OF TITLE AS SOON AS
POSSIBLE, BUT IN ANY EVENT SO AS TO BE RECEIVED NOT LATER THAN 3:00 P.M.
(LONDON TIME) ON 12 DECEMBER 1997. A reply-paid envelope for use in the UK
only is enclosed for your convenience. No acknowledgement of receipt of
documents will be given by or on behalf of the Offeror. All documents sent
by, to or from T&N Shareholders or their appointed agents will be sent at
their own risk. The instructions printed on the Form of Acceptance shall be
deemed to form part of the terms of the Offer.
(C) DOCUMENTS OF TITLE
If your T&N Ordinary Shares are in certificated form, a completed and signed
Form of Acceptance should be accompanied by the relevant share
certificate(s) and/or other documents(s) of title. If for any reason the
relevant share certificate(s) and/or other document(s) of title is/are not
readily available or is/are lost, you should nevertheless complete, sign and
lodge the Form of Acceptance as stated above so as to be received by the
Receiving Agent not later than 3:00 p.m. (London time) on 12 December 1997.
You should send with the Form of Acceptance any share certificate(s) and/or
other document(s) of title which you may have available and a letter stating
that the remaining documents will follow as soon as possible or that you
have lost one or more of your share certificate(s) and/or other document(s)
of title. You should then arrange for the relevant share certificate(s)
and/or other document(s) of title to be forwarded as soon as possible
thereafter. No acknowledgement of receipt of documents will be given. If you
have lost your share certificate(s) and/or other document(s) of title, you
should write as soon as possible to T&N's Registrars, Lloyds Bank
Registrars, Registrars Department, 54 Pershore Road South, Kings Norton,
Birmingham B30 3EP, for a letter of indemnity for the lost share
certificate(s) and/or other document(s) of title which, when completed in
accordance with the instructions given, should be returned by post to the
Receiving Agent as above.
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<PAGE> 17
(D) ADDITIONAL PROCEDURES FOR T&N ORDINARY SHARES IN UNCERTIFICATED FORM (THAT
IS, IN CREST)
If your T&N Ordinary Shares are in uncertificated form, you should insert in
Box 4 of the enclosed Form of Acceptance the participant ID and member
account ID under which such shares are held by you in CREST and otherwise
complete and return the Form of Acceptance as described above. In addition,
you should take (or procure to be taken) the action set out below to
transfer the T&N Ordinary Shares in respect of which you wish to accept the
Offer to an escrow balance (that is, a TTE instruction) specifying the
Receiving Agent (in its capacity as a CREST participant under its
participant ID referred to below) as the Escrow Agent, as soon as possible
and in any event so that the transfer to escrow settles not later than 3:00
p.m. (London time) on 12 December 1997.
If you are a CREST sponsored member, you should refer to your CREST sponsor
before taking any action. Your CREST sponsor will be able to confirm details
of your participant ID and the member account ID under which your T&N
Ordinary Shares are held. In addition, only your CREST sponsor will be able
to send the TTE instruction to CRESTCo in relation to your T&N Ordinary
Shares.
You should send (or, if you are a CREST sponsored member, procure that your
CREST sponsor sends) a TTE instruction to CRESTCo which must be properly
authenticated in accordance with CRESTCo's specifications and which must
contain, in addition to the other information that is required for a TTE
instruction to settle in CREST, the following details:
(i) Number of T&N Ordinary Shares to be transferred to an escrow
balance;
(ii) Your member account ID. This must be the same member account ID as
the member account ID that is inserted in Box 4 of the Form of
Acceptance;
(iii) Your participant ID. This must be the same participant ID as the
participant ID that is inserted in Box 4 of the Form of
Acceptance;
(iv) Participant ID of the Escrow Agent (that is, the Receiving Agent,
in its capacity as a CREST Receiving Agent). This is 3RA32;
(v) Member account ID of the Escrow Agent. This is FEDERAL;
(vi) Form of Acceptance reference number. This is the reference number
that appears on page 3 of the Form of Acceptance. This reference
number should be inserted in the first eight characters of the
shared note field on the TTE instruction. Such insertion will
enable the Receiving Agent to match the transfer to escrow to your
Form of Acceptance. You should keep a separate record of this
reference number for future reference;
(vii) Intended settlement date. This should be as soon as possible and
in any event no later than 3:00 p.m. (London time) on 12 December
1997; and
(viii) Corporate action number. This is corporate action number 3.
After settlement of the TTE instruction, you will not be able to access the
T&N Ordinary Shares concerned in CREST for any transaction or charging
purposes. If the Offer becomes or is declared unconditional in all respects,
the Escrow Agent will transfer the T&N Ordinary Shares concerned to itself
in accordance with paragraph (h) of Part C of Appendix I of this document.
You are recommended to refer to the CREST manual published by CRESTCo for
further information on the CREST procedures outlined above. For ease of
processing, you are requested, wherever possible, to ensure that a Form of
Acceptance relates to only one transfer to escrow.
16
<PAGE> 18
If no Form of Acceptance reference number, or an incorrect Form of
Acceptance reference number, is included on the TTE instruction, the Offeror
may treat any amount of T&N Ordinary Shares transferred to an escrow balance
in favour of the Escrow Agent specified above from the participant ID and
member account ID identified in the TTE instruction as relating to any
Form(s) of Acceptance which relate(s) to the same participant ID and member
account ID (up to the amount of T&N Ordinary Shares inserted or deemed to be
inserted in Box 1 on the Form(s) of Acceptance concerned).
YOU SHOULD NOTE THAT CRESTCO DOES NOT MAKE AVAILABLE SPECIAL PROCEDURES IN
CREST FOR ANY PARTICULAR CORPORATE ACTION. NORMAL SYSTEM TIMINGS AND
LIMITATIONS WILL THEREFORE APPLY IN CONNECTION WITH A TTE INSTRUCTION AND
ITS SETTLEMENT. YOU SHOULD THEREFORE ENSURE THAT ALL NECESSARY ACTION IS
TAKEN BY YOU (OR BY YOUR CREST SPONSOR) TO ENABLE A TTE INSTRUCTION RELATING
TO YOUR T&N ORDINARY SHARES TO SETTLE PRIOR TO 3:00 P.M. (LONDON TIME) ON 12
DECEMBER 1997. IN THIS CONNECTION, YOU ARE REFERRED IN PARTICULAR TO THOSE
SECTIONS OF THE CREST MANUAL CONCERNING PRACTICAL LIMITATIONS OF THE CREST
SYSTEM AND TIMINGS.
The Offeror will make an appropriate announcement if any of the details
contained in this paragraph 10(d) alter for any reason.
(E) DEPOSITS OF T&N ORDINARY SHARES INTO, AND WITHDRAWALS OF T&N ORDINARY SHARES
FROM, CREST
Normal CREST procedures (including timings) apply in relation to any T&N
Ordinary Shares that are, or are to be, converted from uncertificated to
certificated form, or from certificated to uncertificated form, during the
course of the Offer (whether any such conversion arises as a result of a
transfer of T&N Ordinary Shares or otherwise). Holders of T&N Ordinary
Shares who are proposing so to convert any such shares are recommended to
ensure that the conversion procedures are implemented in sufficient time to
enable the person holding or acquiring the T&N Ordinary Shares as a result
of the conversion to take all necessary steps in connection with an
acceptance of the Offer (in particular, as regards delivery of share
certificate(s) or other documents of title or transfers to an escrow balance
as described above) prior to 3:00 p.m. (London time) on 12 December 1997.
(F) VALIDITY OF ACCEPTANCES
Without prejudice to Parts B and C of Appendix I to this document, the
Offeror reserves the right, subject to the City Code, to treat as valid in
whole or in part any acceptance of the Offer which is not entirely in order
or which is not accompanied by the relevant TTE instruction or (as
applicable) the relevant share certificate(s) and/or other document(s) of
title. In that event, no payment of cash under such acceptances will be
made until after the relevant transfer to escrow has settled or (as
applicable) the relevant share certificate(s) and/or other document(s) of
title or indemnities satisfactory to the Offeror have been received.
(G) OVERSEAS T&N SHAREHOLDERS
The attention of T&N Shareholders who are residents or citizens of
jurisdictions outside the United Kingdom and any person (including, without
limitation, any nominee, custodian or trustee) who may have an obligation to
forward this document outside the United Kingdom is drawn to paragraph 6 of
Part B and paragraph (b) of Part C of Appendix I to this document and to the
relevant provisions of the Form of Acceptance.
The Offer is not being made, directly or indirectly, in or into or by use of
the mails of, or by any means or instrumentality of interstate or foreign
commerce of, or any facilities of a securities exchange of Canada
(including, but not limited to, post, facsimile transmission, telex or
telephone). Accordingly, any purported acceptance of the Offer by T&N
17
<PAGE> 19
Shareholders who are unable to give the warranty set out in paragraph (b) of
Part C of Appendix I to this document, is liable to be disregarded.
IF YOU ARE IN ANY DOUBT AS TO THE PROCEDURE FOR ACCEPTANCE, PLEASE CONTACT THE
RECEIVING AGENT BY TELEPHONE ON 0117 937 0672 OR AT THE ADDRESS IN PARAGRAPH (B)
ABOVE. YOU ARE REMINDED THAT, IF YOU ARE A CREST SPONSORED MEMBER, YOU SHOULD
CONTACT YOUR CREST SPONSOR BEFORE TAKING ANY ACTION.
11. SETTLEMENT
Subject to the Offer becoming or being declared unconditional in all respects
(except as provided in paragraph 6 of Part B of Appendix I in the case of
certain overseas T&N Shareholders), settlement of the consideration to which any
T&N Shareholder is entitled under the Offer will be effected (i) in the case of
acceptances received, complete in all respects, by the date on which the Offer
becomes or is declared unconditional in all respects, within 14 days of such
date, or (ii) in the case of acceptances of the Offer received, complete in all
respects, after the date on which the Offer becomes or is declared unconditional
in all respects but while it remains open for acceptance, within 14 days of such
receipt, in the following manner:
(A) T&N ORDINARY SHARES IN UNCERTIFICATED FORM (THAT IS, IN CREST)
Where an acceptance relates to T&N Ordinary Shares in uncertificated form,
settlement of any cash consideration to which the accepting T&N Shareholder
is entitled will be despatched by means of CREST by the Offeror procuring
the creation of an assured payment obligation in favour of the accepting T&N
Shareholder's payment bank in respect of the cash consideration due, in
accordance with the CREST assured payment arrangements.
The Offeror reserves the right to settle all or any part of the
consideration referred to in this paragraph (a), for all or any accepting
T&N Shareholder(s), in the manner referred to in paragraph (b) below if, for
any reason, it wishes to do so.
(B) T&N ORDINARY SHARES IN CERTIFICATED FORM
Where an acceptance relates to T&N Ordinary Shares in certificated form,
settlement of any cash consideration to which the accepting T&N Shareholder
is entitled will be despatched by first class post (or by such other method
as the Panel may approve). All such cash payments will be made in pounds
sterling by cheque, drawn on a branch of a UK clearing bank.
(C) GENERAL
If the Offer does not become or is not declared unconditional in all
respects (i) share certificate(s) and/or other document(s) of title will be
returned by post (or by such other method as may be approved by the Panel),
within 14 days of the Offer lapsing, to the person or agent whose name and
address (outside Canada) is set out in Box 6 of the Form of Acceptance or,
if none is set out, to the first named holder at his/her registered address
(outside Canada) and (ii) the Escrow Agent will, immediately after the
lapsing of the Offer (or within such longer period, not exceeding 14 days
after the Offer lapsing, as the Panel may permit), give TFE instructions to
CRESTCo to transfer all T&N Ordinary Shares held in escrow balances and in
relation to which it is the Escrow Agent for the purposes of the Offer to
the original available balances of the T&N Shareholders concerned.
All documents and remittances sent by, to or from T&N Shareholders or their
appointed agents will be sent at their own risk.
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<PAGE> 20
12. FURTHER INFORMATION
Your attention is drawn to the further information contained in the Appendices
to this document.
Yours sincerely
for and on behalf of
Morgan Stanley & Co. Limited
SIMON ROBEY
Managing Director
19
<PAGE> 21
APPENDIX I
TERMS AND CONDITIONS OF THE OFFER
PART A--CONDITIONS OF THE OFFER
The Offer is subject to the following conditions:
(a) valid acceptances being received (and not, where permitted, withdrawn) by
not later than 3.00 p.m. (London time) on 12 December 1997 (or such later
time(s) and/or date(s) as the Offeror may, subject to the rules of the City
Code, decide) in respect of not less than 90 per cent (or such lower
percentage as the Offeror may decide) in nominal value of the T&N Ordinary
Shares to which the Offer relates, provided that this condition will not be
satisfied unless the Offeror and/or its wholly-owned subsidiaries shall have
acquired or agreed to acquire (whether pursuant to the Offer or otherwise)
T&N Ordinary Shares carrying in aggregate more than 50 per cent of the
voting rights then normally exercisable at a general meeting of T&N,
including for this purpose (to the extent, if any, required by the Panel)
any such voting rights attaching to any T&N Ordinary Shares that are
unconditionally allotted or issued before the Offer becomes or is declared
unconditional as to acceptances, whether pursuant to the exercise of any
outstanding subscription or conversion rights or otherwise and, for this
purpose, (i) the expression "T&N Ordinary Shares to which the Offer relates"
shall be construed in accordance with sections 428 to 430F of the Companies
Act 1985, and (ii) T&N Ordinary Shares which have been unconditionally
allotted shall be deemed to carry the voting rights which they will carry
upon issue; provided that, unless the Offeror otherwise determines, this
condition (a) can only be treated as satisfied at a time when all of the
other conditions in paragraphs (b)-(i) inclusive are either satisfied or
waived;
(b) no government or governmental, quasi-governmental, supranational, statutory,
regulatory or investigative body, authority (including any national
anti-trust or merger control authorities), court, trade agency, association,
institution or professional or environmental body or any other person or
body whatsoever in any relevant jurisdiction (each a "Third Party") having
decided to take, institute, implement or threaten any action, proceeding,
suit, investigation, enquiry or reference or made, proposed or enacted any
statute, regulation, decision or order or required any action to be taken or
information to be provided or otherwise having done anything and there not
continuing to be outstanding any statute, regulation or order thereof which
would or might reasonably be expected to:
(i) make the Offer or its implementation, or the proposed
acquisition by the Offeror or any member of the Wider Federal-Mogul
Group of any shares or other securities in, or control of, T&N, void,
illegal or unenforceable, or otherwise directly or indirectly
restrain, prohibit, restrict or delay the same or impose additional
conditions or obligations with respect thereto, or otherwise impede,
challenge or interfere therewith, or require amendment to the terms of
the Offer or the proposed acquisition of any T&N Ordinary Shares or
the acquisition of control of T&N by the Offeror, in each case in a
manner which is material in the context of the Offer;
(ii) require, prevent or delay the divestiture by any member of the Wider
Federal-Mogul Group of any of its shares or other securities in T&N;
(iii) require, prevent or delay the divestiture or alter the terms envisaged
for any proposed divestiture by any member of the Wider Federal-Mogul
Group or by T&N or any member of the Wider T&N Group, in any such case
of all or any portion of their respective businesses, assets or
property (which, in each case, would be material in the context of the
Wider Federal-Mogul Group or the Wider T&N Group, as appropriate, taken
as a whole) or impose any limitation on the ability of any of them to
conduct their respective businesses (or any of them) or own their
respective assets or properties or any part thereof (which, in each
case, would be material in the context of the Wider Federal-Mogul Group
or the Wider T&N Group, as appropriate, taken as a whole);
(iv) impose any limitation on, or result in a delay in, the ability of any
member of the Wider Federal-Mogul Group to acquire, or to hold or to
exercise effectively, directly or indirectly, all or any rights of
ownership of shares or other securities (or the equivalent) in, or to
exercise management or control over, T&N or any member of the Wider T&N
Group or any member of the Wider Federal-Mogul Group (which, in any
such case, would be material in the context of the Wider Federal-Mogul
Group or the Wider T&N Group, as the case may be, taken as a whole);
(v) any member of the Wider Federal-Mogul Group or the Wider T&N
Group to acquire, or to offer to acquire, any shares or other
securities (or the equivalent) in any member of the Wider
Federal-Mogul Group or the Wider T&N Group owned by any third party
where such acquisition would be material in the context of the Wider
Federal-Mogul Group or the Wider T&N Group, as the case may be, taken
as a whole;
20
<PAGE> 22
(vi) impose any limitation on the ability of any member of the Wider
Federal-Mogul Group or the Wider T&N Group to integrate its business,
or any part of it, with the businesses of any other member of the Wider
Federal-Mogul Group or the Wider T&N Group (in each case, as is
material in the context of the Wider Federal-Mogul Group or the Wider
T&N Group, as the case may be, taken as a whole);
(vii) result in any member of the Wider T&N Group or the Wider Federal-Mogul
Group ceasing to be able to carry on business under any name under
which it presently does so (the consequences of which would be material
in the context of the Wider Federal-Mogul Group or the Wider T&N Group,
as the case may be, taken as a whole); or
(viii) otherwise adversely affect the business or profits or prospects of any
member of the Wider T&N Group or any member of the Wider Federal-Mogul
Group (in a manner which would be material in the context of the Wider
T&N Group or the Wider Federal-Mogul Group, as the case may be, taken
as a whole);
and all applicable waiting and other time periods during which any Third Party
could take, institute, implement or threaten any such action, proceeding, suit,
investigation, enquiry or reference under the laws of any jurisdiction, having
expired, lapsed or been terminated;
(c) without limitation of paragraph (b) above:
(i) the Office of Fair Trading having indicated, in terms satisfactory to
the Offeror, that it is not the intention of the Secretary of State for
Trade and Industry to refer the proposed acquisition of T&N by the
Offeror, or any matters arising therefrom, to the Monopolies and Mergers
Commission;
(ii) all filings having been made and all or any appropriate waiting periods
(including any extensions thereof) under the United States
Hart-Scott-Rodino Antitrust Improvements Act 1976 and the regulations
thereunder having expired, lapsed or been terminated as appropriate in
each case in respect of the Offer and the proposed acquisition of any
T&N Ordinary Shares, or control of T&N by the Offeror or any member of
the Wider Federal-Mogul Group;
(d) all necessary filings having been made and all appropriate waiting and other
time periods under any applicable legislation and regulations in any
jurisdiction having expired, lapsed or been terminated and all statutory or
regulatory obligations in any jurisdiction having been complied with in each
case in connection with the Offer or the acquisition by any member of the
Wider Federal-Mogul Group of any shares or other securities in, or control
of, T&N or any member of the Wider T&N Group and all authorisations, orders,
recognitions, grants, determinations, certificates, consents, clearances,
confirmations, licences, permissions and approvals ("Authorisations")
reasonably considered necessary or appropriate by the Offeror (or any member
of the Wider Federal-Mogul Group) for or in respect of the Offer or the
proposed acquisition of any shares or other securities in, or control of,
T&N or any member of the Wider T&N Group by any member of the Wider
Federal-Mogul Group or the carrying on by any member of the Wider T&N Group
of its business having been obtained, in terms and in a form reasonably
satisfactory to the Offeror, from all appropriate Third Parties or from any
persons or bodies with whom any member of the Wider T&N Group has entered
into contractual arrangements, in each case where the absence of such
Authorisation would have a material adverse effect on the Wider T&N Group
taken as a whole and all such Authorisations remaining in full force and
effect and there being no notice or intimation of an intention to revoke or
not to renew the same;
(e) except as fairly disclosed to the Offeror by or on behalf of T&N prior to 16
October 1997, there being no provision of any arrangement, agreement,
licence, permit, franchise or other instrument to which any member of the
Wider T&N Group is a party or by or to which any such member or any of its
respective assets may be bound or be subject and which, in consequence of
the Offer or proposed acquisition by any member of the Wider Federal-Mogul
Group of some or all of the share capital of T&N or other securities in T&N
or because of a change in the control or management of T&N or any member of
the Wider T&N Group or otherwise, could or might reasonably be expected to
result in, to an extent which would be material in the context of the Wider
T&N Group taken as a whole:
(i) any monies borrowed by or any other indebtedness or liabilities, actual
or contingent, of any member of the Wider T&N Group being or becoming
payable or capable of being declared repayable immediately or prior to
their or its stated maturity, or the ability of any such member to
borrow monies or incur any indebtedness being withdrawn or inhibited;
(ii) the creation or enforcement of any mortgage, charge or other security
interest over the whole or any part of the business, property or assets
of any member of the Wider T&N Group or any such mortgage, charge or
other security interest becoming enforceable or being enforced;
(iii) any such arrangement, agreement, licence, permit, franchise or
instrument, or the rights, liabilities, obligations or interests of any
member of the Wider T&N Group thereunder, being, or becoming capable of
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<PAGE> 23
being, terminated or adversely modified or affected or any action being
taken or any obligation or liability arising thereunder;
(iv) any asset or interest of any member of the Wider T&N Group being or
falling to be disposed of or charged or any right arising under which
any such asset or interest could be required to be disposed of or
charged;
(v) any member of the Wider T&N Group ceasing to be able to carry on
business under any name under which it presently does so;
(vi) the creation of material liabilities actual or contingent by any such
member;
(vii) any interest or business of any member of the Wider T&N Group in or
with any other person, firm or body (or any arrangement or arrangements
relating to any such interest or business) being terminated, adversely
modified or affected; or
(viii) the respective value, financial or trading position of any member of
the Wider T&N Group being prejudiced or adversely affected;
(f) since 31 December 1996 and except as disclosed in the T&N's annual report
and accounts for the year then ended or as otherwise publicly announced by
delivery of an announcement to the Company Announcements Office of the
London Stock Exchange or as would be disclosed by a search at the Companies'
Registry for England and Wales against T&N made on 14 October 1997 or as
fairly disclosed to the Offeror prior to 16 October 1997, or as disclosed in
the Interim Statement of T&N for the six month period ended on 30 June 1997,
no member of the Wider T&N Group having:
(i) (save as between T&N and wholly-owned subsidiaries of T&N) issued or
agreed to or authorised or proposed the issue of additional shares of
any class, or securities convertible into, or rights, warrants or
options to subscribe for or acquire, any such shares or convertible
securities except for any options granted as disclosed to the Offeror
prior to 16 October 1997 and any shares issued upon the exercise of any
options granted under any of the T&N Shares Option Schemes or pursuant
to elections for scrip dividends in relation to the second interim
dividend declared on 28 August 1997;
(ii) recommended, declared, paid or made or proposed to recommend, declare
or pay any bonus, dividend or other distribution (save as between a
wholly-owned subsidiary of T&N and T&N or another wholly-owned
subsidiary of T&N) other than the T&N Dividend;
(iii) made or authorised or proposed or announced any change in its loan
capital;
(iv) merged with or demerged or acquired any body corporate or acquired or
disposed of or transferred, mortgaged or charged or created any
security interest over any assets or (save in the ordinary course of
business) any right, title or interest in any assets (including shares
and trade investments) or authorised, proposed or announced its
intention so to do (in each case with a material adverse effect on the
Wider T&N Group taken as a whole);
(v) issued, authorised or proposed the issue of any debentures or (save in
the ordinary course of business) incurred any indebtedness or contingent
liability which is material in the context of the Wider T&N Group taken
as a whole;
(vi) purchased, redeemed or repaid or announced any proposal to purchase,
redeem or repay any of its own shares or other securities or reduced or
made any other change to any part of its share capital;
(vii) entered into or varied, or authorised, proposed or announced its
intention to enter into or vary any contract, transaction, arrangement
or commitment (whether in respect of capital expenditure or otherwise)
which is of a long term, onerous, or unusual nature or magnitude or
which would be restrictive on the business of any member of the Wider
T&N Group or the Wider Federal-Mogul Group, or which involves or would
involve an obligation of such a nature or magnitude or which could be
so restrictive or which is other than in the ordinary course of
business in each case which is material in the context of the Wider T&N
Group or the Wider Federal-Mogul Group, as the case may be, taken as a
whole;
(viii) implemented or effected, or authorised, proposed or announced its
intention to implement, effect, authorise or propose any
reconstruction, amalgamation, scheme, commitment or other transaction
or arrangement otherwise than in the ordinary course of business which
is material in the context of the Wider T&N Group taken as a whole;
(ix) entered into or changed or made any offer (which remains open for
acceptance) to enter into or change the terms of any contract with any
of the directors or senior executives of any member of the Wider T&N
Group;
(x) taken any corporate action or had any legal proceedings instituted or
threatened against it for its winding-up (voluntarily or otherwise),
dissolution or reorganisation or for the appointment of a receiver,
administrator,
22
<PAGE> 24
administrative receiver, trustee or similar officer of all or
any of its assets and revenues or any analogous proceedings in any
jurisdiction or appointed any analogous person in any jurisdiction (in
each case with a material adverse effect on the Wider T&N Group taken
as a whole);
(xi) been unable or admitted in writing that it is unable to pay its debts
or having stopped or suspended (or threatened to stop or suspend)
payment of its debts generally or ceased or threatened to cease
carrying on all or a substantial part of its business (in each case
with a material adverse effect on the Wider T&N Group taken as a
whole);
(xii) waived or compromised any claim which is material in the context of the
Wider T&N Group, taken as a whole;
(xiii) made any alteration to its memorandum or articles of association, or
any other incorporation document; or
(xiv) entered into any agreement, commitment or arrangement or passed any
resolution or announced any intention with respect to any of the
transactions, matters or events referred to in this condition;
(g) since 31 December 1996 and except as disclosed in the T&N annual report and
accounts for the year then ended, or as otherwise publicly announced by
delivery of an announcement to the Company Announcements Office of the
London Stock Exchange or as fairly disclosed to the Offeror prior to 16
October 1997, or as disclosed in the Interim Statement of T&N for the six
month period ended on 30 June 1997:
(i) there having been no material adverse change or deterioration in the
business, assets, financial or trading position or profits, assets or
prospects of the Wider T&N Group taken as a whole;
(ii) no litigation, arbitration proceedings, prosecution or other legal
proceedings to which any member of the Wider T&N Group is or may become
a party (whether as plaintiff or defendant or otherwise) or an
investigation (save as a result of the Offer) by any Third Party having
been threatened, announced or instituted by or remaining outstanding,
against or in respect of any member of the Wider T&N Group which is
material in the context of the Wider T&N Group taken as a whole;
(iii) no contingent or other liability having arisen which would or could
reasonably be expected to materially and adversely affect the Wider T&N
Group taken as a whole; and
(iv) there having been no enquiry or investigation (save as a result of the
Offer) by, or complaint or, reference to, any third party of a material
nature to T&N in respect of any member of the Wider T&N Group and no
such enquiry, investigation, complaint or reference having been
threatened or instituted;
(h) the Offeror not having discovered:
(i) that any financial or business or other information disclosed
at any time by or on behalf of any member of the Wider T&N Group,
whether publicly, to any member of the Wider Federal-Mogul Group or
otherwise, is misleading, contains a misrepresentation of fact or
omits to state a fact necessary to make the information contained
therein not misleading in any case which has not subsequently been
corrected by such disclosure and, in any event, which is material in
the context of the Wider T&N Group;
(ii) that any member of the Wider T&N Group or partnership, company or other
entity in which any member of the Wider T&N Group has an interest and
which is not a subsidiary undertaking of T&N is subject to any
liability, contingent or otherwise, which is not disclosed in T&N's
annual report and accounts for the financial year ended 31 December
1996 and which is material in the context of the Wider T&N Group taken
as a whole; or
(iii) any information which materially affects (in the context of the Wider
T&N Group as a whole) the import of any information disclosed prior to
16 October 1997 by any member of the Wider T&N Group to the Offeror;
(i) the Offeror not having discovered:
(i) that save as fairly disclosed to the Offeror prior to 16
October 1997 any past or present member of the Wider T&N Group has not
complied with all applicable legislation or regulations of any
jurisdiction with regard to the disposal, discharge, spillage, leak or
emission of any waste or hazardous substance or any substance likely
to impair the environment or harm human health, or otherwise relating
to environmental matters, or that there has otherwise been any such
disposal, discharge, spillage, leak or emission (whether or not the
same constituted a non-compliance by any person with any such
legislation or regulations and wherever the same may have taken place)
which, in any such case, would be likely to give rise to any liability
(whether actual or contingent) on the part of any member of the Wider
T&N Group which would be material in the context of the Wider T&N
Group taken as a whole;
(ii) that save as fairly disclosed to the Offeror prior to 16 October 1997
there is, or is likely to be, any material liability (in the context of
the Wider T&N Group taken as a whole), whether actual or contingent, to
make
23
<PAGE> 25
good, repair, reinstate or clean up any property now or previously
owned, occupied or made use of by any past or present member of the
Wider T&N Group or any controlled waters under any environmental
legislation, regulation, notice, circular or order of any relevant
authority or third party or otherwise; or
(iii) save as fairly disclosed to the Offeror prior to 16 October 1997 that
circumstances exist whereby a person or class of persons would be
likely to have any material (in the context of the Wider T&N Group
taken as a whole) claim or claims in respect of any product or process
of manufacture or materials used therein now or previously
manufactured, sold or carried out by any past or present member of the
Wider T&N Group.
For the purpose of these conditions: (a) "subsidiary undertaking", "associated
undertaking" and "undertaking" have the meanings given by the Companies Act 1985
(but for this purpose ignoring paragraph 20(1)(b) of Schedule 4A of the
Companies Act 1985) and (b) "substantial interest" means a direct or indirect
interest in 20 per cent or more of the voting equity capital of an undertaking.
Subject to the requirements of the Panel, the Offeror reserves the right to
waive all or any of the above conditions, in whole or in part, except condition
(a).
Conditions (b) to (i) (inclusive) must be fulfilled or waived by midnight on the
21st day after the later of 12 December 1997 and the date on which condition (a)
is fulfilled (or in each case such later date as the Panel may agree), failing
which the Offer will lapse. The Offeror shall be under no obligation to waive
(if so capable of waiver) or treat as fulfilled any of conditions (b) to (i)
(inclusive) by a date earlier than the latest date specified above for the
fulfilment thereof notwithstanding that the other conditions of the Offer may at
such earlier date have been waived or fulfilled and that there are at such
earlier date no circumstances indicating that any of such conditions may not be
capable of fulfilment.
If the Offeror is required by the Panel to make an offer for T&N Ordinary Shares
under the provisions of Rule 9 of the City Code, the Offeror may make such
alterations to the conditions of the Offer, including to condition (a) above, as
are necessary to comply with the provisions of that Rule.
The Offer will lapse if the acquisition of T&N is referred to the Monopolies and
Mergers Commission before 3.00 p.m. on the later of 12 December 1997 and the
date when the Offer becomes or is declared unconditional as to acceptances.
If the Offer lapses, the Offer will cease to be capable of further acceptance
and persons accepting the Offer and the Offeror shall thereupon cease to be
bound by acceptances delivered on or before the date on which the Offer so
lapses.
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<PAGE> 26
PART B--FURTHER TERMS OF THE OFFER
The following further terms apply, unless the context otherwise requires, to the
Offer.
Except where the context requires otherwise, references in Parts B and C of this
Appendix I and in the Form of Acceptance to:
(a) the "acceptance condition" means the condition as to acceptances of the
Offer set out in paragraph (a) of Part A of this Appendix I and references
to the Offer becoming unconditional as to acceptances will be construed
accordingly;
(b) "acceptances of the Offer" shall include deemed acceptances of the Offer;
(c) "Offer period" means, in relation to the Offer, the period commencing on 26
September 1997 until whichever of the following dates shall be the later:
(i) 12 December 1997, (ii) the date on which the Offer lapses, and (iii) the
date on which the Offer becomes unconditional;
(d) the "Offer" will include any revision, variation, renewal or extension of
the Offer; and
(e) the "Offer becoming unconditional" shall (unless the context expressly
requires otherwise) (i) where made in this document (other than in this Part
B of Appendix I) or in the Form of Acceptance, mean the Offer becoming or
being declared unconditional in all respects, and (ii) where made in this
Part B of Appendix I, mean the Offer becoming or being declared
unconditional as to acceptances, whether or not any other condition of the
Offer remains to be fulfilled.
1. ACCEPTANCE PERIOD
(a) The Offer will initially be open for acceptance until 3.00 p.m. on 12
December 1997.
(b) Although no revision is envisaged, if the Offer is revised, it will remain
open for acceptance for a period of at least 14 days (or such lesser period
as may be permitted by the Panel) from the date on which written
notification of the revision is posted to T&N Shareholders. Except with the
consent of the Panel, no revision of the Offer may be made or posted after
29 December 1997 or, if later, the day falling 14 days prior to the last
date on which the Offer is able to become unconditional.
(c) The Offer, whether revised or not, shall not (without the consent of the
Panel) be capable of becoming unconditional after midnight on 12 January
1998 (or any earlier time and/or date beyond which the Offeror has stated
that the Offer will not be extended and in respect of which it has not
withdrawn that statement) nor of being kept open for acceptance after that
time and date unless the Offer has previously become unconditional. However,
the Offeror reserves the right, with the permission of the Panel, to extend
the time for the Offer to become unconditional to a later time and/or date.
The Offeror may not, save with the permission of the Panel, for the purpose
of determining whether the acceptance condition has been fulfilled, take
into account acceptances of the Offer received or purchases of T&N Ordinary
Shares made after 1.00 p.m. (London time) on 12 January 1998 (or any earlier
time and/or date beyond which the Offeror has stated that the Offer will not
be extended and in respect of which it has not withdrawn that statement) or
any such later time and/or date to which the Offeror has stated (with the
permission of the Panel) that the Offer will be extended, as the case may
be.
(d) If the Offer becomes unconditional, the Offer will remain open for
acceptance for not less than 14 days from the date on which it would
otherwise have expired. If the Offer has become unconditional and it is
stated that the Offer will remain open until further notice, then not less
than 14 days' notice will be given prior to the closing of the Offer to
those T&N Shareholders who have not accepted the Offer.
(e) If a competitive situation arises after a "no extension" and/or "no
increase" statement (as determined by the Panel) has been made by or on
behalf of the Offeror in relation to the Offer, the Offeror may, if it has
specifically reserved the right to do so at the same time such statement is
made (or otherwise with the consent of the Panel), withdraw such statement
and be free to extend and/or increase the Offer if it complies with the
requirements of the City Code and in particular that it:
(i) announces such withdrawal within four business days after the
announcement of the competing offer and gives notice to the T&N
Shareholders to that effect in writing or (in the case of T&N
Shareholders with registered addresses outside the United Kingdom or
whom the Offeror knows to be nominees, trustees or custodians holding
T&N Ordinary Shares for such persons) by announcement in the United
Kingdom at the earliest practicable opportunity; and
(ii) gives any T&N Shareholders who accepted the Offer after the date of
such statement a right of withdrawal as described in paragraph 3(c)
below.
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<PAGE> 27
(f) The Offeror may choose not to be bound by the terms of a "no extension" or
"no increase" statement if it would otherwise prevent the posting of an
increased or improved Offer (i) if it has reserved the right to do so and
the increased or improved Offer is recommended for acceptance by the board
of T&N, or (ii) with the consent of the Panel.
2. ANNOUNCEMENTS
(a) Without prejudice to paragraph 3(a) of this Part B, by 8.30 a.m. (London
time) on the business day (the "relevant day") next following the day on
which the Offer is due to expire or becomes unconditional or is revised or
extended (or such later time and/or date as the Panel may agree), the
Offeror will make an appropriate announcement and simultaneously inform the
London Stock Exchange of the state of the Offer. Such announcement will
(unless otherwise permitted by the Panel) also state the total number of T&N
Ordinary Shares and rights over such shares (as nearly as practicable):
(i) for which acceptances of the Offer have been received;
(ii) acquired or agreed to be acquired during the Offer period by or on
behalf of the Offeror and any persons acting in concert with the
Offeror;
(iii) held prior to the Offer period by or on behalf of the Offeror and any
persons acting in concert with the Offeror; and
(iv) for which acceptances of the Offer have been received from persons
acting in concert with the Offeror;
and the announcement will specify the percentages of T&N Ordinary Shares
represented by each of these figures. In computing the number of T&N
Ordinary Shares represented by acceptances and purchases for the above
purposes, only those acceptances and purchases permitted to be counted
towards fulfilling the acceptance condition in accordance with paragraphs
5(d) and 5(e) below shall be included in the totals (except as otherwise
agreed by the Panel).
(b) Any decision to extend the time and/or date by which the acceptance
condition has to be fulfilled may be made by the Offeror at any time up to,
and will be announced not later than, 8.30 a.m. (London time) on the
relevant day (or such later time and/or date as the Panel may agree) and the
announcement will state the next expiry date (unless the Offer is then
unconditional in which case the announcement may state that the Offer will
remain open until further notice).
(c) In this Appendix I, references to the making of an announcement or the
giving of notice in each case by or on behalf of the Offeror include the
release of an announcement by the Offeror, public relations consultants of
the Offeror or by Morgan Stanley to the press and the delivery by hand or
telephone, facsimile or telex transmission or other electronic transmission
of an announcement to the London Stock Exchange. An announcement made
otherwise than to the London Stock Exchange will be notified simultaneously
to the London Stock Exchange.
3. RIGHTS OF WITHDRAWAL
(a) If the Offeror, having announced the Offer to be unconditional, fails to
comply by 3.30 p.m. (London time) on the relevant day (or such later time
and/or date as the Panel may agree) with any of the other requirements
specified in paragraph 2(a) of this Part B, an accepting T&N Shareholder may
immediately thereafter withdraw his acceptance of the Offer by written
notice, received either by post, or by hand, to the Receiving Agent, The
Royal Bank of Scotland plc, Registrars Department, New Issues Section, PO
Box 859, Consort House, East Street, Bedminster, Bristol BS99 1XZ or, by
hand only during normal business hours, to The Royal Bank of Scotland plc,
Registrars Department, New Issues Section, PO Box 633, 5-10 Great Tower
Street, London EC3R 5ER. Subject to paragraph 1(c) of this Part B, this
right of withdrawal may be terminated not less than eight days after the
relevant day by the Offeror confirming that the Offer is still unconditional
and complying with the other requirements specified in paragraph 2(a) of
this Part B. If any such confirmation is given, the first period of 14 days
referred to in paragraph 1(d) of this Part B will run from the date of such
confirmation and compliance.
(b) If by 3.00 p.m. (London time) on 2 January 1998 (or such later time and/or
date as the Panel may agree) the Offer has not become unconditional, an
accepting T&N Shareholder may thereafter withdraw his acceptance of the
Offer by written notice, received either by post or by hand to the Receiving
Agent at any time before the earlier of (i) the time when the Offer becomes
unconditional and (ii) the final time for lodgement of acceptances of the
Offer which can be taken into account in accordance with paragraph 1(c) of
this Part B.
(c) If a "no increase" and/or a "no extension" statement has been withdrawn in
accordance with paragraph 1(e) of this Part B, any T&N Shareholder who
accepts the Offer after the date of such statement may withdraw that
acceptance thereafter in the manner referred to in paragraph 3(a) of this
Part B not later than the eighth day after the date on which written notice
of such withdrawal is posted to the relevant T&N Shareholder.
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<PAGE> 28
(d) Except as provided by this paragraph 3 and paragraph 4(c) below, acceptances
of the Offer and elections shall be irrevocable.
(e) In this paragraph 3, "written notice" (including any letter of appointment,
direction or authority) means notice in writing bearing the original
signature(s) of the relevant accepting T&N Shareholder(s) or his or their
agent(s) duly appointed in writing (evidence of whose appointment, in a form
reasonably satisfactory to the Offeror, is produced with the notice). Telex
or facsimile transmission or copies will not be sufficient. No notice which
is postmarked in or otherwise appears to the Offeror or its agents to have
been sent from Canada will be treated as valid.
4. REVISIONS OF THE OFFER
(a) Although no revision of the Offer is envisaged, if the Offer (in its
original or any previously revised form(s)) is revised (either in its terms
or conditions or in the value or form of the consideration offered or
otherwise), which the Offeror reserves the right to do, and any such
revision represents, on the date on which such revision is announced (on
such basis as Morgan Stanley may consider appropriate) an improvement (or no
diminution) in the value of the consideration previously offered, the
benefit of the revised Offer, will, subject as provided in this paragraph 4
and in paragraph 6 of this Part B, be made available to any T&N Shareholder
who has accepted the Offer in its original or any previously revised form(s)
and not validly withdrawn such acceptance (each a "Previous Acceptor"). The
acceptance by or on behalf of a Previous Acceptor of the Offer in its
original or any previously revised form(s) shall, subject as provided in
this paragraph 4 and in paragraph 6 of this Part B, be deemed to be an
acceptance of the Offer as so revised and shall also constitute the
appointment of the Offeror or any director of the Offeror or any director of
Morgan Stanley as his/her attorney and/or agent with authority to accept
such revised Offer on behalf of such Previous Acceptor and, if such revised
Offer includes alternative forms of consideration, to make on his behalf
elections for and/or accept such alternative forms of consideration on his
behalf as such attorney and/or agent in his/her absolute discretion thinks
fit and to execute on behalf of and in the name of such Previous Acceptor
all such further documents (if any) as may be required to give full effect
to such acceptances and/or elections. In making any such acceptance or any
such election, such attorney and/or agent shall take into account the nature
of any previous election made by the Previous Acceptor and such other
factors or matters as he/she may reasonably consider relevant.
(b) The deemed acceptances referred to in this paragraph 4 shall not apply and
the powers of attorney and authorities conferred by paragraph 4(a) above
shall not be exercised by any director of the Offeror or any director of
Morgan Stanley if, as a result thereof, the Previous Acceptor would (on such
basis as Morgan Stanley may consider appropriate) thereby receive less in
aggregate in consideration than he/she would have received in aggregate in
consideration as a result of his/her acceptance of the Offer in the form in
which it was originally accepted and/or elected by him/her or on his/her
behalf or in any previously revised form(s) (unless such Previous Acceptor
has previously agreed in writing to receive less in aggregate
consideration). The deemed acceptances referred to in this paragraph 4 shall
not apply and the exercise of the powers of attorney and authorities
conferred by this paragraph 4 shall be ineffective to the extent that a
Previous Acceptor shall lodge with the Receiving Agent, within fourteen days
of the posting of the document pursuant to which the revision of the Offer
consideration referred to in paragraph 4(a) is made available to T&N
Shareholders, a Form of Acceptance or some other form issued by or on behalf
of the Offeror in which he/she validly elects to receive the consideration
receivable by him/ her under such revised Offer in some other manner than
that set out in his original acceptance.
(c) Subject to paragraph 4(b) above, the powers of attorney and authorities
referred to in this paragraph 4 and any acceptance of a revised Offer and/or
any election pursuant thereto shall be irrevocable unless and until the
Previous Acceptor becomes entitled to withdraw his acceptance under
paragraph 3 of this Part B and duly does so.
(d) The Offeror reserves the right to treat an executed Form of Acceptance
relating to the Offer (in its original or any revised form(s)) which is
received (or dated) on or after the announcement or issue of the Offer in
any revised form as a valid acceptance of the revised Offer and/or election
in respect of the revised Offer and such acceptance shall constitute an
authority in the terms of paragraph 4(a) of this Part B mutatis mutandis on
behalf of the relevant T&N Shareholder.
5. GENERAL
(a) Save with the consent of the Panel, the Offer will lapse unless all
conditions relating to the Offer have been fulfilled or (if capable of
waiver) waived or, where appropriate, have been determined by the Offeror in
its reasonable opinion to be or remain satisfied by midnight on 2 January
1998 or by midnight on the date which is 21 days after the date on which the
Offer becomes unconditional, whichever is the later, or such later date as
the Offeror may, with the consent of the Panel, decide. If the Offer lapses
for any reason, the Offer will cease to be capable of further acceptance and
T&N Shareholders and the Offeror will cease to be bound by prior
acceptances. The Offeror shall be under no obligation to waive or treat as
satisfied any of the conditions (b) to
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(i) (inclusive) of Part A of this Appendix I by a date earlier than the
latest date specified above for the satisfaction thereof notwithstanding
that the other conditions of the Offer may at such earlier date have been
waived or fulfilled and that there are at such earlier date no circumstances
indicating that any of such conditions may be capable of fulfilment.
(b) Except with the consent of the Panel, settlement of the consideration to
which any T&N Shareholder is entitled under the Offer will be implemented in
full in accordance with the terms of the Offer without regard to any lien,
right of set off, counterclaim or other analogous right to which the Offeror
may otherwise be, or claim to be, entitled as against such T&N Shareholder
and will (subject to paragraph 6 below) be effected not later than 14 days
after the later of (i) the date on which the Offer is declared unconditional
in all respects, and (ii) the date of receipt of a valid and complete Form
of Acceptance from such T&N Shareholder. Any cash consideration will be
settled by way of cheques drawn on a UK clearing bank. No consideration will
be sent to an address in Canada.
(c) The instructions, terms, authorities and provisions contained in or deemed
to be incorporated in the Form of Acceptance constitute part of the terms of
the Offer. Words and expressions defined in this document shall have the
same meaning when used in the Form of Acceptance unless the context
otherwise requires. The provisions of this Appendix I shall be deemed to be
incorporated in the Form of Acceptance.
(d) Without prejudice to the right reserved by the Offeror to treat a Form of
Acceptance as valid even though not entirely in order or not accompanied by
the relevant share certificate(s) and/or other document(s) of title or not
accompanied by the relevant transfer to escrow, except as otherwise agreed
by the Panel, an acceptance of the Offer will only be counted towards
fulfilling the acceptance condition if the requirements of Note 4 and, if
applicable, Note 6 to Rule 10 of the Code are satisfied in respect of such
acceptance.
(e) Except as otherwise agreed with the Panel, a purchase of T&N Ordinary Shares
by the Offeror or its nominee(s) (or, if the Offeror is required by the
Panel to make an offer for T&N Ordinary Shares under Rule 9 of the Code, a
person acting in concert with the Offeror or its nominee(s)), if any, will
only be counted towards fulfilling the acceptance condition if the
requirements of Note 5 and, if applicable, Note 6 to Rule 10 of the Code are
satisfied in respect of such purchase.
(f) Except with the consent of the Panel, the Offer will not become
unconditional until the Receiving Agent has issued a certificate to the
Offeror (or its agent) stating the number of T&N Ordinary Shares in respect
of which acceptances have been received which comply with Note 4 to Rule 10
of the City Code and the number of T&N Ordinary Shares otherwise acquired,
whether before or during the Offer period, which comply with Note 5 to Rule
10 of the City Code and, in each case, if appropriate, Note 6 to Rule 10 of
the City Code. Copies of such certificate will be sent to the Panel and to
the financial advisers of T&N as soon as possible after it is issued.
(g) The Offeror and Morgan Stanley reserve the right to treat Forms of
Acceptance as valid if not entirely in order or not accompanied by the
relevant share certificate(s) and/or other relevant document(s) of title or
not accompanied by the relevant transfer to escrow, or if received, by or on
behalf of either of them, at any place or places or in any manner determined
by them otherwise than as specified in this document or in the Form of
Acceptance.
(h) All references in this document and the Form of Acceptance to 12 December
1997 (other than those in the definition of "Offer period" and paragraph
1(a) of this Part B) shall (except where the context otherwise requires) be
deemed, if the expiry date of the Offer is extended, to refer to the expiry
date of the Offer as so extended.
(i) Any omission or failure to despatch this document, the Form of Acceptance,
any other document relating to the Offer and/or any notice required to be
despatched under the terms of the Offer to, or any failure to receive the
same by, any person to whom the Offer is made, or should be made, shall not
invalidate the Offer in any way. Subject to paragraph 6 below, the Offer
extends to any such persons to whom this document, the Form of Acceptance,
and/or any other such document or notice may not have been despatched or who
may not receive such documents and such persons may collect copies of those
documents during normal business hours from the Receiving Agent at either of
the addresses set out in paragraph 3(a) above.
(j) All powers of attorney, appointments of agents and authorities on the terms
conferred by or referred to in this Appendix I or in the Form of Acceptance
are given by way of security for the performance of the obligations of the
T&N Shareholder concerned and are irrevocable (in respect of powers of
attorney, in accordance with section 4 of the Powers of Attorney Act 1971)
except in the circumstances where the donor of such power of attorney,
appointment or authority is entitled to withdraw his acceptance in
accordance with paragraph 3 of this Part B and duly does so.
(k) All communications, notices, certificates, documents of title and
remittances to be delivered by or sent to or from T&N Shareholders (or their
designated agents) will be delivered by or sent to or from them (or their
designated agents) at their risk. No acknowledgement of receipt of any Form
of Acceptance, share certificate(s) and/or other document(s) of title will
be given by or on behalf of the Offeror.
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(l) The Offer and the Form of Acceptance and all acceptances thereof, elections
in respect thereunder and this document shall be governed by and construed
in accordance with English law. Execution by or on behalf of a T&N
Shareholder of a Form of Acceptance will constitute his submission, in
relation to all matters arising out of or in connection with the Offer, to
the jurisdiction of the courts of England and his agreement that nothing
shall limit the right of the Offeror or Morgan Stanley to bring any action,
suit or proceeding arising out of or in connection with the Offer and the
Form of Acceptance in any other manner permitted by law or in any court of
competent jurisdiction.
(m) If sufficient acceptances are received, the Offeror intends to apply the
provisions of sections 428 to 430F (inclusive) of the Companies Act 1985 to
acquire compulsorily any outstanding T&N Ordinary Shares to which the Offer
relates (as defined in the acceptance condition) and to procure the making
by T&N of an application in due course for cancellation of T&N's listing on
the London Stock Exchange.
(n) In relation to any acceptance of the Offer in respect of a holding of T&N
Shares which are in uncertificated form, the Offeror reserves the right to
make such alterations, additions or modifications as may be necessary or
desirable to give effect to any purported acceptance of the Offer, whether
in order to comply with the facilities or requirements of CREST or
otherwise, provided such alterations, additions or modifications are
consistent with the requirements of the City Code or are otherwise made with
the consent of the Panel.
(o) If the Offer does not become unconditional in all respects, the Form of
Acceptance, share certificates and/or other documents of title will be
returned by post (or such other methods as may be approved by the Panel)
within 14 days of the Offer lapsing, at the risk of the person entitled
thereto, to the person or agent whose name and address is set out in the
Form of Acceptance, or, if no address is set out, the first named holder at
his/her registered address (in all cases outside Canada). The Receiving
Agent will, immediately after the lapsing of the Offer (or within such
longer period as the Panel may permit, not exceeding 14 days of the lapsing
of the Offer), give instructions to CRESTCo to transfer all T&N Ordinary
Shares held in escrow balances, and in relation to which it is the escrow
agent for the purposes of the Offer, to the original available balances of
the T&N Shareholders concerned.
(p) The Offer is made on 13 November 1997 and is capable of acceptance from and
after that time.
(q) For the purpose of determining whether the acceptance condition has been
fulfilled at any particular time, Federal-Mogul shall not be bound (unless
otherwise required by the Panel) to take into account any T&N Ordinary
Shares which have been unconditionally issued or allotted before such
determination falls to be made unless T&N has notified Federal-Mogul in
writing of the relevant details of such allotment or issue prior thereto.
Telex or facsimile transmission or copies will not be sufficient for this
purpose.
(r) All references in this Appendix I to any statute or statutory provision
shall include a statute or statutory provision which amends, consolidates or
replaces the same (whether before or after the date hereof).
6. OVERSEAS T&N SHAREHOLDERS
(a) The making of the Offer in, or to T&N Shareholders who are, or are
custodians, nominees or trustees for, citizens, residents or nationals of,
jurisdictions outside the UK may be prohibited or affected by the laws of
the relevant overseas jurisdiction. Such T&N Shareholders should inform
themselves about and observe any applicable legal requirements. It is the
responsibility of any such T&N Shareholder wishing to accept the Offer to
satisfy himself/herself as to the full observance of the laws of the
relevant jurisdiction in connection therewith, including the obtaining of
any governmental, exchange control or other consents which may be required
or the compliance with other formalities needing to be observed and the
payment of any issue, transfer or other taxes or duties in such
jurisdiction. Any such T&N Shareholder will also be responsible for payment
of any such issue, transfer or other taxes or duties or other requisite
payments due in such jurisdiction by whomsoever payable and the Offeror and
any person acting on their behalf shall be entitled to be fully indemnified
and held harmless by such T&N Shareholder for any such issue, transfer or
other taxes or duties as Federal-Mogul or such person may be required to
pay.
(b) In particular, the Offer is not being made, directly or indirectly, in or
into Canada, or by use of the mails of Canada or by any means or
instrumentality of interstate or foreign commerce of, or of any facilities
of a securities exchange of Canada (including, without limitation, facsimile
transmission, telex and telephone).
Accordingly, copies of this document and the Form of Acceptance and any
related offering documents are not being, and must not be, mailed or
otherwise distributed or sent in, into or from Canada. Persons receiving
such documents (including, without limitation, custodians, nominees and
trustees) must not distribute, send or mail them in, into or from Canada
including to T&N Shareholders, or use Canadian mails or any such means,
instrumentality or facility for any purpose, directly or indirectly, in
connection with the Offer, and so doing may invalidate any related purported
acceptance of the Offer. Persons wishing to accept the Offer must not use
Canadian mails or any such means, instrumentality or facility for any
purpose directly or indirectly related to
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acceptance of the Offer. Envelopes containing Forms of Acceptance should not
be postmarked in Canada or otherwise despatched from Canada and all
acceptors must provide addresses outside Canada for the receipt of
consideration to which they are entitled under the Offer or for the return
of Forms of Acceptance, share certificate(s) and/or other document(s) of
title.
(c) A T&N Shareholder will be deemed NOT to have validly accepted the Offer if
(i) he/she cannot give the representation and warranty set out in paragraph
(b) of Part C of this Appendix I; (ii) having completed Box 3 of the Form of
Acceptance with an address in Canada or having a registered address in
Canada he/she does not insert in Box 6 of the Form of Acceptance the name
and address of a person or agent outside Canada to whom he/she wishes the
consideration to which he/she is entitled under the Offer to be sent; (iii)
he/she inserts in Box 6 of the Form of Acceptance the name and address of a
person or agent in Canada to whom he/she wishes the consideration to which
he/she is entitled under the Offer to be sent; or (iv) the Form of
Acceptance received from him/her is in an envelope postmarked in, or which
otherwise appears to the Offeror or its agents to have been sent from,
Canada.
The Offeror reserves the right in its sole discretion, to investigate, in
relation to any acceptance, whether the representation and warranty set out
in paragraph (b) of Part C of this Appendix I could have truthfully been
given by the relevant T&N Shareholder and, if such investigation is made
and, as a result, the Offeror cannot satisfy itself that such representation
and warranty was true and correct, such acceptance shall not be valid.
(d) Neither the Offeror nor Morgan Stanley nor any agent nor director of the
Offeror or Morgan Stanley nor any person acting on behalf of any of them
shall have any liability to any person for any loss or alleged loss arising
from any decision as to the treatment of acceptances of the Offer on any of
the bases set out above or otherwise in connection therewith.
(e) If, in connection with the making of the Offer, notwithstanding the
restrictions described above, any person (including, without limitation,
custodians, nominees and trustees), whether pursuant to a contractual or
legal obligation or otherwise, forwards this document, the Form of
Acceptance or any related offering documents in, into or from Canada or uses
the mails of or any means or instrumentality (including, without limitation,
facsimile transmission, telex and telephone) of interstate or foreign
commerce of, or any facility of a securities exchange of Canada in
connection with such forwarding, such person should (i) inform the recipient
of such fact; (ii) explain to the recipient that such action will invalidate
any purported acceptance by the recipient; and (iii) draw the attention of
the recipient to this paragraph 6.
(f) The Offeror and Morgan Stanley reserve the right to notify any matter
including the making of the Offer, to all or any T&N Shareholders:
(i) with a registered address outside the United Kingdom; or
(ii) whom the Offeror knows to be a custodian, trustee or nominee holding
T&N Shares for person who are citizens, residents or nationals of
jurisdiction outside the United Kingdom,
by announcement or by paid advertisement in a daily national newspaper
published and circulated in the United Kingdom (in which event such notice
shall be deemed to have been sufficiently given, notwithstanding any failure
by any such T&N Shareholder to receive or see such notice) and all
references in this document to notice or the provision of information in
writing or on behalf of the Offeror shall be construed accordingly.
(g) The provisions of this paragraph 6 and/or other terms of the Offer relating
to overseas T&N Shareholders may be waived, varied or modified as regards
specific T&N Shareholders or on a general basis by the Offeror in its
absolute discretion. References in this paragraph 6 to a T&N Shareholder
shall include references to the person or persons executing a Form of
Acceptance and, in the event of more than one person executing a Form
Acceptance, the provisions of this paragraph 6 shall apply to them jointly
and severally.
(h) The provisions of this paragraph 6 supersede any terms of the Offer
inconsistent therewith.
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PART C--FORM OF ACCEPTANCE
Each T&N Shareholder by whom, or on whose behalf, a Form of Acceptance is
executed and delivered to the Receiving Agent, the Offeror or its agent
irrevocably undertakes, represents, warrants and agrees to and with the Offeror,
Morgan Stanley and the Receiving Agent (so as to bind him/her, his/her personal
representatives, his/her heirs, successors and assigns) to the following effect:
(a) that the execution of the Form of Acceptance shall constitute:
(i) an acceptance of the Offer in respect of the number of T&N Ordinary
Shares inserted or deemed to be inserted in Box 1 of the Form of
Acceptance; and
(ii) an undertaking to execute any further documents, take any further
action and give any further assurances which may be required to enable
the Offeror to obtain the full benefit of the terms of this Part C
and/or to perfect any of the authorities expressed to be given
hereunder,
in each case on and subject to the terms and conditions set out or referred
to in this document and the Form of Acceptance and that, subject only to the
person accepting the Offer not having validly withdrawn his acceptance, each
such acceptance shall be irrevocable;
(b) that:
(i) unless "YES" is inserted in Box 5 of the Form of Acceptance:
(1) such T&N Shareholder has not received or sent copies of this
document, the Form of Acceptance or any related offering documents
in, into or from Canada;
(2) such T&N Shareholder has not otherwise utilised in connection with
the Offer or the execution or delivery of the Form of Acceptance,
directly or indirectly, the mails of, or any means or instrumentality
(including, without limitation, the post, facsimile transmission,
telex and telephone) of interstate or foreign commerce, or any
facilities of a securities exchange, of Canada;
(3) such T&N Shareholder was outside Canada when the Form of Acceptance
was delivered and at the time of accepting the Offer;
(4) such T&N Shareholder is not a resident of Canada nor a holder whose
registered address is in Canada and does not hold T&N Ordinary Shares
on behalf of any such person;
(5) such T&N Shareholder is not an agent or fiduciary acting on a
non-discretionary basis for a principal, unless such agent or
fiduciary is an authorised employee of such principal or such
principal has given any instructions with respect to the Offer from
outside Canada; and
(6) the Form of Acceptance has not been mailed or otherwise sent in, into
or from Canada; and
(ii) if such accepting T&N Shareholder is not resident in the United
Kingdom he/she has observed the laws of all relevant territories,
obtained any requisite governmental or other consents, complied with
all requisite formalities and paid any issue, transfer or other taxes
due from him/her, in connection with such acceptance, in any
territory and that he/she has not taken or omitted to take any action
which will or may result in the Offeror, Morgan Stanley or any other
person acting in breach of the legal or regulatory requirements of
any territory in connection with the Offer or his/her acceptance
thereof;
(c) that the execution of the Form of Acceptance and such delivery will
constitute, subject to the person accepting the Offer not having validly
withdrawn his acceptance in accordance with paragraph 3 of Part B of this
Appendix, the irrevocable separate appointment of any director of the
Offeror or Morgan Stanley as such T&N Shareholder's attorney and/or agent
within the terms of paragraph 4 of Part B above and this Part C and with the
authority to complete and execute any further documents and give any further
assurances which may be required in connection with any of the foregoing and
an irrevocable undertaking with such attorney and/or agent to execute any
such further documents and/or give any such further assurances as maybe
required;
(d) that the execution of the Form of Acceptance and such delivery constitutes,
subject to the Offer becoming unconditional in all respects in accordance
with its terms and to the person accepting the Offer not having validly
withdrawn his acceptance in accordance with paragraph 3 of Part B of this
Appendix, the irrevocable separate appointment of any director of the
Offeror or Morgan Stanley as such T&N Shareholder's attorney and/or agent
("attorney"), and an irrevocable instruction to the attorney to complete and
execute all or any form(s) of transfer and/or other document(s) at the
discretion of the attorney and/or agent in relation to the T&N Ordinary
Shares to which the Form of Acceptance relates in favour of the Offeror or
such other person or persons as the Offeror or its agents may direct and to
deliver all such documents together with the certificate(s) and/or other
documents of title relating to T&N Ordinary Shares for registration within
six months of the Offer becoming unconditional in all respects and to
execute all such other documents and to do all such other acts and things as
may, in the opinion of
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<PAGE> 33
the attorney, be necessary or expedient for the purposes of, or in
connection with, the acceptance of the Offer and to vest in the Offeror or
its nominee(s) such T&N Ordinary Shares;
(e) that the execution of the Form of Acceptance and such delivery constitutes,
subject to the Offer becoming unconditional in all respects and to an
accepting T&N Shareholder not having validly withdrawn his acceptance, an
irrevocable authority and request (subject to paragraph 6 of Part B):
(i) to T&N or its agents to procure the registration of the transfer of the
T&N Ordinary Shares in certificated form pursuant to the Offer and the
delivery of the share certificates and/or other documents of title in
respect thereof to the Offeror or as it may direct;
(ii) if the T&N Ordinary Shares concerned are in certificated form, or if
the proviso to sub-paragraph (iii)(aa) below applies, to the Offeror
and Morgan Stanley or their respective agents to procure the despatch
by post (or such other method as may be approved by the Panel) of a
cheque drawn on a branch of a UK clearing bank in respect of any cash
consideration to which such T&N Shareholder is entitled, at the risk of
such T&N Shareholder, to the person or agent whose name and address
outside Canada is set out in Box 6 of the Form of Acceptance or, if
none is set out, to the first-named holder at his registered address
outside Canada; and
(iii) if the T&N Ordinary Shares concerned are in uncertificated form, to the
Offeror and Morgan Stanley or their respective agents to procure the
creation of an assured payment obligation in favour of the T&N
Shareholder's payment bank in accordance with the CREST assured payment
arrangements in respect of any cash consideration to which such
shareholder is entitled provided that (aa) the Offeror may (if, for any
reason, it wishes to do so) determine that all or any part of any such
cash consideration shall be paid by cheque despatched by post, and (bb)
if the T&N Shareholder concerned is a CREST member whose registered
address is in Canada, any cash consideration to which such T&N
Shareholder is entitled shall be paid by cheque despatched by post; and
provided that sub-paragraph (ii) above shall apply to the despatch of
any consideration by post pursuant to this sub-paragraph (iii);
(f) that the Offeror shall be entitled, after the Offer becomes unconditional in
all respects, or if the Offer will become unconditional in all respects or
will lapse, immediately upon the outcome of the resolution in question, in
respect of any T&N Ordinary Shares in respect of which the Offer has been
accepted and not validly withdrawn to direct the exercise of any votes and
any or all other rights and privileges (including the right to requisition
the convening of a general meeting or separate class meeting of T&N); and
that the execution of the Form of Acceptance will constitute an authority to
T&N from such T&N Shareholder to send any notice, circular, warrant or other
document or communication which may be required to be sent to him/her as a
member of T&N in respect of such shares (including any share certificate(s)
or other document(s) of title issued as a result of a conversion of T&N
Ordinary Shares into certificated form) to the Offeror at its registered
office, and the irrevocable appointment of any director of the Offeror or
Morgan Stanley or their respective agents to sign such documents and do such
things as may in the opinion of such attorney seem necessary or desirable in
connection with the exercise of any votes or other rights or privileges
attaching to the T&N Ordinary Shares held by such T&N Shareholder
(including, without limitation, signing any consent to short notice of a
general meeting or separate class meeting as his attorney and on his behalf
and/or executing a form of proxy in respect of such T&N Ordinary Shares
appointing any person nominated by the Offeror to attend general meetings
and separate class meetings of T&N and attending any such meeting and
exercising the votes attaching to such T&N Ordinary Shares on his behalf,
where relevant, such votes to be cast so far as possible to satisfy any
outstanding condition of the Offer) and will also constitute the agreement
of such T&N Shareholder not to exercise any of such rights without the
consent of the Offeror and the irrevocable undertaking of such T&N
Shareholder not to appoint a proxy for or to attend any such general or
separate class meeting. This authority will cease to be valid if the
acceptance is withdrawn in accordance with paragraph 3 of Part B of this
Appendix I;
(g) that he/she will deliver, or procure the delivery to the Receiving Agent of
his/her share certificate(s) and/or other document(s) of title in respect of
all T&N Ordinary Shares in respect of which the Offer has been accepted or
is deemed to have been accepted and not validly withdrawn held by him/her in
certificated form or an indemnity acceptable to the Offeror in lieu thereof
as soon as possible and in any event within six months of the Offer becoming
unconditional in all respects;
(h) that, the execution of the Form of Acceptance and such delivery constitutes
the irrevocable appointment of the Receiving Agent as such T&N Shareholder's
attorney and/or agent an irrevocable instruction and authority to the
attorney and/or agent (i) subject to the Offer becoming or being declared
unconditional in all respects in accordance with its terms and to such
accepting T&N Shareholder not having validly withdrawn his acceptance, to
transfer to itself (or to such other persons as the offeror or its agents
may direct) by means of CREST all or any of the Relevant T&N Ordinary Shares
(as defined below) (but not exceeding the number of T&N Ordinary Shares in
respect of which the Offer is accepted or deemed to be accepted), and (ii)
if the Offer does not become unconditional in all respects, to give
instructions to CRESTCo, immediately after the lapsing of the Offer (or
within such longer period as the Panel may permit, not exceeding 14 days of
the lapsing of the Offer), to transfer
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all Relevant T&N Ordinary Shares to the original available balance of the
accepting T&N Shareholders. "Relevant T&N Ordinary Shares" means T&N
Ordinary Shares in uncertificated form and in respect of which a transfer or
transfers to escrow has or have been effected pursuant to the procedures
described in paragraph 10(d) of the letter from Morgan Stanley contained in
this document and where the transfer(s) to escrow was or were made in
respect of T&N Ordinary Shares held under the same member account ID and
participant ID as the member account ID and participant ID relating to the
Form of Acceptance concerned (but irrespective of whether or not any Form of
Acceptance Reference Number, or a Form of Acceptance Reference Number
corresponding to that appearing on the Form of Acceptance concerned, was
included in the TTE instruction concerned);
(i) that he/she will take (or procure to be taken) the action set out in
paragraph 10(d) of the letter from Morgan Stanley contained in this document
to transfer all T&N Ordinary Shares in respect of which the Offer has been
accepted or is deemed to have been accepted and not validly withdrawn held
by him/her in uncertificated form to an escrow balance as soon as possible
and in any event so that the transfer to escrow settles within six months of
the Offer becoming unconditional in all respects;
(j) that, if for any reason, any T&N Ordinary Shares in respect of which a
transfer to an escrow balance has been effected in accordance with paragraph
10(d) of the letter from Morgan Stanley contained in this document are
converted to certificated form, he/share will (without prejudice to
paragraph (f) of this Part C), immediately deliver or procure the immediate
delivery of the share certificate(s) or other document(s) of title in
respect of all such T&N Ordinary Shares as so converted to the Receiving
Agent at The Royal Bank of Scotland plc, Registrars Department, New Issues
Section, PO Box 859, Consort House, East Street, Bedminster, Bristol BS99
1XZ or The Royal Bank of Scotland plc, Registrars Department, New Issues
Section, PO Box 633, 5-10 Great Tower Street, London EC3R 5ER or as the
Offeror or its agents may direct;
(k) that he/she will do all such acts and things as shall, in the opinion of the
Offeror or its agents, be necessary or expedient to vest in the Offeror or
its nominee(s) or such other person as the Offeror may decide the T&N
Ordinary Shares in respect of which the Offer has been accepted or is deemed
to have been accepted and all such acts and things as may be necessary or
expedient to enable the Receiving Agent to perform its function as Escrow
Agent for the purposes of the Offer;
(l) that he/she agrees to ratify each and every act or thing which may be done
or effected by the Offeror or Morgan Stanley or any of their respective
directors or agents or T&N or any of its directors or agents, as the case
may be, in exercise of any of the powers and/or appointments and/or
authorities thereunder;
(m) that, if any provisions of Part B of this Appendix or this Part C shall be
unenforceable or invalid or shall not operate so as to afford the Offeror or
Morgan Stanley the benefit of the authority expressed to be given therein or
herein, he/she shall, with all practicable speed, do all such acts and
things and execute all such documents that may be required or desirable to
enable the Offeror and/or Morgan Stanley or any of their respective
directors to secure the full benefit of Part B of this Appendix and this
Part C;
(n) that the creation of an assured payment obligation in favour of his/her
payment bank in accordance with the CREST assured payments arrangements as
referred to in paragraph (e)(iii) of this Part C shall, to the extent of the
obligation so created, discharge in full any obligation of the Offeror
and/or Morgan Stanley to pay him/her the cash consideration to which he/she
is entitled pursuant to the Offeror;
(o) that the T&N Ordinary Shares in respect of which the Offer is accepted or
deemed to be accepted are sold free from all liens, charges, equities,
encumbrances, rights of pre-emption and other third party rights or
interests of any nature whatsoever and together with all rights now or
hereafter attaching thereto including voting rights and the right to receive
all dividends and other distributions (if any) declared, paid or made after
16 October 1997 other than the right to receive and retain the second
interim dividend of 3.2 pence (net) per T&N Ordinary Share payable on 14
November 1997, or the scrip alternative to such dividend, and the T&N
Dividend of 3 pence (net) per T&N Ordinary Share payable on 30 January 1998;
(p) that the terms and conditions of the Offer contained in this document are
deemed to be incorporated in, and form part of, the Form of Acceptance which
shall be read and construed accordingly;
(q) that, on execution, the Form of Acceptance shall take effect as a deed; and
(r) that the execution of the Form of Acceptance constitutes his/her submission,
in relation to all matters arising out of the Offer and the Form of
Acceptance, to the jurisdiction of the courts of England.
References in this Part C to a T&N Shareholder shall include references to the
person or persons executing the Form of Acceptance and, in the event of more
than one person executing a Form of Acceptance, the provisions of this Part C
shall apply to them jointly and to each of them.
33
<PAGE> 35
APPENDIX II
FINANCIAL INFORMATION ON FEDERAL-MOGUL
The financial information contained in this Appendix II is extracted from the
Form 10-K/A of Federal-Mogul filed with the US Securities and Exchange
Commission containing the audited consolidated financial statements for the
years ended 31 December 1994, 1995 and 1996 and the Form 10-Q of Federal-Mogul
filed with the US Securities and Exchange Commission containing the unaudited
quarterly report for the period ended 30 September 1997.
1. CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
(AS RESTATED)
-------------------------------
1996 1995 1994
--------- --------- ---------
(MILLIONS OF DOLLARS,
EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C>
Net sales $ 2,032.7 $ 1,999.8 $ 1,889.5
Cost of products sold 1,660.5 1,602.2 1,507.6
--------- --------- ---------
Gross Margin 372.2 397.6 381.9
Selling, general and administrative expenses (333.8) (299.3) (268.8)
Gain on sales of businesses -- 24.0 --
Restructuring charges (57.6) (26.9) --
Re-engineering and other related charges (11.4) (13.9) --
Adjustment of assets held for sale to fair value (151.3) (51.8) --
Interest expense (42.6) (37.3) (21.2)
Interest income 2.9 9.6 7.6
International currency exchange losses (3.7) (2.9) (5.5)
Other expenses, net (3.4) (2.4) (2.5)
--------- --------- ---------
Earnings (loss) before income taxes (228.7) (3.3) 91.5
Income tax expense (benefit) (22.4) 2.5 31.8
--------- --------- ---------
Net Earnings (loss) (206.3) (5.8) 59.7
========= ========= =========
Preferred dividends 8.7 8.9 9.0
Net Earnings (loss) Available to Common Shareholders $ (215.0) $ (14.7) $ 50.7
EARNINGS (LOSS) PER COMMON (AND EQUIVALENT SHARE)
Primary $ (6.12) $ (0.42) $ 1.45
--------- --------- ---------
Fully Diluted $ (6.12) $ (0.42) $ 1.36
========= ========= =========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
34
<PAGE> 36
2. CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31
-----------------------
(AS
RESTATED)
1996 1995
--------- ------------
(MILLIONS OF DOLLARS)
ASSETS
<S> <C> <C>
Cash and equivalents $ 33.1 $ 19.4
Accounts receivable 231.3 293.4
Inventories 417.0 505.8
Prepaid expenses and income tax benefits 81.5 62.8
--------- -----------
Total current assets 762.9 881.4
Property, plant and equipment 350.3 434.7
Goodwill 154.0 226.5
Other intangible assets 63.1 66.6
Business investments and other assets 124.9 100.9
--------- -----------
Total Assets $ 1,455.2 $ 1,710.1
========= ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Short-term debt $ 280.1 $ 111.9
Accounts payable 142.7 172.7
Accrued compensation 37.6 32.3
Restructuring reserves 55.2 10.7
Other accrued liabilities 148.2 92.6
--------- -----------
Total current liabilities 663.8 420.2
Long-term debt 209.6 481.5
Postemployment benefits 207.1 211.5
Other accrued liabilities 56.2 46.6
--------- -----------
Total Liabilities 1,136.7 1,159.8
Series D preferred stock 76.6 76.6
Series C ESOP preferred stock 53.1 56.8
Unearned ESOP compensation (28.4) (34.3)
Common stock 175.7 175.2
Additional paid-in capital 283.5 280.8
Retained earnings (deficit) (193.0) 40.2
Currency translation and other (49.0) (45.0)
--------- -----------
Total Shareholders' Equity 318.5 550.3
--------- -----------
Total Liabilities and Shareholders' Equity $ 1,455.2 $ 1,710.1
========= ===========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
35
<PAGE> 37
3. CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
(AS RESTATED)
-------------------------------
1996 1995 1994
--------- --------- ---------
(MILLIONS OF DOLLARS)
<S> <C> <C> <C>
CASH PROVIDED FROM (USED BY) OPERATING ACTIVITIES
Net earnings (loss) $ (206.3) $ (5.8) $ 59.7
Adjustments to reconcile net earnings (loss) to net cash provided from (used
by) operating activities:
Depreciation and amortization 63.7 61.0 55.7
Gain on sale of businesses -- (24.0) --
Restructuring charges 57.6 26.9 --
Re-engineering and other related charges 11.4 13.9 --
Adjustment of assets held for sale to fair value 151.3 51.8 --
Deferred income taxes (27.8) (16.2) 4.1
Postemployment benefits (2.0) 1.8 4.9
Decrease (increase) in accounts receivable 46.5 (5.0) (55.3)
Decrease (increase) in inventories 54.5 (103.9) (33.5)
Increase (decrease) in accounts payable (25.5) 7.2 --
Payments against restructuring and re-engineering reserves (17.6) (19.4) (14.0)
Increase (decrease) in current liabilities and other 43.2 (23.0) 2.7
--------- --------- ---------
Net Cash Provided from (Used by) Operating Activities 149.0 (34.7) 24.3
CASH PROVIDED FROM (USED BY) INVESTING ACTIVITIES
Expenditures for property, plant and equipment and other long-term assets (54.2) (78.5) (74.9)
Acquisitions of businesses (.3) (72.1) (58.3)
Payments for rationalization of acquired businesses -- (7.3) (24.5)
Proceeds from sales of businesses 42.0 48.5 --
Other -- -- (.8)
--------- --------- ---------
Net Cash Used by Investing Activities (12.5) (109.4) (158.5)
CASH PROVIDED FROM (USED BY) FINANCING ACTIVITIES
Issuance of common stock 0.6 0.2 196.8
Repurchase of common stock -- (9.0) (10.6)
Proceeds from issuance of long-term debt -- 166.2 157.8
Principal payments on long-term debt (29.4) (24.9) (203.7)
Increase (decrease) in short-term debt (61.4) 33.7 14.8
Dividends (26.9) (27.3) (27.7)
Other (5.7) (.4) (2.0)
--------- --------- ---------
Net Cash Provided from (Used by) Financing Activities (122.8) 138.5 125.4
--------- --------- ---------
Increase (Decrease) in Cash and Equivalents 13.7 (5.6) (8.8)
Cash and equivalents at beginning of year 19.4 25.0 33.8
--------- --------- ---------
Cash and Equivalents at end of Year $ 33.1 $ 19.4 $ 25.0
========= ========= =========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
36
<PAGE> 38
4. CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
SERIES C
SERIES D ESOP UNEARNED ADDITIONAL RETAINED
PREFERRED PREFERRED ESOP COMMON PAID-IN EARNINGS
STOCK STOCK COMPENSATION STOCK CAPITAL (DEFICIT)
----------- ----------- ------------ -------- ---------- -----------
(MILLIONS OF DOLLARS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT JANUARY 1, 1994
(as originally reported) $76.6 $60.2 $(44.6) $147.5 $117.2 $46.4
Cumulative effect of restatement
(see Note xviii) (5.1)
----- ----- ------ ------ ------ -----
BALANCE AT JANUARY 1, 1994
(as restated) $76.6 $60.2 $(44.6) $147.5 $117.2 $41.3
Net earnings (as
restated) 59.7
Issuance of common stock 28.8 162.5
Exercise of stock options 1.6 6.1
Repurchase of common stock (3.0) (9.6)
Retirement of preferred stock (1.1)
Amortization of unearned ESOP compensation 4.8
Dividends (27.7)
Preferred dividend tax benefits 1.6
Currency translation
Pension adjustment
----- ----- ------ ------ ------ -----
BALANCE AT DECEMBER 31, 1994 76.6 59.1 (39.8) 174.9 277.8 73.3
Net loss (as
restated) (5.8)
Net issuance of restricted shares 2.2 6.5
Exercise of stock options .2
Repurchase of common stock (1.9) (5.3)
Retirement of preferred stock (2.3)
Amortization of unearned ESOP compensation 5.5
Dividends (27.3)
Preferred dividend tax benefits 1.6
Currency translation
Pension adjustment
----- ----- ------ ------ ------ -----
BALANCE AT DECEMBER 31, 1995 76.6 56.8 (34.3) 175.2 280.8 40.2
Net loss (as restated) (206.3)
Net issuance of restricted shares .3 .9
Exercise of stock options .2 .4
Retirement of preferred stock (3.7)
Amortization of unearned ESOP compensation 5.9
Dividends (26.9)
Preferred dividend tax benefits 1.4
Currency translation effect on assets held
for sale
Currency translation
Pension adjustment
----- ----- ------ ------ ------ -------
BALANCE AT DECEMBER 31, 1996 $76.6 $53.1 $(28.4) $175.7 $283.5 $(193.0)
===== ===== ====== ====== ====== =======
CURRENCY
TRANSLATION
AND OTHER TOTAL
------------- ---------
BALANCE AT JANUARY 1, 1994
(as originally reported) $ (32.2) $ 371.1
Cumulative effect of restatement
(see Note xviii) (5.1)
------ ---------
BALANCE AT JANUARY 1, 1994
(as restated) $ (32.2) $ 366.0
Net earnings (as restated) 59.7
Issuance of common stock 191.3
Exercise of stock options 7.7
Repurchase of common stock (12.6)
Retirement of preferred stock (1.1)
Amortization of unearned ESOP compensation .2 5.0
Dividends (27.7)
Preferred dividend tax benefits 1.6
Currency translation (6.3) (6.3)
Pension adjustment 4.9 4.9
------ ---------
BALANCE AT DECEMBER 31, 1994 (33.4) 588.5
Net loss (as restated) (5.8)
Net issuance of restricted shares (7.7) 1.0
Exercise of stock options .2
Repurchase of common stock (7.2)
Retirement of preferred stock (2.3)
Amortization of unearned ESOP compensation 5.5
Dividends (27.3)
Preferred dividend tax benefits 1.6
Currency translation (1.5) (1.5)
Pension adjustment (2.4) (2.4)
------ ---------
BALANCE AT DECEMBER 31, 1995 (45.0) 550.3
Net loss (as restated) (206.3)
Net issuance of restricted shares (1.2) --
Exercise of stock options .6
Retirement of preferred stock (3.7)
Amortization of unearned ESOP compensation 5.9
Dividends (26.9)
Preferred dividend tax benefits 1.4
Currency translation effect on assets held
for sale 20.1 20.1
Currency translation (24.4) (24.4)
Pension adjustment 1.5 1.5
--------- ---------
BALANCE AT DECEMBER 31, 1996 $(49.0) $318.5
========= =========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
37
<PAGE> 39
5. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(I) ACCOUNTING POLICIES
Organization--Federal-Mogul's core business is providing value-added
services for the global manufacture and distribution of non-discretionary
parts to vehicular and industrial original equipment manufacturers and the
vehicular replacement market.
Principles of Consolidation--The consolidated financial statements include
the accounts of Federal-Mogul and its majority-owned subsidiaries (the
"company"). Intercompany accounts and transactions have been eliminated in
consolidation.
Cash and Equivalents--The company considers all highly liquid investments
with maturities of 90 days or less from the date of purchase to be cash
equivalents.
Inventories--Inventories are stated at the lower of cost or market. Cost
determined by the last-in, first-out (LIFO) method was used for 54% and 52%
of the inventory at December 31, 1996 and 1995, respectively. The remaining
inventories are costed using the first-in, first-out (FIFO) method. If
inventories had been valued at current cost, amounts reported at December 31
would have been increased by $49.4 million in 1996 and $54.2 million in
1995.
At December 31, inventories consisted of the following:
<TABLE>
<CAPTION>
1996 1995
--------- ---------
(MILLIONS OF
DOLLARS)
<S> <C> <C>
Finished products $ 417.0 $ 468.3
Work-in-process 28.0 34.1
Raw materials 20.0 28.6
--------- ---------
465.0 531.0
Reserve for inventory valuation (48.0) (25.2)
--------- ---------
$ 417.0 $ 505.8
========= =========
</TABLE>
Inventory quantity reductions resulting in liquidations of certain LIFO
inventory layers and the reduction in international locations using the LIFO
method increased net earnings by $3.1 million and $1.6 million ($.09 and
$.04 per share) in 1996 and 1994, respectively. There was no effect on
operations for 1995.
The company provides inventory valuation reserves for parts on hand which
exceed anticipated demand and assesses these reserves on a quarterly basis.
Goodwill and Other Intangible Assets--Intangible assets, which result
principally from acquisitions, consist of goodwill, trademarks and
non-compete agreements, patents and other intangibles. Intangible assets are
periodically reviewed for impairment based on an assessment of future cash
flows, or fair value for assets held for sale, to ensure that they are
appropriately valued. Intangible assets are amortized on a straight-line
basis over their estimated useful lives, generally ranging from 7 to 40
years. Goodwill and other intangible assets reflected in the consolidated
balance sheets are net of accumulated amortization of $18.7 million and
$14.2 million for goodwill and $22.1 million and $16.9 million for other
intangible assets at December 31, 1996 and 1995, respectively. Impairment
charges recorded in 1996 and 1995 related solely to assets held for sale.
Management believes that the remaining intangible assets, which relate only
to the core manufacturing and distribution businesses, are not impaired, and
the remaining amortization period is appropriate.
Revenue Recognition--The company recognizes revenue and returns from product
sales and the related customer incentive and warranty expense when goods are
shipped to the customer.
Currency Translation--Exchange adjustments related to international currency
transactions and translation adjustments for subsidiaries whose functional
currency is the United States dollar (principally those located in highly
inflationary economies) are reflected in the consolidated statements of
operations. Translation adjustments of international subsidiaries for which
the local currency is the functional currency are reflected in the
consolidated financial statements as a separate component of shareholders'
equity.
Earnings Per Share--The computation of primary earnings per share is based
on the weighted average number of outstanding common shares during the
period and, when their effect is dilutive, common stock equivalents
consisting of certain shares subject to stock options. Fully-diluted
earnings per share additionally assumes, when the effect is dilutive, the
conversion of outstanding Series C Employee Stock Ownership Plan (ESOP)
preferred stock (Note (xi)) 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
38
<PAGE> 40
fully-diluted calculation is based on the market price of the company's
common stock on December 31, 1996, and the number of preferred shares
held by the ESOP as of December 31 of each of the respective years.
The primary weighted average number of common and equivalent shares
outstanding (in thousands) was 35,105, 34,988 and 35,062 for 1996, 1995
and 1994, respectively. The fully-diluted weighted average number of
common and equivalent shares outstanding (in thousands) was
35,105, 34,988 and 41,812 for 1996, 1995 and 1994, respectively.
Net earnings used in the computation 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
preferred stock dividend requirements when the effect of conversion is
anti-dilutive and 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 when the effect is dilutive.
Environmental Liabilities--The company recognizes environmental
liabilities when a loss is probable and can be reasonably estimated. Such
liabilities are generally not subject to insurance coverage.
Each environmental obligation is estimated by engineering and legal
specialists within the company based on current law and existing
technologies. Such estimates are based primarily upon the estimated cost
of investigation and remediation required and the likelihood that other
potentially responsible parties will be able to fulfill their commitments
at the sites where the company may be jointly and severally liable with
such parties.
The company periodically evaluates and revises its estimates for
environmental obligations based on expenditures against established
reserves and the availability of additional information.
Use of Estimates--The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the
financial statements and accompanying notes. Actual results could differ
from those estimates.
Reclassifications--Certain items in the prior year financial statements
have been reclassified to conform with the presentation used in 1996.
(II) RESTRUCTURING CHARGES
Results of operations in the fourth quarter of 1996 include a
restructuring charge of $57.6 million. This charge is comprised of $42.8
million for employee severance and $14.8 million for exit costs and
consolidation of certain facilities. The workforce reductions and
consolidation of facilities will be substantially completed in 1997.
The restructuring is designed to aggressively improve the company's cost
structure, streamline operations and divest the company of underperforming
assets. The after-tax cash impact of this charge is approximately $40
million, the majority of which is expected to be paid out during 1997.
Employee severance costs result from the termination of approximately
1,430 employees, primarily in the international retail and wholesale
operations, the North American distribution business, and at a closed
North American manufacturing operation. The severance costs are based on
the minimum levels that will be paid to the affected employees pursuant to
the company's workforce reduction policies and certain foreign
governmental requirements.
Exit and consolidation costs principally include lease termination costs
of international retail stores, and certain international wholesale
operations, the consolidation of certain North American distribution
facilities and the consolidation of a North American manufacturing
operation.
Results of operations in the second and fourth quarters of 1995 include
restructuring charges of $6.1 million and $20.8 million, respectively.
These charges are comprised of $20.1 million for employee severance and
$6.8 million for exit costs and consolidation of certain facilities. The
workforce reductions and consolidation of facilities were completed as of
December 31, 1996.
Employee severance costs for 1995 resulted from the termination of a
total of approximately 750 employees, primarily in Argentina, the United
States and Europe. The amounts paid to terminated employees in 1995 and
1996 approximated the related charges recorded in 1995.
Exit costs for 1995 include efforts to consolidate and restructure
selected operations primarily in the United States. The consolidation
charge includes additional costs for certain replacement market and
related facilities consolidated after the acquisition of SPX Corporation's
Sealed Power Replacement aftermarket business.
39
<PAGE> 41
(III) ADJUSTMENT OF ASSETS HELD FOR SALE TO FAIR VALUE
The company continually reviews all components of its businesses for
possible improvement of future profitability through acquisition,
divestiture, reengineering or restructuring. The company adopted Statement
of Financial Accounting Standards No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to be Disposed of,"
effective as of January 1, 1995. This statement addresses the accounting
for the impairment of long-lived assets and long-lived assets to be
disposed of, certain identifiable intangibles and goodwill related to
those assets, and establishes guidance for recognizing and measuring
impairment losses and requires that the carrying amount of impaired assets
be reduced to fair value.
During 1996, management designed and implemented a restructuring plan to
aggressively improve the company's cost structure, streamline operations
and divest the company of underperforming assets. As part of this plan,
the company decided to sell 132 international retail operations, sell or
restructure 30 wholesale international replacement operations and
consolidate a North American manufacturing operation. The company expects
to complete substantially all of these actions in 1997. The carrying value
of the assets held for sale was reduced to fair value based on estimates
of selling values less costs to sell. Selling values used to determine the
fair value of assets held for sale were determined using market prices
(i.e., valuation multiples) of comparable companies from recently
consummated transactions. The carrying value of net assets held for sale
as of December 31, 1996 was $107 million which includes $38 million of
accounts receivable, $88 million of inventory, $29 million of accounts
payable, $1 million of net other current assets and liabilities, and $11
million of noncurrent assets. In accordance with SFAS 121, the carrying
value of long-lived assets held for sale will not be amortized or
depreciated in subsequent periods. The resulting adjustment of $148.5
million to reduce assets held for sale to fair value was recorded in the
fourth quarter of 1996. Net sales for businesses to be disposed of
approximated $234 million, $214 million and $129 million in 1996, 1995 and
1994, respectively.
In 1996, based upon the final sale, the company recorded an additional
writedown of $2.8 million to the net asset value of the United States ball
bearings manufacturing operations. In 1995, the company decided to sell
the ball bearings operations and reduced the carrying value by $17.0
million to record assets held for sale at fair value.
In 1995, the company also decided to sell its heavy-wall bearing
division in Germany and Brazil and certain other non-strategic assets. The
company estimated the fair value of the businesses held for sale based on
discussions with prospective buyers, adjusted for selling costs. The
company reduced its carrying value by $17.0 million to record assets held
for sale at fair value. This division was sold in January 1997 for $10.4
million, which approximated the carrying value of the assets at December
31, 1996.
In addition, in 1995, the company reduced the carrying value of certain
other impaired long-lived assets by $17.8 million to record them at fair
value. No further significant fair value adjustments were recorded for
these assets in 1996.
(IV) REENGINEERING AND OTHER RELATED CHARGES
In 1996, the company initiated an extensive effort to strategically
review its businesses and focus on its competencies of manufacturing,
engineering and distribution. As a result of this process, the company
incurred $11.4 million of pretax charges for professional fees and
personnel costs related to the strategic review of the company, and
changes in management and related costs.
In 1995, the company recorded $13.9 million of pretax charges for
reengineering and other costs. These costs included $7.0 million in
professional fees and personnel costs to reengineer the business on a
company-wide basis and $6.9 million primarily for certain other
non-recurring costs relating to brand consolidation at the customer level
of the company's Federal-Mogul-Registered Trademark-, TRW-Registered
Trademark- and Sealed Power-Registered Trademark- branded engine parts.
(V) CHANGES IN ACCOUNTING ESTIMATES
During the third and fourth quarters of 1996, the company made certain
changes in accounting estimates totaling $51 million ($34 million after
tax, $.97 per share) due to 1996 events and new information becoming
available. The changes in accounting estimates included increasing the
provision for customer incentive programs and related sales initiatives by
$18 million, increasing the provision for excess and obsolete inventory by
$13 million, increasing the provision for bad debts by $3 million,
increasing the provision for environmental and legal matters by $9 million
and increasing various other provisions by approximately $8 million.
(VI) ACQUISITIONS OF BUSINESSES
The company accounted for the following acquisitions as purchases, and
accordingly, the purchase prices have been allocated to the acquired
assets and assumed liabilities based on their estimated fair values as of
the
40
<PAGE> 42
acquisition date. The consolidated statements of operations include the
operating results of the acquired businesses from the acquisition dates
unless otherwise stated.
On September 30, 1995, the company completed its acquisition of the
Centropiezas group, a chain of retail stores in Puerto Rico.
Wales-based Seal Technology Systems Limited, a leading designer and
manufacturer of a specialized range of seals and gaskets for the
automotive sector and other industrial markets was purchased September 25,
1995.
The company acquired Bertolotti Pietro e Figli, S.r.l., a distributor of
premium brand European auto and truck parts throughout Italy on June 28,
1995.
On October 31, 1994, the company purchased all the outstanding shares of
Varex Corporation Limited, the largest independent auto parts distributor
in South Africa. The consolidated statements of operations include the
operating results of Varex from July 1, 1994.
(VII) SALES OF BUSINESSES
In November 1996, the company completed the sale of the operations and
substantially all of the assets of its United States ball bearings
manufacturing operations to NTN-U.S.A. Corporation. The company received
$31 million in cash and retained customer receivables while NTN-U.S.A.
Corporation assumed certain liabilities. The results of operations have
been included in the company's consolidated statement of operations
through the date of sale. The company recognized no gain or loss on the
sale. (Refer to Note (iii) for previous writedowns of assets to fair
value.)
In September 1996, the company completed the sale of the assets and
business of its electrical products manufacturing operations to Capsonic
Automotive, Inc. The company received $11 million in cash and retained
customer receivables, while Capsonic Automotive assumed certain
liabilities. The results of operations have been included in the company's
consolidated statement of operations through the date of sale. The company
recognized no gain or loss on the sale.
In December 1995, the company sold its equity interest in Westwind Air
Bearings Limited in England and its affiliated operations in the United
States and Japan for $20.5 million. The company recognized a pre-tax gain
on the sale of $16.2 million.
In April 1995, the company completed the sale of the operations and
substantially all of the assets of its Precision Forged Products Division
to Borg-Warner Automotive, Inc. The company received $28.0 million in cash
and retained customer receivables, while Borg-Warner assumed certain
liabilities. The results of operations have been included in the company's
consolidated statement of operations through the date of sale. The company
recognized a pre-tax gain on the sale of $7.8 million.
(VIII) FINANCIAL INSTRUMENTS
FOREIGN EXCHANGE RISK AND COMMODITY PRICE MANAGEMENT
The company is subject to exposure to market risks from changes in
foreign exchange rates and raw material price fluctuations. Derivative
financial instruments are utilized by the company to reduce those risks.
The company does not hold or issue derivative financial instruments for
trading or speculative purposes.
The company's foreign exchange contracts at December 31 are summarized
below:
<TABLE>
<CAPTION>
1996 1995
---------------------------- ------------------------
CONTRACT DEFERRED GAIN CONTRACT DEFERRED
AMOUNT (LOSS) AMOUNT (LOSS)
----------- --------------- ----------- -----------
(MILLIONS OF DOLLARS)
<S> <C> <C> <C> <C>
Forwards $ 6.6 $ -- $ 23.5 $ (.3)
Options Purchased -- -- 8.0 --
----- ----- ------- ------
$ 6.6 $ -- $ 31.5 $ (.3)
===== ===== ======= ======
</TABLE>
The company has entered into copper contracts to hedge against the risk of
price increases. These contracts are expected to offset the effects of price
changes on the firm purchase commitments for copper. Under the agreements,
the company is committed to purchase 4.7 million pounds of copper. The net
unrealized gain on these firm purchase commitments at December 31, 1996 is
$.1 million.
Deferred gains and losses are included in other assets and liabilities and
recognized in operations when the future purchase or sale occurs, or at the
point in time when the purchase or sale is no longer expected to occur.
41
<PAGE> 43
Concentrations of Credit Risk
Financial instruments which potentially subject the company to
concentrations of credit risk consist primarily of accounts receivable and
cash investments. The company's customer base includes virtually every
significant global automotive manufacturer and a large number of
distributors and installers of automotive replacement parts. However, the
company's credit evaluation process, reasonably short collection terms and
the geographical dispersion of sales transactions help to mitigate any
concentration of credit risk. The company also has cash investment
policies that limit the amount of credit exposure to any one financial
institution and require placement of investments in financial institutions
evaluated as highly creditworthy.
The company does not generally require collateral for its trade accounts
receivable. The allowance for doubtful accounts of $16.3 million and $18.7
million at December 31, 1996 and 1995 is based upon the expected
collectibility of all trade accounts receivable, including those sold.
Fair Value of Financial Instruments
The carrying amounts of certain financial instruments such as cash and
equivalents, accounts receivable, accounts payable, and short-term and
long-term debt approximate their fair values. The fair value of the
long-term debt is estimated using discounted cash flow analysis and the
company's current incremental borrowing rates for similar types of
arrangements.
Accounts Receivable Securitization
On an ongoing basis, the company sells accounts receivables to
Federal-Mogul Funding Corporation, a wholly owned subsidiary, which then
sells such receivables without recourse to a master trust. Amounts sold
under this arrangement were $95.0 million at December 31, 1996 and 1995.
Accounts receivable at both December 31, 1996 and 1995 exclude the $95.0
million.
(IX) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost and include
expenditures for additional facilities and those expenditures which
materially extend the useful lives of existing buildings, machinery and
equipment.
Depreciation is computed principally by the straight-line method for
financial reporting purposes and by accelerated methods for income tax
purposes.
At December 31, property, plant and equipment consisted of the following:
<TABLE>
<CAPTION>
ESTIMATED
USEFUL LIFE 1996 1995
----------- --------- ---------
(MILLIONS OF
DOLLARS)
<S> <C> <C> <C>
Land -- $ 32.1 $ 35.7
Buildings and building improvements 40 yrs. 144.1 180.8
Machinery and equipment 3-12 yrs. 378.8 442.1
--------- ---------
555.0 658.6
Accumulated depreciation (204.7) (232.0)
--------- ---------
$ 350.3 $ 426.6
========= =========
</TABLE>
The company leases various facilities and equipment under both capital
and operating leases. Net assets subject to capital leases were not
significant at December 31, 1996 and 1995.
The balance of the deferred gain resulting from the 1988 sale and
leaseback of a portion of the corporate headquarters complex was $7.8
million at December 31, 1996. The deferred gain is being amortized over
the term of the lease as a reduction of rent expense. Future minimum
payments under noncancelable operating leases with initial or remaining
terms of more than 1 year are, in millions: 1997-$28.1; 1998-$25.8;
1999-$22.1; 2000-$18.2; 2001-$14.3 and thereafter, $60.8. Future minimum
lease payments have been reduced by approximately $31.2 million for
amounts to be received under sublease agreements.
Total rental expense under operating leases was $33.8 million in 1996,
$34.0 million in 1995 and $25.7 million in 1994, exclusive of property
taxes, insurance and other occupancy costs generally payable by the
company.
(X) DEBT
The company's $300 million United States revolving credit facility
matures in June 1998. The company also has a European revolving credit
facility for $50 million. As of December 31, 1996, the company had $185
million
42
<PAGE> 44
borrowed against the United States revolver and $9 million borrowed
against the European revolver. The company's United States revolving
credit facility contains restrictive covenants that, among other matters,
require the company to maintain certain financial ratios. The covenants
were amended in 1996 in relation to certain charges recorded in the third
and fourth quarters of 1996. The amendments to the covenants are effective
through March 31, 1997. The company intends to enter into a new
consolidated multi-currency revolving credit facility in the first half of
1997. The revolving credit facility borrowings are included in short-term
debt as of December 31, 1996. Short-term debt also includes international
subsidiaries' local credit arrangements that are maintained in accordance
with local customary practice.
The weighted average interest rate for the company's short-term debt was
7.9% and 9.5% as of December 31, 1996 and 1995, respectively. Excluding
the revolving credit facility which was classified as a current liability
at December 31, 1996 and as a long-term liability at December 31, 1995,
the weighted average interest rate for short-term debt increased to 10.9%
at December 31, 1996 from 9.5% at December 31, 1995. The interest rate on
the revolving credit facility at December 31, 1996 and 1995 was 6.1% and
6.2%, respectively.
Long-term debt at December 31 consists of the following:
<TABLE>
<CAPTION>
1996 1995
--------- ---------
(MILLIONS OF
DOLLARS)
<S> <C> <C>
Revolving credit facility $ -- $ 185.0
Medium-term notes 125.0 125.0
Notes payable 64.8 68.1
ESOP obligation 28.0 33.7
European revolving credit facility -- 44.7
Other 17.7 38.1
--------- ---------
235.5 494.6
Less current maturities included in short-term debt 25.9 13.1
--------- ---------
$ 209.6 $ 481.5
========= =========
</TABLE>
In August 1994, the company initiated a medium-term note program for up
to $200 million. Notes were issued in maturities ranging from 5 to 10
years. The average interest rate was approximately 8.4%.
In December 1990, the company privately placed $75 million in notes with
insurance companies. The amount outstanding on these notes was $64.8
million as of December 31, 1996. The interest rate on the notes is
approximately 11%. The notes will mature in December 2000. The note
agreements contain restrictive covenants that, among other matters,
require the company to maintain certain financial ratios and a minimum
level of tangible net worth and limit the amount of indebtedness that the
company may incur. The covenants were amended in 1996 in relation to
certain charges recorded in the third and fourth quarters of 1996. The
amendments to the covenants are effective through June 30, 1997. The
company expects to be in compliance with the original covenants by the
expiration of the amendments.
The ESOP obligation represents the unpaid principal balance on an
11-year loan entered into by the company's ESOP in 1989. Proceeds of the
loan were used by the ESOP to purchase the company's Series C ESOP
preferred stock. Payment of principal and interest on the notes is
unconditionally guaranteed by the company, and therefore, the unpaid
principal balance of the borrowing is classified as long-term debt.
Company contributions and dividends on the preferred shares held by the
ESOP are used to meet semi-annual principal and interest obligations.
The original ESOP obligation bore annual interest at the rate of 11.5%.
The obligation was refinanced with on June 30, 1995 at a fixed interest
rate of 7.2%. The ESOP obligation matures in December 2000.
Aggregate maturities of long-term debt for each of the years following
1997 are, in millions: 1998-$28.5; 1999-$48.5; 2000-$45.1; 2001-$45.1; and
thereafter, $42.4.
Interest paid in 1996, 1995 and 1994 was $43.5 million, $37.1 million
and $21.4 million, respectively.
(XI) CAPITAL STOCK AND PREFERRED SHARE PURCHASE RIGHTS
The company's articles of incorporation authorize the issuance of
60,000,000 shares of common stock, of which 35,130,359 shares, 35,044,859
shares and 34,987,810 shares were outstanding at December 31, 1996, 1995
and 1994, respectively. In February 1994, the company sold 5,750,000
shares of its common stock in a public offering which generated net
proceeds of $191.3 million. The proceeds were used to repay bank debt
outstanding, including debt incurred for the acquisition of SPX
Corporation's Sealed Power Replacement aftermarket business.
43
<PAGE> 45
The articles of incorporation also authorize the issuance of 5,000,000
shares of preferred stock. At December 31, 1996, 1995 and 1994, 1,600,000
shares of $3.875 Series D Convertible Exchangeable Preferred Stock (Series
D preferred stock) were outstanding. Sold to institutional investors in a
private placement, each share has a liquidation preference of $50 and is
convertible into the company's common stock at a conversion price of $18
per share. The shares are redeemable and may be exchanged at the company's
option for 7.75% convertible subordinated debentures due in 2012. Such
debentures would be convertible into the company's common stock at the
same conversion price as the Series D preferred stock.
The company's ESOP covers substantially all domestic salaried employees
and allocates Series C ESOP Convertible Preferred Stock (Series C ESOP
preferred stock) to eligible employees based on their contributions to the
Salaried Employees' Investment Program and their eligible compensation. At
December 31, 1996, 1995 and 1994, respectively, 835,898 shares, 892,620
shares and 926,136 shares of Series C ESOP preferred stock were
outstanding. The company repurchased and retired 56,722 Series C ESOP
preferred shares valued at $3.6 million during 1996 and 33,516 Series C
ESOP preferred shares valued at $2.1 million during 1995, all of which
were forfeited by participants upon early withdrawal from the plan.
The Series C ESOP preferred stock is convertible into shares of the
company's common stock at a rate of two shares of common stock for each
share of preferred stock. The Series C ESOP preferred stock may be issued
only to a trustee acting on behalf of an employee stock ownership plan or
other employee benefit plan of the company. The shares are automatically
converted into shares of common stock in the event of any transfer to any
person other than the plan trustee. The Series C ESOP preferred stock is
redeemable, in whole or in part, at the option of the company.
The charge to operations for the cost of the ESOP was $4.2 million in
1996, $4.4 million in 1995 and $4.9 million in 1994. The company made cash
contributions to the plan of $8.1 million in 1996, $8.5 million in 1995
and $9.2 million in 1994, including preferred stock dividends of $4.1
million in 1996, $4.3 million in 1995 and $4.5 million in 1994.
ESOP shares are released as principal and interest on the debt is paid.
The ESOP Trust uses the preferred dividends not allocated to employees to
make principal and interest payments on the debt. Compensation expense is
measured based on the fair value of shares committed to be released to
employees. Dividends on ESOP shares are treated as a reduction of retained
earnings in the period declared. The number of allocated shares and
suspense shares held by the ESOP were 504,435 and 331,463 at December 31,
1996, and 486,663 and 403,058 at December 31, 1995, respectively. There
were no committed-to-be-released shares at December 31, 1996 and December
31, 1995. Any repurchase of the ESOP shares is strictly at the option of
the company.
In 1988, the company's Board of Directors authorized the distribution of
one Preferred Share Purchase Right (Right) for each outstanding share of
common stock of the company. Each Right entitles shareholders to buy
one-half of one-hundredth of a share of a new series of preferred stock at
a price of $70.
As distributed, the Rights trade together with the common stock of the
company. They may be exercised or traded separately only after the earlier
to occur of: (i) 10 days following a public announcement that a person or
group of persons has obtained the right to acquire 10% or more of the
outstanding common stock of the company (20% in the case of certain
institutional investors), or (ii) 10 business days (or such later date as
may be determined by action of the Board of Directors) following the
commencement or announcement of an intent to make a tender offer or
exchange offer which would result in beneficial ownership by a person or
group of persons of 10% or more of the company's outstanding common stock.
Additionally, if the company is acquired in a merger or other business
combination, each Right will entitle its holder to purchase, at the
Right's exercise price, shares of the acquiring company's common stock (or
stock of the company if it is the surviving corporation) having a market
value of twice the Right's exercise price.
The Rights may be redeemed at the option of the Board of Directors for
$.005 per Right at any time before a person or group of persons acquires
10% or more of the company's common stock. The Board may amend the Rights
at any time without shareholder approval. The Rights will expire by their
terms on November 14, 1998.
(XII) INCENTIVE STOCK PLANS
The company's shareholders adopted stock option plans in 1976 and 1984
and a performance incentive stock plan in 1989. These plans provide
generally for awarding restricted shares or granting options to purchase
shares of the company's common stock. Restricted shares entitle employees
to all of the rights of holders of common stock, subject to certain
transfer restrictions and to forfeiture in the event that the conditions
for their vesting are not met. Options entitle employees to purchase
shares at an exercise price not less than 100% of the fair market value on
the grant date and expire after 10 years.
44
<PAGE> 46
Under the plans, options become exercisable from 6 months to 4 years
after their date of grant, as determined by the Board of Directors at the
time of grant. At December 31, 1996, 284,556 shares were available for
future grants under the plans.
The company has elected to follow Accounting Principles Board Opinion
No. 25, "Accounting for Stock Issued to Employees" (APB 25) and related
interpretations in accounting for its employee stock options. The exercise
price of the company's employee stock options equals the market price of
the underlying stock on the date of grant, and therefore, no compensation
expense is recognized under APB 25.
The following table summarizes activity relating to the company's
incentive stock plans:
<TABLE>
<CAPTION>
NUMBER WEIGHTED-AVERAGE
OF SHARES PRICE
----------------- -----------------
(IN MILLIONS)
<S> <C> <C>
Outstanding at January 1, 1994 2.6 $ 22.02
Options / stock granted .1 36.08
Options exercised (.3) 20.30
Options / stock lapsed or canceled -- --
--
------ ---------
Outstanding at December 31, 1994 2.4 22.98
Options / stock granted .5 18.72
Options exercised -- --
Options / stock lapsed or canceled (.3) 23.69
--
------ ---------
Outstanding at December 31, 1995 2.6 22.02
Options / stock granted .5 22.08
Options exercised -- --
Options / stock lapsed or canceled (.6) 22.32
------ ---------
Outstanding at December 31, 1996 2.5 $ 22.03
====== =========
Options exercisable at December 31, 1996 1.3 $ 22.50
====== =========
Options exercisable at December 31, 1995 1.5 $ 21.50
====== =========
Options exercisable at December 31, 1994 1.2 $ 20.00
====== =========
</TABLE>
Pro forma information regarding net income and earnings per share is
required by FASB Statement No. 123, "Accounting for Stock-Based
Compensation" and has been determined as if the company had accounted for
its employee stock options under the fair value method of that statement.
The fair value for these options was estimated at the date of grant using
a Black-Scholes option pricing model with the following weighted-average
assumptions for 1996 and 1995, respectively: risk-free interest rates of
6.5% and 6.5%; dividend yields of 2.3% and 2.4%; volatility factors of the
expected market price of the company's common stock of 11.2% and 8.1%; and
a weighted average expected life of the option of 5 years. The effect of
applying Statement No. 123's fair value method to the company's
stock-based awards results in net income and earnings per share that
approximate amounts reported. The weighted-average fair value of options
granted during the years ended December 31, 1996 and 1995 are $2.56 and
$.90, respectively.
(XIII) POST EMPLOYMENT BENEFITS
The company maintains several defined benefit pension plans which cover
substantially all domestic employees and certain employees in other
countries. Benefits for domestic salaried employees are based on
compensation, age and years of service, while hourly employees' benefits
are primarily based on negotiated rates and years of service.
International plans maintained by the company provide benefits based on
years of service and compensation.
The company's funding policy is consistent with funding requirements of
federal and international laws and regulations. Plan assets consist
primarily of listed equity securities and fixed income instruments. As of
December 31, 1996, plan assets included 309,000 shares of the company's
common stock valued at approximately $6.8 million.
45
<PAGE> 47
Net periodic pension cost for the company's defined benefit plans in 1996, 1995
and 1994 consists of the following:
<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- ---------
(MILLIONS OF DOLLARS)
<S> <C> <C> <C>
United States Plans
(Income)/Expense
Service cost--benefits earned during the period $ 9.0 $ 7.3 $ 6.8
Interest cost on projected benefit obligation 15.0 15.0 14.0
Actual return on plan assets (30.8) (51.6) (3.7)
Net amortization and deferral 3.3 28.6 (22.7)
Curtailment loss 3.7 .5 1.1
--------- --------- ---------
Net periodic pension (income) cost $ .2 $ (.2) $ (4.5)
========= ========= =========
International Plans
1996 1995 1994
---- ---- ----
(MILLIONS OF DOLLARS)
(Income)/Expense
Service cost--benefits earned during the period $ .4 $ .4 $ .3
Interest cost on projected benefit obligation 2.5 2.7 2.4
-------- ------- --------
Net periodic pension cost $ 2.9 $ 3.1 $ 2.7
======== ======= ========
</TABLE>
The following table sets forth the funded status for the company's defined
benefit plans at December 31:
<TABLE>
<CAPTION>
ASSETS EXCEED ACCUMULATED
ACCUMULATED BENEFITS
BENEFITS EXCEED ASSETS
-------------------- ------------------
1996 1995 1996 1995
--------- --------- ------ -------
(MILLIONS OF DOLLARS)
<S> <C> <C> <C> <C>
United States Plans
Actuarial present value of benefit obligations:
Vested benefit obligation $ 96.2 $ 95.6 $ 88.8 $ 79.9
========= ========= ========= =========
Accumulated benefit obligation $ 102.1 $ 103.4 $ 106.4 $ 95.4
========= ========= ========= =========
Projected benefit obligation $ 104.0 $ 105.0 $ 107.1 $ 96.0
========= ========= ========= =========
Plan assets at fair value 177.8 173.0 84.8 74.6
--------- --------- --------- ---------
Plan assets in excess of (less than) projected benefit obligation 73.8 68.0 (22.3) (21.4)
Unrecognized net (asset) liability at transition (5.8) (9.1) .5 .8
Unrecognized prior service cost .5 .2 10.0 8.8
Unrecognized net (gain) loss (23.2) (18.3) 3.2 6.4
--------- --------- --------- ---------
Accrued pension asset (liability) included in the consolidated
balance sheets $ 45.3 $ 40.8 $ (8.6) $ (5.4)
========= ========= ========= =========
</TABLE>
46
<PAGE> 48
<TABLE>
<CAPTION>
ACCUMULATED
BENEFITS
EXCEED ASSETS
------------------------
1996 1995
----------- -----------
(MILLIONS OF DOLLARS)
<S> <C> <C>
International Plans
Actuarial present value of benefit obligations:
Vested benefit obligation $ 32.9 $ 35.0
========== ==========
Accumulated benefit obligation $ 34.5 $ 36.6
========== ==========
Projected benefit obligation $ 34.5 $ 36.7
========== ==========
Plan assets less than projected benefit obligation (34.5) (36.7)
Unrecognized net loss 4.0 4.4
---------- ----------
Accrued pension liability included in the consolidated balance sheets $ (30.5) $ (32.3)
========== ==========
</TABLE>
The assumptions used in computing the above information are as follows:
<TABLE>
<CAPTION>
1996 1995 1994
----- ----- -----
<S> <C> <C> <C>
United States Plans
Discount rates 7 1/2% 7 1/2% 8 1/2%
Rates of increase in compensation levels 4 1/2% 4 1/2% 5 1/2%
Expected long-term rates of return on assets 10% 10% 10%
</TABLE>
<TABLE>
<CAPTION>
1996 1995 1994
----- ----- -----
<S> <C> <C> <C>
International Plans
Discount rates 7 1/2% 7 1/2% 8 1/2%
Rates of increase in compensation levels 4 1/2% 4 1/2% 4 1/2%
</TABLE>
The Company's minimum liability adjustment was $13.4 million and $15.3
million for United States plans at December 31, 1996 and 1995,
respectively, and $3.5 million and $3.9 million for international plans at
December 31, 1996 and 1995, respectively.
The company also provides health care and life insurance benefits for
certain domestic retirees covered under company-sponsored benefit plans.
Participants in these plans may become eligible for these benefits if they
reach normal retirement age while working for the company. The company's
policy is to fund benefit costs as they are provided, with retirees paying
a portion of the costs.
The components of net periodic postretirement benefit costs are as follows
as of December 31:
<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- ---------
(MILLIONS OF DOLLARS)
<S> <C> <C> <C>
Service cost $ 2.8 $ 2.3 $ 2.8
Interest cost 10.8 10.4 9.0
Curtailment gain (7.5) (1.0) --
Amortized gains (.5) (1.1) --
--------- ------- ------
Net periodic postretirement benefits cost $ 5.6 $ 10.6 $ 11.8
========= ======= ======
</TABLE>
47
<PAGE> 49
The following schedule reconciles the funded status of the company's
postretirement benefit plans to the amounts recorded in the company's
balance sheets as of December 31:
<TABLE>
<CAPTION>
1996 1995
--------- ---------
(MILLIONS OF
DOLLARS)
<S> <C> <C>
Accumulated postretirement benefit obligations (APBO):
Retirees $ 103.9 $ 94.3
Active plan participants 46.9 48.7
--------- ---------
150.8 143.0
Unrecognized net gain (loss) (1.4) 7.6
Unrecognized prior service cost 4.1 4.5
--------- ---------
Accrued postretirement benefits liability $ 153.5 $ 155.1
========= =========
</TABLE>
The discount rate used in determining the APBO was 7.5% at December 31,
1996 and 1995.
At December 31, 1996, the assumed annual health care cost trend used in
measuring the APBO approximated 7.5% in 1996, declining to 7.1% in 1997
and to an ultimate rate of 5.5% estimated to be achieved in 2008.
At December 31, 1995, the assumed annual health care cost trend used in
measuring the APBO approximated 8% in 1995, declining to 7.5% in 1996 and
to an ultimate annual rate of 5.5% estimated to be achieved in 2008.
Increasing the assumed cost trend rate by 1% each year would have
increased the APBO by approximately 8.4% and 10.9% at December 31, 1996
and 1995, respectively. Aggregate service and interest costs would have
increased by approximately 9.4% for 1996, and 12.9% for 1995 and 1994.
In 1991, the company established a retiree health benefits account (as
defined in Section 401(h) of the Internal Revenue Code) within its
domestic salaried employees' pension plan. Annually through the year 2000,
the company may elect to transfer excess pension plan assets (subject to
defined limitations) to the 401(h) account for purposes of funding current
salaried retiree health care costs. The company transferred excess pension
plan assets of $4.2 million in 1996, $4.2 million in 1995 and $4.0 million
in 1994 to the 401(h) account to fund salaried retiree health care
benefits.
(XIV) INCOME TAXES
Under the liability method, deferred tax assets and liabilities are
determined based on differences between financial reporting and tax bases
of assets and liabilities and are measured using the enacted tax rates and
laws that will be in effect when the differences are expected to reverse.
The components of earnings/(loss) before income taxes consisted of the
following:
<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- ---------
(MILLIONS OF DOLLARS)
<S> <C> <C> <C>
Domestic $ (88.3) $ 7.9 $ 90.5
International (140.4) (11.2) 1.0
--------- --------- ---------
$ (228.7) $ (3.3) $ 91.5
========= ========= =========
</TABLE>
48
<PAGE> 50
Significant components of the provision for income taxes/(tax benefit) are
as follows:
<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- ---------
(MILLIONS OF DOLLARS)
<S> <C> <C> <C>
Current:
Federal $ (4.0) $ 12.7 $ 15.4
State and local 2.3 1.2 2.1
International 6.3 9.3 5.2
--------- --------- ---------
Total current 4.6 23.2 22.7
Deferred:
Federal (25.2) (9.0) 14.7
State and local (1.8) (.9) .8
International (10.8) (6.4)
--------- --------- ---------
Total deferred (27.0) (20.7) 9.1
--------- --------- ---------
$ (22.4) $ 2.5 $ 31.8
========= ========= =========
</TABLE>
The reconciliation of income taxes/(tax benefits) computed at the United
States federal statutory tax rate to income tax expense/(benefit) is:
<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- ---------
(MILLIONS OF DOLLARS)
<S> <C> <C> <C>
Income taxes (tax benefits) at United States statutory rate $ (80.1) $ (1.1) $ 32.0
Tax effect from:
Tax credits, state income taxes and other 1.8 (2.3) (2.4)
Losses on international operations without tax benefits and foreign
tax rate differences 55.9 5.9 2.2
--------- --------- ---------
$ (22.4) $ 2.5 $ 31.8
========= ========= =========
</TABLE>
The following table summarizes the company's total provision for income
taxes/(tax benefits):
<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- ---------
(MILLIONS OF DOLLARS)
<S> <C> <C> <C>
Income tax expense (benefit) $ (22.4) $ 2.5 $ 31.8
Allocated to equity:
Currency translation (4.9) 5.3 3.6
Preferred dividends (1.5) (1.6) (1.6)
Investment securities .8 -- --
Other .7 .8 .6
--------- --------- ---------
$ (27.3) $ 7.0 $ 34.4
========= ========= =========
</TABLE>
49
<PAGE> 51
Significant components of the company's deferred tax assets and
liabilities as of December 31 are as follows:
<TABLE>
<CAPTION>
1996 1995
--------- ---------
(MILLIONS OF
DOLLARS)
Deferred tax assets:
<S> <C> <C>
Postretirement benefits $ 57.2 $ 58.5
Net operating loss carryforwards of international subsidiaries 68.1 56.0
Loss on foreign investment 49.0 --
Restructuring costs 8.3 --
Inventory basis 12.0 5.3
Allowance for doubtful accounts 7.0 4.2
Other temporary differences 27.6 16.2
--------- ---------
Total deferred tax assets 229.2 140.2
Valuation allowance for deferred tax assets (89.4) (23.7)
--------- ---------
Net deferred tax assets 139.8 116.5
Deferred tax liabilities:
Fixed asset basis differences (55.0) (62.3)
Pension (12.4) (10.9)
Restructuring costs -- (2.8)
--------- ---------
Total deferred tax liabilities (67.4) (76.0)
--------- ---------
$ 72.4 $ 40.5
========= =========
</TABLE>
Deferred tax assets and liabilities are recorded in the consolidated balance
sheets as follows:
<TABLE>
<CAPTION>
1996 1995
----------- -----------
(MILLIONS OF DOLLARS)
Assets:
<S> <C> <C>
Prepaid expenses and income tax benefits $ 54.6 $ 34.9
Business investments and other assets 21.9 6.2
Liabilities:
Other current accrued liabilities (3.6) --
Other long-term accrued liabilities (.5) (.6)
-------- -------
$ 72.4 $ 40.5
======== =======
</TABLE>
Income taxes paid in 1996, 1995 and 1994 were $6.7 million, $19.4
million and $20.0 million, respectively.
Undistributed earnings of the company's international subsidiaries
amounted to approximately $23 million at December 31, 1996. No taxes have
been provided on approximately $19 million of these earnings, which are
considered by the company to be permanently reinvested. Upon distribution
of these earnings, the company would be subject to United States income
taxes and foreign withholding taxes. Determining the unrecognized deferred
tax liability on the distribution of these earnings is not practicable as
such liability, if any, is dependent on circumstances existing when
remittance occurs.
The company has a $92.0 million German net operating loss carryforward
at December 31, 1996 that has no expiration date. The company has $76.0
million of additional foreign operating losses with various expiration
dates through 2002.
(XV) OPERATIONS BY INDUSTRY SEGMENT AND GEOGRAPHIC AREA
The company is a global manufacturer and distributor of a broad range of
non-discretionary parts, primarily vehicular components for automobiles,
light trucks, heavy duty trucks and farm and construction vehicles and
industrial products. The company sells parts to original equipment
manufacturers, principally the major automotive manufacturers in the
United States and Europe. Through its worldwide distribution network, the
company sells replacement parts in the vehicular replacement market. All
of these activities constitute a single business segment. Canadian
operations are aggregated with the U.S. operations as they are not
significant under the materiality thresholds of SFAS 14.
50
<PAGE> 52
Financial information, summarized by geographic area, is as follows:
<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- ---------
(MILLIONS OF DOLLARS)
<S> <C> <C> <C>
Net sales:
United States and Canada $ 1,224.7 $ 1,280.6 $ 1,334.5
Europe 436.0 382.8 285.3
Other international 372.0 336.4 269.7
--------- --------- ---------
$ 2,032.7 $ 1,999.8 $ 1,889.5
========= ========= =========
Operating earnings (loss):
United States and Canada $ (53.2) $ 57.5 $ 119.6
Europe 11.8 (13.2) (5.0)
Other international (112.8) 13.2 25.1
--------- --------- ---------
(154.2) 57.5 139.7
Corporate expenses and other (27.7) (27.8) (26.6)
--------- --------- ---------
Operating earnings (loss) $ (181.9) $ 29.7 $ 113.1
========= ========= =========
1996 1995 1994
--------- --------- ---------
(MILLIONS OF DOLLARS)
Identifiable assets:
United States and Canada $ 775.5 $ 877.9 $ 885.5
Europe 451.0 493.9 342.5
Other international 228.7 322.7 253.7
--------- --------- ---------
$ 1,455.2 $ 1,710.1 $ 1,481.7
========= ========= =========
</TABLE>
Transfers between geographic areas are not significant, and when made,
are recorded at prices comparable to normal unaffiliated customer sales.
(XVI) LITIGATION AND ENVIRONMENTAL MATTERS
The company is one of a large number of defendants in a number of
lawsuits brought by claimants alleging injury due to exposure to asbestos.
The company is defending all such claims vigorously and believes that it
has substantial defenses to liability and adequate insurance coverage for
its defense costs. The company is also involved in various other legal
actions and claims. While the outcome of litigation cannot be predicted
with certainty, after consulting with the company's legal department,
management believes that these matters will not have a material effect on
the company's consolidated financial statements.
The company is a party to lawsuits filed in various jurisdictions
alleging claims pursuant to the Comprehensive Environmental Response
Compensation and Liability Act of 1980 (CERCLA) or other state or federal
environmental laws. In addition, the company has been notified by the
Environmental Protection Agency and various state agencies that it may be
a potentially responsible party (PRP) for the cost of cleaning up certain
other hazardous waste storage or disposal facilities pursuant to CERCLA
and other federal and state environmental laws. PRP designation requires
the funding of site investigations and subsequent remedial activities.
Although these laws could impose joint and several liability upon each
party at any site, the potential exposure is expected to be limited
because at all sites other companies, generally including many large,
solvent public companies, have been named as PRPs. In addition, the
company has identified certain present and former properties at which it
may be responsible for cleaning up environmental contamination. The
company is actively seeking to resolve these matters. Although difficult
to quantify based on the complexity of the issues, the company has accrued
the estimated cost associated with such matters based upon current
available information from site investigations and consultants. Management
believes that these accruals, which have not been reduced by any
anticipated insurance proceeds, will be adequate to cover the company's
estimated liability for these exposures.
51
<PAGE> 53
(XVII) QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
FIRST SECOND THIRD(1) FOURTH(2) YEAR
--------- --------- ----------- ----------- ---------
(MILLIONS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1996:
Net sales $ 522.9 $ 536.6 $ 492.4 $ 480.8 $2,032.7
Gross margin 113.2 117.5 83.2 58.3 372.2
Net earnings (loss) 11.2 15.9 (12.6) (220.8) (206.3)
Fully diluted earnings (loss) per share .25 .36 (.41) (6.34) (6.12)
FIRST SECOND THIRD(1) FOURTH(2) YEAR
--------- --------- ----------- ----------- ---------
(MILLIONS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)
Year ended December 31, 1995:
Net sales $ 526.0 $ 506.7 $ 481.3 $ 485.8 $1,999.8
Gross margin 106.1 105.3 89.1 97.1 397.6
Net earnings (loss) 14.6 13.9 10.6 (44.9) (5.8)
Fully diluted earnings (loss) per share .34 .32 .24 (1.32) (.42)
</TABLE>
(1) Net loss includes a pretax charge of $38.5 million primarily relating to
changes in estimates, adjustment of assets held for sale to fair value
and other related charges.
(2) Net loss includes a pretax charge for restructuring of $57.6 million,
adjustment of assets held for sale to fair value of $144.9 million and
$61.7 million primarily relating to changes in estimates, and other
related charges.
(3) Net earnings includes pretax charges for restructuring of $6.1 million
and reengineering and other charges of $1.7 million.
(4) Net loss includes pretax charges for restructuring of $20.8 million,
reengineering and other charges of $12.2 million and an adjustment of
assets held for sale to fair value of $51.8 million.
(5) The restated quarterly net earnings (loss) were greater (less) than
amounts previously reported by $.6 million, $.1 million, $4.7 million,
$(.6) million and $.4 million, $(.3) million, $(.4) million, and $4.2
million for the first, second, third and fourth quarters of 1996 and
1995, respectively. The restated earnings (loss) per share on a fully
diluted basis were greater (less) than amounts previously reported $.02,
no effect, $.15, $(.02), and $.01, $(.01), $(.01), $.12, for the first,
second, third and fourth quarters of 1996 and 1995, respectively. See
Note (xviii) Restatement.
(XVIII) RESTATEMENT
The company has restated the previously issued 1996, 1995 and 1994 financial
statements for certain charges recorded in 1996. The restatement does not
affect the company's balance sheet at December 31, 1996. The corrections
primarily pertain to timing in the recognition of the provision for doubtful
accounts and customer incentive programs, the recognition of vendor rebates
and the recognition of certain federal income tax credits. The following
summarizes the net effect of these adjustments in millions:
<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- ---------
(MILLIONS OF DOLLARS)
<S> <C> <C> <C>
Earnings (loss) before income taxes:
As previously reported $ (249.3) $ (3.2) $ 102.1
As restated (228.7) (3.3) 91.5
Net earnings (loss):
As previously reported (211.1) (9.7) 63.3
As restated (206.3) (5.8) 59.7
Earnings (loss) per common share shareholder:
As previously reported (6.26) (.53) 1.46
As restated (6.12) (.42) 1.21
Retained earnings at December 31:
As previously reported (193.0) 45.0 82.0
As restated (193.0) 40.2 73.3
</TABLE>
In addition, previously reported retained earnings as of January 1, 1994 has
been reduced by $5.1 million, which is net of applicable income taxes of
$4.8 million, for the effect of similar items.
52
<PAGE> 54
High and low prices for the company's common stock for each quarter in the
past 2 years were as follows:
<TABLE>
<CAPTION>
1996 1995
-------------------- --------------------
QUARTER HIGH LOW HIGH LOW
- ------- --------- --------- --------- ---------
<S> <C> <C> <C> <C>
First $ 20 7/8 $ 17 3/8 $ 23 1/4 $ 16 3/4
Second 19 7/8 17 7/8 19 7/8 16 7/8
Third 22 1/2 16 1/4 23 3/4 17 3/4
Fourth 24 1/2 20 3/8 21 1/2 17 1/4
</TABLE>
Quarterly dividends of $.12 per common share were declared for 1996 and
1995. In February 1997, the company's Board of Directors declared a
quarterly dividend of $.12 per common share. This was the 244th
consecutive quarterly dividend declared by the company.
53
<PAGE> 55
THIRD QUARTER RESULTS
6. CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
------------------------ -----------------------
(AS RESTATED) (AS RESTATED)
1997 1996 1997 1996
--------- ------------- --------- -----------
(MILLIONS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Net sales $ 424.2 $ 492.4 $ 1,391.6 $ 1,551.9
Cost of products sold 321.4 409.2 1,061.4 1,238.0
--------- ------ --------- -----------
Gross margin 102.8 83.2 330.2 313.9
Selling, general and administrative expenses (74.0) (79.7) (225.9) (243.7)
Adjustment of assets held for sale to fair value -- (6.4) -- (6.4)
Re-engineering, severance and other related charges -- (5.6) -- (5.6)
Interest expense (6.5) (11.0) (25.3) (32.8)
Interest income 2.4 .6 4.2 2.1
International currency exchange losses -- (.7) -- (3.0)
Other, net 2.9 (.3) 1.3 (1.4)
--------- ------ --------- -----------
Earnings (Loss) Before Income Taxes and Extraordinary
Item 27.6 (19.9) 84.5 23.1
Income taxes (benefits) 10.2 (7.3) 24.7 8.6
--------- ------ --------- -----------
Net Earnings (Loss) Before Extraordinary Item 17.4 (12.6) 59.8 14.5
Extraordinary item--loss on early retirement of debt, net
of applicable income tax benefit -- -- 2.6 --
--------- ------ --------- -----------
Net Earnings (Loss) 17.4 (12.6) 57.2 14.5
Preferred stock dividends, net of tax benefits .6 2.2 4.9 .6
--------- ------ --------- -----------
Net Earnings (Loss) Available for Common Shares $ 16.8 $ (14.8) $ 52.3 $ 7.9
========= ========= ========= ==========
EARNINGS (LOSS) PER COMMON SHARE
Primary
Income (loss) before extraordinary item $ .45 $ (.41) $ 1.52 $ .23
Extraordinary item--loss on early retirement of debt,
net of applicable income tax benefit -- -- (.07) --
--------- ------ --------- ----------
Net Earnings (Loss) $ .45 $ (.41) $ 1.45 $ .23
========= ========= ========= ==========
Fully Diluted
Income (loss) before extraordinary item $ .40 $ (.41) $ 1.39 $ .23
Extraordinary item--loss on early retirement of debt,
net of applicable income tax benefit -- -- (.06) --
--------- ------ --------- ----------
Net Earnings (Loss) $ .40 $ (.41) $ 1.33 $ .23
========= ========= ========= ==========
</TABLE>
See accompanying notes.
54
<PAGE> 56
7. CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30 DECEMBER 31
1997 1996
------------- ------------
(MILLIONS OF DOLLARS)
(UNAUDITED)
<S> <C> <C>
ASSETS
Current Assets:
Cash and equivalents $ 20.5 $ 33.1
Accounts receivable (net of allowance for doubtful accounts of $17.1 million and
$16.3 million) 239.4 231.3
Inventories 291.9 417.0
Prepaid expenses and income tax benefits 92.5 81.5
--------- ----------
Total Current Assets 644.3 762.9
Property, Plant and Equipment 312.8 350.3
Goodwill 146.3 154.0
Other Intangible Assets 60.7 63.1
Business Investments and Other Assets 133.0 124.9
--------- ----------
Total Assets $ 1,297.1 $ 1,455.2
========= ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Short-term debt $ 42.1 $ 280.1
Accounts payable 123.0 142.7
Accrued compensation 45.9 37.6
Other accrued liabilities 192.4 203.4
--------- ----------
Total Current Liabilities 403.4 663.8
Long-Term Debt 278.5 209.6
Post-employment Benefits 199.3 207.1
Other accrued Liabilities 67.9 56.2
--------- ----------
Total Liabilities 949.1 1,136.7
Shareholders' Equity:
Series D preferred stock -- 76.6
Series C ESOP preferred stock 49.7 53.1
Unearned ESOP compensation (25.1) (28.4)
Common stock 200.3 175.7
Additional paid-in capital 350.7 283.5
Accumulated deficit (154.6) (193.0)
Currency translation and other (73.0) (49.0)
--------- ----------
Total Shareholders' Equity 348.0 318.5
--------- ----------
Total Liabilities and Shareholders' Equity $ 1,297.1 $ 1,455.2
========= ==========
</TABLE>
See accompanying notes.
55
<PAGE> 57
8. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30
------------------
1997 1996
------- -------
(MILLIONS OF DOLLARS)
<S> <C> <C>
CASH PROVIDED FROM (USED BY) OPERATING ACTIVITIES
Net earnings $ 57.2 $ 14.5
Adjustments to reconcile net earnings to net cash provided from operating activities
Depreciation and amortization 40.7 46.4
Deferred income taxes 5.3 (.7)
Post-employment benefits 1.1 1.8
(Increase) decrease in accounts receivable (51.2) 8.3
Decrease in inventories 48.2 33.3
Increase (decrease) in accounts payable 1.1 (12.4)
Increase in current liabilities and other 34.9 30.2
Adjustment of assets held for sale to fair value -- 6.4
Re-engineering, severance and other related charges -- 5.6
Loss on early retirement of debt 4.1 --
Payments against restructuring and re-engineering reserves (15.9) (13.2)
--------- ------
Net Cash Provided From Operating Activities 125.5 120.2
CASH PROVIDED FROM (USED BY) INVESTING ACTIVITIES
Expenditures for property, plant and equipment (29.9) (34.7)
Proceeds from sale of business investments 78.7 11.0
Purchases of business investments -- (.3)
--------- ------
Net Cash Provided From (Used By) Investing Activities 48.8 (24.0)
CASH PROVIDED FROM (USED BY) FINANCING ACTIVITIES
Issuance of common stock 12.0 .4
Fees for early retirement of debt (4.1) --
Fees related to issuance of debt (9.4) --
Net decrease in debt (163.6) (57.6)
Dividends (18.2) (19.4)
Other (3.6) (3.4)
--------- ------
Net Cash Used By Financing Activities (186.9) (80.0)
--------- ------
Increase (Decrease) in Cash and Equivalents (12.6) 16.2
Cash and Equivalents at Beginning of Period 33.1 19.4
--------- ------
Cash and Equivalents at End of Period $ 20.5 $ 35.6
========= ======
</TABLE>
See accompanying notes.
9. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) SEPTEMBER
30, 1997
(i) 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-
and nine-month periods ended September 30, 1997 are not necessarily
indicative of the results that may be expected for the year ended
December 31, 1997. For further information, refer to the consolidated
financial statements and footnotes thereto included in the Company's
annual report on Form 10-K/A for the year ended December 31, 1996.
56
<PAGE> 58
(II) 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 when their effect is dilutive. The number of contingent
shares used in the fully diluted calculation is based on the market
price of the common stock on September 30, 1997 and the number of
preferred shares held by the Employee Stock Ownership Plan (ESOP) that
were allocated to participants'accounts as of September 30 of each of
the respective years.
The primary weighted average number of common and equivalent
shares outstanding (in thousands) was 37,490 and 36,050 for the three-
and nine-month periods ended September 30, 1997, and 35,097 and 35,088
for the three- and nine-month periods ended September 30, 1996. The
fully diluted weighted average number of common and equivalent shares
outstanding (in thousands) was 42,016 and 41,839 for the three- and
nine- month periods ended September 30, 1997, and 35,097 and 35,122 for
the three- and nine-month periods ended September 30, 1996,
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 preferred stock dividends when
their effect is anti-dilutive and 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 when their effect is dilutive.
In February 1997, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards (SFAS) No. 128,
"Earnings Per Share". SFAS No. 128 is effective for financial
statements issued for periods ending after December 15, 1997. The
adoption of SFAS No. 128 would not materially impact the results of the
earnings per share calculation for the three months and the nine months
ended September 30, 1997 and 1996 and is not expected to materially
impact the results of the earnings per share calculation for the year
ended December 31, 1997.
Quarterly dividends of $.12 per common share were declared for
both the first, second and third quarters of 1997 and 1996.
(III) INVENTORIES
At September 30, 1997 and December 31, 1996, inventories consisted of
the following:
<TABLE>
<CAPTION>
1997 1996
--------- ---------
(MILLIONS OF
DOLLARS)
<S> <C> <C>
Finished products $ 274.9 $ 417.0
Work-in-process 21.1 28.0
Raw materials 15.3 20.0
--------- ---------
311.3 465.0
Reserve for inventory valuation (19.4) (48.0)
--------- ---------
$ 291.9 $ 417.0
========= =========
</TABLE>
The $28.6 million decrease in the reserve for inventory
valuation resulted primarily from the Company's initiative to dispose
of slow moving and obsolete inventory that was fully reserved and the
sales of certain international retail and wholesale businesses. As
such, the reduction in the inventory reserves related to this
initiative did not affect the Company's 1997 earnings.
(IV) DEBT
In June 1997, the Company entered into a new $350 million
multicurrency revolving credit facility agreement with a consortium of
international banks which matures in June 2002. This new agreement
replaces the exiting U.S. and European revolving credit facilities and
has similar pricing terms. The revolving credit facility contains
restrictive covenants that, among other matters, require the Company to
maintain certain financial ratios. As of September 30, 1997, there were
no borrowings outstanding against the revolving credit facility.
In April 1997, the Company issued $125 million of 10-year 8.8% senior
notes.
57
<PAGE> 59
(V) ADJUSTMENT OF ASSETS HELD FOR SALE
The Company received $78.7 million in cash for businesses sold
in the first nine months of 1997, while the purchasers assumed certain
liabilities. The results of operations have been included in the
Company's consolidated statements of earnings through the date of sale
for the following transactions.
In January 1997, the Company completed the previously announced
sale of its heavy wall bearing division in Germany and Brazil to
Zollern BHW Gleitlager GmbH, a member of Fuerstlich Hohenzollernsche
Werke Laucherthal GmbH Co.
On May 13, 1997, the Company completed the previously announced
sale of its Australian replacement operations to Automotive Components
Limited.
On June 3, 1997, the Company completed the previously announced
sale of its South African replacement operations. The Company sold the
distribution operations to Chariots Holding Limited and the retail
operations to Lexshell 16 Investment Holdings (Proprietary) Limited.
The Company continually reviews and updates its impairment
reserves related to the divestiture of its remaining retail/wholesale
replacement operations and adjusts the reserve components to
approximate the net fair value of its remaining businesses held for
sale. There has been no net effect on the 1997 statement of earnings
related to the above events.
(VI) INCOME TAXES
During the second quarter of 1997, the Company recognized an
income tax benefit of $6.8 million related to the sales of the South
African and Australian businesses.
(VII) EXTRAORDINARY ITEM
During the second quarter of 1997, the Company retired $64.7
million in private placement debt. The early retirement of the debt
required a make-whole payment of $4.1 million, which was recorded as an
extraordinary item of $2.6 million, net of the related tax benefit.
(VIII) REDEMPTION OF SERIES D CONVERTIBLE EXCHANGEABLE PREFERRED STOCK
On August 8, 1997, the Company announced its call for the
redemption of all its outstanding $3.875 Series D Convertible
Exchangeable Preferred Stock. Upon calling for redemption, the
preferred stockholders elected to convert each preferred share into
2.778 shares of common stock. On August 28, 1997, the Company issued
4.4 million shares of common stock in exchange for all of the
outstanding Series D convertible exchangeable preferred stock.
(IX) RESTATEMENT
In August 1997, the Company filed a Form 10-K/A which restated
the previously issued 1996 financial statements for certain charges
recorded in 1996. The restatement did not affect the Company's balance
sheet at December 31, 1996. The corrections primarily pertained to
timing in the recognition of the provision for doubtful accounts and
customer incentive programs, the recognition of vendor rebates and the
recognition of certain federal income tax credits. The following
summarizes the net effect of these adjustments on the three-and
nine-month periods ended September 30, 1996, in millions:
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED ENDED
SEPTEMBER 30 SEPTEMBER 30
1996 1996
------------- -------------
(MILLIONS OF DOLLARS)
Earnings (loss) before income taxes:
<S> <C> <C>
As previously reported $ (27.4) $ 14.4
As restated (19.9) 23.1
Net earnings (loss):
As previously reported (17.3) 9.1
As restated (12.6) 14.5
Earnings (loss) per common share:
As previously reported (.56) .07
As restated (.41) .23
Accumulated deficit at December 31, 1996:
As previously reported (193.0) (193.0)
As restated (193.0) (193.0)
</TABLE>
58
<PAGE> 60
(X) SUBSEQUENT EVENT
On October 16, the company announced they had made a cash offer
to acquire all the outstanding common stock of T&N for 260 pence per
share. The offer values T&N's share capital at $2.4 billion. In
addition, the company will assume the debt of T&N at closing. The
company will finance the acquisition through a committed bank facility
from Chase Manhattan Bank. The company's intention is to put in place a
permanent capital structure of a combination of equity and debt
financing.
The offer is subject to various conditions customary in the
United Kingdom, including acceptances of the offer by T&N shareholders
and the receipt of all applicable regulatory approvals in the United
States and Europe. As part of the acquisition process, certain
financing, professional and other related fees have been and will
continue to be incurred in 1997. These fees have been capitalized as
incurred and will be accounted for as direct acquisition or financing
costs once the transaction closes. Management fully expects the
acquisition to close, however, in the event the acquisition is not
completed, these fees would be charged to expense and would materially
impact net earnings at that time. The company may elect to accelerate
payment of certain portions of the bank facility which would result in
an extraordinary charge due to the write-off of the financing cost
associated with the early retirement of debt.
In addition, as part of financing the acquisition, the company
purchased for $28.1 million a foreign currency option with a notional
amount of $2.5 billion to cap the effect of potential unfavorable
fluctuations in the British pound/US dollar exchange rate. The cost of
the option and its change in fair value will be reflected in the
results of operations in the fourth quarter of 1997. The option's fair
value will exceed its cost if the British pound to US dollar exchange
rate exceeds $1.667 at its expiration date in the first quarter of
1998. At closing on 10 November 1997, the British pound to US dollar
exchange rate was $1.697.
RESTRICTED STOCK:
In October 1997, the company met certain share price performance
criteria under the 1989 Long-Term Incentive Plan which resulted in the
recognition of $5.4 million in compensation expense related to vesting
of restricted stock.
59
<PAGE> 61
APPENDIX III
FINANCIAL INFORMATION ON T&N
1. NATURE OF FINANCIAL INFORMATION
The financial information for the three years ended 31 December 1996 contained
in this Appendix III is extracted from the audited consolidated accounts of T&N
for the three years ended on that date. Figures for the years ended 31 December
1994 and 1995 have been restated to reflect disposals in subsequent years.
The financial information contained in this Appendix III does not constitute
statutory accounts within the meaning of section 240 of the Companies Act 1985.
Statutory accounts for each of the three financial years ended 31 December 1994,
1995 and 1996, on which unqualified audit reports (not containing a statement
under section 237(2) or (3) of the Companies Act 1985) have been given by T&N's
auditors, have been delivered to the Registrar of Companies.
2. CONSOLIDATED GROUP PROFIT AND LOSS ACCOUNT
<TABLE>
<CAPTION>
YEAR ENDED 31 DECEMBER
----------------------------------------
NOTES 1996 1995 1994
----- ------------ ------------ ------------
pound sterling pound sterling pound sterling
m m m
<S> <C> <C> <C>
TURNOVER
Continuing operations 1,891.5 1,849.3 1,643.9
Acquisitions 4.8 -- --
------------ ------------ ------------
Total continuing operations 1,896.3 1,849.3 1,643.9
Discontinued operations 59.7 242.2 292.2
------------ ------------ ------------
TOTAL TURNOVER EXCLUDING ASSOCIATED UNDERTAKINGS 1(a) 1,956.0 2,091.5 1,936.1
Cost of sales (1,418.3) (1,507.8) (1,407.7)
------------ ------------ ------------
GROSS PROFIT 537.7 583.7 528.4
Operating expenses (370.3) (369.7) (353.0)
Share of profits of associated undertakings 11.1 12.6 5.0
------------ ------------ ------------
OPERATING PROFIT BEFORE ASBESTOS-RELATED COSTS 1(b),(d) 178.5 226.6 180.4
Asbestos-related costs (515.0) (51.3) (140.0)
------------ ------------ ------------
OPERATING (LOSS)/PROFIT ON ORDINARY ACTIVITIES
Continuing operations (342.5) 152.7 21.6
Acquisitions 0.3 -- --
------------ ------------ ------------
Total continuing operations (342.2) 152.7 21.6
Discontinued operations 5.7 22.6 18.8
------------ ------------ ------------
Total operating (loss)/profit on ordinary activities (336.5) 175.3 40.4
(Loss)/profit on disposal of discontinued operations 2 (1.0) 1.5 --
Release/(charge) of provision made in 1995 2 1.4 (1.4) --
Loss on disposal of properties (continuing operations) (2.0) -- --
Provision against fixed asset investments: Kolbenschmidt
costs 3 (23.4) (19.5) --
------------ ------------ ------------
(LOSS)/PROFIT ON ORDINARY ACTIVITIES BEFORE FINANCE CHARGES (361.5) 155.9 40.4
Net interest payable and similar charges 4 (26.8) (35.8) (29.7)
------------ ------------ ------------
(LOSS)/PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION (388.3) 120.1 10.7
Tax on (loss)/profit on ordinary activities 5 (8.0) (41.4) (22.0)
------------ ------------ ------------
(LOSS)/PROFIT ON ORDINARY ACTIVITIES AFTER TAXATION (396.3) 78.7 (11.3)
Minority interests (4.5) (8.4) (5.2)
------------ ------------ ------------
(Loss)/profit attributable to shareholders (400.8) 70.3 (16.5)
Dividends paid and proposed 6 (16.0) (31.9) (20.8)
------------ ------------ ------------
TRANSFER (FROM)/TO RESERVES 21 (416.8) 38.4 (37.3)
------------ ------------ ------------
(Loss)/earnings per L1 share 7 (75.4)p 13.3p (3.2)p
Earnings per L1 share pre asbestos-related costs 7 14.8p 22.7p 19.3p
Dividends per L1 share 6 3.0p 6.0p 10.85p
------------ ------------ ------------
</TABLE>
60
<PAGE> 62
3. CONSOLIDATED GROUP BALANCE SHEET
<TABLE>
<CAPTION>
31 DECEMBER
NOTES 1996
----- -----------
pound sterling
m
<S> <C> <C>
FIXED ASSETS
Tangible assets 11 697.2
Investments 12 59.5
-----------
756.7
CURRENT ASSETS
Stocks 13 247.6
Debtors falling due within one year 14 350.8
Debtors falling due after more than one year 14 66.1
Investments 15 5.6
Cash at bank and in hand 18 131.5
-----------
801.6
-----------
CREDITORS: DUE WITHIN ONE YEAR
Borrowings 18 77.2
Other creditors 16 472.5
-----------
549.7
-----------
NET CURRENT ASSETS
251.9
-----------
TOTAL ASSETS LESS CURRENT LIABILITIES 1,008.6
CREDITORS: DUE AFTER MORE THAN ONE YEAR
Borrowings 18 260.2
Other creditors 17 15.9
-----------
276.1
-----------
PROVISIONS FOR LIABILITIES AND CHARGES 19 589.5
-----------
NET ASSETS 143.0
===========
CAPITAL AND RESERVES
Called up share capital 20 532.2
Share premium account 21 0.2
Revaluation reserves 21 21.6
Associated undertakings' reserves 21 5.0
Goodwill write off reserve 21 (181.1)
Profit and loss account 21 (259.6)
-----------
EQUITY SHAREHOLDERS' FUNDS 118.3
Minority equity interests 24.7
-----------
143.0
===========
</TABLE>
61
<PAGE> 63
4. CONSOLIDATED GROUP CASH FLOW STATEMENT
<TABLE>
<CAPTION>
YEAR ENDED
NOTES 31 DECEMBER 1996
----- --------------------------
pound sterling poound sterling
m m
<S> <C> <C> <C>
CASH INFLOW FROM OPERATING ACTIVITIES
Before asbestos-related payments 22(a) 287.3
Asbestos-related payments 22(a) (64.8)
----------
NET CASH INFLOW FROM OPERATING ACTIVITIES 22(a) 222.5
RETURNS ON INVESTMENTS AND SERVICING OF FINANCE 22(b) (31.4)
TAXATION 22(c) (28.9)
CAPITAL EXPENDITURE AND FINANCIAL INVESTMENT 22(d) (125.5)
----------
36.7
ACQUISITIONS AND DISPOSALS 22(e) 59.3
EQUITY DIVIDENDS PAID (31.9)
----------
64.1
MANAGEMENT OF LIQUID RESOURCES 22(f) (6.2)
FINANCING 22(g)
Reduction in debt (30.1)
Issue of T&N plc shares 1.2
Capital input by minorities 1.8 (27.1)
---------- ----------
INCREASE IN CASH 30.8
----------
RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT
Increase in cash in the year 24 30.8
Cash outflow from decrease in debt and lease financing 24 30.1
Cash outflow from movement in liquid resources 24 6.2
----------
Change in net debt resulting from cash flows 24 67.1
Exchange difference 24 42.6
----------
Reduction in net debt 109.7
Net debt at start of year 24 (310.0)
----------
Net debt at end of year 24 (200.3)
==========
</TABLE>
62
<PAGE> 64
GROUP STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
-----------------------------------------
NOTES 1996 1995 1994
----- ----- ---- ----
pound sterling pound sterling pound sterling
m m m
<S> <C> <C> <C> <C>
(Loss)/profit attributable to shareholders (400.8) 70.3 (16.5)
Other recognised gains and losses:
Unrealised profit on revaluation of fixed assets -- 1.6 --
Currency translation differences on foreign currency net
investments 21 (23.1) (1.6) (9.1)
Other recognised losses 21 (0.6) (1.4) (1.9)
--------- --------- ---------
(23.7) (1.4) (11.0)
--------- --------- ---------
Total recognised gains and losses relating to the year (424.5) 68.9 (27.5)
========= ========= =========
1996 1995 1994
---- ---- ----
pound sterling pound sterling pound sterling
m m m
<S> <C> <C> <C> <C>
HISTORICAL COST PROFITS/(LOSSES)
Reported (loss)/profit on ordinary activities before taxation (388.3) 120.1 10.7
Realisation of revaluation surpluses 21 5.6 6.6 0.4
Difference between the historical depreciation charge and the
actual depreciation charge 0.6 0.7 0.9
--------- --------- ---------
Historical cost (loss)/profit on ordinary activities before
taxation (382.1) 127.4 12.0
--------- --------- ---------
Historical cost (loss)/profit for the year after taxation,
minority interests and dividends (410.6) 45.7 (36.0)
========= ========= =========
1996 1995 1994
---- ---- ----
pound sterling pound sterling pound sterling
m m m
<S> <C> <C> <C> <C>
RECONCILIATIONS OF MOVEMENTS IN SHAREHOLDERS' FUNDS
(LOSS)/PROFIT ATTRIBUTABLE TO SHAREHOLDERS (400.8) 70.3 (16.5)
DIVIDENDS (16.0) (31.9) (20.8)
--------- --------- ---------
TRANSFER (FROM)/TO RESERVES (416.8) 38.4 (37.3)
Other recognised gains and losses (as above) (23.7) (1.4) (11.0)
New share capital subscribed 1.2 2.2 3.4
Goodwill 21 9.4 (4.4) (1.0)
--------- --------- ---------
Net change (429.9) 34.8 (45.9)
Shareholders' funds at start of year 548.2 513.4 559.3
--------- --------- ---------
Shareholders' funds at end of year 118.3 548.2 513.4
========= ========= =========
</TABLE>
63
<PAGE> 65
5. PRINCIPAL ACCOUNTING POLICIES
The Group follows applicable UK Accounting Standards and Practice. The financial
statements are prepared under the historical cost convention, as modified by the
revaluation of certain fixed assets.
BASIS OF CONSOLIDATION
The consolidated financial statements comprise the audited accounts of the
Company and its subsidiary undertakings, together with the Group's share of the
profits and losses and of the reserves of its associated undertakings. The
accounts of subsidiaries are drawn up to the same date as those of the Company.
Results of subsidiaries acquired or sold during the year are included from, or
up to, their respective dates of acquisition or disposal.
ASSOCIATED UNDERTAKINGS
Associated undertakings are companies, other than subsidiaries, in which the
Group has a long-term and substantial investment and over which significant
influence is exercised, normally through board representation. Associated
undertakings are accounted for on the equity basis, that is, the Group's share
of profits before tax, and taxation are included in the profit and loss account.
Its interest in their net assets, other than goodwill, is included in
investments in the Group balance sheet.
DEFERRED TAX
Deferred tax is attributable to timing differences between results as computed
for tax purposes and as stated in the accounts. These differences arise from,
for example, different rates at which allowances are granted for capital
expenditure for tax purposes and at which depreciation is charged in the
accounts. Provision for deferred tax, including that relating to post retirement
benefits, is made only to the extent that it is probable that an actual
liability or asset will crystallise.
DEPRECIATION
Depreciation is provided on cost or the revalued amount, as applicable, to write
fixed assets down to their estimated residual values on a straight line basis as
follows:
- - Freehold buildings, 2.5% per annum
- - Leasehold buildings are assumed to have a life equal to the period of the
lease, but with a maximum of 40 years
- - Plant and machinery, at rates ranging from 7% to 33% per annum
- - Mining assets, on a variable rate basis by reference to the current
extraction rate of ore in relation to known ore reserves
FOREIGN CURRENCIES
Overseas companies' results and cash flows are translated into sterling at
average exchange rates and their balance sheets at year end exchange rates. An
adjustment to local currency results is made to reflect current price levels,
where appropriate, before translation into sterling. Exchange differences
arising from the translation of the opening balance sheets and results of
overseas companies are dealt with through reserves. Exchange differences on
transactions in foreign currencies are included in the profit and loss account.
GRANTS
Grants related to expenditure on tangible fixed assets are credited to profit
over a period approximating to the lives of qualifying assets. Grants receivable
to date, less the amounts so far credited to profit, are included in creditors.
INTANGIBLES
Goodwill, being the excess of the fair value of purchase consideration over the
fair value attributed to the net tangible assets acquired, is charged to
reserves. On disposal of businesses, any goodwill previously eliminated on
acquisition is included in determining the profit or loss on disposal. Other
intangibles are written off when acquired.
LEASING
Finance leases of significant items of plant and machinery are capitalised and
depreciated in accordance with the Group's depreciation policy. The capital
element of future lease payments is included under borrowings. Interest,
calculated on the reducing balance method, is included within net financing
charges. Operating lease rentals are charged to the profit and loss account when
incurred.
64
<PAGE> 66
PENSIONS AND OTHER POST-EMPLOYMENT BENEFITS
The cost of providing pensions and other post-employment benefits is charged
against profits on a systematic basis, with pension surpluses and deficits being
amortised over the expected remaining service lives of current employees.
Differences between the amounts charged in the profit and loss account and
payments made to the plans are treated as assets or liabilities in the balance
sheet. The unfunded post-employment medical benefit liability is included in
provisions in the balance sheet.
RESEARCH AND DEVELOPMENT
Research and development revenue expenditure, including all expenditure on
patents and trademarks, is written off when incurred.
STOCKS
Stocks are stated at the lower of original cost and net realisable value on a
first-in-first-out basis. Cost comprises material, labour and an allocation of
attributable overhead expenses. Net realisable value is the price at which
stocks can be sold in the normal course of business after allowing for the costs
of realisation.
TURNOVER
Turnover is the value of sales to third parties at net invoice value excluding
value added tax or equivalent overseas sales taxes.
65
<PAGE> 67
6. NOTES TO THE FINANCIAL INFORMATION
(1.) Analysis of Results
The Composites and Camshafts grouping comprises Camshafts, Powder Metal
Products, Heat Transfer Products and Industrial Products and Materials. Figures
for the Engine Parts Aftermarket Group are reflected in the product groupings to
which they relate.
(a) TURNOVER
Market Supplied
<TABLE>
<CAPTION>
1996 1995 1994
------------ ------------ ------------
pound sterling pound sterling pound sterling
m m m
<S> <C> <C> <C>
Light vehicle original equipment 782.0 756.6 639.4
Automotive aftermarket 529.4 480.1 464.5
Industrial and heavy duty original equipment 644.6 854.8 832.2
------------ ------------ ------------
1,956.0 2,091.5 1,936.1
============ ============ ============
<CAPTION>
Product Groupings
1996 1995 1994
------------ ------------ ------------
LM LM LM
<S> <C> <C> <C>
Bearings 333.1 342.5 310.8
Sealing Products 259.7 270.5 261.0
Friction Products 329.0 329.3 308.5
Piston Products 574.7 559.6 504.0
Composites and Camshafts 399.8 347.4 259.6
------------ ------------ ------------
Continuing operations 1,896.3 1,849.3 1,643.9
Discontinued operations 59.7 242.2 292.2
------------ ------------ ------------
1,956.0 2,091.5 1,936.1
============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
Businesses acquired and discontinued
1996 1996 1995 1994
ACQUISITIONS DISCONTINUED DISCONTINUED DISCONTINUED
------------ ------------ ------------ ------------
pound sterling pound sterling pound sterling pound sterling
m m m m
<S> <C> <C> <C> <C>
Sealing Products -- 5.3 6.1 38.9
Friction Products -- -- 0.6 1.2
Piston Products 4.8 -- -- 1.4
Composites and Camshafts -- 0.1 85.0 117.3
Construction Materials and Engineering -- 54.3 150.5 133.4
------------ ------------ ------------ ------------
4.8 59.7 242.2 292.2
============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
Regional
BY ORIGIN BY DESTINATION
---------------------------------------- ----------------------------------------
1996 1995 1994 1996 1995 1994
------------ ------------ ------------ ------------ ------------ ------------
pound sterling pound sterling pound sterling pound sterling pound sterling pound sterling
m m m m m m
<S> <C> <C> <C> <C> <C> <C>
UK 507.7 594.7 569.7 312.5 360.7 351.2
Mainland Europe 733.3 731.3 627.8 824.2 861.7 733.6
North America 560.2 541.6 550.3 578.6 561.6 548.2
South Africa 116.5 121.0 101.9 98.2 110.1 97.4
Zimbabwe 17.0 80.6 69.0 19.4 34.3 30.9
Other countries 21.3 22.3 17.4 123.1 163.1 174.8
------------ ------------ ------------ ------------ ------------ ------------
1,956.0 2,091.5 1,936.1 1,956.0 2,091.5 1,936.1
============ ============ ============ ============ ============ ============
</TABLE>
Inter-group turnover between product groupings and regions is not material.
66
<PAGE> 68
(b) OPERATING PROFIT BEFORE ASBESTOS-RELATED COSTS
Product Groupings
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
pound sterling pound sterling pound sterling
m m m
<S> <C> <C> <C>
Bearings 44.7 48.6 31.6
Sealing Products 21.1 25.9 25.1
Friction Products 16.9 29.0 26.9
Piston Products 41.4 55.1 43.9
Composites and Camshafts 48.7 45.4 34.1
------------ ------------ ------------
Continuing operations 172.8 204.0 161.6
Discontinued operations 5.7 22.6 18.8
------------ ------------ ------------
178.5 226.6 180.4
============ ============ ============
</TABLE>
Businesses Acquired and Discontinued
<TABLE>
<CAPTION>
1996 1996 1995 1994
ACQUISITIONS DISCONTINUED DISCONTINUED DISCONTINUED
------------ ------------ ------------ ------------
pound sterling pound sterling pound sterling pound sterling
m m m m
<S> <C> <C> <C> <C>
Sealing Products -- 0.3 0.3 (3.5)
Friction Products -- -- (0.1) (0.1)
Piston Products 0.3 -- -- 0.1
Composites and Camshafts -- -- 3.4 6.9
Construction Materials and Engineering -- 5.4 19.0 15.4
------------ ------------ ------------ ------------
0.3 5.7 22.6 18.8
============ ============ ============ ============
</TABLE>
Regional
<TABLE>
<CAPTION>
1996 1995 1994
----------- ------------ ------------
pound sterling pound sterling pound sterling
m m m
<S> <C> <C> <C>
UK 68.4 69.5 50.7
Mainland Europe 46.1 72.1 49.2
North America 55.2 53.3 49.1
South Africa 7.9 13.0 8.7
Zimbabwe 1.5 15.5 18.1
Other countries (0.6) 3.2 4.6
------------ ------------ ------------
178.5 226.6 180.4
============ ============ ============
</TABLE>
Asbestos-related costs, financing charges, losses on disposal of discontinued
operations and the provisions against the Kolbenschmidt investment are not
allocated by product groupings or region.
67
<PAGE> 69
(c) CAPITAL EMPLOYED
Product groupings
<TABLE>
<CAPTION>
1996
------------
pound sterling
m
<S> <C>
Bearings 124.5
Sealing Products 82.0
Friction Products 133.6
Piston Products 259.9
Composites and Camshafts 148.2
------------
Continuing operations 748.2
Discontinued operations (3.7)
------------
744.5
Assets held for disposal and trade investments 14.6
Asbestos-related provisions (440.6)
Net deferred consideration for acquisitions and disposals 24.8
------------
Capital employed 343.3
Net borrowings (200.3)
------------
Net assets 143.0
============
Regional
1996
------------
LM
UK 230.6
Mainland Europe 240.4
North America 190.7
South Africa 40.4
Other countries 42.4
------------
744.5
============
</TABLE>
(d) Costs of continuing operations charged in arriving at operating profit
before asbestos-related costs include L15.3m (1995 L11.3m, 1994 L19.8m) in
respect of redundancy and rationalisation. L8.1m of these costs have been
charged as administrative costs and the majority of the remainder as costs of
sales.
(e) Operating profit is stated after charging
<TABLE>
<CAPTION>
1996 1995 1994
------------ ------------ ------------
pound sterling pound sterling pound sterling
m m m
<S> <C> <C> <C>
Auditor's and its associates' remuneration
- -- as Group auditors (1.8) (1.8) (1.8)
- -- fees for other services (1.4) (0.9) (0.7)
Depreciation of tangible fixed assets
- -- owned assets (97.3) (100.3) (95.7)
- -- finance leased assets (1.0) (1.3) (2.4)
Operating lease rentals
- -- on plant and machinery (8.7) (7.8) (9.9)
- -- on land and buildings (7.4) (7.0) (7.6)
</TABLE>
68
<PAGE> 70
(2.) SALE OF DISCONTINUED OPERATIONS
The profit on disposal comprises:
<TABLE>
<CAPTION>
1996
------------
pound sterling
m
<S> <C>
Loss on disposal of businesses (3.4)
Profit on sale of 30% of Bellefontaine bearings business 2.4
------------
(1.0)
Add back provision made in 1995 1.4
------------
0.4
============
Disposals during 1996 comprised the following:
BUSINESS EFFECTIVE DATE
- -------- -------------------
Budd Chemical Company 5 January 1996
Construction Materials businesses in Zimbabwe and Zambia 31 March 1996
Tempered Spring 3 June 1996
AETC 30 June 1996
Industrial Sealing businesses in South Africa 31 December 1996
Ferodo Zambia 31 December 1996
Hydra-Tight France 31 December 1996
</TABLE>
In addition to the above disposals, the Tempered Spring business in the United
States was closed. On 31 December 1996, 30% of the Glacier Vandervell
Bellefontaine bearings business was sold. Details of assets disposed are set out
below.
NET ASSETS AT DATE OF DISPOSAL
<TABLE>
<CAPTION>
CONSTRUCTION TEMPERED BELLE-
MATERIALS SPRING AETC FONTAINE OTHERS TOTAL
------------ --------- -------- --------- --------- ---------
pound pound pound pound pound pound
sterling sterling sterling sterling sterling sterling
m m m m m m
<S> <C> <C> <C> <C> <C> <C>
Fixed assets 18.9 9.0 20.1 -- 4.3 52.3
Stocks 21.1 1.6 6.3 -- 2.2 31.2
Debtors 29.5 5.4 8.8 -- 2.1 45.8
Creditors (24.5) (5.3) (8.7) -- (3.5) (42.0)
Net (overdraft)/cash (4.9) -- -- -- 0.6 (4.3)
Goodwill on acquisition of
businesses -- 1.0 5.1 1.5 2.0 9.6
Minority interest sold -- -- -- 1.8 -- 1.8
------------ --------- --------- --------- --------- ---------
40.1 11.7 31.6 3.3 7.7 94.4
(Loss)/profit (1.6) (3.6) 5.9 2.4 (4.1) (1.0)
------------ --------- --------- --------- --------- ---------
Consideration realised 38.5 8.1 37.5 5.7 3.6 93.4
Analysis of consideration realised
Net cash proceeds 38.5 7.5 37.5 5.7 3.6 92.8
Preference shares -- 0.6 -- -- -- 0.6
------------ --------- --------- --------- --------- ---------
38.5 8.1 37.5 5.7 3.6 93.4
------------ --------- --------- --------- --------- ---------
Cash arising during the year from
disposal of operations
Net cash proceeds 38.5 7.5 37.5 5.7 3.6 92.8
Prior year disposals -- -- -- -- 1.3 1.3
Deferred consideration (22.3) -- -- -- (1.3) (23.6)
Net overdraft/(cash) disposed 4.9 -- -- -- (0.6) 4.3
------------ --------- --------- --------- --------- ---------
21.1 7.5 37.5 5.7 3.0 74.8
------------ --------- --------- --------- --------- ---------
Operating profit in 1996 to date of
disposal 1.5 -- 4.0 -- 0.2 5.7
============ ========= ========= ========= ========= =========
</TABLE>
69
<PAGE> 71
(3.) OPTION TO ACQUIRE HOLDING IN KOLBENSCHMIDT AG ("KS")*
The Company announced on 30 March 1995 that the Group had entered into option
arrangements on 1,345,452 shares in KS, representing approximately 49.99% of the
issued share capital of KS. The option arrangements were entered into with
Commerzbank AG. In February 1996 the Group extended these arrangements until 31
December 1996. During 1996 KS issued to all its shareholders 9 shares for each
share already held, such that the option arrangements related to the 13,454,520
shares still representing 49.99% of the issued share capital of KS. In December
1996 options over 6,727,260 shares expired. If Commerzbank AG sells these shares
at above Dm 14 per share, the Company will receive half of the excess over Dm 14
per share. The remaining options over a further 6,727,260 shares were
transferred to Metallbank GmbH and extended until 5 September 1997. The maximum
consideration payable on exercise of these options would be Dm 114.4m (pound
sterling m 43.4m). If the Company does not exercise the option over the shares
held by Metallbank GmbH, and Metallbank GmbH sell the shares at a price less
than Dm 17 per share, T&N is required to pay Metallbank GmbH the difference per
share between the price received and Dm 17. The exceptional charge of pound
sterling m 23.4m (1995 pound sterling m 19.5m) relates to continuing
operations and comprises:
<TABLE>
<CAPTION>
1996 1995 1994
------------ ------------ ------------
pound pound pound
sterling sterling sterling
m m m
<S> <C>
Transfer of options to Metallbank 8.5 -- --
Payable on lapse of options with Commerzbank 10.0 -- --
Provision against costs previously capitalised -- 12.0 --
Other holding costs 4.9 7.5 --
------------ ------------ ------------
23.4 19.5 --
============ ============ ============
</TABLE>
(4.) Net Interest Payable and Similar Charges
Interest payable on bank loans, overdrafts and other loans
<TABLE>
<CAPTION>
1996 1995 1994
------------ ------------ ------------
pound pound pound
sterling sterling sterling
m m m
<S> <C> <C> <C>
- -- repayable within five years, not by instalments (26.2) (31.5) (17.9)
- -- repayable within five years, by instalments (4.4) (4.6) (4.8)
- -- repayable wholly or partly in more than five years (1.5) (3.4) (12.1)
Interest on finance leases repayable within five years (0.4) (0.3) (0.3)
------------ ------------ ------------
(32.5) (39.8) (35.1)
INTEREST RECEIVABLE 5.7 4.0 5.4
------------ ------------ ------------
(26.8) (35.8) (29.7)
============ ============ ============
</TABLE>
(5.) Taxation
<TABLE>
<CAPTION>
1996 1995 1994
------------ ------------ ------------
pound pound pound
sterling sterling sterling
m m m
<S> <C> <C> <C>
UK corporation tax at 33% (1995 and 1994 33%) (15.2) (13.9) (6.8)
Relief for overseas taxation 8.6 8.8 5.0
Advance corporation tax written back/(off) 0.7 (3.9) (4.0)
Deferred tax 9.0 (4.4) 5.8
Prior period adjustments -- 0.4 (0.2)
------------ ------------ ------------
Total UK 3.1 (13.0) (0.2)
Overseas (21.5) (23.3) (23.4)
Overseas deferred tax 16.2 (0.8) 7.1
Associated undertakings (7.0) (5.6) (1.6)
Prior period adjustments 1.2 1.3 (3.9)
------------ ------------ ------------
(8.0) (41.4) (22.0)
============ ============ ============
</TABLE>
The overseas tax charge has been reduced by pound 5.0m (1995 pound 6.0m, 1994
poumd 2.2m) by
utilising losses brought forward.
- --------------------------
*More recent information is contained in T&N's unaudited interim report for the
six months to 30 June 1997 which is reproduced on pages 85 to 90 of this
document.
70
<PAGE> 72
The tax (charge)/credit arises as follows:
<TABLE>
<CAPTION>
1996 1995 1994
-------------- -------------- --------------
pound sterling pound sterling pound sterling
m m m
<S> <C> <C>
On the disposal of operations (1.8) (2.4) --
On loss on disposal of properties (0.1) -- --
On provision against fixed asset investments 0.6 5.5 --
On asbestos-related costs 35.5 1.6 13.0
On other profits (42.2) (46.1) (35.0)
------------ ------------ ------------
(8.0) (41.4) (22.0)
============ ============ ============
</TABLE>
Corporation tax relief for the asbestos charge is available only when payments
are made. As a consequence, the tax credit taken in these accounts is calculated
by reference to the payments made rather than the charge in the accounts and has
been increased by the related movement in the deferred tax debtor. No tax relief
is available on the goodwill of L9.7m (1995 L6.6m, 1994 nil) charged in arriving
at the profit on disposal of operations of L0.4m (1995 L0.1m, 1994 nil).
(6.) DIVIDENDS
<TABLE>
<CAPTION>
1996 1995 1994
-------------------------- -------------------------- --------------------------
pound pound pound
sterling sterling sterling
P PER SHARE m P PER SHARE m P PER SHARE m
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Interim 3.00 (16.0) 3.00 (15.9) 7.50 (3.1)
Final -- -- 3.00 (16.0) 3.35 (17.7)
----------- ----------- ----------- ----------- ----------- -----------
3.00 (16.0) 6.00 (31.9) 10.85 (20.8)
=========== =========== =========== =========== =========== ===========
</TABLE>
Because of the exceptional asbestos-related charge during 1996, the Company did
not have sufficient distributable reserves to declare a final dividend for 1996.
The directors declared a special first 1997 interim dividend of 3p per share
payable to shareholders on the register on 2 May 1997 in lieu of the final 1996
dividend, with the result that shareholders received dividends totalling 6p per
share, the same as for 1995, on the usual payment dates.
(7.) (Loss)/Earnings per pound 1 Share
(Loss)/Earnings:
<TABLE>
<CAPTION>
1996 1995 1994
-------------------------- -------------------------- --------------------------
pound pound pound
sterling sterling sterling
P PER SHARE m P PER SHARE m P PER SHARE m
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net basis (75.4) (400.8) 13.3 70.3 (3.2) (16.5)
Nil basis (75.6) (401.5) 14.0 74.2 (2.5) (12.6)
Final (pre asbestos-related
costs basis) 14.8 78.7 22.7 120.1 19.3 99.1
----------- ----------- ----------- ----------- ----------- -----------
Average number of shares in
issue weighted on a time
basis 531.6 530.2 514.5
=========== =========== ===========
</TABLE>
In addition to earnings per share on the net basis, as required by SSAP 3, the
earnings per share are also shown after adjustment for asbestos-related costs.
The adjustment made is to add back asbestos-related costs of pound sterling
515.0m (1995 pound sterling 51.3m, 1994 pound sterling 140.0m) and
associated tax credits of pound sterling 35.5m (1995 pound sterling 1.6m,
1994 pound sterling 13.0m). In the opinion of the directors, this allows
shareholders to gain a clearer understanding of the performance of the Group.
There is no material difference between the earnings per share figures noted
above those calculated on a fully diluted basis.
Earnings per share calculated on a nil basis has been adjusted for
Advance Corporation Tax written back of pound sterling 0.7m (1995 charge of
pound sterling 3.9m, 1994 charge of pound sterling 4.0m).
71
<PAGE> 73
(8.) Employees
<TABLE>
<CAPTION>
1996 1995 1994
AVERAGE AVERAGE AVERAGE
NUMBER NUMBER NUMBER
------------ ------------ ------------
<S> <C> <C> <C>
UK 10,036 11,613 11,996
Mainland Europe 9,765 10,228 10,433
North America 7,172 7,115 6,903
South Africa 4,379 4,221 3,924
Zimbabwe 2,069 8,785 8,780
Other countries 472 695 769
------------ ------------ ------------
33,893 42,657 42,805
============ ============ ============
</TABLE>
At the year end the total number of employees was 30,473 (1995 40,941, 1994
42,416).
Employment costs
<TABLE>
<CAPTION>
1996 1995 1994
------------ ------------ ------------
pound pound pound
sterling sterling sterling
m m m
<S> <C> <C> <C>
Wages and salaries 601.1 635.8 600.5
Social security costs 96.0 96.0 91.5
Other pension costs (Note 9) 12.9 12.4 12.6
Other post-employment benefits (Note 9) 3.0 2.6 2.9
Redundancy payments 13.9 6.5 9.5
------------ ------------ ------------
726.9 753.3 717.0
============ ============ ============
</TABLE>
(9.) Post-employment benefits
The Company and most of its subsidiaries operate both defined benefit and
defined contribution pension schemes. With the exception of the schemes in
Germany, the assets of the principal schemes are held in separate trustee-
administered funds. The most significant schemes are in the UK, Germany and the
US. The element of the total pension cost relating to overseas schemes has been
determined in accordance with local best practice and regulations and, where
applicable, on the advice of consultant actuaries.
The UK scheme is the largest, covering the majority of UK employees. The pension
cost is assessed in accordance with the advice of independent qualified
actuaries in order to secure final salary-related benefits. The most recent
actuarial review, using the projected unit method, was carried out on 31 March
1993 and, as a result of this review, a number of scheme improvements were made.
At 31 March 1993 the market value of the assets of the UK scheme was pound
sterling 747m (1990 pound sterling 648m) and the actuarial value of these assets
represented 129% (1990 143%) of the benefits that had accrued to members, after
allowing for increases in earnings and scheme improvements.
The assumptions made which have the most significant effect on the results of
this valuation are those relating to the differentials between the rates of
return on investments and the rates of increase in salaries and pensions. It was
assumed that the investment return would be 2% (1990 2%) per annum higher than
the rate of annual salary increases, and 5% (1990 4.5%) per annum higher than
the rate at which present and future pensions would increase.
The surplus in the UK scheme is being amortised over 13 years, the average
remaining service lives of employees. The credit arising from the amortisation
of this surplus more than offsets ongoing pension costs. The resultant SSAP 24
credit, including interest, was pound sterling 5.7m (1995 pound sterling
4.9m, 1994 pound sterling 4.6m).
From January 1994 until 31 March 1996 the Group made payments to the UK scheme
at a rate of 4% of pensionable earnings. Since 1 April 1996 no payments have
been necessary because of the surplus in the scheme.
In 1996 the prepayment in respect of pensions for the UK scheme increased by
pound sterling 9.0m to pound sterling 45.0m at the end of 1996. In 1995 it
increased by pound sterling 11.8m to pound sterling 36.0m. This amount is
included in debtors (Note 14).
In the US, the Group operates a number of defined benefit schemes and defined
contribution schemes. These schemes undergo an actuarial analysis annually.
In Germany, the Group operates a number of defined benefit pension schemes.
These undergo an actuarial valuation annually. Provisions for the liabilities
amounted to pound sterling 76.9m at the end of 1996 (1995 pound sterling
89.1m, 1994 pound sterling 79.9m).
72
<PAGE> 74
In addition, other post-employment benefits in the US are fully provided for in
accordance with UK accounting standards. Provisions amounted to pound sterling
31.1m at the end of 1996 (1995 pound sterling 34.3m, 1994 pound sterling 46.7m)
in respect of these benefits. The cost of post-employment medical benefits in
the US was pound sterling 2.8m (1995 pound sterling 2.9m, 1994 pound sterling
2.9m).
There are no other significant post-employment benefits.
(10.) Directors' Emoluments
<TABLE>
<CAPTION>
DIRECTORS' EMOLUMENTS 1996 1995 1994
------------------------- ------------ ------------ ------------
pound pound pound
sterling sterling sterling
000 000 000
<S> <C> <C> <C>
Non-executive directors:
Fees 195 212 166
Consultancy fee -- deputy non-executive chairman -- 180 180
------------ ------------ ------------
195 392 346
------------ ------------ ------------
Executive directors:
Remuneration 1,363 1,353 1,186
Performance-related bonuses 50 322 283
------------ ------------ ------------
1,413 1,675 1,469
Pension contributions 32 56 34
------------ ------------ ------------
Total emoluments 1,445 1,731 1,503
Compensation for loss of office 564 -- --
------------ ------------ ------------
2,009 1,731 1,503
============ ============ ============
</TABLE>
The pension contributions of pound sterling 32,000 (1995 pound sterling 56,000,
1994 pound sterling 30,000) represent cash paid to the UK Pension Scheme at
the contribution rate of 4% for the first quarter of 1996 and nil thereafter
(1995 4% for the year, 1994 4% for the year) plus payments to Mr Harding's
personal pension policy.
<TABLE>
<CAPTION>
Chairman--highest paid director (excluding pension
contributions): 1996 1995 1994
------------ ------------ ------------
pound pound pound
sterling sterling sterling
000 000 000
<S> <C> <C> <C>
Performance-related bonus -- 77 71
------------ ------------ ------------
320 397 365
============ ============ ============
FEES AND EMOLUMENTS, EXCLUDING
PENSION CONTRIBUTIONS, WERE: 1996 1995 1994
- -------------------------------------------------------- ------------ ------------ ------------
NUMBER NUMBER NUMBER
Nil - pound sterling 5,000 -- 2 --
pound sterling 5,001 - pound sterling 10,000 -- -- 1
pound sterling 15,001 - pound sterling 20,000 1 -- 3
pound sterling 20,001 - pound sterling 25,000 4 3 --
pound sterling 25,001 - pound sterling 30,000 2 2 --
pound sterling 30,001 - pound sterling 35,000 1 -- 1
pound sterling 35,001 - pound sterling 40,000 2 -- --
pound sterling 70,001 - pound sterling 75,000 1 -- --
pound sterling 125,001 - pound sterling 130,000 -- 1 --
pound sterling 165,001 - pound sterling 170,000 -- 1 --
pound sterling 175,001 - pound sterling 180,000 1 -- --
pound sterling 190,001 - pound sterling 195,000 -- -- 1
pound sterling 205,001 - pound sterling 210,000 -- -- 1
pound sterling 210,001 - pound sterling 215,000 -- 1 --
pound sterling 230,001 - pound sterling 235,000 -- -- 2
pound sterling 235,001 - pound sterling 240,000 1 -- 1
pound sterling 245,001 - pound sterling 250,000 -- 1 1
pound sterling 255,001 - pound sterling 260,000 -- 1 --
pound sterling 260,001 - pound sterling 265,000 1 2 --
pound sterling 265,001 - pound sterling 270,000 1 -- 1
pound sterling 320,001 - pound sterling 325,001 1 -- --
pound sterling 395,001 - pound sterling 400,000 -- 1 --
</TABLE>
73
<PAGE> 75
(11.) TANGIBLE FIXED ASSETS
(A) COST OR VALUATION
<TABLE>
<CAPTION>
LAND AND PLANT AND
BUILDINGS MACHINERY TOTAL
------------ ------------ ------------
pound pound pound
sterling sterling sterling
m m m
<S> <C> <C> <C>
At 1 January 1996 289.7 1,078.5 1,368.2
Currency translation (24.9) (93.0) (117.9)
Acquisition of businesses 1.0 4.8 5.8
Capital expenditure 9.2 115.4 124.6
Transfers between Group companies and reclassifications -- 2.2 2.2
Disposal of operations (43.5) (69.3) (112.8)
Other disposals (0.7) (20.8) (21.5)
------------ ------------ ------------
At 31 December 1996 230.8 1,017.8 1,248.6
============ ============ ============
Comprising:
Cost 149.5 998.3 1,147.8
Valuation:
in 1989 63.0 -- 63.0
other years 18.3 19.5 37.8
------------ ------------ ------------
230.8 1,017.8 1,248.6
============ ============ ============
</TABLE>
Revaluations are carried out on an existing use basis.
(B) DEPRECIATION
<TABLE>
<CAPTION>
LAND AND PLANT AND
BUILDINGS MACHINERY TOTAL
------------ ------------ ------------
pound pound pound
sterling sterling sterling
m m m
<S> <C> <C> <C>
At 1 January 1996 47.2 528.1 575.3
Currency translation (3.0) (43.3) (46.3)
Transfers between Group companies and reclassifications (0.2) 3.1 2.9
Disposal of operations (20.0) (40.7) (60.7)
Other disposals (0.2) (17.9) (18.1)
Charge for the year 7.1 91.2 98.3
------------ ------------ ------------
At 31 December 1996 30.9 520.5 551.4
============ ============ ============
Net book value
At 31 December 1996 199.9 497.3 697.2
============ ============ ============
</TABLE>
Included in the cost of fixed assets of the Group at 31 December 1996 are
buildings in the course of construction of pound sterling 2.3m and plant
and machinery in the course of construction of pound sterling 25.9m.
(C) NET BOOK VALUE OF LAND AND BUILDINGS
<TABLE>
<CAPTION>
1996
------------
pound
sterling
m
<S> <C>
Freehold land -- not depreciated 49.5
Freehold buildings 148.3
Long leasehold (over 50 years unexpired) 0.2
Short leasehold 1.9
------------
199.9
============
</TABLE>
74
<PAGE> 76
(D) CAPITALISED LEASES INCLUDED IN PLANT AND MACHINERY
<TABLE>
<CAPTION>
1996
------------
pound
sterling m
<S> <C>
Cost 28.4
Depreciation (23.8)
------------
Net book value 4.6
============
</TABLE>
(E) HISTORICAL COST OF TANGIBLE FIXED ASSETS
<TABLE>
<CAPTION>
LAND AND PLANT AND
BUILDINGS MACHINERY TOTAL
------------ ------------ ------------
pound pound pound
sterling m sterling m sterling m
<S> <C> <C> <C>
Cost or ascribed value 199.4 1,016.6 1,216.0
Charge for the year (37.8) (519.5) (557.3)
------------ ------------ ------------
Net historical cost value
At 31 December 1996 161.6 497.1 658.7
============ ============ ============
</TABLE>
(12.) FIXED ASSET INVESTMENTS
<TABLE>
<CAPTION>
ASSOCIATED OTHER
UNDERTAKINGS OTHER SHARES INVESTMENTS TOTAL
------------ ------------ ------------ ------------
pound pound pound pound
sterling m sterling m sterling m sterling m
<S> <C> <C> <C> <C>
Cost or valuation
At 1 January 1996 52.4 7.6 19.9 79.9
Currency translation (5.9) (0.1) (5.7) (11.7)
Additions 7.0 0.7 23.4 31.1
Disposals and repayments -- (0.2) -- (0.2)
Reclassifications and other movements 0.9 (0.1) -- 0.8
Share of retained losses (2.7) -- -- (2.7)
------------ ------------ ------------ ------------
At 31 December 1996 51.7 7.9 37.6 97.2
------------ ------------ ------------ ------------
Provisions:
At 1 January 1996 -- (0.1) (19.8) (19.9)
Currency translation -- -- 5.6 5.6
Provision for the year -- -- (23.4) (23.4)
------------ ------------ ------------ ------------
At 31 December 1996 -- (0.1) (37.6) (37.7)
============ ============ ============ ============
51.7 7.8 -- 59.5
============ ============ ============ ============
</TABLE>
Listed investments included above in associated undertakings at net book
value are pound sterling 7.5m -- market value pound sterling 5.7m. At 31
December 1996, Group associated undertakings investments included loans
receivable of pound sterling 1.8m.
(13.) STOCKS
<TABLE>
<CAPTION>
1996
------------
pound
sterling m
<S> <C>
Raw materials and consumables 41.9
Work in progress 45.7
Finished goods 160.0
------------
247.6
============
</TABLE>
75
<PAGE> 77
(14.) DEBTORS
(A) DEBTORS FALLING DUE WITHIN ONE YEAR
<TABLE>
<CAPTION> 1996
------------
pound
sterling
m
<S> <C>
Trade 260.2
Amounts owed by associated undertakings 1.4
Amounts owed in respect of disposals of operations 24.8
Assets held for disposal 6.8
Overseas taxation recoverable 6.1
Deferred tax recoverable (Note 25) 13.9
Prepayments and accrued income 13.9
Other 23.7
------------
350.8
============
</TABLE>
(B) DEBTORS FALLING DUE AFTER MORE THAN ONE YEAR
<TABLE>
<CAPTION>
1996
------------
pound
sterling
m
<S> <C>
Amounts owed in respect of disposals of operations 3.4
Prepaid pension costs (Note 9) 45.0
Deferred tax recoverable (Note 25) 16.5
Overseas taxation recoverable 0.2
Other debtors 1.0
------------
66.1
============
</TABLE>
(15.) CURRENT ASSET INVESTMENTS
<TABLE>
<CAPTION>
1996
------------
pound
sterling
m
<S> <C>
Listed investments -- market value pound sterling 5.1m 5.1
Other investments -- market value pound sterling 0.6m 0.5
------------
5.6
============
</TABLE>
(16.) CREDITORS -- DUE WITHIN ONE YEAR
<TABLE>
<CAPTION>
1996
------------
pound
sterling
m
<S> <C>
Trade 168.9
Amounts owed to associated undertakings 2.1
Payroll and other taxes, including social security 54.1
Taxation -- United Kingdom corporation tax 5.9
-- Overseas taxation 13.6
Accruals and deferred income 69.4
Grants not yet credited to profit 1.7
Asbestos-related insurance premium 92.0
Other 64.8
------------
472.5
============
</TABLE>
76
<PAGE> 78
(17.) CREDITORS -- DUE AFTER MORE THAN ONE YEAR
<TABLE>
<CAPTION>
1996
------------
pound
sterling
m
<S> <C>
Amounts owed in respect of acquisitions 3.4
Accruals and deferred income 1.3
Grants not yet credited to profit 4.4
Other 6.8
------------
15.9
============
</TABLE>
(18.) NET BORROWINGS
<TABLE>
<CAPTION>
BORROWINGS 1996
- ---------- ------------
pound
sterling
m
<S> <C>
Repayable after more than five years
-- Instalments 7.7
-- Otherwise 0.7
Two to five years
-- Instalments 23.0
-- Otherwise 186.0
One to two years
-- Instalments 8.7
-- Otherwise 34.1
------------
Total due after more than one year 260.2
Total due within one year 77.2
------------
Total borrowings 337.4
------------
Cash at bank and in hand and current asset investments 137.1
------------
Net borrowings 200.3
============
Analysis of total borrowings
Finance leases 5.3
Bank overdrafts and loans secured on assets of the Group 37.4
Unsecured bank overdrafts and loans 294.7
------------
337.4
============
Analysis of borrowings by currency
Sterling (33.9)
Other European currencies 130.3
United States Dollar 80.4
South African Rand 9.3
Other currencies 14.2
------------
200.3
============
</TABLE>
The majority of the Group's borrowings are at variable rates between 35
and 50 basis points above the applicable base rate for the currency. Interest
rate swaps have been entered into in a mix of currencies whereby the interest
charge on total debt of L108m has been swapped from variable to fixed rates for
periods of between two and five years. Included in cash and current asset
investments, at 31 December 1996, amounts totalling pound sterling 22.8m are
held by the Group's insurance company of which pound sterling 17.6m is required
to meet insurance regulatory requirements and which, as a result, is not readily
available for the general purposes of the Group.
77
<PAGE> 79
(19.) PROVISIONS FOR LIABILITIES AND CHARGES
<TABLE>
<CAPTION>
POST-
EMPLOYMENT ASBESTOS- OTHER
BENEFITS RESTRUCTURING RELATED PROVISIONS TOTAL
------------ ------------- ------------ ------------ ------------
pound pound pound pound pound
sterling sterling sterling sterling sterling
m m m m m
<S> <C> <C> <C> <C> <C>
At 1 January 1996 159.7 1.3 99.0 18.8 278.8
Reclassified from/(to) creditors 0.3 -- (97.7) 1.2 (96.2)
Reclassified from debtors -- -- (1.3) -- (1.3)
Currency translation (20.9) -- (9.6) (1.5) (32.0)
Charge/(credit) for the year 15.4 -- 515.0 (1.3) 529.1
Payments (12.4) (1.3) (64.8) (10.4) (88.9)
------------ ------------- ------------ ------------ ------------
At 31 December 1996 142.1 -- 440.6 6.8 589.5
============ ============= ============ ============ ============
</TABLE>
Other provisions include leaving benefits which may become payable to employees
in certain acquired companies and costs of environmental cleaning.
(20.) CALLED UP SHARE CAPITAL
<TABLE>
<CAPTION>
ISSUED AND
AUTHORISED FULLY PAID
NO. OF NO. OF
SHARES SHARES
------------ ------------
<S> <C> <C>
Ordinary shares of L1 each
At 1 January 1996 725,000,000 531,160,903
Options exercised -- 1,042,262
------------ ------------
At 31 December 1996 725,000,000 532,203,165
============ ============
<CAPTION>
EXECUTIVE SAVINGS-
NO. OF RELATED NO. TOTAL NO. OF
SHARE OPTION SCHEMES SHARES OF SHARES SHARES
-------------------- ------------ ------------ ------------
<S> <C> <C> <C>
At 1 January 1996 12,002,006 9,353,338 21,355,344
Granted 695,000 5,491,378 6,186,378
Exercised (260,797) (781,465) (1,042,262)
Lapsed (103,980) (1,525,676) (1,629,656)
------------ ------------ ------------
At 31 December 1996 12,332,229 12,537,575 24,869,804
============ ============ ============
<CAPTION>
SAVINGS-
SHARE OPTION SCHEMES EXECUTIVE RELATED TOTAL
-------------------- ------------ ------------ ------------
<S> <C> <C> <C>
Number of holders 154 2,911
------------ ------------
Latest dates exercisable range between 1997/2006 1997/2003
Exercisable at the following price per share
101.7p -- 2,883,633 2,883,633
111.4p 1,847,345 -- 1,847,345
127.2p-147.8p 1,005,230 6,453,393 7,458,623
158.1p-172.1p 4,891,153 2,342,484 7,233,637
182.8p-199.8p 754,346 858,065 1,612,411
201.6p-226.2p 3,834,155 -- 3,834,155
------------ ------------ ------------
12,332,229 12,537,575 24,869,804
============ ============ ============
</TABLE>
78
<PAGE> 80
The interests in the Company, of those who were directors at 31 December 1996,
were as follows:
<TABLE>
<CAPTION>
ORDINARY
SHARES
31.12.96
------------
<S> <C>
Sir Colin Hope 105,562
M A Bell 16,000
R H Boissier 2,488
D G Carruthers 67,414
D A Harding 5,000
Sir Terence Harrison 5,000
Professor F R Hartley 3,001
P S Lewis 1,000
A C McWilliam 2,326
I F R Much 34,168
A J P Sabberwal 67,370
T A Welsh 5,914
Sir Geoffrey Whalen 4,654
------------
319,897
============
</TABLE>
No director has any beneficial interest in shares of any subsidiary.
(21.) RESERVES
<TABLE>
<CAPTION>
SHARE ASSOCIATED GOODWILL
PREMIUM REVALUATION UNDERTAKINGS' WRITE OFF PROFIT AND
ACCOUNT RESERVES RESERVES RESERVE LOSS ACCOUNT
------------ ------------ ------------ ------------ ------------
pound pound pound pound pound
sterling sterling sterling sterling sterling
m m m m m
<S> <C> <C> <C> <C> <C>
At 1 January 1996 -- 29.3 12.9 (190.5) 165.3
Currency translation on overseas
assets -- (1.7) (5.9) -- (58.1)
Currency translation on net debt -- -- -- -- 42.6
Transfer to profit and loss -- -- (2.7) -- (414.1)
Realisation of revaluation
surpluses -- (5.6) -- -- 5.6
Premium on share issues 0.2 -- -- -- --
Goodwill arising on acquisitions -- -- -- (0.3) --
Goodwill on disposals -- -- -- 9.7 --
Other movements -- (0.4) 0.7 -- (0.9)
------------ ------------ ------------ ------------ ------------
At 31 December 1996 0.2 21.6 5.0 (181.1) (259.6)
============ ============ ============ ============ ============
</TABLE>
Cumulative goodwill written off to Group reserves at 31 December 1996
totals pound sterling 248.3m, comprising pound sterling 181.1m shown above and
pound sterling 67.2m written off to a merger reserve in earlier years.
Retained earnings of overseas subsidiaries and associated undertakings would be
liable to tax if remitted as dividends to the United Kingdom.
79
<PAGE> 81
(22.) NOTES TO THE CASH FLOW STATEMENT
<TABLE>
<CAPTION>
1996
------------
pound
sterling
m
<S> <C>
(A) RECONCILIATION OF OPERATING PROFIT TO NET CASH INFLOW FROM OPERATING
ACTIVITIES
Operating loss (336.5)
Share of profits of associated undertakings (11.1)
Dividends received from associated undertakings 6.8
Depreciation 98.3
Loss on sale of tangible fixed assets 2.5
Decrease in stocks 22.2
Decrease in debtors 1.0
Decrease in creditors (2.0)
Decrease in provisions (7.9)
Other non cash movements (1.0)
Charge for asbestos-related costs 515.0
------------
Cash inflow from operating activities before asbestos-related payments 287.3
Asbestos-related payments (64.8)
------------
Cash inflow from operating activities after asbestos-related payments 222.5
============
(B) RETURNS ON INVESTMENT AND SERVICING OF FINANCE
1996
------------
pound
sterling
m
Interest received 5.2
Interest paid (35.4)
Dividends paid to minorities (1.2)
------------
(31.4)
============
(C) TAXATION
1996
------------
pound
sterling
m
UK tax paid (9.3)
Overseas tax paid (19.6)
------------
(28.9)
============
(D) CAPITAL EXPENDITURE AND FINANCIAL INVESTMENT
1996
------------
pound
sterling
m
Purchase of tangible fixed assets (114.3)
Disposal of tangible fixed assets 2.3
Additions to trade and other investments (primarily Kolbenschmidt) (13.6)
Disposal of trade investments 0.1
------------
(125.5)
============
</TABLE>
80
<PAGE> 82
<TABLE>
<CAPTION>
1996
------------
pound
sterling m
<S> <C>
(E) Acquisitions And Disposals
Acquisitions (Note 23) (8.5)
Sale of discontinued operations (Note 2) 74.8
Additions to associated undertakings (7.0)
------------
59.3
============
(F) Management of Liquid Resources
1996
------------
pound
sterling m
Additions to current asset investments (4.4)
Increases in short term investments (1.8)
------------
(6.2)
============
(G) Financing
1996
------------
pound
sterling m
New loans 176.7
Repayment of loans (206.8)
------------
Cash outflow from decrease in debt and lease financing (30.1)
Issues of ordinary share capital 1.2
Capital input by minorities 1.8
------------
(27.1)
============
(H) Acquired and Discontinued OPERATIONS
</TABLE>
In 1996, acquired and discontinued operations had no significant impact on any
of the cash flow categories, other than as disclosed in acquisitions and
disposals (Note 22(e)) above.
(23.) Acquisitions
On 12 July 1996 the Group acquired the trade, fixed assets and stock of the
Cummins Engine Company's piston ring business in the United States. The
consideration is contingent on the profits of the business during 1997 and
therefore has not yet been finally determined. The maximum consideration of
L6.5m has been provided in these accounts, this being the current best estimate
of the amount which will be payable. There was no difference between the book
value and fair value of the assets acquired. Accurate details of profits and
losses prior to acquisition are not available because the business was part of a
larger operating entity.
<TABLE>
<CAPTION>
pound
ASSETS ACQUIRED sterling m
---------------- ------------
<S> <C>
Fixed assets 5.8
Stocks 0.4
------------
6.2
Goodwill 0.3
------------
CASH CONSIDERATION 6.5
------------
Cash paid for acquisitions
Cash consideration 6.5
Consideration deferred (3.7)
Prior year deferred consideration paid (mainly Connoisseur) 5.7
------------
Cash outflow on acquisitions 8.5
============
</TABLE>
81
<PAGE> 83
(24.) Analysis of Movement in Net Debt
<TABLE>
<CAPTION>
EXCHANGE MOVEMENT ON
-------------------------- AT 31
AT 1 JANUARY OPENING MOVEMENT IN DECEMBER
1996 CASH FLOW BALANCES YEAR 1996
------------ ------------ ------------ ------------ ------------
pound pound pound pound pound
sterling m sterling m sterling m sterling m sterling m
<S> <C> <C> <C> <C> <C>
Cash at bank and in hand 95.4 23.8 (10.3) 1.5 110.4
Overdrafts (35.7) 7.0 5.2 (0.5) (24.0)
------------ ------------ ------------ ------------ ------------
59.7 30.8 (5.1) 1.0 86.4
------------ ------------ ------------ ------------ ------------
Debt due within one year (106.4) 24.0 30.0 0.7 (51.7)
Debt due after one year (273.9) 2.6 13.1 1.8 (256.4)
Finance leases (10.3) 3.5 1.9 (0.4) (5.3)
------------ ------------ ------------ ------------ ------------
(390.6) 30.1 45.0 2.1 (313.4)
------------ ------------ ------------ ------------ ------------
Short term deposits 19.7 1.8 (0.3) (0.1) 21.1
Current asset investments 1.2 4.4 -- -- 5.6
------------ ------------ ------------ ------------ ------------
20.9 6.2 (0.3) (0.1) 26.7
------------ ------------ ------------ ------------ ------------
Net borrowings (310.0) 67.1 39.6 3.0 (200.3)
============ ============ ============ ============ ============
</TABLE>
(25.) Deferred Taxation
<TABLE>
<CAPTION>
AT 31
DECEMBER
1996
------------
pound
sterling m
<S> <C>
Asset recognised
Asbestos-related costs 27.4
Losses and other timing differences 3.0
------------
30.4
============
</TABLE>
No provision has been made for tax which would become payable on the amount by
which assets have been revalued because there is no current intention to dispose
of these assets.
<TABLE>
<CAPTION>
AT 31
DECEMBER
1996
------------
pound
sterling m
<S> <C>
Unprovided assets/(liabilities)
Excess of book value over tax value of fixed assets (63.4)
Asbestos-related costs 52.0
Losses and other timing differences (17.7)
------------
(29.1)
===========
</TABLE>
Provision for deferred taxation is only made to the extent that it is probable
that an actual liability or asset will crystallise. Advance corporation tax of
L56.5m is available for carry forward against future UK tax liabilities.
(26.) Related Party Transactions
The T&N Group is related to all its associated undertakings because it exerts
significant influence over them. During the year various transactions have
occurred between the T&N Group and its associates including:
- -- sales of goods and equipment to associated undertakings of pound sterling
12.8m;
- -- purchases of goods from associated undertakings of pound sterling 15.5m;
- -- royalties received from associated undertakings of pound sterling 1.4m;
- -- dividends received from associated undertakings of pound sterling 6.8m;
- -- investments in associated undertakings as set out in Note 12.
82
<PAGE> 84
Sales between associated undertakings totalled pound sterling 16.0m.
Trading balances with associated undertakings at 31 December 1996 are set out in
Notes 14 and 16.
Entities which the T&N Group sold and acquired during the year, details of which
are set out in Notes 2 and 23, are deemed to be related parties because the T&N
Group exercised control over these whilst they were part of the T&N Group.
Transactions during the year which are not eliminated on consolidation totalled
L1.0m comprising mainly the provision of utilities to disposed businesses. All
these transactions were entered into on arms length terms.
(27.) Commitments and Contingent Liabilities
<TABLE>
<CAPTION>
AT 31
DECEMBER
1996
------------
pound
sterling m
<S> <C>
Future capital expenditure -- contracts placed 12.6
============
Operating leases -- payment commitments for 1997
On leases of land and buildings expiring
within one year 1.0
between two and five years 2.1
in more than five years 2.1
------------
5.2
============
On leases of plant and machinery expiring
within one year 1.4
between two and five years 7.0
in more than five years 0.1
------------
8.5
============
</TABLE>
At 31 December 1996 the Company and its UK subsidiaries had contingent
liabilities of pound sterling 64.3m in connection with guarantees relating to
bank borrowings of certain overseas subsidiaries. The maximum potential
liability under those guarantees is pound sterling 121.4m. Contingent
liabilities also exist in respect of cross-guarantees given by the Company and
its UK subsidiaries to support some of the Group's UK bank borrowings.
(28.) Asbestos-related litigation*
In the United States of America, T&N plc and two of its US subsidiaries ("the
T&N Companies") are among many defendants named in numerous court actions
alleging personal injury resulting from exposure to asbestos or asbestos-
containing products. T&N plc is also subject to asbestos-disease litigation, to
a lesser extent, in the UK. Because of the slow onset of asbestos-related
diseases, the directors anticipate that similar claims will be made in the
future. It is not known how many such claims will be made nor the expenditure
which may arise therefrom.
In previous years, there was insufficient information and insurance protection
to enable an estimate of the outstanding cost of potential future
asbestos-disease claims to be made with reasonable accuracy. Therefore, in
accordance with Statement of Standard Accounting Practice No18, provision was
made only for those claims notified and in respect of which payment was
outstanding at each accounting date.
The directors have now been able, by payment of a premium of pound sterling 92m,
to arrange a pound sterling 500m layer of insurance cover, should the aggregate
amount of claims notified after 30 June 1996 where the exposure occurred prior
to 1 July 1996 (IBNR claims) exceed pound sterling 690m.
IBNR CLAIMS
This, together with recent claims experience and medical information, has
enabled the directors to determine an estimate of the cost of future claims with
reasonable accuracy. The directors have made provision of pound sterling 550
million for IBNR claims at 30 June 1996 (being a point between the high (pound
sterling 690m) and low (pound sterling 429m) estimates prepared by actuaries
using assumptions referred to below). For the purpose of these accounts this
provision is being made on a discounted basis, using a rate of 7%. The directors
intend to set aside this provision in a separate fund, and the
- --------------------------
*More recent information is contained in T&N's unaudited interim report for the
six months to 30 June 1997 which is reproduced on pages 85 to 90 of this
document.
83
<PAGE> 85
provision of L323m allows a margin to enable this to be phased in accordance
with the assumptions over a period of approximately 36 months. Tax relief is
available on this provision when payments are made.
CLAIMS NOTIFIED AND OUTSTANDING AT 30 JUNE 1996
As regards claims notified and outstanding at 30 June 1996 in the UK, full
provision is made in respect of such claims.
As regards claims notified and outstanding at 30 June 1996 in the US, provision
continues to be made based on data provided by the Center for Claims Resolution
(CCR), whom T&N has appointed as its exclusive representative in relation to all
asbestos-related personal injury claims made against the T&N Companies in the
United States. In estimating the provision, the directors have had regard
principally to the industry in which the plaintiff claims exposure, the alleged
disease type, the State in which the action is being brought and the share which
will be applicable to the T&N Companies having regard to the agreed method of
operation of the CCR. Such shares may in certain circumstances be subject to
retroactive adjustment. Even where settlement has already been agreed in
principle with plaintiffs' lawyers in respect of a group of cases, the actual
cost of each claim to the T&N Companies may not be determined until it is
finally processed and paid sometime in the future.
CONTINGENT LIABILITY
Accordingly, although the directors believe that they have made appropriate
provision for claims, because of the factors described in this note, there are
contingencies in relation to the amount at which such claims will be finally
settled.
Given the substantial layer of insurance cover, one contingency in relation to
IBNR claims concerns claims exceeding the amount provided, but below the level
of insurance cover. This amounts to L140m gross, and L58m when discounted. The
directors also recognise the importance of setting up a separate fund in
accordance with the assumptions used in arriving at the discounted provision.
In arriving at the IBNR provision, assumptions have been made regarding the
total number of claims which it is anticipated may be received in the future,
the average cost of settlement (which is sensitive to the industry in which the
plaintiff claims exposure, the alleged disease type and the State in which the
action is being brought), the rate of receipt of claims and the timing of
settlement and the level of subrogation claims brought by insurance companies.
In addition it has been assumed that the terms of the Georgine Settlement will
not apply (even though the directors have received legal advice that this will
not necessarily be the case). If the Georgine Settlement continues in force for
some time, whether or not it is ultimately upheld by the Courts of the United
States, the present value of the potential liability for US IBNR claims should
reduce.
So far as relates to claims reported at 30 June 1996, T&N is primarily exposed
to differences between the assumptions referred to above and the actual claims
settlement experience as it emerges.
US PROPERTY DAMAGE LITIGATION
Following the successful jury verdict in the Chase Manhattan property damage
case in December 1995, judgement was entered in the Company's favour on all
counts during the year. Motions have been filed with the Court by The Chase
Manhattan Bank, seeking a new trial and appealing against the decision in the
Company's favour. The Company has received legal advice that such motions stand
no realistic prospect of success. Full provision has been made in respect of the
anticipated legal costs which may be incurred in relation to the Chase Manhattan
case, and for the other eight remaining property claims.
82
<PAGE> 86
7. INTERIM RESULTS OF T&N
The following is the text of the interim report containing T&N's results for the
six months to 30 June 1997 which were announced on 18 August 1997.
The figures below do not comprise statutory accounts. The figures for the year
ended 31 December 1996 are extracted from the full Group accounts which have
been filed with the Registrar of Companies. The figures for the six months ended
30 June 1996 and 30 June 1997 are unaudited.
"CHAIRMAN'S STATEMENT
Profit before tax on an FRS3 basis rose to pound sterling 114.7m in the
six months to 30 June 1997 compared with pound sterling 58.1m in the first half
of the previous year. Exceptional profits contributed pound sterling 29.4m to
the improvement and there was no charge for asbestos-related costs (1996: pound
sterling 25m). On an underlying basis, profit before tax was virtually unchanged
from the previous year despite the adverse effects of exchange translation.
Operating margins rose by a full percentage point to 10.6%. Cash generation was
strong.
TRADING
Sales of continuing operations were pound sterling 908m, pound sterling
49m below the previous year after adverse exchange translation effects of pound
sterling 84m. At constant exchange rates and excluding acquisitions, which
contributed pound sterling 3m, sales grew by 4%. Operating profits on continuing
businesses reached pound sterling 95.8m, up pound sterling 4.2m after adverse
exchange translation effects of pound sterling 5.9m. Rationalisation costs
charged against operating profit totalled pound sterling 9.9m compared with
pound sterling 9.2m the previous year as the Group continued its productivity
improvement programmes. Margins rose from 9.6% to 10.6% with all Product Groups
showing an improvement.
Bearings, Sealing Products and Composites & Camshafts were particularly
strong while Pistons and Friction confirmed their recovery programmes were on
track. Metal Leve, acquired in June, has made an encouraging start. In general,
volumes in north America were strong; in Europe volumes were little changed.
Total sales, including discontinued activities, were pound sterling 932m (1996:
pound sterling 1,051m) and operating profit pound sterling 98.7m (1996: pound
sterling 100.2m).
The effect of exchange rate movements in the period was felt principally on the
translation of overseas earnings. Compared with the first six months of the
previous year, sterling strengthened by about 18% against the continental
currencies and 7% against the dollar, reducing sales and operating profits of
continuing businesses as mentioned above. Transaction effects were, however,
relatively minor in the period. The Group's policy of manufacturing in the same
geographical area as the customer confined the effect, in the main, to exports
from the UK to Continental Europe amounting to less than 10% of Group sales.
While some areas of activity experienced pressure on prices, in general the
strong market position and technology base of the Product Groups enabled volumes
to be maintained at satisfactory margins.
Profit before tax in the period benefited from two exceptional credits.
Profit from the disposal of non-core businesses, principally the Flexitallic
industrial sealing activity sold in April, totalled pound sterling 15.9m after
goodwill clawback of pound sterling 1.8m. The results also include pound
sterling 13.5m from the sale of options over 24.9% of the equity in
Kolbenschmidt AG received under the terms of a profit sharing arrangement with
Commerzbank. The Group has negotiated matching call and put options over the
remaining 24.9% of Kolbenschmidt equity with exercise dates up to December 1999.
If exercised at the end of this period these options would generate a profit,
net of holding costs, of approximately pound sterling 24m at current exchange
rates largely recouping the costs incurred to date. The Group welcomes the steps
being taken by Rheinmetall AG to merge their Pierburg subsidiary with
Kolbenschmidt. An additional profit of pound sterling 5.0m from the sale of the
Tenmat activity sold on 4 August has not been included in the half year accounts
though the business has been treated as a discontinued activity.
Asbestos-related costs arising in the period were charged to provisions set up
in the 1996 accounts.
Net interest charges fell in the period from pound sterling 15.2m to
pound sterling 13.4m partly because of favourable exchange rate effects but also
because of strong cash generation. Interest cover before exceptional credits was
7.4 times (1996: 6.6 times). Taxation accounted for pound sterling 38.4m, an
effective rate of 33%, compared with pound sterling 20.3m (35%) in the first
half of 1996. After minority interests of pound sterling 2.4m, profit
attributable to T&N shareholders rose by pound sterling 39.3m to pound sterling
73.9m. Earnings per share rose to 13.9p compared with 6.5p the previous year.
Excluding the effect of exceptional gains, earnings per share were 10.2p. The
special dividend in lieu of the 1996 final was paid in July. The Board has
decided to increase the interim dividend by 7% from 3.0p to 3.2p. This will be
paid on 14 November 1997 to shareholders on the register on 12 September 1997. A
Scrip Alternative will be offered.
The results include a pension credit arising under SSAP24 of pound
sterling 2.9m (1996: pound sterling 2.5m). The Group is currently discussing
with its advisers the impact of recent Budget changes on the pension credit but
at this stage does not expect the effect to be material this year.
85
<PAGE> 87
CASH
Cash generation continued to receive high priority in the period and
cash generated by operating activities increased from pound sterling 94.9m to
pound sterling 102.9m. Inventories at the end of the reporting period were pound
sterling 239.2m compared to pound sterling 292.8m twelve months earlier.
Adjusting for disposals and the effect of exchange rates, inventories on a like
for like basis fell by about 8% over the twelve months.
Asbestos-related payments in the period comprised pound sterling 92m
paid in January in respect of the insurance premium charged in the 1996
accounts, and pound sterling 34.3m of ongoing payments, down from pound sterling
40.8m the previous year. The cash outflow on taxation was also down, from pound
sterling 11.7m to pound sterling 8.5m. Capital expenditure totalled pound
sterling 41.9m compared with pound sterling 53.7m so that net cash flow
(excluding the insurance premium) before acquisitions, disposals and financing
improved from an outflow of (pound sterling 32.2m) to an inflow of pound
sterling 5.3m.
Acquisitions, principally Metal Leve acquired in June, totalled pound
sterling 33.0m. Disposals generated pound sterling 52.6m. Additional receipts
totalling pound sterling 17m due from the sale in 1996 of the Group's Zimbabwean
construction activity have been delayed owing to operational difficulties in the
mining operations. The Group is receiving interest on the delayed payments which
have been treated as a receivable. The proceeds of the disposals have been
transferred to the asbestos claims fund which is shown separately in the balance
sheet. With the disposal of Tenmat mentioned above, the Group currently has
around pound sterling 70m in the asbestos fund. The Group will be appointing
external fund managers to advise on the investment of the fund in the next few
months.
After favourable exchange effects of pound sterling 10.6m, bank
borrowings at the close of the period were pound sterling 307.6m compared with
pound sterling 312.7m a year earlier. With pound sterling 51.2m in the asbestos
claims fund, net debt was pound sterling 256.4m (June 1996: pound sterling
312.7m).
ASBESTOS
The measures announced last year, to take a significant provision in
respect of the estimated present value of possible future asbestos-related
disease claims against the Group, and to purchase a substantial (pound sterling
500m) layer of insurance as additional cover, protect the Company against the
decision of the US Supreme Court not to preserve the Georgine settlement. The
procedures established by the settlement, which sought to resolve claims through
an efficient administrative system rather than through the Courts, thus came to
an end on 21 July 1997. The Company, working with the other members of the
Center for Claims Resolution, will continue its efforts to achieve the essential
aim of the Georgine settlement.
Following the successful jury verdict in the Chase Manhattan property damage
case in December 1995, Chase lodged various motions with the Court seeking a new
trial. Such motions were defeated. Chase has now submitted an appeal against the
jury's verdict. The Company has received legal advice that the appeal stands no
realistic prospect of success.
Further progress has been made in reducing the number of other property damage
claims, and only four of such cases now remain pending. The Company's potential
liability in respect of such cases has been fully provided for. In the United
Kingdom, the claims processing and administration procedures continue to operate
well.
PROSPECTS
Continued strong cash generation and operating margins back to 10.6%, even after
charging substantial rationalisation costs, provide a sound basis for
improvement to the Group's performance in the future. The strength of sterling
is obviously an issue, but our strong market position, geographical spread and
investment in technology is limiting the overall effect on the Group. The
decision to increase the dividend reflects our confidence.
SIR COLIN HOPE
CHAIRMAN
86
<PAGE> 88
GROUP PROFIT AND LOSS ACCOUNT
<TABLE>
<CAPTION>
SIX MONTHS SIX MONTHS YEAR ENDED
ENDED ENDED 31 DECEMBER
NOTE 30 JUNE 1997 30 JUNE 1996 1996
--------- ------------ ------------ -----------
pound pound pound pound
sterling sterling sterling sterling
m m m m
<S> <C> <C> <C> <C>
TURNOVER
Turnover including share of associated undertakings 977 1,098 2,038
Associated undertakings (45) (47) (82)
------------ ------------ ------------
Turnover excluding associated undertakings 1 932 1,051 1,956
------------ ------------ ------------
OPERATING PROFIT 1&2 98.7 100.2 178.5
Asbestos-related costs -- (25.0) (515.0)
Profit/(loss) on disposals 3 15.9 0.8 (1.6)
Kolbenschmidt option profit/(costs) 4 13.5 (2.7) (23.4)
------------ ------------ ------------
PROFIT/(LOSS) ON ORDINARY ACTIVITIES BEFORE INTEREST 128.1 73.3 (361.5)
Net interest payable (13.4) (15.2) (26.8)
------------ ------------ ------------
PROFIT/(LOSS) ON ORDINARY ACTIVITIES BEFORE TAXATION 114.7 58.1 (388.3)
Taxation 5 (38.4) (20.3) (8.0)
------------ ------------ ------------
PROFIT/(LOSS) ON ORDINARY ACTIVITIES AFTER TAXATION 76.3 37.8 (396.3)
Minority interests (2.4) (3.2) (4.5)
------------ ------------ ------------
Profit/(loss) attributable to shareholders 73.9 34.6 (400.8)
Dividends (33.0) (15.9) (16.0)
------------ ------------ ------------
Transfer to/(from) reserves 40.9 18.7 (416.8)
------------ ------------ ------------
Earnings per 40p share (net) 7 13.9p 6.5p (75.4p)
Dividends per 40p share 8 6.2p 3.0p 3.0p
============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
GROUP BALANCE SHEET
SIX MONTHS SIX MONTHS YEAR ENDED
ENDED ENDED 31 DECEMBER
NOTE 30 JUNE 1997 30 JUNE 1996 1996
--------- ------------ ------------ ------------
pound pound pound pound
sterling sterling sterling sterling
m m m m
<S> <C> <C> <C> <C>
Tangible fixed assets and investments 726.3 775.1
756.7
------------ ------------ ------------
Stocks 239.2 292.8 247.6
Debtors 460.3 523.7 416.9
Creditors (404.0) (398.7) (484.4)
------------ ------------ ------------
Operating working capital 295.5 417.8 180.1
------------ ------------ ------------
OPERATING ASSETS 1,021.8 1,192.9 936.8
------------ ------------ ------------
Dividends and ACT payable (41.3) (39.8) (4.0)
Provisions for liabilities and charges 6 (554.7) (249.8) (589.5)
------------ ------------ ------------
ASSETS EMPLOYED 425.8 903.3 343.3
------------ ------------ ------------
Share capital 7 213.0 531.5 532.2
Reserves (70.8) 34.6 (413.9)
------------ ------------ ------------
Shareholders' funds 142.2 566.1 118.3
Minority interests 27.2 24.5 24.7
------------ ------------ ------------
EQUITY 169.4 590.6 143.0
------------ ------------ ------------
Other borrowings 307.6 312.7 200.3
Asbestos fund (51.2) -- --
------------ ------------ ------------
Net borrowings 256.4 312.7 200.3
------------ ------------ ------------
CAPITAL EMPLOYED 425.8 903.3 343.3
============ ============ ============
</TABLE>
87
<PAGE> 89
GROUP NET DEBT MOVEMENT
<TABLE>
<CAPTION>
SIX MONTHS SIX MONTHS YEAR ENDED
ENDED ENDED 31 DECEMBER
NOTE 30 JUNE 1997 30 JUNE 1996 1996
--------- ------------ ------------ ------------
pound pound pound
sterling sterling sterling
m m m
<S> <C> <C> <C> <C>
OPERATING PROFIT/(LOSS) 98.7 75.2 (336.5)
Depreciation 49.2 51.6 98.3
Operating working capital (45.0) (53.2) 21.2
Asbestos-related costs -- 25.0 515.0
Provisions etc. -- (3.7) (10.7)
------------ --------- ------------
CASH INFLOW FROM OPERATING ACTIVITIES 102.9 94.9 287.3
Asbestos-related payments -- claims and costs (34.3) (40.8) (64.8)
-- insurance premium (92.0) -- --
------------ --------- ------------
NET CASH (OUTFLOW)/INFLOW FROM OPERATING ACTIVITIES (23.4) 54.1 222.5
Returns on investment and servicing of finance (11.7) (18.2) (31.4)
Taxation (8.5) (11.7) (28.9)
------------ --------- ------------
CASH (OUTFLOW)/INFLOW BEFORE INVESTING ACTIVITIES AND
FINANCING (43.6) 24.2 162.2
Capital expenditure (41.9) (53.7) (114.3)
Other (1.2) (2.7) (11.2)
------------ --------- ------------
NET CASH (OUTFLOW)/INFLOW BEFORE ACQUISITIONS, DISPOSALS AND
FINANCING (86.7) (32.2) 36.7
Acquisitions 3 (33.0) (9.6) (15.5)
Disposals 3 52.6 26.2 74.8
Equity dividends paid -- -- (31.9)
Share issues 0.4 0.9 3.0
------------ --------- ------------
(66.7) (14.7) 67.1
Currency translation 10.6 12.0 42.6
------------ --------- ------------
Net debt change (56.1) (2.7) 109.7
============ ========= ============
</TABLE>
GROUP STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
<TABLE>
<CAPTION>
SIX MONTHS SIX MONTHS
ENDED ENDED
30 JUNE 1997 30 JUNE 1996
------------ ------------
pound pound
sterling sterling
m m
<S> <C> <C>
Profit attributable to shareholders 73.9 34.6
Other recognised gains and losses:
Currency translation differences on foreign currency net investments (7.6) (9.0)
Other 0.9 0.3
------------ ------------
(6.7) (8.7)
------------ ------------
Total recognised gains and losses relating to the period 67.2 25.9
============ ============
</TABLE>
RECONCILIATION OF MOVEMENT IN SHAREHOLDERS' FUNDS
<TABLE>
<CAPTION>
SIX MONTHS SIX MONTHS
ENDED ENDED
30 JUNE 1997 30 JUNE 1996
------------ ------------
pound pound
sterling sterling
m m
<C> <C> <C>
Profit attributable to shareholders 73.9 34.6
Dividends (33.0) (15.9)
------------ ------------
Transfer to reserves 40.9 18.7
Other recognised gains and losses (as above) (6.7) (8.7)
New share capital subscribed 0.2 0.5
Goodwill charged on disposal 1.8 7.7
Goodwill on acquisition (12.3) (0.3)
------------ ------------
Net change 23.9 17.9
Shareholders' funds at 31 December 1996/1995 118.3 548.2
------------ ------------
Shareholders' funds at 30 June 1997/1996 142.2 566.1
============ ============
</TABLE>
88
<PAGE> 90
NOTES TO THE ACCOUNTS
<TABLE>
<CAPTION>
TURNOVER OPERATING PROFIT
---------------------------------------- ----------------------------------------
SIX MONTHS SIX MONTHS YEAR ENDED SIX MONTHS SIX MONTHS YEAR ENDED
ENDED 30 ENDED 30 31 DECEMBER ENDED 30 ENDED 30 31 DECEMBER
JUNE 1997 JUNE 1996 1996 JUNE 1997 JUNE 1996 1996
------------ ------------ ------------ ------------ ------------ ------------
pound pound pound pound pound pound
sterling sterling sterling sterling sterling sterling
m m m m m m
<S> <C> <C> <C> <C> <C> <C>
1. PRODUCT GROUPINGS
Bearings 167 175 333 25.0 23.7 44.7
Sealing Products 101 115 216 10.7 10.3 16.2
Friction Products 159 170 320 11.3 11.3 16.5
Piston Products 287 301 574 24.5 23.1 41.4
Composites and Camshafts 194 196 381 24.3 23.2 45.6
------------ ------------ ------------ ------------ ------------ ---------
Continuing operations* 908 957 1,824 95.8 91.6 164.4
Discontinued operations 24 94 132 2.9 8.6 14.1
------------ ------------ ------------ ------------ ------------ ---------
Total 932 1,051 1,956 98.7 100.2 178.5
------------ ------------ ------------ ------------ ------------ ---------
*Including acquisitions 3 -- -- 0.4 -- --
GEOGRAPHICAL -- BY ORIGIN
UK 227 219 431 27.4 28.1 56.2
Mainland Europe 337 392 725 34.1 27.2 45.9
North America 283 281 537 31.4 30.9 54.1
South Africa 53 56 111 3.1 4.3 8.0
Other countries 8 9 20 (0.2) 1.1 0.2
------------ ------------ ------------ ------------ ------------ ---------
Continuing operations 908 957 1,824 95.8 91.6 164.4
Discontinued operations 24 94 132 2.9 8.6 14.1
------------ ------------ ------------ ------------ ------------ ---------
Total 932 1,051 1,956 98.7 100.2 178.5
------------ ------------ ------------ ------------ ------------ ---------
GEOGRAPHICAL -- BY DESTINATION
UK 148 145 281
Mainland Europe 375 425 785
North America 284 282 551
South Africa 44 48 92
Other countries 57 57 115
------------ ------------ ------------
Continuing operations 908 957 1,824
Discontinued operations 24 94 132
------------ ------------ ------------
Total 932 1,051 1,956
============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS SIX MONTHS YEAR ENDED
ENDED 30 ENDED 30 31 DECEMBER
JUNE 1997 JUNE 1996 1996
------------ ------------ ------------
pound pound pound
sterling sterling sterling
m m m
<S> <C> <C> <C>
2. ASSOCIATED UNDERTAKINGS
Share of turnover 45.0 47.0 82.0
------------ ------------ ------------
Share of profits before taxation 6.2 7.4 11.1
============ ============ ============
</TABLE>
3. ACQUISITIONS AND DISCONTINUED OPERATIONS
On 16 June 1997 the Group acquired Metal Leve Inc, a manufacturer of
articulated pistons, based in Michigan, USA. On 27 February 1997 the Group
acquired Michigan Stamping Corporation, which manufactures heat shields and
is also based in Michigan, USA. The goodwill figures included in these
accounts in respect of acquisitions are preliminary and may be subject to
amendment. Disposals during the period comprised the Flexitallic Sealing
businesses with effect from 10 April 1997, the Ferodo Caernarfon business
with effect from 3 May 1997 and Kafue Fisheries on 26 June 1997. On 4
August 1997 the Tenmat businesses were sold. The profit on disposal is not
included in these accounts. The trading results of the Tenmat businesses
are included in discontinued operations.
4. OPTIONS OVER SHARES IN KOLBENSCHMIDT AG ('KS')
At 31 December 1996 the Company held options to acquire 6,727,260 shares
in KS, representing 24.99% of the issued share capital of KS. These
arrangements expire on 5 September 1997. The option price is DM 17 per
share and the consideration payable on exercise of the options would be DM
114.4m (pound sterling 37.6m). On 28 May 1997 the Company announced that it
had entered into option arrangements to sell 6,727,260 shares in KS at a
price of DM 30 per share. The revenue receivable on exercise of these
options would be DM 201.8m (pound sterling 66.4m). These
89
<PAGE> 91
arrangements expire on 15 December 1999. In addition, arrangements have
been entered into to extend to 15 December 1999 the existing options to
acquire KS shares. Both these new option arrangements are conditional on
the proposed merger between KS and Pierburg AG, Rheinmetall AG's automotive
subsidiary, taking place. The costs of these new arrangements (pound
sterling 6.2m) have been included in investments. In December 1996 option
arrangements with Commerzbank AG over a further 6,727,260 shares in KS
expired. Commerzbank AG subsequently sold the shares subject to the
arrangements and, under the terms of the agreement, the Company received
part of the proceeds. This gain of (pound sterling 13.5m has been
recognised as a profit.
The exceptional credit/(charge) relates to continuing operations and
comprises:
<TABLE>
<CAPTION>
SIX MONTHS SIX MONTHS YEAR ENDED
ENDED 30 ENDED 30 31 DECEMBER
JUNE 1997 JUNE 1996 1996
------------ ------------ ------------
pound sterling pound sterling pound sterling
m m m
<S> <C> <C> <C>
Received from Commerzbank on sale of shares 13.5 -- --
Payable on lapse of options with Commerzbank -- -- (10.0)
Transfer of options to Metallbank -- -- (8.5)
Other holding costs -- (2.7) (4.9)
------------ ------------ ------------
13.5 (2.7) (23.4)
============ ============ ============
</TABLE>
5. TAXATION (CHARGE)/CREDIT
<TABLE>
<CAPTION>
SIX MONTHS SIX MONTHS YEAR ENDED
ENDED 30 ENDED 30 31 DECEMBER
JUNE 1997 JUNE 1996 1996
------------ ------------ ------------
pound sterling pound sterling pound sterling
<S> <C> <C> <C>
UK (8.2) (5.1) 3.1
Overseas (26.8) (11.6) (4.1)
Associated undertakings (3.4) (3.6) (7.0)
------------ ------------ ------------
(38.4) (20.3) (8.0)
============ ============ ============
</TABLE>
6. PROVISIONS FOR LIABILITIES AND CHARGES
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Retirement benefits (137.1) (156.3) (142.1)
Asbestos-related (412.3) (81.2) (440.6)
Other (5.3) (12.3) (6.8)
------------ ------------ ------------
(554.7) (249.8) (589.5)
============ ============ ============
</TABLE>
7. SHARE CAPITAL
<TABLE>
<CAPTION> SIX MONTHS ENDED 30 JUNE
--------------------------
1997
NUMBER 1997
------------ ------------
(m) pound sterling
m
<S> <C> <C>
At 1 January 1997 532.2 532.2
Capital reduction -- (319.4)
Shares issued 0.3 0.2
------------ ------------
At 30 June 1997 532.5 213.0
------------ ------------
Average number of shares in issue:
Six months ended 30 June 1997 532.3
Six months ended 30 June 1996 531.4
============
</TABLE>
A capital reduction was approved by the Court on 29 January 1997 and took
effect on 30 January 1997. In accordance with the terms of the capital
reduction, the nominal value of authorised and issued shares was reduced
from pound sterling 1.00 to 40p. The reduction in share capital of pound
sterling 319.4m is transferred to other reserves and has no impact on
shareholders' funds.
8. DIVIDENDS
The 1997 dividends of 6.2p per share include an interim dividend of 3.2p per
share and a further 3.0p per share as a 'first interim' dividend in lieu of
a 1996 final dividend.
9. ACCOUNTING POLICIES
There has been no change in accounting policies in the six month period
ended 30 June 1997. The accounting policies are as disclosed in the accounts
for the year ended 31 December 1996."
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<PAGE> 92
APPENDIX IV
ADDITIONAL INFORMATION
1. RESPONSIBILITY
(a) The directors of Federal-Mogul whose names are set out in paragraph 2(a)
below and the directors of the Offeror, whose names are set out in paragraph
2(b) below, accept responsibility for the information contained in this
document, other than the information contained in this document relating to
T&N, the directors of T&N and their immediate families and persons connected
with the directors of T&N. To the best of the knowledge and belief of such
directors (who have taken all reasonable care to ensure that such is the
case), the information contained in this document for which they accept
responsibility is in accordance with the facts and does not omit anything
likely to affect the import of such information.
(b) The directors of T&N, whose names are set out in paragraph 2(c) below,
accept responsibility for the information contained in this document
relating to T&N, the directors of T&N and their immediate families and
persons connected with the directors of T&N. To the best of the knowledge
and belief of the directors of T&N (who have taken all reasonable care to
ensure that such is the case), the information contained in this document
for which they accept responsibility is in accordance with the facts and
does not omit anything likely to affect the import of such information.
2. DIRECTORS AND THE OFFEROR
(A) DIRECTORS OF FEDERAL-MOGUL
The directors of Federal-Mogul are as follows:
<TABLE>
<CAPTION>
NAME POSITION
- ---- -----------------------------------
<S> <C>
Richard A. Snell Chairman, Chief Executive Officer
and President
John J. Fannon Director
Roderick M. Hills Director
Antonio Madero Director
Robert S. Miller Jr. Director
John C. Pope Director
H. Michael Sekyra Director
</TABLE>
(B) DIRECTORS OF THE OFFEROR
<TABLE>
<CAPTION>
The names of the directors of the Offeror are as follows:
NAME POSITION
- ---- -----------------------------------
<S> <C>
Richard A. Snell Director
Thomas A. Ryan Director
Alan Johnson Director
</TABLE>
(C) DIRECTORS OF T&N
<TABLE>
<CAPTION>
The names of the directors of T&N and the positions they hold are as follows:
NAME POSITION
- ---- -----------------------------------
<S> <C>
Sir Colin Hope Chairman
Ian F.R. Much Chief Executive
David A. Harding Finance Director
Robert G. Beeston Non-Executive Director
Roger H. Boissier Non-Executive Director
Sir Terence Harrison Non-Executive Director
Professor Frank R. Hartley Non-Executive Director
Paul S. Lewis Non-Executive Director
Alister C. McWilliam Executive Director
T. Allan Welsh Executive Director
Sir Geoffrey Whalen Non-Executive Director
</TABLE>
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<PAGE> 93
(D) INFORMATION ON THE OFFEROR
Federal-Mogul Global Growth Limited is a wholly owned indirect subsidiary of
Federal-Mogul and has its registered office at Malvern Drive, Ty-Glas Industrial
Estate, Llanishen, Cardiff, Wales CF4 5WW. It was incorporated in England and
Wales under the Companies Act 1985 as a private limited company on 23 October
1997. Federal-Mogul Global Growth Limited's authorised share capital is 1000
ordinary shares of L1 nominal value each of which 100 ordinary shares have been
issued and fully paid. Federal-Mogul Global Growth Limited is a holding and
investment company in the Federal-Mogul Group and has been specially formed to
make the Offer. Federal-Mogul Global Growth Limited has not traded since its
date of incorporation and no accounts of Federal-Mogul Global Growth Limited
have been prepared. The immediate holding company of Federal-Mogul Global Growth
Limited is F-M UK Holding Limited which is wholly-owned by Federal-Mogul. Two
investors have a stake in Federal-Mogul above 5%: Capital Group (11.9%) and
Janus Capital (11.9%).
3. SHAREHOLDINGS AND DEALINGS
For the purposes of this paragraph 3, "disclosure period" means the period
commencing on 26 September 1996 (being the date 12 months prior to the
commencement of the Offer period) and ending at the close of business on 11
November 1997 (being the latest practicable date prior to the posting of this
document).
(A) HOLDINGS
(i) At the close of business on 11 November 1997 (being the latest
practicable date prior to the posting of this document), the directors
of T&N were interested in the following T&N Ordinary Shares:
<TABLE>
<CAPTION>
NUMBER OF
DIRECTOR T&N ORDINARY SHARES
--------------------------------------- ---------------------
<S> <C>
Sir Colin Hope 107,774
Ian Much 34,952
David Harding 5,104
Alister McWilliam 2,375
Allan Welsh 19,445
Robert Beeston 10,000
Roger Boissier 2,595
Sir Terence Harrison 10,000
Professor Hartley 3,131
Paul Lewis 1,000
Sir Geoffrey Whalen 4,856
</TABLE>
(ii) At the close of business on 11 November 1997 (being the last
practicable date prior to the posting of this document), the directors
of T&N had the following options over T&N Ordinary Shares:
<TABLE>
<CAPTION>
EXERCISE
NORMAL EXERCISE NUMBER OF T&N PRICE
NAME SCHEME PERIOD ORDINARY SHARES PER SHARE
- ------------------- ------------------------------------ --------------------- --------------- -------------
<S> <C> <C> <C> <C>
Sir Colin Hope T&N UK Share Option Scheme and 1995 11.4.91-10.4.98 55,796 159.5p
Executive Share Option Scheme 18.4.92-17.4.99 55,796 184.6p
10.4.93-9.4.00 86,084 147.8p
11.4.94-10.4.01 107,606 171.9p
19.3.95-18.3.02 94,112 111.4p
12.4.97-11.4.04 50,833 226.2p
1.2.00-31.7.00 8,145 119.7p
Ian Much T&N UK Share Option Scheme and 1995 11.4.94-10.4.01 80,704 171.9p
Executive Share Option Scheme 19.3.95-18.3.02 78,427 111.4p
15.4.96-14.4.03 20,913 172.1p
12.4.97-11.4.04 25,416 226.2p
10.5.98-9.5.05 100,000 159.0p
2.9.00-1.9.07 150,000 157.5p
T&N UK Savings-Related Share Option 1.7.98-31.12.98 2,846 158.1p
Scheme 1.7.00-31.12.00 4,924 158.4p
1.7.00-31.12.00 5,077 135.9p
1.7.01-31.12.01 2,215 155.7p
</TABLE>
92
<PAGE> 94
<TABLE>
<CAPTION>
EXERCISE
NORMAL EXERCISE NUMBER OF T&N PRICE
NAME SCHEME PERIOD ORDINARY SHARES PER SHARE
- ------------------- ------------------------------------ --------------------- --------------- -------------
<S> <C> <C> <C> <C>
David Harding T&N 1995 Executive Share Option 10.5.98-9.5.05 100,000 159.0p
Scheme 6.9.99-5.9.06 50,000 137.0p
2.9.00-1.9.07 200,000 157.5p
Alister McWilliam T&N UK Share Option Scheme and 1995 11.4.91-10.4.98 16,739 159.5p
Executive Share Option Scheme 18.4.92-17.4.99 22,318 184.5p
10.4.93-9.4.00 21,521 147.7p
11.4.94-10.4.01 43,043 171.9p
19.3.95-18.3.02 29,279 111.4p
15.4.96-14.4.03 15,685 172.1p
12.4.97-11.4.04 25,416 226.2p
6.10.97-5.10.04 10,166 207.5p
10.5.98-9.5.05 50,000 159.0p
2.10.99-1.10.06 20,000 134.5p
2.9.00-1.9.07 90,000 157.5p
T&N Savings-Related Share Option 1.7.00-31.12.00
Scheme
7,174 135.9p
Allan Welsh T&N UK Share Option Scheme and 1995 11.4.94-10.4.01 43,043 171.9p
Executive Share Option Scheme 19.3.95-18.3.02 41,827 111.4p
15.4.96-14.4.03 15,685 172.1p
12.4.97-11.4.04 25,416 226.2p
10.5.98-9.5.05 50,000 159.0p
2.10.99-1.10.06 20,000 134.5p
2.9.00-1.9.07 125,000 157.5p
T&N Savings-Related Share Option 1.7.00-31.12.00 1,015 135.9p
Scheme 1.2.02-31.7.02 2,882 119.7p
1.2.03-31.7.03 8,192 151.6p
</TABLE>
(iii) The following irrevocable undertakings to accept the Offer have been
given by the directors of T&N in respect of the following numbers of
relevant securities:
<TABLE>
<CAPTION>
NAME NUMBER OF T&N ORDINARY SHARES
------------------------- -------------------------------
<S> <C>
Sir Colin Hope 107,774
Ian Much 34,952
David Harding 5,104
Alister McWilliam 2,375
Allan Welsh 19,445
Robert Beeston 10,000
Roger Boissier 2,595
Sir Terence Harrison 10,000
Professor Hartley 3,131
Paul Lewis 1,000
Sir Geoffrey Whalen 4,856
</TABLE>
93
<PAGE> 95
(B) DEALINGS
In addition to the grant of the options referred to in paragraph (a)(ii)
above, dealings for value in T&N Ordinary Shares by the directors of T&N and
their immediate families and related trusts during the disclosure period were
as follows:
<TABLE>
<CAPTION>
NUMBER OF T&N
NAME DATE TRANSACTION ORDINARY SHARES PRICE PER SHARE
- --------------------- ------------------- ----------------------------------- --------------- ---------------
<S> <C> <C> <C> <C>
Sir Colin Hope To be issued on 14 Scrip issue in respect of second
November 1997 interim dividend 2,212 152.7p
Ian Much 11 July 1997 Scrip issue in respect of first
interim dividend 68 136.3p
To be issued on 14 Scrip issue in respect of second
November 1997 interim dividend 716 152.7p
David Harding To be issued on 14 Scrip issue in respect of second
November 1997 interim dividend 104 152.7p
Alister McWilliam To be issued on 14 Scrip issue in respect of second
November 1997 interim dividend 49 152.7p
Allan Welsh 23 December 1996 Exercise and purchase 2,371 158.1p
31 December 1996 Sale 2,371 172.0p
11 July 1997 Scrip issue in respect of first
interim dividend 130 136.3p
25 September 1997 Exercise and purchase 13,274 101.7p
To be issued on 14 Scrip issue in respect of second
November 1997 interim dividend 127 152.7p
Robert Beeston 6 March 1997 Purchase 10,000 157.5p
Roger Boissier 11 July 1997 Scrip issue in respect of first
interim dividend 54 136.3p
To be issued on 14 Scrip issue in respect of second
November 1997 interim dividend 53 152.7p
Sir Terence Harrison 4 October 1996 Purchase 5,000 134.0p
3 June 1997 Purchase 5,000 124.0p
Professor Hartley 11 July 1997 Scrip issue in respect of first
interim dividend 66 136.3p
To be issued on 14 Scrip issue in respect of second
November 1997 interim dividend 64 152.7p
Paul Lewis 28 November 1996 Purchase 1,000 184.5p
Sir Geoffrey Whalen 11 July 1997 Scrip issue in respect of first
interim dividend 102 136.3p
To be issued on 14 Scrip issue in respect of second
November 1997 interim dividend 100 152.7p
</TABLE>
(C) ARRANGEMENTS
Hoare Govett Corporate Finance Limited offers a bridge facility to holders
of options under the T&N UK Share Option Scheme and the T&N 1995 Executive
Share Option Scheme to facilitate the exercise of options and, if required,
the sale of shares arising after exercise of options in order to fund the
subscription price, interest charge and dealing costs.
(D) GENERAL
Save as disclosed in paragraphs (a), (b) and (c) above:
(i) none of Federal-Mogul nor the Offeror nor any member of the
Federal-Mogul Group owns or controls any relevant securities nor has any
such person dealt for value therein during the disclosure period;
(ii) none of the directors of Federal-Mogul nor the directors of the Offeror
nor any member of their immediate families is interested (as described
in Parts VI and X of the Companies Act 1985), directly or indirectly,
in relevant securities nor has any such person dealt for value therein
during the disclosure period;
94
<PAGE> 96
(iii) no person acting in concert with Federal-Mogul (excluding exempt market
makers and exempt fund managers) owns or controls any relevant
securities nor has any such person dealt for value therein during the
disclosure period;
(iv) neither Federal-Mogul nor any person acting in concert with
Federal-Mogul has any arrangement of the kind referred to in paragraph
3(e) below with any of the directors, recent directors, shareholders or
recent shareholders of T&N having any connection with or dependence
upon the Offer;
(v) T&N does not own or control and no director of T&N is interested (as
described in parts VI and X of the Companies Act 1985), directly or
indirectly, in any shares in Federal-Mogul or the Offeror nor has any
such person dealt for value therein during the disclosure period;
(vi) no director of T&N is interested (as described in Parts VI and X of the
Companies Act 1985), directly or indirectly, in relevant securities nor
has any such director or any member of his immediate family or any
related trust or any company under its control dealt for value therein
during the disclosure period;
(vii) no subsidiary of T&N nor any pension fund of T&N or any subsidiary of
T&N nor any bank, financial or other professional adviser (including
stockbrokers) to T&N nor any person controlling, controlled by, or
under the same control as, any such bank, financial or other
professional adviser (other than exempt market-makers) owns or controls
any relevant securities nor has any such person dealt for value therein
during the period commencing on 26 September 1997 (the date of
commencement of the Offer period) and ending on 11 November 1997 (the
latest practicable date prior to the posting of this document); and
(viii) neither T&N nor any person who is an associate of T&N has any
arrangement of the kind referred to in paragraph 3(e) below relating to
relevant securities.
(E) DEFINITIONS
For the purposes of this paragraph 3:
(i) "arrangement" includes indemnity or option arrangements, and any
agreement or understanding, formal or informal, of whatever nature
relating to relevant securities which may be an inducement to deal or
refrain from dealing;
(ii) "relevant securities" means T&N Ordinary Shares and securities
convertible into, rights to subscribe for, options (including traded
options) in respect of, and derivatives referenced to, any of the
foregoing;
(iii) an "associate" of T&N means any of:
(aa) its subsidiaries, its associated companies and companies of which
any such subsidiaries or associated companies are associated
companies (where ownership or control of 20 per cent. or more of the
equity share capital is regarded as the test of associated company
status);
(bb) the banks, financial and other professional advisers (including
stockbrokers) to T&N or any company referred to in (aa) above,
including persons controlling, controlled by or under the same
control as such banks, financial or other professional advisers;
(cc) the directors of T&N (together with their close relatives and
related trusts) or of any company referred to in (aa) above;
(dd) the pension funds of T&N or of any company referred to in (aa)
above; and
(iv) "control" means a holding, or aggregate holdings, of shares carrying 30
per cent. or more of all the voting rights attributable to the share
capital of a company which are currently exercisable at a general
meeting, irrespective of whether the holding or holdings give de facto
control, and references to a "bank" do not apply to a bank whose sole
relationship with T&N is the provision of normal commercial banking
services.
4. MARKET QUOTATIONS
The following table shows the middle-market quotations for T&N Ordinary Shares,
as derived from the London Stock Exchange Daily Official List on the following
dates, unless otherwise indicated:
(i) the first dealing day of each of the 6 months immediately prior to the
date of this document;
(ii) 25 September 1997, being the last dealing day prior to the announcement
that T&N had received an approach from Federal-Mogul; and
(iii) 11 November 1997, being the latest practicable date prior to the
posting of this document.
95
<PAGE> 97
<TABLE>
<CAPTION>
DATE T&N ORDINARY SHARE PRICE (P)
- ---------------------- ----------------------------
<S> <C>
2 June 1997 123p
1 July 1997 144p
1 August 1997 142p
1 September 1997 157 1/2p
25 September 1997 182p
1 October 1997 246 1/2p
3 November 1997 251p
11 November 1997 250p
</TABLE>
5. MATERIAL CONTRACTS
(1) FEDERAL-MOGUL
The following contracts have been entered into by members of the Federal-Mogul
Group, otherwise than in the ordinary course of business, since 26 September
1995 (being the date two years before the Offer period began) and are or may be
material:
(a) On 15 October 1997 a Senior Credit Agreement was entered into by
Federal-Mogul and Chase Manhattan Bank as administrative agent and lender
pursuant to which Federal-Mogul may borrow: (i) up to $2.35 billion in term
loans (the "Term Loans") to be used to finance the acquisition of T&N, pay
the fees and expenses in connection therewith and refinance existing
indebtedness of T&N, and (ii) up to $400 million outstanding at a given time
in revolving credit loans (the "Revolving Credit Loans") to be used to
refinance Federal-Mogul's existing revolving credit agreement, to pay fees
and expenses incurred under this Agreement and for working capital and other
general corporate purposes. The Term Loans are divided into three tranches
repayable over certain periods up to 31 December 2005. Revolving Credit
Loans are available for six years commencing on the first date upon which
payment for T&N shares must be made (the "Closing Date"). Federal-Mogul's
obligations under this Agreement are secured by a lien on certain inventory
and accounts receivable of Federal-Mogul and certain subsidiaries. In
addition, Federal-Mogul and certain subsidiaries will guarantee the Term
Loans and Revolving Credit Loans and will pledge the capital stock of
certain of their subsidiaries and certain intercompany loans.
(b) On 15 October 1997 a Senior Subordinated Credit Agreement was entered into
by Federal-Mogul and Chase Manhattan Bank as administrative agent and lender
pursuant to which Federal-Mogul may borrow $500 million (the "Loans") to
finance the acquisition of T&N and pay the fees and expenses in connection
therewith. The Loans will be subordinated to the loans under the Senior
Credit Agreement and other senior indebtedness of Federal-Mogul and will
mature on the first anniversary of the Closing Date unless unpaid at this
date, in which case the loans will roll over into term loans maturing ten
years after the Closing Date. The Loans will have the benefit of guarantees,
on a subordinated basis, by the guarantors of the loans under the Senior
Credit Agreement.
(c) On 15 October 1997, Federal-Mogul purchased from Chase Manhattan Bank a
foreign currency option with a notional amount of $2.5 billion to eliminate
downside risks associated with fluctuation in the pounds sterling/US dollar
exchange rate through to its expiration date of 15 January 1998. The option
was purchased for $28.1 million.
(2) T&N
The following contracts have been entered into by members of the T&N Group,
otherwise than in the ordinary course of business, since 26 September 1995
(being the date two years before the Offer period began) and are or may be
material:
(a) On 4 August 1997 T&N, Tenmat Limited, Tenmat Midlands Limited (together the
"UK Vendors"), T&N Export Services Limited, T&N Technology Limited, Tenmat
GmbH, Tenmat SARL, T&N Industries, Inc, True Fortune Limited (the
"Purchaser"), Modular Stock Limited (the "Purchaser's Guarantor"), Isomoules
Sarl and T&N Holdings Vermogensverwaltung Burschied GmbH ("Burschied GmbH")
entered into an asset sale agreement relating to the sale by T&N of the
business and assets of its Tenmat division. Under the terms of the agreement
the UK Vendors (as defined in the agreement) sold with full title guarantee
to the Purchaser certain assets and their UK business as a going concern,
T&N Export Services Limited and the UK Vendors sold with full title
guarantee to the Purchaser various debts, T&N Technology Limited and the
Vendors sold with full title guarantee to the Purchaser certain intellectual
property rights and the UK Vendors sold with full title guarantee to the
Purchaser the UK properties, as such terms are defined in the Agreement. The
consideration payable for the sale and purchase of the assets and the UK
business was pound sterling 14,490,220 in cash, subject to adjustment
under the terms of the agreement.
In addition, the Purchaser's Guarantor procured that its wholly owned
subsidiary Tenmat Holdings, Inc. acquired the entire issued share capital of
Tenmat Inc, that its subsidiary Burshied GmbH acquired the German Business
and that its subsidiary Isomoules Sarl acquired the French Business, where
"German Business" and "French
96
<PAGE> 98
Business" are defined in the agreement. The consideration payable in cash
under these related agreements was, subject to adjustment, under the US
Agreement pound sterling 1,808,588, under the French Agreement
Ffr10,890,277 and under the German Agreement DM3,677,510.
(b) By a letter agreement dated 16 June 1997 between Metallbank GmbH and T&N,
the bank granted to T&N a call option in respect of 6,727,260 shares in
Kolbenschmidt AG ('KS') on the terms set out in the letter. T&N has the
right to exercise the call option until 15 December 1999 at a price of DM 17
net per KS share. The total premium amount paid in respect of this option
was DM 15,472,698. A letter dated 18 July 1997 between the same parties
clarified the terms of the earlier agreement. By a letter agreement dated 12
May 1997 between the same parties, the bank granted to T&N a put option in
respect of 6,727,260 shares in KS on the terms set out in the letter. T&N
has the right to exercise the put option on 15 December 1999 at a price of
DM 30 net per KS share. The total amount paid to the bank in respect of this
option was DM 1,345,452.
(c) On 10 April 1997 T&N, T&N Investments Limited, T&N Investments Inc.,
Flexitallic Limited, Flexitallic Sealing Materials Limited, T&N Export
Services Limited, Flexitallic, Inc., Goetze Vermogensverwaltungs GmbH,
Flexitallic Canada Limited, Ferodo A.S., Dan Loc Corporation (the
"Purchaser"), Dan Loc Holdings Inc., Dan Loc Limited, Delta 72
Unternehmensverwaltungs GmbH, Frederique s.r.o., Dan Loc (Canada) Limited,
Dan Loc Investments Inc., and Dan Loc Transitional, L.P. entered into an
agreement under which T&N and the Selling Subsidiaries (as defined) agreed
to sell to the Purchaser and the Purchasing Subsidiaries (as defined) as a
going concern the business of manufacture and/or selling of spiral wound
gaskets, ring type joints, asbestos and non asbestos sheet ceiling
materials, valve packing and related products. The Purchaser and the
Purchasing Subsidiaries agreed to pay to T&N and the Selling Subsidiaries
the aggregate amount of $70 million, subject to adjustment. The Purchaser
also assumed certain liabilities.
(d) On 10 April 1997 the same parties as those referred to in (c) above (with
the exception of T&N Investments Limited, T&N Investments Inc., T&N Export
Services Limited, Dan Loc Holdings Inc. and Dan Loc Investments Inc.)
entered into a deed of special indemnity. Under the deed, T&N and the
Selling Subsidiaries (as defined) agreed to indemnify the Purchaser and the
Purchasing Subsidiaries in respect of certain environmental and
asbestos-related matters. The indemnity is for a period of 27 years from
closing and is unlimited as to amounts payable.
(e) Under a stock purchase agreement dated 19 March, 1997 between Metal Leve
S.A. Industria E Comercio (the "Parent"), Metal Leve International Limited
(the "Seller") and T&N Industries Inc. (the "Buyer"), the Seller agreed to
sell to the Buyer all of the issued and outstanding shares of common stock,
par value $1 per share, of Metal Leve Inc. (a Michigan Corporation), subject
to the terms of the agreement. Immediately prior to closing, the Parent and
the Seller contributed the Contributed Assets (as defined) to Metal Leve
Inc. The consideration payable by the Purchaser was $46 million, subject to
adjustment in accordance with the terms of the agreement. The business of
the Company (prior to closing) was the research and design with respect to,
and the development, manufacture, marketing, sale and distribution of other
pistons manufactured by Metal Leve Inc. in the US, articulated pistons and
large bore composite pistons by the Parent and its subsidiaries and other
diesel pistons sold by Metal Leve Inc. in the US.
(f) On 30 December 1996 T&N entered into an asbestos liability policy with
Curzon Insurance Limited of Guernsey (the "Insurer"). The period of
insurance commenced on 1 July 1996 and is unlimited in time. The premium
payable was pound sterling 92,046,000. Under the terms of the policy, the
Insurer indemnifies T&N for the ultimate net loss suffered by it in excess
of a retained limit of pound sterling 690 million, in connection with
asbestos claims made after 1 July 1996 anywhere in the world. The policy is
subject to an overall limit in respect of all claims of pound sterling 500
million. T&N may (with the approval of the Insurer) insure all or part of
the retained limit. Any ultimate net losses suffered by any T&N subsidiary
are conclusively presumed to have been suffered by T&N, to the extent of
T&N's shareholding in such subsidiary as at 1 July 1996.
(g) By a reinsurance agreement dated 30 December 1996 the Insurer referred to in
(f) above reinsured the ultimate net loss in excess of the retained limit
with Centre Reinsurance International Company (of Ireland), European
International Reinsurance Company Limited (of Barbados) and Muencheuer
Rueckversicherungs-Gesellschaft (of Germany). Each re-insurer is severally
liable for 33 1/3% of any ultimate net loss, up to a maximum of
pound sterling 166,666,666.66 each.
(h) On 16 December 1996 Glacier Vandervell Inc. (a member of the T&N Group)
("Glacier") and Daido Metal America Corporation ("Daido") (together the
"Members") entered into an agreement to form Glacier Daido America, L.L.C.
(the "Company"), for the purpose of manufacture in North America of
automotive bearing products for sale in north, central and south America and
export to other countries. The agreement continues until 31 December 2050,
unless earlier dissolved. The percentage interests of Glacier and Daido in
the Company are 70% and 30% respectively. As initial capital contributions,
Glacier contributed the net assets and liabilities of its Bellefontaine,
Ohio bearings manufacturing facility (worth $30 million) and Daido
contributed $9 million.
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<PAGE> 99
Additional capital contributions may be required of the Members in certain
circumstances. Operational funds of up to $5 million may be advanced by the
Members during the first 5 years of the term.
(i) Under an asset transfer agreement dated 16 December 1996 between Glacier
Vandervell Inc. (the "Transferor") and Glacier Daido America, L.L.C., of
Delaware (the "Transferee"), the Transferor agreed to transfer to the
Transferee substantially all of the operating assets and liabilities of the
Transferor used in its Bellefontaine, Ohio bearing plant for the manufacture
of thin wall fluid film automotive bearings and by-metal strip material for
use in the manufacture of bearings (the "Business"). In consideration for
the Transferred Assets (as defined in the agreement) the Transferee issued
to the Transferor a 70% ownership interest in the Transferee. As additional
consideration for the sale of the Transferred Assets to the Transferee, the
Transferee assumed and agreed to perform and indemnify the Transferor
against the Assumed Liabilities (defined in the agreement). As further
consideration, the Transferee agreed to make a one time distribution to the
Transferor on 18 December 1996 of US$9 million in accordance with the terms
of the agreement. The aggregate consideration for the Transferred Assets was
US$30 million.
(j) By an agreement dated 19 July 1996 between T&N, AE Turbine Components
Limited (together the "Vendors"), T&N Export Services Limited, Precision
Castparts Corp. and AETC Limited (the "Purchaser"), the Vendors agreed to
sell to the Purchaser the business of the manufacture, machining and repair
of hot gas path components for gas turbines as a going concern together with
certain specific assets. In addition, T&N Export Services Limited agreed to
sell to the Purchaser certain specified debts. The consideration payable to
the Vendors was an initial payment of pound sterling 41 million, subject
to adjustment under the terms of the agreement.
(k) On 7 March 1996 T&N International Limited ("TNI") and T&N (the "Sellers")
entered into an agreement to sell to Africa Resources Limited (the
"Purchaser"), the entire issued share capitals of SMM Holdings Limited
(registered in England), THZ Holdings Limited (registered in England), TAP
Building Products Limited (registered in Zambia) and African Associated
Mines (Pvt) Limited (registered in Zimbabwe). The consideration payable for
the acquisition is US$60 million, payable to T&N in monthly instalments of
US$5 million payable on the last day of each month, with interest charged on
any later payment.
(l) In connection with the agreement referred to at (k) above, by a memorandum
of deposit and charge dated 15 March 1996 between the Purchaser, Africa
Construction Limited, the companies listed in the memorandum and T&N, the
Purchaser and Africa Construction Limited agreed to secure certain of their
obligations.
(m) By an agreement for the sale and purchase of the business and assets of the
division known as "Hydra-Tight" dated 23 October 1995 between T&N,
Hydra-Tight Limited, Bolting Technology Limited, Flexitallic Engineering
Limited, Pilgrim Engineering Developments Limited, Pilgrim Moorside Limited,
HTD Limited, and Inhoco 420 Limited (the "Purchaser"), T&N agreed to sell or
procure the sale of, and each of the Subsidiaries (as defined) agreed to
sell to the Purchaser as a going concern the assets (including intellectual
property) and undertaking of the its business of the design, manufacture,
marketing and sale of hydraulic and mechanical products and the rental, hire
or leasing of such products.
The consideration payable (subject to adjustment under the terms of the
agreement) to the Vendor for all the assets was the sum of pound sterling
6,998,000 in cash, the allotment and issue (at an aggregate sum of pound
sterling 2,250,000) of the Consideration Securities (as defined) by the
Purchaser to T&N or as T&N may direct. The Purchaser also agreed to make
available to T&N an interest-free loan of pound sterling 2,764,000 and to
pay further consideration of up to pound sterling 1,500,000, in each case
on the terms set out in the agreement.
(n) On 24 September 1995 T&N, T&N International Limited, T&N Industries Inc.,
T&N De Mexico S.A. De C.V. and Questreign Limited ("Questreign") entered
into an agreement under which Questreign agreed to purchase, or to procure
that a member of Questreign's Group purchased, from T&N or a member of the
T&N Group the UK Business, the Mexican Shares and the Chem Shares, each as
defined in the agreement. The consideration was paid in cash as follows. In
respect of the UK business the sum of pound sterling 29,787,478 plus pound
sterling 1,000,000 subject to adjustment, in respect of the Chem Shares the
sum of pound sterling 825,152 and in respect of the Mexican Shares, the sum
of pound sterling 1,804,000. The terms of the agreement were altered by a
supplemental agreement entered into between the same parties on 5 October
1995.
6. SERVICE CONTRACTS OF THE DIRECTORS OF T&N
The following directors of T&N have entered into service contracts having more
than 12 months to run with T&N, short particulars of which are set out below:
(a) Sir Colin Hope has a service contract with T&N which continues until
terminated as follows:
(i) prior to 1 June 1999 by not less than 12 months' written notice by T&N;
(ii) thereafter by notice expiring on 31 May 2000 by T&N;
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(iii) by not less than 12 months' written notice expiring on or before 31 May
2000 by Sir Colin Hope; or
(iv) automatically on 31 May 2000.
(b) Ian Much, David Harding, Alister McWilliam and Allan Welsh have service
contracts with T&N which continue until terminated as follows:
(i) by not less than two years' written notice by T&N;
(ii) by not less than six month's written notice at any time by the relevant
director; or
(iii) automatically on the last day of the month in which the relevant
director's sixty-second birthday occurs.
Under the terms of their service contracts, the T&N executive directors are
entitled to receive inter alia, a basic salary and an annual bonus. For the
year to 31 December 1997 the basic salaries are as follows: Sir Colin Hope:
pound sterling 310,000; Ian Much: pound sterling 300,000; David Harding: pound
sterling 206,000; Alister McWilliam: pound sterling 160,000; and Allan Welsh:
pound sterling 185,000. For the year to 31 December 1997 the T&N executive
directors (other than Sir Colin Hope, who has waived his bonus entitlement)
have a bonus opportunity equivalent to up to 40% of their annual salaries as at
31 December 1997 if certain objective criteria are met. These objective
criteria vary according to the position of the director concerned and are based
upon a basket of formulae comprising group and product group targets, including
a group achievement of earnings per share of 17.2p per share.
(c) Robert Beeston, Sir Terence Harrison and Paul Lewis have letters of
appointment with T&N which continue until terminated by not less than 12
months' written notice at any time, or in any event, in the case of Robert
Beeston, on 31 December 2000 and in the cases of Sir Terence Harrison and
Paul Lewis on 31 December 1998. Under the terms of these letters of
appointment Roger Beeston and Sir Terence Harrison are entitled to receive
an annual fee of pound sterling 23,500 and Paul Lewis is entitled to
receive an annual fee of pound sterling 26,500.
It has been agreed that, conditional on the Offer becoming wholly unconditional:
(i) Sir Colin Hope and Ian Much will resign as directors and employees of T&N
receiving pound sterling 336,574 and pound sterling 900,500 respectively
as compensation.
(ii) David Harding, Allan Welsh and Alister McWilliam may, by 30 days' notice
expiring not earlier than six months (or, in the case of David Harding,
sixty days) after the Offer becomes wholly unconditional, terminate their
employment with T&N. If they do so, or T&N terminates their employment
within one year of the Offer becoming wholly unconditional, they will be
entitled to receive pound sterling 620,700, pound sterling 549,900 and
pound sterling 478,900 respectively as compensation.
In addition T&N has agreed to make payment in respect of David Harding's
contractual pension entitlement (less appropriate deductions for tax) to
retirement benefits in excess of those which would be funded by contributions
within the approved limit for that part of an employee's pension which can be
funded through an approved pension scheme under the Finance Act 1989. Under his
service agreement, T&N had agreed that David Harding's pension shall, subject to
certain reservations, be as if the limitation did not apply and T&N has now
varied that agreement such that a cash contribution will be made to fund that
entitlement.
Save as disclosed above, there are no service contracts between any director or
proposed director of T&N with T&N or any of its subsidiaries having more than 12
months to run and no such contract has been entered into or amended within the
six months preceding the date of this document.
7. BASES OF CALCULATIONS AND SOURCES OF INFORMATION
In this document, unless otherwise stated, or the context otherwise requires,
the following bases and sources have been used:
(a) the prices of T&N Ordinary Shares as at a particular date are the closing
middle-market quotations for those shares as derived from the London Stock
Exchange Daily Official List as at that date;
(b) references to the value which the Offer places on the T&N Ordinary Share
Capital have been calculated using the Offer value of 260 pence per T&N
Ordinary Share and T&N's fully diluted ordinary share capital, meaning the
number of issued T&N Ordinary Shares as at 13 November 1997 and assuming the
exercise of all outstanding options under the T&N Share Option Schemes and
the issue on 14 November 1997 of 9,711,876 T&N Ordinary Shares pursuant to
the scrip alternative to the 1997 second interim dividend;
(c) the premia of the Offer over T&N's average share price in the one month and
three months prior to 25 September 1997 have been calculated using the Offer
value of 260 pence per T&N Ordinary Share and the arithmetic mean of the
closing middle-market quotations for T&N Ordinary Shares as derived from the
London Stock Exchange Daily Official List for the one month of 157.5 pence
and for the three months of 149.75 pence respectively;
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(d) the figures in paragraphs 3 and 4 of the letter from Morgan Stanley for
consolidated net income before exceptional items, for Federal-Mogul and T&N
respectively, have been calculated on the basis of certain assumptions;
(e) the statements in paragraph 5 of the letter from Morgan Stanley as to the
combined revenues, employees and geographic profile of Federal-Mogul and T&N
for 1996 are derived from the published annual report and audited annual
financial statements for Federal-Mogul Group for the year ended 31 December
1996 and the published consolidated annual report and accounts for T&N for
the year ended 31 December 1996. No account has been taken of differences
between UK GAAP and US GAAP. In addition, in the statements in paragraph 5
as to the combined revenues, employees, geographic profile, customers and
financial benefits, no account has been taken of any divestitures which
might be required by anti-trust authorities;
(f) the statements in paragraph 5 of the letter from Morgan Stanley as to the
effect of the acquisition on Federal-Mogul's earnings per share assume that
Federal-Mogul has implemented an appropriate refinancing;
(g) unless stated otherwise, US dollars have been converted into pounds sterling
and vice versa at the rate of 1.6 US dollars to 1.0 pound sterling. The US
dollar to pounds sterling exchange rate as at 10 November 1997 was 1.6871 as
published in the Financial Times on 11 November 1997, the latest practicable
date prior to the posting of this document; and
(h) the current equity market capitalisation of Federal-Mogul of US$1,781
million has been calculated using the last reported sale price of
Federal-Mogul's common stock on the New York Stock Exchange as at 10
November 1997 and the number of issued common stock as at 10 November 1997.
8. GENERAL
(a) (i) Morgan Stanley is satisfied that resources are available to the Offeror
sufficient to satisfy full acceptance of the Offer.
(ii) Federal-Mogul estimates that the total amount of funds necessary to
purchase all the T&N Ordinary Shares pursuant to the Offer will be
approximately pound sterling 1,500 million. Subject to the proposed
refinancing referred to in paragraph 5 of the letter from Morgan
Stanley on page 12, the funds needed to satisfy this consideration
will principally come from the proceeds of borrowings under the Senior
Credit Agreement and the Senior Subordinated Credit Agreement referred
to in paragraphs 5(1)(a) and (b) above respectively (the "Credit
Agreements").
To the extent that the Offeror requires funds to pay the consideration
under the Offer such funds will be made available by a combination of
capital contributions to the Offeror and its intermediate holding
companies and intercompany loans directly or indirectly to the Offeror
from its direct and indirect holding companies.
Payment of interest and principal on the facilities provided under the
Credit Agreements will be funded partly out of receipts by companies
within the Federal-Mogul Group from their investment in T&N and partly
from sources within the Federal-Mogul Group. Subject to compliance, where
necessary, with the procedures set out in sections 155 to 158 of the
Companies Act, it is intended that certain members of the T&N Group will
enter into various agreements to provide security to the lenders under
the Credit Agreements.
(b) Save as disclosed in this document, no agreement, arrangement or
understanding (including any compensation arrangement) exists between the
Offeror, Federal-Mogul or any person acting in concert with it for the
purpose of the Offer and any of the directors, recent directors,
shareholders or recent shareholders of T&N having any connection with or
dependence on, the Offer.
(c) So far as the directors of Federal-Mogul are aware and except as disclosed
in paragraph 6 above, no proposal exists in connection with the Offer that
any payment or other benefit be made or given to any director of T&N as
compensation for loss of office or as consideration for or in connection
with his retirement from office.
(d) Save as disclosed in this document, there is no agreement, arrangement or
understanding whereby the beneficial ownership of any of the T&N Ordinary
Shares to be acquired by the Offeror pursuant to the Offer will be
transferred to any other person, save that the Offeror reserves the right to
transfer any such shares to any member of the Federal-Mogul Group.
(e) Rothschilds, which is regulated by The Securities and Futures Authority in
the UK, has given and not withdrawn its written consent to the issue of this
document with the inclusion of its name in the form and context in which it
appears.
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EXHIBIT 2.2
EQUITY PURCHASE AGREEMENT
THIS EQUITY PURCHASE AGREEMENT (this "AGREEMENT"), is dated as of
January 9, 1998, by and among each of the Persons (as hereinafter defined) set
forth in the Schedule of Sellers attached hereto (each a "SELLER" and
collectively the "SELLERS") and Federal-Mogul Corporation, a Michigan
corporation ("F-M" or the "BUYER"). Capitalized terms used herein without
definition have the meanings accorded such terms in EXHIBIT A hereto.
R E C I T A L S
A. The Sellers collectively own (i) all of the partnership interests of
Fel-Pro Master General Partnership, an Illinois general partnership ("MGP"), and
(ii) all of the issued and outstanding capital stock of Felt Products Mfg. Co.,
a Delaware corporation, Fel-Pro Management Co., a Delaware corporation, Meridian
Parts Corporation, a California corporation, and Fel-Pro Mexico S. de R.L. de
C.V., a Mexican limited liability partnership (collectively, the "CORPORATIONS"
and together with MGP, the "COMPANIES").
B. Buyer desires to purchase all of the partnership interests of MGP
and all of the issued and outstanding capital stock of the Corporations.
C. Buyer desires to purchase certain real property owned by Fel-Pro
Realty Corporation ("REALTY").
NOW, THEREFORE, in consideration of the mutual promises and agreements
contained herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:
ARTICLE 1
PURCHASE AND SALE OF EQUITY INTERESTS
SECTION 1.1 PURCHASE AND SALE
(a) Upon the terms and subject to the conditions set forth in
this Agreement, Sellers shall sell to the Buyer, without recourse,
representation or warranty except as otherwise expressly provided herein, and
Buyer shall purchase from Sellers, (i) all of the outstanding shares of capital
stock of the Corporations (the "SHARES") and all of the partnership interests of
MGP (the "PARTNERSHIP INTERESTS" and, together with the Shares, the "EQUITY
INTERESTS"), and (ii) the real property listed on SECTION 1.1(C) OF THE
DISCLOSURE SCHEDULE owned by Realty (the "INCLUDED REAL PROPERTY"), free and
clear of all liens, mortgages, charges, security interests, defects in title, or
other encumbrances of any nature whatsoever (a "LIEN"), other than, in the case
of clause (ii) above, Permitted Liens, and together with all rights now and
hereafter attaching thereto, for an aggregate purchase price equal to
$716,750,000 minus the Debt Amount (the "PURCHASE PRICE"), which shall consist
of (i) cash in an amount equal to $491,750,000 minus the Debt Amount (the "CASH
PORTION"), and (ii) that number of shares of F-M Exchangeable Preferred Stock
<PAGE> 2
equal to (x) $225,000,000 divided by (y) the product of the Effective Time Share
Value multiplied by five (5) (the "STOCK PORTION"). Notwithstanding the
foregoing, if F-M makes the F-M Cash Election, the Purchase Price shall be
reduced to $706,750,000, no shares of the F-M Exchangeable Preferred Stock will
be included as part of the Purchase Price and, in lieu thereof, the Cash Portion
will be increased by $215,000,000.
(b) The Purchase Price shall be allocated among the Equity
Interests and the Included Real Property as is mutually agreed to by the Buyer
and the Sellers' Representatives prior to the Closing. In the event the Buyer
and the Sellers' Representatives are unable to agree on such an allocation, the
Buyer and the Sellers shall retain a nationally recognized valuation or
accounting firm, the fees and expenses of which shall be borne 50% by the Buyer
and 50% by the Sellers, to perform such allocation based on its determination of
the appropriate valuation of the Companies, the Included Entities and the
Included Real Estate and the allocation of such firm shall be binding on the
Sellers and the Buyer.
(c) The Cash Portion and the Stock Portion shall be allocated
among the holders of the Equity Interests and the owners of the Included Real
Property in such amounts as is mutually agreed to prior to the Closing by the
holders of the Equity Interests and the owners of the Included Real Property.
(d) In addition to the Purchase Price, at the Closing, Buyer
shall pay to the Sellers, by wire transfer to one or more accounts designated by
the Sellers' Representatives, cash in the amount of $3,735,000 to compensate the
Sellers for income taxes resulting from the 338 Election.
(e) In the event the Closing does not occur prior to March 15,
1998 and Felt pays the approximately $1,900,000 installment of Taxes payable
under Code Section 1363 (relating to LIFO recapture upon an S Election) due on
March 15, 1998, each of the Purchase Price and the Cash Portion will be
increased by the amount of such payment.
SECTION 1.2. CLOSING. Unless the parties hereto shall agree in writing
upon a different location, time or date, the closing of the sale and
purchase of the Equity Interests and the Included Real Property (the "CLOSING")
shall take place at the offices of Katten Muchin & Zavis, 525 West Monroe
Street, Suite 1600, Chicago, Illinois 60661 at 10:00 A.M., Chicago time, on (i)
February 24, 1998, (ii) if the conditions required to be satisfied or
waived pursuant to ARTICLES 5 and 6 hereof (other than those requiring the
delivery of a certificate or other document, or the taking of other action, at
the Closing) have been satisfied or waived prior to February 24, 1998, then on
such earlier date which is designated by the Sellers' Representatives and
reasonably satisfactory to Buyer, or (iii) if the conditions required to be
satisfied or waived pursuant to ARTICLES 5 and 6 hereof (other than those
requiring the delivery of a certificate or other document, or the taking of
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other action, at the Closing) have not been satisfied or waived on
February 24, 1998, then on such later date which is designated by the Sellers'
Representatives and reasonably satisfactory to Buyer and is not less than three
nor more than ten business days after the satisfaction or waiver of the last of
the conditions required to be satisfied or waived pursuant to ARTICLES 5 and 6
hereof (other than those requiring the delivery of a certificate or other
document, or the taking of other action, at the Closing), or (iv) at such other
time and date as the parties hereto may designate by mutual written consent of
the Buyer and the Sellers' Representatives. The term "CLOSING DATE" means the
date and time at which the Closing occurs.
SECTION 1.3 DELIVERIES AT THE CLOSING. Subject to the conditions set forth
in this Agreement, at the Closing:
(a) Sellers shall deliver to Buyer (i) newly-issued
certificate(s) representing all of the Shares in the name of the Buyer, (ii)
written assignments of all of the Partnership Interests sufficient to convey to
Buyer good title to the Partnership Interests, (iii) instruments of conveyance
with respect to the Included Real Property reasonably acceptable to Buyer and
the Sellers, (iv) with respect to each Corporation and Included Entity (as set
forth on Exhibit B hereto) which is a corporation, instruments evidencing the
resignation of each director of such Corporation and Included Entity and each
officer of such Corporation and Included Entity, as designated by Buyer at least
five business days prior to the Closing, (v) all certificates and other
instruments and documents which are expressly required pursuant to this
Agreement to be delivered by Sellers to Buyer at the Closing and (vi) other
certificates, instruments and documents reasonably requested by the Buyer which
are necessary to consummate the transactions contemplated by this Agreement; and
(b) Buyer shall (i) accept and purchase the Equity Interests
and the Included Real Property from Sellers and pay and deliver to Sellers the
Cash Portion by wire transfer of immediately available funds to a bank account
or accounts, which account or accounts are to be specified in writing by the
Sellers' Representatives at least two business days prior to the Closing Date,
(ii) unless F-M has made the F-M Cash Election, deliver to the Sellers the
certificates representing the shares of F-M Exchangeable Preferred Stock
representing the Stock Portion, issued in the names of the Sellers as specified
to F-M by the Sellers' Representatives at least three (3) business days prior to
Closing, (iii) deliver to Sellers all certificates and other instruments and
documents which are expressly required pursuant to this Agreement to be
delivered by Buyer to Sellers at the Closing and (iv) deliver to Sellers other
certificates, instruments and documents reasonably requested by the Sellers
which are necessary to consummate the transactions contemplated by this
Agreement.
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<PAGE> 4
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF SELLERS
Subject to SECTION 10.1, Sellers represent and warrant to Buyer as of the
date hereof as follows:
SECTION 2.1 SELLERS.
(a) Organization; Authority; Good Standing. Each Seller which is a
trust is validly existing under its Charter Documents and has the power and
authority to execute, deliver and perform its obligations under this Agreement.
Each Seller who is an individual has the legal capacity to execute, deliver and
perform his or her obligations under this Agreement. Realty is a corporation
validly existing and in good standing under the laws of its state of
incorporation and has the corporate power and authority to execute, deliver and
perform its obligations under this Agreement. McCormick Investments, L.P. is a
limited partnership validly existing and in good standing under the laws of its
state of organization and has the partnership power and authority to execute,
deliver and perform its obligations under this Agreement.
(b) Enforceability. The execution and delivery of this Agreement
and the consummation of the transactions provided for hereby have been duly
authorized by the trustees and other trust fiduciaries, board of directors or
partners, as the case may be, of each of the Sellers, and no other trust,
corporate or partnership proceeding or action, as the case may be, on the part
of any Seller is necessary to authorize the execution or delivery of this
Agreement or the consummation of any of the transactions contemplated hereby.
This Agreement has been duly executed by each Seller and constitutes the legal
valid and binding obligations of each Seller, enforceable against such Seller in
accordance with its terms, except that such enforcement may be limited by any
bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer or other
laws (whether statutory, regulatory or decisional), now or hereafter in effect,
relating to or affecting the rights of creditors generally or by equitable
principles (regardless of whether considered in a proceeding at law or in
equity).
(c) Ownership of Shares and Partnership Interests; Title. Each
Seller is the record and beneficial owner of the Shares and/or the Partnership
Interests set forth opposite its or their respective names in SECTION 2.1(C) OF
THE DISCLOSURE SCHEDULE. Each Seller has, and shall transfer to Buyer at the
Closing, good title to such Shares and/or Partnership Interests, free and clear
of any and all Liens, except (i) as created by this Agreement, (ii) for
restrictions imposed by federal and state securities laws and (iii) Liens
described on SECTION 2.1(C) of the DISCLOSURE SCHEDULE, which Liens will not
exist as of
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the Closing. The Equity Interests set forth on SECTION 2.1(C) OF THE
DISCLOSURE SCHEDULE constitute all of the Equity Interests.
(d) Representation Letter. Each Seller who is to receive shares of
F-M Exchangeable Preferred Stock has, or prior to the Closing will have,
delivered to F-M a duly executed Representation Letter, dated as of the date
hereof, substantially in the form attached hereto as EXHIBIT D, and each such
Representation Letter is, or at the time of delivery will be, complete and
accurate in all material respects.
SECTION 2.2 COMPANIES AND INCLUDED ENTITIES.
(a) Ownership of Equity Interests. Except as set forth on
SECTION 2.2(A) of THE DISCLOSURE SCHEDULE, the Companies and the Included
Entities, as the case may be, are the record and beneficial owners of all of the
shares of capital stock, partnership interests, membership interests or other
equity interests, as applicable, issued with respect to the Included Entities,
free and clear of any Liens, except (i) as created by this Agreement, (ii) for
restrictions imposed by federal and state securities laws and (iii) with respect
to Included Entities that are partnerships or limited liability companies,
restrictions pursuant to the partnership agreements or operating agreements,
respectively.
(b) Corporate Organization; Good Standing. Each Company and
Included Entity which is a corporation is validly existing and in good standing
under the laws of its jurisdiction of incorporation and has the corporate power
and authority to own, lease and operate the assets held or used by it and to
conduct its business as currently conducted. Each such Company and Included
Entity is duly qualified to do business and is in good standing as a foreign
corporation in each jurisdiction where qualification as a foreign corporation is
required, except where the failure to be so qualified and in good standing would
not have a Material Adverse Effect. Sellers have previously made available to
Buyer complete and correct copies of each such Company's and Included Entity's
Charter Documents as presently in effect. The minute books of each such
corporation have been made available to Buyer.
(c) Limited Partnerships, Limited Liability Company
Organization; Good Standing. Each Company and Included Entity which is either a
limited partnership or a limited liability company is validly existing and in
good standing under the laws of its jurisdiction of organization and has the
partnership or limited liability company power and authority to own, lease and
operate the assets held or used by it and to conduct its business as currently
conducted. Each such Company and Included Entity is duly qualified to do
business as a foreign limited partnership or limited liability company, as
applicable, in each jurisdiction where qualification as a foreign limited
partnership or limited liability company, as applicable, is required, except
where the failure to be so
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qualified would not have a Material Adverse Effect. Sellers have previously made
available to Buyer complete and correct copies of each such Company's and
Included Entity's Charter Documents as presently in effect.
(d) MGP Organization. MGP is an Illinois general partnership
validly existing and in good standing under the laws of the State of Illinois
and has the power and authority to own, lease and operate the assets held or
used by it and to conduct its business as currently conducted. MGP is duly
qualified to do business in each jurisdiction where such qualification is
required, except where the failure to be so qualified would not have a Material
Adverse Effect. Sellers have previously made available to Buyer a complete and
correct copy of the Charter Documents of MGP as presently in effect.
(e) Trusts. Each trust (each, a "TRUST") which holds legal
title to any of the Equity Interests as of the date hereof, has the requisite
authority and power to enter into this Agreement and to consummate the
transactions contemplated hereby. Each trust agreement creating a Trust is a
legal, valid and binding trust agreement and each Trust is a valid trust under
the laws of the jurisdiction in which it was created.
SECTION 2.3 SUBSIDIARIES. As of the Closing, except for Included
Entities, none of the Companies nor Included Entities will have any
Subsidiaries. As of the Closing, except for interests in Included Entities and
except as set forth in SECTION 2.3 OF THE DISCLOSURE SCHEDULE, none of the
Companies nor Included Entities will own, directly or indirectly, any equity,
profits or voting interest in any Person or have any agreement or commitment to
purchase any such interest.
SECTION 2.4 CAPITALIZATION.
(a) The authorized capital stock of the Companies and Included Entities
which are corporations is as set forth in SECTION 2.4 OF THE DISCLOSURE
SCHEDULE. All of the outstanding shares of such capital stock have been duly
authorized and validly issued, are fully paid and nonassessable and have not
been issued in violation of any preemptive rights. As of the Closing, other than
as set forth herein or in SECTION 2.4 OF THE DISCLOSURE SCHEDULE, there will be
no security, option, warrant, right, call, subscription, agreement, commitment
or understanding of any nature whatsoever, fixed or contingent, that directly or
indirectly (i) calls for the issuance, sale, pledge or other disposition of any
shares of capital stock or other equity interest of any such Company or Included
Entity or any securities convertible into, or other rights to acquire, any
shares of any capital stock or other equity interest of any such Company or
Included Entity, (ii) relates to the voting or control of such capital stock,
equity interest, securities or rights of any such Company or Included Entity or
(iii) obligates any such Company or Included Entity to grant, offer or enter
into any of the foregoing.
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(b) With respect to each Company and Included Entity that is a
partnership or limited liability company, all the partnership interests or
membership interests of such entity are as described in its Charter Documents.
As of the Closing, other than as set forth herein or as described in the
applicable Charter Documents, there will be no security, option, warrant, right,
call, subscription, agreement, commitment or understanding of any nature
whatsoever, fixed or contingent, that directly or indirectly (i) calls for the
issuance, sale, pledge or other disposition of any partnership interests,
membership interests or other equity interest of any such Company or Included
Entity or any securities convertible into, or other rights to acquire, any
partnership interests, membership interests, or other equity interest of any
such Company or Included Entity, (ii) relates to the voting or control of any
partnership interests, membership interests, equity interest, securities or
rights of any such Company or Included Entity or (iii) obligates any such
Company or Included Entity to grant, offer or enter into any of the foregoing.
(c) The Shares and Partnership Interests set forth on SECTION 2.1(C) OF
THE DISCLOSURE SCHEDULE constitute all of the shares of capital stock,
partnership interests, membership interests and other equity interests issued
by, or with respect to, the Companies.
SECTION 2.5 NO CONFLICTS. The execution, delivery and performance by the
Sellers of this Agreement do not and will not (i)(A) contravene, conflict with
or violate any provisions of the Charter Documents of any Seller, Company or
Included Entity, (B) except as set forth in SECTION 2.5 OF THE DISCLOSURE
SCHEDULE, contravene, violate, conflict with or result in the breach or
termination of, or otherwise give any other person the right to accelerate,
renegotiate or terminate or receive any payment, or constitute a default, event
of default (or an event which with notice, lapse of time, or both, would
constitute a default or event of default), under the terms of any contracts,
agreements, leases, licenses, mortgages, indentures, bonds, notes or other
instruments to which any of the Sellers, Companies or Included Entities is a
party or by which any of them or their respective securities, properties or
businesses are bound, or result in the creation of any Liens upon any of their
respective securities, properties or businesses or (C) assuming that the
Governmental Actions/Filings referred to in this SECTION 2.5 below or in SECTION
2.5 OF THE DISCLOSURE SCHEDULE are obtained or made, result in any violation by
any Seller, Company or Included Entity of any law, rule or regulation applicable
to it, or any license or authorization, approval, registration permit issued by
any governmental, administrative or regulatory authority to any Seller, Company
or Included Entity (each, a "PERMIT"), except, with respect to sub-clauses (B)
and (C), for such contraventions, conflicts, terminations, violations, breaches,
accelerations, renegotiations, payments, defaults or events of default as would
not have a Material Adverse Effect, (ii) result in any violation by any Seller,
Company or Included Entity of any judgment, injunction or
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decree of any court or governmental, administrative or regulatory authority
applicable to it or (iii) assuming that the notices referred to in SECTION 2.5
OF THE DISCLOSURE SCHEDULE are made, require any consent or approval of, notice
to or filing, registration or qualification with, any governmental,
administrative or regulatory authority (a "GOVERNMENTAL ACTION/FILING") to be
made or obtained by any Seller, Company or Included Entity except (A) in
connection or compliance with the United States Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, and the rules and regulations promulgated
thereunder (the "HSR ACT"), (B) any federal, state or local Tax filings, (C) any
Governmental Actions/Filings that may be required to be made as a result of (x)
the specific regulatory status of Buyer or any of its Affiliates, (y) any other
facts that relate to the business or activities in which Buyer or any of its
Affiliates is engaged or (z) without limitation of sub-clause (x) or (y), any
other facts that relate to the business or activities in which Buyer or any of
its Affiliates proposes to be engaged (other than, insofar as Governmental
Actions/Filings are concerned, by acquiring ownership of the Companies and
Included Entities, by reference to the Companies' and Included Entities'
activities as presently conducted), (D) any Pension Benefit Guaranty Corporation
("PBGC") "Notice of Reportable Event" required under Section 4043(c) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA") and (E)
any other Governmental Actions/Filings the failures of which to make or obtain
would not have a Material Adverse Effect.
SECTION 2.6 FINANCIAL STATEMENTS; UNDISCLOSED LIABILITIES; BANK DEBT.
(a) Sellers have delivered to Buyer the following financial
statements (collectively, the "FINANCIAL STATEMENTS"): the combined balance
sheets, statements of income and cash flow of the Fel-Pro Group for the year
ended December 31, 1996 and for the nine-month period ended September 30, 1997.
(i) The Fel-Pro Group December 31, 1996 financial
statements and accompanying notes to the financial statements
have been compiled from the financial statements of the
Companies, the Included Entities and the Excluded Entities.
SECTION 2.6(A) OF THE DISCLOSURE SCHEDULE sets forth which of
such financial statements are audited and which of such
financial statements are unaudited. The Fel-Pro Group December
31, 1996 financial statements present fairly, in all material
respects, the combined financial position of the Companies,
Included Entities, and Excluded Entities as of and for the
fiscal year ended December 31, 1996 in accordance with
generally accepted accounting principles applied on a
consistent basis ("GAAP").
(ii) The Fel-Pro Group September 30, 1997 financial
statements are the unaudited internal monthly statements of
the Companies, the
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Included Entities and the Excluded Entities. The Fel-Pro Group
September 30, 1997 financial statements present fairly, in all
material respects, the combined financial position of the
Companies, Included Entities and Excluded Entities as of and
for the nine-month period ended September 30, 1997 in
accordance with GAAP, except for the absence of required
footnote disclosure and customary year-end adjustments and
expense reclassifications.
(b) Except as set forth on SECTION 2.6(B) OF THE DISCLOSURE
SCHEDULE, as of September 30, 1997, none of the Companies or Included Entities
had any material liabilities or obligations of any nature, whether known or
unknown, accrued, absolute, contingent or otherwise, and whether due or to
become due (collectively, "LIABILITIES" and individually, a "LIABILITY") which
were required by GAAP to be reflected in financial statements and that were not
reflected or reserved against in the balance sheet of the Fel-Pro Group as of
September 30, 1997. Since September 30, 1997, none of the Companies or Included
Entities has incurred any material Liability that would be required by GAAP to
be reflected in the financial statements of the Fel-Pro Group except Liabilities
that were incurred in the usual and ordinary course of business consistent with
past practice.
(c) Either (x) the Bank Debt and all other indebtedness for
borrowed money of any of the Companies or Included Entities shall be satisfied
in full (i) by the Sellers or (ii) by the Companies or Included Entities, but
only out of cash held by any such Company or Included Entity on or prior to the
Closing, or (y) the principal amount of the Bank Debt and such other
indebtedness outstanding as of the Closing shall have been included in the Debt
Amount, but only if the prepayment thereof is permitted without premium or
penalty.
SECTION 2.7 BUSINESS SINCE SEPTEMBER 30, 1997. Except as disclosed in
SECTION 2.7 OF THE DISCLOSURE SCHEDULE and except as specifically
contemplated by this Agreement, since September 30, 1997 each of the Companies
and the Included Entities has conducted its businesses and operations only in
the ordinary and usual course in substantially the same manner as theretofore
conducted and has not undergone or suffered any change in its condition
(financial or otherwise), properties, liabilities or operations which has been,
in any case or in the aggregate, materially adverse to the Companies and
Included Entities, taken as a whole. For purposes of this Agreement, no change
shall be considered to be "materially adverse" if such change is primarily the
result of this Agreement or the transactions contemplated hereby or the
announcement thereof, the filing of additional lawsuits or actions relating to
asbestos fibers in products manufactured or sold by any Company or Included
Entity or any action permitted by the last sentence of SECTION 4.6(A) hereof.
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SECTION 2.8 COMPLIANCE WITH LAW; LITIGATION; INJUNCTIONS. (i) None
of the Companies nor any Included Entity is in violation of any law, rule,
regulation, order, judgment or decree applicable to it, except (A) as set forth
in SECTION 2.8 OF THE DISCLOSURE SCHEDULE and (B) for violations the existence
of which and cost of remedying would not have a Material Adverse Effect. Except
for the matters set forth in SECTION 2.8 OF THE DISCLOSURE SCHEDULE (as to which
no representation or warranty is made), (ii) there is no action, suit, claim or
other proceeding or investigation (each, a "PROCEEDING") pending or, to Sellers'
knowledge, threatened against any of the Companies or Included Entities, at law
or in equity, before any federal, state or municipal court, governmental
administrative or regulatory agency or arbitrator which, if, adversely
determined, would result in a Liability for any Company or Included Entity in
excess of $250,000, and (ii) none of the Companies nor any Included Entity, or
any of their respective assets, properties or businesses, is a party to, or
subject to or bound by, any order, injunction or decree of any court or
governmental authority which has a Material Adverse Effect.
(a) Except as set forth on SECTION 2.8 OF THE DISCLOSURE SCHEDULE,
since January 1, 1997, none of the Companies or Included Entities has received
any written notice in any form from a governmental, administrative or regulatory
authority (including any citations, notices of violations, complaints, consent
orders or inspection reports) alleging that any of the Companies or Included
Entities was not at the time of such notice or is not currently in compliance,
in all material respects, with all applicable Permits, laws, rules, regulations,
judgments or decrees.
SECTION 2.9 CONTRACTS AND AGREEMENTS; DEFAULTS. Set forth in Part A of
SECTION 2.9 OF THE DISCLOSURE SCHEDULE is a list, as of the date of this
Agreement, of (i) all outstanding mortgages, indentures, notes, installment
obligations or other contracts or instruments to which any of the Companies or
Included Entities is a party evidencing or providing for any borrowing of money
by any of the Companies or Included Entities (except as such borrowings relate
to intercompany payables or intercompany receivables), (ii) all outstanding
guaranties by any of the Companies or Included Entities of any obligation of
another Person for borrowings, excluding endorsements made for collection in the
ordinary course of business, (iii) all outstanding contracts containing
non-competition covenants of any of the Companies or Included Entities, (iv) all
outstanding leases to which any of the Companies or Included Entities is a party
involving obligations of more than $100,000 per annum and (v) each other
outstanding contract to which any of the Companies or Included Entities is a
party which was not entered into in the ordinary course of business or which
requires or is likely to require the payment by any of the Companies or Included
Entities in any future 12-month period of an amount, or requires any of the
Companies or Included Entities to provide in any future 12-month period goods or
services having a fair market value or aggregate sales price, of more than
$250,000. Except as set forth in Part B of SECTION 2.9 OF THE DISCLOSURE
SCHEDULE or for such breaches, defaults or events as have not had and are not
reasonably likely to have a
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Material Adverse Effect, (x) none of the Companies, Included Entities nor, to
the knowledge of Sellers, any other party to any contract to which any of the
Companies or Included Entities is a party is in breach of or default under any
such contract, (y) no event has occurred which would (or which would after
notice or lapse of time or both) become a breach or default by any of the
Companies or Included Entities under any such contract, and (z) no event has
occurred which would (or which would after notice or lapse of time or both)
entitle any other party thereto to cancel or terminate any such contract.
SECTION 2.10 AFFILIATED TRANSACTIONS. SECTION 2.10 OF THE DISCLOSURE
SCHEDULE sets forth a complete and accurate list of all agreements, commitments,
undertakings, leases, mortgages, notes or other contract or instruments, to
which any of the Sellers or any Affiliate of any Seller (including, without
limitation, the Excluded Entities, but excluding any of the Companies or
Included Entities), on the one hand, and any of the Companies or Included
Entities, on the other hand, is a party.
SECTION 2.11 EMPLOYEE BENEFITS.
(a) Except as set forth in SECTION 2.11(A) OF THE DISCLOSURE
SCHEDULE, the Companies and Included Entities do not maintain or
contribute to, or have any obligation to contribute to, or have any liability
with respect to, any plan, program, arrangement, agreement or commitment that
is an employment, consulting, severance or deferred compensation or change in
control agreement, or an executive compensation, incentive bonus, pension,
stock purchase, profit sharing, severance pay, life, health, disability,
accident, medical insurance, vacation, or other material employee benefit plan,
program, arrangement, agreement or commitment, including any "employee benefit
plan" as defined in section 3(3) of ERISA (collectively, the "BENEFIT PLANS").
(b) The Companies and Included Entities have made available to the
Buyer true and complete copies of each of the Benefit Plans and related trust
agreements and/or insurance contracts, if any, and all summary plan descriptions
related thereto, as they have been amended as of the date hereof, and the two
most recent Forms 5500, including financial statements and actuarial valuations,
filed with the IRS with respect to each of the Benefit Plans.
(c) For purposes of this SECTION 2.11, "SELLER GROUP PLAN" means each
"employee pension benefit plan" (within the meaning of section 3(2) of ERISA)
subject to Title IV of ERISA (i) that is maintained, sponsored or contributed to
by the Companies or Included Entities or by any other person or entity that is
considered a single employer with the Companies or Included Entities for
purposes of Title IV of ERISA or section 414 of the Internal Revenue Code of
1986, as amended (the "CODE") (the "SELLER GROUP"), (ii) or with respect to
which any member of the Seller Group may incur liability under Title
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IV of ERISA. No Seller Group Plan is a Multiemployer Plan (within the meaning of
Section 3(37)(A) of ERISA) subject to ERISA.
(d) With respect to each Seller Group Plan:
(i) no such plan has been terminated so as to result,
directly or indirectly, in any liability, contingent or
otherwise, of any member of the Seller Group under Title IV of
ERISA;
(ii) no complete or partial withdrawal from such plan
has been made by a member of the Seller Group, or by any other
person, so as to result in a liability to a member of the
Seller Group, whether such liability is contingent or
otherwise;
(iii) no proceeding has been initiated by any person
(including the PBGC) to terminate any such plan or to appoint
a trustee for any such plan;
(iv) no condition or event currently exists or
currently is expected to occur that could result, directly or
indirectly, in any liability of any member of the Seller Group
under Title IV of ERISA, whether to the PBGC or otherwise, on
account of the termination of any such plan;
(v) if any such plan were to be terminated as of the
Closing Date, no member of the Seller Group would incur,
directly or indirectly, any liability under Title IV of ERISA;
(vi) no "reportable event" (as defined in section
4043 of ERISA) has occurred with respect to any such plan;
(vii) no such plan which is subject to section 302 of
ERISA or section 412 of the Code has incurred any "accumulated
funding deficiency" (as defined in section 302 of ERISA and
section 412 of the Code, respectively), whether or not waived;
and
(viii) the transactions contemplated hereby will not
result in any event described in section 4062(e) of ERISA.
(e) Except as described in SECTION 2.11(E) OF THE DISCLOSURE
SCHEDULE, no event has occurred in connection with which the Companies or
Included Entities could be subject to any material liability under ERISA, the
Code or any other law, regulation or governmental order applicable to any
Benefit Plan, including, without limitation, sections 406, 409, 502(i) or 4069
of ERISA, or sections 4971, 4975 or 4976 of the Code. Each Benefit
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Plan is in compliance, in all material respects, with its terms, including, but
not limited to, the payment provisions thereof, except as otherwise required by
law, and is in compliance, in all material respects, with all applicable laws,
rules and regulations, including, without limitation, ERISA and the Code.
(f) Except as set forth in SECTION 2.11(F) OF THE DISCLOSURE
SCHEDULE, each Benefit Plan which is an "employee pension benefit plan" (as
defined in section 3(2) of ERISA) and intended to qualify under section 401 of
the Code has received a favorable determination letter from the IRS with respect
to such qualification, its related trust has been determined to be exempt from
taxation under section 501(a) of the Code and, to the knowledge of the Sellers,
nothing has occurred since the date of such letter that has or is likely to
adversely affect such qualification or exemption.
(g) With respect to each Benefit Plan, there are no actions,
suits or claims pending (other than routine claims for benefits) or, to the
knowledge of the Sellers, threatened, with respect to such Benefit Plan or
against the assets of such Benefit Plan which, if adversely determined, would
result in a Liability for any Company, Included Entity or Benefit Plan in excess
of $250,000.
(h) Except as disclosed in SECTION 2.11(H) OF THE DISCLOSURE
SCHEDULE, the consummation of the transactions contemplated hereby, either alone
or in combination with another event, will not (i) entitle any employee or
former employee of any of the Companies or Included Entities to severance pay or
unemployment compensation, (ii) increase the amount of compensation due to any
such employee, (iii) accelerate the time of vesting of any compensation, stock
incentive or other benefit or (iv) reasonably be expected to result in any
"excess parachute payment" under section 280G of the Code.
(i) Except as disclosed in SECTION 2.11(I) OF THE DISCLOSURE
SCHEDULE, there is no announced plan or commitment (whether or not legally
binding) to create any additional Benefit Plans or to amend or modify any
existing Benefit Plan. Except as disclosed in Section 2.11(i) of the Disclosure
Schedule, neither any Seller, nor any member of the Seller Group, has any
liability with respect to or in connection with providing post-employment health
and welfare benefits to any current or former employees, except as required
under section 4980B of the Code or state continuation of coverage laws.
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SECTION 2.12 LABOR MATTERS.
(a) Except as set forth in SECTION 2.12(A) OF THE DISCLOSURE SCHEDULE,
there are no collective bargaining agreements or other contracts between any of
the Companies or Included Entities and any union or other employee
organizations. Except as set forth in SECTION 2.12(A) OF THE DISCLOSURE
SCHEDULE, there is no organizing activity involving any Company or any Included
Entity pending or, to the knowledge of the Sellers, threatened by any labor
organization or group or employees of the Company.
(b) Except as set forth in SECTION 2.12(B) OF THE DISCLOSURE SCHEDULE,
none of the Companies or Included Entities has any written or unwritten
employment agreements or contracts, between such Company or Included Entity on
the one hand and any executives, managers, employees, or consultants on the
other hand.
(c) Except as set forth in SECTION 2.12(C) OF THE DISCLOSURE SCHEDULE,
there are no complaints, charges or claims against any of the Companies or
Included Entities pending or, to the knowledge of the Sellers, threatened to be
brought by or filed with any governmental, administrative or regulatory
authority based on, arising out of, in connection with or otherwise relating to
the employment by any of the Companies or Included Entities of any individual,
including individuals classified by the Companies or Included Entities as
independent contractors or "leased employees" (within the meaning of section
414(n) of the Code), or the failure to employ any individual, including any
claim relating to employment discrimination, equal pay, employee safety and
health, immigration, wages and hours or workers' compensation, which, if
adversely determined, would result in a Liability for any Company or Included
Entity in excess of $250,000.
(d) Except as set forth in SECTION 2.12(D) OF THE DISCLOSURE SCHEDULE,
each of the Companies and Included Entities is in compliance, in all material
respects, with all laws, rules and regulations, (including any legal obligation
to engage in affirmative action) relating to the employment of former, current,
and prospective employees, independent contractors and "leased employees"
(within the meaning of section 414(n) of the Code) including all such laws,
rules and regulations relating to wages, hours, collective bargaining,
employment discrimination, immigration, disability, civil rights, safety and
health, workers' compensation and pay equity.
(e) Except as set forth in SECTION 2.12(E) OF THE DISCLOSURE SCHEDULE,
no representation, election, arbitration proceeding, grievance, labor strike,
dispute, slowdown, stoppage or other labor trouble is pending or, to the
knowledge of the Sellers, threatened against, involving or affecting any of the
Companies or Included Entities.
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(f) Except as set forth in SECTION 2.12(F) OF THE DISCLOSURE SCHEDULE,
no individual has been treated by any of the Companies or Included Entities as a
"leased employee" (within the meaning of section 414(n) of the Code).
SECTION 2.13 TAXES. Except as set forth on SECTION 2.13 OF THE
DISCLOSURE SCHEDULE:
(A) GENERAL REPRESENTATIONS.
(i) FILING OF RETURNS. Each of the Companies have
duly and timely filed each material Tax Return required to be
filed with any Tax Authority (or has timely and properly filed
valid extensions of time with respect to the filing thereof)
and Sellers or Sellers' Affiliates have duly and timely filed
each material Tax Return required to be filed with any Tax
Authority by Sellers or Sellers' Affiliates which include or
are based upon the assets, operations, ownership or activities
of any of the Companies or Included Entities, including any
consolidated, combined, unitary, fiscal unity or similar Tax
Return which includes or is based upon the assets, operations,
ownership or activities of any of the Companies or Included
Entities (or Sellers or Sellers' Affiliates have timely and
properly filed valid extensions of time with respect to the
filing thereof). Such Tax Returns were correct and complete in
all material respects. Except as disclosed on SECTION 2.13
(A)(I) OF THE DISCLOSURE SCHEDULE, to the knowledge of
Sellers, there is no investigation or other proceeding pending
or threatened by any Tax Authority for any jurisdiction where
any of the Companies or Included Entities do not file Tax
Returns with respect to a given Tax that may lead to an
assertion by such Tax Authority that any of the Companies or
Included Entities is or may be subject in a given Tax in such
jurisdiction.
(ii) PAYMENT OF TAXES. The Companies and the Included
Entities (or Sellers or Sellers' Affiliates on behalf of the
Companies or Included Entities) have paid all Taxes shown to
be due on all Tax Returns filed prior to the date hereof with
respect to the assets, ownership, operations and activities of
the Companies and the Included Entities.
(iii) TAX OWNERSHIP. Except as disclosed in SECTION
2.13(A)(III) OF THE DISCLOSURE SCHEDULE, each asset with
respect to which any of the Companies or Included Entities
claim depreciation, amortization or similar expense for Tax
purposes is owned for Tax purposes by such Company or Included
Entity under Applicable Tax Law.
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(iv) RULINGS. Except as disclosed in SECTION
2.13(A)(IV) OF THE DISCLOSURE Schedule, there are no
outstanding rulings of or requests for rulings with any Tax
Authority expressly addressed to any of the Companies or
Included Entities (or to an Affiliate of any Company or
Included Entity) that are, or if issued would be, binding upon
the Companies for any Post-Closing Period.
(v) CLOSING AGREEMENTS. Except as disclosed in
SECTION 2.13(A)(V) OF THE DISCLOSURE SCHEDULE, none of the
Companies or Included Entities (or Sellers or Sellers'
Affiliates with respect to any of the Companies or Included
Entities) has, in a manner that would be binding on any of the
Companies or for any Post-Closing Period, (A) executed, become
subject to or entered into any closing agreement pursuant to
section 7121 of the Code or any similar or predecessor
provision thereof under the Code or other Applicable Tax Law,
(B) agreed to any extension of time with respect to the filing
of any Tax Return of any of the Companies or Included Entities
(including any Tax Return which includes or is based upon
their respective assets, ownership, operations or activities),
the payment of any Taxes of any of the Companies or Included
Entities, or any limitation period regarding the assessment of
any such Taxes or (C) received approval to make or agreed to a
change in accounting method or has any application pending
with any Tax Authority requesting permission for any such
change.
(vi) GAIN RECOGNITION. Except as disclosed in SECTION
2.13(A)(VI) OF THE DISCLOSURE SCHEDULE, no item of income or
gain reported for financial purposes in any Pre-Closing Period
is required to be included in taxable income for a
Post-Closing Period.
(vii) TAX EXEMPT FINANCING, ETC. None of the assets
of the Companies or the Included Entities is (A) required to
be or are being depreciated under the alternative depreciation
system under section 168(g)(2) of the Code, or (B) is subject
to section 168(f) of the Code. None of the assets of the
Companies or the Included Entities are property which the
Purchaser or the companies will be required to treat as "tax
exempt use property" within the meaning of section 168(h)(1)
of the Code. Except as disclosed on SECTION 2.13(A)(VII) OF
THE DISCLOSURE SCHEDULE, no "industrial development bonds"
within the meaning of section 103 of the United States
Internal Revenue Code of 1954, as amended and in effect prior
to the enactment of the United States Tax Reform Act of 1986,
"private activity bonds" within the meaning of section 141 of
the Code or other tax exempt financing which have been used to
finance assets of the Companies whether leased or owned.
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(viii) INTANGIBLE ELECTIONS. Except as set forth in
SECTION 2.13(A)(VIII) OF THE DISCLOSURE SCHEDULE, no Company
has made or is bound by any election under section 197 of the
Code.
(ix) ELIGIBILITY OF MERIDIAN PARTS CORPORATION UNDER
SECTION 338(H)(10). The Sellers are eligible to make the 338
Election.
(b) Definitions. For purposes of this Section 2.13, the
following capitalized terms shall be given the meanings set forth below.
(i) "APPLICABLE TAX LAW" shall mean any law of any
nation, state, region, province, locality, municipality or
other jurisdiction relating to Taxes, including regulations
and other official pronouncements of any governmental entity
or political subdivision of such jurisdiction charged with
interpreting such laws.
(ii) "POST-CLOSING PERIOD" shall mean, (A) with
respect to any of the Companies or any of the Included
Entities which are classified as partnerships under the Code,
any Tax Period commencing after the Closing Date and the
portion of any Straddle Period commencing after the Closing
Date; and (B) with respect to any of the Companies or any of
the Included Entities which are classified as S Corporations
under the Code, any Tax Period commencing on the Closing Date
and the portion of any Straddle Period commencing on the
Closing Date.
(iii) "PRE-CLOSING PERIOD" shall mean, (A) with
respect to any of the Companies or any of the Included
Entities which are classified as partnerships under the Code,
any Tax Period ending on the Closing Date and the portion of
any Straddle Period ending on the Closing Date; and (B) with
respect to any of the Companies or any of the Included
Entities which are classified as S Corporations under the
Code, any Tax Period ending before the Closing Date and any
portion of any Straddle Period ending before the Closing Date.
(iv) "STRADDLE PERIOD" shall mean, with respect to
any Company, any Tax Period that begins before and ends on or
after the Closing Date.
(v) "TAX" or "TAXES" shall mean any income,
corporation, gross receipts, profits, gains, capital stock,
capital duty, franchise, withholding, social security
(including any social security charge or premium),
unemployment, disability, property, wealth, welfare, stamp,
excise,
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occupation, sales, use, transfer, value added, alternative
minimum, estimated or other similar tax (including any fee,
assessment or other charge in the nature of or in lieu of any
tax) imposed by any governmental entity (whether national,
local, municipal or otherwise) or political subdivision
thereof, and any interest, penalties, additions to tax or
additional amounts in respect of the foregoing, and including
any transferee or secondary liability in respect of any tax
(whether by Applicable Tax Law, contractual agreement or
otherwise) and any liability in respect of any tax as a result
of being a member of any affiliated, consolidated, combined,
unitary or similar group.
(vi) "TAX AUTHORITY" shall mean, with respect to any
Tax, the governmental entity or political subdivision thereof
that imposes such Tax, and the agency (if any) charged with
the collection of such Taxes for such entity or subdivision,
including any governmental or quasi-governmental entity or
agency that imposes, or is charged with collecting, social
security or similar charges or premiums.
(vii) "TAX BENEFIT" shall mean the present value of
any refund, credit or reduction in otherwise required Tax
payments including any interest payable thereon, which present
value shall be computed as of the Closing Date or the first
date on which the right to the refund, credit or other Tax
reduction arises or otherwise becomes available to be
utilized, whichever is later, (A) using the Tax rate
applicable to the highest level of income with respect to such
Tax under the Applicable Tax Law on such date, and (B) using
the interest rate on such date imposed on corporate
deficiencies paid within 30 days of a notice of proposed
deficiency under the U.S. Code or other Applicable Tax Law.
Any Tax Benefit shall be computed net of any related Tax cost
(which shall be computed in the same manner in which Tax
Benefits are otherwise computed pursuant to this definition).
(viii) "TAX PERIOD" shall mean, with respect to any
Tax, the period for which the tax is reported as provided
under Applicable Tax Laws.
(ix) "TAX RETURN" shall mean, with respect to any
Tax, any information return with respect to such Tax, any
report, statement, declaration or document required to be
filed under the Applicable Tax Law in respect of such Tax, any
claims for refund or Taxes paid, and any amendment or
supplements to any of the foregoing.
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SECTION 2.14 PERMITS. Except as set forth in SECTION 2.14 OF THE DISCLOSURE
SCHEDULE or as would not have a Material Adverse Effect, (i) all Permits that
are presently required for the operation of the businesses conducted by each of
the Companies and the Included Entities as presently conducted, have been duly
obtained by the relevant Company or Included Entity and are in full force and
effect and will remain in full force and effect following consummation of the
transactions contemplated hereby and (ii) the Companies and Included Entities
are in compliance with all such Permits. No Proceeding to modify, suspend,
terminate or otherwise limit any such Permit that is material to the businesses
of the Companies and the Included Entities is pending or, to the knowledge of
Sellers, threatened.
SECTION 2.15 TITLE. Each of the Companies and Included Entities, has good
title to each item of tangible personal property owned by such Company
or Included Entity, free and clear of all Liens except Permitted Liens and
Liens described in SECTION 2.15 OF THE DISCLOSURE SCHEDULE. The real property
and tangible personal property owned or leased by the Companies and the
Included Entities includes all real property and tangible personal property
necessary for the conduct of the businesses and operations as currently
conducted by the Companies and the Included Entities.
SECTION 2.16 CONDITION OF ASSETS. Except as set forth in SECTION 2.16 OF
THE DISCLOSURE SCHEDULE, all material items of tangible personal property of the
Companies and Included Entities currently used in their businesses or operations
is in all material respects in working condition, reasonable wear and tear and
loss due to normal operations, excepted.
SECTION 2.17 ENVIRONMENTAL.
(a) Compliance with Environmental Requirements. To the
knowledge of the Sellers, except as set forth in SECTION 2.17(A) OF
THE DISCLOSURE SCHEDULE, the Companies and Included Entities are in compliance
with all applicable federal, state and local laws, rules, regulations,
ordinances and requirements relating to pollution or protection of the
environment or human health ("ENVIRONMENTAL REQUIREMENTS"), with respect to
which the failure to comply would have a Material Adverse Effect.
(b) No Hazardous Wastes. To the knowledge of Sellers, except
as set forth in SECTION 2.17(B) OF THE DISCLOSURE SCHEDULE, the Companies and
the Included Entities have never generated, transported, treated, stored, or
disposed of any Hazardous Materials at any site, location or facility in
material violation of any Environmental Requirements, except where such a
violation would not have a Material Adverse Effect, and no such Hazardous
Materials are present on, in or under any real property owned or used by the
Companies and the Included Entities in violation of any Environmental
Requirement, except where the presence of such Hazardous Materials would not
have a
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Material Adverse Effect. For purposes of this Agreement, "HAZARDOUS
MATERIALS" shall mean any pollutants or contaminants or hazardous or toxic
substances, wastes or materials including petroleum products, PCBs and asbestos
defined as such or governed by any applicable Environmental Requirement.
(c) No Actions or Proceedings. The Companies and the Included
Entities have not been subject to, or received any notice (written or oral) of
any private, administrative or judicial action, or any notice (written or oral)
of any intended private, administrative, or judicial action or material
liability relating to the presence or alleged presence of Hazardous Materials
in, under or upon any real property owned or used by the Companies or the
Included Entities or any Hazardous Materials released or sent to off-site
locations, which would have a Material Adverse Effect and, other than as set
forth in SECTION 2.17(C) OF THE DISCLOSURE SCHEDULE, to the knowledge of the
Sellers, (i) there is no reasonable basis for any such notice or action; and
(ii) there are no pending or threatened actions or proceedings (or notices of
potential actions or proceedings) from any governmental agency or any other
entity regarding any matter relating to protection of the environment which
would have a Material Adverse Effect.
SECTION 2.18 REAL PROPERTY. Each Company or Included Entity has good and
marketable fee simple title to all of the real property listed in SECTION 2.18
OF THE DISCLOSURE SCHEDULE under its name (collectively, the "OWNED REAL
PROPERTY"), and has valid leasehold interests in all of the real property which
it holds under the leases described in SECTION 2.18 OF THE DISCLOSURE SCHEDULE
under its name (collectively, the "LEASED REAL PROPERTY"; and together with the
Owned Real Property, the "REAL PROPERTY"), in each case free and clear of all
Liens, except for Liens listed in SECTION 2.18 OF THE DISCLOSURE SCHEDULE and
Permitted Liens. The Owned Real Property and the Leased Real Property, together,
constitute all real properties used or occupied by the Companies or Included
Entities in connection with their businesses and operations. SECTION 2.18 OF THE
DISCLOSURE SCHEDULE includes a correct and complete list, and a brief
description of all real estate in which the Companies or Included Entities have
an ownership interest and accurately reflects the status of title to the subject
real estate as of the date hereof. SECTION 2.18 OF THE DISCLOSURE SCHEDULE
includes a correct and complete list, and a brief description of all real estate
leased to the Companies or Included Entities and leased by the Companies or
Included Entities, and all improvements thereon. With respect to the Real
Property:
(a) Easements. The applicable Company or Included Entity has
all material easements and rights necessary to conduct its businesses
and operations;
(b) Condemnation. No material portion of any parcel thereof is
subject to any pending or, to the knowledge of the Sellers, threatened
condemnation proceeding or proceeding by any public authority;
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(c) Subleases. Except for the leases described in SECTION
2.18(C) OF THE DISCLOSURE SCHEDULE, there are no leases, subleases,
licenses, concessions or other agreements, written or oral, granting to any
Person or Persons (other than the Companies or Included Entities) the right
of use or occupancy of any portion of any parcel of the Real Property;
(d) Options. There are no outstanding options or rights of
first refusal to purchase any parcel of the Owned Real Property or any
parcel of the Leased Real Property leased from an Affiliate of any Company,
or any portion thereof or interest therein;
(e) Possession. There are no parties (other than the Companies
or Included Entities) in possession of any parcel of Real Property, other
than tenants under any leases of the Real Property who are in possession of
space to which they are entitled, and the applicable Company or Included
Entity enjoys peaceful and undisturbed possession under all leases for
Leased Real Property;
(f) Utilities. All facilities located on each parcel of Real
Property are supplied with utilities and other services necessary for the
operation of such facilities, including gas, electricity, water and
telephone, all of which services are adequate for the operation of such
facilities as presently conducted by the applicable Company or Included
Entity and are provided via public roads or via permanent, irrevocable,
appurtenant easements benefiting the parcel of the Real Property; and
(g) Access. Each parcel of Real Property abuts on and has
direct vehicular access to a public road or access to a public road via a
permanent, irrevocable, appurtenant easement benefiting the parcel of Real
Property.
SECTION 2.19 INTELLECTUAL PROPERTY. SECTION 2.19 OF THE DISCLOSURE SCHEDULE
contains a complete and correct list of all registered trademarks and
servicemarks owned by any Company or Included Entity and all patents, pending
patent applications and applications for the registration of other trademarks or
servicemarks owned or filed by any Company or Included Entity. SECTION 2.19 OF
THE DISCLOSURE SCHEDULE also contains (a) a complete and correct list of all
material trade or corporate names used by any Company or Included Entity, (b) a
complete and correct list of all material licenses and other rights granted by
any Company or Included Entity to any third party with respect to Proprietary
Rights and (c) a complete and correct list of all material licenses and other
rights granted by any third party with respect to Proprietary Rights to any
Company or Included Entity, excluding commercially available software. Except as
set forth in SECTION 2.19 OF THE DISCLOSURE SCHEDULE, the applicable Company or
Included Entity has a valid
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right to use all of its registered and unregistered trademarks and servicemarks
and other Proprietary Rights material to the operation of its business as
presently conducted. Except as set forth in SECTION 2.19 OF THE DISCLOSURE
SCHEDULE, (A) none of the Companies, Included Entities nor any agent of the
Companies or Included Entities has received any written notice of an allegation
or claim of any infringement or misappropriation by, or conflict with, any third
party with respect to the Proprietary Rights or products processes and services,
which are material to the operation of the business as presently conducted, and
(B) no Company or Included Entity has infringed, misappropriated or otherwise
violated any Proprietary Rights of any third party, which would have a Material
Adverse Effect.
SECTION 2.20 INSURANCE POLICIES. Set forth on SECTION 2.20 OF THE
DISCLOSURE SCHEDULE is a correct and complete list (specifying the insurer, the
policy number or covering note number with respect to binders) of insurance
policies, binders, contracts or instruments (collectively, the "POLICIES") to
which any of the Companies or Included Entities is a party or by which any of
their assets are covered by property, fire, liability, product liability,
workmen's compensation, vehicular, crime, fiduciary, builders' risk, title and
other insurance. True and complete copies all of such Policies have been or, at
Closing, will be provided to Buyer. Except as set forth in SECTION 2.20 OF THE
DISCLOSURE SCHEDULE, all such Policies are in full force and effect in
accordance with their respective terms and will remain in full force and effect
after the Closing. Except as set forth on SECTION 2.20 OF THE DISCLOSURE
SCHEDULE, none of Sellers, the Companies or the Included Entities has received
any notice that any of the Companies or Included Entities is in default with
respect to any provision of any such policies, binders, contracts or
instruments. Except as set forth on SECTION 2.20 OF THE DISCLOSURE SCHEDULE,
none of the Companies or Included Entities has failed to give any notice or
present any claim thereunder in due and timely fashion or as required by any
such Policies so as to jeopardize full recovery under such Policies.
SECTION 2.21 BROKERS. Except for Donaldson, Lufkin & Jenrette Securities
Corporation and The Beacon Group, the fees of whom will be the sole
responsibility of Sellers, none of the Sellers, the Companies, the Included
Entities nor any of their respective directors, officers, employees or
Affiliates has employed any broker or finder or has incurred or will incur any
broker's, finder's or similar fees, commissions or expenses, in each case in
connection with the transactions contemplated by this Agreement.
SECTION 2.22 ACCOUNTS RECEIVABLE AND INVENTORY. The accounts receivable
shown on the balance sheet at September 30, 1997 contained in the Financial
Statements, or recorded by any of the Companies or Included Entities subsequent
to the date of such balance sheet, except to the extent thereafter collected or
written-off in the ordinary course of business and consistent with past
practices, are bona fide accounts receivable
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created in the ordinary course of business, and each of such accounts
receivable exists without setoff, is not the subject of a pledge or assignment
to secure debt and is free of any and all Liens. The Company and included
Entities have good and sufficient title to the inventory owned by them, free and
clear of Liens, other than Permitted Liens.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF BUYER
Subject to SECTION 10.1, Buyer hereby represents and warrants to each
Seller as of the date hereof as follows:
SECTION 3.1 INCORPORAION OF BUYER. F-M is a Michigan corporation validly
existing as a corporation in good standing under the laws of the State of
Michigan.
SECTION 3.2 AUTHORITY, BINDING EFFECT. Buyer has the corporate power and
corporate authority to execute and deliver this Agreement, to perform its
obligations hereunder and to consummate the transactions provided for hereby,
and all corporate action of Buyer necessary for the making and performance of
this Agreement by Buyer has been duly taken. The execution, delivery and
performance by Buyer of this Agreement do not and will not (i)(A) contravene any
provisions of the Charter Documents of Buyer, (B) with or without the giving of
notice or the passage of time or both, result in any breach by Buyer of, or
default or permitted or required acceleration of performance by Buyer under, or
the creation of any Lien upon any of Buyer's assets, or the creation in favor of
any third party of any right of termination of, any mortgage, indenture,
contract, agreement or other instrument to which Buyer is a party or (C)
assuming that the Governmental Actions/Filings referred to in this SECTION 3.2
below are obtained or made, result in any violation by Buyer of any law, rule or
regulation applicable to Buyer, or any Permit except, with respect to
sub-clauses (B) and (C), for such violations, breaches or defaults as would not
in the aggregate (x) result in the imposition of any liability on Seller, or (y)
prevent Buyer from consummating its purchase of the Equity Interests as
contemplated by this Agreement (clause (x) or (y), a "BUYER ADVERSE EFFECT"),
(ii) result in any violation by Buyer of any judgment, injunction or decree of
any court or governmental authority applicable to Buyer or (iii) require any
Governmental Action/Filing to be made or obtained by Buyer except (A) in
connection or in compliance with the HSR Act, (B) any federal, state or local
Tax filings and (C) any other Governmental Actions/Filings the failure to make
or obtain would not in the aggregate have a Buyer Adverse Effect. Buyer is not a
party to, nor subject to or bound by, any Judgment injunction or decree of any
court or governmental authority which may prevent Buyer from consummating its
purchase of the Equity Interests as contemplated by this Agreement. This
Agreement has been duly executed and delivered by Buyer.
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This Agreement constitutes the valid and binding obligation of Buyer,
enforceable against Buyer in accordance with its terms except that such
enforcement may be limited by any bankruptcy, insolvency, reorganization,
moratorium, fraudulent transfer or other laws (whether statutory, regulatory or
decisional), now or hereafter in effect, relating to or affecting the rights of
creditors generally or by equitable principles (regardless of whether considered
in a proceeding at law or in equity).
SECTION 3.3 ACQUISTITION OF EQUITY INTERESTS FOR INVESTMENT. Buyer is
acquiring the Equity Interests for investment and not with a view toward, or for
sale in connection with, any distribution thereof in violation of any applicable
securities laws, nor with any present intention of publicly distributing or
selling the Equity Interests in violation of any applicable securities laws.
Buyer agrees that the Equity Interests may not be sold, transferred, offered for
sale, pledged, hypothecated or otherwise disposed of (i) without registration
under the United States Securities Act of 1933, as amended, except pursuant to
an exemption from such registration available under such Act and (ii) except in
accordance with any applicable provisions of state securities laws.
SECTION 3.4 BROKERS. Except for Morgan Stanley & Co. Incorporated, the fees
of which will be the sole responsibility of Buyer, neither Buyer, nor any
director, officer, employee or Affiliate thereof, has employed any broker or
finder or has incurred or will incur any broker's, finder's or similar fees,
commissions or expenses, in each case in connection with the transactions
contemplated by this Agreement.
SECTION 3.5 BUYER FINANCING. Buyer will have at the Closing sufficient
funds to enable it to pay the Purchase Price and to perform its obligations
hereunder.
SECTION 3.6 CAPITALIZATION.
(a) The authorized capital stock of F-M consists of 60,000,000 shares of
F-M Common Stock and 5,000,000 shares of preferred stock ("F-M PREFERRED
STOCK"). As of January 5, 1998, 40,202,603 shares of F-M Common Stock and
773,351 shares of F-M Preferred Stock were issued and outstanding. As of January
5, 1998, F-M was obligated to issue 14,929,200 shares of F-M Common Stock upon
exercise or conversion of outstanding options, warrants and other convertible
securities. F-M has no other obligations to issue shares of F-M Common Stock or
F-M Preferred Stock. The Buyer has previously made available to the Sellers'
Representatives correct and complete copies of the Charter Documents of F-M.
(b) The F-M Exchangeable Preferred Stock has been duly authorized by all
necessary actions of F-M (other than the filing of the Certificate of
Designations with the Secretary of State of the State of Michigan), and, upon
issuance, will be validly issued, fully paid and nonassessable, free and clear
of all Liens, except (i) as created by this
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Agreement and (ii) for restrictions on transfer pursuant to the Securities Act
and applicable state securities laws.
SECTION 3.7 SEC FILINGS. Since December 31, 1996, F-M has filed all forms,
reports and documents required to be filed with the SEC pursuant to the federal
securities laws and the SEC rules and regulations thereunder (the "BUYER SEC
REPORTS"). As of their respective dates, the Buyer SEC Reports (i) were prepared
in accordance with the requirements of the Securities Act or the Exchange Act,
as the case may be, and the rules and regulations of the SEC thereunder
applicable to such Buyer SEC Reports and (ii) did not at the time they were
filed (or if amended or superseded by a filing prior to the date of this
Agreement, then on the date of such filing) contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
SECTION 3.8 SEC PROCEEDINGS. There are no Proceedings pending, or to F-M's
knowledge threatened, against F-M before the SEC. No stop order suspending the
effectiveness of any registration statement filed with the SEC with respect to
the F-M Common Stock is in effect and no Proceedings for such purpose are
pending or, to F-M's knowledge, threatened by the SEC.
SECTION 3.9 FINANCIAL STATEMENTS. Each of the audited financial statements
and each of the unaudited financial statements (including, in each case, any
related notes thereto), contained in the Buyer SEC Reports fairly presents in
all material respects the financial condition and results of operations of F-M
and its Subsidiaries as at the respective dates thereof and for the periods
referred to therein, all in accordance with GAAP, except as may be indicated in
the notes thereto and except that the unaudited interim financial statements
were or are subject to normal year-end adjustments in accordance with GAAP.
SECTION 3.10 NO MATERIAL ADVERSE CHANGE. Since September 30, 1997, there
has not been any material adverse change in the condition (financial or
otherwise), properties, liabilities or operations of F-M and its Subsidiaries,
taken as a whole.
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ARTICLE 4
COVENANTS
SECTION 4.1 ACCESS; CONFIDENTIALITY
(a) At the reasonable request of Buyer, and upon reasonable advance
notice, Sellers shall from time to time prior to the Closing give or cause to be
given to the officers, employees, accountants, counsel and other authorized
representatives of Buyer (collectively, "BUYER'S REPRESENTATIVES") access during
normal business hours to any and all premises, properties, files, books,
records, documents and other information of the Companies and Included Entities.
(b) The provisions of the confidentiality agreement, dated October 1,
1997 between Fel-Pro Incorporated and F-M (the "CONFIDENTIALITY AGREEMENT"),
shall survive the execution of this Agreement and shall apply with respect to
all information made available to Buyer's Representatives pursuant to this
SECTION 4.1.
SECTION 4.2 NOTICE OF PROCEEDINGS; AGREEMENT TO DEFEND
(a) Each party to this Agreement will notify the other promptly in
writing upon (i) such party's becoming aware of any order, judgment or decree
restraining or enjoining the consummation of this Agreement or the transactions
contemplated hereby or any complaint or threatened complaint seeking such an
order, judgment or decree or (ii) such party's receiving any notice from any
governmental authority of its intention (A) to institute a Proceeding to
restrain or enjoin, the consummation of this Agreement or the transactions
contemplated hereby or (B) to nullify or render ineffective this Agreement or
such transactions if consummated.
(b) In the event any Person brings a Proceeding, which challenges the
validity or legality of this Agreement or the transactions contemplated by this
Agreement or any instrument or document contemplated hereby, the parties hereto
agree to consult and to cooperate with each other and use all reasonable efforts
to defend against such Proceeding and, in the event an injunction or other order
is issued in connection with any of the foregoing, to use all reasonable efforts
to have such injunction lifted or such order set aside so that the transactions
contemplated by this Agreement and the instruments and documents contemplated
hereby may proceed.
SECTION 4.3 CONSUMMATION OF AGREEMENT. Subject to the provisions of
SECTION 8.1 of this Agreement, each party hereto shall use all reasonable
efforts to fulfill and perform all conditions and obligations on its part to be
fulfilled and performed under this Agreement, and to cause the transactions
contemplated by this Agreement to be fully
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carried out. Notwithstanding anything herein to the contrary, nothing contained
in this Agreement shall obligate Buyer to consent or agree to take any action
(or to permit Sellers or any of the Companies or Included Entities to take any
action), requested or required by any Person, involving the making of
arrangements for or effecting any sale or disposition of, or holding separate,
any assets or any properties of Buyer or any of its Affiliates or any of the
Companies or Included Entities or the imposition of any limitation on the
conduct by Buyer or the Companies or Included Entities of any of their
respective businesses or operations.
SECTION 4.4 CONSENTS AND FILINGS; HSR ACT. Each of the parties hereto
shall (and shall cause its Affiliates to) use all reasonable efforts to obtain
or make, as the case may be, as soon as possible, all Governmental
Actions/Filings as may be required to be obtained or made, as the case may be,
by it (and/or any of its Affiliates) in order to enable such party (and/or any
of its Affiliates) to perform its obligations under this Agreement. Within 10
business days after the date of this Agreement, Buyer and Seller shall each file
or cause to be filed with the United States Federal Trade Commission (the "FTC")
and the United States Department of Justice (the "DOJ") their respective filings
and any other required submissions under the HSR Act. Without limiting the
generality of the preceding sentence, Buyer and Seller shall promptly file or
cause to be filed any additional documents with the FTC and the DOJ that are
required to be filed by such parties and their Affiliates under the HSR Act in
connection with this Agreement and the transactions contemplated hereby and
shall comply in a timely manner with all requests for further information by the
FTC or DOJ.
SECTION 4.5 ANNOUNCEMENTS. Neither party hereto will (and each such
party will cause its Affiliates not to) issue any press release or otherwise
make any public statement with respect to the transactions contemplated hereby
without the prior written consent of the other party which shall not be
unreasonably withheld, except as and to the extent that such party or any of its
Affiliates determines in good faith that it is so obligated by applicable law,
regulation or stock exchange rules, in which case such party shall give notice
to the other party in advance of such party's or its Affiliate's intent to make
such announcement or issue such press release and the parties hereto shall use
all reasonable efforts to cause a mutually agreeable release or announcement to
be issued.
SECTION 4.6 CONDUCT OF BUSINESS OF THE COMPANY PRIOR TO THE CLOSING
(a) Except as specifically contemplated by this Agreement and
except as set forth in SECTION 4.6(A) OF THE DISCLOSURE SCHEDULE, during the
period from the date of this Agreement to the Closing, Sellers shall cause each
of the Companies and Included Entities to:
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(1) carry on its business in, and only in, the ordinary
course in substantially the same manner as heretofore conducted and, to
the extent consistent with such business, use all reasonable efforts to
preserve intact its present business organization, keep available the
services of its present officers and employees and preserve its
relationships with clients, suppliers, customers, distributors and
others having business dealings with it, pay its obligations in
accordance with its normal payment practices unless such obligations
are being contested in good faith, maintain all assets other than those
disposed of in the ordinary course of business in satisfactory repair
and condition, maintain its books of account and records in the usual
regular and ordinary manner, and preserve its good will; and
(2) promptly advise Buyer in writing of any change in its
condition (financial or otherwise), properties, Liabilities, operations
or prospects which is or may reasonably be expected to be materially
adverse to it.
Nothing contained in this Agreement shall be deemed to limit in any way Sellers'
ability to cause the Companies and Included Entities to make distributions of
Excluded Assets to Sellers or any Affiliates of any Seller or incur indebtedness
for borrowed money so long as the principal amount of such indebtedness
outstanding as of the Closing has been included in the Debt Amount and
prepayment thereof is permitted without premium or penalty.
(b) Sellers shall ensure that Companies and the Included Entities
will not, during the period from the date of this Agreement to the Closing,
except as set forth in SECTION 4.6(A) OR (B) OF THE DISCLOSURE SCHEDULE or as
specifically contemplated by this Agreement, without the prior written consent
of Buyer:
(1) purchase, acquire, sell or lease any substantial
properties or assets except in the ordinary course of business
consistent with past practices;
(2) enter into any contract of employment with any
employee (other than contracts terminable at will by the applicable
Company or Included Entity without penalty) or make any loan to any
employee, except travel advances to employees in the ordinary course of
business;
(3) except in the ordinary course of business, as may
be required by, or as a result of, applicable law, in order to replace
or repair similar assets, or pursuant to contracts or commitments
existing as of the date hereof, make (except pursuant to contracts or
agreements existing on the date of this Agreement), or enter into any
contract directly committing the Companies or Included Entities to
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make, any single capital expenditure in excess of $250,000 provided
further that the aggregate of all capital expenditures shall not exceed
$750,000;
(4) except as may be required by, or as a result of,
applicable law or grant (except pursuant to contracts, agreements or
benefit plans existing on the date of this Agreement) or agree to grant
to any existing employee any material increase in the rates of
salaries, compensation or other employment benefits of any class of
employees of the Companies or Included Entities aggregating more than
ten percent (10%) of the aggregate compensation of such employee as of
the date hereof;
(5) except for borrowings under any credit facility
or loan agreement existing on the date of this Agreement, which
borrowings shall be satisfied in full by Sellers or by the Companies or
Included Entities, but only out of cash held by any Company or Included
Entity, on or prior to the Closing and the incurrence of indebtedness
for borrowed money by any Company or Included Entity, which is repaid
out of Excluded Assets or which remains outstanding as of the Closing
so long as the principal amount of such indebtedness outstanding as of
the Closing is included in the Debt Amount and prepayment thereof is
permitted without premium or penalty, incur or guarantee any
indebtedness for borrowed money (other than endorsements made for
collection in the ordinary course of business).
(6) amend any of its Charter Documents;
(7) acquire, by merger, consolidation, purchase of
stock or assets or otherwise, any corporation, partnership, association
or other business organization or division thereof;
(8) alter its outstanding capital stock, other equity
interests or partnership structure, as the case may be, or declare, set
aside, make or pay any dividend or other distribution (other than
dividends or distributions of Excluded Assets) in respect of its
capital stock, partnership interests or other equity interests, as the
case may be, or purchase or redeem any shares of its capital stock,
partnership interests or other equity interests, as the case may be;
(9) issue or sell any of its capital stock,
partnership interests or other equity interests, as the case may be, or
any options, warrants or other rights to purchase any such shares or
interests or any securities convertible into or exchangeable for any
such shares or interests;
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(10) mortgage, pledge or subject to any Lien (other
than Permitted Liens), any of its properties, other than in the
ordinary course of business consistent with past practice;
(11) compromise, settle or otherwise adjust any material
claim or litigation;
(12) make any change in its accounting procedures or
practices unless mandated by generally accepted accounting principles;
(13) except as provided for in Section 9.1(g), adopt,
enter into, amend in any material respect, announce any intention to
adopt or terminate, any Benefit Plan or other employee benefit plan,
program or arrangement of general applicability; or
(14) agree to do any of the foregoing.
SECTION 4.7 TAX COVENANTS.
(a) Preparation and Filing of Tax Returns; Payment of Taxes.
Between the date hereof and the Closing, Sellers shall cause the Companies and
the Included Entities to prepare and file on or before the due date therefor all
Tax Returns required to be filed by the Companies and the Included Entities
(except for any Tax Return for which an extension has been granted as permitted
hereunder) on or before the Closing, and shall pay, or cause the Companies and
the Included Entities to pay, all Taxes (including estimated Taxes) due on such
Tax Return (or due with respect to Tax Returns for which an extension has been
granted as permitted hereunder) or which are otherwise required to be paid at
any time prior to or during such period. Such Tax Returns shall be prepared in
accordance with the most recent Tax practices as to elections and accounting
methods except for new elections that may be made therein that were not
previously available.
(b) Notification of Tax Proceedings. Between the date hereof
and the Closing, to the extent any Seller has knowledge of the commencement or
scheduling of any Tax audit, the assessment of any Tax, the issuance of any
notice of Tax due or any bill for collection of any Tax due for Taxes, or the
commencement or scheduling of any other administrative or judicial proceeding
with respect to the determination, assessment or collection of any Tax of any
Company or Included Entity, Sellers shall provide prompt notice to Purchaser of
such matter, setting forth information (to the extent known) describing any
asserted Tax liability in reasonable detail and including copies of any notice
or other documentation received from the applicable Tax authority with respect
to such matter.
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(c) Tax Elections, Waivers and Settlements. Sellers shall not,
and shall cause each Company or Included Entity not to, take any of the
following actions: (i) make, revoke or amend any Tax election; (ii) execute any
waiver of restrictions on assessment or collection of any Tax; or (iii) except
as set forth on SECTION 4.7(C) OF THE DISCLOSURE SCHEDULE, enter into or amend
any agreement or settlement with any Tax authority.
SECTION 4.8 INTERCOMPANY ACCOUNTS. Sellers shall take all steps
necessary such that (a) all indebtedness for borrowed money of any of the
Companies or Included Entities are paid out of Excluded Assets or with the
proceeds of indebtedness for borrowed money, the outstanding principal amount of
which is included in the Debt Amount so long as prepayment thereof is permitted
without premium or penalty and (b) all contracts between any Company or Included
Entity and any Seller or any Affiliate of the Sellers (including, without
limitation, the Excluded Entities but excluding the Companies and Included
Entities) existing as of the Closing (other than the Chemical Lease) are
canceled at or prior to the Closing without any consideration being paid in
respect therefor.
ARTICLE 5
CONDITIONS TO THE OBLIGATIONS OF SELLERS
SECTION 5.1 SELLERS' CLOSING CONDITIONS. The obligations of Sellers
under this Agreement to effect the Closing are, subject to the fulfillment of
the following conditions prior to or at the Closing, each of which may be waived
(as conditions to Sellers' obligations) by the Sellers' Representatives in their
absolute discretion:
(a) Representations, Warranties, Covenants
(1) The representations and warranties of Buyer contained in
ARTICLE 3 of this Agreement shall be true and correct in all material respects
as of the date hereof and as of the Closing Date as though restated on and as of
such date (except in the case of any representation or warranty that by its
terms is made as of a date specified therein which shall be accurate in all
material respects as of such date):
(2) Buyer shall have performed and complied in all material
respects with each and every covenant and agreement required by this Agreement
to be performed or complied with by it at or prior to the Closing; and
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(3) Buyer shall have furnished Seller with a certificate,
dated the Closing Date and duly executed on behalf of Buyer to the effect that
the conditions set forth in clauses (1) and (2) of this SECTION 5.1(A) have been
satisfied.
(b) Proceedings. No party to this Agreement shall be subject to any
order, stay, injunction or decree of any court of competent jurisdiction or
governmental, administrative or regulatory authority restraining or prohibiting
the consummation of the transactions contemplated hereby.
(c) Real Estate. At or prior to the Closing, Fel-Pro Chemical Products,
L.P. ("CHEMICAL") shall have executed a real estate lease with Realty to lease
the portion of the building currently leased by Chemical from Realty for a term
of three years on market terms (the "CHEMICAL LEASE"), which lease shall be in a
form reasonably acceptable to the Sellers.
(d) HSR Act. The waiting period (and any extension thereof) under the
HSR Act applicable to the transactions contemplated hereby shall have expired or
been terminated.
(e) Certificate of Designations. The Certificate of Designations in
substantially the form attached hereto as EXHIBIT E (the "CERTIFICATE OF
DESIGNATIONS") shall have been duly filed with the Secretary of State of the
State of Michigan.
(f) Registration Agreement. F-M shall have executed and delivered to
the Sellers' Representatives the Registration Agreement in the form attached
hereto as EXHIBIT F (the "REGISTRATION AGREEMENT").
ARTICLE 6
CONDITIONS TO THE OBLIGATIONS OF BUYER
SECTION 6.1 BUYER'S CLOSING CONDITIONS. The obligations of Buyer under
this Agreement to effect the Closing are, at its option, subject to the
fulfillment of the following conditions prior to or at the Closing, each of
which may be waived (as conditions to its obligations) by Buyer in its absolute
discretion:
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(a) Representations, Warranties, Covenants.
(1) The representations and warranties of Sellers
contained in ARTICLE 2 of this Agreement shall have been true and
correct in all material respects as of the date hereof and, after
taking into account all amendments and/or supplements to the
Disclosure Schedule pursuant to SECTION 10.12(B) hereof, shall be true
and correct in all material respects as of the Closing Date as though
restated on and as of such date (except in the case of any
representation or warranty that by its terms is made as of a date
specified therein, which shall be accurate in all material respects as
of such date);
(2) Sellers shall have performed and complied in all
material respects with each and every covenant and agreement required
by this Agreement to be performed or complied with by them at or prior
to the Closing; and
(3) Sellers shall have furnished Buyer with a
certificate, dated the Closing Date and duly executed on behalf of
Sellers by the Sellers' Representatives, to the effect that the
conditions set forth in clauses (1) and (2) of this SECTION 6.1(A)
have been satisfied.
(b) Proceedings. No party to this Agreement shall be
subject to any law, rule or regulation or any order, stay, injunction or decree
of any court of competent jurisdiction or governmental, administrative or
regulatory authority, restraining or prohibiting the consummation of the
transactions contemplated hereby.
(c) Real Estate. At or prior to the Closing, Chemical shall have
executed the Chemical Lease, which lease shall be in a form reasonably
acceptable to the Buyer.
(d) Consents. All consents of any governmental, administrative or
regulatory authority required for the Sellers' consummation of the transactions
contemplated by this Agreement shall have been made or obtained and all waiting
periods specified under applicable laws, rules and regulations and all
extensions thereof, the passing of which is necessary for such consummation,
shall have passed.
(e) Absence of Withholding Tax Liability. The Sellers agree to
provide to the Buyer a certificate executed by each Seller that, as of the
Closing Date, such Seller is not a foreign person within the meaning of Section
1445 of the Code and the Treasury Regulations thereunder. If such certificate is
not delivered to Buyer, Buyer shall be entitled to withhold 10% of the Purchase
Price as required by Section 1445 of the Code.
(f) Debt-Free. As of the Closing, none of the Companies or
Included Entities shall have any outstanding indebtedness for borrowed money
except for such
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indebtedness for borrowed money, the outstanding principal amount of which has
been included in the Debt Amount and is prepayable without premium or penalty.
(g) Registration Agreement. The Sellers that are to receive
shares of Exchangeable Preferred Stock shall have executed and delivered to F-M
the Registration Agreement.
ARTICLE 7
TAX AND OTHER MATTERS
SECTION 7.1 TAXES RELATED TO TRANSACTIONS. Notwithstanding anything to the
contrary in this ARTICLE 7, Sellers shall be liable for and shall pay (i) any
and all Taxes imposed on the Sellers arising in any way in connection with the
transfer of the Equity Interests contemplated by SECTION 1.1; (ii) any taxes
payable by the Sellers as partners or shareholders of the Companies or any of
the Included Entities (including, without limitation, any shareholder level tax
imposed upon the deemed asset sale and deemed liquidation of Meridian under
Treasury Regulation ss.1.338(h)(10)-1); (iii) except for Taxes payable by Felt
under Code Section 1363 (relating to LIFO recapture upon an S Election), any
corporate level Taxes imposed upon any of the Companies or any of the Included
Entities resulting from the transfer of the Equity Interests contemplated by
SECTION 1.1 (including, without limitation, (A) any corporate level Taxes
imposed upon any of the Companies under Code Section 1374 resulting from the
transfer of the Equity Interests contemplated by SECTION 1.1, and (B) any Taxes
incurred under Treasury Regulation ss.1.338(h)(10)-1(e)(1) and 1.338(h)(10)-1(f)
upon the deemed asset sale by Meridian); and (iv) any other transfer Taxes
incurred in connection with the transactions contemplated hereby and Sellers
shall indemnify, defend and hold Buyer harmless against any and all such Taxes.
SECTION 7.2 ALLOCATION OF LIABILITY FOR TAXES.
(a) Sellers Liable For Shareholder And Partner Level Taxes. Except as
set forth in SECTION 7.2(C), Sellers shall be liable for, and shall
indemnify, defend and hold Buyer harmless from and against, any and all
Taxes imposed on items of income, loss, deduction or credit which are
passed through to the Sellers, as shareholders or partners of any of the
Companies or any of the Included Entities, for any time periods during
which (i) any of the Companies or any of the Included Entities are
classified as S Corporations or Partnerships for purposes of the Code and
(ii) the Sellers are such shareholders or partners; including, without
limitation, any and all Taxes imposed on items of income, loss, deduction
or credit which are passed through to the Sellers, as shareholders or
partners, under the provisions of
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Code Section 1366 (in the case of any "S corporation" (as such term is
defined in Code Section 1361) hereinafter an "S Corporation")), or Code
Section 702 (in the case of any partnership).
(b) Sellers Liable For Installment Sale Obligation. Sellers shall be
liable for, and shall indemnify, defend and hold Buyer harmless from and
against, any income Taxes imposed on Felt (including, without limitation,
any Taxes imposed under Code Sections 1374 and 453), relating to the
installment sale of certain assets from Felt (or its affiliates or
predecessors) to Fel-Pro Chemical Products L.P., Fel-Pro Specialty Sealing
Products, L.P. and FP Diesel L.P. under the terms and conditions of the
following promissory notes: (i) Amended and Restated Secured Promissory
Note dated December 28, 1992 payable by Fel-Pro Chemical Products, L.P. to
Fel-Pro Incorporated, (ii) Amended and Restated Secured Promissory Note
dated December 28, 1992 payable by Fel-Pro Specialty Sealing Products LP to
Fel-Pro Incorporated, and (iii) Amended and Restated Secured Promissory
Note dated January 31, 1994 payable by FP Diesel LP (formerly Phillips) to
Fel-Pro Incorporated.
(c) Buyer Liable For Certain Corporate Level Taxes. Except for those
corporate level Taxes expressly treated under SECTION 7.1 above and those
corporate level Taxes allocated to Sellers under SECTIONS 7.2(B) or 7.7(D),
Buyer shall be liable for, and shall indemnify, defend and hold Sellers
harmless from and against, any Taxes imposed on any of the Companies or any
of the Included Entities which are classified as corporations for U.S.
Federal income tax proposes (including, without limitation, any Taxes
payable by Felt under Code Section 1363 (relating to LIFO recapture upon an
S Election)).
SECTION 7.3 PRORATION OF TAXES
(a) Method of Proration for Income Tax. Income Tax items shall be
apportioned between the Pre-Closing Period and the Post-Closing Period based on
a closing of the books and records of the relevant entity or entities as of the
Closing Date (provided that depreciation, amortization and depletion for any
Straddle Period shall be apportioned on a daily pro rata basis). Notwithstanding
anything to the contrary in the preceding sentence, the parties agree that for
U.S. federal income Tax purposes, Tax Items for any Straddle Period shall be
apportioned between Pre-Closings Periods and Post-Closing Periods in accordance
with U.S. Treasury Regulations Section 1.1362-3(b), which regulations shall be
reasonably interpreted by the parties in a manner intended to achieve the method
of apportionment described in the preceding sentence.
(b) No Contrary Elections. Seller and Buyer will not exercise any
option or election (including any election to ratably allocate a Tax year's
items under Treasury
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Regulation Section 1.1362-3(b)) to allocate Tax items in a manner inconsistent
with SECTION 7.2(A) hereof.
SECTION 7.4 PREPARATION AND FILING OF TAX RETURNS AND PAYMENT OF TAX.
(a) Seller's Rights and Responsibilities. Sellers shall have the right
and obligation to timely prepare and file, and cause to be timely prepared and
filed, when due: (i) any Income Tax Return that is required to include the
operations, ownership, assets or activities of any Company or Included Entity
for any period ending on or prior to the Closing Date, including, without
limitation, (x) all final returns of any of the Companies or Included Entities
which are S Corporations or partnerships for the periods beginning on the first
day of the 1998 fiscal year through and including the Closing Date, and (y) all
returns related to the deemed asset sale and deemed liquidation of Meridian
under Treasury Regulation ss.1.338(h)(10)-1(e)(1), (2); and (ii) all Tax Returns
for transfer taxes to be paid by Sellers pursuant to the terms hereof.
(b) Buyer's Rights and Responsibilities. Buyer shall have the right and
obligation to timely prepare and file, or cause to be timely prepared and filed,
when due, all other Tax Returns that are required to include the operations,
ownership, assets or activities of any Company or Included Entity.
SECTION 7.5 PARTNERSHIP ELECTIONS UNDER SECTION 754
Sellers shall cause such Included Entities as are identified by the
Buyer in writing prior to the Closing Date and which are classified as
partnerships for federal income tax purposes to make elections under Section 754
of the Code.
SECTION 7.6 TAX CONTROVERSIES; ASSISTANCE AND COOPERATION.
(a) Notice. In the event any Income Tax Authority informs a Seller, on
the one hand, or Buyer, on the other, of any notice of proposed audit, claim,
assessment or other dispute concerning an amount of Income Taxes with respect to
which the other party may be liable, the party so informed shall promptly notify
the other party of such matter. Such notice shall contain factual information
(to the extent known) describing any asserted Income Tax liability in reasonable
detail and shall be accompanied by copies of any notice or other documents
received from any Tax authority with respect to such matter.
(b) Consent to Settlement. Buyer and Sellers shall not agree to settle
or permit the settlement of any Tax liability or compromise any claims with
respect to Taxes, which settlement or compromise may affect the liability for
Taxes (or right to tax benefit) of the other party, without such other party's
consent. Neither Buyer nor the Sellers shall
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make, revoke or amend any Tax election or amend any Tax return of the other
party, without such other party's consent which may affect the other party's
liability for Taxes or right to tax benefit.
(c) Assistance and Cooperation. Sellers, on the one hand, and Buyer and
Company, on the other, shall cooperate (and cause their affiliates to cooperate)
with each other and with each other's agents, including accounting firms and
legal counsel, in connection with Tax matters relating to the Companies or any
Included Entity, including (i) preparation and filing of Tax Returns, (ii)
determining the liability and amount of any Taxes due or the right to and amount
of any refund of Taxes, (iii) examinations of Tax Returns, and (iv) any
administrative or judicial proceeding in respect of Taxes assessed or proposed
to be assessed. Such cooperation shall include each party making all information
and documents in its possession relating to the Company and available to the
other party. The parties shall retain all Tax Returns, schedules and work
papers, and all material records and other documents relating thereto, until the
expiration of the applicable statute of limitations (including, to the extent
notified by any party, any extension thereof), of the Tax Period to which such
Tax Returns and other documents and information relate. Each of the parties
shall also make available to the other party, as reasonably requested and
available, personnel (including officers, directors, employees and agents)
responsible for preparing, maintaining, and interpreting information and
documents relevant to Taxes, and personnel reasonably required as witnesses or
for purposes of providing information or documents in connection with any
administrative or judicial proceedings relating to Taxes.
SECTION 7.7 MERIDIAN SECTION 338 ELECTION.
(a) With respect to the purchase and sale (the "MERIDIAN TRANSACTION")
pursuant hereto of the capital stock of Meridian Parts Corporation ("MERIDIAN"),
the Buyer and the Sellers shall make a timely election (i) under Section
338(h)(10) of the Code and Section 1.338(h)(10)-1 of the Treasury Regulations
promulgated pursuant to the Code (the "338 ELECTION"), but pursuant to Section
230515(e)(3) of the California General Taxation Code will elect to not make a
similar Section 338(h)(10) election for purposes of tax in the State of
California. The Sellers shall take all actions reasonably requested by the Buyer
(including, but not limited to, the preparation, completion and timely joint
filing by the Buyer and the Sellers of Form 8023-A, and the preparation,
completion and timely filing of such other forms, returns, elections, schedules
and other documents and instruments reasonably requested by the Buyer) to effect
a timely Section 338(h)((10) election in accordance with Section 338(h)(10) of
the Code and Section 1.338(h)(10)-1 of the Treasury Regulations promulgated
pursuant to the Code, and the Buyer shall take all actions reasonably requested
by the Sellers' Representatives to file any forms required by the California
Franchise Tax Board to elect not to have Section 338(h)(10) applicable for
California purposes, with respect to the Meridian Transaction. The Buyer and the
Sellers
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shall report the Meridian Transaction consistent with the 338 Election and with
the California election described above and shall take no position contrary
thereto or inconsistent therewith in any tax return, or in any discussion with
or any proceeding before any taxing authority or other governmental body or
otherwise.
(b) The portion of the Purchase Price allocated to the Meridian
Transaction pursuant to the allocation of the Purchase Price pursuant to SECTION
1.2 that comprises the "modified aggregate deemed sale price" (as defined in,
and required to be allocated pursuant to, Section 338(h)(10) of the Code) shall
be allocated with respect to the Meridian Transaction in accordance with a
schedule prepared by the Sellers' Representatives and the Buyer consistent with
the methodology utilized to calculate the amount identified in Section 1.1(d)
and otherwise in accordance with the requirements of the Code and the
regulations thereunder. Such allocation shall, for federal tax purposes, be
binding on Meridian, the Sellers and the Buyer. Meridian, the Sellers and the
Buyer shall file their respective federal tax returns in accordance with such
allocation and shall not take any position inconsistent with such allocation.
Meridian, the Sellers and the Buyer shall file their respective California tax
returns consistent with the election not to have Section 338(h)(10) apply. In
the event that any such allocation is disputed by any taxing authority, the
party receiving notice of such dispute shall promptly notify and consult with
the other parties hereto concerning resolution of such dispute and such dispute
shall be settled or compromised by the Buyer, with the consent of the Sellers'
Representative which consent shall not be unreasonably withheld. The Buyer shall
cause Meridian to comply with this SECTION 7.7.
(c) The Sellers shall, on a timely basis, prepare (in a manner
consistent with prior practice and this Agreement), execute, and file on behalf
of Meridian (A) the federal income tax returns to be filed on behalf of Meridian
for the period ending as of the close of business on the Closing Date that will
include the gain or loss resulting from the "deemed sale" and "deemed
liquidation" that will occur (pursuant to Treasury Regulation Section
1.338(h)(10)-1(e)(1) and (2) promulgated under the Code) by reason of the
Buyer's and the Sellers' election pursuant to Section 338(h)(10) of the Code and
(B) any corresponding state and local income tax returns required to be filed on
behalf of Company for the period ending as of the close of business on the
Closing Date. The Buyer shall cooperate with the Sellers in connection with the
preparation and filing of such returns by making the books, records and
personnel of the appropriate companies and Included Entities available to the
Sellers and taking such other actions as the Sellers may reasonably request. The
Buyer shall have the right to review and comment upon such returns prior to
filing. The Sellers shall bear the costs and expenses of preparing and filing
such return.
(d) ALLOCATION OF MERIDIAN INCOME TAXES. Sellers shall be
responsible for all federal income Taxes attributable to Meridian for periods
ending on or before the
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Closing Date resulting from the 338 Election (including, without limitation, any
built-in gain tax imposed upon Meridian under Code Section 1374). Buyer shall be
responsible for all federal income Taxes of Meridian for periods ending after
the Closing Date. Sellers will be liable for California income taxes of Meridian
resulting from the refusal of the California Tax authorities to respect the
election not to make a 338 Election for California tax purposes, and Buyer and
Meridian will be liable for non-federal income Taxes of Meridian for periods
ending after the Closing Date.
SECTION 7.8 NO COMPETITION. Sellers' Representatives agree that during the
two-year period commencing on the Closing Date, none of the Sellers'
Representatives will, directly or indirectly, (i) participate or engage in any
of the businesses currently engaged in by the Companies and Included Entities
anywhere in the United States; or (ii) induce or attempt to influence any
employee of any of the Companies or Included Entities as of the Closing Date to
terminate such employee's employment or become an employee of any entity
established by or associated with any of Seller or any Affiliate of the Sellers'
Representatives.
SECTION 7.9 CONFIDENTIALITY. If the transactions contemplated by this
Agreement are consummated, the Sellers agree to maintain the confidentiality of
all proprietary and other non-public information regarding the Companies and the
Included Entities, except as necessary to file tax returns and other reports to
governmental agencies and except as set forth below. In the event that any
Seller reasonably believes that it is required by law to disclose any
confidential information described in this SECTION 7.7, such Seller will (i)
provide the Buyer with prompt notice before such disclosure in order that the
Buyer may attempt to obtain a protective order or other assurance that
confidential treatment will be accorded such confidential information and (ii)
cooperate with the Buyer in attempting to obtain such order or other assurance.
The provisions of this SECTION 7.7 shall not apply to any information, documents
or materials which are in the public domain or shall come into the public
domain, other than by reason of default by a Seller.
SECTION 7.10 NAMES. Sellers agree to take such steps as are necessary as
soon as practicable to change the name of any Excluded Entity to delete the
names "Fel-Pro" or "FP" therefrom and agree not to employ, trade upon or utilize
such names in any business of any kind or character.
SECTION 7.11 AUTHORIZED SHARES. F-M shall use its best efforts to cause the
number of authorized shares of F-M Common Stock to be increased, as soon as
practicable, to an aggregate number of authorized shares of F-M Common Stock
sufficient to effect the issuance of all of the shares of F-M Common Stock
issuable upon exchange of the F-M Exchangeable Preferred Stock issuable in
connection with the transactions contemplated hereby. F-M shall provide the
Sellers' Representatives with copies of any solicitations of its stockholders in
connection with such matter. Promptly following any
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such increase, F-M shall reserve and keep available out of its authorized but
unissued shares of F-M Common Stock a sufficient number of its shares of F-M
Common Stock to effect the exchange of all shares of the F-M Exchangeable
Preferred Stock issuable in connection with the transactions contemplated
hereby.
SECTION 7.12 STOCK LISTING. F-M shall take all action necessary, including,
but not limited to filing an additional listing application, to list the shares
of F-M Common Stock issuable upon conversion of the F-M Exchangeable Preferred
Stock on the stock exchange or market on which the F-M Common Stock is then
listed provided that all applicable listing requirements are satisfied.
ARTICLE 8
TERMINATION
SECTION 8.1 TERMINATION OF AGREEMENT. This Agreement may be terminated at
any time on or prior to the Closing:
(a) by the mutual written consent of the Sellers' Representatives
and Buyer;
(b) by either the Sellers' Representatives or Buyer, if the
Closing has not taken place by April 20, 1998, and the terminating party is
not in material breach of its obligations hereunder;
(c) by Buyer or the Sellers' Representatives, if any court or
governmental, administrative or regulatory body of competent jurisdiction
in the United States shall have issued an order, stay, judgment or decree,
or taken any other action, permanently prohibiting the transactions
contemplated by this Agreement, or mandating that Buyer sell, dispose of or
hold separate any assets or properties of Buyer or any of its Affiliates or
any assets or properties of the Companies or Included Entities and such
order, stay, judgment, decree or other action, shall have become final and
non-appealable; or
(d) by Buyer if the amendments and supplements to the Disclosure
Schedule pursuant to SECTION 10.12(B) have, in the aggregate, a Material
Adverse Effect.
If Buyer or the Sellers' Representatives terminate this Agreement pursuant to
the foregoing provisions of this SECTION 8.1, such termination shall be effected
by written
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notice to the other party specifying the provision pursuant to which
such termination is made.
SECTION 8.2 LIABILITIES UPON TERMINATION. Except for SECTION 4.5 hereof
(and, to the extent relevant thereto, the terms of SECTIONS 10.4, 10.5, 10.6,
10.7, 10.13, 10.14, 10.17 and 10.18 hereof), which shall survive any termination
of this Agreement, upon the termination of this Agreement pursuant to SECTION
8.1 hereof, this Agreement shall forthwith become null and void, and no party
hereto or any of its officers, directors, partners, employees, agents,
consultants, stockholders or principals shall have any rights, liabilities or
obligations hereunder or with respect hereto; provided, however, that nothing
contained in SECTION 8.1 or this SECTION 8.2 shall (i) relieve any party from
liability for any willful failure to comply with any covenant or agreement
contained herein (and the terms of SECTIONS 10.4, 10.5, 10.6, 10.7, 10.13,
10.14, 10.17 and 10.18 hereof shall apply to any such failure) or (ii) affect
the Confidentiality Agreement, which shall survive any termination of this
Agreement.
ARTICLE 9
EMPLOYEE MATTERS
SECTION 9.1 EMPLOYEE BENEFIT PLAN MATTERS.
(a) Effective as of the Closing, Buyer shall cause the applicable
Company or Included Entity to offer to employ or continue the employment of all
persons who are designated on the records of such Company, Included Entity or
Realty as of the Closing as employees, whether or not then actively at work,
including, without limitation, any employees who are on vacation leave, leave of
absence, sick leave or disability leave ("COMPANY EMPLOYEES"). Buyer shall also
cause the applicable Company or Included Entity to honor any re-employment
rights of any current or former employees of such Company or Included Entity,
including, but not limited to, any such persons who are receiving long-term
disability benefits as of the Closing. Nothing contained herein shall be deemed
to require the Buyer to employ or cause any Company or Included Entity to employ
any individual for any period of time following the Closing.
(b) Each employee benefit plan, fund, policy or arrangement
established or maintained by Buyer or its Affiliates for Company Employees
("BUYER PLAN") shall grant vesting and eligibility credit (for initial
participation purposes), to the extent such credit was given under the Benefit
Plans, to each Company Employee for all service on or prior to the Closing Date
with any Company or Included Entity or any predecessor or Affiliate of any of
the foregoing, for all purposes other than benefit accrual under a "defined
benefit plan," within the meaning of Section 3(35) of ERISA; provided, that any
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Buyer Plan may be designed to offset, or otherwise avoid duplication of, any
benefits to which a Company Employee is entitled under any comparable Benefit
Plan or any amount payable under a Benefit Plan may be reduced to the extent
paid under a Buyer Plan.
(c) Effective as of the Closing, Buyer shall establish, or shall
cause the appropriate Companies and/or Included Entities, to continue, or be
included in, a group health plan which shall cover all Company Employees and
their family members who immediately prior to the Closing were covered under any
group health plan maintained by any Company or Included Entity. Any such group
health plan established or maintained by Buyer shall (i) waive any waiting
period, (ii) waive any exclusion or limitation for preexisting conditions which
were covered (generally and/or specifically as to any individual) under any
group health plan maintained by the Companies and Included Entities prior to the
Closing and (iii) grant credit (for purposes of annual deductibles, copayments
and out-of-pocket limits) for any covered claims incurred or payments made prior
to the Closing Date during the plan year in which the Closing Date occurs.
(d) Buyer shall, or shall cause the applicable Company or
Included Entity to, recognize and honor the terms of (including, but not by way
of limitation, making contributions or benefit payments as may be required by)
the ERP Bonus Program, the Fel-Pro Incorporated Management Deferred Compensation
Plan and the Fel-Pro Incorporated Voluntary Deferral Plan, and shall not allow
such plans to be amended or terminated in any way that adversely affects any
participant's benefits thereunder; provided, that such deferred compensation
plans may be amended so that no further accruals or additions to participant's
benefits thereunder shall be required from the date of the adoption of such
amendment (other than earnings or similar credits pursuant to the terms of such
plans as currently in effect). In addition, Buyer shall cause the Companies and
Included Entities to maintain in effect the benefit programs set forth on
SECTION 9.1(D) OF THE DISCLOSURE SCHEDULE as currently in effect for the periods
set forth on SECTION 9.1(D) OF THE DISCLOSURE SCHEDULE. Except as set forth in
this SECTION 9.1(D) or the terms of any such Benefit Plan, Seller recognizes
Buyer's right to amend or terminate any Benefit Plan or substitute any Buyer
Plan at any time after the Closing.
(e) Buyer shall, or shall cause the applicable Company or
Included Entity to, make the severance payments listed on Part A of SECTION
9.1(E) OF THE DISCLOSURE SCHEDULE to any Company Employee (except for those
Company Employees set forth on Part B of SECTION 9.1(E) OF THE DISCLOSURE
SCHEDULE), who are terminated by the applicable Company or Included Entity other
than for "cause" (as hereafter defined) on or prior to the date that is one year
after the Closing Date. For purposes of this paragraph (e) "CAUSE" shall mean
such Company Employee's theft, fraud, willful and
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repeated neglect of duties or conviction of a felony. Notwithstanding anything
contained herein to the contrary, Sellers shall be responsible for making all
payments to Company Employees pursuant to (i) the Long-Term Incentive Plan
resulting from a "CHANGE IN CONTROL", (ii) any and all retention bonus
agreements executed in contemplation of or as a consequence of the Companies
being sold (excluding the employment agreements listed on Part C of SECTION
9.1(E) OF THE DISCLOSURE SCHEDULE) (the "Retention Bonus Agreements")and (iii)
the Special Bonus. The Sellers may, at their option, fulfill such responsibility
by (i) causing the Companies and Included Entities to incur indebtedness for
borrowed money, the proceeds of which are used to pay or fund such obligations,
so long as the principal amount of such indebtedness has been included in the
determination of the Debt Amount and prepayment thereof is permitted without
premium or penalty, (ii) causing the Companies and Included Entities to pay or
fund such obligations with Excluded Assets, (iii) paying or funding such
obligations, or (iv) any combination of the foregoing. The bonuses payable
pursuant to the Retention Bonus Agreements shall be accrued by the Companies and
the Included Entities prior to the Closing and paid within seventy-five (75)
days of the Closing Date. If requested by the Sellers' Representatives, the
Buyer shall use its best efforts to cause the Companies and the Included
Entities to amend the Retention Bonus Agreements to provide for the payment of
such bonuses within seventy-five (75) days of the Closing Date.
(f) Buyer shall be liable for and shall indemnify and hold the Sellers
and their Affiliates harmless from and against any and all liability arising
under the Workers Adjustment and Retraining Notification Act and any similar
state laws as a result of actions by the Buyer or by any Company or Included
Entity after the Closing.
(g) Buyer acknowledges that the Companies and the Included Entities
shall pay a bonus to the Eligible Employees in the aggregate gross pretax amount
of $10,000,000 (the "SPECIAL BONUS") in consideration for the Eligible
Employees' services to the Companies, the Included Entities and Realty prior to
the Closing Date and agrees to cause the Companies and the Included Entities to
comply with the terms of this SECTION 9.1(G). The Special Bonus shall be in
addition to all other amounts owed to the Eligible Employees by the Companies,
the Included Entities and Realty and shall not reduce any amounts that may be
payable to any Eligible Employee at any time in the future (including, but not
limited to, amounts payable under the bonus and other arrangements listed on
SECTION 4.6 OF THE DISCLOSURE SCHEDULE). The Special Bonus to be paid to, or on
account of, each Eligible Employee shall be determined and paid in accordance
with, the following provisions:
(1) Determination. The amount of the Special Bonus to be paid to
or on account of each Eligible Employee shall be determined by first allocating
the gross pretax amount of the Special Bonus among each Company, Included Entity
and Realty based on the percentage that the wages of the Eligible Employees of
such entity for 1997
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and the first payroll of 1998 bears to the total wages of the Eligible Employees
of the Companies, the Included Entities and Realty for 1997 and the first
payroll of 1998. With respect to the Participating Eligible Employees, the
amount of the Special Bonus allocated to each Company, Included Entity or Realty
shall be allocated to the Participating Eligible Employees of such entity
through the application of the formulas set forth in Section 17 of the
Retirement Plan that are effective upon a Change of Control (the "CHANGE OF
CONTROL FORMULAS"), disregarding for this purpose any applicable
non-discrimination, allocation limitation or other testing rules contained in
the Code that limit the amount that may be allocated to any Eligible Employee.
With respect to the Non-Participating Eligible Employees, the amount of the
Special Bonus allocated to each Company, Included Entity or Fel-Pro Realty
Corporation shall be allocated to Non-Participating Eligible Employees based on
the percentage that each Non-Participating Eligible Employee's wages for 1997
and the first payroll of 1998 bears to the total wages of all of the
Non-Participating Eligible Employees for 1997 and the first payroll of 1998
employed by such entity.
(2) Contribution and Payments.
(A) With respect to Participating Eligible Employees, the
amount of the Special Bonus allocated to each Participating Eligible Employee
that the Company or Included Entity that employs or employed such Participating
Eligible Employee is permitted to contribute to the Retirement Plan to satisfy
the required allocation, taking into account all applicable non-discrimination,
allocation limitations and other testing rules contained in the Code that limit
the amount that may be allocated to such Participating Eligible Employee, shall
be contributed to the Retirement Plan and allocated to such Participating
Eligible Employee in accordance with the Change in Control Formulas. To the
extent the amount of the Special Bonus allocated to a Participating Eligible
Employee exceeds the amount that the Company or Included Entity that employs or
employed such Participating Eligible Employee is permitted to contribute to the
Retirement Plan, the excess shall be paid, in cash, directly to such
Participating Eligible Employee.
(B) With respect to Non-Participating Eligible Employees, the
amount of the Special Bonus allocated to each such employee shall be paid, in
cash, directly to such employee.
(3) Timing. All contributions required to be made to the Retirement
Plan pursuant to this SECTION 9.1(G) shall be made prior to the Closing Date.
All payments required to be made directly to Eligible Employees pursuant to this
SECTION 9.1(G) shall be accrued prior to the Closing Date and paid to such
Eligible Employees within 75 days of the Closing Date. In the event that any
Eligible Employee becomes ineligible to receive the Special Bonus allocated to
such Eligible Employee that was to be
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paid directly to such Eligible Employee in accordance with paragraph (2) above,
the Buyer shall cause the amount allocated to such Eligible Employee to be paid
to the Sellers.
(4) Taxes. Any payments to be made directly to Eligible
Employees hereunder shall be subject to customary withholding taxes
and such other employment taxes as are required under applicable law to be
collected from an employee with respect to compensation paid by an employer to
an employee.
ARTICLE 10
MISCELLANEOUS
SECTION 10.1 EXCLUSIVITY OF REPRESENTATIONS; RELIANCE ON
REPRESENTATIONS; TERMINATION OF EPRESENTATIONS.
(a) THE REPRESENTATIONS AND WARRANTIES MADE BY SELLERS AND BUYER,
RESPECTIVELY, IN THIS AGREEMENT ARE IN LIEU OF AND ARE EXCLUSIVE OF ALL OTHER
REPRESENTATIONS AND WARRANTIES, INCLUDING, WITHOUT LIMITATION, ANY IMPLIED
WARRANTY OF MERCHANTABILITY OR OF FITNESS FOR A PARTICULAR PURPOSE AND ANY OTHER
IMPLIED WARRANTIES, OF SELLERS AND BUYER, RESPECTIVELY. SELLERS AND BUYER EACH
HEREBY DISCLAIMS ANY SUCH OTHER OR IMPLIED REPRESENTATIONS OR WARRANTIES,
NOTWITHSTANDING THE DELIVERY OR DISCLOSURE BY SELLERS OR ANY OTHER PERSON TO
BUYER OR ANY OF ITS DIRECTORS, OFFICERS, EMPLOYEES, AGENTS OR REPRESENTATIVES,
OR BY BUYER OR ANY OTHER PERSON TO SELLERS OR ANY OF ITS DIRECTORS, OFFICERS
EMPLOYEES, AGENTS OR REPRESENTATIVES OF ANY DOCUMENTATION OR OTHER INFORMATION
IN CONNECTION WITH THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
(b) Except for the representations and warranties of Sellers set
forth in SECTIONS 2.1(C), 2.1(D), 2.2(A), 2.4 and 2.21 and of Buyer
set forth IN SECTIONS 3.4 AND 3.6 (such representations and warranties of
Sellers and Buyer, the "SURVIVING REPRESENTATIONS AND WARRANTIES"), the
representations and warranties of the Sellers set forth in ARTICLE 2 and of
Buyer set forth in ARTICLE 3 shall terminate and merge at, and not survive, the
closing and thereafter shall be void and no longer enforceable. The parties
hereto agree and acknowledge that, except for claims of actual fraud or a
breach of any Surviving Representations and Warranties, no party hereto will
have any right to indemnification or the right to bring any claim or action for
damages relating to the breach of any representation or warranty set forth
herein or in any other agreement
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contemplated hereby, whether such claim or action arises under
contract or tort, as a result of a violation of law or otherwise.
(c) ARTICLES 7, 10, and SECTION 9.1 hereof shall survive the
Closing.
SECTION 10.2 EXPENSES. The Sellers, on the one hand, and the Buyer, on the
other hand, shall bear all of its respective expenses incurred in connection
with the transactions contemplated by this Agreement, including, without
limitation, accounting and legal fees incurred in connection herewith. The
Sellers shall bear all of the expenses incurred by the Companies prior to the
Closing in connection with the sale of the Equity Interests and the Included
Real Property contemplated hereby.
SECTION 10.3 FURTHER ASSURANCES. From time to time after the Closing
Date, without the payment of any additional consideration except as
otherwise set forth in this Agreement, each party hereto will execute all such
instruments and take all such actions as the other party, being advised by
counsel, shall reasonably request in connection with carrying out and
effectuating the intent and purpose hereof and all transactions and things
contemplated by this Agreement.
SECTION 10.4 NOTICES. Notices and other communications provided for herein
shall be in writing (which shall include notice by facsimile transmission) and
shall be delivered or mailed (or if by graphic scanning or other facsimile
communications equipment of the sending party hereto, delivered by such
equipment), addressed as follows:
If to Sellers to:
Kenneth A. Lehman
2715 Sheridan Road
Evanston, Illinois 60201
Telecopier No. (847) 475-2234
and
Richard A. Morris
2323 Marcy
Evanston, Illinois 60201
Telecopier No. (847) 328-3035
and
David A. Weinberg
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<PAGE> 47
2135 North Cleveland
Chicago, Illinois 60614
Telecopier No. (773) 929-2288
With a copy to:
Katten Muchin & Zavis
525 West Monroe Street
Suite 1600
Chicago, Illinois 60661
Telecopier No. (312) 902-1061
Attention: Allan B. Muchin, Esq.
David R. Shevitz, Esq.
If to Buyer:
Federal Mogul Corporation
26555 Northwestern Highway
Southfield, Michigan 48034
Attention: Charles B. Grant
Vice President-Corporate Development
Diane L. Kaye, Esq.
Vice President, General Counsel
and Secretary
or to such other address as a party may from time to time designate in writing
in accordance with this section. All notices and other communications given to
any party hereto in accordance with the provisions of this Agreement shall be
deemed to have been given on the date of receipt.
SECTION 10.5 ASSIGNMENT. This Agreement and all of the provisions hereof
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns; provided, however, that neither
this Agreement nor any of the rights, interests, or obligations hereunder may be
assigned by any of the parties hereto without the prior written consent of the
other parties, except that (i) Buyer may assign any or all of its rights and
obligations hereunder (other than F-M'S obligation to issue its stock
consideration and its obligations under SECTIONS 7.11 AND 7.12) to one of its
wholly-owned subsidiaries without the consent of the Sellers; provided, that any
such assignment shall not relieve Buyer from any liability hereunder, and (ii)
any Seller may assign any or all of its right and obligations hereunder to any
Permitted Transferee to whom such Seller sells, assigns or transfers any or all
of such Seller's Equity Interests prior to the Closing; provided, that such
Permitted Transferee expressly agrees in writing to be bound by the terms of
this Agreement. In the event of any transfer of Equity Interests
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<PAGE> 48
made pursuant to clause (ii) of the preceding sentence, the Schedule of Sellers
and SECTION 2.1(C) OF THE DISCLOSURE SCHEDULE shall be amended to reflect such
sale, assignment or transfer. Any assignment in violation of this Agreement
shall be null and void ab initio.
SECTION 10.6 CONSTRUCTION.
(a) Unless otherwise expressly specified herein, (i) defined terms in
the singular shall also include the plural and vice versa, (ii) the words
"hereof," "herein," "hereunder" and other similar words refer to this Agreement
as a whole, (iii) Article, Section, Schedule and Exhibit references in this
Agreement are to Articles of, Sections of Schedules to and Exhibits to this
Agreement and (iv) words of any gender (masculine, feminine, neuter) mean and
include correlative words of the other genders.
(b) The captions in this Agreement are for convenience only and shall
not in any way affect the meaning or construction of any provision of this
Agreement.
(c) All references to "days" shall be to calendar days unless business
days are specified.
(d) Unless the context otherwise requires, (i) "or" is not exclusive
and (ii) "including" means "including but not limited to" and "including without
limitation".
(e) As used herein, the phrases "date of this Agreement" and "date
hereof" and any other phrases of similar import shall mean January 9, 1998
(regardless, with respect to representations and warranties, of the date or time
as of which such representations and warranties are made or deemed to have been
made or as of which the accuracy or inaccuracy thereof is measured or
determined).
SECTION 10.7 LAW GOVERNING. THIS AGREEMENT IS INTENDED AS A CONTRACT
UNDER AND SHALL BE CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAW OF
THE STATE OF ILLINOIS, INCLUDING WITHOUT LIMITATION AS TO ALL MATTERS OF
CONSTRUCTION, VALIDITY, ENFORCEABILITY AND PERFORMANCE.
SECTION 10.8 WAIVER OF PROVISIONS. The provisions, terms, covenants,
representations, warranties and conditions of this Agreement may be waived only
by a written instrument executed by the party hereto waiving compliance. The
failure of any party hereto at any time or times to require performance of any
provision of this Agreement shall in no manner affect the right of such party at
a later date to enforce the same. No waiver by any party hereto of any condition
or the breach of any provision, term, covenant, representation or warranty
contained in this Agreement, whether by
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conduct or otherwise, in any one or more instances shall be deemed to be or
construed as a further or continuing waiver of any such condition or of the
breach of any other provision, term, covenant, representation or warranty of
this Agreement.
SECTION 10.9 COUNTERPARTS. This Agreement may be executed in several
counterparts, and all counterparts so executed shall constitute one agreement,
binding on the parties hereto, notwithstanding that such parties are not
signatory to the same counterpart.
SECTION 10.10 ENTIRE AGREEMENT. This Agreement and the Schedules and
Exhibits hereto constitute the entire agreement between the parties and
supersedes and cancels any and all prior agreements between them relating to the
subject matter hereof, excluding the Confidentiality Agreement (which shall
remain in full force and effect). This Agreement may not be amended or modified
except by a written agreement signed by Buyer and Seller.
SECTION 10.11 ACCESS TO BOOKS AND RECORDS.
(a) After the Closing, Buyer shall, upon the Sellers'
Representatives' request from time to time, and upon reasonable notice, in
connection with the preparation by Sellers or their Affiliates of Tax returns
and for such other purposes as the Sellers' Representatives shall reasonably
request, (i) (A) provide to the authorized representatives of Sellers and its
Affiliates full access, during normal business hours, to any and all premises,
properties, files, books, records, documents and other information of the
Companies and Included Entities, (B) cause its officers and the officers of the
Companies and Included Entities to furnish to Sellers and their authorized
representatives any and all financial, technical and operating data and other
information pertaining to the Companies and Included Entities and (C) make
available to Sellers and their authorized representatives personnel of Buyer and
the Companies and Included Entities to consult with such personnel and (ii) make
available for inspection and copying by Sellers at Sellers' expense true and
complete copies of any documents relating to the foregoing. In exercising their
rights under the foregoing provisions of this SECTION 10.11, Sellers and their
representatives shall not interfere with Buyer's, the Companies' or the Included
Entities' normal operations. Buyer shall cause the Companies and Included
Entities to retain the files, books, records and documents of the Companies and
the Included Entities for at least six years after the Closing Date. Thereafter,
Buyer shall give the Sellers' Representatives at least 60 business days prior
written notice of the proposed destruction of any such files, books, records or
documents and, at the request and expense of Sellers, shall deliver to Sellers
any of such files, books, records or documents that Sellers may request.
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(b) After the Closing, Buyer, the Companies and the Included
Entities, on the one hand, and the Sellers, on the other hand, will
make available to the other, as reasonably requested, and to any taxing
authority, all information, records or documents relating to the liability for
Taxes or potential liability of the Companies or any of the Included Entities
for Taxes for all periods prior to or including the Closing Date and will
preserve such information, records or documents until the expiration of any
applicable statute or limitations or extensions thereof.
SECTION 10.12 DISCLOSURE SCHEDULE.
(a) Any information disclosed in any section of the Disclosure
Schedule, if reasonably related to any other sections of the Disclosure Schedule
and described in reasonable detail to allow a reasonable person to make the
applicable connection, shall be deemed fully disclosed for the purposes of all
applicable sections of the Disclosure Schedule. Neither the specification
(directly or indirectly by reference to a defined term hereof) of any dollar
amount in the representations and warranties set forth in ARTICLE 2 nor the
inclusion of any items in the Disclosure Schedule shall be deemed to constitute
an admission by Sellers or Buyer, or otherwise imply, that any such amount or
such items so included are material for the purposes of this Agreement. The
inclusion of, or reference to, any item within any particular section of the
Disclosure Schedule does not constitute an admission by either Sellers or Buyer
that such item meets any or all of the criteria set forth in this Agreement for
inclusion in such section of the Disclosure Schedule. The inclusion of, or
reference to, any item within any particular section of the Disclosure Schedule
does not constitute an admission by either Sellers or Buyer that the item
constitutes a violation of any federal, state or local law, rule, statute,
regulation, ordinance, permit, judgment, decree or other equivalent.
(b) From the date hereof until the Closing Date, the Sellers may
amend and/or supplement the Disclosure Schedule to reflect events or changes
occurring after the execution of this Agreement. Such amendments and/or
supplements shall not effect Buyer's right to terminate this Agreement under
SECTION 8.1(D).
SECTION 10.13 ARBITRATION. Any dispute arising out of or relating in any
manner to this Agreement or the underlying transaction, or to the breach,
termination or validity of this Agreement, shall be resolved in accordance with
the procedures specified in this SECTION 10.13, which shall be the sole and
exclusive procedures for resolution of any such disputes.
Any such dispute shall be submitted to arbitration in accordance with the
rules and procedures of the American Arbitration Association, before three
independent and impartial arbitrators, none of whom shall be appointed by either
party, provided, however, that if either party will not participate in
non-binding mediation, the other may
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initiate arbitration before the expiration of the above period. The place of
arbitration shall be Chicago, Illinois. Substantive legal issues in the
arbitration shall be determined in accordance with the laws of the State of
Illinois in accordance with SECTION 10.7. The arbitrators are empowered to grant
and issue mandatory directives, prohibitions, orders or restraints to enforce
this Agreement as they may deem necessary or advisable, directed to or against
any of the parties, including a directive or order requiring specific
performance of any covenant, agreement or provision of this Agreement. The
arbitrators are not empowered to award damages in excess of compensatory
damages, and each party irrevocably waives any right to recover such damages
with respect to any dispute resolved by arbitration. Judgment upon the award
rendered by the arbitrators may be entered by any court having jurisdiction
thereof. Each party shall bear its own costs, except that the costs of the
mediator and the arbitrators shall be borne equally by the parties.
SECTION 10.14 NO THIRD PARTY BENEFICIARY. This Agreement is for the sole
benefit of the parties hereto and their respective successors and permitted
assigns and nothing herein, express or implied, is intended to or shall confer
upon any other Person any legal or equitable right, benefit or remedy of any
nature whatsoever under or by reason of this Agreement.
SECTION 10.15 SELLERS' REPRESENTATIVES.
(a) Each of the Sellers agrees that actions (including, but not
limited to, waivers and consents to amendments) or omissions to act hereunder by
Sellers' Representatives, whether before or after the Closing, shall be binding
upon and enforceable against each Seller.
(b) In furtherance of SECTION 10.15(A) hereof, Buyer shall be
entitled to rely exclusively upon any communications or writings given or
executed by the Sellers' Representatives and shall not be liable in any manner
whatsoever for any action taken or not taken in reliance upon the actions taken
or not taken or communications or writings given or executed by the Sellers'
Representatives and Buyer shall be entitled to disregard any notices or
communications given or made by Sellers unless given or made through the
Sellers' Representatives.
SECTION 10.16 NO PRESUMPTION. With regard to each and every term and
condition of this Agreement and any and all agreements and instruments subject
to the terms hereof or referred to herein, the parties hereto understand and
agree that the same have or has been mutually negotiated, prepared and drafted,
and if at any time the parties hereto desire or are required to interpret or
construe any such term or condition or any agreement or instrument subject
hereto, no consideration shall be given to the issue of
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which party hereto actually prepared, drafted or requested any term or condition
of this Agreement or any agreement or instrument subject hereto.
SECTION 10.17 SEVERABILITY. To the fullest extent that they may
effectively do so under applicable law, the parties hereto hereby waive any
provision of law which renders any provision of this Agreement invalid, illegal
or unenforceable in any respect. Such parties further agree that any provision
of this Agreement which, notwithstanding the preceding sentence, is rendered or
held invalid, illegal or unenforceable in any respect in any jurisdiction shall
be ineffective, but such ineffectiveness shall be limited as follows: (i) if
such provision is rendered or held invalid, illegal or unenforceable in such
jurisdiction only as to a particular Person or Persons or under any particular
circumstance or circumstances, such provision shall be ineffective, but only in
such jurisdiction and only with respect to such particular Person or Persons or
under such particular circumstance or circumstances, as the case may be; (ii)
without limitation of clause (i), such provision shall in any event be
ineffective only as to such jurisdiction and only to the extent of such
invalidity, illegality or unenforceability, and such invalidity, illegality or
unenforceability in such jurisdiction shall not render invalid, illegal or
unenforceable such provision in any other jurisdiction, and (iii) without
limitation of clause (i) or (ii), such ineffectiveness shall not render invalid,
illegal or unenforceable this Agreement or any of the remaining provisions
hereof. Without limitation of the preceding sentence, (A) it is the intent of
the parties hereto that, in the event that in any court proceeding, such court
determines that any provision of this Agreement is illegal, invalid or
unenforceable in any jurisdiction to any extent, such court shall have the power
to, and shall, (1) modify such provision (including by limiting the Persons
against whom, or the circumstances under which, such provision shall be
effective in such jurisdiction) for purposes of such proceeding to the minimum
extent necessary so that such provision, as so modified, may then be enforced in
such proceeding and (2) enforce such provision, as so modified pursuant to
clause (1), in such proceeding and (B) upon any determination that any provision
of this Agreement is invalid, illegal or unenforceable, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of such parties as closely as possible in a mutually acceptable manner in
order that the transactions contemplated hereby be consummated as originally
contemplated to the greatest extent possible. Nothing in this SECTION 10.17 is
intended to, or shall, (x) limit the ability of any party hereto to appeal any
court ruling or the effect of any favorable ruling on appeal or (y) limit the
intended effect of SECTION 10.7 or 10.13.
SECTION 10.18 AFFILIATES; SUBSIDIARIES. References in this Agreement to
"Affiliates" or "Subsidiaries" of a specified Person refer to, and include, only
other Persons which from time to time constitute "Affiliates" or "Subsidiaries,"
as the case may be, of such specified Person, and do not include, at any
particular time, other Persons that may have been, but at such time have ceased
to be, "Affiliates" or "Subsidiaries," as the case may be, of such specified
Person.
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[signature page follows]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
SELLERS:
FEL-PRO REALTY CORPORATION
By:
--------------------------------
Title:
-------------------------
MCCORMICK INVESTMENTS L.P.
By:
--------------------------------
Title:
-------------------------
THE OTHER SELLERS LISTED ON THE
ATTACHED SCHEDULE OF SELLERS
By:
---------------------------------------
Richard A. Morris, under power-of-
attorney
By:
---------------------------------------
Kenneth A. Lehman, under power-of-
attorney
By:
---------------------------------------
David A. Weinberg, under power-of-
attorney
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BUYER:
FEDERAL-MOGUL CORPORATION
By:
-------------------------------
Title:
-----------------------
55
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SCHEDULE OF SELLERS
Fel-Pro Realty Corporation
McCormick Investments L.P.
MORRIS FAMILY
A. FEL-PRO MANAGEMENT CO.
Robert J. Morris Revocable Trust U/A/D 2/16/83
Ellen J. Morris
Bruce E. Morris
Richard A. Morris
B. FEL-PRO MASTER GENERAL PARTNERSHIP
Morris MGP Trust for Ellen U/A/D 3/1/96
Morris MGP Trust for Bruce U/A/D 6/23/96
Morris MGP Trust for Richard U/A/D 3/1/96
C. MERIDIAN PARTS CORPORATION
Morris 1992 Gift Trust for Ellen U/A/D 12/10/92
Morris Meridian Trust for Ellen U/A/D 3/1/96
Morris 1992 Gift Trust for Bruce U/A/D 12/10/92
Morris Meridian Trust for Bruce U/A/D 6/23/96
Morris 1992 Gift Trust for Richard U/A/D 12/10/92
Morris Meridian Trust for Richard U/A/D 3/1/96
D. FELT PRODUCTS MFG. CO.
Robert J. Morris Revocable Trust U/A/D 2/16/83
Robert J. Morris Trust U/A/D 7/26/65
Clara Morris Trust U/A/D 12/20/55
Ellen J. Morris
Ellen J. Morris 1997 Children's Trust U/A/D 11/3/97
Bruce E. Morris
Bruce Morris 1997 Children's Trust U/A/D 11/3/97
Richard A. Morris
Richard A. Morris 1997 Children's Trust U/A/D 10/31/97
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Ellen J. Morris Family Gift Trust U/A/D 9/27/85
Bruce E. Morris Family Gift Trust U/A/D 9/27/85
Richard A. Morris Family Gift Trust U/A/D 9/27/85
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LEHMAN FAMILY
A. FEL-PRO MANAGEMENT CO.
Elliot Lehman Trust dated 5/20/87
Frances M. Lehman Trust dated 5/20/87
Kenneth A. Lehman
Lucy G. Lehman
Kay L. Schlozman
Stanley F. Schlozman
Paul A. Lehman
B. FEL-PRO MASTER GENERAL PARTNERSHIP
Kenneth A. Lehman 1992E Family Trust
Paul A. Lehman 1992E Family Trust
Kay Lehman Schlozman 1992E Family Trust
Paul A. Lehman 1992F Family Trust
Kay Lehman Schlozman 1992F Family Trust
Kenneth A. Lehman 1992F Family Trust
C. MERIDIAN PARTS CORPORATION
Kenneth A. Lehman 1992E Family Trust dated 12/11/92
Paul A. Lehman 1992E Family Trust dated 12/11/92
Kay Lehman Schlozman 1992E Family Trust dated 12/11/92
Kenneth A. Lehman 1992F Family Trust dated 12/11/92
Paul A. Lehman 1992F Family Trust dated 12/11/92
Kay Lehman Schlozman 1992F Family Trust dated 12/11/92
D. FELT PRODUCTS MFG. CO.
Elliot Lehman Trust dated 5/20/87
Frances M. Lehman Trust dated 5/20/87
E. Lehman Fifteen Year Income Trust
F. Lehman Fifteen Year Income Trust
Kenneth A. Lehman 1996 E Family Trust U/A/D 6/11/96
Kenneth A. Lehman 1996 F Family Trust U/A/D 6/11/96
Paul Lehman 1996 E Family Trust U/A/D 6/11/96
Paul Lehman 1996 E Family Trust U/A/D
Kay Lehman Schlozman 1996 E Family Trust U/A/D 6/11/96
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Kay Lehman Schlozman 1996 F Family Trust U/A/D 6/11/96
Kenneth A. Lehman
Lucy G. Lehman
Kay L. Schlozman
Stanley F. Schlozman
Paul A. Lehman
Ronna Stamm
Kay Schlozman Children's Trust U/A/D 12/20/82
Schlozman Family Trust U/A/D 9/30/85
Schlozman Family Gift Trust U/A/D 9/30/85
Kay Lehman Schlozman 1997 Children's Trust U/A/D 11/3/97
Paul Lehman Children's Trust U/A/D 12/20/82
Paul Lehman Irrevocable Children's Trust U/A/D 9/30/85
Paul Lehman Children's Trust U/A/D 9/30/85
Betsy Ganford Lehman Irrevocable Trust No. 1 dated 12/22/83
Betsy Ganford Lehman Irrevocable Trust No. 2 U/A/D 9/30/85
Kenneth Lehman Children's Trust U/A/D 12/20/82 F/B/O Betsy Ganford
Lehman
Kenneth Lehman Children's Trust U/A/D 9/30/85 F/B/O Betsy Ganford
Lehman
Amy Ganford Lehman Irrevocable Trust No. 1 dated 12/22/83
Amy Ganford Lehman Irrevocable Trust No. 2 U/A/D 9/30/85
Kenneth Lehman Children's Trust U/A/D 12/20/82 F/B/O Amy Ganford
Lehman
Kenneth Lehman Children's Trust U/A/D 9/30/85 F/B/O Amy Ganford Lehman
Peter Ganford Lehman Irrevocable Trust No. 1 dated 12/22/83
Peter Ganford Lehman Irrevocable Trust No. 2 U/A/D 9/30/85
Kenneth Lehman Children's Trust U/A/D 12/20/82 F/B/O Peter Ganford
Lehman
Kenneth Lehman Children's Trust U/A/D 9/30/85 F/B/O Peter Ganford
Lehman
Daniel Aaron Schlozman Trust No. 1 U/A/D 12/30/81
Daniel Aaron Schlozman Trust No. 2 U/A/D 12/30/81
Schlozman 1994 Gift Trust for Julia U/A/D 1/3/94
Paul A. Lehman Irrevocable Family Trust A U/A/D 11/3/97
Jonathan Lehman Irrevocable Trust No. 1 dated 12/22/83
Michael Lehman Irrevocable Trust No. 1 dated 12/22/83
Elizabeth Lehman Irrevocable Trust No. 2 dated 5/12/97
59
<PAGE> 60
WEINBERG/RADOV/KESSLER FAMILY
A. FEL-PRO MANAGEMENT CO.
Sylvia Radov Revocable Trust U/A/D 10/23/85
Lewis C. Weinberg Irrevocable Trust dated 8/12/76
Barbara W. Kessler Revocable Trust U/A/D 7/26/82
Dennis L. Kessler Revocable Trust U/A/D 7/26/82
David A. Weinberg Estate Trust U/A/D 6/5/84
Kessler 1996 Gift Trust for Daniel U/A/D 12/16/96
Daniel C. Weinberg Revocable Trust U/A/D 7/29/97
Carol Jung
Ronna Stamm
B. FEL-PRO MASTER GENERAL PARTNERSHIP
Weinberg 1992 Gift Trust for Barbara U/A/D 12/10/92
Weinberg 1992 Gift Trust for David U/A/D 12/10/92
Weinberg 1992 Gift Trust for Daniel U/A/D 12/10/92
Sylvia MGP Trust for Barbara U/A/D 6/1/96
Sylvia MGP Trust for David U/A/D 6/1/96
Sylvia MGP Trust for Daniel U/A/D 6/1/96
C. MERIDIAN PARTS CORPORATION
Sylvia 1992 Gift Trust for Barbara U/A/D 12/10/92
Sylvia 1992 Gift Trust for David U/A/D 12/10/92
Sylvia 1992 Gift Trust for Daniel U/A/D 12/10/92
D. FELT PRODUCTS MFG. CO.
Sylvia M. Radov
Lewis C. Weinberg Irrevocable Trust dated 8/12/76
Sylvia 1996 Gift Trust for Barbara U/A/D 4/4/96
Sylvia 1996 Gift Trust for David U/A/D 4/4/96
Sylvia 1996 Gift Trust for Daniel U/A/D 4/4/96
Barbara W. Kessler Revocable Trust U/A/D 7/26/82
Dennis L. Kessler Revocable Trust U/A/D 7/26/82
Dennis L. Kessler 1997 Children's Trust U/A/D 11/3/97
Kessler Family Trust U/A/D 9/30/85
60
<PAGE> 61
David A. Weinberg Estate Trust U/A/D 6/5/84
DAW Family Trust U/A/D 9/30/85
Daniel C. Weinberg Revocable Trust U/A/D 7/29/97
Carol Jung
Kessler 1996 Gift Trust for David U/A/D 12/16/96
Kessler 1996 Gift Trust for Daniel U/A/D 12/16/96
LCW-DCW Family Gift Trust U/A/D 9/30/85
SMR-DCW Family Gift Trust U/A/D 9/30/85
DCW Family Trust U/A/D 9/30/85
Lewis C. Weinberg Grandchildren's Gift Trust for Keith Albert U/A/D
12/1/82
Keith A. Kessler
Keith A. Kessler 1997 Children's Trust U/A/D 11/3/97
Lewis C. Weinberg Grandchildren's Gift Trust for Arthur Jay U/A/D
12/1/82
Arthur J. Kessler
Lewis C. Weinberg Grandchildren's Gift Trust for Eric Joseph U/A/D
12/1/82
Eric Joseph Kessler Irrevocable Trust U/A/D 12/27/77
Lewis C. Weinberg Grandchildren's Gift Trust for Mindy Joy U/A/D
12/1/82
Mindy Joy Weinberg Irrevocable Trust U/A/D 12/27/77
SMR-DAW Children's Gift Trust for Mindy Joy U/A/D 12/13/82
Lewis C. Weinberg Grandchildren's Gift Trust for Brian Lee U/A/D
12/1/82
Brian L. Weinberg SMR-DAW Children's Gift Trust for Brian
U/A/D 12/13/82
Lewis C. Weinberg Grandchildren's Gift Trust for Zachary Daniel U/A/D
12/1/82
Zachary Daniel Weinberg Irrevocable Trust U/A/D 12/31/81
Abigail Weinberg Trust U/A/D 2/20/90
Abigail Weinberg Annual Gift Trust U/A/D 12/3/91
61
<PAGE> 62
EXHIBIT A
1. For purposes of the Agreement to which this EXHIBIT A is attached
(the "AGREEMENT"), the following terms shall have the following meanings:
"AFFILIATE" means, as to any specified Person, any other Person which,
directly or indirectly, controls, is controlled by or is under common control
with, such specified Person. For the purposes of this definition, "control"
means the possession of the power to direct or cause the direction of the
management and policies of such Person, whether through the ownership of voting
securities, by contract or otherwise.
"AVERAGE PRICE" means the average of the daily closing prices per share
for the F-M Common Stock on the New York Stock Exchange (as reported in the NYSE
Composite Transactions listing) for the twenty (20) trading days commencing with
the first trading day after the announcement by the parties hereto of the
execution of this Agreement.
"BANK DEBT" means all borrowings under that certain line of credit
by and between Fel-Pro Incorporated, Felt Products Mfg. Co. and The First
National Bank of Chicago, dated April 22, 1997.
"CHANGE OF CONTROL" has the meaning ascribed to it in the Retirement
Plan.
"CHARTER DOCUMENTS" means (i) with respect to a corporation, the
articles or certificate of incorporation and bylaws of such corporation, (ii)
with respect to a general partnership, the partnership or other similar
agreement of such general partnership, (iii) with respect to a limited
partnership, the certificate of limited partnership or similar state filing and
partnership or other similar agreement of such limited partnership, (iv) with
respect to a trust, the trust or similar agreement of such trust, (v) with
respect to a limited liability company, the certificate of organization or other
similar state filing and operating or other similar agreement of such limited
liability company and (vi) with respect to any Person, including the foregoing,
the charter or constantive documents and filings of such Person.
"DEBT AMOUNT" means the aggregate principal amount of all indebtedness
for borrowed money of the Companies and the Included Entities outstanding as of
the Closing.
"DISCLOSURE SCHEDULE" means the Disclosure Schedule, dated the date of
the Agreement, delivered to Buyer, as from time to time amended and/or
supplemented in accordance with SECTION 10.12(B) of the Agreement.
A-1
<PAGE> 63
"EFFECTIVE TIME SHARE VALUE" means (i) if the Average Price is greater
than or equal to $40.00 and less than or equal to $42.00, the Average Price;
(ii) if the Average Price is greater than $42.00, $42.00 plus fifty percent of
the amount by which the Average Price exceeds $42.00; and (iii) if the Average
Price is less than $40.00, $40.00 minus fifty percent of the amount by which
$40.00 exceeds the Average Price.
"ELIGIBLE EMPLOYEES" means the Participating Eligible Employees
and the Non-Participating Eligible Employees.
"EXCHANGE ACT" means the Securities Act of 1934, as amended, or any
successor law including the rules and regulations promulgated thereunder.
"EXCLUDED ASSETS" means the assets described on EXHIBIT C to the
Agreement.
"EXCLUDED ENTITIES" means those entities listed as Excluded Entities on
EXHIBIT B to the Agreement.
"FEL-PRO GROUP" means the Companies, the Included Entities and the
Excluded Entities.
"FELT" means Felt Products Mfg. Co., a Delaware corporation.
"F-M CASH ELECTION" means the election, exercisable by F-M, in F-M's
sole discretion, by written notice delivered to the Sellers' Representatives at
least five (5) business days prior to the Closing Date, if the Average Price is
below $40.00, to deliver cash in the amount of $215,000,000 to the Sellers at
the Closing in lieu of shares of F-M Exchangeable Preferred Stock as part of the
Purchase Price.
"F-M COMMON STOCK" means the Common Stock of F-M.
"F-M EXCHANGEABLE PREFERRED STOCK" means the Series E Mandatory
Exchangeable Preferred Stock of F-M.
"INCLUDED ENTITIES" means those entities listed as Included Entities on
EXHIBIT B to the Agreement.
"IRS" means the United States Internal Revenue Service or any successor
agency, and, to the extent relevant, the United States Department of the
Treasury.
"KNOWLEDGE OF SELLER" or "SELLERS' KNOWLEDGE" (or words of similar
import) means the actual knowledge of any member of the Operating Committee of
Fel-Pro Incorporated, the general managers of FP Diesel LP, FP Performance
Products LP and FP
A-2
<PAGE> 64
Chemical Products LP, respectively, the President of the Ventures Group of
Fel-Pro Incorporated or the Vice President International.
"LIEN" has the meaning set forth in SECTION 1.1.
"MATERIAL ADVERSE EFFECT" means (i) a material adverse effect on the
assets, condition (financial or otherwise), operations or business of the
Companies and the Included Entities, on a combined basis, or (ii) an effect that
will prevent Sellers from consummating the sale of the Equity Interests to Buyer
as contemplated by the Agreement. For purposes hereof, the filing of additional
lawsuits or actions relating to asbestos fibers in products manufactured or sold
by any Company or Included Entity shall be deemed not to have a "Material
Adverse Effect."
"NON-PARTICIPATING ELIGIBLE EMPLOYEES" means those Company Employees,
as of the Closing Date, who could satisfy the criteria set forth in Section 17
of the Retirement Plan to receive an allocation of a contribution upon a Change
of Control if they were employed by a Company or Included Entity that
participates in the Retirement Plan.
"PARTICIPATING ELIGIBLE EMPLOYEES" means those Company Employees, as of
the Closing Date, who could satisfy the criteria set forth in Section 17 of the
Retirement Plan to receive an allocation of a contribution upon a Change of
Control.
"PERMITTED LIENS" means (i) Liens for Taxes not yet due and payable or
that are being contested in good faith, (ii) Liens arising or resulting from any
action taken by Buyer or any of its Affiliates, (iii) Liens created by, arising
out of or specifically contemplated or permitted by the Agreement, and (iv)
Liens identified as Permitted Liens in any Section of the Disclosure Schedule,
(v) materialmen's, mechanics', workmen's, repairmen's, employees or other like
Liens arising in the course of construction or in the ordinary course of
operations or maintenance, in each such case securing obligations which are not
delinquent or are being contested in good faith, (vi) zoning restrictions,
easements, licenses or other restrictions on the use of real property or other
immaterial irregularities in title thereto or encumbrances thereon, so long as
the same do not materially interfere with or impair the use of such real
property in the manner normally used, (vii) Liens arising out of judgments or
awards with respect to which at the time an appeal or proceeding for review is
being prosecuted in good faith if adequate reserves with respect thereto have
been established and are being maintained and with respect to which there shall
have been secured a stay of execution pending such appeal or proceeding for
review and (viii) that are immaterial, individually and in the aggregate, with
respect to the assets of the Companies and the Included Entities, taken as a
whole.
"PERMITTED TRANSFEREE" means, with respect to a Seller, (i) the spouse
or lineal descendants (or their spouses) of such Seller, (ii) any trust for the
benefit of such Seller or
A-3
<PAGE> 65
the benefit of the spouse or lineal descendants (or their spouses) of such
Seller, (iii) any Person in which such Seller, the spouse and the lineal
descendants (or their spouses) of such Seller are the direct and/or beneficial
owners of all of the equity interests, (iv) the personal representative of such
Seller upon such Seller's death for purposes of administration of such Seller's
estate or upon such Seller's incompetency for purposes of the protection and
management of the assets of such Seller, (v) if such Seller is a trust, the
beneficiary or beneficiaries of such trust and (vi) another Seller.
"PERSON" means any individual, corporation, partnership, limited
liability company, joint venture, association, joint stock company, trust
(including any beneficiary thereof), unincorporated organization or government
or any agency or political subdivision thereof.
"PROPRIETARY RIGHTS" means all patents, patent applications, patent
disclosures and inventions (whether or not patentable and whether or not reduced
to practice); all trademarks, service marks, trade dress, trade names and
corporate names; all registered and unregistered statutory and common law
copyrights; all registrations, applications and renewals for any of the
foregoing; all trade secrets, confidential information, ideas, formulae,
compositions, know-how, manufacturing and production processes and techniques,
research and development information, drawings, specifications, designs, plans,
improvements, proposals, technical and computer data, documentation and
software, financial, business and marketing plans, and franchisee, customer and
supplier lists and related information and all other proprietary rights.
"RETIREMENT PLAN" means the Fel-Pro Incorporated Employees' Profit
Sharing and Retirement Plan (also incorporating the provisions of the Fel-Pro
Incorporated Employees' Money Purchase Plan), including any amendments made
prior to Closing.
"SEC" means the Securities and Exchange Commission of the United
States.
"SECURITIES ACT" means the Securities Act of 1933, as amended, or any
successor law including the rules and regulations promulgated thereunder.
"SELLERS' REPRESENTATIVES" means, collectively, Richard A. Morris,
David A. Weinberg and Kenneth A. Lehman, and any one of them, acting pursuant to
the power-of-attorney granted to the foregoing pursuant to Section 4 of that
certain Equityholders Agreement dated September 26, 1997.
"SUBSIDIARY" means each corporation or other Person in which a Person
owns or controls, directly or indirectly, capital stock or other equity
interests representing more than 50% of the outstanding voting stock or other
equity interests of such corporation or other Person.
A-4
<PAGE> 66
2. The following terms are defined in the sections of the Agreement
indicated:
<TABLE>
<CAPTION>
DEFINED TERM SECTION
<S> <C>
"338 Election".............................................................................7.7(a)
"Agreement"..........................................................................Introduction
"Benefit Plans"...........................................................................2.11(a)
"Buyer"..............................................................................Introduction
"Buyer Adverse Effect"........................................................................3.2
"Buyer Plan"...............................................................................9.1(b)
"Buyer SEC Reports"...........................................................................3.7
"Buyer's Representatives"..................................................................4.1(a)
"Cash Portion".............................................................................1.1(a)
"cause"....................................................................................9.1(e)
"Certificate of Designations...............................................................5.1(f)
"change in control"........................................................................9.1(e)
"Change of Control Formulas"............................................................9.1(g)(i)
"Chemical".................................................................................5.1(c)
"Chemical Lease"...........................................................................5.1(c)
"Closing".....................................................................................1.2
"Closing Date"................................................................................1.2
"Code"....................................................................................2.11(c)
"Companies".............................................................................Recital A
"Company Employees"........................................................................9.1(a)
"Confidentiality Agreement"................................................................4.1(b)
"Corporations"..........................................................................Recital A
"DOJ".........................................................................................4.4
"Environmental Requirements"..............................................................2.17(a)
"ERISA".......................................................................................2.5
"Equity Interests"............................................................................1.1
"Financial Statements".....................................................................2.6(a)
"F-M"................................................................................Introduction
"F-M Preferred Stock".........................................................................3.6
"FTC".........................................................................................4.4
"GAAP"..................................................................................2.6(a)(i)
"Governmental Action/Filing"..................................................................2.5
"Hazardous Materials".....................................................................2.17(b)
</TABLE>
A-5
<PAGE> 67
<TABLE>
<S> <C>
"HSR Act".....................................................................................2.5
"Included Real Property"......................................................................1.1
"Leased Real Property".......................................................................2.18
"Liabilities/Liability"....................................................................2.6(b)
"Lien"........................................................................................1.1
"Meridian".................................................................................7.5(a)
"Meridian Transaction".....................................................................7.5(a)
"MGP"...................................................................................Recital A
"Owned Real Property"........................................................................2.18
"Partnership Interests".......................................................................1.1
"PBGC"........................................................................................2.5
"Permit"......................................................................................2.5
"Policies"...................................................................................2.20
"Proceeding"..................................................................................2.8
"Purchase Price"..............................................................................1.1
"Real Property"..............................................................................2.18
"Realty"................................................................................Recital C
"Registration Agreement"...................................................................5.1(g)
"Seller(s)"..........................................................................Introduction
"Seller Group"............................................................................2.11(c)
"Seller Group Plan".......................................................................2.11(c)
"Shares"......................................................................................1.1
"Special Bonus"............................................................................9.1(g)
"Stock Portion"............................................................................1.1(a)
"Surviving Representations and Warranties"................................................10.1(c)
"Taxes"................................................................................2.13(b)(v)
"Trust"....................................................................................2.2(e)
</TABLE>
A-6
<PAGE> 68
EXHIBIT B
INCLUDED ENTITIES
Fel-Pro Incorporated, an Illinois corporation
Fel-Pro Canada, a Canadian corporation
Fel-Pro Mercosur L.P., a Delaware limited partnership [INACTIVE]
FP Performance Products LP, a Delaware limited partnership
Fel-Pro Specialty Sealing Products L.P., a Delaware limited
partnership
Fel-Pro Chemical Products L.P., a Delaware limited partnership
Fel-Pro Chemical Products Latin America L.P., a Delaware limited
partnership
Fel-Pro S.A., a Colombian corporation
Fel-Pro Limited, a UK private limited corporation Polymer Scotland,
Ltd., a UK private limited corporation
FP Diesel L.P., a Delaware limited partnership
FP Diesel, Limited, a UK private limited corporation MPC Export, Inc.
a California corporation
Fel-Pro Chemical Products Chile, S.A., a Chilean corporation Demech
Fel-Pro Private Limited, an Indian limited partnership
EXCLUDED ENTITIES
Fel-Pro Investments, L.L.C., a Delaware limited liability company
Fel-Pro Realty Corporation, an Illinois corporation
McCormick Investments, Inc., a Delaware corporation
McCormick Investments L.P., a Delaware limited partnership
B-1
<PAGE> 69
EXHIBIT C
EXCLUDED ASSETS
<TABLE>
<S> <C>
12-28-97
Estimated(1)
(000's)
$ 9,096 a. All cash of the Companies and Included Entities, including, but
(15,500) Line of Credit not limited to, the proceeds received in the repayment of any indebtedness
( 6,404) of borrowed money from another Company or Included Entity.
6,035 b. All marketable securities owned by any Company or Included Entity (except for
marketable securities included in the Fel-Pro Incorporated Employee Benefits
Trust).
9,860 c. All life insurance policies owned by any Company or Included
Entity.
25,453 d. All receivables owing by all insurance trusts and split dollar insurance
receivables owing to any Company or Included Entity.
8,558 e. All notes receivable due from the shareholders and partners.
0 f. All membership interests of three limited liability companies or
partnerships created to hold only Excluded Assets.
156 g. All trade and accounts receivable that exist between any Company
or Included Entity, on the one hand, and any Excluded Entity, on the other
hand.
(18,261) h. All notes receivable (notes payable) that exist between any of
the Companies, the Included Entities or the Excluded Entities.
</TABLE>
C-1
<PAGE> 70
(1) These amounts are expected to change prior to the Closing.
C-2
<PAGE> 1
EXHIBIT 3.2
BYLAWS
OF
FEDERAL-MOGUL CORPORATION
<PAGE> 2
BYLAWS
OF
FEDERAL-MOGUL CORPORATION
INDEX
PAGE
----
ARTICLE I - SHAREHOLDERS 1
- -------------------------
(1)
Section 1 - Annual Meeting 1
(2)
Section 2 - Special Meeting 1
Section 3 - Place of Meeting 2
Section 4 - Notice of Meeting 2
(3)
Section 5 - Adjourned Meetings 2
Section 6 - Voting Lists 2
Section 7 - Quorum 3
Section 8 - Manner of Acting 3
(4)
Section 9 - Postponement of Annual or Special Meeting 3
(5)
Section 10 - Nomination and Shareholder Business Bylaw 3
ARTICLE II - DIRECTORS 6
- -----------------------
Section 1 - General Powers 6
(6)
Section 2 - Number, Tenure, Qualifications, & Removal 6
Section 3 - Annual Meetings 7
Section 4 - Regular Meetings 7
Section 5 - Special Meetings 7
- -----------------------
(1) Amended 5/21/85, 7/25/90
(2) Amended 11/03/88
(3) Amended 7/25/90
(4) Amended 7/25/90
(5) Amended 7/25/90
(6) Amended 8/01/84, 2/04/88, 2/08/89, 9/28/89, 7/24/91, 4/26/95, 2/04/98
-i-
<PAGE> 3
PAGE
----
(7)
Section 6 - Notice 8
Section 7 - Quorum 8
Section 8 - Manner of Acting 9
Section 9 - Vacancies 9
Section 10 - Compensation 9
Section 11 - Committees 9
ARTICLE III - OFFICERS 9
- -----------------------
Section 1 - Number 9
Section 2 - Election and Term of Office 10
Section 3 - Removal and Resignations 10
Section 4 - Vacancies 10
Section 5 - The Chief Executive Officer 10
Section 6 - Authority of Officers, Agents and Employees,
Generally 11
Section 7 - The Chairman of the Board, The Vice Chairman
of the Board and The President 12
(8)
Section 8 - The Secretary 12
Section 9 - The Treasurer 13
Section 10 - Assistant Secretaries and Assistant Treasurers 13
Section 11 - Remuneration 13
(9)
ARTICLE IV - INDEMNIFICATION OF DIRECTORS, OFFICERS,
- -----------------------------------------------------
EMPLOYEES AND AGENTS 14
--------------------
Section 1 - Non-Derivative Actions 14
Section 2 - Derivative Actions 14
Section 3 - Expenses or Successful Defense 15
Section 4 - Definition 15
Section 5 - Contract Right; Limitation on Indemnity 16
Section 6 - Right of Claimant to Bring Suit 16
Section 7 - Proportionate Indemnity 17
Section 8 - Expense Advance 17
Section 9 - Non-Exclusivity of Rights 17
Section 10 - Indemnification of Employees and Agents of
the Corporation 18
- ---------------------------
(7) Amended 7/25/90
(8) Amended 8/01/84
(9) Amended 11/03/88
-ii-
<PAGE> 4
Page
----
Section 11 - Insurance 18
Section 12 - No Liability if Determination Made in Good Faith 18
Section 13 - Scope of Indemnity; Changes in Michigan Law 18
Section 14 - Severability 19
ARTICLE V - FIXING RECORD DATE 19
- -------------------------------
ARTICLE VI - LOANS, CHECKS, DEPOSITS, ETC. 20
- -------------------------------------------
Section 1 - Loans 20
Section 2 - Checks, Drafts, etc. 20
Section 3 - Deposits 20
ARTICLE VII - CERTIFICATES FOR SHARES 21
- --------------------------------------
(10)
Section 1 - Certificates for Shares 21
Section 2 - Lost Certificates 21
Section 3 - Transfer of Shares 21
Section 4 - Regulations 22
Section 5 - Elimination of Certificates for Stock 22
ARTICLE VIII - FISCAL YEAR 22
- ---------------------------
ARTICLE IX - SEAL 22
- ------------------
(11)
ARTICLE X - EMERGENCY PROVISIONS 22
- ----------------------------------
Section 1 - General 22
Section 2 - Unavailable Directors 23
Section 3 - Authorized Number of Directors 23
Section 4 - Quorum 23
Section 5 - Creation of Emergency Committee 23
Section 6 - Constitution of Emergency Committee 24
Section 7 - Powers of Emergency Committee 24
Section 8 - Directors Becoming Available 25
Section 9 - Election of Board of Directors 25
Section 10 - Termination of Emergency Committee 25
ARTICLE XI - AMENDMENTS 25
- ------------------------
- ------------------------
(10) Amended 7/28/90
(11) Amended 8/01/84
-iii-
<PAGE> 5
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.
-1-
<PAGE> 6
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 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 and
place of the meeting, shall be subject to the inspection by any shareholder
during the whole time of the meeting, and shall be
-2-
<PAGE> 7
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 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.
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(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 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
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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) 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 and 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 meeting 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.
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(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.
(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 May 20, 1998, shall be ten 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
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have requested that he continue to hold office following such 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.
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
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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.
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
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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.
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,
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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 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
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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, 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 the following powers and duties subject to the direction
and under the supervision of the Board of Directors. The Chairman
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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.
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
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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 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
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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
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
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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 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, 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
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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 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.
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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 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.
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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 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
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<PAGE> 23
such amendment), against all 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 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
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<PAGE> 24
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 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
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<PAGE> 25
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 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.
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<PAGE> 26
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.
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
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<PAGE> 27
are unwilling to perform their duties or whose whereabouts are unknown shall
automatically cease to be directors, 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 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
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<PAGE> 28
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 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
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<PAGE> 29
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.
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<PAGE> 1
EXHIBIT 4.6
10,000,000 TRUST CONVERTIBLE PREFERRED SECURITIES
FEDERAL-MOGUL FINANCING TRUST
7% TRUST CONVERTIBLE PREFERRED SECURITIES
(liquidation amount $50 per convertible preferred security)
guaranteed to the extent set forth in the guarantee agreement by,
and convertible into the common stock of,
FEDERAL-MOGUL CORPORATION
PURCHASE AGREEMENT
November 24, 1997
<PAGE> 2
November 24, 1997
Morgan Stanley & Co. Incorporated
1585 Broadway
New York, New York 10036
Dear Sirs and Mesdames:
Federal-Mogul Financing Trust, a special purpose statutory business
trust created under the laws of the State of Delaware (the "TRUST"), proposes to
issue and sell to Morgan Stanley & Co. Incorporated (the "INITIAL PURCHASER")
10,000,000 of its 7% convertible preferred securities, liquidation preference
$50 per convertible preferred security (the "FIRM SECURITIES"). The Trust also
proposes to issue and sell to the Initial Purchaser not more than an additional
1,500,000 of its 7% convertible preferred securities, liquidation preference $50
per convertible preferred security (the "ADDITIONAL SECURITIES"), if and to the
extent that you shall have determined to exercise the right to purchase such
convertible preferred securities granted to you in Section 2 hereof. The Firm
Securities and the Additional Securities are hereinafter collectively referred
to as the "CONVERTIBLE PREFERRED SECURITIES." The Convertible Preferred
Securities will be convertible into shares of common stock without par value
(the "UNDERLYING SECURITIES") of Federal-Mogul Corporation, a Michigan
corporation ("FEDERAL-MOGUL" or the "COMPANY").
<PAGE> 3
The Convertible Preferred Securities will be guaranteed by the Company
to the extent described in the Memorandum (as defined below), with respect to
distributions and amounts payable upon liquidation or redemption pursuant to the
Preferred Securities Guarantee Agreement to be dated as of December 1, 1997
executed and delivered by the Company and The Bank of New York, as trustee (the
"GUARANTEE TRUSTEE"), for the benefit of the holders from time to time of the
Convertible Preferred Securities (the "GUARANTEE"). The Trust will use the
proceeds from the sale of the Convertible Preferred Securities and the sale of
Trust Common Securities (as defined below) to purchase from the Company
$515,463,950 aggregate principal amount of its 7% Convertible Junior
Subordinated Debentures due December 1, 2027 ($592,783,550 aggregate principal
amount if and to the extent that you shall have determined to exercise the right
to purchase Additional Securities granted to you in Section 2 hereof) (the
"CONVERTIBLE DEBENTURES") to be issued under a Junior Subordinated Indenture to
be dated as of December 1, 1997 between the Company and The Bank of New York, as
trustee (the "INDENTURE TRUSTEE") (as supplemented by the First Supplemental
Indenture to be dated as of December 1, 1997 between the Company and the
Indenture Trustee, the "INDENTURE"). The Company will also be the holder of one
hundred percent of the common securities representing undivided beneficial
interests in the assets of the Trust (the "TRUST COMMON SECURITIES"). The Trust
has been created under Delaware law pursuant to the filing of a Certificate of
Trust (the "CERTIFICATE OF TRUST") with the Secretary of State of the State of
Delaware, and will be governed by an Amended and Restated Declaration of Trust
(the "DECLARATION") executed by the Company, as Sponsor, and by the trustees and
administrators of the Trust (the "FMFT TRUSTEES"), all of whom have been
appointed by the Company as holder of one hundred percent of the Trust Common
Securities. A majority of the FMFT Trustees (the "ADMINISTRATORS") are persons
who are employees or officers of or affiliated with the Company. One FMFT
Trustee, The Bank of New York, is unaffiliated with the Company and shall act as
institutional trustee (the "INSTITUTIONAL TRUSTEE") and as Indenture Trustee for
the purposes of the Trust Indenture Act of 1939, as amended (the "TRUST
INDENTURE ACT"). The Bank of New York (Delaware) will act as Delaware Trustee.
The Convertible Preferred Securities and the Underlying Securities will
be offered without being registered under the Securities Act of 1933, as amended
(the "SECURITIES ACT"), to qualified institutional buyers in compliance with the
exemption from registration provided by Rule 144A under the Securities Act and
in offshore transactions in reliance on Regulation S under the Securities Act
("REGULATION S").
The Initial Purchaser and its direct and indirect transferees will be
entitled to the benefits of a Registration Rights Agreement to be dated as of
December 1, 1997 among the Trust, the Company and the Initial Purchaser (the
"REGISTRATION RIGHTS AGREEMENT").
<PAGE> 4
In connection with the sale of the Convertible Preferred Securities,
the Company has prepared a preliminary offering memorandum (the "PRELIMINARY
MEMORANDUM") and will prepare a final offering memorandum (the "FINAL
MEMORANDUM" and, with the Preliminary Memorandum, each a "MEMORANDUM") including
or incorporating by reference a description of the terms of the Convertible
Preferred Securities, the Convertible Debentures, the Guarantee and the
Underlying Securities, the terms of the offering, a description of the Trust and
a description of the Company. As used herein, the term "MEMORANDUM" shall
include in each case the documents incorporated by reference therein. The terms
"SUPPLEMENT," "AMENDMENT" and "AMEND" as used herein with respect to a
Memorandum shall include all documents deemed to be incorporated by reference in
the Preliminary Memorandum or Final Memorandum that are filed subsequent to the
date of such Memorandum with the Securities and Exchange Commission (the
"COMMISSION") pursuant to the Securities Exchange Act of 1934, as amended (the
"EXCHANGE ACT").
1. Representations and Warranties. Each of the Trust and the Company
jointly and severally represents and warrants to, and agrees with, the Initial
Purchaser that:
(a) (i) Each document, if any, filed or to be filed pursuant
to the Exchange Act and incorporated by reference in either Memorandum
complied or will comply when so filed in all material respects with the
Exchange Act and the applicable rules and regulations of the Commission
thereunder and (ii) the Preliminary Memorandum does not contain, and
the Final Memorandum, in the form used by the Initial Purchaser to
confirm sales and on the Closing Date (as defined in Section 4), will
not contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading, except
that the representations and warranties set forth in this paragraph do
not apply to statements or omissions in either Memorandum based upon
information relating to the Initial Purchaser furnished to the Company
and the Trust in writing by the Initial Purchaser expressly for use
therein.
(b) The Company has been duly incorporated, is validly
existing as a corporation in good standing under the laws of the
jurisdiction of its incorporation, has the corporate power and
authority to own its property and to conduct its business as described
in each Memorandum and is duly qualified to transact business and is in
good standing in each jurisdiction in which the conduct of its business
or its ownership or leasing of property requires such qualification,
except to the extent that the failure to be so qualified or be in good
standing would not have a material adverse effect on the Company and
its subsidiaries, taken as a whole.
<PAGE> 5
(c) Each subsidiary of the Company that is a "significant
subsidiary" within the meaning of Regulation S-X under the Securities
Act (each, a "SIGNIFICANT SUBSIDIARY") has been duly incorporated, is
validly existing as a corporation in good standing under the laws of
the jurisdiction of its incorporation, has the corporate power and
authority to own its property and to conduct its business as described
in each Memorandum and is duly qualified to transact business and is in
good standing in each jurisdiction in which the conduct of its business
or its ownership or leasing of property requires such qualification,
except to the extent that the failure to be so qualified or be in good
standing would not have a material adverse effect on the Company and
its subsidiaries, taken as a whole; all of the issued shares of capital
stock of each Significant Subsidiary have been duly and validly
authorized and issued, are fully paid and non-assessable and are owned
directly by the Company, free and clear of all liens, encumbrances,
equities or claims, except to the extent that failure to be so
authorized, issued and fully paid and non-assessable and so owned would
not have a material adverse effect on the Company and its subsidiaries,
taken as a whole.
(d) The Trust has been duly created and is validly existing in
good standing as a business trust under the Delaware Business Trust
Act, is a "grantor trust" for Federal income tax purposes, has the
power and authority to conduct its business as presently conducted and
as described in each Memorandum and is not required to be authorized to
do business in any other jurisdiction.
(e) This Agreement has been duly authorized, executed and
delivered by each of the Trust and the Company.
(f) The Indenture has been duly authorized by the Company and,
upon execution and delivery thereof by the Company (and assuming due
authorization, execution and delivery by each party thereto other than
the Company), will be a valid and binding agreement of the Company,
enforceable in accordance with its terms, subject to applicable
bankruptcy, insolvency and similar laws affecting creditors' rights
generally and general principles of equity.
(g) The Convertible Debentures have been duly authorized by
the Company and, when executed and authenticated in accordance with the
provisions of the Indenture and delivered to the Trust against payment
therefor as described in the Final Memorandum, will constitute valid
and binding obligations of the Company, enforceable in accordance with
their terms, subject to applicable bankruptcy, insolvency and similar
laws affecting creditors' rights generally and general principles of
equity, and will be entitled to the benefits of the Indenture.
<PAGE> 6
(h) The Guarantee has been duly authorized by the Company and,
upon execution and delivery thereof by the Company (and assuming due
authorization, execution and delivery by the Guarantee Trustee), will,
as of the Closing Date, be a valid and binding agreement of the
Company, enforceable in accordance with its terms, subject to
applicable bankruptcy, insolvency and similar laws affecting creditors'
rights generally and general principles of equity and except as rights
to indemnification may be limited under applicable law.
(i) The Registration Rights Agreement has been duly authorized
by each of the Trust and the Company and, when executed and delivered
by each of the Trust and the Company (and assuming due authorization,
execution and delivery by the Initial Purchaser), will be a valid and
binding agreement of each of the Trust and the Company, enforceable in
accordance with its terms, subject to applicable bankruptcy, insolvency
and similar laws affecting creditors' rights generally and general
principles of equity and except as rights to indemnification and
contribution may be limited under applicable law.
(j) The Declaration has been duly authorized by the Company
and, upon execution and delivery thereof by the Company (and assuming
due authorization, execution and delivery thereof by each party thereto
other than the Company), will, as of the Closing Date, be a valid and
binding agreement of the Company and the FMFT Trustees, enforceable in
accordance with its terms, subject to applicable bankruptcy, insolvency
and similar laws affecting creditors' rights generally and general
principles of equity and except as rights to indemnification may be
limited under applicable law.
(k) The Convertible Preferred Securities have been duly
authorized by the Declaration and, when executed and authenticated in
accordance with the provisions of the Declaration and delivered to and
paid for by the Initial Purchaser in accordance with the terms of this
Agreement, will be validly issued and (subject to the terms of the
Declaration) fully paid and non-assessable undivided beneficial
interests in the assets of the Trust, and the issuance of such
Convertible Preferred Securities will not be subject to any preemptive
or similar rights. Holders of the Convertible Preferred Securities will
be entitled to the same limitation of personal liability extended to
stockholders of private corporations for profit organized under the
General Corporation Law of the State of Delaware. The Trust Common
Securities have been duly authorized by the Declaration and, when
issued and delivered to the Company against payment therefor as
described in the Final Memorandum, will be validly issued undivided
beneficial interests in the
<PAGE> 7
assets of the Trust, and the issuance of such Trust Common Securities
will not be subject to any preemptive rights.
(l) The execution and delivery by the Company of, and the
performance by the Company of its obligations under, this Agreement,
the Declaration, the Registration Rights Agreement, the Guarantee, the
Indenture and the Convertible Debentures will not contravene any
provision of applicable law, the Declaration or the certificate of
incorporation or by-laws of the Company or any agreement or other
instrument binding upon the Company or any of its Significant
Subsidiaries that is material to the Company and its subsidiaries,
taken as a whole, or any judgment, order or decree of any governmental
body, agency or court having jurisdiction over the Company or any
Significant Subsidiary, and no consent, approval, authorization or
order of, or qualification with, any governmental body or agency is
required for the performance by the Company of its obligations under
this Agreement, the Declaration, the Registration Rights Agreement, the
Guarantee, the Indenture or the Convertible Debentures, except such as
may be required by the securities or Blue Sky laws of the various
states in connection with the offer and sale of the Convertible
Preferred Securities and the Underlying Securities and by Federal and
state securities laws with respect to the Company's obligations under
the Registration Rights Agreement.
(m) The execution and delivery by the Trust of, and the
performance by the Trust of its obligations under, this Agreement and
the Registration Rights Agreement will not contravene any provision of
applicable law or the Declaration or any agreement or other instrument
binding upon the Trust that is material to the Trust, or any judgment,
order or decree of any governmental body, agency or court having
jurisdiction over the Trust, and no consent, approval, authorization or
order of, or qualification with, any governmental body or agency is
required for the performance by the Trust of its obligations under this
Agreement, except such as may be required by the securities or Blue Sky
laws of the various states in connection with the offer and sale of the
Convertible Preferred Securities and the Underlying Securities and by
Federal and state securities laws with respect to the Trust's
obligations under the Registration Rights Agreement.
(n) The authorized capital stock of the Company conforms as to
legal matters in all material respects to the description thereof
contained in the Final Memorandum.
(o) The Underlying Securities reserved for issuance upon the
conversion of the Convertible Debentures and the Convertible Preferred
Securities have been duly authorized and reserved and, when issued upon
<PAGE> 8
conversion of the Convertible Debentures or the Convertible Preferred
Securities in accordance with the terms thereof, will be validly
issued, fully paid and non-assessable, and the issuance of such
Underlying Securities will not be subject to any preemptive or similar
rights.
(p) The outstanding shares of the Company's Common Stock have
been duly authorized and are validly issued, fully paid and
nonassessable and are not subject to any preemptive or similar rights.
(q) There has not occurred any material adverse change, or any
development involving a prospective material adverse change, in the
condition, financial or otherwise, or in the earnings, business or
operations of the Trust or the Company and its subsidiaries, taken as a
whole, from that set forth in the Final Memorandum.
(r) The Company and its subsidiaries (i) are in compliance
with any and all applicable foreign, federal, state and local laws and
regulations relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants or
contaminants ("ENVIRONMENTAL LAWS"), (ii) have received all permits,
licenses or other approvals required of them under applicable
Environmental Laws to conduct their respective businesses and (iii) are
in compliance with all terms and conditions of any such permit, license
or approval, except where such noncompliance with Environmental Laws,
failure to receive required permits, licenses or other approvals or
failure to comply with the terms and conditions of such permits,
licenses or approvals would not, singly or in the aggregate, have a
material adverse effect on the Company and its subsidiaries, taken as a
whole.
(s) To the knowledge of the Company, there are no costs and
liabilities associated with Environmental Laws (including, without
limitation, any capital or operating expenditures required for
clean-up, closure of properties or compliance with Environmental Laws
or any permit, license or approval, any related constraints on
operating activities and any potential liabilities to third parties)
that would singly or in the aggregate, have a material adverse effect
on the Company and its subsidiaries, taken as a whole.
(t) The Trust is not, and after giving effect to the offering
and sale of the Convertible Preferred Securities and the application of
the proceeds thereof as described in the Final Memorandum, will not be
an "investment company" as such term is defined under the Investment
Company Act of 1940, as amended, and the Company is not, and after
giving effect to the sale of the Convertible Debentures and the
application of the proceeds thereof as described in the Final
Memorandum, will not be
<PAGE> 9
an "investment company" as such term is defined under the Investment
Company Act of 1940, as amended.
(u) There are no legal or governmental proceedings pending or,
to the knowledge of the Trust or the Company, threatened to which the
Trust or the Company or any of its Significant Subsidiaries is a party
or to which any of the properties of the Trust or the Company or any of
its Significant Subsidiaries is subject other than proceedings
accurately described in all material respects in the Final Memorandum
and proceedings with respect to which there is not a reasonable
probability of an adverse decision and that, if adversely decided,
would not have a material adverse effect on the Trust or the Company
and its subsidiaries, taken as a whole, or on the power or ability of
the Trust or the Company to perform its respective obligations under
this Agreement, the Indenture, the Convertible Preferred Securities,
the Convertible Debentures, the Declaration, the Guarantee or the
Registration Rights Agreement or to consummate the transactions
contemplated by the Final Memorandum.
(v) Neither the Company nor any affiliate (as defined in Rule
501(b) of Regulation D under the Securities Act, an "AFFILIATE") of the
Company has directly, or through any agent, (i) sold, offered for sale,
solicited offers to buy or otherwise negotiated in respect of, any
security (as defined in the Securities Act) that is or will be
integrated with the sale of the Convertible Preferred Securities in a
manner that would require the registration of the Convertible Preferred
Securities under the Securities Act or (ii) engaged in any form of
general solicitation or general advertising in connection with the
offering of the Convertible Preferred Securities (as those terms are
used in Regulation D under the Securities Act), or in any manner
involving a public offering within the meaning of Section 4(2) of the
Securities Act.
(w) The Convertible Preferred Securities satisfy the
requirements set forth in Rule 144A(d)(3) under the Securities Act.
(x) None of the Company, its Affiliates or any person acting
on its or their behalf has engaged or will engage in any directed
selling efforts (as that term is defined in Regulation S under the
Securities Act ("REGULATION S")) with respect to the Convertible
Preferred Securities, and the Company and its Affiliates and any person
acting on its or their behalf have complied and will comply with the
offering restrictions requirements of Regulation S, except that no
representation, warranty or agreement is made by the Company in this
paragraph with respect to the actions or omissions of the Initial
Purchaser or its agents.
(y) Assuming the accuracy of the representations and
warranties
<PAGE> 10
and compliance with the agreements of the Initial Purchaser in Section
7, it is not necessary in connection with the offer, sale and delivery
of the Convertible Preferred Securities to the Initial Purchaser in
the manner contemplated by this Agreement or in connection with the
initial resale of such Convertible Preferred Securities by the Initial
Purchaser in accordance with Section 7 of this Agreement to register
the Convertible Preferred Securities, the Underlying Securities, the
Guarantee or the Convertible Debentures under the Securities Act or to
qualify the Indenture under the Trust Indenture Act.
2. Agreements to Sell and Purchase. Upon the basis of the
representations and warranties herein contained, the Trust hereby agrees to sell
to the Initial Purchaser, and the Initial Purchaser, upon the basis of the
representations and warranties herein contained, but subject to the conditions
hereinafter stated, agrees to purchase from the Trust the Firm Securities at a
purchase price of $50 per Convertible Preferred Security (the "PURCHASE PRICE").
In consideration of such purchases on the Closing Date, the proceeds of
which will be used to purchase the Convertible Debentures, the Company shall pay
to the Initial Purchaser, in immediately available funds, on the Closing Date a
commission of $1.50 per Convertible Preferred Security.
On the basis of the representations and warranties contained in this
Agreement, and subject to its terms and conditions, the Trust agrees to sell to
the Initial Purchaser the Additional Securities, and the Initial Purchaser shall
have a one-time right to purchase up to 1,500,000 Additional Securities at the
Purchase Price plus accrued distributions, if any, to the date of payment and
delivery. If you elect to exercise such option, you shall so notify the Trust
and the Company in writing not later than 30 days after the date of this
Agreement, which notice shall specify the number of Additional Securities to be
purchased by the Initial Purchaser and the date on which such Additional
Securities are to be purchased. Such date may be the same as the Closing Date
but not earlier than the Closing Date nor later than ten business days after the
date of such notice. Additional Securities may be purchased as provided in
Section 4 hereof solely for the purpose of covering over-allotments made in
connection with the offering of the Firm Securities.
Each of the Trust and the Company hereby agree that, without the prior
written consent of the Initial Purchaser, it will not, during the period ending
90 days after the date of this Agreement, (i) offer, pledge, sell, contract to
sell, sell any option or contract to purchase, purchase any option or contract
to sell, grant any option, right or warrant to purchase, lend, or otherwise
transfer or dispose of, directly or indirectly, any equity securities of the
Company, the Trust or any similar trust or any securities convertible into or
exercisable or exchangeable for any equity security of the Company, the Trust or
any similar trust or (ii) enter into
<PAGE> 11
any swap or other agreement that transfers to another, in whole or in part, any
of the economic consequences of ownership of any equity securities of the
Company, the Trust or any similar trust, whether any such transaction described
in clause (i) or (ii) above is to be settled by delivery of any equity
securities of the Company, the Trust or any similar trust or such other
securities, in cash or otherwise. The foregoing sentence shall not apply to (A)
the sale of the Convertible Preferred Securities under this Agreement, (B) the
issuance by the Company of the Convertible Debentures, (C) the issuance to the
Company by the Trust of the Trust Common Securities as described in the Final
Memorandum or (D) the issuance of Common Stock upon conversion of the
Convertible Preferred Securities and the Convertible Debentures, (E) the
issuance by the Company of any shares of common stock upon the exercise of an
option or warrant or the conversion of a security outstanding on the date hereof
that has been publicly disclosed or of which the Initial Purchaser has been
advised in writing, (F) the issuance of Common Stock pursuant to any employee
incentive plans outstanding on the date hereof that have been publicly disclosed
or of which the Initial Purchaser has been advised in writing and (G) any action
or transaction otherwise prohibited by the preceding sentence to the extent
relating to the issuance of Common Stock in connection with any acquisition by
or merger or business combination or similar transaction concerning the Company.
3. Offering. You have advised the Trust and the Company that the
Initial Purchaser will make an offering of the Convertible Preferred Securities
purchased by the Initial Purchaser hereunder on the terms to be set forth in the
Final Memorandum, as soon as practicable after this Agreement is entered into as
in your judgment is advisable.
4. Payment and Delivery. Payment for the Firm Securities shall be
made to the Trust in Federal or other funds immediately available in New York
City against delivery of such Firm Securities for the account of the Initial
Purchaser at 10:00 a.m., New York City time, on December 1, 1997, or at such
other time on the same or such other date, not later than December 8, 1997, as
shall be designated in writing by you. The time and date of such payment are
hereinafter referred to as the "CLOSING DATE."
Payment for any Additional Securities shall be made to the Trust in
Federal or other funds immediately available in New York City against delivery
of such Firm Securities for the account of the Initial Purchaser at 10:00 a.m.,
New York City time, on the date specified in the notice described in Section 2
or at such other time on the same or on such other date, in any event not later
than December 24, 1997, as shall be designated in writing by you. The time and
date of such payment are hereinafter referred to as the "OPTION CLOSING DATE."
Certificates for the Firm Securities and Additional Securities shall be
in definitive or global form, as specified by you, and registered in such names
and in
<PAGE> 12
such denominations as you shall request in writing not later than one full
business day prior to the Closing Date or the Option Closing Date, as the case
may be. The certificates evidencing the Firm Securities and Additional
Securities shall be delivered to you on the Closing Date or the Option Closing
Date, as the case may be, with any transfer taxes payable in connection with the
transfer of the Convertible Preferred Securities to the Initial Purchaser duly
paid, against payment of the Purchase Price therefor plus accrued distributions,
if any, to the date of payment and delivery.
5. Conditions to the Initial Purchaser's Obligations. The obligations
of the Initial Purchaser to purchase and pay for the Firm Securities on the
Closing Date are subject to the following conditions:
(a) Subsequent to the execution and delivery of this Agreement
and prior to the Closing Date:
(i) there shall not have occurred any downgrading,
nor shall any notice have been given of any intended or
potential downgrading or of any review for a possible change
that does not indicate the direction of the possible change,
in the rating accorded the Company or any of the Company's
securities or in the rating outlook for the Company by any
"nationally recognized statistical rating organization," as
such term is defined for purposes of Rule 436(g)(2) under the
Securities Act; and
(ii) there shall not have occurred any change, or any
development involving a prospective change, in the condition,
financial or otherwise, or in the earnings, business or
operations of the Company and its subsidiaries (including the
Trust), taken as a whole, from that set forth in the Final
Memorandum (exclusive of any amendments or supplements thereto
subsequent to the date of this Agreement) that, in your
judgment, is material and adverse and that makes it, in your
judgment, impracticable to market the Convertible Preferred
Securities on the terms and in the manner contemplated in the
Final Memorandum.
(b) The Initial Purchaser shall have received on the Closing
Date certificates, dated the Closing Date and signed by an executive
officer of the Company and an Administrator of the Trust, respectively,
to the effect set forth in Section 5(a)(i) (in the case of the
certificate signed by an executive officer of the Company) and to the
effect that the representations and warranties of the Company and the
Trust, respectively, contained in this Agreement are true and correct
as of the Closing Date and that each of the Company and the Trust has
complied with all of the agreements and satisfied all of the conditions
on its part to be performed or satisfied
<PAGE> 13
hereunder on or before the Closing Date.
The executive officer or Administrator signing and delivering
each such certificate may rely upon the best of his or her knowledge as
to proceedings threatened.
(c) The Initial Purchaser shall have received on the Closing
Date an opinion or opinions of Cleary, Gottlieb, Steen & Hamilton,
outside counsel for the Company and the Trust, dated the Closing Date,
to the effect set forth in Exhibit A-1, an opinion of Diane L. Kaye,
Vice President, General Counsel and Secretary of the Company, to the
effect set forth in Exhibit A-2 and an opinion of Richards, Layton &
Finger, special Delaware counsel to the Trust, to the effect set forth
in Exhibit A-3. Such opinions shall be rendered to the Initial
Purchaser at the request of the Company and the Trust and shall so
state therein.
(d) The Initial Purchaser shall have received on the Closing
Date an opinion of Davis Polk & Wardwell, counsel for the Initial
Purchaser, dated the Closing Date, to the effect set forth in Exhibit
B.
(e) The Initial Purchaser shall have received on each of the
date hereof and on the Closing Date a letter, dated the date hereof or
the Closing Date, as the case may be, in form and substance
satisfactory to the Initial Purchaser, from Ernst & Young LLP,
independent public accountants, containing statements and information
of the type ordinarily included in accountants' "comfort letters" to
underwriters with respect to the financial statements and certain
financial information contained in or incorporated by reference into
each Memorandum; provided that the letter delivered on the Closing Date
shall use a "cut-off date" not earlier than the date hereof.
(f) The "lock-up" agreements, each substantially in the form
of Exhibit C, between you and Richard Snell, Alan Johnson and Thomas
Ryan relating to sales and certain other dispositions of common stock
of the Company, delivered to you on or before the date hereof, shall be
in full force and effect on the Closing Date.
The obligations of the Initial Purchaser to purchase Additional
Securities hereunder are subject to the delivery to you on the Option Closing
Date of such documents as you may reasonably request with respect to the good
standing of the Company and the Trust, the due authorization and issuance of the
Additional Securities and other matters related to the issuance of the
Additional Securities and the execution and authentication of any related
Convertible Debentures.
6. Covenants of the Company and the Trust. In further consideration
of
<PAGE> 14
the agreements of the Initial Purchaser herein contained, each of the Company
and the Trust covenants with the Initial Purchaser as follows:
(a) To furnish to you in New York City, without charge, prior
to 5:00 p.m., New York City time, on the business day next succeeding
the date of this Agreement and during the period mentioned in Section
6(c), as many copies of the Final Memorandum, any documents
incorporated by reference therein and any supplements and amendments
thereto as you may reasonably request.
(b) Before amending or supplementing either Memorandum, to
furnish to you a copy of each such proposed amendment or supplement and
not to use any such proposed amendment or supplement to which you
reasonably object; provided, that the Company and the Trust may use any
such proposed amendment or supplement, notwithstanding any such
objection, if such use is, in the opinion of counsel for the Company
and the Trust, necessary in order that the Final Memorandum, as so
amended or supplemented, will not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the
statements therein, in the light of the circumstances under which they
were made, not misleading or to cause such Final Memorandum, as amended
or supplemented, to comply with applicable law.
(c) If, during such period after the date hereof and prior to
the date on which all of the Convertible Preferred Securities shall
have been sold by the Initial Purchaser, any event shall occur or
condition exist as a result of which it is necessary to amend or
supplement the Final Memorandum in order to make the statements
therein, in the light of the circumstances when the Final Memorandum is
delivered to a purchaser, not misleading, or if, in the opinion of
counsel for the Initial Purchaser, it is necessary to amend or
supplement the Final Memorandum to comply with applicable law,
forthwith to prepare and furnish, at its own expense, to the Initial
Purchaser either amendments or supplements to the Final Memorandum so
that the statements in such Final Memorandum as so amended or
supplemented will not, in the light of the circumstances when such
Final Memorandum is delivered to a purchaser, be misleading or so that
such Final Memorandum, as amended or supplemented, will comply with
applicable law.
(d) To endeavor to qualify the Convertible Preferred
Securities, the Guarantee, the Convertible Debentures and the
Underlying Securities for offer and sale under the securities or Blue
Sky laws of such jurisdictions as you shall reasonably request;
provided, that neither Federal-Mogul nor the Trust will be required to
(i) qualify as a foreign corporation or as a dealer in securities in
any jurisdiction where it would
<PAGE> 15
not otherwise be required to qualify but for this Agreement, or (ii)
take any action that would subject it to general service of process in
suits or to taxation in any such jurisdiction where it is not now so
subject.
(e) To reserve and keep available at all times, free of
preemptive rights, sufficient Underlying Securities for the purpose of
enabling the Company to satisfy any obligations to issue Underlying
Securities upon the conversion of the Convertible Debentures and the
Convertible Preferred Securities.
(f) Whether or not the transactions contemplated in this
Agreement are consummated or this Agreement is terminated, to pay or
cause to be paid all expenses incident to the performance of the
Company's and the Trust's obligations under this Agreement, including:
(i) the fees, disbursements and expenses of the Company's and the
Trust's counsel and the Company's and the Trust's accountants in
connection with the issuance and sale of the Convertible Preferred
Securities and all other fees or expenses in connection with the
preparation of each Memorandum and all amendments and supplements
thereto, including all printing costs associated therewith, and the
delivering of copies thereof to the Initial Purchaser, in the
quantities herein above specified, (ii) all costs and expenses related
to the transfer and delivery of the Convertible Preferred Securities to
the Initial Purchaser, including any transfer or other taxes payable
thereon, (iii) the cost of printing or producing any Blue Sky or legal
investment memorandum in connection with the offer and sale of the
Convertible Preferred Securities, the Underlying Securities, the
Guarantee or the Convertible Debentures under state securities laws and
all expenses in connection with the qualification of the Convertible
Preferred Securities, the Underlying Securities, the Guarantee or the
Convertible Debentures for offer and sale under state securities laws
as provided in Section 6(d) hereof, including filing fees and the
reasonable fees and disbursements of counsel for the Initial Purchaser
in connection with such qualification and in connection with the Blue
Sky or legal investment memorandum, (iv) the fees and expenses, if any,
incurred in connection with the admission of the Convertible Preferred
Securities for trading in PORTAL or any appropriate market system, (v)
the costs and charges of the Trustee and any transfer agent, registrar
or depositary, (vi) the cost of the preparation, issuance and delivery
of the Convertible Preferred Securities, the Underlying Securities, the
Convertible Debentures and the Guarantee, (vii) the costs and expenses
of the Company relating to investor presentations on any "road show"
undertaken in connection with the marketing of the offering of the
Convertible Preferred Securities, including, without limitation,
reasonable expenses associated with the production of road show slides
and graphics, fees and expenses of any consultants engaged in
connection with the road show presentations with
<PAGE> 16
the prior written approval of the Company, travel and lodging expenses
of the representatives and officers of the Company and any such
consultants (for the avoidance of doubt, excluding transportation and
lodging expenses of any representatives of the Initial Purchaser), and
the cost of any aircraft chartered with the prior written approval of
the Company in connection with the road show, and (viii) all other cost
and expenses of the Company and the Trust incident to the performance
by the Company and the Trust of their obligations hereunder for which
provision is not otherwise made in this Section. It is understood,
however, that except as provided in this Section, Section 8, and the
last paragraph of Section 10, the Initial Purchaser will pay all of its
costs and expenses, including fees and disbursements of its counsel,
transfer taxes payable on resale of any of the Convertible Preferred
Securities by it and any advertising expenses connected with any offers
it may make.
(g) Neither the Company nor any Affiliate will sell, offer for
sale or solicit offers to buy or otherwise negotiate in respect of any
security (as defined in the Securities Act) that could be integrated
with the sale of the Convertible Preferred Securities in a manner that
would require the registration under the Securities Act of the
Convertible Preferred Securities.
(h) Not to solicit any offer to buy or offer or sell the
Convertible Preferred Securities or the Underlying Securities by means
of any form of general solicitation or general advertising (as those
terms are defined in Regulation D under the Securities Act) or in any
manner involving a public offering within the meaning of Section 4(2)
of the Securities Act.
(i) While any of the Convertible Preferred Securities or the
Underlying Securities remain "restricted securities" within the meaning
of the Securities Act, to make available, upon request, to any seller
of such Convertible Preferred Securities the information specified in
Rule 144A(d)(4) under the Securities Act, unless the Company is then
subject to Section 13 or 15(d) of the Exchange Act.
(j) During the period of two years after the Closing Date or
the Option Closing Date, if later, the Company will not, and will not
permit any of its affiliates (as defined in Rule 144 under the
Securities Act) to resell any of the Securities or the Underlying
Securities that constitute "restricted securities" under Rule 144 that
have been reacquired by any of them.
(k) To use its best efforts to permit the Convertible
Preferred Securities to be designated PORTAL securities in accordance
with the rules and regulations adopted by the National Association of
Securities
<PAGE> 17
Dealers, Inc. relating to trading in the PORTAL Market.
(l) None of the Company, its Affiliates or any person acting
on its or their behalf (other than the Initial Purchaser) will engage
in any directed selling efforts (as that term is defined in Regulation
S) with respect to the Convertible Preferred Securities, and the
Company and its Affiliates and each person acting on its or their
behalf (other than the Initial Purchaser) will comply with the offering
restrictions requirement of Regulation S.
(m) To cause the Underlying Securities to be listed or
approved for listing on the New York Stock Exchange, Inc. as promptly
as practicable, but in any event within 90 days from the later of the
Closing Date and the Option Closing Date.
7. Offering of Securities; Restrictions on Transfer. (a) The Initial
Purchaser represents and warrants that it is a qualified institutional buyer as
defined in Rule 144A under the Securities Act (a "QIB"). The Initial Purchaser
agrees with the Company that (i) it will not solicit offers for, or offer or
sell, the Convertible Preferred Securities by any form of general solicitation
or general advertising (as those terms are defined in Regulation D under the
Securities Act) or in any manner involving a public offering within the meaning
of Section 4(2) of the Securities Act and (ii) it will solicit offers for such
Convertible Preferred Securities only from, and will offer and sell the
Convertible Preferred Securities only to, persons that it reasonably believes to
be (A) in the case of offers inside the United States, QIBs, and (B) in the case
of offers or sales outside the United States, to persons other than U.S. persons
("FOREIGN PURCHASERS," which term shall include dealers or other professional
fiduciaries in the United States acting on a discretionary basis for foreign
beneficial owners (other than an estate or trust)) in reliance upon Regulation S
under the Securities Act that, in each case, in purchasing the Convertible
Preferred Securities are deemed to have represented and agreed as provided in
the Final Memorandum under the caption "Transfer Restrictions."
(b) The Initial Purchaser represents, warrants, and agrees with respect
to offers and sales outside the United States that:
(i) the Initial Purchaser understands that no action has been
or will be taken in any jurisdiction by the Company or the Trust that
would permit a public offering of the Convertible Preferred Securities,
or possession or distribution of either Memorandum or any other
offering or publicity material relating to the Convertible Preferred
Securities, in any country or jurisdiction where action for that
purpose is required;
(ii) the Initial Purchaser will comply with all applicable laws
and
<PAGE> 18
regulations in each jurisdiction in which it acquires, offers, sells or
delivers Convertible Preferred Securities or has in its possession or
distributes either Memorandum or any such other material, in all cases
at its own expense;
(iii) the Convertible Preferred Securities have not been
registered under the Securities Act and may not be offered or sold
within the United States or to, or for the account or benefit of, U.S.
persons except in accordance with Rule 144A or Regulation S under the
Securities Act or pursuant to another exemption from the registration
requirements of the Securities Act;
(iv) the Initial Purchaser has offered the Convertible
Preferred Securities and will offer and sell the Convertible Preferred
Securities (A) as part of their distribution at any time and (B)
otherwise until 40 days after the later of the commencement of the
offering and the Closing Date (or Option Closing Date, if later), only
in accordance with Rule 903 of Regulation S or as otherwise permitted
in Section 7(a); accordingly, neither the Initial Purchaser, its
Affiliates nor any persons acting on its or their behalf have engaged
or will engage in any directed selling efforts (within the meaning of
Regulation S) with respect to the Convertible Preferred Securities, and
the Initial Purchaser, its Affiliates and any such persons have
complied and will comply with the offering restrictions requirement of
Regulation S;
(v) the Initial Purchaser has (A) not offered or sold and,
prior to the date six months after the Closing Date, will not offer or
sell any Convertible Preferred Securities to persons in the United
Kingdom except to persons whose ordinary activities involve them in
acquiring, holding, managing or disposing of investments (as principal
or agent) for the purposes of their businesses or otherwise in
circumstances which have not resulted and will not result in an offer
to the public in the United Kingdom within the meaning of the Public
Offers of Securities Regulations 1995; (B) complied and will comply
with all applicable provisions of the Financial Services Act 1986 with
respect to anything done by it in relation to the Convertible Preferred
Securities in, from or otherwise involving the United Kingdom, and (C)
only issued or passed on and will only issue or pass on in the United
Kingdom any document received by it in connection with the issue of the
Convertible Preferred Securities to a person who is of a kind described
in Article 11(3) of the Financial Services Act 1986 (Investment
Advertisements) (Exemptions) Order 1996 or is a person to whom such
document may otherwise lawfully be issued or passed on;
(vi) the Initial Purchaser understands that the Convertible
Preferred Securities have not been and will not be registered under the
<PAGE> 19
Securities and Exchange Law of Japan, and represents that it has not
offered or sold, and agrees not to offer or sell, directly or
indirectly, any Convertible Preferred Securities in Japan or for the
account of any resident thereof except pursuant to any exemption from
the registration requirements of the Securities and Exchange Law of
Japan and otherwise in compliance with applicable provisions of
Japanese law; and
(vii) the Initial Purchaser agrees that, at or prior to
confirmation of sales of the Convertible Preferred Securities, it will
have sent to each distributor, dealer or person receiving a selling
concession, fee or other remuneration that purchases Convertible
Preferred Securities from it during the restricted period a
confirmation or notice to substantially the following effect:
"The Securities covered hereby have not been
registered under the U.S. Securities Act of 1933 (the
"Securities Act") and may not be offered and sold within the
United States or to, or for the account or benefit of, U.S.
persons (i) as part of their distribution at any time or (ii)
otherwise until 40 days after the later of the commencement of
the offering and the final closing date, except in either case
in accordance with Regulation S (or Rule 144A if available)
under the Securities Act. Terms used above have the meaning
given to them by Regulation S."
Terms used in this Section 7(b) have the meanings given to them by Regulation S.
8. Indemnity and Contribution. (a) Each of the Company and the Trust
jointly and severally agrees to indemnify and hold harmless the Initial
Purchaser and each person, if any, who controls the Initial Purchaser within the
meaning of either Section 15 of the Securities Act or Section 20 of the Exchange
Act, from and against any and all losses, claims, damages and liabilities
(including, without limitation, any legal or other expenses reasonably incurred
in connection with defending or investigating any such action or claim) caused
by any untrue statement or alleged untrue statement of a material fact contained
in either Memorandum (as amended or supplemented if the Company shall have
furnished any amendments or supplements thereto), or caused by any omission or
alleged omission to state therein a material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, except insofar as such losses, claims, damages or
liabilities are caused by any such untrue statement or omission or alleged
untrue statement or omission based upon information relating to the Initial
Purchaser furnished to the Company and the Trust in writing by the Initial
Purchaser expressly for use therein; provided,
<PAGE> 20
that the indemnification contained in this paragraph (a) with respect to the
Preliminary Memorandum shall not inure to the benefit of the Initial Purchaser
(or to the benefit of any person controlling the Initial Purchaser) on account
of any such loss, claim, damage, judgment, liability or expense arising from the
sale of the Convertible Preferred Securities by the Initial Purchaser to any
person if the untrue statement or alleged untrue statement or omission or
alleged omission of a material fact contained in the Preliminary Memorandum was
corrected in the Final Memorandum and the Initial Purchaser sold Convertible
Preferred Securities to that person without sending or giving, at or prior to
the written confirmation of such sale, a copy of the Final Memorandum (as then
amended or supplemented) if the Company or the Trust had previously furnished
sufficient copies thereof to the Initial Purchaser on a timely basis.
(b) The Initial Purchaser agrees to indemnify and hold harmless the
Trust, the FMFT Trustees, the Company, its directors, its officers and each
person, if any, who controls the Trust or the Company within the meaning of
either Section 15 of the Securities Act or Section 20 of the Exchange Act to the
same extent as the foregoing indemnity from the Company and the Trust to the
Initial Purchaser, but only with reference to information relating to the
Initial Purchaser furnished to the Company and the Trust in writing by the
Initial Purchaser expressly for use in either Memorandum or any amendments or
supplements thereto.
(c) In case any proceeding (including any governmental investigation)
shall be instituted involving any person in respect of which indemnity may be
sought pursuant to Section 8(a) or 8(b), such person (the "INDEMNIFIED PARTY")
shall promptly notify the person against whom such indemnity may be sought (the
"INDEMNIFYING PARTY") in writing and the indemnifying party, upon request of the
indemnified party, shall retain counsel reasonably satisfactory to the
indemnified party to represent the indemnified party and any others the
indemnifying party may designate in such proceeding and shall pay the fees and
disbursements of such counsel related to such proceeding. In any such
proceeding, any indemnified party shall have the right to retain its own
counsel, but the fees and expenses of such counsel shall be at the expense of
such indemnified party unless (i) the indemnifying party and the indemnified
party shall have mutually agreed to the retention of such counsel or (ii) the
named parties to any such proceeding (including any impleaded parties) include
both the indemnifying party and the indemnified party and representation of both
parties by the same counsel would be inappropriate due to actual or potential
differing interests between them. It is understood that the indemnifying party
shall not, in respect of the legal expenses of any indemnified party in
connection with any proceeding or related proceedings in the same jurisdiction,
be liable for the fees and expenses of more than one separate firm (in addition
to any local counsel) for all such indemnified parties and that all such fees
and expenses shall be reimbursed as they are incurred. Such firm shall be
designated in writing by Morgan Stanley & Co.
<PAGE> 21
Incorporated, in the case of parties indemnified pursuant to Section 8(a), and
by the Company, in the case of parties indemnified pursuant to Section 8(b). The
indemnifying party shall not be liable for any settlement of any proceeding
effected without its written consent, but if settled with such consent or if
there be a final judgment for the plaintiff, the indemnifying party agrees to
indemnify the indemnified party from and against any loss or liability by reason
of such settlement or judgment. Notwithstanding the foregoing sentence, if at
any time an indemnified party shall have requested an indemnifying party to
reimburse the indemnified party for fees and expenses of counsel as contemplated
by the second and third sentences of this paragraph, the indemnifying party
agrees that it shall be liable for any settlement of any proceeding effected
without its written consent if (i) such settlement is entered into more than 30
days after receipt by such indemnifying party of the aforesaid request and (ii)
such indemnifying party shall not have reimbursed the indemnified party in
accordance with such request prior to the date of such settlement. No
indemnifying party shall, without the prior written consent of the indemnified
party, effect any settlement of any pending or threatened proceeding in respect
of which any indemnified party is or could have been a party and indemnity could
have been sought hereunder by such indemnified party, unless such settlement
includes an unconditional release of such indemnified party from all liability
on claims that are the subject matter of such proceeding.
(d) To the extent the indemnification provided for in Section 8(a) or
8(b) is unavailable to an indemnified party or insufficient in respect of any
losses, claims, damages or liabilities referred to therein, then each
indemnifying party under such paragraph, in lieu of indemnifying such
indemnified party thereunder, shall contribute to the amount paid or payable by
such indemnified party as a result of such losses, claims, damages or
liabilities (i) in such proportion as is appropriate to reflect the relative
benefits received by the Company and the Trust on the one hand and the Initial
Purchaser on the other hand from the offering of the Convertible Preferred
Securities or (ii) if the allocation provided by clause 8(d)(i) above is not
permitted by applicable law, in such proportion as is appropriate to reflect not
only the relative benefits referred to in clause 8(d)(i) above but also the
relative fault of the Company and the Trust on the one hand and of the Initial
Purchaser on the other hand in connection with the statements or omissions that
resulted in such losses, claims, damages or liabilities, as well as any other
relevant equitable considerations. The relative benefits received by the Company
and the Trust on the one hand and the Initial Purchaser on the other hand in
connection with the offering of the Convertible Preferred Securities shall be
deemed to be in the same respective proportions as the net proceeds from the
offering of the Convertible Preferred Securities (before deducting expenses)
received by the Trust and the total discounts and commissions received by the
Initial Purchaser, in each case as set forth in the Final Memorandum, bear to
the aggregate offering price of the Convertible Preferred Securities. The
relative fault of the Company and the Trust on the one hand and of the Initial
Purchaser on the
<PAGE> 22
other hand shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the Company
and the Trust or by the Initial Purchaser and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission.
(e) The Company, the Trust and the Initial Purchaser agree that it
would not be just or equitable if contribution pursuant to this Section 8 were
determined by pro rata allocation or by any other method of allocation that does
not take account of the equitable considerations referred to in Section 8(d).
The amount paid or payable by an indemnified party as a result of the losses,
claims, damages and liabilities referred to in Section 8(d) shall be deemed to
include, subject to the limitations set forth above, any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim. Notwithstanding the provisions of this
Section 8, the Initial Purchaser shall not be required to contribute any amount
in excess of the amount by which the total price at which the Convertible
Preferred Securities resold by it in the initial placement of such Convertible
Preferred Securities were offered to investors exceeds the amount of any damages
that the Initial Purchaser has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission. No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation. The remedies provided for in
this Section 8 are not exclusive and shall not limit any rights or remedies
which may otherwise be available to any indemnified party at law or in equity.
(f) The indemnity and contribution provisions contained in this Section
8 and the representations, warranties and other statements of the Company and
the Trust contained in this Agreement shall remain operative and in full force
and effect regardless of (i) any termination of this Agreement, (ii) any
investigation made by or on behalf of the Initial Purchaser or any person
controlling the Initial Purchaser or by or on behalf of the Trust, the FMFT
Trustees, the Company, its officers or directors or any person controlling the
Company and (iii) acceptance of and payment for any of the Convertible Preferred
Securities.
9. Termination. This Agreement shall be subject to termination by
notice given by you to the Company, if (a) after the execution and delivery of
this Agreement and prior to the Closing Date (i) trading generally shall have
been suspended or materially limited on or by, as the case may be, any of the
New York Stock Exchange, the American Stock Exchange, the National Association
of Securities Dealers, Inc., the Chicago Board of Options Exchange, the Chicago
Mercantile Exchange or the Chicago Board of Trade, (ii) trading of any
securities
<PAGE> 23
of the Company or the Trust shall have been suspended on any exchange or in any
over-the-counter market, (iii) a general moratorium on commercial banking
activities in New York shall have been declared by either Federal or New York
State authorities or (iv) there shall have occurred any outbreak or escalation
of hostilities or any change in financial markets or any calamity or crisis
that, in your judgment, is material and adverse and (b) in the case of any of
the events specified in clauses 9(a)(i) through 9(a)(iv), such event, singly or
together with any other such event, makes it, in your judgment, impracticable to
market the Convertible Preferred Securities on the terms and in the manner
contemplated in the Final Memorandum.
If this Agreement shall be terminated by the Initial Purchaser because
of any failure or refusal on the part of the Company or the Trust to comply with
the terms or to fulfill any of the conditions of this Agreement, or if for any
reason the Company or the Trust shall be unable to perform its obligations under
this Agreement, the Company will reimburse the Initial Purchaser for all
out-of-pocket expenses (including the fees and disbursements of their counsel)
reasonably incurred by the Initial Purchaser in connection with this Agreement
or the offering contemplated hereunder.
<PAGE> 24
10. Effectiveness. This Agreement shall become effective upon the
execution and delivery hereof by the parties hereto.
11. Counterparts. This Agreement may be signed in any number of
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
12. Applicable Law. This Agreement shall be governed by and construed
in accordance with the internal laws of the State of New York.
13. Headings. The headings of the sections of this Agreement have been
inserted for convenience of reference only and shall not be deemed a part of
this Agreement.
Very truly yours,
FEDERAL-MOGUL FINANCING TRUST
By: FEDERAL-MOGUL CORPORATION,
as Sponsor
By:__________________________
Name:
Title:
FEDERAL-MOGUL CORPORATION
By:__________________________
Name:
Title:
Accepted as of the date hereof
MORGAN STANLEY & CO. INCORPORATED
By:____________________________
Name:
Title:
<PAGE> 25
EXHIBIT A-1
OPINION OF OUTSIDE COUNSEL FOR
THE COMPANY AND THE TRUST
The opinion of Cleary, Gottlieb, Steen & Hamilton, outside counsel for
the Company and the Trust to be delivered pursuant to Section 5(c) of the
Purchase Agreement, shall be to the effect that:
A. The Indenture is a valid, binding and enforceable agreement of the
Company.
B. The Convertible Debentures are valid, binding and enforceable
obligations of the Company, entitled to the benefits of the Indenture.
C. The Guarantee is a valid, binding and enforceable agreement of the
Company.
D. The statements in the Final Memorandum set forth under the
headings "Federal-Mogul Financing Trust," "Description of the Convertible
Preferred Securities," "Description of the Guarantee," "Description of the
Convertible Debentures" and "Transfer Restrictions" in the Final Memorandum,
insofar as such statements purport to summarize certain provisions of the
Guarantee, the Convertible Debentures and the Indenture, provide a fair summary
of such provisions.
E. The Registration Rights Agreement is a valid, binding and
enforceable agreement of the Company (except that such counsel may state that it
expresses no opinion with respect to Section 6 of the Registration Rights
Agreement providing for indemnification and contribution).
F. The issuance and sale of the Convertible Preferred Securities by
the Trust to the Initial Purchaser pursuant to the Purchase Agreement, the
performance by the Trust and the Company of their respective obligations in the
Purchase Agreement, the Declaration, the Registration Rights Agreement, the
Guarantee, the Indenture and the Convertible Preferred Securities do not require
any consent, approval, authorization, registration or qualification of or with
any governmental authority of the United States or the State of New York, except
such as may be required by the United States federal securities laws pursuant to
the Registration Rights Agreement (but such counsel may state that they express
no opinion as to any consent, approval, authorization, registration or
qualification that may be required under state securities or Blue Sky laws).
<PAGE> 26
G. Assuming the accuracy of the representations and warranties and
compliance with the agreements contained in the Purchase Agreement (other than
the representation and warranty contained in Section 1(y) thereof), no
registration of the Convertible Preferred Securities, the Guarantee, the
Convertible Debentures or the Underlying Shares under the Securities Act and no
qualification of the Indenture under the Trust Indenture Act are required for
the offer and sale of the Convertible Preferred Securities in the manner
contemplated by the Purchase Agreement.
H. The Trust is not and, after giving effect to the offering and sale
of the Convertible Preferred Securities and the application of the proceeds
thereof as described in the Final Memorandum, will not be an "investment
company" as such term is defined in the Investment Company Act of 1940, as
amended.
I. Under current law and assuming full compliance with the terms of
the Indenture and the Declaration, the Convertible Debentures will be classified
for United States federal income tax purposes as indebtedness of the Company.
J. Under current law and assuming full compliance with the terms of
the Declaration and the Indenture, the Trust will be classified as a grantor
trust and not as an association taxable as a corporation.
K. The discussion set forth in the Final Memorandum under the caption
"United States Federal Income Taxation" fairly and accurately summarizes the
specific tax matters addressed therein, based upon current las and the
assumptions stated or referred to therein.
L. (i) The documents incorporated by reference in the Final
Memorandum (except for financial statements and schedules and other financial
and statistical data included therein and the Exhibits thereto, as to which such
counsel need not express any view), as of the respective dates of their filing
with the Commission, appeared on their face to be appropriately responsive in
all material respects to the requirements of the Exchange Act and the rules and
regulations thereunder. (ii) No information has come to the attention of such
counsel that causes them to believe that the Final Memorandum (except the
financial statements and schedules and other financial and statistical data, the
information contained under the heading "Summary of Principal Differences
Between Generally Accepted Accounting Principles in the United States and the
United Kingdom" therein and the information appearing in Annex A, Annex B and
Annex C thereto, as to which such counsel need not express any view), as of the
date thereof or as of the date of such opinion, contained or contains any untrue
statement of a material fact or omitted or omits to state a material fact
necessary
A-1-2
<PAGE> 27
in order to make the statements therein, in the light of the circumstances under
which they were made, not misleading.
With respect to paragraph L above, counsel may state that their opinion
and belief are based upon their participation in the preparation of the Final
Memorandum (and any amendments or supplements thereto) and review and discussion
of the contents thereof and review of the documents incorporated by reference
therein, but are without independent check or verification except as specified.
Such counsel may state that, insofar as the foregoing opinions relate
to the validity, binding effect or enforceability of any agreement or obligation
of the Company or the Trust, (a) they have assumed that the Company and the
Trust and each other party to such agreement or obligation has satisfied those
legal requirements that are applicable to it to the extent necessary to make
such agreement or obligation enforceable against it (except that no such
assumption may be made as to the Company or the Trust regarding matters of the
laws of the State of New York), and (b) such opinions are subject to applicable
bankruptcy, insolvency and similar laws affecting creditors' rights generally
and to general principles of equity.
A-1-3
<PAGE> 28
EXHIBIT A-2
OPINION OF GENERAL COUNSEL OF THE COMPANY
The opinion of Diane L. Kaye, Vice President, General Counsel and
Secretary of the Company, to be delivered pursuant to Section 5(c) of the
Purchase Agreement, shall be to the effect that:
A. The Company has been duly incorporated, is validly existing as a
corporation in good standing under the laws of the State of Michigan, with
corporate power to own its properties and conduct its business as described in
the Final Memorandum, and is duly qualified to transact business and is in good
standing in each jurisdiction in which the conduct of its business or its
ownership or leasing of property requires such qualification, except to the
extent that the failure to be so qualified or be in good standing would not have
a material adverse effect on the Company and its subsidiaries, taken as a whole.
B. The shares of common stock outstanding on the [Closing Date]
[Option Closing Date] have been duly authorized and are validly issued, fully
paid and non-assessable.
C. The authorized capital stock of the Company conforms as to legal
matters to the description thereof contained in the Final Memorandum.
D. All of the issued and outstanding capital stock of each
Significant Subsidiary has been duly authorized and validly issued, is fully
paid and non-assessable and is owned beneficially and of record directly or
indirectly by the Company free and clear of all liens, encumbrances, equities or
claims, except to the extent that failure to be so authorized, issued and fully
paid and non-assessable and so owned would not have a material adverse effect on
the Company and its subsidiaries, taken as a whole.
E. The Underlying Securities reserved for issuance upon the
conversion of the Convertible Debentures and the Convertible Preferred
Securities have been duly authorized and reserved and, when issued upon such
conversion of the Convertible Debentures or the Convertible Preferred Securities
in accordance with the terms thereof, will be validly issued, fully paid and
non-assessable, and the issuance of such Underlying Securities will not be
subject to any preemptive or similar rights.
F. The execution and delivery of each of the Indenture, the
Declaration, the Guarantee, the Registration Rights Agreement and the Purchase
<PAGE> 29
Agreement have been duly authorized by all necessary corporate action of the
Company, and each such document has been duly executed and delivered by the
Company.
G. The execution and delivery of the Convertible Debentures have been
duly authorized by all necessary corporate action of the Company, and the
Convertible Subordinated Debentures in global form have been duly executed and
delivered by the Company.
H. The statements set forth under the heading "Description of the
Federal-Mogul Capital Stock" in the Final Memorandum, insofar as such statements
purport to summarize certain provisions of the capital stock of the Company,
provide a fair summary of such provisions, and the statements set forth under
the heading "Part I.--Item 3. Legal Proceedings" in the Company's Annual Report
on Form 10-K/A for the fiscal year ended December 31, 1996, insofar as the
statements therein purport to summarize of the legal proceedings referred to
therein, provide a fair summary of such proceedings.
I. To the knowledge of such counsel (after reasonable investigation),
other than as described in the Final Memorandum, no legal or governmental
proceedings are pending or threatened to which the Company or any of its
subsidiaries or the Trust is a party or to which any of the assets of the
Company or any of its subsidiaries or the Trust are subject other than
proceedings with respect to which there is not a reasonable probability of an
adverse decision and that, if adversely decided, would have a material adverse
effect on the Trust or on the Company and its subsidiaries (including the
Trust), taken as a whole, or on the power or ability of the Company to perform
its obligations under the Purchase Agreement, the Registration Rights Agreement,
the Declaration, the Guarantee, the Indenture, the Convertible Debentures or the
Convertible Preferred Securities or to consummate the transactions contemplated
by the Final Memorandum.
J. The execution and delivery by the Company of, and the performance
by the Company of its obligations under, the Purchase Agreement, the
Declaration, the Registration Rights Agreement, the Guarantee, the Indenture and
the Convertible Debentures (a) do not require any consent, approval,
authorization, registration or qualification of or with any governmental
authority of the United States or the State of Michigan, except such as may be
required by the securities or Blue Sky laws of the various states in connection
with the offer and sale of the Convertible Preferred Securities and by Federal
and state securities laws with respect to the Company's obligations under the
Registration Rights Agreement, (b) do not result in a breach or violation of the
federal laws of the United States or the laws of the State of Michigan or the
Company's articles of incorporation or bylaws and (c) to the best of such
counsel's knowledge, do not
A-2-2
<PAGE> 30
result in any breach or violation of any agreement or other instrument binding
upon the Company or any of its subsidiaries that is material to the Company and
its subsidiaries, taken as a whole, or, to the best of such counsel's knowledge,
any judgment, order or decree of any governmental body, agency or court having
jurisdiction over the Company or any subsidiary.
K. The Company is not and, after giving effect to the offering and
sale of the Convertible Debentures and the Convertible Preferred Securities and
the application of the proceeds thereof as described in the Final Memorandum,
will not be an "investment company" as such term is defined in the Investment
Company Act of 1940, as amended.
A-2-3
<PAGE> 31
EXHIBIT A-3
OPINION OF SPECIAL DELAWARE COUNSEL FOR THE TRUST
The opinion of Richards, Layton & Finger, special Delaware counsel
for the Trust, to be delivered pursuant to Section 5(c) of the Purchase
Agreement, shall be to the effect that:
A. The Trust has been duly created and is validly existing in good
standing as a business trust under the Delaware Business Trust Act and all
filings required under the laws of the State of Delaware with respect to the
creation and valid existence of the Trust as a business trust have been made.
B. Under the Declaration and the Delaware Business Trust Act, the
Trust has the trust power and authority to own its properties and conduct its
business, all as described in the Memorandum.
C. The Declaration constitutes a valid and binding obligation of the
Company, the Administrators and the Trustees, and is enforceable against the
Company, the Administrators and the Trustees, in accordance with its terms.
D. Under the Declaration and the Delaware Business Trust Act, the
Trust has the trust power and authority to (A) execute and deliver the Purchase
Agreement and the Registration Rights Agreement and to perform its obligations
under the Purchase Agreement and the Registration Rights Agreement, and (B)
issue and perform its obligations under the Trust Securities.
E. Under the Declaration and the Delaware Business Trust Act, the
execution and delivery by the Trust of the Purchase Agreement and the
Registration Rights Agreement, and the performance by the Trust of its
obligations thereunder, have been duly authorized by all necessary trust action
on the part of the Trust.
F. The Convertible Preferred Securities have been duly authorized by
the Declaration and are duly and validly issued and, subject to the
qualifications set forth herein, fully paid and nonassessable undivided
beneficial interests in the assets of the Trust. The holders of the Convertible
Preferred Security, as beneficial owners of the Trust, will be entitled to the
same limitation of personal liability extended to stockholders of private
corporations for profit organized under the General Corporation Law of the State
of Delaware. Such counsel may state, however, that the holders of Convertible
Preferred Security may be obligated, pursuant to the Declaration, (A) to provide
indemnity and/or security in
<PAGE> 32
connection with and pay taxes or governmental charges arising from transfers of
Convertible Preferred Securities and the issuance of replacement Convertible
Preferred Securities, and (B) to provide security or indemnity in connection
with requests of or directions to the Property Trustee to exercise its rights
and powers under the Declaration.
G. The Common Securities have been duly authorized by the Declaration
and are duly and validly issued undivided beneficial interests in the assets of
the Trust.
H. Under the Declaration and the Delaware Business Trust Act, the
issuance of the Trust Securities is not subject to preemptive rights.
I. The issuance and the sale of the Trust Securities by the Trust,
the execution, delivery and performance by the Trust of the Purchase Agreement
and the Registration Rights Agreement, the consummation by the Trust of the
transactions contemplated by the Purchase Agreement and the Registration Rights
Agreement and compliance by the Trust with its obligations under the Purchase
Agreement and the Registration Rights Agreement do not violate (A) the
Certificate or the Declaration, or (B) any applicable Delaware law or Delaware
administrative regulation.
J. After due inquiry on November __, 1997, limited to, and solely to
the extent disclosed thereupon, the court dockets for active cases of the Court
of Chancery of the State of Delaware in and for New Castle County, Delaware, of
the Superior Court of the State of Delaware in and for New Castle County,
Delaware, and of the United States Federal District Court sitting in the State
of Delaware, we do not know of any legal or governmental proceeding pending
against the Trust.
K. No authorization, approval, consent or order of any Delaware court
or any Delaware governmental authority or Delaware agency is required to be
obtained by the Trust solely in connection with the issuance and sale of the
Trust Securities.
L. The Convertible Preferred Security Holders (other than those
Convertible Preferred Security Holders who reside or are domiciled in the State
of Delaware) will have no liability for income taxes imposed by the State of
Delaware solely as a result of their participation in the Trust, and the Trust
will not be liable for any income tax imposed by the State of Delaware.
Such counsel may state that the opinion expressed in paragraph C above
is subject, as to enforcement, to the effect upon the Declaration of (i)
bankruptcy,
A-3-2
<PAGE> 33
insolvency, moratorium, receivership, reorganization, liquidation,
fraudulent conveyance or transfer and other similar laws relating to or
affecting the rights and remedies of creditors generally, (ii) principles of
equity, including applicable law relating to fiduciary duties (regardless of
whether considered and applied in a proceeding in equity or at law), and (iii)
the effect of applicable public policy on the enforceability of provisions
relating to the indemnification or contribution.
A-3-3
<PAGE> 34
EXHIBIT B
OPINION OF DAVIS POLK & WARDWELL
The opinion of Davis Polk & Wardwell to be delivered pursuant to
Section 5(d) of the Purchase Agreement shall be to the effect that:
A. The Convertible Debentures, when executed and authenticated in
accordance with the provisions of the Indenture and delivered by the Company
against payment therefor as described in the Final Memorandum, will be valid and
binding obligations of the Company, enforceable in accordance with their terms,
subject to applicable bankruptcy, insolvency or similar laws affecting
creditors' rights generally and general principles of equity, and will be
entitled to the benefits of the Indenture.
B. Each of the Indenture, the Guarantee, the Declaration and the
Registration Rights Agreement is, assuming due authorization, execution and
delivery thereof by the parties thereto, a valid and binding agreement of the
parties thereto, enforceable in accordance with its terms, subject to applicable
bankruptcy, insolvency or similar laws affecting creditors' rights generally and
general principles of equity and except as rights to indemnification and
contribution under the Registration Rights Agreement may be limited under
applicable law.
C. The statements in the Final Memorandum under the captions
"Federal-Mogul Financing Trust," "Description of the Convertible Preferred
Securities," "Description of the Guarantee," "Description of the Convertible
Debentures," "Plan of Distribution" and "Transfer Restrictions," insofar as such
statements constitute summaries of the legal matters or documents referred to
therein, fairly summarize the matters referred to therein.
D. No facts have come to the attention of such counsel to cause such
counsel to believe that (except for financial statements and schedules and other
financial and statistical data included or incorporated by reference, and except
for the information contained in the section thereof entitled "Summary of
Certain Differences Between Generally Accepted Accounting Principles in the
United States and in the United Kingdom" and in Annex A, Annex B or Annex C
thereto, as to which such counsel need not express any belief) the Final
Memorandum when issued contained, or as of the date such opinion is delivered
contains, any untrue statement of a material fact or omitted or omits to state a
material fact necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading.
<PAGE> 35
E. Based upon the representations, warranties and agreements of the
Company and the Trust in Sections 1(v), 1(w), 1(x), 6(g), 6(h) and 6(l) of the
Purchase Agreement and of the Initial Purchaser in Section 7 of the Purchase
Agreement, it is not necessary in connection with the offer, sale and delivery
of the Convertible Preferred Securities to the Initial Purchaser under the
Purchase Agreement or in connection with the initial resale of such Convertible
Preferred Securities by the Initial Purchaser in accordance with Section 7 of
the Purchase Agreement to register the Convertible Preferred Securities, the
Underlying Securities, the Guarantee or the Convertible Debentures under the
Securities Act of 1933 or to qualify the Indenture under the Trust Indenture
Act, it being understood that no opinion is expressed as to any subsequent
resale of any Convertible Preferred Security or Underlying Security.
With respect to paragraph F above, Davis Polk & Wardwell may state that
their opinion and belief are based upon their participation in the preparation
of the Final Memorandum (and any amendments or supplements thereto) and review
and discussion of the contents thereof (including the review of, but not
participation in the preparation of, the incorporated documents), but are
without independent check or verification except as specified.
B-2
<PAGE> 36
EXHIBIT C
LOCK-UP LETTER
November 24, 1997
Morgan Stanley & Co. Incorporated
1585 Broadway
New York, NY 10036
Dear Sirs and Mesdames:
The undersigned understands that Morgan Stanley & Co. Incorporated
("MORGAN STANLEY") proposes to enter into a Purchase Agreement (the "PURCHASE
AGREEMENT") with Federal-Mogul Financing Trust, a special purpose statutory
business trust formed under the laws of the State of Delaware (the "TRUST"),
providing for the offering (the "OFFERING") by Morgan Stanley, as Initial
Purchaser (the "INITIAL PURCHASER"), of 10,000,000 7% convertible preferred
securities, liquidation preference $50 per convertible preferred security (the
"CONVERTIBLE PREFERRED SECURITIES"), and up to an additional 1,500,000
Convertible Preferred Securities that are subject to an over-allotment option.
The Convertible Preferred Securities will be convertible into shares of common
stock without par value of Federal-Mogul Corporation, a Michigan corporation
(the "COMMON STOCK").
<PAGE> 37
To induce the Initial Purchaser to enter into the Purchase Agreement,
the undersigned hereby agrees that, without the prior written consent of Morgan
Stanley, it will not, during the period commencing as of the date hereof and
ending 90 days after the date of the final offering memorandum relating to the
Offering (the "FINAL MEMORANDUM"), (1) offer, pledge, sell, contract to sell,
sell any option or contract to purchase, purchase any option or contract to
sell, grant any option, right or warrant to purchase, lend, or otherwise
transfer or dispose of, directly or indirectly, any shares of Common Stock or
any securities convertible into or exercisable or exchangeable for Common Stock
or (2) enter into any swap or other arrangement that transfers to another, in
whole or in part, any of the economic consequences of ownership of the Common
Stock, whether any such transaction described in clause (1) or (2) above is to
be settled by delivery of Common Stock or such other securities, in cash or
otherwise. The foregoing sentence shall not apply to (i) transactions relating
to shares of Common Stock or other securities acquired in open market
transactions after the completion of the Offering, (ii) sales of shares of
Common Stock or securities convertible into or exercisable or exchangeable for
shares of Common Stock, (iii) the exercise of any options with respect to the
Common Stock, or (iv) transfers of any Common Stock or securities convertible
into or exercisable or exchangeable for shares of Common Stock to a person or an
entity that is controlled by the undersigned and that agrees to be bound by the
agreements set forth herein.
The undersigned understands that whether or not the Offering actually
occurs depends on a number of factors, including market conditions, and that any
Offering will be made only pursuant to a Purchase Agreement, the terms of which
are subject to negotiation between the Company and the Initial Purchaser.
Very truly yours,
(Name) __________________________
(Address) __________________________
<PAGE> 1
EXHIBIT 4.7
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT is made and entered into as of
December 1, 1997 by and among Federal-Mogul Corporation, a Michigan corporation
("FEDERAL-MOGUL"), Federal-Mogul Financing Trust, a special purpose business
trust created under the laws of the State of Delaware (the "TRUST"), and Morgan
Stanley & Co. Incorporated (the "INITIAL PURCHASER") pursuant to the Purchase
Agreement, dated as of November 24, 1997 (the "PURCHASE AGREEMENT"), among
Federal-Mogul, the Trust and the Initial Purchaser. In order to induce the
Initial Purchaser to enter into the Purchase Agreement, Federal-Mogul and the
Trust have agreed to provide the registration rights set forth in this
Agreement. The execution of this Agreement is a condition to the closing under
the Purchase Agreement.
Federal-Mogul and the Trust agree with the Initial Purchaser, (i) for
its benefit as Initial Purchaser and (ii) for the benefit of the beneficial
owners (including the Initial Purchaser) from time to time of the Convertible
Preferred Securities (as defined herein) and the beneficial owners from time to
time of the Underlying Common Stock (as defined herein) issued upon conversion
of the Convertible Debentures (as defined herein) (each of the foregoing a
"HOLDER" and together the "HOLDERS"), as follows:
Section 1. Definitions. Capitalized terms used herein without
definition shall have their respective meanings set forth in the Purchase
Agreement. As used in this Agreement, the following terms shall have the
following meanings:
Affiliate: With respect to any specified person, an "affiliate," as
defined in Rule 144, of such person.
Amendment Effectiveness Deadline Date: See Section 2(d) hereof.
Applicable Conversion Price: The Applicable Conversion Price as of any
date of determination means the Conversion Price in effect as of such date of
determination or, if no Convertible Debentures are then outstanding, the
Conversion Price that would be in effect were Convertible Debentures then
outstanding.
Business Day: Each Monday, Tuesday, Wednesday, Thursday and Friday that
is not a day on which banking institutions in The City of New York are
authorized or obligated by law or executive order to close.
Common Stock: The shares of common stock without par value of Federal-
Mogul and any other shares of common stock as may constitute "Common Stock" for
purposes of the Indenture, including the Underlying Common Stock.
<PAGE> 2
Conversion Price: Conversion Price shall have the meaning assigned such
term in the Indenture.
Convertible Debentures: The 7% Convertible Junior Subordinated
Debentures of Federal-Mogul to be purchased by the Trust pursuant to the
Debenture Purchase Agreement dated the date hereof between Federal-Mogul and the
Trust.
Convertible Preferred Securities: The 7% Trust Convertible Preferred
Securities of the Trust.
Damages Accrual Period: See Section 2(e) hereof.
Damages Payment Date: Each payment date under the Declaration, in the
case of Convertible Preferred Securities, each Interest Payment Date (as defined
in the Indenture), in the case of Convertible Debentures, and each March 1, June
1, September 1 and December 1, in the case of Underlying Common Stock.
Declaration: The Amended and Restated Declaration of Trust, dated as
of the date hereof, of the Trust.
Deferral Notice: See Section 3(i) hereof.
Deferral Period: See Section 3(i) hereof.
Effectiveness Deadline Date: See Section 2(a) hereof.
Effectiveness Period: The period commencing with the date hereof and
ending on the date that all Registrable Securities have ceased to be Registrable
Securities.
Event: See Section 2(e) hereof.
Event Termination Date: See Section 2(e) hereof.
Event Date: See Section 2(e) hereof.
Exchange Act: The Securities Exchange Act of 1934, as amended, and
the rules and regulations of the SEC promulgated thereunder.
Filing Deadline Date: See Section 2(a) hereof.
Guarantee: The guarantee by Federal-Mogul of the Convertible Preferred
Securities pursuant to the Preferred Securities Guarantee Agreement dated as of
the date hereof.
2
<PAGE> 3
Holder: See the second paragraph of this Agreement.
Indenture: The Indenture dated as of the date hereof between
Federal-Mogul and The Bank of New York, as trustee, pursuant to which the
Convertible Debentures are being issued, as amended by the First Supplemental
Indenture dated as of the date hereof between Federal-Mogul and The Bank of New
York, as trustee.
Initial Purchaser: Morgan Stanley & Co. Incorporated.
Initial Shelf Registration Statement: See Section 2(a) hereof.
Liquidated Damages Amount: See Section 2(e) hereof.
Losses: See Section 6 hereof.
Material Event: See Section 3(i) hereof.
Notice and Questionnaire: A written notice delivered to Federal-Mogul
and the Trust containing substantially the information called for by the Notice
and Questionnaire attached as Appendix A to the Offering Memorandum of
Federal-Mogul and the Trust dated November 24, 1997 relating to the Convertible
Preferred Securities.
Notice Holder: On any date, any Holder that has delivered a Notice and
Questionnaire to Federal-Mogul or the Trust on or prior to such date.
Prospectus: The prospectus included in any Registration Statement
(including, without limitation, a prospectus that discloses information
previously omitted from a prospectus filed as part of an effective registration
statement in reliance upon Rule 430A promulgated under the Securities Act), as
amended or supplemented by any amendment or prospectus supplement, including
post-effective amendments, and all material incorporated by reference or
explicitly deemed to be incorporated by reference in such Prospectus.
Purchase Agreement: See the first paragraph of this Agreement.
Record Holder: (i) With respect to any Damages Payment Date relating to
any Convertible Preferred Security or Convertible Debenture as to which any such
Liquidated Damages Amount has accrued, the Registered Holder of such Convertible
Preferred Security or Convertible Debenture on the record date with respect to
the distribution payment date under the Declaration or the interest payment date
under the Indenture, as the case may be, on which such Damages Payment Date
shall occur and (ii) with respect to any Damages Payment Date relating to any
Underlying Common Stock as to which any
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such Liquidated Damages Amount has accrued, the registered holder of such
Underlying Common Stock 15 days prior to the next succeeding Damages Payment
Date.
Registered Holder: The holder of a Convertible Preferred Security that
is registered as such on the books of the Trust.
Registrable Securities: The Convertible Preferred Securities, the
Guarantee, the Convertible Debentures and the Underlying Common Stock, until
such securities have been converted or exchanged, and, at all times subsequent
to any such conversion or exchange, any securities into or for which such
securities have been converted or exchanged, and any security issued with
respect thereto upon any stock dividend, split or similar event until, in the
case of any such security, (A) the earliest of (i) its effective registration
under the Securities Act and resale in accordance with the Registration
Statement covering it, (ii) expiration of the holding period that would be
applicable thereto under Rule 144(k) were it not held by an Affiliate of
Federal-Mogul or the Trust or (iii) its sale to the public pursuant to Rule 144,
and (B) as a result of the event or circumstance described in any of the
foregoing clauses (i) through (iii), the legends with respect to transfer
restrictions required under the Declaration and the Indenture are removed or
removable in accordance with the terms of the Declaration or the Indenture, as
the case may be.
Registration Expenses: See Section 5 hereof.
Registration Statement: Any registration statement of Federal-Mogul or
the Trust that covers any of the Registrable Securities pursuant to the
provisions of this Agreement, including the Prospectus, amendments and
supplements to such registration statement, including post-effective amendments,
all exhibits, and all material incorporated by reference or explicitly deemed to
be incorporated by reference in such registration statement.
Restricted Securities: As this term is defined in Rule 144.
Rule 144: Rule 144 under the Securities Act, as such Rule may be
amended from time to time, or any similar rule or regulation hereafter adopted
by the SEC.
Rule 144A: Rule 144A under the Securities Act, as such Rule may be
amended from time to time, or any similar rule or regulation hereafter adopted
by the SEC.
SEC: The Securities and Exchange Commission.
Securities Act: The Securities Act of 1933, as amended, and the rules
and regulations promulgated by the SEC thereunder.
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Shelf Registration Statement: See Section 2(a) hereof.
Subsequent Shelf Registration Statement: See Section 2(b) hereof.
TIA: The Trust Indenture Act of 1939, as amended.
Trustee: The Bank of New York (or any successor entity), the
Institutional Trustee under the Declaration and the Trustee under the Indenture.
Underlying Common Stock: The Common Stock into which the Convertible
Debentures are convertible.
Section 2. Shelf Registration. (a) Federal-Mogul and the Trust shall
prepare and file with the SEC, as soon as practicable but in any event by the
date (the "FILING DEADLINE DATE") one hundred and eighty (180) days after the
date hereof, a Registration Statement for an offering to be made on a delayed or
continuous basis pursuant to Rule 415 of the Securities Act (a "SHELF
REGISTRATION STATEMENT") registering the resale from time to time by Holders
thereof of all of the Registrable Securities (the "INITIAL SHELF REGISTRATION
STATEMENT"). The Initial Shelf Registration Statement shall be on Form S-3 or
another appropriate form permitting registration of such Registrable Securities
for resale by such Holders in accordance with the methods of distribution
elected by the Holders and set forth in the Initial Shelf Registration
Statement. Federal-Mogul and the Trust shall use their best efforts to cause the
Initial Shelf Registration Statement to become effective under the Securities
Act as promptly as is practicable but in any event by the date (the
"EFFECTIVENESS DEADLINE DATE") two hundred and seventy (270) days after the date
hereof, and to keep the Initial Shelf Registration Statement (or any Subsequent
Shelf Registration Statement) continuously effective under the Securities Act
until the expiration of the Effectiveness Period. At the time the Initial Shelf
Registration Statement becomes effective, each Holder that became a Notice
Holder on or prior to the date ten Business Days prior to such time of
effectiveness shall be named as a selling securityholder in the Initial Shelf
Registration Statement and the related Prospectus in such a manner as to permit
such Holder to deliver such Prospectus to purchasers of Registrable Securities
in accordance with applicable law.
(b) If the Initial Shelf Registration Statement or any Subsequent
Shelf Registration Statement ceases to be effective for any reason at any time
during the Effectiveness Period (other than because all Registrable Securities
registered thereunder shall have been resold pursuant thereto or shall have
ceased to be Registrable Securities), Federal-Mogul and the Trust shall use
their best efforts to obtain the prompt withdrawal of any order suspending the
effectiveness thereof, and in any event shall within thirty (30) days of such
cessation of effectiveness amend the Shelf Registration Statement in a manner
reasonably expected to obtain the withdrawal of the order suspending the
effectiveness thereof, or file an additional Shelf Registration Statement
covering all of the
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<PAGE> 6
securities that as of the date of such filing are Registrable Securities (a
"SUBSEQUENT SHELF REGISTRATION STATEMENT"). If a Subsequent Shelf Registration
Statement is filed, Federal-Mogul and the Trust shall use their best efforts to
cause the Subsequent Shelf Registration Statement to become effective as
promptly as is practicable after such filing and to keep such Registration
Statement (or subsequent Subsequent Shelf Registration Statement) continuously
effective until the end of the Effectiveness Period.
(c) Federal-Mogul and the Trust shall supplement and amend the Shelf
Registration Statement if required by the rules, regulations or instructions
applicable to the registration form used by Federal-Mogul and the Trust for such
Shelf Registration Statement, if required by the Securities Act or, to the
extent to which Federal-Mogul and the Trust do not reasonably object, as
reasonably requested by the Initial Purchaser or by the Trustee on behalf of the
Registered Holders.
(d) Each Holder of Registrable Securities agrees that if such Holder
wishes to sell Registrable Securities pursuant to a Shelf Registration Statement
and related Prospectus, it will do so only in accordance with this Section 2(d)
and Section 3(i). Each Holder of Registrable Securities wishing to sell
Registrable Securities pursuant to a Shelf Registration and related Prospectus
agrees to deliver a Notice and Questionnaire to Federal-Mogul and the Trust at
least three (3) Business Days prior to any intended distribution of Registrable
Securities under the Shelf Registration Statement. From and after the date the
Initial Shelf Registration Statement becomes effective, Federal-Mogul and the
Trust shall, as promptly as is practicable after the date a Notice and
Questionnaire is delivered, and in any event within five (5) Business Days after
such date, (i) if required by applicable law, file with the SEC a post-effective
amendment to the Shelf Registration Statement or prepare and, if required by
applicable law, file a supplement to the related Prospectus or a supplement or
amendment to any document incorporated therein by reference or file any other
required document so that the Holder delivering such Notice and Questionnaire is
named as a selling securityholder in the Shelf Registration Statement and the
related Prospectus in such a manner as to permit such Holder to deliver such
Prospectus to purchasers of the Registrable Securities in accordance with
applicable law and, if Federal-Mogul and the Trust shall file a post-effective
amendment to the Shelf Registration Statement, use their best efforts to cause
such post-effective amendment to become effective under the Securities Act as
promptly as is practicable, but in any event by the date (the "AMENDMENT
EFFECTIVENESS DEADLINE DATE") forty-five (45) days after the date such
post-effective amendment is required by this clause to be filed; (ii) provide
such Holder copies of any documents filed pursuant to Section 2(d)(i); and (iii)
notify such Holder as promptly as practicable after the effectiveness under the
Securities Act of any post-effective amendment filed pursuant to Section
2(d)(i); provided, that if such Notice and Questionnaire is delivered during a
Deferral Period, Federal-Mogul and the Trust shall so inform the Holder
delivering such Notice and Questionnaire and shall take the actions set forth
in clauses (i), (ii) and (iii) above upon expiration of the Deferral Period in
accordance with Section 2(j). Federal-Mogul and the Trust shall be under no
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<PAGE> 7
obligation to name any Holder that is not a Notice Holder as a selling
securityholder in any Registration Statement or related Prospectus.
(e) The parties hereto agree that the Holders of Registrable
Securities will suffer damages, and that it would not be feasible to ascertain
the extent of such damages with precision, if (i) the Initial Shelf Registration
Statement has not been filed on or prior to the Filing Deadline Date, (ii) the
Initial Shelf Registration Statement has not become effective under the
Securities Act on or prior to the Effectiveness Deadline Date, (iii)
Federal-Mogul and the Trust have failed to perform their obligations set forth
in Section 2(d) within the time period required, (iv) any post-effective
amendment to the Shelf Registration Statement filed pursuant to Section
2(d)(1)(A) has not become effective under the Securities Act on or prior to the
Amendment Effectiveness Deadline Date, (v) the aggregate duration of Deferral
Periods in any period exceeds the number of days permitted in respect of such
period pursuant to Section 3(i) hereof or (vi) the number of Deferral Periods in
any period exceeds the number permitted in respect of such period pursuant to
Section 3(i) (each of the events of a type described in any of the foregoing
clauses (i) through (vi) are individually referred to herein as an "EVENT," and
the Filing Deadline Date in the case of clause (i), the Effectiveness Deadline
Date in the case of clause (ii), the date by which Federal-Mogul and the Trust
are required to perform their obligations set forth in Section 2(d) in the case
of clause (iii), the Amendment Effectiveness Deadline Date in the case of clause
(iv), the date on which the aggregate duration of Deferral Periods in any period
exceeds the number of days permitted by Section 3(i) hereof in the case of
clause (v), and the date of the commencement of a Deferral Period that causes
the limit on the number of Deferral Periods in any period under Section 3(i)
hereof to be exceeded in the case of clause (vi), being referred to herein as an
"EVENT DATE"). Events shall be deemed to continue until the "EVENT TERMINATION
DATE," which shall be the following dates with respect to the respective types
of Events: the date the Initial Registration Statement is filed in the case of
an Event of the type described in clause (i), the date the Initial Registration
Statement becomes effective under the Securities Act in the case of an Event of
the type described in clause (ii), the date Federal-Mogul and the Trust perform
their obligations set forth in Section 2(d) in the case of an Event of the type
described in clause (iii), the date the relevant post-effective amendment to the
Shelf Registration Statement becomes effective under the Securities Act in the
case of an Event of the type described in clause (iv), termination of the
Deferral Period that caused the limit on the aggregate duration of Deferral
Periods in a period set forth in Section 3(i) to be exceeded in the case of the
commencement of an Event of the type described in clause (v), and termination of
the Deferral Period the commencement of which caused the number of Deferral
Periods in a period permitted by Section 3(j) to be exceeded in the case of an
Event of the type described in clause (vi).
Accordingly, commencing on (and including) any Event Date and ending on
(but excluding) the next date on which there are no Events that have occurred
and are continuing (a "DAMAGES ACCRUAL PERIOD"), Federal-Mogul agrees to pay, as
liquidated
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<PAGE> 8
damages and not as a penalty, an amount (the "LIQUIDATED DAMAGES AMOUNT"),
payable on the Damages Payment Dates, (i) prior to the conversion thereof, to
Record Holders (as set forth in the succeeding paragraph) of (x) Convertible
Preferred Securities or (y) in the event that the Convertible Debentures are
distributed to holders of Convertible Preferred Securities upon dissolution of
the Trust in accordance with the Declaration, Convertible Debentures, accruing
at a rate per annum equal to one-half of one percent (.5%) of the liquidation
amount of such Convertible Preferred Securities or of the principal amount of
such Convertible Debentures, as the case may be, and (ii) to Record Holders (as
set forth in the succeeding paragraph) of shares of Underlying Common Stock
issued upon conversion of Convertible Preferred Securities or Convertible
Debentures that are Registrable Securities, accruing, for each portion of such
Damages Accrual Period beginning on and including a Damages Payment Date (or, in
respect of the first such portion, the Event Date) and ending on but excluding
the next subsequent Damages Payment Date, at a rate per annum equal to one-half
of one percent (.5%) of the aggregate Applicable Conversion Price of such shares
of Underlying Common Stock as of the Business Day immediately preceding such
next subsequent Damages Payment Date; provided, that in the case of a Damages
Accrual Period that is in effect solely as a result of an Event of the type
described in clause (iii) or (iv) of the preceding paragraph, such Liquidated
Damages Amount shall be paid only to the Holders (as set forth in the succeeding
paragraph) that have delivered Notice and Questionnaires that caused
Federal-Mogul and the Trust to incur the obligations set forth in Section 2(d)
the non-performance of which is the basis of such Event. Notwithstanding the
foregoing, no Liquidated Damages Amounts shall accrue as to any Registrable
Security from and after the earlier of (x) the date such security is no longer a
Registrable Security and (y) expiration of the Effectiveness Period. The rate of
accrual of the Liquidated Damages Amount with respect to any period shall not
exceed the rate provided for in this paragraph notwithstanding the occurrence of
multiple concurrent Events.
Federal-Mogul shall pay on each Damages Payment Date that portion of
the Liquidated Damages Amount payable pursuant to this Section 2(e) in respect
of any Damages Accrual Period that has accrued from and including the next
preceding Damages Payment Date during such Damages Accrual Period (or, in
respect of the first such portion, the Event Date with respect to such Damages
Accrual Period) to but excluding such Damages Payment Date on any Convertible
Preferred Security, Convertible Debenture or share of Underlying Common Stock to
the Record Holders thereof; provided, that any Liquidated Damages Amount accrued
with respect to any Convertible Preferred Security or Convertible Debenture or
portion thereof called for redemption on a redemption date or converted into
Underlying Common Stock on a conversion date prior to the Damages Payment Date,
shall, in any such event, be paid instead to the holder who submitted such
Convertible Preferred Security or Convertible Debenture or portion thereof for
redemption or conversion on the applicable redemption date or conversion date,
as the case may be, on such date (or promptly following the conversion date, in
the case of conversion); provided further, that, in the case of an Event
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of the type described in clause (iii) or (iv) of the first paragraph of this
Section 2(e), such Liquidated Damages Amount shall be paid only to the Holders
entitled thereto pursuant to such first paragraph by check mailed to the address
set forth in the Notice and Questionnaire delivered by such Holder. The Trustee
shall be entitled, on behalf of Registered Holders of Convertible Preferred
Securities, Convertible Debentures or Underlying Common Stock, to seek any
available remedy for the enforcement of this Agreement, including for the
payment of such Liquidated Damages Amount. Notwithstanding the foregoing, the
parties agree that the sole damages payable for a violation of the terms of this
Agreement with respect to which liquidated damages are expressly provided shall
be such liquidated damages. Nothing shall preclude a Notice Holder or Holder of
Registrable Securities from pursuing or obtaining specific performance or other
equitable relief with respect to this Agreement.
All of Federal-Mogul's obligations set forth in this Section 2(e) that
are outstanding with respect to any Registrable Security at the time such
security ceases to be a Registrable Security shall survive until such time as
all such obligations with respect to such security have been satisfied in full
(notwithstanding termination of this Agreement pursuant to Section 9(k)).
The parties hereto agree that the liquidated damages provided for in
this Section 2(e) constitute a reasonable estimate of the damages that may be
incurred by Holders of Registrable Securities by reason of the failure of the
Shelf Registration Statement to be filed or declared effective or available
(absolutely or as a practical matter) for effecting resales of Registrable
Securities in accordance with the provisions hereof.
Section 3. Registration Procedures. In connection with the
registration obligations of Federal-Mogul and the Trust under Section 2 hereof,
Federal-Mogul and the Trust shall:
(a) Before filing any Registration Statement or Prospectus or any
amendments or supplements thereto with the SEC, furnish to the Initial Purchaser
copies of all such documents proposed to be filed and use their best efforts to
reflect in each such document when so filed with the SEC such comments as the
Initial Purchaser reasonably shall propose within two (2) Business Days of the
delivery of such copies to the Initial Purchaser.
(b) Prepare and file with the SEC such amendments and post-effective
amendments to each Registration Statement as may be necessary to keep such
Registration Statement continuously effective for the applicable period
specified in Section 2; cause the related Prospectus to be supplemented by any
required Prospectus supplement, and as so supplemented to be filed pursuant to
Rule 424 (or any similar provisions then in force) under the Securities Act; and
use its best efforts to comply with the provisions of the Securities Act
applicable to it with respect to the disposition of all
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<PAGE> 10
securities covered by such Registration Statement during the applicable period
in accordance with the intended methods of disposition by the sellers thereof
set forth in such Registration Statement as so amended or such Prospectus as so
supplemented.
(c) As promptly as practicable give notice to the Notice Holders and
the Initial Purchaser (i) when any Prospectus, Prospectus supplement,
Registration Statement or post-effective amendment to a Registration Statement
has been filed with the SEC and, with respect to a Registration Statement or any
post-effective amendment, when the same has become effective, (ii) of any
request, following the effectiveness of the Initial Shelf Registration Statement
under the Securities Act, by the SEC or any other federal or state governmental
authority for amendments or supplements to any Registration Statement or related
Prospectus or for additional information, (iii) of the issuance by the SEC or
any other federal or state governmental authority of any stop order suspending
the effectiveness of any Registration Statement or the initiation or threatening
of any proceedings for that purpose, (iv) of the receipt by Federal-Mogul or the
Trust of any notification with respect to the suspension of the qualification or
exemption from qualification of any of the Registrable Securities for sale in
any jurisdiction or the initiation or threatening of any proceeding for such
purpose, (v) of the occurrence of (but not the nature of or details concerning)
a Material Event and (vi) of the determination by Federal-Mogul that a
post-effective amendment to a Registration Statement would be appropriate, which
notice may, at the discretion of Federal-Mogul (or as required pursuant to
Section 3(i)), state that it constitutes a Deferral Notice, in which event the
provisions of Section 3(i) shall apply.
(d) Use its best efforts to obtain the withdrawal of any order
suspending the effectiveness of a Registration Statement or the lifting of any
suspension of the qualification (or exemption from qualification) of any of the
Registrable Securities for sale in any jurisdiction in which they have been
qualified for sale, in either case at the earliest possible moment.
(e) If reasonably requested by the Initial Purchaser or any Notice
Holder, as promptly as practicable incorporate in a Prospectus supplement or
post-effective amendment to a Registration Statement such information as the
Initial Purchaser or such Notice Holder shall, on the basis of an opinion of
nationally-recognized counsel experienced in such matters, determine to be
required to be included therein by applicable law and make any required filings
of such Prospectus supplement or such post-effective amendment; provided, that
Federal-Mogul and the Trust shall not be required to take any actions under this
Section 3(e) that are not, in the reasonable opinion of counsel for
Federal-Mogul, in compliance with applicable law.
(f) As promptly as practicable furnish to each Notice Holder and the
Initial Purchaser, without charge, at least one (1) conformed copy of the
Registration Statement and any amendment thereto, including financial statements
but excluding schedules, all
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documents incorporated or deemed to be incorporated therein by reference and all
exhibits (unless reasonably requested in writing by such Notice Holder or the
Initial Purchaser, as the case may be).
(g) Deliver to each Notice Holder in connection with any sale of
Registrable Securities pursuant to a Registration Statement, without charge, as
many copies of the Prospectus or Prospectuses relating to such Registrable
Securities (including each preliminary prospectus) and any amendment or
supplement thereto as such Notice Holder may reasonably request; and
Federal-Mogul and the Trust hereby consent to the use of such Prospectus or each
amendment or supplement thereto by each Notice Holder in connection with any
offering and sale of the Registrable Securities covered by such Prospectus or
any amendment or supplement thereto in the manner set forth therein.
(h) As promptly as practicable register or qualify or cooperate with
the Notice Holders in connection with the registration or qualification (or
exemption from such registration or qualification) of such Registrable
Securities for offer and sale under the securities or Blue Sky laws of such
jurisdictions within the United States as any Notice Holder reasonably requests
in writing (which request may be included in the Notice and Questionnaire); keep
each such registration or qualification (or exemption therefrom) effective
during the Effective Period in connection with such Notice Holder's offer and
sale of Registrable Securities pursuant to such registration or qualification
(or exemption therefrom) and do any and all other acts or things necessary or
advisable to enable the disposition in such jurisdictions of such Registrable
Securities in the manner set forth in the relevant Registration Statement and
the related Prospectus; provided, that neither Federal-Mogul nor the Trust will
be required to (i) qualify as a foreign corporation or as a dealer in securities
in any jurisdiction where it would not otherwise be required to qualify but for
this Agreement or (ii) take any action that would subject it to general service
of process in suits or to taxation in any such jurisdiction where it is not then
so subject.
(i) Upon (A) the issuance by the SEC of a stop order suspending the
effectiveness of the Shelf Registration Statement or the initiation of
proceedings with respect to the Shelf Registration Statement under Section 8(d)
or 8(e) of the Securities Act, (B) the occurrence of any event or the existence
of any fact (a "MATERIAL EVENT") as a result of which any Registration Statement
shall contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading, or any Prospectus shall contain any untrue statement of
a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, or (C) the occurrence
or existence of any pending corporate development that, in the discretion of
Federal- Mogul, makes it appropriate to suspend the availability of the Shelf
Registration Statement and the related Prospectus, (i) in the case of clause
(B) above, subject to the next sentence, as promptly as practicable prepare and
file, if necessary pursuant to applicable law, a post-effective amendment to
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such Registration Statement or a supplement to the related Prospectus or any
document incorporated therein by reference or file any other required document
that would be incorporated by reference into such Registration Statement and
Prospectus so that such Registration Statement does not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading, and
such Prospectus does not contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary to make
the statements therein, in the light of the circumstances under which they were
made, not misleading, as thereafter delivered to the purchasers of the
Registrable Securities being sold thereunder, and, in the case of a
post-effective amendment to a Registration Statement, subject to the next
sentence, use their best efforts to cause it to become effective as promptly as
is practicable, and (ii) give notice to the Notice Holders that the availability
of the Shelf Registration Statement is suspended (a "DEFERRAL NOTICE") and, upon
receipt of any Deferral Notice, each Notice Holder shall not sell any
Registrable Securities pursuant to the Registration Statement until such Notice
Holder's receipt of copies of the supplemented or amended Prospectus provided
for in clause (i) above, or until it is advised in writing by Federal-Mogul that
the Prospectus may be used, and has received copies of any additional or
supplemental filings that are incorporated or deemed incorporated by reference
in such Prospectus. Federal-Mogul and the Trust will use their best efforts to
ensure that the use of the Prospectus may be resumed (x) in the case of clause
(A) above, as promptly as is practicable, (y) in the case of clause (B) above,
as soon as, in the sole judgment of Federal-Mogul, public disclosure of such
Material Event would not be prejudicial to or contrary to the interests of
Federal-Mogul or the Trust or, if necessary to avoid unreasonable burden or
expense, as soon as practicable thereafter and (z) in the case of clause (C)
above, as soon as, in the discretion of Federal-Mogul, such suspension is no
longer appropriate. Federal-Mogul and the Trust shall be entitled to exercise
their right under this Section 3(i) to suspend the availability of the Shelf
Registration Statement or any Prospectus, without incurring any obligation to
pay liquidated damages pursuant to Section 2(e), no more than one (1) time in
any three (3) month period or three (3) times in any twelve (12) month period,
and the period during which the availability of the Registration Statement and
any Prospectus is suspended (the "DEFERRAL PERIOD") shall, without incurring any
obligation to pay liquidated damages pursuant to Section 2(e), not exceed thirty
(30) days; provided, that in the case of a Material Event relating to an
acquisition or a probable acquisition meeting the significance test of Rule
3-05(b)(2)(iv) of Regulation S-X under the Securities Act, Federal-Mogul and the
Trust may, without incurring any obligation to pay liquidated damages pursuant
to Section 2(e), deliver to Notice Holders a second certificate to the effect
set forth above, which shall have the effect of extending the Deferral Period by
up to an additional thirty (30) days, or such shorter period of time as is
specified in such second notice; provided, that the aggregate duration of any
Deferral Periods shall not, without incurring any obligation to pay liquidated
damages pursuant to Section 2(e), exceed sixty (60) days in any three (3) month
period or ninety (90) days in any twelve (12) month period.
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(j) If requested in connection with a disposition of Registrable
Securities pursuant to a Registration Statement, make reasonably available for
inspection by the Notice Holders of such Registrable Securities and any
broker-dealers, attorneys and accountants retained by such Notice Holders, all
relevant financial and other records, pertinent corporate documents and
properties of Federal-Mogul and the Trust and its subsidiaries, and cause the
executive officers, directors and designated employees of Federal-Mogul and its
subsidiaries to make reasonably available for inspection all relevant
information reasonably requested by such Notice Holders or any such
broker-dealers, attorneys or accountants in connection with such disposition, in
each case as is customary for similar "due diligence" examinations; provided,
that any information that is designated by Federal-Mogul and the Trust, in good
faith, as confidential at the time of delivery of such information shall be kept
confidential by such Notice Holders or any such broker-dealer, attorney or
accountant, unless such disclosure is made in connection with a court proceeding
or is required by law, or such information becomes available to the public
generally or through a third party without an accompanying obligation of
confidentiality; and provided further, that the foregoing inspection and
information gathering shall, to the greatest extent possible, be coordinated on
behalf of the Notice Holders and the other parties entitled thereto by the
counsel referred to in Section 5.
(k) Comply with all applicable rules and regulations of the SEC and
make generally available to its securityholders earning statements (which need
not be audited) satisfying the provisions of Section 11(a) of the Securities Act
and Rule 158 thereunder (or any similar rule promulgated under the Securities
Act) no later than 45 days after the end of any 12-month period (or 90 days
after the end of any 12-month period if such period is a fiscal year) commencing
on the first day of the first fiscal quarter of Federal-Mogul commencing after
the effective date of a Registration Statement, which statements shall cover
said 12-month periods.
(l) Unless all Registrable Securities shall be held in book-entry
form, cooperate with each Notice Holder to facilitate the timely preparation and
delivery of certificates representing Registrable Securities to be sold
pursuant to a Registration Statement, which certificates shall not bear any
restrictive legends, and cause such Registrable Securities to be in such
denominations and registered in such names as such Notice Holder may request.
(m) Provide a CUSIP number for all Registrable Securities other than
the Guarantee not later than the effective date of the Initial Shelf
Registration Statement and provide the Trustee and the transfer agent for the
Common Stock with printed certificates for the Registrable Securities that are
in a form eligible for deposit with the Depository Trust Company.
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(n) Provide such information as is required for any filings required
to be made with the National Association of Securities Dealers, Inc.
(o) Upon (i) the filing of the Initial Registration Statement and (ii)
the effectiveness of the Initial Registration Statement, announce the same, in
each case by release to Reuters Economic Services and Bloomberg Business News.
Section 4. Holder's Obligations. Each Holder agrees, by acquisition of
the Registrable Securities, that no Holder of Registrable Securities shall be
entitled to sell any of such Registrable Securities pursuant to a Registration
Statement or to receive a Prospectus relating thereto, unless such Holder has
furnished Federal-Mogul and the Trust with a Notice and Questionnaire as
required pursuant to Section 2(d) hereof (including the information required to
be included in such Notice and Questionnaire) and the information set forth in
the next sentence. Each Notice Holder agrees promptly to furnish to
Federal-Mogul and the Trust all information required to be disclosed in order to
make the information previously furnished to Federal-Mogul and the Trust by such
Notice Holder not misleading and any other information regarding such Notice
Holder and the distribution of such Registrable Securities as Federal-Mogul and
the Trust may from time to time reasonably request. Any sale of any Registrable
Securities by any Holder shall constitute a representation and warranty by such
Holder that the information relating to such Holder and its plan of distribution
is as set forth in the Prospectus delivered by such Holder in connection with
such disposition, that such Prospectus does not as of the time of such sale
contain any untrue statement of a material fact relating to or provided by such
Holder or its plan of distribution and that such Prospectus does not as of the
time of such sale omit to state any material fact relating to or provided by
such Holder or its plan of distribution necessary to make the statements in such
Prospectus, in the light of the circumstances under which they were made, not
misleading.
Section 5. Registration Expenses. Federal-Mogul shall bear all fees and
expenses incurred in connection with the performance by Federal-Mogul and the
Trust of their obligations under Sections 2 and 3 whether or not any of the
Registration Statements become effective. Such fees and expenses shall include,
without limitation, (i) all registration and filing fees (including, without
limitation, fees and expenses (x) with respect to filings required to be made
with the National Association of Securities Dealers, Inc. and (y) of compliance
with federal and state securities or Blue Sky laws (including, without
limitation, reasonable fees and disbursements of the counsel specified in the
next sentence in connection with Blue Sky qualifications of the Registrable
Securities under the laws of such jurisdictions as the Notice Holders of a
majority of the Registrable Securities being sold pursuant to a Registration
Statement may designate), (ii) printing expenses (including, without limitation,
expenses of printing certificates for Registrable Securities in a form eligible
for deposit with The Depository Trust Company, (iii) duplication expenses
relating to copies of any Registration Statement or Prospectus delivered to any
Holders hereunder, (iv) fees and disbursements of counsel for Federal-
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<PAGE> 15
Mogul and the Trust in connection with the Shelf Registration Statement, (v)
reasonable fees and disbursements of the Trustee and its counsel and of the
registrar and transfer agent for the Common Stock and (vi) Securities Act
liability insurance obtained by Federal-Mogul in its sole discretion. In
addition, Federal-Mogul shall bear or reimburse the Notice Holders for the
reasonable fees and disbursements of one firm of legal counsel for the Holders,
which shall initially be Davis Polk & Wardwell, but which may, with the written
consent of the Initial Purchaser (which shall not be unreasonably withheld), be
another nationally recognized law firm experienced in securities law matters
designated by Federal- Mogul. In addition, Federal-Mogul shall pay the internal
expenses of Federal-Mogul and the Trust (including, without limitation, all
salaries and expenses of officers and employees performing legal or accounting
duties), the expense of any annual audit, the fees and expenses incurred in
connection with the listing of the Registrable Securities on any securities
exchange on which similar securities of Federal-Mogul are then listed and the
fees and expenses of any person, including special experts, retained by Federal-
Mogul or the Trust. Notwithstanding the provisions of this Section 5, each
seller of Registrable Securities shall pay all registration expenses to the
extent Federal-Mogul is prohibited by applicable Blue Sky laws from paying for
or on behalf of such seller of Registrable Securities.
Section 6. Indemnification.
(a) Indemnification by Federal-Mogul. Federal-Mogul and the Trust
shall jointly and severally indemnify and hold harmless each Notice Holder and
each person, if any, who controls any Notice Holder (within the meaning of
either Section 15 of the Securities Act or Section 20 of the Exchange Act) from
and against all losses, liabilities, claims, damages and expenses (including,
without limitation, any legal or other expenses reasonably incurred in
connection with defending or investigating any such action or claim)
(collectively, "LOSSES"), arising out of or based upon any untrue statement or
alleged untrue statement of a material fact contained in any Registration
Statement or Prospectus or in any amendment or supplement thereto or in any
preliminary prospectus, or arising out of or based upon any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, except insofar as such
Losses arise out of or are based upon the information relating to any Holder
furnished to Federal-Mogul and the Trust in writing by such Holder expressly for
use therein; provided, that the indemnification contained in this paragraph
shall not inure to the benefit of any Holder of Registrable Securities (or to
the benefit of any person controlling such Holder) on account of any such Losses
arising out of or based upon an untrue statement or alleged untrue statement or
omission or alleged omission made in any preliminary prospectus if either (A)
(i) such Holder failed to send or deliver a copy of the Prospectus with or prior
to the delivery of written confirmation of the sale by such Holder to the person
asserting the claim from which such Losses arise and (ii) the Prospectus would
have corrected such untrue statement or alleged untrue statement or such
omission or alleged omission, or (B) (x) such untrue statement or
15
<PAGE> 16
alleged untrue statement, omission or alleged omission is corrected in an
amendment or supplement to the Prospectus and (y) having previously been
furnished by or on behalf of Federal-Mogul or the Trust with copies of the
Prospectus as so amended or supplemented, such Holder thereafter fails to
deliver such Prospectus as so amended or supplemented, with or prior to the
delivery of written confirmation of the sale of a Registrable Security to the
person asserting the claim from which such Losses arise.
(b) Indemnification by Holder of Registrable Securities. Each Holder
agrees severally and not jointly to indemnify and hold harmless Federal-Mogul
and the Trust and their respective directors and officers, including without
limitation the trustees of the Trust, and each person, if any, who controls
Federal-Mogul or the Trust (within the meaning of either Section 15 of the
Securities Act or Section 20 of the Exchange Act), from and against all losses
arising out of or based upon any untrue statement or alleged untrue statement of
a material fact contained in any Registration Statement or Prospectus or in any
amendment or supplement thereto or in any preliminary prospectus, or arising out
of or based upon any omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading, to the extent, but only to the extent, that such untrue
statement or omission is contained in any information relating to such Holder so
furnished in writing by such Holder to Federal-Mogul and the Trust expressly for
use in such Registration Statement or Prospectus. In no event shall the
liability of any selling Holder of Registrable Securities hereunder be greater
in amount than the dollar amount of the proceeds received by such Holder upon
the sale of the Registrable Securities pursuant to the Shelf Registration
Statement giving rise to such indemnification obligation.
(c) Conduct of Indemnification Proceedings. In case any proceeding
(including any governmental investigation) shall be instituted involving any
person in respect of which indemnity may be sought pursuant to either of the two
preceding paragraphs, such person (the "INDEMNIFIED PARTY") shall promptly
notify the person against whom such indemnity may be sought (the "INDEMNIFYING
PARTY") in writing and the indemnifying party, upon request of the indemnified
party, shall retain counsel reasonably satisfactory to the indemnified party to
represent the indemnified party and any others the indemnifying party may
designate in such proceeding and shall pay the fees and disbursements of such
counsel related to such proceeding. In any such proceeding, any indemnified
party shall have the right to retain its own counsel, but the fees and expenses
of such counsel shall be at the expense of such indemnified party unless (i) the
indemnifying party and the indemnified party shall have mutually agreed to the
retention of such counsel or (ii) the named parties to any such proceeding
(including any impleaded parties) include both the indemnifying party and the
indemnified party and representation of both parties by the same counsel would
be inappropriate due to actual or potential differing interests between them. It
is understood that the indemnifying party shall not, in respect of the legal
expenses of any indemnified party in connection with any proceeding or related
proceedings in the same jurisdiction, be liable for the fees and expenses of
16
<PAGE> 17
more than one separate firm (in addition to any local counsel) for all
indemnified parties, and that all such fees and expenses shall be reimbursed as
they are incurred. Such separate firm shall be designated in writing by, in the
case of parties indemnified pursuant to Section 6(a), the Holders of a majority
(with Holders of Convertible Preferred Securities (or Convertible Debentures
issued upon liquidation of the Trust) deemed to be the Holders, for purposes of
determining such majority, of the number of outstanding shares of Underlying
Common Stock into which such Convertible Preferred Securities (or Convertible
Debentures) are or would be convertible or exchangeable as of the date on which
such designation is made) of the Registrable Securities covered by the Shelf
Registration Statement held by Holders that are indemnified parties pursuant to
Section 6(a) and, in the case of parties indemnified pursuant to Section 6(b),
Federal-Mogul. The indemnifying party shall not be liable for any settlement of
any proceeding effected without its written consent, but if settled with such
consent or if there be a final judgment for the plaintiff, the indemnifying
party agrees to indemnify the indemnified party from and against any loss or
liability by reason of such settlement or judgment. Notwithstanding the
foregoing sentence, if at any time an indemnified party shall have requested an
indemnifying party to reimburse the indemnified party for fees and expenses of
counsel as contemplated by the second and third sentences of this paragraph, the
indemnifying party agrees that it shall be liable for any settlement of any
proceeding effected without its written consent if (i) such settlement is
entered into more than 30 days after receipt by such indemnifying party of the
aforesaid request and (ii) such indemnifying party shall not have reimbursed the
indemnified party in accordance with such request prior to the date of such
settlement. No indemnifying party shall, without the prior written consent of
the indemnified party, effect any settlement of any pending or threatened
proceeding in respect of which any indemnified party is or could have been a
party and indemnity could have been sought hereunder by such indemnified party,
unless such settlement includes an unconditional release of such indemnified
party from all liability on claims that are the subject matter of such
proceeding.
(d) Contribution. To the extent that the indemnification provided for
in this Section 6 is unavailable to an indemnified party under Section 6(a) or
6(b) hereof in respect of any Losses or is insufficient to hold such indemnified
party harmless, then each applicable indemnifying party, in lieu of indemnifying
such indemnified party, shall contribute to the amount paid or payable by such
indemnified party as a result of such Losses (i) in such proportion as is
appropriate to reflect the relative benefits received by the indemnifying party
or parties on the one hand and the indemnified party or parties on the other
hand or (ii) if the allocation provided by clause (i) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the relative fault of
the indemnifying party or parties on the one hand and of the indemnified party
or parties on the other hand in connection with the statements or omissions that
resulted in such Losses, as well as any other relevant equitable considerations.
Benefits received by Federal-Mogul and the Trust shall be deemed to be equal to
the total net proceeds from the initial placement
17
<PAGE> 18
pursuant to the Purchase Agreement (before deducting expenses) of the
Registrable Securities to which such Losses relate. Benefits received by any
Holder shall be deemed to be equal to the value of receiving Registrable
Securities that are registered under the Securities Act. The relative fault of
the Holders on the one hand and Federal-Mogul and the Trust on the other hand
shall be determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged omission
to state a material fact relates to information supplied by the Holders or by
Federal-Mogul or the Trust and the parties' relative intent, knowledge, access
to information and opportunity to correct or prevent such statement or omission.
The Holders' respective obligations to contribute pursuant to this paragraph are
several in proportion to the respective number of Registrable Securities they
have sold pursuant to a Registration Statement, and not joint.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 6(d) were determined by pro rata
allocation or by any other method or allocation that does not take into account
the equitable considerations referred to in the immediately preceding paragraph.
The amount paid or payable by an indemnified party as a result of the Losses
referred to in the immediately preceding paragraph shall be deemed to include,
subject to the limitations set forth above, any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim. Notwithstanding this Section 6(d), an
indemnifying party that is a selling Holder of Registrable Securities shall not
be required to contribute any amount in excess of the amount by which the total
price at which the Registrable Securities sold by such indemnifying party and
distributed to the public were offered to the public exceeds the amount of any
damages that such indemnifying party has otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation.
(e) The indemnity, contribution and expense reimbursement obligations
of the parties hereunder shall be in addition to any liability any indemnified
party may otherwise have hereunder, under the Purchase Agreement or otherwise.
(f) The indemnity and contribution provisions contained in this
Section 6 shall remain operative and in full force and effect regardless of (i)
any termination of this Agreement, (ii) any investigation made by or on behalf
of any Holder or any person controlling any Holder, or Federal-Mogul or the
Trust, or Federal-Mogul's officers or directors or the trustees of the Trust or
any person controlling Federal-Mogul or the Trust and (iii) the sale of any
Registrable Securities by any Holder.
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<PAGE> 19
Section 7. Information Requirements. (a) Federal-Mogul and the Trust
covenant that, at any time before the end of the Effectiveness Period
Federal-Mogul is not subject to the reporting requirements of the Exchange Act,
they will cooperate with any Holder of Registrable Securities and take such
further reasonable action as any Holder of Registrable Securities may reasonably
request (including, without limitation, making such reasonable representations
as any such Holder may reasonably request), all to the extent required from time
to time to enable such Holder to sell Registrable Securities without
registration under the Securities Act within the limitation of the exemptions
provided by Rule 144 and Rule 144A under the Securities Act and customarily
taken in connection with sales pursuant to such exemptions. Upon the request of
any Holder of Registrable Securities, each of Federal-Mogul and the Trust shall
deliver to such Holder a written statement as to whether it has complied with
such filing requirements, unless such a statement has been included in
Federal-Mogul's most recent report required to be filed and filed pursuant to
Section 13 or Section 15(d) of Exchange Act. Notwithstanding the foregoing,
nothing in this Section 7 shall be deemed to require Federal-Mogul or the Trust
to register any of its securities (other than the Common Stock) under any
section of the Exchange Act.
Section 8. Miscellaneous.
(a) No Conflicting Agreements. Neither Federal-Mogul nor the Trust
has, as of the date hereof, nor shall, on or after the date of this Agreement,
enter into any agreement with respect to its securities that conflicts with the
rights granted to the Holders of Registrable Securities in this Agreement. Each
of Federal-Mogul and the Trust represents and warrants that the rights granted
to the Holders of Registrable Securities hereunder do not in any way conflict
with the rights granted to the Holders of the Federal-Mogul's or the Trust's
securities under any other agreements.
(b) Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given, unless Federal-Mogul and the Trust have obtained the written
consent of Holders of a majority of the then outstanding Underlying Common Stock
constituting Registrable Securities (with Holders of Convertible Preferred
Securities (or Convertible Debentures issued upon liquidation of the Trust)
deemed to be the Holders, for purposes of this Section, of the number of
outstanding shares of Underlying Common Stock into which such Convertible
Preferred Securities (or Debentures) are or would be convertible or exchangeable
as of the date on which such consent is requested). Notwithstanding the
foregoing, a waiver or consent to depart from the provisions hereof with respect
to a matter that relates exclusively to the rights of Holders of Registrable
Securities whose securities are being sold pursuant to a Registration Statement
and that does not directly or indirectly affect the rights of other Holders of
Registrable Securities may be given by Holders of at least a majority of the
Registrable Securities being sold by such Holders pursuant to such
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<PAGE> 20
Registration Statement; provided, that the provisions of this sentence may not
be amended, modified, or supplemented except in accordance with the provisions
of the immediately preceding sentence.
(c) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand delivery, by telecopier, by
courier guaranteeing overnight delivery or by first-class mail, return receipt
requested, and shall be deemed given (i) when made, if made by hand delivery,
(ii) upon confirmation, if made by telecopier, (iii) one (1) Business Day after
being deposited with such courier, if made by overnight courier or (iv) on the
date indicated on the notice of receipt, if made by first-class mail, to the
parties as follows:
(w) if to a Holder of Registrable Securities, at the most
current address given by such Holder to Federal-Mogul and the
Trust in a Notice and Questionnaire or any amendment thereto;
(x) if to Federal-Mogul, to:
Federal-Mogul Corporation
26555 Northwestern Highway
Southfield, Michigan 48034
Attention: Treasurer
Telecopy No.: (248) 354-8103
(y) if to the Trust, to:
Federal-Mogul Financing Trust
c/o Federal-Mogul Corporation
26555 Northwestern Highway
Southfield, Michigan 48034
Attention: Corporate Secretary
Telecopy No.: (248) 354-8103
and
(z) if to the Initial Purchaser, to:
Morgan Stanley & Co. Incorporated
1585 Broadway
New York, New York
Attention: John Faulkner
Telecopy No: (212) 761-8872
20
<PAGE> 21
or to such other address as such person may have furnished to the other persons
identified in this Section 9(c) in writing in accordance herewith.
(d) Approval of Holders. Whenever the consent or approval of Holders
of a specified percentage of Registrable Securities is required hereunder,
Registrable Securities held by Federal-Mogul, the Trust or their respective
affiliates (as such term is defined in Rule 405 under the Securities Act) (other
than the Initial Purchaser or subsequent Holders of Registrable Securities if
such subsequent Holders are deemed to be such affiliates solely by reason of
their holdings of such Registrable Securities) shall not be counted in
determining whether such consent or approval was given by the Holders of such
required percentage.
(e) Successors and Assigns. Any person who purchases any Registrable
Securities from the Initial Purchaser shall be deemed, for purposes of this
Agreement, to be an assignee of the Initial Purchaser. This Agreement shall
inure to the benefit of and be binding upon the successors and assigns of each
of the parties and shall inure to the benefit of and be binding upon each Holder
of any Registrable Securities.
(f) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be original and all of which taken together
shall constitute one and the same agreement.
(g) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(h) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT
REGARD TO CONFLICTS OF LAWS PRINCIPLES THEREOF.
(i) Severability. If any term, provision, covenant or restriction of
this Agreement is held to be invalid, illegal, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions set forth herein
shall remain in full force and effect and shall in no way be affected, impaired
or invalidated thereby, and the parties hereto shall use their best efforts to
find and employ an alternative means to achieve the same or substantially the
same result as that contemplated by such term, provision, covenant or
restriction, it being intended that all of the rights and privileges of the
parties shall be enforceable to the fullest extent permitted by law.
(j) Entire Agreement. This Agreement is intended by the parties as a
final expression of their agreement and is intended to be a complete and
exclusive statement of the agreement and understanding of the parties hereto in
respect of the subject matter contained herein and the registration rights
granted by Federal-Mogul and the Trust with
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<PAGE> 22
respect to the Registrable Securities. Except as provided in the Purchase
Agreement, there are no restrictions, promises, warranties or undertakings,
other than those set forth or referred to herein, with respect to the
registration rights granted by Federal-Mogul with respect to the Registrable
Securities. This Agreement supersedes all prior agreements and undertakings
among the parties with respect to such registration rights. No party hereto
shall have any rights, duties or obligations other than those specifically set
forth in this Agreement. Without limiting the generality of the foregoing,
Federal-Mogul shall have no obligation to participate in "road show" or, except
as specifically provided in this Agreement, "due diligence" activities in
connection with any underwritten public offering of Registrable Securities, and
Federal-Mogul shall have no obligation to enter into underwriting or
indemnification agreements with respect to, or deliver opinions, comfort letters
or closing certificates in connection with, any such underwritten public
offering.
(k) Termination. This Agreement and the obligations of the parties
hereunder shall terminate upon the end of the Effectiveness Period, except for
any liabilities or obligations under Sections 4, 5 or 6 hereof and the
obligations to make payments of and provide for liquidated damages under Section
2(e) hereof to the extent such damages accrue prior to the end of the
Effectiveness Period, each of which shall remain in effect in accordance with
their terms.
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<PAGE> 23
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
FEDERAL-MOGUL CORPORATION
By:_______________________________
Name:
Title:
FEDERAL-MOGUL FINANCING TRUST
By:_______________________________
Name:
Title: Administrator
Accepted as of the date first above written:
MORGAN STANLEY & CO. INCORPORATED
(for its benefit and for the benefit of the Holders)
By:_______________________________
Name:
Title:
23
<PAGE> 1
EXHIBIT 4.8
================================================================================
INDENTURE
BETWEEN
FEDERAL-MOGUL CORPORATION
AS ISSUER
AND
THE BANK OF NEW YORK
AS TRUSTEE
DATED AS OF DECEMBER 1, 1997
SUBORDINATED DEBENTURES
================================================================================
<PAGE> 2
TABLE OF CONTENTS (1)
---------------
<TABLE>
<CAPTION>
ARTICLE 1 DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
PAGE
<S> <C>
SECTION 1.01. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.02. Compliance Certificates and Opinions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
SECTION 1.03. Form of Documents Delivered to Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 1.04. Acts of Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 1.05. Notice, Etc., to Trustee and Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 1.06. Notice to Holders of Debentures; Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 1.07. Language of Notices, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 1.08. Conflict with Trust Indenture Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 1.09. Effect of Headings and Table of Contents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 1.10. Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 1.11. Separability Clause . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 1.12. Benefits of Indenture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 1.13. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 1.14. Legal Holidays . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 1.15. Immunity of Incorporators, Shareholders, Officers, Directors and Employees . . . . . . . . . . . . . . 17
ARTICLE 2 ISSUE, DESCRIPTION, TERMS, EXECUTION, REGISTRATION AND EXCHANGE OF DEBENTURES
SECTION 2.01. Designation, Terms, Amount Authentication and Delivery of Debentures . . . . . . . . . . . . . . . . . 18
SECTION 2.02. Form of Debenture and Trustee's Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 2.03. Date and Denominations of Debentures and Provisions for Payment of Principal, Premium and
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 2.04. Execution of Debentures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 2.05. Exchange of Debentures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 2.06. Temporary Debentures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 2.07. Mutilated, Destroyed, Lost or Stolen Debentures . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 2.08. Cancellation of Surrendered Debentures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 2.09. Provisions of Indenture and Debentures for Sole Benefit
of Parties and Debentureholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
</TABLE>
- --------------------------
(1) Note: This table of contents shall not, for any purpose be deemed to
be part of the Indenture.
<PAGE> 3
<TABLE>
<S> <C>
SECTION 2.10. Appointment of Authenticating Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 2.11. Global Debenture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 2.12. CUSIP Numbers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
ARTICLE 3 SATISFACTION AND DISCHARGE
SECTION 3.01. Satisfaction and Discharge of Indenture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 3.02. Application of Trust Money . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 3.03. Company's Option to Effect Defeasance or Covenant Defeasance . . . . . . . . . . . . . . . . . . . . . 31
SECTION 3.04. Discharge and Defeasance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 3.05. Covenant Defeasance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 3.06. Conditions to Defeasance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
ARTICLE 4 REMEDIES
SECTION 4.01. Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 4.02. Acceleration of Maturity; Recission and Annulment . . . . . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 4.03. Collection of Indebtedness and Suits for Enforcement by Trustee . . . . . . . . . . . . . . . . . . . 40
SECTION 4.04. Trustee May File Proofs of Claim . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 4.05. Trustee May Enforce Claims Without Possession of Debentures . . . . . . . . . . . . . . . . . . . . . 42
SECTION 4.06. Application of Money Collected . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 4.07. Limitation on Suits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
SECTION 4.08. Unconditional Right of Holders to Receive Principal, Premium and Interest . . . . . . . . . . . . . . 44
SECTION 4.09. Restoration of Rights and Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 4.10. Rights and Remedies Cumulative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 4.11. Delay or Omission Not Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 4.12. Control by Holders of Debentures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
SECTION 4.13. Waiver of Past Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
SECTION 4.14. Undertaking for Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
SECTION 4.15. Waiver of Stay or Extension Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
ARTICLE 5 THE TRUSTEE
SECTION 5.01. Duties and Responsibilities of the Trustee; During Default;
Prior to Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
SECTION 5.02. Certain Rights of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
</TABLE>
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SECTION 5.03. Not Responsible for Recitals or Issuance of Debentures . . . . . . . . . . . . . . . . . . . . . . . . 50
SECTION 5.04. May Hold Debentures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
SECTION 5.05. Money Held in Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
SECTION 5.06. Compensation and Reimbursement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
SECTION 5.07. Resignation and Removal; Appointment of Successor . . . . . . . . . . . . . . . . . . . . . . . . . . 51
SECTION 5.08. Acceptance of Appointment by Successor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
SECTION 5.09. Disqualification; Conflicting Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
SECTION 5.10. Corporate Trustee Required; Eligibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
SECTION 5.11. Preferential Collection of Claims Against Company . . . . . . . . . . . . . . . . . . . . . . . . . . 55
SECTION 5.12. Merger, Conversion, Consolidation or Succession to Business . . . . . . . . . . . . . . . . . . . . . 55
SECTION 5.13. Notice of Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
ARTICLE 6 HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY
SECTION 6.01. Preservation of Information: Communications to Holders . . . . . . . . . . . . . . . . . . . . . . . . 56
SECTION 6.02. Reports by Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
SECTION 6.03. Reports by Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
ARTICLE 7 CONSOLIDATION, MERGER, SALE OR CONVEYANCE
SECTION 7.01. Company May Consolidate, Etc. on Certain Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
SECTION 7.02. Successor Corporation Substituted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
SECTION 7.03. Opinion of Counsel to Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
ARTICLE 8 SUPPLEMENTAL INDENTURES
SECTION 8.01. Supplemental Indentures Without Consent of Holders . . . . . . . . . . . . . . . . . . . . . . . . . . 59
SECTION 8.02. Supplemental Indentures with Consent of Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
SECTION 8.03. Execution of Supplemental Indentures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
SECTION 8.04. Effect of Supplemental Indentures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
SECTION 8.05. Conformity with Trust Indenture Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
SECTION 8.06. Reference in Debentures to Supplemental Indentures . . . . . . . . . . . . . . . . . . . . . . . . . . 62
ARTICLE 9 COVENANTS
SECTION 9.01. Payment of Principal, Premium and Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
SECTION 9.02. Maintenance of Office or Agency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
SECTION 9.03. Money for Debentures Payments to Be Held in Trust . . . . . . . . . . . . . . . . . . . . . . . . . . 63
</TABLE>
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SECTION 9.04. Limitation on Dividends; Transactions with Affiliates . . . . . . . . . . . . . . . . . . . . . . . . 65
SECTION 9.05. Covenants as to Federal-Mogul Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
SECTION 9.06. Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
SECTION 9.07. Statement by Officers as to Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
SECTION 9.08. Financial Information; SEC Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
ARTICLE 10 REDEMPTION OF DEBENTURES
SECTION 10.01. Applicability of Article . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
SECTION 10.02. Election to Redeem; Notice to Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
SECTION 10.03. Selection by Trustee of Debentures to Be Redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . 68
SECTION 10.04. Notice of Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
SECTION 10.05. Deposit of Redemption Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
SECTION 10.06. Debentures Payable on Redemption Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
SECTION 10.07. Debentures Redeemed in Part . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
ARTICLE 11 SINKING FUNDS
SECTION 11.01. Applicability of Article . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
SECTION 11.02. Satisfaction of Sinking Fund Payments with Debentures . . . . . . . . . . . . . . . . . . . . . . . . 71
SECTION 11.03. Redemption of Debentures for Sinking Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
ARTICLE 12 CONVERSION OF DEBENTURES
SECTION 12.01. Applicability of Article . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
SECTION 12.02. Exercise of Conversion Privilege . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
SECTION 12.03. No Fractional Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
SECTION 12.04. Adjustment of Conversion Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
SECTION 12.05. Reservation of Shares of Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
SECTION 12.06. Payment of Certain Taxes upon Conversion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
SECTION 12.07. Nonassessability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
SECTION 12.08. Effect of Consolidation or Merger on Conversion Privilege . . . . . . . . . . . . . . . . . . . . . . 76
SECTION 12.09. Duties of Trustee Regarding Conversion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
SECTION 12.10. Repayment of Certain Funds Upon Conversion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
</TABLE>
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ARTICLE 13 SUBORDINATION OF DEBENTURES
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SECTION 13.01. Debentures Subordinate to Senior Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
SECTION 13.02. Payment Over of Proceeds Upon Dissolution, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
SECTION 13.03. Prior Payment to Senior Indebtedness Upon Acceleration of Debentures . . . . . . . . . . . . . . . . 78
SECTION 13.04. No Payment When Senior Indebtedness in Default . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
SECTION 13.05. Payment Permitted in Certain Situations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
SECTION 13.06. Subrogation to Rights of Holders of Senior Indebtedness . . . . . . . . . . . . . . . . . . . . . . . 80
SECTION 13.07. Provisions Solely to Define Relative Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
SECTION 13.08. Trustee to Effectuate Subordination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
SECTION 13.09. No Waiver of Subordination Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
SECTION 13.10. Notice to Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
SECTION 13.11. Reliance on Judicial Order or Certificate of Liquidating Agent . . . . . . . . . . . . . . . . . . . 83
SECTION 13.12. Trustee Not Fiduciary for Holders of Senior Indebtedness . . . . . . . . . . . . . . . . . . . . . . 83
SECTION 13.13. Rights of Trustee as Holder of Senior Indebtedness, Preservation of Trustee's Rights . . . . . . . . 83
SECTION 13.14. Article Applicable to Paying Agents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
SECTION 13.15. Certain Conversions Deemed Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
</TABLE>
<PAGE> 7
INDENTURE, dated as of December 1, 1997, between Federal-Mogul
Corporation, a corporation duly organized and existing under the laws of the
State of Michigan (the "COMPANY"), having its principal office at 26555
Northwestern Highway, Southfield, Michigan 48034 and The Bank of New York, a
New York banking corporation having its principal corporate trust office at 101
Barclay Street, Floor 21 West, New York, New York 10286, as Trustee (the
"TRUSTEE").
RECITALS OF THE COMPANY
The Company has duly authorized the execution and delivery of this
Indenture to provide for the issuance from time to time of its secured or
unsecured subordinated debentures, notes or other evidences of indebtedness
(the "DEBENTURES"), to be issued in one or more series as in this Indenture
provided.
All things necessary to make this Indenture a valid agreement of the
Company, in accordance with its terms, have been done.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the
Debentures by the Holders thereof, it is mutually agreed, for the equal and
proportionate benefit of all Holders of the Debentures or of a series thereof,
as follows:
ARTICLE 1
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
SECTION 1.1. Definitions. For all purposes of this Indenture, except
as otherwise expressly provided or unless the context otherwise requires:
(a) the terms defined in this Article have the meanings assigned to
them in this Article and include the plural as well as the singular;
(b) all other terms used herein that are defined in the Trust
Indenture Act, either directly or by reference therein, have the meanings
assigned to them therein;
(c) the words "herein", "hereof" and "hereunder" and other words of
similar import refer to this Indenture as a whole and not to any particular
Article, Section or other subdivision; and
(d) a reference to a Section or Article is to a Section or Article
of this Indenture.
<PAGE> 8
"ACT," when used with respect to any Holder of a Debenture, has the
meaning specified in Section 1.04.
"AFFILIATE" has the same meaning as given to that term in Rule 405 of
the Securities Act of 1933, as amended, or any successor rule thereunder.
"AUTHENTICATING AGENT" means any Person authorized by the Trustee
pursuant to Section 2.10 to act on behalf of the Trustee to authenticate
Debentures of one or more series.
"AUTHORIZED NEWSPAPER" means a newspaper, in the English language or
in an official language of the country of publication, customarily published on
each Business Day, whether or not published on Saturdays, Sundays or holidays,
and of general circulation in the place, in connection with which the term is
used, or in the financial community of such place. Where successive
publications are required to be made in Authorized Newspapers, the successive
publications may be made in the same or in different newspapers in the same
city meeting the foregoing requirements and in each case on any Business Day.
"BOARD OF DIRECTORS" means either the board of directors of the
Company or any duly authorized committee of that board.
"BOARD RESOLUTION" means a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Company to have been duly adopted by
the Board of Directors and to be in full force and effect on the date of such
certification, and delivered to the Trustee.
"BUSINESS DAY," when used with respect to any Place of Payment or any
other particular location referred to in this Indenture or in the Debentures,
means each Monday, Tuesday, Wednesday, Thursday and Friday that is not a day on
which banking institutions in that Place of Payment or other location are
authorized or obligated by law or executive order to close.
"COMMISSION" means the United States Securities and Exchange
Commission.
"COMMON SECURITIES" means undivided beneficial interests in the assets
of the Federal-Mogul Financing Trust that rank pari passu with Preferred
Securities issued by such Federal-Mogul Financing Trust; provided, that upon
the occurrence of an Event of Default, the rights of holders of Common
Securities to
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<PAGE> 9
payment in respect to distributions and payments upon liquidation, redemption
and otherwise are subordinated to the rights of holders of Preferred
Securities.
"COMMON SECURITIES GUARANTEE" means any Guarantee that the Company
enters into that operates directly or indirectly for the benefit of holders of
Common Securities of Federal-Mogul Financing Trust.
"COMMON STOCK" includes any stock of any class of the Company that has
no preference in respect of dividends or of amounts payable in the event of any
voluntary or involuntary liquidation, dissolution or winding up of the Company
and that is not subject to redemption by the Company. Subject to the
anti-dilution provisions of any convertible Debenture, however, shares of
Federal-Mogul Common Stock issuable on conversion of a Debenture shall include
only shares of the class designated as Common Stock of the Company at the date
of any supplemental indenture, Board Resolution or other instrument authorizing
such Debenture or shares of any class or classes resulting from any
reclassification or reclassifications thereof that have no preference in
respect of the payment of dividends or the distribution of assets upon any
voluntary or involuntary liquidation, dissolution or winding-up of the Company
and that are not subject to redemption by the Company; provided, that if at any
time there shall be more than one such resulting class, the shares of each such
class then so issuable shall be substantially in the proportion that the total
number of shares of such class resulting from all such reclassifications bears
to the total number of shares of all classes resulting from all such
reclassifications.
"COMPANY" means the Person named as the "COMPANY" in the first
paragraph of this Indenture until a successor Person shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"COMPANY" shall mean such successor Person.
"COMPANY REQUEST" or "COMPANY ORDER" means a written request or order
signed in the name of the Company by the Chairman of the Board of Directors or
the President or any Executive Vice President or any Vice President and by the
Treasurer or the Secretary or any Assistant Treasurer or any Assistant
Secretary of the Company and delivered to the Trustee.
"CORPORATE TRUST OFFICE" means the principal office of the Trustee at
which at any particular time its corporate trust business shall be
administered.
"CORPORATION" means a corporation, association, company, joint-stock
company or business trust.
3
<PAGE> 10
"COVENANT DEFEASANCE" has the meaning specified in Section 3.05.
"DEBENTURE REGISTER" has the meaning specified in Section 2.05.
"DEBENTURE REGISTRAR" has the meaning specified in Section 2.05.
"DEBENTURES" has the meaning stated in the first recital of this
Indenture and more particularly means any Debentures authenticated and
delivered under this Indenture.
"DECLARATION," with respect to a Federal-Mogul Trust, means the
Amended and Restated Declaration of Trust of such Federal-Mogul Trust.
"DEFAULTED INTEREST" has the meaning specified in Section 2.03.
"DEFEASANCE" has the meaning specified in Section 3.04.
"DEPOSITARY" means, with respect to the Debentures of any series for
which the Company shall determine that such Debentures will be issued as a
Global Debenture, The Depository Trust Company, New York, New York, another
clearing agency, or any successor registered as a clearing agency under the
Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"), or other
applicable statute or regulation, which, in each case, shall be designated by
the Company pursuant to either Section 2.01 or 2.11.
"DOLLAR" or "$" means a dollar or other equivalent unit in such coin
or currency of the United States of America as at the time shall be legal
tender for the payment of public and private debts.
"EVENT OF DEFAULT" has the meaning specified in Section 4.01.
"FEDERAL-MOGUL TRUST" means Federal-Mogul Financing Trust, a Delaware
statutory business trust, or any permitted successor thereto, or any
substantially similar Delaware statutory business trust sponsored by the
Company.
"GLOBAL DEBENTURE" means, with respect to any series of Debentures, a
Debenture executed by the Company and authenticated and made available for
delivery by the Trustee to the Depositary, or pursuant to the Depositary's
instruction, all in accordance with the Indenture, which shall be registered in
the name of the Depositary or its nominee.
4
<PAGE> 11
"GUARANTOR" means the Company in its capacity as guarantor under any
Trust Securities Guarantees.
"HOLDER", when used with respect to any Debenture, means the Person in
whose name the Debenture is registered in the Debenture Register.
"INDENTURE" means this instrument as originally executed or as it may
from time to time be supplemented or amended by one or more indentures
supplemental hereto entered into pursuant to the applicable provisions hereof
and shall include the terms of Debentures of any series established as
contemplated by Section 2.01.
"INTEREST," when used with respect to an Original Issue Discount
Debenture that by its terms bears interest only at Maturity, means interest
payable at Maturity.
"INTEREST PAYMENT DATE," when used with respect to any Debenture,
means the Stated Maturity of an installment of interest on such Debenture.
"MATURITY," when used with respect to any Debenture, means the date on
which the principal of such Debenture or an installment of such principal
becomes due and payable as therein or herein provided, whether at the Stated
Maturity or by declaration of acceleration, call for redemption, notice of
option to elect repayment or otherwise.
"OFFICERS' CERTIFICATE" means a certificate signed by the Chairman of
the Board of Directors or the President or any Executive Vice President or any
Vice President and by the Treasurer or the Secretary or any Assistant Treasurer
or any Assistant Secretary of the Company and delivered to the Trustee.
"OPINION OF COUNSEL" means a written opinion of counsel, who may be an
employee of or counsel for the Company and who shall be acceptable to the
Trustee.
"ORIGINAL ISSUE DISCOUNT DEBENTURE" means any Debenture that provides
for an amount less than the principal amount thereof to be due and payable upon
a declaration of acceleration of the Maturity thereof pursuant to Section 4.02.
"OUTSTANDING," when used with respect to Debentures of any series,
means, as of the date of determination, all Debentures of such series
theretofore authenticated and delivered under this Indenture, except:
5
<PAGE> 12
(i) Debentures of such series theretofore canceled by the
Trustee or any Paying Agent or delivered to the Trustee for
cancellation or that have previously been canceled;
(ii) Debentures of such series for whose payment or
redemption of which money or United States Government Obligations in
the necessary amount has been theretofore deposited in accordance with
Article 3 with the Trustee or any Paying Agent (other than the
Company) in trust or set aside and segregated in trust by the Company
(if the Company shall act as its own Paying Agent) for the Holders of
Debentures of such series; provided, if Debentures of such series or
portions of Debentures of such series are to be redeemed prior to the
Maturity thereof, notice of such redemption has been duly given
pursuant to this Indenture or provision therefor satisfactory to the
Trustee has been made;
(iii) Debentures of such series that have been paid pursuant
to Section 2.07 or in exchange for or in lieu of which other
Debentures of such series have been authenticated and delivered
pursuant to this Indenture, other than any Debentures of such series
in respect of which there shall have been presented to the Trustee
proof satisfactory to it that Debentures of such series are held by a
bona fide purchaser in whose hands Debentures of such series are valid
obligations of the Company; and
(iv) Debentures of such series as to which Defeasance has
been effected pursuant to Section 3.04;
provided, that in determining whether the Holders of the requisite aggregate
principal amount of the Outstanding Debentures of such series have given any
request, demand, authorization, direction, notice, consent or waiver hereunder
or whether a quorum is present at a meeting of Holders of Debentures of such
Series (A) the principal amount of an Original Issue Discount Debenture of such
series that shall be deemed to be Outstanding shall be the amount of the
principal thereof that would be due and payable as of the date of such
determination upon acceleration of the Maturity thereof pursuant to Section
4.02, (B) the principal amount of a Debenture of such series denominated in a
foreign currency or currencies shall be the U.S. dollar equivalent, determined
on the date of original issuance of such Debenture, of the principal amount
(or, in the case of an Original Issue Discount Debenture of such series, the
U.S. dollar equivalent on the date of original issuance of such Debenture of
the amount determined as provided in (A) above) of such Debenture, and (C)
Debentures of such series owned by the Company or any other obligor upon such
Debentures, or any Affiliate of the
6
<PAGE> 13
Company or of such other obligor shall be disregarded and deemed not to be
Outstanding, except that, in determining whether the Trustee shall be protected
in relying upon any such request, demand, authorization, direction, notice,
consent or waiver, or upon any such determination as to the presence of a
quorum, only Debentures of such series that the Trustee actually knows to be so
owned shall be so disregarded. Debentures of such series so owned that have
been pledged in good faith may be regarded as Outstanding if the pledgee
establishes to the satisfaction of the Trustee the pledgee's right so to act
with respect to such Debentures and that the pledgee is not the Company or any
other obligor upon such Debentures or any Affiliate of the Company or of such
other obligor.
"PAYING AGENT" means any Person authorized by the Company to pay the
principal of and any premium and interest on any Debentures on behalf of the
Company.
"PERSON" means a legal person, including any individual, corporation,
state, partnership, joint venture, trust, association, joint stock company,
limited liability company, unincorporated association or government or any
agency or political subdivision thereof, or any other entity of whatever
nature.
"PLACE OF PAYMENT," when used with respect to the Debentures of any
series, means the place or places where, subject to the provisions of Section
9.02, the principal of and any premium and interest on Debentures of such
series are payable as specified as contemplated by Section 2.01.
"PREDECESSOR DEBENTURE" of any Debenture of any series means every
previous Debenture evidencing all or a portion of the same debt as that
evidenced by such Debenture; and, for the purposes of this definition, any
Debenture of any series authenticated and delivered under Section 2.07 in
exchange for or in lieu of a mutilated, destroyed, lost or stolen Debenture
shall be deemed to evidence the same debt as the mutilated, destroyed, lost or
stolen Debenture.
"PREFERRED SECURITIES" means undivided beneficial interests in the
assets of Federal-Mogul Trust that rank pari passu with Common Securities
issued by such Federal-Mogul Trust; provided, that upon the occurrence of an
Event of Default, the rights of holders of Common Securities to payment in
respect of distributions and payments upon liquidation, redemption and
otherwise are subordinated to the rights of holders of Preferred Securities.
"PREFERRED SECURITIES GUARANTEE" means any Guarantee that the Guarantor
may enter into with The Bank of New York or other Persons that
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operates directly or indirectly for the benefit of holders of Preferred
Securities of such Federal-Mogul Trust.
"REDEMPTION DATE," when used with respect to any Debenture to be
redeemed, means the date fixed for such redemption by or pursuant to this
Indenture.
"REDEMPTION PRICE," when used with respect to any Debenture to be
redeemed, means the price at which it is to be redeemed pursuant to this
Indenture.
"REPRESENTATIVE" means the (a) indenture trustee or other trustee, agent
or representative for any Senior Indebtedness or (b) with respect to any Senior
Indebtedness that does not have any such trustee, agent or other
representative, (i) in the case of such Senior Indebtedness issued pursuant to
an agreement providing for voting arrangements as among the holders or owners
of such Senior Indebtedness, any holder or owner of such Senior Indebtedness
acting with the consent of the required persons necessary to bind such holders
or owners of such Senior Indebtedness and (ii) in the case of all other such
Senior Indebtedness, the holder or owner of such Senior Indebtedness.
"RESPONSIBLE OFFICER" means, when used with respect to the Trustee, any
vice president, any assistant vice president, any assistant treasurer or any
other officer of the Trustee customarily performing functions similar to those
performed by any of the above designated officers and also means, with respect
to a particular corporate trust matter, any other officer to whom such matter
is referred because of such officer's knowledge of and familiarity with the
particular subject.
"RULE 144(K)" means Rule 144(k) under the Securities Act or any
successor rule.
"SECURITIES ACT" means the Securities Act of 1933, as amended, or any
successor statute.
"SENIOR INDEBTEDNESS" means, with respect to the Company, (i) the
principal, premium, if any, and interest in respect of (A) indebtedness of such
obligor for money borrowed under any credit agreements, notes, guarantees or
similar documents and (B) indebtedness evidenced by securities, debentures,
bonds or other similar instruments issued by such obligor, (ii) all capital
lease obligations of such obligor, (iii) all obligations of such obligor issued
or assumed as the deferred purchase price of property, all conditional sale
obligations of such obligor and all obligations of such obligor under any title
retention agreement (but
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excluding trade accounts payable arising in the ordinary course of business),
(iv) all obligations of such obligor for the reimbursement on any letter of
credit, bankers' acceptance, security purchase facility or similar credit
transaction, (v) all obligations of such obligor (contingent or otherwise) with
respect to an interest rate or other swap, cap or collar agreements, oil or
gas commodity hedge transactions or other similar instruments or agreements or
foreign currency hedge, exchange, purchase or similar instruments or
agreements, (vi) all obligations of the types referred to in clauses (i)
through (v) above of other persons for the payment of which such obligor is
responsible or liable as obligor, guarantor or otherwise and (vii) all
obligations of the types referred to in clauses (i) through (vi) above of other
persons secured by any lien on any property or asset of such obligor (whether
or not such obligation is assumed by such obligor) whether outstanding on the
date of this Indenture or thereafter created, incurred, assumed, guaranteed or
in effect guaranteed by such obligor, except for (1) any such indebtedness that
is by its terms expressly subordinated to or pari passu with the Debentures and
(2) any indebtedness between or among such obligor or its affiliates, including
all other debt securities and guarantees in respect of those debt securities,
issued to any trust, or a trustee of such trust, partnership or other entity
affiliated with the Company that is a financing vehicle of the Company (a
"FINANCING ENTITY") in connection with the issuance by such financing entity of
preferred securities or other securities that rank pari passu with, or junior
to, the Preferred Securities. Such Senior Indebtedness shall continue to be
Senior Indebtedness and be entitled to the benefits of Article 13 provisions
irrespective of any deferrals, renewals, extensions or refundings of, or
amendments, modifications, supplements or waivers of any term of such Senior
Indebtedness.
"STATED MATURITY," when used with respect to any Debenture or any
installment of principal thereof or interest thereon, means the date specified
in such Debenture as the fixed date on which the principal of such Debenture or
such installment of principal or interest is due and payable.
"SUBSIDIARY" means, with respect to any Person, (i) any corporation at
least a majority of whose outstanding Voting Stock shall at the time be owned,
directly or indirectly, by such Person or by one or more of its Subsidiaries or
by such Person and one or more of its Subsidiaries, (ii) any general
partnership, joint venture, business trust or similar entity, at least a
majority of whose outstanding partnership or similar interests shall at the
time be owned by such Person or by one or more of its Subsidiaries or by such
Person and one or more of its Subsidiaries and (iii) any limited partnership of
which such Person or any of its Subsidiaries is a general partner.
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"TRANSFER RESTRICTION TERMINATION DATE" means the first date on which
the Preferred Securities, the Debentures and any Common Stock issued or
issuable upon the conversion or exchange thereof (other than (i) such
securities acquired by the Company or any Affiliate thereof and (ii) Common
Stock issued upon the conversion or exchange of any such security described in
clause (i) above) may be sold pursuant to Rule 144(k).
"TRUSTEE" means the Person named as the "TRUSTEE" in the first paragraph
of this Indenture until a successor Trustee shall have become such pursuant to
the applicable provisions of this Indenture, and thereafter "TRUSTEE" shall
mean or include each Person who is then a Trustee hereunder, and if at any time
there is more than one such Person, "TRUSTEE" as used with respect to the
Debentures of any series shall mean the Trustee with respect to Debentures of
that series.
"TRUST INDENTURE ACT" means the Trust Indenture Act of 1939 as in force
at the date as of which this instrument was executed; provided, that in the
event the Trust Indenture Act of 1939 is amended after such date, "TRUST
INDENTURE ACT" means, to the extent required by any such amendment, the Trust
Indenture Act of 1939 as so amended.
"TRUST SECURITIES" means Common Securities and Preferred Securities of a
Federal-Mogul Trust.
"TRUST SECURITIES GUARANTEES" means the Common Securities Guarantee and
the Preferred Securities Guarantee.
"UNITED STATES" means the United States of America (including the States
and the District of Columbia), its territories, its possessions and other areas
subject to its jurisdiction.
"U.S. GOVERNMENT OBLIGATIONS" means direct obligations of the United
States for the payment of which its full faith and credit is pledged, or
obligations of a person controlled or supervised by and acting as an agency or
instrumentality of the United States and the payment of which is
unconditionally guaranteed as a full faith and credit obligation by the United
States that, in either case, are not callable or redeemable at the option of
the issuer thereof, and shall also include a depository receipt issued by a
bank (as defined in Section 3(a)(2) of the Securities Act) as custodian with
respect to any such U.S. Government Obligations or a specific payment of
principal of or interest on any such U.S. Government Obligations held by such
custodian for the account of the holder of such depository receipt; provided
that (except as required by law) such custodian is not authorized to make any
deduction from the amount payable to the holder of such
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depository receipt from any amount received by the custodian in respect of
the U.S. Government Obligations or the specific payment of principal of or
interest on the U.S. Government Obligations evidenced by such depository
receipt.
"VOTING STOCK," as applied to stock of any Person, means shares,
interests, participations or other equivalents in the equity interest (however
designated) in such Person having ordinary voting power for the election of a
majority of the directors (or the equivalent) of such Person, other than
shares, interests, participations or other equivalents having such power only
by reason of the occurrence of a contingency.
"YIELD TO MATURITY" means the yield to maturity on Debentures of any
series, calculated at the time of issuance of such series, or, if applicable,
at the most recent redetermination of interest on such series, and calculated
in accordance with accepted financial practice.
SECTION 1.2. Compliance Certificates and Opinions. Except as otherwise
expressly provided by this Indenture, upon any application or request by the
Company to the Trustee to take any action under any provision of this
Indenture, the Company shall furnish to the Trustee an Officers' Certificate
stating that all conditions precedent, if any, provided for in this Indenture
relating to the proposed action have been complied with and an Opinion of
Counsel stating that in the opinion of such counsel all such conditions
precedent, if any, have been complied with, except that in the case of any such
application or request as to which the furnishing of such documents is
specifically required by any provision of this Indenture relating to such
particular application or request, no additional certificate or opinion need be
furnished.
Every certificate or opinion by or on behalf of the Company with respect
to compliance with a condition or covenant provided for in this Indenture,
except for certificates provided for in Section 9.07, shall include:
(a) a statement that each individual signing such
certificate or opinion has read such covenant or condition and the
definitions herein relating thereto;
(b) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(c) a statement that, in the opinion of each such
individual, the individual has made such examination or investigation
as is necessary to
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enable such individual to express an informed opinion as to whether
or not such covenant or condition has been complied with; and
(d) a statement as to whether, in the opinion of each such
individual, such condition or covenant has been complied with.
SECTION 1.3. Form of Documents Delivered to Trustee. In any case
where several matters are required to be certified by, or covered by an opinion
of, any specified Person, it is not necessary that all such matters be
certified by, or covered by the opinion of, only one such Person, or that they
be so certified or covered by only one document, but one such Person may
certify or give an opinion with respect to some matters and one or more other
such Persons as to other matters, and any such Person may certify or give an
opinion as to such matters in one or several documents.
Any certificate or opinion of an officer of the Company may be based,
insofar as it relates to legal matters, upon a certificate or opinion of, or
representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to the matters upon which such officer's certificate or opinion is
based are erroneous. Any such certificate or Opinion of Counsel may be based,
insofar as it relates to factual matters, upon a certificate or opinion of, or
representations by, an officer or officers of the Company stating that the
information with respect to such factual matters is in the possession of the
Company, unless such counsel knows, or in the exercise of reasonable care
should know, that the certificate or opinion or representations with respect to
such matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
SECTION 1.4. Acts of Holders. (a) Any request, demand, authorization,
direction, notice, consent, waiver or other action provided or permitted by
this Indenture to be given or taken by Holders may be embodied in and evidenced
by one or more instruments of substantially similar tenor signed by such
Holders in person or by agent duly appointed in writing. Except as herein
otherwise expressly provided, such action shall become effective when such
instrument or instruments or record or both are delivered to the Trustee and,
where it is hereby expressly required, to the Company. Such instrument or
instruments and any such
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record (and the action embodied therein and evidenced thereby) are herein
sometimes referred to as the "ACT" of the Holders signing such instrument or
instruments and so voting at any such meeting. Proof of execution of any such
instrument or of a writing appointing any such agent or proxy, or of the holding
by any Person of a Debenture of any series, shall be sufficient for any purpose
of this Indenture and (subject to Section 5.02) conclusive in favor of the
Trustee and the Company, if made in the manner provided in this Section.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by a certificate of a notary public or other officer authorized by
law to take acknowledgments of deeds, certifying that the individual signing
such instrument or writing acknowledged to the execution thereof. Where such
execution is by a signer acting in a capacity other than the signer's individual
capacity, such certificate or affidavit shall also constitute sufficient proof
of the signer's authority. The fact and date of the execution of any such
instrument or writing, or the authority of the Person executing the same, may
also be proved in any other manner that the Trustee deems sufficient.
(c) The principal amount and serial numbers of Debentures of any
series held by any Person, and the date of holding the same, shall be proved by
the Debenture Register.
(d) Any request, demand, authorization, direction, notice, consent,
waiver or other Act of the Holder of any Debenture of any series shall bind
every future Holder of the same Debenture and the Holder of every Debenture
issued upon the registration of transfer thereof or in exchange therefor or in
lieu thereof in respect of anything done, omitted or suffered to be done by the
Trustee or the Company in reliance thereon, whether or not notation of such
action is made upon such Debenture.
(e) With respect to the Debentures of any series, upon receipt by the
Trustee of (i) by written notice directing the time, method or place of
conducting any proceeding or exercising any trust or power pursuant to Section
4.01 with respect to Debentures of such series or (ii) any written demand,
request or notice with respect to any matter on which the Holders of Debentures
of such series are entitled to act under this Indenture, in each case from
Holders of less than, or proxies representing less than, the requisite principal
amount of Outstanding Debentures of such series entitled to give such demand,
request or notice, the Trustee shall establish a record date for determining
Holders of Outstanding Debentures of such series entitled to join in such
demand, request or notice, which
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record date shall be the close of business on the day the Trustee received such
demand, request or notice. The Holders on such record date, or their duly
designated proxies, and only such Persons, shall be entitled to join in such
demand, request or notice whether or not such Holders remain Holders after such
record date; provided, that unless the Holders of the requisite principal amount
of Outstanding Debentures of such series shall have joined in such demand,
request or notice prior to the day that is the ninetieth day after such record
date, such demand, request or notice shall automatically and without further
action by any Holder be canceled and of no further effect. Nothing in this
paragraph shall prevent a Holder, or a proxy of a Holder, from giving, (i) after
the expiration of such 90-day period, a new demand, request or notice identical
to a demand, request or notice that has been canceled pursuant to the proviso to
the preceding sentence or (ii) during any such 90-day period, a new demand,
request or notice that has been canceled pursuant to the proviso to the
preceding sentence or (iii) during any such 90-day period, a new demand, request
or notice contrary to or different from such demand, request or notice, in
either of which events a new record date shall be established pursuant to the
provisions of this clause.
(f) The Company may set any day as the record date for the purpose of
determining the Holders of Outstanding Debentures of any series entitled to give
or take any request, demand, authorization, direction, notice, consent, waiver
or other action provided or permitted by this Indenture to be given or taken by
Holders of Debentures of such series. With regard to any record date set
pursuant to this paragraph, the Holders of Outstanding Debentures of such series
on such record date (or their duly appointed agents), and only such Persons,
shall be entitled to give or take the relevant action, whether or not such
Holders remain Holders after such record date. With regard to any action that
may be given or taken hereunder only by Holders of a requisite principal amount
of Outstanding Debentures of any series (or their duly appointed agents) and for
which a record date is set pursuant to this paragraph, the Company may, at its
option, set an expiration date after which no such action purported to be given
or taken by any Holder shall be effective hereunder unless given or taken on or
prior to such expiration date by Holders of the requisite principal amount of
Outstanding Debentures of such series on such record date (or their duly
appointed agents). On or prior to any expiration date set pursuant to this
paragraph, the Company may, on one or more occasions at its option, extend such
date to any later date. Nothing in this paragraph shall prevent any Holder (or
any duly appointed agent thereof) from giving or taking, after any expiration
date, any action identical to, or, at any time, contrary to or different from,
any action given or taken, or purported to have been given or taken, hereunder
by a Holder on or prior to such date, in which event the Company may set a
record date in respect thereof pursuant to this clause. Notwithstanding the
foregoing or the Trust Indenture Act,
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the Company shall not set a record date for, and the provisions of this clause
shall not apply with respect to, any action to be given or taken by Holders
pursuant to Section 4.01, 4.02 or 4.12.
SECTION 1.5. Notice, Etc., to Trustee and Company. Any request, demand,
authorization, direction, notice, consent, waiver or Act of Holders or other
document provided or permitted by this Indenture to be made upon, given or
furnished to, or filed with,
(a) the Trustee by any Holder or by the Company shall be
sufficient for every purpose hereunder if made, given, furnished
or filed in writing to or with the Trustee at its Corporate Trust
Office, Attention: Corporate Trust Trustee Administration, or
(b) the Company by the Trustee or by any Holder shall be sufficient
for every purpose hereunder (unless otherwise herein expressly provided) if in
writing and mailed, first-class postage prepaid, to the Company addressed to it
at the address of its principal office specified in the first paragraph of this
Indenture, to the attention of its Treasurer, or at any other address previously
furnished in writing to the Trustee by the Company.
SECTION 1.6. Notice to Holders of Debentures; Waiver. Except as
otherwise expressly provided herein, where this Indenture provides for notice to
Holders of Debentures of any event, such notice shall be sufficiently given to
Holders of any series if in writing and mailed, first-class postage prepaid, to
each Holder of a Debenture affected by such event, at the address of such Holder
as registered in the books of the Company, not earlier than the earliest date,
and not later than the latest date, prescribed for the giving of such notice;
provided, that any notice of redemption of Debentures required to be given to
all Holders shall also be given by release made by the Company to Reuters
Economic Services and Bloomberg Business News not earlier than the earliest
date, and not later than the latest date, prescribed for the giving of such
notice.
In case by reason of the suspension of regular mail service or by
reason of any other cause it shall be impracticable to give such notice to
Holders of Debentures by mail, then such notification as shall be made with the
approval of the Trustee shall constitute sufficient notice to such Holders for
every purpose hereunder. In any case where notice to Holders of Debentures is
given by mail, neither the failure to mail such notice, nor any defect in any
notice mailed to any particular Holder of a Debenture shall affect the
sufficiency of such notice with respect to other Holders of Debentures.
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Where this Indenture provides for notice in any manner, such notice may
be waived in writing by the Person entitled to receive such notice, either
before or after the event, and such waiver shall be the equivalent of such
notice. Waivers of notice by Holders of Debentures shall be filed with the
Trustee, but such filing shall not be a condition precedent to the validity of
any action taken in reliance upon such waiver.
SECTION 1.7. Language of Notices, Etc. Any request, demand,
authorization, direction, notice, consent or waiver required or permitted under
this Indenture shall be in the English language, except that any published
notice may be in an official language of the country of publication.
SECTION 1.8. Conflict with Trust Indenture Act. If and to the extent
that any provision of this Indenture limits, qualifies or conflicts with another
provision included in this Indenture that is required to be included in this
Indenture by any of SECTIONs 310 to 318, inclusive, of the Trust Indenture Act,
such required provision shall control.
SECTION 1.9. Effect of Headings and Table of Contents. The Article and
SECTION headings herein and the Table of Contents are for convenience only and
shall not affect the construction hereof.
SECTION 1.10. Successors and Assigns. All covenants and
agreements in this Indenture by the Company shall bind its
successors and assigns, whether so expressed or not.
SECTION 1.11. Separability Clause. In case any provision in this
Indenture or the Debentures shall be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby.
SECTION 1.12. Benefits of Indenture. Nothing in this Indenture or the
Debentures, express or implied, shall give to any Person, other than the parties
hereto, any Authenticating Agent, any Paying Agent, any Debentures Registrar and
their successors hereunder, the holders of Trust Securities, and the Holders of
Debentures, any benefit or any legal or equitable right, remedy or claim under
this Indenture.
SECTION 1.13. Governing Law. This Indenture and the Debentures shall be
governed by and construed in accordance with the laws of the State of New York,
without regard to conflict of laws principles thereof.
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SECTION 1.14. Legal Holidays. In any case where any Interest Payment
Date, Redemption Date, sinking fund payment date, Maturity or Stated Maturity of
any Debenture of any series shall not be a Business Day at any Place of Payment,
then (notwithstanding any other provision of this Indenture or of the Debentures
other than a provision in the Debentures of any series that specifically states
that such provision shall apply in lieu of this Section) payment of interest or
principal (and premium, if any) will be made on the next succeeding Business Day
at such Place of Payment; provided, that no interest shall accrue on the amount
so payable for the period from and after such Interest Payment Date, Redemption
Date or Stated Maturity, as the case may be, to such succeeding Business Day and
except that, if such Business Day is in the next succeeding calendar year, then
such payment shall be made on the immediately preceding Business Day, in each
case with the same force and effect as if made on such date.
SECTION 1.15. Immunity of Incorporators, Shareholders, Officers,
Directors and Employees. No recourse under or upon any obligation, covenant or
agreement of this Indenture, or of a Debenture of any series, or for any claim
based thereon or otherwise in respect thereof, shall be had against any
incorporator, shareholder, officer, director or employee, as such, past, present
or future, of the Company or of any successor corporation, either directly or
through the Company, whether by virtue of any constitution, statute or rule of
law, or by the enforcement of any assessment or penalty or otherwise; it being
expressly understood that this Indenture and the obligations issued hereunder
are solely corporate obligations of the Company, and that no such personal
liability whatever shall attach to, or is or shall be incurred by, the
incorporators, shareholders, officers, directors or employees, as such, of the
Company or of any successor corporation, or any of them, because of the creation
of the indebtedness hereby authorized, or under or by reason of the obligations
or agreements contained in this Indenture or in any of the Debentures or implied
therefrom; and that any and all such personal liability, either at common law or
in equity or by constitution or statute, of, and any and all such rights and
claims against, every such incorporator, shareholder, officer, director or
employee, as such, because of the creation of the indebtedness hereby
authorized, or under of by reason of the obligations or agreements contained in
this Indenture or in any of the Debentures or implied therefrom, are hereby
expressly waived and released as a condition of, and as a consideration for, the
execution of this Indenture and the issue of such Debentures.
All payments of interest and other amounts, if any, to be made by the
Trustee hereunder shall be made only from the money deposited with the Trustee
and only to the extent that the Trustee shall have sufficient income or proceeds
to
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make such payments in accordance with the terms of this Indenture, and each
Holder thereof, by its acceptance of a Debenture, agrees that it will look
solely to the income and proceeds deposited with the Trustee to the extent
available for distribution to such Holder as provided and that the Trustee is
not personally liable in any manner to such Holder for any amounts payable or
any liability under this Indenture or any Debenture.
ARTICLE 2
ISSUE, DESCRIPTION, TERMS, EXECUTION, REGISTRATION AND
EXCHANGE OF DEBENTURES
SECTION 2.1. Designation, Terms, Amount Authentication and Delivery of
Debentures. The aggregate principal amount of Debentures that may be
authenticated and delivered under this Indenture is unlimited.
The Debentures may be issued in one or more series up to the aggregate
principal amount of Debentures of that series from time to time authorized by or
pursuant to a Board Resolution or pursuant to one or more indentures
supplemental hereto, prior to the initial issuance of Debentures of a particular
series. Prior to the initial issuance of Debentures of any series, there shall
be established in or pursuant to a Board Resolution, and set forth in an
Officers' Certificate, or established in one or more indentures supplemental
hereto:
(a) the title of the Debentures of the series (which shall
distinguish the Debentures of the series from all other Debentures);
(b) any limit upon the aggregate principal amount of the
Debentures of that series that may be authenticated and delivered under
this Indenture (except for Debentures authenticated and delivered upon
registration of transfer of, or in exchange for, or in lieu of, other
Debentures of that series);
(c) the date or dates on which the principal of the Debentures
of the series is payable;
(d) the rate or rates at which the Debentures of the series
shall bear interest or the manner of calculation of such rate or rates,
if any;
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(e) the date or dates from which such interest shall accrue,
the Interest Payment Dates on which such interest will be payable or
the manner of determination of such Interest Payment Dates and the
record date for the determination of Holders to whom interest is
payable on any such Interest Payment Dates;
(f) the right, if any, to extend or defer the interest payment
periods and the duration of such extension;
(g) the period or periods within which, the price or prices at
which, and the terms and conditions upon which, Debentures of the
series may be redeemed, in whole or in part, at the option of the
Company;
(h) the obligation, if any, of the Company to redeem or
purchase Debentures of the series pursuant to any sinking fund or
analogous provisions (including payments made in cash in anticipation
of future sinking fund obligations) or at the option of a Holder
thereof and the period or periods within which, the price or prices at
which, and the terms and conditions upon which, Debentures of the
series shall be redeemed or purchased, in whole or in part, pursuant to
such obligation;
(i) any exchangeability, conversion or prepayment
provisions of the Debentures;
(j) the form of the Debentures of the series including the
form of the certificate of authentication for such series;
(k) if other than denominations of $50 or any integral
multiple thereof, the denominations in which the Debentures of the
series shall be issuable;
(l) any and all other terms with respect to such series (which
terms shall not be inconsistent with the terms of this Indenture); and
(m) whether the Debentures are issuable as a Global Debenture
and, in such case, the identity of the Depositary for such series.
(n) If the Debentures of such series are to be deposited as
trust assets in a Federal-Mogul Trust the name of the applicable
Federal-Mogul (which shall distinguish such Federal-Mogul Trust from
all other Federal-
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Mogul Trusts) into which the Debentures of such series are to
be deposited as trust assets and the date of its Declaration of Trust.
All Debentures of any one series shall be substantially identical
except as to denomination and except as may otherwise be provided in or pursuant
to any such Board Resolution or in any indenture supplemental hereto.
If any of the terms of the series are established by action taken
pursuant to a Board Resolution, a copy of an appropriate record of such action
shall be certified by the Secretary or an Assistant Secretary of the Company and
delivered to the Trustee at or prior to the delivery of the Officers'
Certificate setting forth the terms of the series.
SECTION 2.2. Form of Debenture and Trustee's Certificate. The
Debentures of any series and the Trustee's certificate of authentication to be
borne by such Debentures shall be substantially of the tenor and purport as set
forth in one or more indentures supplemental hereto or as provided in a Board
Resolution and as set forth in an Officers' Certificate, and may have such
letters, numbers or other marks of identification or designation and such
legends or endorsements printed, lithographed or engraved thereon as the Company
may deem appropriate and as are not inconsistent with the provisions of this
Indenture, or as may be required to comply with any law or with any rule or
regulation made pursuant thereto or with any rule or regulation of any stock
exchange on which Debentures of that series may be listed, or to conform to
usage.
SECTION 2.3. Date and Denominations of Debentures and Provisions for
Payment of Principal, Premium and Interest. The Debentures shall be issuable as
registered Debentures and in the denominations of $50 or any integral multiple
thereof, subject to Section 2.01(k). The Debentures of a particular series shall
bear interest payable on the dates and at the rate specified with respect to
that series. The principal of and the interest on the Debentures of any series,
as well as any premium thereon in case of redemption thereof prior to maturity,
shall be payable in the coin or currency of the United States of America that at
the time is legal tender for public and private debt, at the office or agency of
the Company maintained for that purpose in the Borough of Manhattan, The City
and State of New York. Each Debenture shall be dated the date of its
authentication. Interest on the Debentures shall be computed on the basis of a
360-day year composed of twelve 30-day months.
The interest installment on any Debenture that is payable, and is
punctually paid or duly provided for, on any Interest Payment Date for
Debentures of that series shall be paid to the person in whose name said
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Debenture (or one or more Predecessor Debentures) is registered at the close of
business on the regular record date for such interest installment. In the case
of any Debenture that is converted into Common Stock of the Company on or after
any regular record date and prior to the next succeeding Interest Payment Date
(other than a Debenture whose Maturity is prior to such Interest Payment Date),
interest whose Stated Maturity is on such Interest Payment Date shall be payable
on such Interest Payment Date notwithstanding such conversion, and such interest
(whether or not punctually paid or duly provided for) shall be paid to the
Person in whose name that Debenture (or one or more Predecessor Debentures) is
registered at the close of business on such regular record date. In the event
that any Debenture of a particular series or portion thereof is called for
redemption and the redemption date is subsequent to a regular record date with
respect to any Interest Payment Date and prior to such Interest Payment Date,
the amount of such payment shall include accumulated and unpaid interest accrued
to, but excluding, such redemption date. Except as expressly provided, in the
case of any Debenture that is converted, interest whose Stated Maturity is after
the date of conversion of such Debenture shall not be payable.
Any interest on any Debenture that is payable, but is not punctually
paid or duly provided for, on any Interest Payment Date for Debentures of the
same series (herein called "DEFAULTED INTEREST") shall forthwith cease to be
payable to the registered Holder on the relevant regular record date by virtue
of having been such Holder; and such Defaulted Interest shall be paid by the
Company, at its election, as provided in clause (a) or clause (b) below:
(a) The Company may make payment of any Defaulted Interest on
Debentures to the persons in whose names such Debentures (or their
respective Predecessor Debentures) are registered at the close of
business on a special record date for the payment of such Defaulted
Interest, which shall be fixed in the following manner: the Company
shall notify the Trustee in writing of the amount of Defaulted Interest
proposed to be paid on each such Debenture and the date of the proposed
payment, and at the same time the Company shall deposit with the
Trustee an amount of money equal to the aggregate amount proposed to be
paid in respect of such Defaulted Interest or shall make arrangements
satisfactory to the Trustee for such deposit prior to the date of the
proposed payment, such money when deposited to be held in trust for the
benefit of the persons entitled to such Defaulted Interest as in this
clause provided. Thereupon the Trustee shall fix a special record date
for the payment of such Defaulted Interest, which shall not be more
than 15 nor less than 10 days prior to the date of the proposed payment
and not less than 10 days after
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the receipt by the Trustee of the notice of the proposed payment. The
Trustee shall promptly notify the Company of such special record date
and, in the name and at the expense of the Company, shall cause notice
of the proposed payment of such Defaulted Interest and the special
record date therefor to be mailed, first class postage prepaid, to each
Debentureholder at his or her address as it appears in the Debenture
Register (as hereinafter defined), not less than 10 days prior to such
special record date. Notice of the proposed payment of such Defaulted
Interest and the special record date therefor having been mailed as
aforesaid, such Defaulted Interest shall be paid to the persons in
whose names such Debentures (or their Predecessor Debentures) are
registered on such special record date and shall be no longer payable
pursuant to the following clause (b).
(b) The Company may make payment of any Defaulted Interest on
any Debentures in any other lawful manner not inconsistent with the
requirements of any securities exchange on which such Debentures may be
listed, and upon such notice as may be required by such exchange, if,
after notice given by the Company to the Trustee of the proposed
payment pursuant to this clause, such manner of payment shall be deemed
practicable by the Trustee.
Unless otherwise set forth in a Board Resolution or one or more
indentures supplemental hereto establishing the terms of any series of
Debentures pursuant to Section 2.01 hereof, the term "regular record date" as
used in this Section with respect to a series of Debentures with respect to any
Interest Payment Date for such series shall mean either the fifteenth day of the
month immediately preceding the month in which an Interest Payment Date
established for such series pursuant to Section 2.01 hereof shall occur, if such
Interest Payment Date is the first day of a month, or the last day of the month
immediately preceding the month in which an Interest Payment Date established
for such series pursuant to Section 2.01 hereof shall occur, if such Interest
Payment Date is the fifteenth day of a month, whether or not such date is a
Business Day.
Subject to the foregoing provisions of this Section, each Debenture of
a series delivered under this Indenture upon transfer of or in exchange for or
in lieu of any other Debenture of such series shall carry the rights to interest
accrued and unpaid, and to accrue, which were carried by such other Debenture.
SECTION 2.4. Execution of Debentures. The Debentures shall be
signed on behalf of the Company by the Chairman or Vice Chairman of its Board
of
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Directors or its President or one of its Vice Presidents, under its corporate
seal attested by its Secretary or one of its Assistant Secretaries. The
signature of the Chairman, Vice Chairman, President or a Vice President and/or
the signature of the Secretary or an Assistant Secretary in attestation of the
corporate seal, upon the Debentures, may be in the form of a manual or facsimile
signature of a present or any future Chairman, Vice Chairman, President or Vice
President and of a present or any future Secretary or Assistant Secretary and
may be imprinted or otherwise reproduced on the Debentures and for that purpose
the Company may use the manual or facsimile signature of any person who shall
have been a Chairman, Vice Chairman, President or Vice President, or of any
person who shall have been a Secretary or Assistant Secretary, notwithstanding
the fact that at the time the Debentures shall be authenticated and delivered or
disposed of such person shall have ceased to be the Chairman, Vice Chairman,
President or a Vice President, or the Secretary or an Assistant Secretary, of
the Company, as the case may be. The seal of the Company may be in the form of a
facsimile of the seal of the Company and may be impressed, affixed, imprinted or
otherwise reproduced on the Debentures.
Only such Debentures as shall bear thereon a certificate of
authentication substantially in the form established for such Debentures,
executed manually by an authorized signatory of the Trustee, or by any
Authenticating Agent with respect to such Debentures, shall be entitled to the
benefits of this Indenture or be valid or obligatory for any purpose. Such
certificate executed by the Trustee, or by any Authenticating Agent appointed by
the Trustee with respect to such Debentures, upon any Debenture executed by the
Company shall be conclusive evidence that the Debenture so authenticated has
been duly authenticated and made available for delivery hereunder and that the
Holder is entitled to the benefits of this Indenture.
At any time and from time to time after the execution and delivery of
this Indenture, the Company may deliver Debentures of any series executed by the
Company to the Trustee for authentication, together with a written order of the
Company for the authentication and delivery of such Debentures, signed by its
President or any Vice President and its Treasurer or any Assistant Treasurer,
and the Trustee in accordance with such written order shall authenticate and
make available for delivery such Debentures.
In authenticating such Debentures and accepting the additional
responsibilities under this Indenture in relation to such Debentures, the
Trustee shall be entitled to receive, and (subject to Section 5.01) shall be
fully protected in
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relying upon, an Opinion of Counsel stating that the form and terms thereof have
been established in conformity with the provisions of this Indenture.
The Trustee shall not be required to authenticate such Debentures if
the issue of such Debentures pursuant to this Indenture will affect the
Trustee's own rights, duties or immunities under the Debentures and this
Indenture or otherwise in a manner that is not reasonably acceptable to the
Trustee.
SECTION 2.5. Exchange of Debentures. (a) Debentures of any series may
be exchanged upon presentation thereof at the office or agency of the Company
designated for such purpose in the Borough of Manhattan, The City and State of
New York, for other Debentures of such series of authorized denominations, and
for a like aggregate principal amount, upon payment of a sum sufficient to cover
any tax or other governmental charge in relation thereto, all as provided in
this Section 2.05. In respect of any Debentures so surrendered for exchange, the
Company shall execute, the Trustee shall authenticate and such office or agency
shall make available for delivery in exchange therefor the Debenture or
Debentures of the same series that the Debentureholder making the exchange shall
be entitled to receive, bearing numbers not contemporaneously outstanding.
(b) The Company shall keep, or cause to be kept, at its office or
agency designated for such purpose in the Borough of Manhattan, The City and
State of New York, or such other location designated by the Company a register
or registers (herein referred to as the "DEBENTURE REGISTER") in which, subject
to such reasonable regulations as it may prescribe, the Company shall register
the Debentures and the transfers of Debentures as in this Article provided and
that at all reasonable times shall be open for inspection by the Trustee. The
registrar for the purpose of registering Debentures and transfer of Debentures
as herein provided shall be appointed as authorized by Board Resolution (the
"DEBENTURE REGISTRAR").
Upon surrender for transfer of any Debenture at the office or agency of
the Company designated for such purpose in the Borough of Manhattan, The City
and State of New York, the Company shall execute, the Trustee shall authenticate
and such office or agency shall make available for delivery in the name of the
transferee or transferees a new Debenture or Debentures of the same series as
the Debenture presented for a like aggregate principal amount.
All Debentures presented or surrendered for exchange or registration of
transfer, as provided in this Section, shall be accompanied by a written
instrument or instruments of transfer, in form satisfactory to the Company or
the Debenture
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Registrar, duly executed by the registered Holder or by his duly authorized
attorney in writing.
(c) No service charge shall be made for any exchange or registration
of transfer of Debentures, or issue of new Debentures in case of partial
redemption of any series, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge in relation thereto,
other than exchanges pursuant to Section 2.06, Section 8.06 and Section 10.07
not involving any transfer.
(d) The Company shall not be required (i) to issue, exchange or
register the transfer of any Debentures during a period beginning at the opening
of business 15 days before the day of the mailing of a notice of redemption of
less than all the outstanding Debentures of the same series and ending at the
close of business on the day of such mailing, nor (ii) to register the transfer
of or exchange any Debentures of any series or portions thereof called for
redemption. The provisions of this Section 2.05 are, with respect to any Global
Debenture, subject to Section 2.11 hereof.
SECTION 2.6. Temporary Debentures. Pending the preparation of
definitive Debentures of any series, the Company may execute, and the Trustee
shall authenticate and make available for delivery, temporary Debentures of any
authorized denomination, and substantially in the form of the definitive
Debentures in lieu of which they are issued, but with such omissions, insertions
and variations as may be appropriate for temporary Debentures, all as may be
determined by the Company. Every temporary Debenture of any series shall be
executed by the Company and be authenticated by the Trustee upon the same
conditions and in substantially the same manner, and with like effect, as the
definitive Debentures of such series. Without unnecessary delay the Company will
execute and will furnish definitive Debentures of such series and thereupon any
or all temporary Debentures of such series may be surrendered in exchange
therefor (without charge to the Holders), at the office or agency of the Company
designated for the purpose in the Borough of Manhattan, The City and State of
New York, and the Trustee shall authenticate and such office or agency shall
make available for delivery in exchange for such temporary Debentures an equal
aggregate principal amount of definitive Debentures of such series, unless the
Company advises the Trustee to the effect that definitive Debentures need not be
executed and furnished until further notice from the Company. Until so
exchanged, the temporary Debentures of such series shall be entitled to the same
benefits under this Indenture as definitive Debentures of such series
authenticated and delivered hereunder.
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SECTION 2.7. Mutilated, Destroyed, Lost or Stolen Debentures. In case
any temporary or definitive Debenture shall become mutilated or be destroyed,
lost or stolen, the Company (subject to the next succeeding sentence) shall
execute, and upon its request the Trustee (subject as aforesaid) shall
authenticate and make available for delivery, a new Debenture of the same series
bearing a number not contemporaneously outstanding, in exchange and substitution
for the mutilated Debenture, or in lieu of and in substitution for the Debenture
so destroyed, lost or stolen. In every case the applicant for a substituted
Debenture shall furnish to the Company and to the Trustee such security or
indemnity as may be required by them to save each of them harmless, and, in
every case of destruction, loss or theft, the applicant shall also furnish to
the Company and to the Trustee evidence to their satisfaction of the
destruction, loss or theft of the applicant's Debenture and of the ownership
thereof. The Trustee may authenticate any such substituted Debenture and make
available for delivery the same upon the written request or authorization of any
officer of the Company. Upon the issuance of any substituted Debenture, the
Company may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee) connected therewith.
In case any Debenture that has matured or is about to mature shall become
mutilated or be destroyed, lost or stolen, the Company may, instead of issuing a
substitute Debenture, pay or authorize the payment of the same (without
surrender thereof except in the case of a mutilated Debenture) if the applicant
for such payment shall furnish to the Company and to the Trustee such security
or indemnity as they may require to save them harmless, and, in case of
destruction, loss or theft, evidence to the satisfaction of the Company and the
Trustee of the destruction, loss or theft of such Debenture and of the ownership
thereof.
Every Debenture issued pursuant to the provisions of this Section in
substitution for any Debenture that is mutilated, destroyed, lost or stolen
shall constitute an additional contractual obligation of the Company, whether or
not the mutilated, destroyed, lost or stolen Debenture shall be found at any
time, or be enforceable by anyone, and shall be entitled to all the benefits of
this Indenture equally and proportionately with any and all other Debentures of
the same series duly issued hereunder. All Debentures shall be held and owned
upon the express condition that the foregoing provisions are exclusive with
respect to the replacement or payment of mutilated, destroyed, lost or stolen
Debentures, and shall preclude (to the extent lawful) any and all other rights
or remedies, notwithstanding any law or statute existing or hereafter enacted to
the contrary with respect to the replacement or payment of negotiable
instruments or other securities without their surrender.
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SECTION 2.8. Cancellation of Surrendered Debentures. All Debentures
surrendered for the purpose of payment, redemption, exchange or registration of
transfer shall, if surrendered to the Company or any paying agent, be delivered
to the Trustee for cancellation, or, if surrendered to the Trustee, shall be
canceled by it, and no Debentures shall be issued in lieu thereof except as
expressly required or permitted by any of the provisions of this Indenture. On
written request of the Company, the Trustee shall deliver to the Company
canceled Debentures held by the Trustee. If the Company shall otherwise acquire
any of the Debentures, however, such acquisition shall not operate as a
redemption or satisfaction of the indebtedness represented by such Debentures
unless and until the same are delivered to the Trustee for cancellation.
SECTION 2.9. Provisions of Indenture and Debentures for Sole Benefit of
Parties and Debentureholders. Nothing in this Indenture or in the Debentures,
express or implied, shall give or be construed to give to any person, firm or
corporation, other than the parties hereto and the Holders, any legal or
equitable right, remedy or claim under or in respect of this Indenture, or under
any covenant, condition or provision herein contained; all such covenants,
conditions and provisions being for the sole benefit of the parties hereto and
of the Holders.
SECTION 2.10. Appointment of Authenticating Agent. So long as any of
the Debentures of any series remain outstanding there may be an Authenticating
Agent for any or all such series of Debentures, which the Trustee shall have the
right to appoint. Said Authenticating Agent shall be authorized to act on behalf
of the Trustee to authenticate Debentures of such series issued upon exchange,
transfer or partial redemption thereof, and Debentures so authenticated shall be
entitled to the benefits of this Indenture and shall be valid and obligatory for
all purposes as if authenticated by the Trustee hereunder. All references in
this Indenture to the authentication of Debentures by the Trustee shall be
deemed to include authentication by an Authenticating Agent for such series
except for authentication upon original issuance or pursuant to Section 2.07
hereof. Each Authenticating Agent shall be acceptable to the Company and shall
be a corporation that has a combined capital and surplus, as most recently
reported or determined by it, sufficient under the laws of any jurisdiction
under which it is organized or in which it is doing business to conduct a trust
business, and that is otherwise authorized under such laws to conduct such
business and is subject to supervision or examination by Federal or State
authorities. If at any time any Authenticating Agent shall cease to be eligible
in accordance with these provisions, it shall resign immediately.
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Any Authenticating Agent may at any time resign by giving written
notice of resignation to the Trustee and to the Company. The Trustee may at any
time (and upon request by the Company shall) terminate the agency of any
Authenticating Agent by giving written notice of termination to such
Authenticating Agent and to the Company. Upon resignation, termination or
cessation of eligibility of any Authenticating Agent, the Trustee may appoint an
eligible successor Authenticating Agent acceptable to the Company. Any successor
Authenticating Agent, upon acceptance of its appointment hereunder, shall become
vested with all the rights, powers and duties of its predecessor hereunder as if
originally named as an Authenticating Agent pursuant hereto.
SECTION 2.11. Global Debenture. (a) If the Company shall establish
pursuant to Section 2.01 that the Debentures of a particular series are to be
issued as one or more Global Debentures, then the Company shall execute and the
Trustee shall, in accordance with Section 2.04, authenticate and make available
for delivery, one or more Global Debentures, which shall represent, and shall be
denominated in an aggregate amount equal to the aggregate principal amount of,
all of the Outstanding Debentures of such series, shall be registered in the
name of the Depositary or its nominee, shall be made available for delivery by
the Trustee to the Depositary or pursuant to the Depositary's instruction and
shall bear a legend substantially to the following effect: "Except as otherwise
provided in Section 2.11 of the Indenture, this Debenture may be transferred, in
whole but not in part, only to another nominee of the Depositary or to a
successor Depositary or to a nominee of such successor Depositary."
(b) Notwithstanding the provisions of Section 2.05, the Global
Debenture of a series may be transferred, in whole but not in part and in the
manner provided in Section 2.05, only to another nominee of the Depositary for
such series, or to a successor Depositary for such series selected or approved
by the Company or to a nominee of such successor Depositary.
(c) If at any time the Depositary for a series of Debentures notifies
the Company that it is unwilling or unable to continue as Depositary for such
series or if at any time the Depositary for such series shall no longer be
registered or in good standing under the Exchange Act, or other applicable
statute or regulation and a successor Depositary for such series is not
appointed by the Company within 90 days after the Company receives such notice
or becomes aware of such condition, as the case may be, this Section 2.11 shall
no longer be applicable to the Debentures of such series and the Company will
execute and, subject to Section 2.05, the Trustee will authenticate and make
available for delivery Debentures of such series in definitive registered form
without coupons, in
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authorized denominations, and in an aggregate principal amount equal to the
principal amount of the Global Debentures of such series in exchange for such
Global Debenture. In addition, the Company may at any time determine that the
Debentures of any series shall no longer be represented by one or more Global
Debentures and that the provisions of this Section 2.11 shall no longer apply to
the Debentures of such series. In such event the Company will execute and,
subject to Section 2.05, the Trustee, upon receipt of an Officers' Certificate
evidencing such determination by the Company, will authenticate and make
available for delivery Debentures of such series in definitive registered form
without coupons, in authorized denominations, and in an aggregate principal
amount equal to the principal amount of the Global Debentures of such series in
exchange for such Global Debentures. Upon the exchange of the Global Debentures
for such Debentures in definitive registered form without coupons, in authorized
denominations, the Global Debentures shall be canceled by the Trustee. Such
Debentures in definitive registered form issued in exchange for the Global
Debentures pursuant to this Section 2.11 shall be registered in such names and
in such authorized denominations as the Depositary, pursuant to instructions
from its direct or indirect participants or otherwise, shall instruct the
Trustee. The Trustee shall make available for delivery such Debentures to the
Depositary for delivery to the persons in whose names such Debentures are so
registered.
SECTION 2.12. CUSIP Numbers. The Company in issuing the Debentures may
use "CUSIP" and "CINS" numbers (if then generally in use), and the Trustee shall
use CUSIP numbers or CINS numbers, as the case may be, in notices of redemption
or exchange as a convenience to Debentureholders and no representation shall be
made as to the correctness of such numbers either as printed on the Debentures
or as contained in any notice of redemption or exchange and any such redemption
or exchange shall not be affected by any defect in or omission of such numbers.
The Company will promptly notify the Trustee of any change in the "CUSIP" or
"CINS" numbers.
ARTICLE 3
SATISFACTION AND DISCHARGE
SECTION 3.1. Satisfaction and Discharge of Indenture. Except as
otherwise specified as contemplated by Section 2.01, this Indenture shall upon
Company Request cease to be of further effect (except as to any surviving rights
of registration of transfer or exchange of Debentures herein expressly provided
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for), and the Trustee, at the expense of the Company, shall execute proper
instruments acknowledging satisfaction and discharge of this Indenture, when:
(a) either,
(i) all Debentures theretofore authenticated and
delivered and have been delivered to the Trustee for
cancellation; or
(ii) all such Debentures not theretofore delivered to
the Trustee for cancellation,
(A) have become due and payable, or
(B) will become due and payable at their
Stated Maturity within one year, or
(C) are to be called for redemption within
one year under arrangements satisfactory to the
Trustee for the giving of notice of redemption by the
Trustee in the name, and at the expense, of the
Company,
and the Company, in the case of (A), (B) or (C) above, has
deposited or caused to be deposited with the Trustee as trust
funds in trust for the purpose, an amount sufficient to pay
and discharge the entire indebtedness on such Debentures not
theretofore delivered to the Trustee for cancellation, for
principal (and premium, if any) and any interest to the date
of such deposit (in the case of Debentures that have become
due and payable) or to the Stated Maturity or Redemption Date,
as the case may be;
(b) the Company has paid or caused to be paid all other sums
payable hereunder by the Company; and
(c) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent herein provided for relating to the satisfaction and
discharge of this Indenture have been complied with.
Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Company to the Trustee under Section 5.06, the obligations of
the Company to any Authenticating Agent under Section 2.10 and, if money shall
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have been deposited with the Trustee pursuant to clause 3.01(a)(ii) of this
Section, the obligations of the Trustee under Section 3.02 and the last
paragraph of Section 9.03 shall survive.
SECTION 3.2. Application of Trust Money. Subject to the provisions of
the last paragraph of Section 9.03, all money and U.S. Government Obligations
deposited with the Trustee pursuant to Section 3.01 or 3.03 and all money
received by the Trustee in respect of such U.S. Government Obligations shall be
held in trust and applied by it, in accordance with the provisions of the
Debentures and this Indenture, to the payment, either directly or through any
Paying Agent (including the Company acting as its own Paying Agent), to the
Persons entitled thereto, of the principal (and premium, if any) and any
interest for whose payment such money and U.S. Government Obligations have been
deposited with or received by the Trustee. Money deposited pursuant to this
Section not in violation of this Indenture shall not be subject to claims of the
holders of Senior Indebtedness under Article 14. All monies deposited with the
Trustee pursuant to Section 3.04 for the payment of Debentures subsequently
converted shall be returned to the Company upon a Company Request. All moneys
deposited with the Trustee pursuant to Section 3.04 for the payment of
Debentures subsequently converted shall be returned to the Company upon Company
Request; provided, that the Company shall have furnished to the Trustee such
security or indemnity as the Trustee may require.
SECTION 3.3. Company's Option to Effect Defeasance or Covenant
Defeasance. If applicable to Debentures of any series, the Company may elect, at
its option at any time, to have Section 3.04 or Section 3.06 applied to any such
series of Debentures or any Debentures of such series, as the case may be,
designated pursuant to Section 2.01 as being defeasible pursuant to such Section
3.04 or 3.06, in accordance with any applicable requirements provided pursuant
to Section 2.01 and upon compliance with the conditions set forth below in this
Article. Any such election shall be evidenced by a Board Resolution or in
another manner specified as contemplated by Section 2.01 for such Debentures.
SECTION 3.4. Discharge and Defeasance. If this Section 3.04 is
specified, under the terms of Section 2.01, to be applicable to Debentures of
any series, then notwithstanding Section 3.01 and upon compliance with the
applicable conditions set forth in 3.06: (1) the Company shall be deemed to have
paid and discharged the entire indebtedness on all the Outstanding Debentures of
any such series ("DEFEASANCE") and (2) the provisions of this Indenture as it
relates to such Outstanding Debentures shall no longer be in effect (except (i)
as to the rights of Holders of Debentures of such series to receive, solely from
the
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trust fund described in Section 3.06, payment of (a) the principal of (and
premium, if any) and any installment of principal of (and premium, if any) or
interest on Debentures of such series on the Stated Maturity of such principal
(and premium, if any) or installment of principal (and premium, if any) or
interest or upon optional redemption and/or (b) any mandatory sinking fund
payments or analogous payments applicable to the Debentures of such series on
that day on which such payments are due and payable in accordance with the terms
of the Indenture and of Debentures of such series, (ii) the Company's
obligations with respect to Debentures of such series under Sections 2.06, 2.05,
2.07, 9.02, 9.03, and 9.04 and (iii) the rights, powers, trusts, duties and
immunities of the Trustee hereunder, including those under Section 5.08 hereof).
SECTION 3.5. Covenant Defeasance. If this Section 3.05 is specified, as
contemplated by Section 2.01, to be applicable to any series of Debentures or
any Debentures of such series, as the case may be, (a) the Company shall be
released from its obligations under Sections 9.04 through 9.07, inclusive, and
any covenants provided pursuant to Section 2.01(u) or 8.01(b) for the benefit of
the Holders of Debentures of such series that pursuant to the terms of such
Debentures of such series are defeasible pursuant to this Section 3.05 and (b)
the occurrence of any event specified in Sections 4.01(d) (with respect to any
of Sections 9.03 through 9.07, inclusive, and any such covenants provided
pursuant to Sections 2.01(u), 8.01(b) or 8.01(f) and 4.01(g) (if pursuant to the
terms of such Debentures this Section 4.05 is applicable to any such event
specified in Section 4.01(g)) shall be deemed not to be or result in an Event of
Default, in each case with respect to Debentures of such series as provided in
this Section on and after the date the conditions set forth in Section 3.06 are
satisfied (hereinafter called "COVENANT DEFEASANCE"). For this purpose, such
Covenant Defeasance means that, with respect to Debentures of such series, the
Company may omit to comply with and shall have no liability in respect of any
term, condition or limitation set forth in any such specified Section (to the
extent so specified in the case of Section 4.01(d) and 4.01(g)), whether
directly or indirectly by reason of any reference elsewhere herein to any such
Section or by reason of any reference in any such Section to any other provision
herein or in any other document, but the remainder of this Indenture and such
Debentures shall be unaffected thereby.
SECTION 3.6. Conditions to Defeasance. The following
shall be the conditions to the application of Section 3.04 or
Section 3.05 to any applicable series of Debentures or any
Debentures of such series, as the case may be
(a) either
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(i) with respect to all Outstanding Debentures of
such series or such Debentures of such Series, as the case may
be, with reference to this Section 3.06, the Company has
deposited or caused to be deposited with the Trustee
irrevocably (but subject to the provisions of Section 3.02 and
the last paragraph of Section 9.03), as trust funds in trust,
specifically pledged as security for, and dedicated solely to,
the benefit of the Holders of the Debentures of such series,
(i) lawful money of the United States in an amount, or (ii)
U.S. Government Obligations that through the payment of
interest and principal in respect thereof in accordance with
their terms will provide not later than the opening of
business on the due dates of any payment referred to in clause
(i) or (ii) of this subparagraph (a)(1) lawful money of the
United States in an amount, or (iii) a combination thereof,
sufficient, in the opinion of a nationally recognized firm of
independent public accountants expressed in a written
certification thereof delivered to the Trustee, to pay and
discharge (A) the principal of (and premium, if any) and each
installment of principal (and premium, if any) and interest on
such Debentures the Stated Maturity of such principal or
installment of principal or interest or upon optional
redemption and (B) any mandatory sinking fund payments or
analogous payments applicable to the Debentures of such series
on the day on which such payments are due and payable in
accordance with the terms of this Indenture and of the
Debentures of such series; or
(ii) the Company has properly fulfilled such other
means of satisfaction and discharge as is specified, as
contemplated by Section 2.01, to be applicable to the
Debentures of such series;
(b) the Company has paid or caused to be paid all other sums
payable with respect to the Debentures of such series;
(c) such deposit for the benefit of Holders of Debentures of
such series will not result in a breach or violation of, or constitute
a default under, this Indenture or any other agreement or instrument to
which the Company is a party or by which it is bound;
(d) no Event of Default or event that with the giving of
notice or lapse of time, or both, would become an Event of Default with
respect to the Debentures of such series shall have occurred and be
continuing on the date of such deposit and no Event of Default under
Section 4.01(e) or
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Section 4.01(f) or event that, with the giving of notice or lapse of
time, or both, would become an Event of Default under Section 4.01(e)
or Section 4.01(f), shall have occurred and be continuing on the 91st
day after such date;
(e) in the event of an election to have Section 3.04 apply to
the Debentures of any series, the Company has delivered to the Trustee
an Opinion of Counsel to the effect that (i) the Company has received
from, or there has been published by, the Internal Revenue Service a
ruling, or (ii) since the date of this Indenture there has been a
change in applicable federal income tax law, in either case to the
effect that, and based thereon such Opinion of Counsel shall confirm
that, the Holders of Debentures of such series will not recognize
income, gain or loss for federal income tax purposes as a result of
such deposit, defeasance and discharge and will be subject to federal
income tax on the same amount and in the same manner and at the same
times as would have been the case if such deposit, defeasance and
discharge had not occurred;
(f) in the event of an election to have Section 3.05 apply to
Debentures of any series, the Company shall have delivered to the
Trustee an Opinion of Counsel to the effect that the Holders of
Debentures of such series will not recognize gain or loss for federal
income tax purposes as a result of the deposit and Covenant Defeasance
to be effected with respect to the Debentures of such series and will
be subject to United States federal income tax on the same amount, in
the same manner and at the same times as would be the case if such
deposit and Covenant Defeasance were not to occur;
(g) if the Debentures of such series are then listed on any
domestic or foreign securities exchange, the Company shall have
delivered to the Trustee an Opinion of Counsel to the effect that such
deposit, defeasance and discharge will not cause the Debentures of such
series to be delisted;
(h) no default in the payment of the principal (and premium,
if any) or any interest on any Senior Indebtedness beyond any
applicable grace period shall have occurred and be continuing;
(i) no other default with respect to any Senior Indebtedness
shall have occurred and be continuing and shall have resulted in the
acceleration of such Senior Indebtedness; and
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(j) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent herein provided for relating to the Defeasance or Covenant
Defeasance with respect to Debentures of such series have been complied
with and an Opinion of Counsel to the effect that either (i) as a
result of such deposit and the related exercise of the Company's option
under this Article, registration is not required under the Investment
Company Act of 1940, as amended, by the Company, the trust funds
representing such deposit or the Trustee or (ii) all necessary
registrations under said Act have been effected.
Any deposits with the Trustee referred to in Section 3.06(a)(i) shall
be irrevocable and shall be made under the terms of an escrow/trust agreement in
form and substance satisfactory to the Trustee. If any Outstanding Debentures of
such series are to be redeemed prior to their Stated Maturity, whether pursuant
to any optional redemption provisions or in accordance with any mandatory
sinking fund requirement, the applicable escrow trust agreement shall provide
therefor and the Company shall make such arrangements as are satisfactory to the
Trustee for the giving of notice of redemption by the Trustee in the name, and
at the expense, of the Company.
Upon Defeasance with respect to all the Debentures of any series, the
terms and conditions of the Debentures of such series, including the terms and
conditions with respect thereto set forth in this Indenture, shall no longer be
binding upon, or applicable to, the Company; provided, that the Company shall
not be discharged from any payment obligations in respect of Debentures of such
series that are deemed not to be Outstanding under clause (iii) of the
definition thereof if such obligations continue to be valid obligations of the
Company under applicable law.
Notwithstanding the cessation, termination and discharge of all
obligations, covenants and agreements (except as provided above in this Section
3.06) of the Company under this Indenture with respect to the Debentures of any
series, the obligations of the Company to the Trustee under Section 5.06, and
the obligations of the Trustee under Section 3.02 and the last paragraph of
Section 9.03 shall survive with respect the Debentures of such series.
Anything in this Article to the contrary notwithstanding, the Trustee
shall deliver or pay to the Company from time to time upon Company Request any
money or U.S. Government Obligations held by it as provided in this Section 3.06
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with respect to Debentures of any series that, in the opinion of a nationally
recognized firm of independent public accountants expressed in a written
certification thereof delivered to the Trustee, are in excess of the amount
thereof that would then be required to be deposited to effect the Defeasance or
Covenant Defeasance, as the case may be, with respect to Debentures of such
series.
The Company shall pay and indemnify the Trustee against any tax, fee or
other charge imposed on or assessed against the U.S. Government Obligations
deposited pursuant to this Section 3.06 or the principal and interest received
in respect thereof other than any such tax, fee or other charge which by law is
for the account of the Holders of Outstanding Debentures.
ARTICLE 4
REMEDIES
SECTION 4.1. Events of Default. "EVENT OF DEFAULT," wherever used
herein with respect to Debentures of any series, unless otherwise provided the
applicable supplemental indenture, means any one or more of the following events
(whatever the reason for such Event of Default and whether it shall be voluntary
or involuntary or be effected by operation of law or pursuant to any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body):
(a) default in the payment of any interest upon any Debenture
of such series when it becomes due and payable, and continuance of such
default for a period of 30 days (whether or not such payment is
prohibited by the subordination provisions set forth in Article 13
hereof); provided, that a valid extension of an interest payment period
by the Company in accordance with the terms of any indenture
supplemental hereto, shall not constitute a default in the payment of
interest for this purpose; or
(b) default in the payment of the principal of (or premium, if
any, on) any Debenture of such series as and when the same shall become
due and payable whether at maturity, upon redemption, by declaration or
otherwise, or in any payment required by any sinking or analogous fund
established with respect to that series (whether or not such payment is
prohibited by the subordination provisions set forth in Article 13
hereof); provided, that a valid extension of the maturity of the
Debentures of such series in accordance with the terms of any indenture
supplemental hereto
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shall not constitute a default in the payment of principal or premium,
if any; or
(c) if the Debentures of such series are convertible or
exchangeable into or for shares of Common Stock of the Company or other
securities, cash or other property pursuant to any supplemental
indenture, Board Resolution or other instrument authorizing Debentures
of such series, failure by the Company to convert such Debentures
(whether or not conversion or exchange is prohibited by the
subordination provisions set forth in Article 13); or
(d) default in the performance, or breach, of any covenant or
warranty of the Company in this Indenture (other than a covenant or
warranty a default in whose performance or whose breach is elsewhere in
this Section specifically dealt with or that has expressly been
included in this Indenture solely for the benefit of any series of
Debentures other than such series), and continuance of such default or
breach for a period of 90 days after there has been given, by
registered or certified mail, to the Company by the Trustee or to the
Company and the Trustee by the Holders of at least 25% in aggregate
principal amount of the Outstanding Debentures of such series, a
written notice specifying such default or breach and requiring it to be
remedied and stating that such notice is a "NOTICE OF DEFAULT"
hereunder; or
(e) the entry by a court having jurisdiction in the premises
of a decree or order for relief in respect of the Company in an
involuntary case or proceeding under any applicable federal or state
bankruptcy, insolvency, reorganization or other similar law, or
appointing a custodian, receiver, liquidator, assignee, trustee,
sequestrator or other similar official of the Company or of any
substantial part of its property, or ordering the winding up or
liquidation of its affairs, and the continuance of any such decree or
order for relief or any such other decree or order unstayed and in
effect for a period of 60 consecutive days; or
(f) the commencement by the Company of a voluntary case or
proceeding under any applicable federal or state bankruptcy,
insolvency, reorganization or other similar law or of any other case or
proceeding to be adjudicated as bankrupt or insolvent, or the consent
by it to the entry of a decree or order for relief in respect of the
Company in an involuntary case or proceeding under any applicable
federal or state bankruptcy, insolvency, reorganization or other
similar law or to the commencement of
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any bankruptcy or insolvency case or proceeding against it, or the
filing by it of a petition or answer or consent seeking reorganization
or relief under any applicable federal or state law, or the consent by
it to the filing of such petition or to the appointment of or taking
possession by a custodian, receiver, liquidation, assignee, trustee,
sequestrator or similar official of the Company or of any substantial
part of its property, or the making by it of an assignment for the
benefit of creditors; or
(g) in the event Debentures of any series are issued to a
Federal-Mogul Trust or a trustee of such trust in connection with the
issuance of Trust Securities by such Federal-Mogul Trust, such
Federal-Mogul Trust shall have voluntarily or involuntarily dissolved,
wound-up its business or otherwise terminated its existence except in
connection with (i) the distribution of Debentures of such series to
holders of Trust Securities in liquidation of their interest in such
Federal-Mogul Trust, (ii) the redemption of all of the outstanding
Trust Securities of such Federal-Mogul Trust or (iii) certain mergers,
consolidations or amalgamations, each as permitted by the Declaration
of such Federal-Mogul Trust; or
(h) any other Event of Default provided pursuant to Section
2.01 with respect to Debentures of such series.
SECTION 4.2. Acceleration of Maturity; Recission and Annulment. If an
Event of Default described in clause (a), (b), (c), (d), (g) or (h) (if the
Event of Default under clause (d) is with respect to less than all series of
Debentures then Outstanding) of Section 4.01 above occurs and is continuing,
then, and in each and every such case, unless the principal of all of the
Debentures of such series shall have already become due and payable, either the
Trustee or the Holders of not less than 25% in aggregate principal amount of the
Debentures of such series then Outstanding hereunder (each such series voting as
a separate class), by notice in writing to the Company (and to the Trustee if
given by the Holders of Debentures of such series), may declare the entire
principal (or, if the Debentures of such series are Original Issue Discount
Debentures, such portion of the principal amount as may be specified in the
terms of such series) of all Debentures of such series and the interest accrued
thereon, if any, to be due and payable immediately, and upon any such
declaration the same shall become immediately due and payable. If an Event of
Default described in clause (d) (if the Event of Default under clause (d)
relates to all series of Debentures then Outstanding), (e) or (f) of Section
4.01 occurs and is continuing, then and in each and every such case, unless the
principal of all the Debentures of all series shall have already become due and
payable, either the Trustee or the Holders of not less than 25% in aggregate
principal amount of all the Debentures of all series then Outstanding
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hereunder (treated as one class), by notice in writing to the Company (and to
the Trustee if given by Holders of Debentures), may declare the entire principal
(or, if any Debentures are Original Issue Discount Debentures such portion of
the principal as may be specified in the terms thereof) of all Debentures of all
series then Outstanding and interest accrued thereon, if any, to be due and
payable immediately, and upon any such declaration the same shall become
immediately due and payable.
The foregoing provisions, however, are subject to the condition that
if, at any time after the principal (or, if any Debentures are Original Issue
Discount Debentures, such portion of the principal as may be specified in the
terms thereof) of the Debentures of any series (or of all the Debentures of all
series, as the case may be) then Outstanding shall have been so declared due and
payable, and before any judgment or decree for the payment of such moneys shall
have been obtained or entered as hereinafter provided, the Company shall pay or
shall deposit with the Trustee a sum sufficient to pay all matured installments
of interest upon all the Debentures of such series (or of all Debentures of all
series, as the case may be) and the principal of (and premium, if any on)
Debentures of such series (or of all Debentures of all series, as the case may
be) that shall have become due otherwise than by acceleration (with interest
upon such principal and, to the extent that payment of such interest is
enforceable under applicable law, on overdue installments of interest, at the
same rate as the rate of interest or Yield to Maturity (in the case of Original
Issue Discount Debentures) specified in the Debentures of such series (or at the
respective rates of interest or Yields to Maturity of all Debentures of all
series, as the case may be) to the date of such payment or deposit) and such
amount as shall be sufficient to cover reasonable compensation to the Trustee,
and each predecessor Trustee, their respective agents, attorneys and counsel,
and all other expenses and liabilities incurred, and all advances made, by the
Trustee and each predecessor Trustee except as a result of negligence or bad
faith, and if any and all Events of Default under the Indenture, other than the
non-payment of the principal of Debentures of such series (or, if any Debentures
are Original Issue Discount Debentures, such portion of the principal as may be
specified in the terms thereof) that shall have become due by acceleration,
shall have been cured, waived or otherwise remedied as provided herein -- then
and in every such case the Holders of a majority in aggregate principal amount
of all the Debentures of such series, each series voting as a separate class (or
of all Debentures of all series, as the case may be, voting as a single class),
then Outstanding, by written notice to the Company and to the Trustee, may waive
all such defaults with respect to the Debentures of such series (or with respect
to all Debentures of all series, as the case may be) and rescind and annul such
declaration and its consequence, but no such waiver or rescission and annulment
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shall extend to or shall affect any subsequent default or shall impair any right
consequent thereon.
In case the Trustee shall have proceeded to enforce any right with
respect to Debentures of such series under this Indenture and such proceedings
shall have been discontinued or abandoned because of such rescission or
annulment or for any other reason or shall have been determined adversely to the
Trustee, then and in every such case the Company and the Trustee shall be
restored respectively to their former positions and rights hereunder, and all
rights, remedies and powers of the Company and the Trustee shall continue as
though no such proceedings had been taken.
SECTION 4.3. Collection of Indebtedness and Suits for
Enforcement by Trustee. The Company covenants that if:
(a) default is made in the payment of any interest on any
Debenture of any series, or any payment required by any sinking or
analogous fund established with respect to Debentures of such series as
and when the same shall have become due and payable and such default
continues for a period of 30 days (provided that a valid extension of
the interest payment period permitted by the terms of the supplemental
indenture or Board Resolutions setting forth the terms of the
Debentures of such series shall not constitute a default in the payment
of interest), or
(b) default is made in the payment of the principal of (or
premium, if any, on) any Debenture of any series when the same shall
have become due and payable, whether upon maturity of the Debentures of
such series or upon redemption or upon declaration or otherwise,
the Company will, upon demand of the Trustee, pay to it, for the benefit of the
Holders of Debentures of such series, the whole amount then due and payable on
such Debentures of such series and any premium and interest and, to the extent
that payment of such interest shall be legally enforceable under applicable law,
interest on any overdue principal and on the premium, if any, and overdue
interest, at the rate or rates prescribed therefor in Debentures of such series
and, if the Debentures of such series are held by a Federal-Mogul Trust or a
trustee of such trust, without duplication of any other amounts paid by such
Federal- Mogul Trust or trustee in respect thereof, upon overdue installments of
interest at the rate per annum expressed in the Debentures of such series; and
in addition thereto, such further amount as shall be sufficient to cover the
costs and expenses of
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collection, including the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel under Section 5.06.
If the Company fails to pay such amounts forthwith upon such demand,
the Trustee, in its own name and as trustee of an express trust, may institute a
judicial proceeding for the collection of the sums so due and unpaid, may
prosecute such proceeding to judgment or final decree and may enforce the same
against the Company or any other obligor upon Debentures of such series and
collect the moneys adjudged or decreed to be payable in the manner provided by
law out of the property of the Company or any other obligor upon Debentures of
such series, wherever situated.
If an Event of Default with respect to Debentures of any series occurs
and is continuing, the Trustee may in its discretion proceed to protect and
enforce its rights and the rights of the Holders of Debentures of such series by
such appropriate judicial proceedings as the Trustee shall deem most effectual
to protect and enforce any such rights, either at law or in equity or in
bankruptcy or otherwise whether for the specific enforcement of any covenant or
agreement in this Indenture or in aid of the exercise of any power granted
herein, or to enforce any other proper remedy.
SECTION 4.4. Trustee May File Proofs of Claim. In case of the pendency
of any receivership, insolvency, liquidation, bankruptcy, reorganization,
arrangement, adjustment, composition or other judicial proceeding relative to
the Company or any other obligor upon the Debentures of any series or the
property of the Company or of such other obligor or their creditors, the Trustee
(irrespective of whether the principal of the Debentures of such series shall
then be due and payable as therein expressed or by declaration or otherwise and
irrespective of whether the Trustee shall have made any demand on the Company
for the payment of overdue principal or interest) shall be entitled and
empowered, by intervention in such proceeding or otherwise,
(a) to file and prove a claim for the whole amount of
principal and any premium and interest owing and unpaid in respect of
the Debentures of any series and to file such other papers or documents
as may be necessary or advisable in order to have the claims of the
Trustee (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) and
of the Holders of Debentures of such series, and
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(b) to collect and receive any moneys or other property
payable or deliverable on any such claims and to distribute the same,
and any custodian, receiver, assignee, trustee, liquidator, sequestrator or
other similar official in any such judicial proceeding is hereby authorized by
each Holder of Debentures of such series to make such payments to the Trustee
and, in the event that the Trustee shall consent to the making of such payments
directly to the Holders of Debentures of such series, to pay to the Trustee any
amount due it for the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel, and any other amounts due the
Trustee under Section 5.06.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder of a
Debenture of any series, any plan of reorganization, arrangement, adjustment or
composition affecting the Debentures of such series or the rights of any Holder
thereof or to authorize the Trustee to vote in respect of the claim of any
Holder of Debentures of any series in any such proceeding.
SECTION 4.5. Trustee May Enforce Claims Without Possession of
Debentures. All rights of action and claims under this Indenture or under any of
the terms established with respect to the Debentures of any series may be
prosecuted and enforced by the Trustee without the possession of any of the
Debentures of such series or the production thereof in any proceeding relating
thereto, and any such proceeding instituted by the Trustee shall be brought in
its own name as trustee of an express trust, and any recovery of judgment shall,
after provision for the payment of the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel due under
Section 5.06, be for the ratable benefit of the Holders of the Debentures of
such series in respect of which such judgment has been recovered.
SECTION 4.6. Application of Money Collected. Any money collected by the
Trustee pursuant to this Article with respect to Debentures of any series shall
be applied in the following order, at the date or dates fixed by the Trustee
and, in case of the distribution of such money on account of principal or any
premium or interest, upon presentation of the Debentures of such series, or
both, as the case may be, and the notation thereon of the payment if only
partially paid and upon surrender thereof if fully paid:
FIRST: To the payment of all amounts due the Trustee
under Section 5.06;
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SECOND: To the payment of all Senior Indebtedness of
the Company and to the extent required by Article 13:
THIRD: To the payment of the amounts then due and unpaid for
principal of and any premium and interest on the Debentures of such
series in respect of which or for the benefit of which such money has
been collected, ratably, without preference or priority of any kind,
according to the amounts due and payable on Debentures of such series
for principal and any premium and interest, respectively; and
FOURTH: To the payment of the remainder, if any, to
the Company.
SECTION 4.7. Limitation on Suits. No Holder of any
Debenture of any series shall have any right to institute any
proceeding, judicial or otherwise, with respect to this
Indenture, or for the appointment of a receiver or trustee, or
for any other remedy hereunder, unless;
(a) such Holder has previously given written notice to the
Trustee of a continuing Event of Default with respect to the Debentures
of such series and of the continuance thereof with respect to the
Debentures of such series specifying such Event of Default, as
hereinbefore provided;
(b) the Holders of not less than 25% in principal amount of
the Outstanding Debentures of such series shall have made written
request to the Trustee to institute proceedings in respect of such
Event of Default in its own name as Trustee hereunder;
(c) such Holder or Holders shall have offered to the Trustee
reasonable indemnity against the costs, expenses and liabilities to be
incurred in compliance with such request;
(d) the Trustee for 60 days after its receipt of such notice,
request and offer of indemnity has failed to institute any such
proceeding; and
(e) no direction inconsistent with such written request has
been given to the Trustee during such 60 day period by the Holders of a
majority in principal amount of the Outstanding Debentures of such
series;
it being understood and intended that no one or more of such Holders shall have
any right in any manner whatever by virtue of, or by availing of, any provision
of this Indenture to affect, disturb or prejudice the rights of any other of
such
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Holders, or to obtain or to seek to obtain priority or preference over any
other of such Holders or to enforce any right under this Indenture, except in
the manner herein provided and for the equal and ratable benefit of all of such
Holders.
SECTION 4.8. Unconditional Right of Holders to Receive Principal,
Premium and Interest. Notwithstanding any other provision in this Indenture, but
subject to Article 13 of this Indenture, the Holder of any Debenture of any
series shall have the right, which is absolute and unconditional, to receive
payment of the principal of and any premium and (subject to Section 2.03)
interest on Debenture of such series on the Stated Maturity or Maturities
expressed in Debentures of such series (or, in the case of redemption, on the
Redemption Date) and to institute suit for the enforcement of any such payment,
and such rights shall not be impaired without the consent of such Holder.
SECTION 4.9. Restoration of Rights and Remedies. If the Trustee or any
Holder of Debentures of any series has instituted any proceeding to enforce any
right or remedy under this Indenture and such proceeding has been discontinued
or abandoned for any reason, or has been determined adversely to the Trustee or
to such Holder, then and in every such case, subject to any determination in
such proceeding, the Company, the Trustee and the Holders of Debentures of such
series shall be restored severally and respectively to their former positions
hereunder and thereafter all rights and remedies of the Trustee and the Holders
shall continue as though no such proceeding had been instituted.
SECTION 4.10. Rights and Remedies Cumulative. Except as otherwise
provided with respect to the replacement or payment of mutilated, destroyed,
lost or stolen Debentures in the last paragraph of Section 2.07, no right or
remedy herein conferred upon or reserved to the Trustee or to the Holders of
Debentures is intended to be exclusive of any other right or remedy, and every
right and remedy shall, to the extent permitted by law, be cumulative and in
addition to every other right and remedy given hereunder or now or hereafter
existing at law or in equity or otherwise. The assertion or employment of any
right or remedy hereunder, or otherwise, shall not prevent the concurrent
assertion or employment of any other appropriate right or remedy.
SECTION 4.11. Delay or Omission Not Waiver. No delay or omission of the
Trustee or of any Holder of any Debenture to exercise any right or remedy
accruing upon any Event of Default occurring and continuing as aforesaid shall
impair any such right or remedy or constitute a waiver of any such Event of
Default or an acquiescence therein. Subject to the provisions of Section 4.07,
every right and remedy given by this Article or by law to the Trustee or to the
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Holders of Debentures may be exercised from time to time, and as often as may be
deemed expedient, by the Trustee or by the Holders of Debentures, as the case
may be.
SECTION 4.12. Control by Holders of Debentures. The Holders of a
majority in aggregate principal amount of the Outstanding Debentures of any
series shall have the right to direct the time, method and place of conducting
any proceeding for any remedy available to the Trustee, or exercising any trust
or power conferred on the Trustee, with respect to the Debentures of such
series; provided, that
(a) such direction shall not be in conflict with any
rule of law or with this Indenture, and
(b) the Trustee may take any other action deemed proper by the
Trustee; provided, that such direction shall not be in conflict with
any rule of law or with this Indenture or be unduly prejudicial to the
rights of Holders of Debentures of any other series at the time
Outstanding. Subject to the provisions of Section 5.02, the Trustee
shall have the right to decline to follow any such direction if the
Trustee in good faith shall, by a Responsible Officer or Officers of
the Trustee, determine that the proceeding so directed would involve
the Trustee in personal liability.
SECTION 4.13. Waiver of Past Defaults. The Holders of not less than a
majority in principal amount of the Outstanding Debentures of any series may on
behalf of the Holders of all the Debentures of such series waive any past
default hereunder with respect to the Debentures of such series and its
consequences, except a default
(a) in the payment of the principal of (or premium, if any) or
any interest on any Debenture of such series as and when the same shall
become due by the terms of Debentures of such series otherwise than by
acceleration (unless such default has been cured and sums sufficient to
pay all matured installments of interest and principal and any premium
has been deposited with the Trustee (in accordance with Section 4.02),
or
(b) in respect of a covenant or provision hereof that under
Article 8 cannot be modified or amended without the consent of the
Holder of each Outstanding Debenture of such series affected;
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provided, that if the Debentures of such series are held by a Federal-Mogul
Trust or a trustee of such trust, such waiver or modification to such waiver
shall not be effective until the holders of a majority in liquidation preference
of Trust Securities of the applicable Federal-Mogul Trust shall have consented
to such waiver or modification to such waiver; provided further, that if the
consent of the Holder of each Outstanding Debenture of such series is required,
such waiver shall not be effective until each holder of the Trust Securities of
the applicable Federal-Mogul Trust shall have consented to such waiver; provided
further, that a default in respect of any covenant or provision contained in
Article 12 may only be waived by the Holders affected thereby.
Upon any such waiver, the default covered thereby shall cease to exist,
and any Event of Default arising therefrom shall be deemed to have been cured,
for every purpose of this Indenture and the Company, the Trustee and the Holders
of the Debentures of such series shall be restored to their former positions and
rights hereunder, respectively; but no such waiver shall extend to any
subsequent or other default or impair any right consequent thereon.
SECTION 4.14. Undertaking for Costs. All parties to this Indenture
agree, and each Holder of any Debenture by his acceptance thereof shall be
deemed to have agreed, that any court may in its discretion require, in any suit
for the enforcement of any right or remedy under this Indenture, or in any suit
against the Trustee for any action taken, suffered or omitted by it as Trustee,
the filing by any party litigant in such suit of an undertaking to pay the costs
of such suit, and that such court may in its discretion assess reasonable costs,
including reasonable attorneys' fees and expenses, against any party litigant in
such suit, having due regard to the merits and good faith of the claims or
defenses made by such party litigant; but the provisions of this Section shall
not apply to any suit instituted by the Company, to any suit instituted by the
Trustee, to any suit instituted by any Holder, or group of Holders, holding in
the aggregate more than 10% in principal amount of the Outstanding Debentures of
any series, or to any suit instituted by any Holder of any Debenture for the
enforcement of the payment of the principal of or any premium or interest on
such Debenture on or after the Stated Maturity or Maturities expressed in such
Debenture (or, in the case of redemption, on or after the Redemption Date).
SECTION 4.15. Waiver of Stay or Extension Laws. The Company covenants
(to the extent that it may lawfully do so) that it will not at any time insist
upon, or plead, or in any manner whatsoever claim or take the benefit or
advantage of, any stay or extension law wherever enacted, now or at any time
hereafter in force, which may affect the covenants or the performance of this
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Indenture; and the Company (to the extent that it may lawfully do so) hereby
expressly waives all benefit or advantage of any such law and covenants that it
will not hinder, delay or impede the execution of any power herein granted to
the Trustee, but will suffer and permit the execution of every such power as
though no such law had been enacted.
ARTICLE 5
THE TRUSTEE
SECTION 5.1. Duties and Responsibilities of the Trustee; During
Default; Prior to Default. With respect to the Holders of any series of
Debentures issued hereunder, the Trustee, prior to the occurrence of an Event of
Default with respect to the Debentures of a such series and after the curing or
waiving of all Events of Default that may have occurred with respect to
Debentures of such series, undertakes to perform such duties and only such
duties as are specifically set forth in this Indenture. In case an Event of
Default with respect to the Debentures of such series has occurred (which has
not been cured or waived), the Trustee shall exercise with respect to the
Debentures of such series such of the rights and powers vested in it by this
Indenture, and shall use the same degree of care and skill in their exercise, as
a prudent man would exercise or use under the circumstances in the conduct of
his own affairs.
No provision of this Indenture shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent failure
to act or its own wilful misconduct, except that:
(a) prior to the occurrence of an Event of Default with
respect to the Debentures of any series and after the curing or waiving
of all such Events of Default with respect to the Debentures of such
series that may have occurred:
(i) the duties and obligations of the Trustee with
respect to the Debentures of such series shall be determined
solely by the express provisions of this Indenture, and the
Trustee shall not be liable except for the performance of such
duties and obligations as are specifically set forth in this
Indenture, and no implied covenants or obligations shall be
read into this Indenture against the Trustee: and
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(ii) in the absence of bad faith on the part of the
Trustee, the Trustee may conclusively rely, as to the truth of
the statements and the correctness of the opinions expressed
therein, upon any statements, certificates or opinions
furnished to the Trustee and conforming to the requirements of
this Indenture; but in the case of any such statement,
certificates or opinions that by any provision hereof are
specifically required to be furnished to the Trustee, the
Trustee shall be under a duty to examine the same to determine
whether or not they conform to the requirements of this
Indenture;
(b) the Trustee shall not be liable for any error of judgment
made in good faith by a Responsible Officer or Responsible Officers of
the Trustee, unless it shall be proved that the Trustee was negligent
in ascertaining the pertinent facts; and
(c) the Trustee shall not be liable with respect to any action
taken or omitted to be taken by it in good faith in accordance with the
direction of the Holders pursuant to Section 4.12 relating to the time,
method and place of conducting any proceeding for any remedy available
to the Trustee, or exercising any trust or Power conferred upon the
Trustee, under this Indenture.
No provision of this Indenture shall require the Trustee to extend or
risk its own funds or otherwise incur any financial liability in the performance
of any of its duties hereunder, or in the exercise of any of its rights or
powers, if it shall have reasonable grounds for believing that repayment of such
funds or adequate indemnity against such risk or liability is not reasonably
assured to it.
SECTION 5.2. Certain Rights of Trustee. Subject to the
provisions of the Trust Indenture Act:
(a) the Trustee may conclusively rely and shall be fully
protected in acting or refraining from acting upon any resolution,
certificate, statement, instrument, opinion, report, notice, request,
direction, consent, order, bond, debenture, note, other evidence of
indebtedness or other paper or document believed by it to be genuine
and to have been signed or presented by the proper party or parties;
(b) any request or direction of the Company mentioned herein
shall be sufficiently evidenced by an Officers' Certificate and any
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resolution of the Board of Directors may be sufficiently evidenced by a
Board Resolution;
(c) whenever in the administration of this Indenture the
Trustee shall deem it desirable that a matter be proved or established
prior to taking, suffering or omitting any action hereunder, the
Trustee (unless other evidence be herein specifically prescribed) may,
in the absence of bad faith on its part, conclusively rely upon an
Officers' Certificate;
(d) the Trustee may consult with counsel of its selection and
the advice of such counsel or any Opinion of Counsel shall be full and
complete authorization and protection in respect of any action taken,
suffered or omitted by it hereunder in good faith and in reliance
thereon;
(e) the Trustee shall be under no obligation to exercise any
of the rights or powers vested in it by this Indenture at the request
or direction of any of the Holders of Debentures of any series pursuant
to this Indenture, unless such Holders shall have offered to the
Trustee reasonable security or indemnity against the costs, expenses
and liabilities that might be incurred by it in compliance with such
request or direction, including such reasonable advances as may be
requested by the Trustee;
(f) the Trustee shall not be bound to make any investigation
into the facts or matters stated in any resolution, certificate,
statement, instrument, opinion, report, notice, request, direction,
consent, order, bond, debenture, note, other evidence of indebtedness
or other paper or document, but the Trustee, in its discretion, may
make such further inquiry or investigation into such facts or matters
as it may see fit, and, if the Trustee shall determine to make such
further inquiry or investigation, it shall be entitled to examine the
books, records and premises of the Company, personally or by agent or
attorney;
(g) the Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or
through agents or attorneys and the Trustee shall not be responsible
for any misconduct or negligence on the part of any agent or attorney
appointed with due care by it hereunder;
(h) the Trustee shall not be liable for any action taken,
suffered, or omitted to be taken by it in good faith and reasonably
believed by it to be authorized or within the discretion or rights or
powers conferred upon it
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by this Indenture, unless the Trustee was negligent in ascertaining
the pertinent facts; and
(i) the Trustee shall not be deemed to have notice of any
default or Event of Default unless a Responsible Officer of the Trustee
has actual knowledge thereof or unless written notice of any event
which is in fact such a default is received by the Trustee at the
Corporate Trust Office of the Trustee, and such notice references the
Debentures and this Indenture.
SECTION 5.3. Not Responsible for Recitals or Issuance of Debentures.
The recitals contained herein and in the Debentures (except the Trustee's
certificates of authentication) shall be taken as the statements of the Company,
and the Trustee or any Authenticating Agent assumes no responsibility for their
correctness. The Trustee makes no representations as to the validity or
sufficiency of this Indenture or of any Debentures. The Trustee or any
Authenticating Agent shall not be accountable for the use or application by the
Company of Debentures or the proceeds thereof.
SECTION 5.4. May Hold Debentures. The Trustee, any Authenticating
Agent, any Paying Agent, or any other agent of the Company, in its individual or
any other capacity, may become the owner or pledgee of Debentures and, subject
to Section 5.09 and 5.11, may otherwise deal with the Company with the same
rights it would have if it were not Trustee, Authenticating Agent, Paying Agent,
or such other agent.
SECTION 5.5. Money Held in Trust. Money held by the Trustee in trust
hereunder need not be segregated from other funds except to the extent required
by law. The Trustee shall be under no liability for interest on any money
received by it hereunder except as otherwise agreed in writing with the Company.
SECTION 5.6. Compensation and Reimbursement. The Company agrees:
(a) to pay to the Trustee or any successor Trustee from time
to time such compensation as shall be agreed in writing between the
Company and the Trustee for all services rendered by it hereunder
(which compensation shall not be limited by any provision of law in
regard to the compensation of a trustee of an express trust);
(b) except as otherwise expressly provided herein, to
reimburse the Trustee or any predecessor Trustee upon its request for
all reasonable expenses, disbursements and advances incurred or made by
the Trustee in accordance with any provision of this Indenture
(including the
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compensation and the expenses and disbursements of its
agents and counsel), except any such expense, disbursement
or advance as may be attributable to its negligence or bad
faith; and
(c) to indemnify the Trustee and any predecessor Trustee for,
and to hold it harmless against, any and all loss, damage, claim,
liability or expense, including taxes (other than taxes based on the
income of the Trustee) incurred without negligence or bad faith on its
part, arising out of or in connection with the acceptance or
administration of the trust or trusts hereunder, including the costs
and expenses of defending itself against any claim or liability in
connection with the exercise or performance of any of its powers or
duties hereunder.
When the Trustee incurs expenses or renders services in connection with
an Event of Default specified in Section 4.01(e) or Section 4.01(f), the
expenses (including the reasonable charges and expenses of its counsel) and the
compensation for the services are intended to constitute expenses of
administration under any applicable federal or state bankruptcy, insolvency or
other similar laws.
The Trustee shall have a lien prior to the Debentures as to all
property and funds held by it hereunder for any amount owing it or any
predecessor Trustee pursuant to this Section 5.06, except with respect to funds
held in trust for the benefit of the Holders of particular Debentures.
The provisions of this Section 5.06 shall survive the termination of
this Indenture.
SECTION 5.7. Resignation and Removal; Appointment of Successor. (a) No
resignation or removal of the Trustee and no appointment of a successor Trustee
pursuant to this Article shall become effective until the acceptance of
appointment by the successor Trustee in accordance with the applicable
requirements of Section 5.08.
(b) The Trustee may resign at any time with respect to the Debentures
of one or more series by giving written notice thereof to the Company. If the
instrument of acceptance by a successor Trustee required by Section 5.08 shall
not have been delivered to the Trustee within 30 days after the giving of such
notice of resignation, the resigning Trustee may petition any court of competent
jurisdiction for the appointment of a successor Trustee with respect to the
Debentures of such series.
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(c) The Trustee may be removed at any time with respect to the
Debentures of any series by Act of the Holders of a majority in principal amount
of the Outstanding Debentures of such series delivered to the Trustee and to the
Company. If the instrument of acceptance by a successor Trustee required by
Section 5.08 shall not have been delivered to the Trustee within 30 days after
the delivery of such Act of removal, the Trustee being removed may petition any
court of competent jurisdiction for the appointment of a successor Trustee with
respect to the Debentures of such series.
(d) If at any time:
(i) the Trustee shall fail to comply with Section 310(b) of
the Trust Indenture Act after written request therefor by the Company
or by any Holder of a Debenture who has been a bona fide Holder of a
Debenture for at least six months, or
(ii) the Trustee shall cease to be eligible under Section 6.10
and Section 310(a) of the Trust Indenture Act and shall fail to resign
after written request therefor by the Company or by any such Holder of
a Debenture who has been a bona fide Holder of Debenture for at least
six months, or
(iii) the Trustee shall become incapable of acting or shall be
adjudged bankrupt or insolvent or a receiver of the Trustee or of its
property shall be appointed or any public officer shall take charge or
control of the Trustee or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation, then, in any such case,
(A) the Company by a Board Resolution may remove the Trustee with respect to all
Debentures, or
(B) subject to Section 4.14 any Holder of a Debenture who has been a bona fide
Holder of a Debenture for at least six months may, on behalf of himself and all
others similarly situated, petition any court of competent jurisdiction for the
removal of the Trustee with respect to all Debentures and the appointment of a
successor Trustee or Trustees.
(e) If the Trustee shall resign, be removed or become incapable of acting,
or if a vacancy shall occur in the office of Trustee for any cause, with respect
to the Debentures of one or more series, the Company, by a Board Resolution,
shall promptly appoint a successor Trustee or Trustees with respect to the
Debentures
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of that or those series (it being understood that any such successor Trustee may
be appointed with respect to the Debentures of one or more or all of such series
and that at any time there shall be only one Trustee with respect to the
Debentures of any particular series) and shall comply with the applicable
requirements of Section 5.08. If, within one year after such resignation,
removal or incapability, or the occurrence of such vacancy, a successor Trustee
with respect to the Debentures of any series shall be appointed by Act of the
Holders of a majority in principal amount of Outstanding Debentures of such
series delivered to the Company and the retiring Trustee, the successor Trustee
so appointed shall, forthwith upon its acceptance of such appointment in
accordance with the applicable requirements of Section 5.08, become the
successor Trustee with respect to the Debentures of such series and to that
extent supersede the successor Trustee appointed by the Company. If no successor
Trustee with respect to the Debentures of any series shall have been so
appointed by the Company or the Holders of Debentures of such series and
accepted appointment in the manner required by Section 5.08, any Holder of a
Debenture of such series who has been a bona fide Holder of a Debenture of such
series for at least six months may, on behalf of himself and all others
similarly situated, petition any court of competent jurisdiction for the
appointment of a successor Trustee with respect to the Debentures of such
series.
(f) The Company shall give notice of each resignation and each removal
of the Trustee with respect to the Debentures of any series and each appointment
of a successor Trustee with respect to the Debentures of any series in the
manner provided in Section 1.06. Each notice shall include the name of the
successor Trustee with respect to the Debentures of such series and the address
of its Corporate Trust Office.
SECTION 5.8. Acceptance of Appointment by Successor. (a) In case of the
appointment hereunder of a successor Trustee with respect to all Debentures,
every such successor Trustee so appointed shall execute, acknowledge and deliver
to the Company and to the retiring Trustee an instrument accepting such
appointment, and thereupon the resignation or removal of the retiring Trustee
shall become effective and such successor Trustee, without any further act, deed
or conveyance, shall become vested with all the rights, powers, trusts and
duties of the retiring Trustee; but on the written request of the Company or the
successor Trustee, such retiring Trustee shall, upon payment of its charges,
execute and deliver an instrument transferring to such successor Trustee all the
rights, powers and trusts of the retiring Trustee and shall duly assign,
transfer and deliver to such successor Trustee all property and money held by
such retiring Trustee hereunder.
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(b) In case of the appointment hereunder of a successor Trustee with
respect to the Debentures of one or more (but not all) series, the Company, the
retiring Trustee and each successor Trustee with respect to the Debentures of
such series shall execute and deliver an indenture supplemental hereto wherein
each successor Trustee shall accept such appointment and that (i) shall contain
such provisions as shall be necessary or desirable to transfer and conform to,
and to vest in, each successor Trustee all the rights, powers, trusts and duties
of the retiring Trustee with respect to the Debentures of such series to which
the appointment of such successor Trustee relates, (ii) if the retiring Trustee
is not retiring with respect to all Debentures, shall contain such provisions as
shall be deemed necessary or desirable to confirm that all the rights, powers,
trusts and duties of the retiring Trustee with respect to the Debentures of such
series as to which the retiring Trustee is not retiring shall continue to be
vested in the retiring Trustee, and (iii) shall add to or change any of the
provisions of this Indenture as shall be necessary to provide for or facilitate
the administration of the trusts hereunder by more than one Trustee, it being
understood that nothing herein or in such supplemental indenture shall
constitute such Trustees as co-trustees of the same trust and that each such
Trustee shall be trustee of a trust or trusts hereunder separate and apart from
any trust or trusts hereunder administered by any other such Trustee; and upon
the execution and delivery of such supplemental indenture the resignation or
removal of the retiring Trustee shall become effective to the extent provided
therein and each such successor Trustee, without any further act, deed or
conveyance, shall become vested with all the rights, powers, trusts and duties
of the retiring Trustee with respect to the Debentures of such series to which
the appointment of such successor Trustee relates; but, on the written request
of the Company or any successor Trustee, such retiring Trustee shall duly
assign, transfer and deliver to such successor Trustee all property and money
held by such retiring Trustee hereunder with respect to the Debentures of such
series to which the appointment of such successor Trustee relates.
(c) Upon the written request of any such successor Trustee, the
Company shall execute any and all instruments for more fully and certainly
vesting in and confirming to such successor Trustee all such rights, powers and
trusts referred to in paragraph (a) or (b) of this Section, as the case may be.
(d) No successor Trustee shall accept its appointment unless at the
time of such acceptance such successor Trustee shall be qualified and eligible
under this Article.
SECTION 5.9. Disqualification; Conflicting Interests. If the Trustee
has or shall acquire a conflicting interest within the meaning of Section 310(b)
of the
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Trust Indenture Act, the Trustee and the holder of Common Securities (as if it
were the obligor referred to in Section 310(b) of the Trust Indenture Act) shall
in all respects comply with the provisions of Section 310(b) of the Trust
Indenture Act.
SECTION 5.10. Corporate Trustee Required; Eligibility. There shall be
at all times a Trustee hereunder, which shall be a Person that is eligible
pursuant to the Trust Indenture Act to act as such and has a combined capital
and surplus of at least $500,000,000. If such Person publishes reports of
condition at least annually, pursuant to law or to the requirements of said
supervising or examining authority, then for the purposes of this Section, the
combined capital and surplus of such Person shall be deemed to be its combined
capital and surplus as set forth in its most recent report of condition so
published. If at any time the Trustee shall cease to be eligible in accordance
with the provisions of this Section, it shall resign immediately in the manner
and with the effect hereunder specified in this Article.
SECTION 5.11. Preferential Collection of Claims Against Company. If and
when the Trustee shall be or become a creditor of the Company (or any other
obligor upon the Debentures), the Trustee shall be subject to the provisions of
the Trust Indenture Act regarding the collection of claims against the Company
(or any such other obligor).
SECTION 5.12. Merger, Conversion, Consolidation or Succession to
Business. Any corporation into which the Trustee may be merged or converted or
with which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all the corporate trust business
of the Trustee shall be the successor of the Trustee hereunder, provided such
corporation shall be otherwise qualified and eligible under this Article,
without the execution or filing of any paper or any further act on the part of
any of the parties hereto. In case any Debentures shall have been authenticated,
but not delivered, by the Trustee then in office, any successor by merger,
conversion or consolidation to such authenticating Trustee may adopt such
authentication and deliver the Debentures so authenticated with the same effect
as if such successor Trustee had itself authenticated such Debentures.
SECTION 5.13. Notice of Defaults. If a default occurs hereunder with
respect to Debentures of any series, the Trustee shall give the Holders of
Debentures of such series notice of such default as and to the extent provided
by the Trust Indenture Act; provided, that in the case of any default of the
character specified in Section 4.01(d) with respect to Debentures of such
series, no such
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notice to Holders shall be given until at least 30 days after the occurrence
thereof. For the purpose of this Section, the term "default" means any event
that is, or after notice or lapse of time or both would become, an Event of
Default with respect to Debentures of such series.
ARTICLE 6
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY
SECTION 6.1. Preservation of Information: Communications to Holders.
(a) The Trustee shall preserve, in as current a form as is reasonably
practicable, the names and addresses of Holders of Debentures (i) contained in
the most recent list furnished to the Trustee as provided in Section 312(a) of
the Trust Indenture Act, (ii) received by the Trustee in its capacity as
Debenture Registrar and (iii) filed with it within the two preceding years
pursuant to Section 313(c)(2) of the Trust Indenture Act.
(b) If three or more Holders of Debentures of any series (herein
referred to as "APPLICANTS") apply in writing to the Trustee, and furnish to the
Trustee reasonable proof that each such applicant has owned a Debenture of such
series for a period of at least six months preceding the date of such
application, and such application states that the applicants desire to
communicate with other Holders of Debentures of such series with respect to
their rights under this Indenture or under the Debentures of such series and is
accompanied by a copy of the form of proxy or other communication that such
applicants propose to transmit, then the Trustee shall, within five Business
Days after the receipt of such application, at its election, either
(i) afford such applicants access to the information preserved
at the time by the Trustee in accordance with Section 6.01(a), or
(ii) inform such applicants as to the approximate number of
Holders of Debentures of such series whose names and addresses appear
in the information preserved at the time by the Trustee in accordance
with Section 6.01(a), and as to the approximate cost of mailing to such
Holders the form of proxy or other communication, if any, specified in
such application.
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(c) Every Holder of Debentures, by receiving and holding the same,
agrees with the Company and the Trustee that neither the Company nor the Trustee
nor any agent of either of them shall be held accountable by reason of the
disclosure of any such information as to the names and addresses of the Holders
of Debentures in accordance with Section 6.01(b), regardless of the source from
which such information was derived and that the Trustee shall not be held
accountable by reason of mailing any material pursuant to a request made under
Section 6.01(b).
SECTION 6.2. Reports by Trustee. The Trustee shall in each year
transmit to Holders such reports concerning the Trustee and its actions under
this Indenture as may be required pursuant to the Trust Indenture Act in the
manner provided pursuant thereto. If required by Section 313(a) of the Trust
Indenture Act, the Trustee shall, within sixty days after each May 15 following
the date of this Indenture deliver to Holders a brief report, dated as of such
May 15, which complies with the provisions of Section 313(a). The trustee shall
also comply with the requirements of Section 313(d) of the Trust Indenture Act.
SECTION 6.3. Reports by Company. The Company shall file with the
Trustee such documents, reports and information as required by Section 314 (if
any) and the compliance certificate required by Section 314 of the Trust
Indenture Act in the form, in the manner and at the times required by Section
314 of the Trust Indenture Act. The Company shall transmit information to the
Holders of the Debentures as required by Section 313(c) of the Trust Indenture
Act.
Delivery of such reports, information and documents to the Trustee is
for informational purposes only and the Trustee's receipt of such shall not
constitute notice of any information contained therein or determinable from
information contained therein, including the Company's compliance with any of
its covenants hereunder (as to which the Trustee is entitled to rely exclusively
on Officers' Certificates).
ARTICLE 7
CONSOLIDATION, MERGER, SALE OR CONVEYANCE
SECTION 7.1. Company May Consolidate, Etc. on Certain Terms. The
Company shall not merge or consolidate with any other corporation or sell or
convey all or substantially all of its assets to any Person, unless (a) either
the Company shall be the continuing corporation, or the successor corporation
(if
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other than the Company) shall be a corporation organized under the laws of the
United States of America or any State thereof and shall expressly assume the due
and punctual payment of the principal of and interest on all the Debentures,
according to their tenor, and the due and punctual performance and observance of
all of the covenants and conditions of this Indenture to be performed or
observed by the Company, by supplemental indenture satisfactory to the Trustee,
executed and delivered to the Trustee by such corporation, and (b) the Company
or such successor corporation, as the case may be, shall not, immediately after
such merger or consolidation, or such sale or conveyance, be in default in the
performance of any such covenant or condition.
SECTION 7.2. Successor Corporation Substituted. In case of any such
consolidation, merger, sale or conveyance, and following such an assumption by
the successor corporation, such successor corporation shall succeed to and be
substituted for the Company, with the same effect as if it had been named
herein. Such successor corporation may cause to be signed, and may issue either
in its own name or in the name of the Company prior to such succession any or
all of the Debentures issuable hereunder that theretofore shall not have been
signed by the Company and delivered to the Trustee; and, upon the order of such
successor corporation instead of the Company and subject to all the terms,
conditions and limitations in this Indenture prescribed, the Trustee shall
authenticate and shall make available for delivery any securities that
previously shall have been signed and delivered by the officers of the Company,
to the Trustee for authentication, and any Debentures that such successor
corporation thereafter shall cause to be signed and delivered to the Trustee for
that purpose. All of the Debentures so issued shall in all respects have the
same legal rank and benefit under this Indenture as the Debentures theretofore
or thereafter issued in accordance with the terms of this Indenture as though
all of such Debentures had been issued at the date of the execution hereof.
In case of any such consolidation, merger, sale or conveyance such
changes in phraseology and form (but not in substance) may be made in the
Debentures thereafter to be issued as may be appropriate.
In the event of any such sale or conveyance (other than a conveyance by
way of lease) the Company or any successor corporation that shall theretofore
have become such in the manner described in this Article shall be discharged
from all obligations and covenants under this Indenture and the Debentures and
may be liquidated and dissolved.
SECTION 7.3. Opinion of Counsel to Trustee. The Trustee may receive an
Opinion of Counsel, prepared in accordance with Section 1.02, as conclusive
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evidence that any such consolidation, merger, sale, lease or conveyance, and any
such assumption, and any such liquidation or dissolution, complies with the
applicable provisions of this Indenture.
ARTICLE 8
SUPPLEMENTAL INDENTURES
SECTION 8.1. Supplemental Indentures Without Consent of Holders.
Without the consent of any Holders of Debentures, the Company, when authorized
by a Board Resolution, and the Trustee, at any time and from time to time, may
enter into one or more indentures supplemental hereto, in form satisfactory to
the Trustee, for any of the following purposes:
(a) to evidence the succession of another Person to the
Company and the assumption by any such successor of the covenants of
the Company herein and in the Debentures; or
(b) to add to the covenants of the Company for the benefit of
the Holders of Debentures of all or any series (and if such covenants
are to be for the benefit of Debentures of less than all series,
stating that such covenants are expressly being included solely for the
benefit of such series) or to surrender any right or power herein
conferred upon the Company; or
(c) to comply with any requirements of the Commission in
connection with the qualification of this Indenture under the Trust
Indenture Act;
(d) to add any additional Events of Default (and if such
Events of Default are to be for the benefit of Debentures of less than
all series, stating that such Events of Default are expressly being
included solely for the benefit of such series); or
(e) to change or eliminate any of the provisions of this
Indenture, provided that any such change or elimination shall become
effective only when there is no Debenture Outstanding of any series
created prior to the execution of such supplemental indenture that is
entitled to the benefit of such provision; or
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(f) to establish the form or terms of Debentures of any series
as permitted by Sections 2.01; or
(g) to evidence and provide for the acceptance of appointment
thereunder by a successor Trustee with respect to the Debentures of one
or more series and to add to or change any of the provisions of this
Indenture as shall be necessary to provide for or facilitate the
administration of the trusts hereunder by more than one Trustee,
pursuant to the requirements of Section 5.08(b); or
(h) to make provision with respect to the conversion rights of
Holders pursuant to the requirements of Article 12, including providing
for the conversion of the Debentures into any security or property
(other than the Common Stock of the Company); or
(i) to cure any ambiguity, to correct or supplement any
provision herein that may be inconsistent with any other provision
herein, or to make any other provisions with respect to matters or
questions arising under this Indenture; provided, that such action
shall not adversely affect the interests of the Holders of Debentures
of any series in any material respect.
SECTION 8.2. Supplemental Indentures with Consent of Holders. With the
consent of the Holders of not less than a majority in aggregate principal amount
of the Outstanding Debentures of each series affected by such supplemental
indenture, by Act of said Holders delivered to the Company and the Trustee, the
Company, when authorized by a Board Resolution, and the Trustee may enter into
an indenture or indentures supplemental hereto for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
this Indenture or of modifying in any manner the rights of the Holders of
Debentures of such series under this Indenture; provided, that no such
supplemental indenture shall, without the consent of the Holder of each
Outstanding Debenture affected thereby,
(a) change the Stated Maturity of the principal of, or any
installment of principal of or interest on, any Debenture of any
series, or reduce the principal amount thereof or the rate of interest
thereon or any premium payable upon the redemption thereof, or reduce
the amount of the principal of an Original Issue Discount Debenture
that would be due and payable upon a declaration of acceleration of the
Maturity thereof pursuant to Section 4.02 or change the coin or
currency in which any
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Debenture or any premium or interest thereon is payable, or impair the
right to institute suit for the enforcement of any such payment on or
after the Stated Maturity thereof (or, in the case of redemption, on or
after the Redemption Date), or
(b) reduce the percentage in principal amount of the
Outstanding Debentures of any series, the consent of whose Holders is
required for any such supplemental indenture, or the consent of whose
Holders is required for any waiver of certain defaults hereunder and
their consequences provided for in this Indenture, or
(c) modify any of the provisions of this Section or Section
4.13, except to increase the percentage of Outstanding Debentures of
any series the consent of the Holders of which is required pursuant to
such provisions or to provide that certain other provisions of this
Indenture cannot be modified or waived without the consent of the
Holder of each Outstanding Debenture affected thereby, or
(d) make any change that adversely affects the right to
convert any Debenture of any series as provided in Article 12 or
pursuant to Section 2.01 (except as permitted by Section 8.01) or
decrease the conversion rate or increase the conversion price of any
such Debenture of such series, or
(e) if the Debentures of any series are secured, change the
terms and conditions pursuant to which the Debentures of such series
are secured in a manner adverse to the Holders of the secured
Debentures of such series, or
(f) make any change in Article 13 that adversely affects the
rights of any Holders of Outstanding Debentures of such series,
If the Debentures of such series are held by a Federal-Mogul Trust or a
trustee of such trust, such supplemental indenture shall not be effective until
the holders of a majority in liquidation preference of Trust Securities of the
applicable Trust shall have consented to such supplemental indenture; provided,
that if the consent of the Holder of each Outstanding Debenture of such series
is required, such supplemental indenture shall not be effective until each
holder of the Trust Securities of the applicable Federal-Mogul Trust shall have
consented to such supplemental indenture.
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A supplemental indenture that changes or eliminates any covenant or
other provision of this Indenture that has expressly been included solely for
the benefit of Debentures of one or more particular series, or that modifies the
rights of the Holders of Debentures of such series with respect to such covenant
or other provision, shall be deemed not to affect the rights under this
Indenture of the Holders of Debentures of any other series.
It shall not be necessary for any Act of Holders of Debentures of any
series under this Section to approve the particular form of any proposed
supplemental indenture, but it shall be sufficient if such Act shall approve the
substance thereof.
SECTION 8.3. Execution of Supplemental Indentures. In executing or
accepting the additional trusts created by any supplemental indenture permitted
by this Article or the modifications thereby of the trusts created by this
Indenture, the Trustee shall be entitled to receive, and (subject to Section
5.02) shall be fully protected in relying upon, an Opinion of Counsel stating
that the execution of such supplemental indenture is authorized or permitted by
this Indenture. The Trustee may, but shall not be obligated to, enter into any
such supplemental indenture that affects the Trustee's own rights, duties or
immunities under this Indenture or otherwise.
SECTION 8.4. Effect of Supplemental Indentures. Upon the execution of
any supplemental indenture under this Article, this Indenture shall be modified
in accordance therewith, and such supplemental indenture shall form a part of
this Indenture for all purposes; and every Holder of Debentures theretofore or
thereafter authenticated and delivered hereunder shall be bound thereby.
SECTION 8.5. Conformity with Trust Indenture Act. Every supplemental
indenture executed pursuant to this Article shall conform to the requirements of
the Trust Indenture Act of 1939, as amended, in effect on such date.
SECTION 8.6. Reference in Debentures to Supplemental Indentures.
Debentures of any series authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article may, and shall if required by
the Trustee, bear a notation in form approved by the Trustee as to any matter
provided for in such supplemental indenture. If the Company shall so determine,
new Debentures of any series so modified as to conform, in the opinion of the
Trustee and the Company, to any such supplemental indenture may be prepared and
executed by the Company and authenticated and made available for delivery by the
Trustee in exchange for Outstanding Debentures of such series.
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ARTICLE 9
COVENANTS
SECTION 9.1. Payment of Principal, Premium and Interest. The Company
covenants and agrees for the benefit of Debentures of any series that it will
duly and punctually pay the principal of and any premium and interest on the
Debentures of such series in accordance with the terms of the Debentures of such
series and this Indenture.
SECTION 9.2. Maintenance of Office or Agency. So long as any series of
the Debentures remain outstanding, the Company agrees to maintain an office or
agency in the Borough of Manhattan, The City and State of New York, with respect
to each such series and at such other location or locations as may be designated
as provided in this Section 9.02, where (i) Debentures of that series may be
presented for payment, (ii) Debentures of that series may be presented as herein
above authorized for registration of transfer and exchange, and (iii) notices
and demands to or upon the Company in respect of the Debentures of that series
and this Indenture may be given or served, such designation to continue with
respect to such office or agency until the Company shall, by written notice
signed by its President or a Vice President and delivered to the Trustee,
designate some other office or agency for such purposes or any of them. If at
any time the Company shall fail to maintain any such required office or agency
or shall fail to furnish the Trustee with the address thereof, such
presentations, notices and demands may be made or served at the Corporate Trust
Office of the Trustee, and the Company hereby appoints the Trustee as its agent
to receive all such presentations, notices and demands.
SECTION 9.3. Money for Debentures Payments to Be Held in Trust. If the
Company shall at any time act as its own Paying Agent with respect to Debentures
of any series, it will, on or before each due date of the principal of and any
premium or interest on any of the Debentures of such series, segregate and hold
in trust for the benefit of the Persons entitled thereto a sum sufficient to pay
the principal and any premium or interest so becoming due until such sums shall
be paid to such Persons or otherwise disposed of as herein provided and will
promptly notify the Trustee of its action or failure to act.
Whenever the Company shall have one or more Paying Agents for
Debentures of any series it will, prior to each due date of the principal of and
any premium or interest on any Debentures of such series, deposit with a Paying
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Agent a sum sufficient to pay the principal and any premium or interest so
becoming due, such sum to be held in trust for the benefit of the Persons
entitled to such principal, premium or interest, and (unless such Paying Agent
is the Trustee) the Company will promptly notify the Trustee of its action or
failure to act.
The Company will cause each Paying Agent for Debentures of any series
other than the Trustee to execute and deliver to the Trustee an instrument in
which such Paying Agent shall agree with the Trustee, subject to the provisions
of this Section, that such Paying Agent will:
(a) hold all sums held by it for the payment of the principal
of and any premium or interest on Debentures of such series in trust
for the benefit of the Persons entitled thereto until such sums shall
be paid to such Persons or otherwise disposed of as herein provided;
(b) give the Trustee notice of any default by the Company (or
any other obligor upon the Debentures of such series) in the making of
any payment of principal of and any premium or interest on the
Debentures of such series;
(c) comply with the provisions of the Trust Indenture Act
applicable to it as Paying Agent; and
(d) at any time during the continuance of any such default,
upon the written request of the Trustee, forthwith pay to the Trustee
all sums so held in trust by such Paying Agent.
The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay, or
by Company Order direct any Paying Agent to pay, to the Trustee all sums held in
trust by the Company or such Paying Agent, such sums to be held by the Trustee
upon the same trusts as those upon which such sums were held by the Company or
such Paying Agent; and, upon such payment by any Paying Agent to the Trustee,
such Paying Agent shall be released from all further liability with respect to
such money.
Any money deposited with the Trustee or any Paying Agent, or then held
by the Company, in trust for the payment of the principal of and any premium or
interest on any Debenture of any series and remaining unclaimed for two years
after such principal and any premium or interest has become due and payable
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shall be paid to the Company on Company Request, or (if then held by the
Company) shall be discharged from such trust; and the Holder of the Debenture of
such series shall thereafter, as an unsecured general creditor, look only to the
Company for payment thereof, and all liability of the Trustee or such Paying
Agent with respect to such trust money and all liability of the Company as
trustee thereof shall thereupon cease; provided, that the Trustee or such Paying
Agent, before being required to make any such repayment, may at the expense of
the Company cause to be published once, in an Authorized Newspaper in each Place
of Payment, notice that such money remains unclaimed and that after a date
specified therein, which shall not be less than 30 days from the date of such
publication, any unclaimed balance of such money then remaining will be repaid
to the Company.
SECTION 9.4. Limitation on Dividends; Transactions with Affiliates. If
Debentures of any series are issued to a Federal- Mogul Trust or a trustee of
such trust in connection with the issuance of Trust Securities by such
Federal-Mogul Trust and (a) there shall have occurred any event that would
constitute an Event of Default, (b) the Guarantor shall be in default with
respect to its payment of any obligations under the Preferred Securities
Guarantee or the Common Securities Guarantee relating to such Federal-Mogul
Trust, or (c) the Company shall have given notice of its election to defer
payments of interest on Debentures of such series by extending the interest
payment period as provided herein and such period, or any extension thereof,
shall be continuing, then the Company (y) shall not declare or pay any dividend
on, make any distributions with respect to, or redeem, purchase or acquire, or
make a liquidation payment with respect to, any of its capital stock (other than
(i) purchases or acquisitions of shares of Common Stock in connection with
satisfaction by the Company or any of its subsidiaries of their respective
obligations under any employee benefit plans, (ii) as a result of a
reclassification of capital stock of the Company or the exchange or conversion
of one class or series of the Company's capital stock for another class or
series of capital stock of the Company or (iii) the purchase of fractional
interests in shares of the Company's capital stock pursuant to the conversion or
exchange provisions of such capital stock of the Company or the security being
converted or exchanged) or make any guarantee payments with respect to the
foregoing, and (z) shall not make any payment of interest, principal or premium,
if any, on, or repay, repurchase or redeem, any debt securities (including
guarantees) issued by the Company that rank pari passu with or junior to the
Debentures of such series.
SECTION 9.5. Covenants as to Federal-Mogul Trust. In the
event Debentures are issued to a Federal-Mogul Trust or a trustee
of such trust in connection with the issuance of Trust Securities
by such Federal-Mogul Trust, for
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so long as such Trust Securities remain outstanding, the Company will (a)
maintain 100% direct or indirect ownership of the Common Securities of such
Federal-Mogul Trust; provided, that any permitted successor of the Company under
the Indenture may succeed to the Company's ownership of the Common Securities,
(b) use its reasonable efforts to cause such Federal-Mogul Trust (i) to remain a
statutory business trust, except in connection with a distribution of Debentures
of such series to the holders of Trust Securities in liquidation of such
Federal-Mogul Trust, the redemption of all of the Trust Securities of such
Trust, or certain mergers, consolidations or amalgamations, each as permitted by
the Declaration, (ii) to continue to be classified as a grantor trust for United
States federal income tax purposes and (iii) to continue to qualify for an
exemption from registration under the Investment Company Act of 1940, as
amended, and (c) use its reasonable efforts to cause each holder of Trust
Securities to be treated as owning an undivided beneficial interest in the
Debentures of such series.
SECTION 9.6. Existence. Subject to Article 7, the Company will do or
cause to be done all things necessary to preserve and keep in full force and
effect its existence, rights (charter and statutory) and franchises; provided,
that the Company shall not be required to preserve any such right or franchise
if the Board of Directors shall determine that the preservation thereof is no
longer desirable in the conduct of the business of the Company and that the loss
thereof is not disadvantageous in any material respect to the Holders.
SECTION 9.7. Statement by Officers as to Default. The Company will
deliver to the Trustee, within 120 days after the end of each fiscal year of the
Company ending after the date hereof, an Officers' Certificate signed by its
principal executive officer, principal financial officer or principal accounting
officer stating whether or not to the best knowledge of the signer thereof the
Company is in default in the performance and observance of any of the terms,
provisions and conditions of this Indenture, and if the Company shall be in
default, specifying all such defaults and the nature and status thereof of which
they may have knowledge.
The Company shall file with the Trustee written notice of the
occurrence of any default relating to an Event of Default of the type described
in clause (e), (f) or (g) of Section 4.01 or any Event of Default within five
Business Days of its becoming aware of any such default or Event of Default.
SECTION 9.8. Financial Information; SEC Reports. The Company shall file
with the Trustee, within 15 days after it files any annual and quarterly
reports, information, documents and other reports with the Commission, copies of
its annual report and of the information, documents and other reports (or copies
of
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such portions of any of the foregoing as the Commission may by rules and
regulations prescribe) that the Company is required to file with the Commission
pursuant to Section 13 or 15(d) of the Exchange Act.
If at any time, the Company is not required to file any such reports
with the Commission, the Company will deliver to the Trustee (a) as soon as
available and in any event within 90 days after the end of each fiscal year of
the Company (i) a consolidated balance sheet of the Company and its Subsidiaries
as of the end of such fiscal year and the related consolidated statements of
operations, stockholders' equity and cash flows for such fiscal year, all
reported on by an independent public accountant of nationally recognized
standing and (ii) a report containing a management's discussion and analysis of
the financial condition and results of operations and a description of the
business and properties of the Company and (b) as soon as available and in any
event within 45 days after the end of each of the first three quarters of each
fiscal year of the Company (i) an unaudited consolidated financial report for
such quarter and (ii) a report containing a management's discussion and analysis
of the financial condition and results of operations of the Company; provided,
that the foregoing shall not be required for any fiscal year or quarter, as the
case may be, with respect to which the Company files or expects to file with the
Trustee an annual report or quarterly report, as the case may be, pursuant to
the second paragraph of this Section 9.08.
With respect to Debentures originally issued in an offering not
registered pursuant to the Securities Act, if prior to the Transfer Restriction
Termination Date, the Company is neither subject to Section 13 or 15(d) of the
Exchange Act, the Company shall at the request of any Holder provide to such
Holder and any prospective purchaser designated by such Holder such information,
if any, required by Rule 144A(d)(4) under the Securities Act.
ARTICLE 10
REDEMPTION OF DEBENTURES
SECTION 10.1. Applicability of Article. Debentures of any series that
are redeemable before their Stated Maturity shall be redeemable in accordance
with their terms and (except as otherwise specified as contemplated by Section
2.01 for Debentures of any series) in accordance with this Article.
SECTION 10.2. Election to Redeem; Notice to Trustee. The election of
the Company to redeem Debentures of any series shall be evidenced by an
Officers'
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Certificate. In the case of any redemption, at the election of the Company, the
Company shall, upon not less than 40 nor more than 60 days prior to the
Redemption Date fixed by the Company, notify the Trustee of such Redemption
Date and of the principal amount of Debentures of such series to be redeemed.
In the case of any redemption of Debentures of such series (a) prior to the
expiration of any restriction on such redemption provided in the terms of such
Debentures of such series or elsewhere in this Indenture, or (b) pursuant to an
election of the Company that is subject to a condition specified in the terms
of Debentures of such series, the Company shall furnish the Trustee with an
Officers' Certificate evidencing compliance with such restriction or condition.
SECTION 10.3. Selection by Trustee of Debentures to Be Redeemed. If
less than all the Debentures of any series and of like tenor are to be redeemed,
the particular Debentures of such series to be redeemed shall be selected not
more than 60 days prior to the Redemption Date by the Trustee, from the
Outstanding Debentures of such series and of like tenor not previously called
for redemption. If the Outstanding Debentures have not been distributed to the
Holders of Trust Securities upon a dissolution of the Federal-Mogul Trust (where
applicable), the Debentures to be redeemed may be selected by such method as the
Trustee shall deem fair and appropriate and that may provide for the selection
of portions (equal to the minimum authorized denomination for Debentures of such
series or any integral multiple thereof) of the principal amount of Registered
Debentures of such series of a denomination larger than the minimum authorized
denomination for Debentures of such series. If the Outstanding Debentures have
been distributed to the Holders of Trust Securities, then the Trustee must
redeem the Outstanding Debentures pro rata.
If Debentures of any series selected for partial redemption are
converted in part before termination of the conversion right with respect to the
portion of the Debenture of such series so selected, the converted portion of
the Debentures of such series shall be deemed (so far as may be) to be the
portion selected for redemption. Debentures (or portions thereof) that have been
converted during a selection of Debentures of such series to be redeemed shall
be treated by the Trustee as Outstanding for the purpose of such selection. In
any case where more than one Debenture of such series is registered in the same
name, the Trustee in its discretion may treat the aggregate principal amount so
registered as if it were represented by one Debenture of such series.
The Trustee shall promptly notify the Company in writing of the
Debentures of such series selected for redemption and, in the case of any
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Debentures of such series selected for partial redemption, the principal amount
thereof to be redeemed.
For all purposes of this Indenture, unless the context otherwise
requires, all provisions relating to the redemption of Debentures of such series
of such series shall relate, in the case of any Debentures of such series
redeemed or to be redeemed only in part, to the portion of the principal amount
of the Debentures of such series that has been or is to be redeemed.
SECTION 10.4. Notice of Redemption. Notice of redemption shall be given
in the manner provided in Section 1.06 to the Holders of Debentures to be
redeemed not less than 30 nor more than 60 days prior to the Redemption Date.
All notices of redemption shall identify the Debentures (including the
CUSP number) to be redeemed and shall state:
(a) the Redemption Date;
(b) the Redemption Price;
(c) if less than all the Outstanding Debentures of any series
are to be redeemed, the identification (and, in the case of partial
redemption, the principal amounts) of the particular Debentures of such
series to be redeemed, and a statement to the effect that on or after
the Redemption Date upon surrender of such Debenture a new Debenture of
such series in the principal amount equal to the unredeemed portion
will be issued;
(d) that on the Redemption Date the Redemption Price will
become due and payable upon each such Debenture of such series to be
redeemed and, if applicable, that interest thereon will cease to accrue
on and after said date;
(e) the place or places where such Debentures of such series,
maturing after the Redemption Date, are to be surrendered for payment
of the Redemption Price;
(f) that the redemption is for a sinking fund, if such is the
case; and
(g) if applicable, the conversion rate or price, the date on
which the right to convert the Debentures of such series to be redeemed
will
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terminate and the place or places where such Debentures may be surrendered for
conversion.
A notice of redemption published as contemplated by Section 1.06 need
not identify particular Registered Debentures of such series to be redeemed.
Notice of redemption of Debentures to be redeemed at the election of
the Company shall be given by the Company or, at the Company's request, by the
Trustee in the name and at the expense of the Company.
SECTION 10.5. Deposit of Redemption Price. Prior to 10:00 A.M., New
York time, on any Redemption Date, the Company shall deposit with the Trustee or
with a Paying Agent (or, if the Company is acting as its own Paying Agent,
segregate and hold in trust as provided in Section 9.03) an amount of money
sufficient to pay the Redemption Price of, and (except if the Redemption Date
shall be an Interest Payment Date) accrued interest on, all the Debentures that
are to be redeemed on that date.
If any Debenture called for redemption is converted into Common Stock
of the Company, any money deposited with the Trustee or with any Paying Agent or
so segregated and held in trust for the redemption of such Debenture shall
(subject to any right of the Holder of such Debenture or any Predecessor
Debenture to receive interest as provided in Section 2.03) be paid to the
Company upon Company Request or, if then held by the Company, shall be
discharged from such trust.
SECTION 10.6. Debentures Payable on Redemption Date. Notice of
redemption having been given as aforesaid, the Debentures so to be redeemed
shall on the Redemption Date become due and payable at the Redemption Price
therein specified, and from and after such date (unless the Company shall
default in the payment of the Redemption Price and accrued interest) such
Debentures shall cease to bear interest. Upon surrender of any such Debenture
for redemption in accordance with said notice maturing after the Redemption
Date, such Debenture shall be paid by the Company at the Redemption Price
together with accrued interest to the Redemption Date; provided, that, unless
otherwise specified as contemplated by Section 2.01, installments of interest on
Registered Debentures whose Stated Maturity is on or prior to the Redemption
Date shall be payable to the Holders of such Debentures or one or more
Predecessor Debentures, registered as such at the close of business on the
relevant record dates according to their terms and the provisions of Section
2.03.
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If any Debenture called for redemption shall not be so paid upon
surrender thereof for redemption, the principal and any premium shall, until
paid, bear interest from the Redemption Date at the rate prescribed therefor in
the Debenture.
SECTION 10.7. Debentures Redeemed in Part. Any Registered Debenture of
any series that is to be redeemed only in part shall be surrendered at a Place
of Payment therefor (with due endorsement by, or a written instrument of
transfer in form satisfactory to the Company and the Trustee duly executed by,
the Holder thereof or his attorney duly authorized in writing), and the Company
shall execute, and the Trustee shall authenticate and make available for
delivery to the Holder of such Debenture without service charge, a new
Registered Debenture or Debentures of such series and of like tenor of any
authorized denomination as requested by such Holder, in aggregate principal
amount equal to and in exchange for the unredeemed portion of the principal of
the Debenture of such series so surrendered.
ARTICLE 11
SINKING FUNDS
SECTION 11.1. Applicability of Article. The provisions of this Article
shall be applicable to any sinking fund for the retirement of Debentures of any
series except as otherwise specified as contemplated by Section 2.01 for
Debentures of such series.
The minimum amount of any sinking fund payment provided for by the
terms of Debentures of any series is herein referred to as a "MANDATORY SINKING
FUND PAYMENT," and any payment in excess of such minimum amount provided for by
the terms of Debentures of any series is herein referred to as an "OPTIONAL
SINKING FUND PAYMENT." If provided for by the terms of Debentures of any series,
the cash amount of any sinking fund payment may be subject to reduction as
provided in Section 11.02. Each sinking fund payment shall be applied to the
redemption of Debentures of any series as provided for by the terms of
Debentures of such series.
SECTION 11.2. Satisfaction of Sinking Fund Payments with Debentures .
The Company (a) may deliver Outstanding Debentures of any series (other than any
previously called for redemption (b) an may apply as a credit Debentures of such
series that have been redeemed either at the election of the Company pursuant to
the terms of the Debentures of such series or through the application
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of permitted optional sinking fund payments pursuant to the terms of the
Debentures, in each case in satisfaction of all or any part of any sinking fund
payment with respect to the Debentures of such series required to be made
pursuant to the terms of the Debentures of such series; provided, that the
Debentures of such series have not been previously so credited. The Debentures
shall be received and credited for such purpose by the Trustee at the Redemption
Price specified in the Debentures of such series for redemption through
operation of the sinking fund and the amount of such sinking fund payment shall
be reduced accordingly.
SECTION 11.3. Redemption of Debentures for Sinking Fund. Not less than
60 days prior to each sinking fund payment date for Debentures of any series,
the Company will deliver to the Trustee an Officers' Certificate specifying the
amount of the next ensuing sinking fund payment for such series pursuant to the
terms of such series, the portion thereof, if any, that is to be satisfied by
payment of cash and the portion thereof, if any, that is to be satisfied by
delivering and crediting Debentures of such series pursuant to Section 11.02 and
will also deliver to the Trustee any Debentures of such series to be so
delivered. Not less than 45 days before each such sinking fund payment date the
Trustee shall select the Debentures of such series to be redeemed upon such
sinking fund payment date in the manner specified in Section 10.03 and cause
notice of the redemption thereof to be given in the name of and at the expense
of the Company in the manner provided in Section 10.04. Such notice having been
duly given, the redemption of such Debentures of such series shall be made upon
the terms and in the manner stated in Sections 10.06 and 10.07.
ARTICLE 12
CONVERSION OF DEBENTURES
SECTION 12.1. Applicability of Article. The provisions of this Article
shall be applicable to the Debentures of any series that are convertible into
shares of Common Stock of the Company, and the issuance of such shares of Common
Stock upon the conversion of Debentures of such series, except as otherwise
specified as contemplated by Section 2.01 for the Debentures of such series. The
terms and provisions applicable to the conversion of Debentures of any series
into securities of the Company (other than Common Stock) shall, if applicable,
be set forth in an Officers' Certificate or established in one or more
indentures supplemental hereto, prior to the issuance of Debentures of such
series in accordance with Section 2.01.
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SECTION 12.2. Exercise of Conversion Privilege. In order to exercise a
conversion privilege, the Holder of a Debenture of any series with such a
privilege shall surrender such Debenture to the Company at the office or agency
maintained for that purpose pursuant to Section 1.02, accompanied by written
notice to the Company that the Holder elects to convert such Debenture or a
specified portion thereof. Such notice shall also state, if different from the
name and address of such Holder, the name or names (with address) in that the
certificate or certificates for shares of Common Stock that shall be issuable on
such conversion shall be issued. Debentures of such series surrendered for
conversion shall (if so required by the Company or the Trustee) be duly endorsed
by or accompanied by instruments of transfer in forms satisfactory to the
Company and the Trustee duly executed by the registered Holder or its attorney
duly authorized in writing. As promptly as practicable after the receipt of such
notice and of any payment required pursuant to a Board Resolution and, subject
to Section 2.01, set forth, or determined in the manner provided, in an
Officers' Certificate, or established in one or more indentures supplemental
hereto setting forth the terms of Debentures and the surrender of such
Debentures in accordance with such reasonable regulations as the Company may
prescribe, the Company shall issue and shall deliver, at the office or agency at
which such Debenture is surrendered, to such Holder or on its written order, a
certificate or certificates for the number of full shares of Common Stock
issuable upon the conversion of such Debenture (or specified portion thereof),
in accordance with the provisions of such Board Resolution, Officers'
Certificate or supplemental indenture, and cash as provided therein in respect
of any fractional share of such Common Stock otherwise issuable upon such
conversion. Such conversion shall be deemed to have been effected immediately
prior to the close of business on the date on which such notice and such
payment, if required, shall have been received in proper order for conversion by
the Company and such Debenture shall have been surrendered as aforesaid (unless
such Holder shall have so surrendered such Debenture and shall have instructed
the Company to effect the conversion on a particular date following such
surrender and such Holder shall be entitled to convert such Debenture on such
date, in which case such conversion shall be deemed to be effected immediately
prior to the close of business on such date) and at such time the rights of the
Holder of such Debenture as such Debenture Holder shall cease and the person or
persons in whose name or names any certificate or certificates for shares of
Common Stock of the Company shall be issuable upon such conversion shall be
deemed to have become the holder or holders of record of the shares represented
thereby. Except as set forth above and subject to Section 2.03, no payment or
adjustment shall be made upon any conversion on account of any interest accrued
on the Debentures of such series surrendered for conversion or on account of any
dividends on the Common Stock of the Company issued upon
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such conversion. Debentures surrendered for conversion on or after any regular
record date and prior to the next succeeding Interest Payment Date (other than a
Debenture or a portion of a Debenture called for redemption on a Redemption Date
occurring after such regular record date and on or prior to such Interest
Payment Date) shall be accompanied by payment equal to the amount of interest
payable on such Debenture on such Interest Payment Date.
In the case of any Debenture of any series that is converted in part
only, upon such conversion the Company shall execute and the Trustee shall
authenticate and make available for delivery to or on the order of the Holder
thereof, at the expense of the Company, a new Debenture or Debentures of such
series, of authorized denominations, in aggregate principal amount equal to the
unconverted portion of such Debenture.
SECTION 12.3. No Fractional Shares. No fractional share of Common Stock
of the Company shall be issued upon conversions of Debentures of any series. If
more than one Debenture of such series shall be surrendered for conversion at
one time by the same Holder, the number of full shares that shall be issuable
upon conversion shall be computed on the basis of the aggregate principal amount
of the Debentures of such series (or specified portions thereof to the extent
permitted hereby) so surrendered. If, except for the provisions of this Section
12.03, any Holder of a Debenture or Debentures of such series would be entitled
to a fractional share of Common Stock of the Company upon the conversion of such
Debenture or Debentures, or specified portions thereof, the Company shall pay to
such Holder an amount in cash equal to the current market value of such
fractional share computed (a) if such Common Stock is listed or admitted to
unlisted trading privileges on a national securities exchange, on the basis of
the last reported sale price regular way on such exchange on the last trading
day prior to the date of conversion upon which such a sale shall have been
effected, or (b) if such Common Stock is not at the time so listed or admitted
to unlisted trading privileges on a national securities exchange or market, on
the basis of the average of the bid and asked prices of such Common Stock in the
over-the-counter market, on the last trading day prior to the date of
conversion, as reported by the National Quotation Bureau, Incorporated or
similar organization if the National Quotation Bureau, Incorporated is no longer
reporting such information, or if not so available, the fair market price as
determined by the Board of Directors. For purposes of this Section, "trading
day" shall mean each Monday, Tuesday, Wednesday, Thursday and Friday other than
any day on which the Common Stock is not traded on the American Stock Exchange,
or if the Common Stock is not traded on the American Stock Exchange, on the
principal exchange or market on which the Common Stock is traded or quoted.
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SECTION 12.4. Adjustment of Conversion Price. The conversion price of
Debentures of any series that is convertible into Common Stock of the Company
shall be adjusted for any stock dividends, stock splits, reclassification,
combinations or similar transactions in accordance with the terms of the
supplemental indenture or Board Resolutions setting forth the terms of the
Debentures of such series.
Whenever the conversion price is adjusted, the Company shall compute
the adjusted conversion price in accordance with terms of the applicable Board
Resolution or supplemental indenture and shall prepare an Officers' Certificate
setting forth the adjusted conversion price and showing in reasonable detail the
facts upon which such adjustment is based, and such certificate shall forthwith
be filed at each office or agency maintained for the purpose of conversion of
Debentures of such series pursuant to Section 9.02 and, if different, with the
Trustee. The Company shall forthwith cause a notice setting forth the adjusted
conversion price to be mailed, first class postage prepaid, to each Holder of
Debentures of such series at its address appearing on the Debenture Register and
to any conversion agent other than the Trustee.
SECTION 12.5. Reservation of Shares of Common Stock. The Company shall
at all times reserve and keep available, free from preemptive rights, out of its
authorized but unissued Common Stock or treasury shares, for the purpose of
effecting the conversion of Debentures, the full number of shares of Common
Stock of the Company then issuable upon the conversion of all outstanding
Debentures of any series that has conversion rights.
SECTION 12.6. Payment of Certain Taxes upon Conversion. The Company
will pay any and all taxes that may be payable in respect of the issue or
delivery of shares of its Common Stock on conversion of Debentures pursuant
hereto. The Company shall not, however, be required to pay any tax that may be
payable in respect of any transfer involved in the issue and delivery of shares
of its Common Stock in a name other than that of the Holder of the Debenture or
Debentures to be converted, and no such issue or delivery shall be made unless
and until the person requesting such issue has paid to the Company the amount of
any such tax, or has established, to the satisfaction of the Company, that such
tax has been paid.
SECTION 12.7. Nonassessability. The Company covenants that all shares
of Common Stock that may be issued upon conversion of Debentures will upon issue
in accordance with the terms hereof be duly and validly issued and fully paid
and nonassessable.
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SECTION 12.8. Effect of Consolidation or Merger on Conversion
Privilege. With respect to Debentures of any series, in case of any
consolidation of the Company with, or merger of the Company into or with any
other Person, or in case of any sale of all or substantially all of the assets
of the Company or any other similar event, the conversion privilege shall be
modified in accordance with the terms of the supplemental indenture or Board
Resolutions setting forth the terms of the Debentures of such series.
SECTION 12.9. Duties of Trustee Regarding Conversion. Neither the
Trustee nor any conversion agent shall at any time be under any duty or
responsibility to any Holder of Debentures of any series that is convertible
into Common Stock to determine whether any facts exist that may require any
adjustment of the conversion price, or with respect to the nature or extent of
any such adjustment when made, or with respect to the method employed, whether
herein or in any supplemental indenture (or whether a supplemental indenture
need be entered into), any resolutions of the Board of Directors or written
instrument executed by one or more officers of the Company provided to be
employed in making the same. Neither the Trustee nor any conversion agent shall
be accountable with respect to the validity or value (or the kind or amount) of
any shares of Common Stock, or of any securities or property, which may at any
time be issued or delivered upon the conversion of any Debentures and neither
the Trustee nor any conversion agent makes any representation with respect
thereto. Neither the Trustee nor any conversion agent shall be responsible for
any failure of the Company to issue, transfer or deliver any shares of Common
Stock or stock certificates or other securities or property upon the surrender
of any Debenture for the purpose of conversion or to comply with any of the
covenants of the Company contained in this Article 12 or in the applicable
supplemental indenture, resolutions of the Board of Directors or written
instrument executed by one or more duly authorized officers of the Company. All
Debentures delivered for conversion shall be delivered to the Trustee to be
canceled by or at the direction of the Trustee, which shall dispose of the same
as provided in Section 2.08.
SECTION 12.10. Repayment of Certain Funds Upon Conversion. Any funds
that at any time shall have been deposited by the Company or on its behalf with
the Trustee or any other paying agent for the purpose of paying the principal
of, and premium, if any, and interest, if any, on any of the Debentures
(including funds deposited for the sinking fund referred to in Article 2 hereof)
and that shall not be required for such purposes because of the conversion of
such Debentures as provided in this Article 12 shall after such conversion be
repaid to the Company by the Trustee upon the Company's written request, subject
to Section 2.03 hereof.
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ARTICLE 13
SUBORDINATION OF DEBENTURES
SECTION 13.1. Debentures Subordinate to Senior Indebtedness. The
Company covenants and agrees, and each Holder of a Debenture, by the Holder's
acceptance thereof, likewise covenants and agrees, that, to the extent and in
the manner hereinafter set forth in this Article, the indebtedness represented
by the Debentures and the payment of the principal of (and premium, if any) and
interest on each and all of the Debentures are hereby expressly made subordinate
and junior in right of payment to the prior payment in full of all Senior
Indebtedness of the Company, whether outstanding at the date of this Indenture
or thereafter incurred. No provision of this Article shall prevent the
occurrence of any default or Event of Default hereunder.
SECTION 13.2. Payment Over of Proceeds Upon Dissolution, Etc. Upon any
payment by the Company or distribution of assets of the Company of any kind or
character, whether in cash, property or securities, to creditors upon any
dissolution or winding-up or liquidation or reorganization of the Company,
whether voluntary or involuntary or in bankruptcy, insolvency, receivership or
other proceedings, all amounts due upon all Senior Indebtedness of the Company
shall first be paid in full, or payment thereof provided for in money in
accordance with its terms, before any payment is made by the Company on account
of the principal (and premium, if any) or interest on the Debentures; and upon
any such dissolution or winding-up or liquidation or reorganization, any payment
by the Company, or distribution of assets of the Company of any kind or
character, whether in cash, property or securities, to which the Holders of the
Debentures or the Trustee would be entitled to receive from the Company, except
for the provisions of this Article, shall be paid by the Company or by any
receiver, trustee in bankruptcy, liquidation trustee, agent or other Person
making such payment or distribution, or by the Holders of the Debentures or by
the Trustee under the Indenture if received by them or it, directly to the
holders of Senior Indebtedness of the Company (pro rata to such holders on the
basis of the respective amounts of Senior Indebtedness held by such holders, as
calculated by the Company) or their representative or representatives, or to the
trustee or trustees under any indenture pursuant to which any instruments
evidencing such Senior Indebtedness may have been issued, as their respective
interests may appear, to the extent necessary to pay such Senior Indebtedness in
full, in money or money's worth, after giving effect to any concurrent payment
or distribution to
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or for the holders of such Senior Indebtedness, before any payment or
distribution is made to the Holders of the Debentures or to the Trustee.
In the event that, notwithstanding the foregoing, any payment or
distribution of assets of the Company of any kind or character, whether in cash,
property or securities, prohibited by the foregoing, shall be received by the
Trustee before all Senior Indebtedness of the Company is paid in full, or
provision is made for such payment in money in accordance with its terms, such
payment or distribution shall be held in trust for the benefit of and shall be
paid over or delivered to the holders of such Senior Indebtedness or their
representative or representatives, or to the trustee or trustees under any
indenture pursuant to which any instruments evidencing such Senior Indebtedness
may have been issued, and their respective interests may appear, as calculated
by the Company, for application to the payment of all Senior Indebtedness of the
Company, as the case may be, remaining unpaid to the extent necessary to pay
such Senior Indebtedness in full in money in accordance with its terms, after
giving effect to any concurrent payment or distribution to or for the benefit of
the holders of such Senior Indebtedness.
For purposes of this Article only, the words "cash, property or
securities" shall not be deemed to include shares of stock of the Company as
reorganized or readjusted, or securities of the Company or any other corporation
provided for by a plan of reorganization or readjustment that are subordinated
in right of payment to all Senior Indebtedness that may at the time be
outstanding to substantially the same extent as, or to a greater extent than,
the Debentures are so subordinated as provided in this Article. The
consolidation of the Company with, or the merger of the Company into, another
Person or the liquidation or dissolution of the Company following the conveyance
or transfer of its properties and assets substantially as an entirety to another
Person upon the terms and conditions set forth in Article 7 shall not be deemed
a dissolution, winding up, liquidation, reorganization, assignment for the
benefit of creditors or marshaling of assets and liabilities of the Company for
the purposes of this Section if the Person formed by such consolidation or into
which the Company is merged or the Person that acquires by conveyance or
transfer such properties and assets substantially as an entirety, as the case
may be, shall, as a part of such consolidation, merger, conveyance or transfer,
comply with the conditions set forth in Article 7.
SECTION 13.3. Prior Payment to Senior Indebtedness Upon Acceleration of
Debentures. In the event that any Debentures are declared due and payable before
their Stated Maturity, then and in such event the holders of Senior Indebtedness
shall be entitled to receive payment in full of all amounts due or to
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become due on or in respect of all Senior Indebtedness or provision shall be
made for such payment in cash, before the Holders of the Debentures are entitled
to receive any payment (including any payment that may be payable by reason of
the payment of any other indebtedness of the Company being subordinated to the
payment of the Debentures) by the Company on account of the principal of (or
premium, if any) or interest on the Debentures or on account of the purchase or
other acquisition of Debentures; provided, that nothing in this Section shall
prevent the satisfaction of any sinking fund payment in accordance with Article
11 by delivering and crediting pursuant to Section 11.02 Debentures that have
been acquired (upon redemption or otherwise) prior to such declaration of
acceleration or that have been converted pursuant to Article 12.
In the event that, notwithstanding the foregoing, the Company shall
make any payment to the Trustee or the Holder of any Debenture prohibited by the
foregoing provisions of this Section, and if such fact shall, at or prior to the
time of such payment, have been made known to the Trustee or, as the case may
be, such Holder, then and in such event such payment shall be paid over and
delivered forthwith to the Company.
The provisions of this Section shall not apply to any payment with
respect to which Section 12.02 would be applicable.
SECTION 13.4. No Payment When Senior Indebtedness in Default. In the
event and during the continuation of any default by the Company in the payment
of principal, premium, interest or any other payment due on any Senior
Indebtedness of the Company, as the case may be, beyond any applicable grace
period with respect thereto, or in the event that the maturity of any Senior
Indebtedness of the Company, as the case may be, has been accelerated because of
a default, then, in any such case, no payment shall be made by the Company with
respect to the principal (including redemption and sinking fund payments) of, or
premium, if any, or interest on the Debentures until such default is cured or
waived or ceases to exist or any such acceleration or demand for payment has
been rescinded.
In the event that, notwithstanding the foregoing, any payment shall be
received by the Trustee when such payment is prohibited by the preceding
paragraph of this Section 13.04 such payment shall be held in trust for the
benefit of, and shall be paid over or delivered to, the holders of Senior
Indebtedness or their respective representatives, or to the trustee or trustees
under any indenture pursuant to which any of such Senior Indebtedness may have
been issued, as their respective interests may appear, but only to the extent
that the holders of the Senior Indebtedness (or their representative or
representatives or a trustee) notify
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the Trustee in writing within 90 days of such payment of the amounts then due
and owing on the Senior Indebtedness and only the amounts specified in such
notice to the Trustee shall be paid to the holders of Senior Indebtedness.
SECTION 13.5. Payment Permitted in Certain Situations. Nothing
contained in this Article or elsewhere in this Indenture or in any of the
Debentures shall prevent (a) the Company, at any time except during the pendency
of any dissolution, winding-up, liquidation or reorganization of the Company,
whether voluntary or involuntary or any bankruptcy, insolvency, receivership or
other proceedings of the Company referred to in Section 13.02 or under the
conditions described in Section 13.03 or 13.4, from making payments at any time
of principal of or premium, if any, or interest on the Debentures, or (b) the
application by the Trustee of any money deposited with it hereunder to the
payment of or on account of the principal of, or premium, if any, or interest on
the Debentures or the retention of such payment by the Holders, if, at the time
of such application by the Trustee, it did not have knowledge that such payment
would have been prohibited by the provisions of this Article.
SECTION 13.6. Subrogation to Rights of Holders of Senior Indebtedness .
Subject to the payment in full of all Senior Indebtedness or the provision for
such payment in cash or cash equivalents or otherwise in a manner satisfactory
to the holders of Senior Indebtedness, the rights of the Holders of Debentures
shall be subrogated to the extent of the payments or distributions made to the
holders of such Senior Indebtedness pursuant to the provisions of this Article
13 (equally and ratably with the holders of indebtedness of the Company that by
its express terms is subordinated to indebtedness of the Company to
substantially the same extent as the Debentures are subordinated to the Senior
Indebtedness and is entitled to like rights of subrogation) to the rights of the
holders of such Senior Indebtedness to receive payments and distributions of
cash, property and securities applicable to the Senior Indebtedness until the
principal of (and premium, if any) and interest on the Debentures shall be paid
in full. For purposes of such subrogation, no payments or distributions to the
holders of the Senior Indebtedness of any cash, property or securities to which
the Holders of Debentures or the Trustee would be entitled except for the
provisions of this Article, and no payments over pursuant to the provisions of
this Article to or for the benefit of the holders of Senior Indebtedness by
Holders of Debentures or the Trustee, shall, as among the Company, its creditors
other than holders of Senior Indebtedness and the Holders of Debentures, be
deemed to be a payment or distribution by the Company to or on account of the
Senior Indebtedness.
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SECTION 13.7. Provisions Solely to Define Relative Rights. The
provisions of this Article are and are intended solely for the purpose of
defining the relative rights of the Holders of Debentures on the one hand and
the holders of Senior Indebtedness on the other hand. Nothing contained in this
Article or elsewhere in this Indenture or in the Debentures is intended to or
shall (a) impair, as among the Company, its creditors other than holders of
Senior Indebtedness and the Holders of Debentures, the obligation of the
Company, which is absolute and unconditional (and which, subject to the rights
under this Article of the holders of Senior Indebtedness, is intended to rank
equally with all other general obligations of the Company), to pay to the
Holders of Debentures the principal of (and premium, if any) and interest on the
Debentures as and when the same shall become due and payable in accordance with
their terms; or (b) affect the relative rights against the Company of the
Holders of Debentures and creditors of the Company, as the case may be, other
than the holders of Senior Indebtedness; or (c) prevent the Trustee or the
Holder of any Debenture from exercising all remedies otherwise permitted by
applicable law upon default under this Indenture, subject to the rights, if any,
under this Article of the holders of Senior Indebtedness to receive cash,
property and securities otherwise payable or deliverable to the Trustee or such
Holder.
SECTION 13.8. Trustee to Effectuate Subordination. Each Holder of a
Debenture by such Holder's acceptance thereof authorizes and directs the Trustee
on such Holder's behalf to take such action as may be necessary or appropriate
to effectuate the subordination provided in this Article and appoints the
Trustee such Holder's attorney-in-fact for any and all such purposes.
SECTION 13.9. No Waiver of Subordination Provisions. No right of any
present or future holder of any Senior Indebtedness to enforce subordination as
herein provided shall at any time in any way be prejudiced or impaired by any
act or failure to act on the part of the Company or by any act or failure to
act, in good faith, by any such holder, or by any noncompliance by the Company
with the terms, provisions and covenants of this Indenture, regardless of any
knowledge thereof any such holder may have or be otherwise charged with.
Without in any way limiting the generality of the foregoing paragraph,
the holders of Senior Indebtedness may, at any time and from time to time,
without the consent of or notice to the Trustee or the Holders of the
Debentures, without incurring responsibility to the Holders of Debentures and
without impairing or releasing the subordination provided in this Article or the
obligations hereunder of the Holders of Debentures to the holders of Senior
Indebtedness do any one or more of the following: (a) change the manner, place
or terms of payment or
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extend the time of payment of, or renew or alter, Senior Indebtedness or
otherwise amend or supplement in any manner Senior Indebtedness or any
instrument evidencing the same or any agreement under which Senior Indebtedness
is outstanding; (b) sell, exchange, release or otherwise deal with any property
pledged, mortgaged or otherwise securing Senior Indebtedness; (c) release any
Person liable in any manner for the collection of Senior Indebtedness; and (d)
exercise or refrain from exercising any rights against the Company and any other
Person.
SECTION 13.10. Notice to Trustee. The Company shall give prompt written
notice to a Responsible Officer of the Trustee of any fact known to the Company
that would prohibit the making of any payment to or by the Trustee in respect of
the Debentures pursuant to the provisions of this Article. Notwithstanding the
provisions of this Article or any other provision of this Indenture, the Trustee
shall not be charged with knowledge of the existence of any facts that would
prohibit the making of any payment to or by the Trustee in respect of the
Debentures pursuant to the provisions of this Article, unless and until a
Responsible Officer of the Trustee shall have received written notice thereof
from the Company or a holder or holders of Senior Indebtedness or from any
trustee therefor; and, prior to the receipt of any such written notice, the
Trustee, subject to the provisions of Section 5.02, shall be entitled in all
respects to assume that no such facts exist; provided, that if the Trustee shall
have not received the notice provided for in this Section at least two Business
Days prior to the date upon which by the terms hereof any money may become
payable for any purpose (including, without limitation, the payment of the
principal of (or premium, if any) or interest on any Debentures, then, anything
herein contained to the contrary notwithstanding, the Trustee shall have full
power and authority to receive such money and to apply the same to the purposes
for which they were received, and shall not be affected by any notice to the
contrary that may be received by it within two Business Days prior to such date.
Subject to the provisions of Section 5.02, the Trustee shall be
entitled to rely on the delivery to it of a written notice by a Person
representing himself to be a holder of Senior Indebtedness (or a trustee
therefor) to establish that such notice has been given by a holder of Senior
Indebtedness (or a trustee therefor). In the event that the Trustee determines
in good faith that further evidence is required with respect to the right of any
Person as a holder of Senior Indebtedness to participate in any payment or
distribution pursuant to this Article, the Trustee may request such Person to
furnish evidence to the reasonable satisfaction of the Trustee as to the amount
of Senior Indebtedness held by such Person, the extent to which such Person is
entitled to participate in such payment or distribution and
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any other facts pertinent to the rights of such Person under this Article, and
if such evidence is not furnished, the Trustee may defer any payment to such
Person pending judicial determination as to the right of such Person to receive
such payment.
SECTION 13.11. Reliance on Judicial Order or Certificate of Liquidating
Agent. Upon any payment or distribution of assets of the Company referred to in
this Article, the Trustee, subject to the provisions of Section 5.02, and the
Holders of Debentures shall be entitled to conclusively rely upon any order or
decree entered by any court of competent jurisdiction in which such insolvency,
bankruptcy, receivership, liquidation, reorganization, dissolution, winding up
or similar case or proceeding is pending, or a certificate of the trustee in
bankruptcy, receiver, liquidating trustee, custodian, assignee for the benefit
of creditors, agent or other Person making such payment or distribution,
delivered to the Trustee or to the Holders of Debentures, for the purpose of
ascertaining the Persons entitled to participate in such payment or
distribution, the holders of Senior Indebtedness and other indebtedness of the
Company, as the case may be, the amount thereof or payable thereon, the amount
or amounts paid or distributed thereon and all other facts pertinent thereto or
to this Article.
SECTION 13.12. Trustee Not Fiduciary for Holders of Senior
Indebtedness. With respect to the holders of Senior Indebtedness, the Trustee
undertakes to perform or to observe only such of its covenants and obligations
as are specifically set forth in this Article, and no implied covenants or
obligations with respect to the holders of such Senior Indebtedness shall be
read into the Indenture against the Trustee. Except with respect to Section
13.04, the Trustee shall not be deemed to owe any fiduciary duty to the holders
of Senior Indebtedness and shall not be liable to any such holders or creditors
if it shall in good faith pay over or distribute to Holders of Debentures or to
the Company or to any other Person cash, property or securities to which any
holders of Senior Indebtedness shall be entitled by virtue of this Article or
otherwise.
SECTION 13.13. Rights of Trustee as Holder of Senior Indebtedness,
Preservation of Trustee's Rights. The Trustee in its individual capacity shall
be entitled to all the rights set forth in this Article with respect to any
Senior Indebtedness that may at any time be held by it, to the same extent as
any other holder of Senior Indebtedness and nothing in this Indenture shall
deprive the Trustee of any of its rights as such holder.
Nothing in this Article shall apply to claims of, or payments to, the
Trustee under or pursuant to Section 5.06.
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SECTION 13.14. Article Applicable to Paying Agents. In case at any time
any Paying Agent other than the Trustee shall have been appointed by the Company
and be then acting hereunder, the term "TRUSTEE" as used in this Article shall
in such case (unless the context otherwise requires) be construed as extending
to and including such Paying Agent within its meaning as fully for all intents
and purposes as if such Paying Agent were named in this Article in addition to
or in place of the Trustee; provided, that Section 12.13 shall not apply to the
Company or any Affiliate of the Company if it or such Affiliate acts as Paying
Agent.
SECTION 13.15. Certain Conversions Deemed Payment. For the purposes of
this Article only, (a) the issuance and delivery of junior securities (or cash
paid in lieu of fractional shares) upon conversion of Debentures in accordance
with Article 12, or pursuant to the terms set forth in an Officers' Certificate
or established in one or more indentures supplemental hereto in accordance with
Section 2.01, shall not be deemed to constitute a payment or distribution on
account of the principal of or premium or interest on Debentures or on account
of the purchase or other acquisition of Debentures, and (b) the payment,
issuance or delivery of cash, property or securities (other than junior
securities and cash paid in lieu of fractional shares) upon conversion of a
Debenture shall be deemed to constitute payment on account of the principal of
such Debenture. For the purposes of this Section, the term "junior securities"
means (i) shares of any stock of any class of the Company and (ii) securities of
the Company that are subordinated in right of payment to all Senior Indebtedness
that may be outstanding at the time of issuance or delivery of such securities
to substantially the same extent as, or to a greater extent than, the Debentures
are so subordinated as provided in this Article. Nothing contained in this
Article or elsewhere in this Indenture or in the Debentures is intended to or
shall impair, as among the Company, its creditors other than holders of Senior
Indebtedness and the Holders of Debentures, the right, which is absolute and
unconditional, of the Holder of any Debenture to convert such Debenture in
accordance with Article 12.
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<PAGE> 91
This instrument may be executed in any number of counterparts, each of
which so executed shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed as of the day and year first above written.
FEDERAL-MOGUL CORPORATION
By
----------------------------------------
Name:
Title:
THE BANK OF NEW YORK, AS TRUSTEE
By
----------------------------------------
Name:
Title:
<PAGE> 1
EXHIBIT 4.9
================================================================================
FIRST SUPPLEMENTAL INDENTURE
BETWEEN
FEDERAL-MOGUL CORPORATION
AND
THE BANK OF NEW YORK
DATED AS OF DECEMBER 1, 1997
$515,463,950 (SUBJECT TO INCREASE UP TO $592,783,550 IN THE EVENT AN
OVER-ALLOTMENT OPTION IS EXERCISED)
7% CONVERTIBLE JUNIOR SUBORDINATED DEBENTURES
===============================================================================
<PAGE> 2
FIRST SUPPLEMENTAL INDENTURE, dated as of December 1, 1997
(the "FIRST SUPPLEMENTAL Indenture"), between Federal-Mogul Corporation, a
Michigan corporation (the "COMPANY"), and The Bank of New York, as trustee (the
"TRUSTEE") under the Indenture dated as of December 1, 1997 between the Company
and the Trustee (the "BASE INDENTURE" and, together with the First Supplemental
Indenture, the "INDENTURE").
WHEREAS, the Company executed and delivered the Base Indenture to the
Trustee to provide for the future issuance of the Company's unsecured junior
subordinated debt securities to be issued from time to time in one or more
series as might be determined by the Company under the Indenture, in an
unlimited aggregate principal amount that may be authenticated and delivered as
provided in the Base Indenture;
WHEREAS, pursuant to the terms of the Base Indenture, the Company
desires to provide for the establishment of a new series of its Debentures to be
known as its 7% Convertible Junior Subordinated Debentures (the "CONVERTIBLE
DEBENTURES"), the form and substance of such Convertible Debentures and the
terms, provisions and conditions thereof to be set forth as provided in the Base
Indenture and this First Supplemental Indenture;
WHEREAS, Federal-Mogul Financing Trust, a Delaware statutory business
trust (the "TRUST"), has offered to Morgan Stanley & Co. Incorporated (the
"INITIAL PURCHASER") in a private placement $500,000,000 ($575,000,000 if the
Initial Purchaser's over-allotment option is exercised) aggregate liquidation
amount of its 7% Trust Convertible Preferred Securities (the "CONVERTIBLE
PREFERRED SECURITIES"), representing undivided beneficial interests in the
assets of the Trust and proposes to invest the proceeds from such offering,
together with the proceeds of the issuance and sale by the Trust to the Company
of $15,463,950 ($17,783,550, if the Initial Purchaser's option is exercised)
aggregate liquidation amount of its Common Securities, in $515,463,950
($592,783,550 if the Initial Purchaser's over-allotment option is exercised)
aggregate principal amount of the Convertible Debentures; and
WHEREAS, the Company has requested that the Trustee execute and deliver
this First Supplemental Indenture and all requirements necessary to make this
First Supplemental Indenture a valid instrument in accordance with its terms,
and to make the Convertible Debentures, when executed by the Company and
authenticated and delivered by the Trustee, the valid obligations of the
Company, have been performed, and the execution and delivery of this First
Supplemental Indenture has been duly authorized in all respects.
NOW THEREFORE, in consideration of the purchase and acceptance of the
Convertible Debentures by the Holders thereof, and for the purpose of setting
forth, as provided in the Base Indenture, the form and substance of the
Convertible Debentures and the terms, provisions and conditions thereof, the
Company covenants and agrees with the Trustee as follows:
<PAGE> 3
ARTICLE 1
DEFINITIONS
SECTION 1.1. Definition of Terms. For all purposes of this First
Supplemental Indenture, except as otherwise expressly provided or unless the
context otherwise requires:
(a) the terms that are defined in the Base Indenture and not otherwise
defined herein have the same meanings when used in this First Supplemental
Indenture;
(b) the terms defined in this Article have the meaning assigned to
them in this Article and include the plural as well as the singular;
(c) all other terms used herein that are defined in the Trust
Indenture Act, whether directly or by reference therein, have the meanings
assigned to them therein;
(d) a reference to a Section or Article is to a Section or Article of
this First Supplemental Indenture;
(e) the words "herein," "hereof" and "hereunder" and other words of
similar import refer to this First Supplemental Indenture as a whole and not to
any particular Article, Section or other subdivision;
(f) headings are for convenience of reference only and do not affect
interpretation; and
(g) the following terms have the meanings given to them in the
Declaration: (i) "ADMINISTRATORS"; (ii) "BUSINESS DAY"; (iii) "CLEARING AGENCY";
(iv) "COMMON STOCK"; (v) "CONVERTIBLE PREFERRED SECURITY CERTIFICATE"; (vi)
"DELAWARE TRUSTEE"; (vii) "DISSOLUTION TAX OPINION"; (viii) "DISTRIBUTION"; (ix)
"DTC"; (x) "INSTITUTIONAL TRUSTEE"; (xi) "INVESTMENT COMPANY EVENT"; (xii)
"NO-RECOGNITION OPINION"; (xiii) "NON-U.S. Person"; (ix) "PORTAL MARKET"; (xv)
"PURCHASE AGREEMENT"; (xvi) "QIB"; (xvii) "RULE 144A"; (xviii) "REGULATION S";
(xix) "RULE 144(K)"; (xx) "REDEMPTION TAX OPINION"; (xxi) "ADMINISTRATORS";
(xxii) "SPECIAL EVENT"; (xxiii) "TAX EVENT" and (xxiv) "TRUST SECURITIES".
"ADDITIONAL INTEREST" shall have the meaning set forth in Section 2.05.
"APPLICABLE PRICE" means (i) in the event of a Non-Stock Fundamental
Change in which the holders of the Common Stock receive only cash, the amount of
cash received by a holder of one share of Common Stock and (ii) in the event of
any other Fundamental Change, the average of the daily Closing Prices of one
share of Common Stock during the 10 Trading Days immediately prior to the record
date for the determination of the holders of Common Stock entitled to receive
cash, securities, property or other assets in connection with such Fundamental
Change or, if there is no such record date, prior to the date upon which the
holders of the Common Stock shall have the right to receive such cash,
securities, property or other assets, but
2
<PAGE> 4
the adjustment shall be based upon the consideration that the holders of Common
Stock received in the transaction or event as a result of which more than 50% of
the Common Stock shall have been exchanged for, converted into or acquired for,
or shall constitute solely the right to receive, such cash, securities, property
or other assets.
"CLOSING PRICE" of any common stock on any day shall mean the last
reported sale price regular way on such day or, in case no such sale takes place
on such day, the average of the reported closing bid and asked prices regular
way of such common stock, in each case on the New York Stock Exchange Composite
Tape or, if the common stock is not listed or admitted to trading on such
exchange, on the principal national securities exchange on which such common
stock is listed or admitted to trading, or, if not listed or admitted to trading
on any national securities exchange, on the Nasdaq Stock Market or, if not
reported by the Nasdaq Stock Market, the average of the closing bid and asked
prices as furnished by any New York Stock Exchange member firm selected from
time to time by the board of directors of the Company for that purpose or, if
not so available in such manner, as otherwise determined in good faith by the
board of directors.
"COMMON STOCK FUNDAMENTAL CHANGE" means any Fundamental Change in which
more than 50% of the value (as determined in good faith by the board of
directors of the Company) of the consideration received by holders of Common
Stock consists of common stock that, for the 10 Trading Days immediately prior
to such Fundamental Change, has been admitted for listing or admitted for
listing subject to notice of issuance on a national securities exchange or
quoted on The NASDAQ National Market; provided, that a Fundamental Change shall
not be a Common Stock Fundamental Change unless either (i) the Company continues
to exist after the occurrence of such Fundamental Change and the outstanding
Convertible Debentures continue to exist as outstanding Convertible Debentures
or (ii) the outstanding Convertible Debentures continue to exist as Convertible
Debentures and are convertible into shares of the common stock of the
corporation succeeding to the business of the Company.
"COMPOUNDED INTEREST" shall have the meaning specified in Section 4.01.
"CONVERTIBLE PREFERRED SECURITIES" has the meaning specified in the
recitals to this First Supplemental Indenture.
"CONVERSION PRICE" has the meaning set forth in Section 6.01.
"DECLARATION" means the Amended and Restated Declaration of Trust of
Federal-Mogul Financing Trust, a Delaware statutory business trust, dated as of
December 1, 1997.
"DEFERRED INTEREST" has the meaning specified in Section 4.01.
"DISSOLUTION EVENT" means that, as a result of the occurrence and
continuation of a Special Event, the Trust is to be dissolved in accordance with
the Declaration, and the Convertible Debentures held by the Institutional
Trustee are to be distributed to the holders of the Trust Securities issued by
the Trust pro rata in accordance with the Declaration.
3
<PAGE> 5
"EXTENSION PERIOD" has the meaning specified in Section 4.01.
"FUNDAMENTAL CHANGE" means the occurrence of any transaction or event
or series of transactions or events pursuant to which all or substantially all
of the Common Stock shall be exchanged for, converted into, acquired for or
shall constitute solely the right to receive cash, securities, property or other
assets (whether by means of an exchange offer, liquidation, tender offer,
consolidation, merger, combination, reclassification, recapitalization or
otherwise); provided, that in the case of any such series of transactions or
events, for purposes of adjustment of the Conversion Price, such Fundamental
Change shall be deemed to have occurred when substantially all of the Common
Stock shall have been exchanged for, converted into or acquired for, or shall
constitute solely the right to receive, such cash, securities, property or other
assets.
"MATURITY DATE" means the date on which the Convertible Debentures
mature and on which the principal shall be due and payable together with all
accrued and unpaid interest thereon including Compounded Interest and Additional
Interest, if any.
"NON-STOCK FUNDAMENTAL CHANGE" means any Fundamental Change other than
a Common Stock Fundamental Change.
"OFFER" means the recommended cash offer by the Company announced on
October 16, 1997 to acquire the entire issued share capital of T&N plc ("T&N").
"OPTIONAL REDEMPTION PRICE" has the meaning specified in Section 3.02.
"PURCHASER STOCK PRICE" means, with respect to any Common Stock
Fundamental Change, the average of the daily Closing Prices for one share of the
common stock received by holders of Common Stock in such Common Stock
Fundamental Change during the 10 Trading Days immediately prior to the date
fixed for the determination of the holders of Common Stock entitled to receive
such common stock or, if there is no such date, prior to the date upon which the
holders of Common Stock shall have the right to receive such common stock.
"REFERENCE MARKET PRICE" initially means $27.43 and, in the event of
any adjustment to the Conversion Price other than as a result of a Fundamental
Change, the Reference Market Price shall also be adjusted so that the ratio of
the Reference Market Price to the Conversion Price after giving effect to any
such adjustment shall always be the same as the ratio of the initial Reference
Market Price to the initial Conversion Price.
"TRADING DAY," in reference to a given security, shall mean a day on
which such security is traded on the national securities exchange or quotation
system used to determine the Closing Price for such security.
4
<PAGE> 6
ARTICLE 2
GENERAL TERMS AND CONDITIONS OF THE CONVERTIBLE DEBENTURES
SECTION 2.1. Designation and Principal Amount. There is hereby
authorized a series of Debentures designated the "7% CONVERTIBLE JUNIOR
SUBORDINATED DEBENTURES," limited in aggregate principal amount to the sum of
(a) $515,463,950 and (b) such aggregate principal amount (which may not exceed
$77,319,600 aggregate principal amount) of Convertible Debentures as shall be
purchased by the Trust pursuant to an over-allotment option in accordance with
the terms of the Purchase Agreement, except for Convertible Debentures
authenticated and delivered upon registration of transfer of, or in exchange
for, or in lieu of, other Convertible Debentures under the terms of this
Indenture, which amount shall be as set forth in any written order of the
Company for the authentication and delivery of Convertible Debentures pursuant
to Section 2.04 of the Base Indenture.
SECTION 2.2. Maturity. The Maturity Date is December 1, 2027.
SECTION 2.3. Form and Payment. Except as provided in Section 2.04, the
Convertible Debentures shall be issued to the Trust in fully registered
certificated form without coupons in denominations of $50 in principal amount
and integral multiples thereof. Principal and interest on the Convertible
Debentures issued in certificated form will be payable, the transfer of such
Convertible Debentures will be registrable and such Convertible Debentures will
be exchangeable for Convertible Debentures bearing identical terms and
provisions, at the office or agency of the Company; provided, that payment of
interest may be made at the option of the Company by check mailed to the Holder
at such address as shall appear in the Debenture Register. Notwithstanding the
foregoing, so long as the Holder of any Convertible Debentures is the
Institutional Trustee, the payment of the principal of and interest (including
Compounded Interest and Additional Interest, if any) on such Convertible
Debentures held by the Institutional Trustee will be made at such place and to
such account as may be designated by the Institutional Trustee.
SECTION 2.4. Exchange and Registration of Transfer of Convertible
Debentures Distributed Upon Dissolution; Restrictions on Transfers; Depositary .
If distributed to holders of Convertible Preferred Securities in connection with
a Dissolution Event, the Convertible Debentures will be issued to such holders
in the same form as the Convertible Preferred Securities that such Convertible
Debentures replace, and shall be governed by the following provisions:
(a) So long as Convertible Debentures are eligible for book-entry
settlement with the Despositary, or unless otherwise required by law, all
Convertible Debentures that are so eligible will be represented by one or more
Global Debentures. The transfer and exchange of beneficial interests in any such
Global Debenture shall be effected through the Depositary in accordance with the
Indenture and the procedures of the Depositary therefor.
5
<PAGE> 7
Beneficial owners of a Convertible Debenture represented by a Global
Debenture shall not be entitled to have certificates registered in their names,
will not receive or be entitled to receive physical delivery of certificates in
definitive form and will not be considered Holders of such Convertible
Debenture.
(b) Each Convertible Debenture that bears or is required to bear the
legend set forth in this Section (a "RESTRICTED SECURITY") shall be subject to
the restrictions on transfer provided in the legend set forth in this Section,
unless such restrictions on transfer shall be waived by the written consent of
the Company, and the Holder of each Restricted Security, by such
securityholder's acceptance thereof, agrees to be bound by such restrictions on
transfer. As used in this Section and in Section 2.04(c), the terms "TRANSFER"
encompasses any sale, pledge, transfer or other disposition of any Restricted
Security.
Prior to the Transfer Restriction Termination Date, any certificate
evidencing a Convertible Debenture shall bear a legend in substantially the
following form, unless otherwise agreed by the Company (with written notice
thereof to the Trustee):
THE SECURITY EVIDENCED HEREBY HAS NOT BEEN REGISTERED UNDER THE
UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), OR ANY STATE SECURITIES LAWS, AND, ACCORDINGLY, MAY NOT BE
OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT
OR BENEFIT OF, UNITED STATES PERSONS EXCEPT AS SET FORTH IN THE
FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF, THE HOLDER (1)
REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS
DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (B) IT IS NOT A
UNITED STATES PERSON AND IS ACQUIRING THE SECURITY EVIDENCED
HEREBY IN AN OFFSHORE TRANSACTION; (2) AGREES THAT IT WILL NOT,
PRIOR TO THE EXPIRATION OF THE HOLDING PERIOD APPLICABLE TO SALES
OF THE SECURITY EVIDENCED HEREBY UNDER RULE 144(K) UNDER THE
SECURITIES ACT (OR ANY SUCCESSOR PROVISION), RESELL OR OTHERWISE
TRANSFER THE SECURITY EVIDENCED HEREBY OR THE COMMON STOCK
ISSUABLE UPON CONVERSION OF SUCH SECURITY EXCEPT (A) TO
FEDERAL-MOGUL CORPORATION OR ANY SUBSIDIARY THEREOF, (B) INSIDE
THE UNITED STATES TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE
WITH RULE 144A UNDER THE SECURITIES ACT, (C) OUTSIDE THE UNITED
STATES IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT, (D)
PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144
UNDER THE SECURITIES ACT (IF AVAILABLE) OR (E) PURSUANT TO A
REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE
SECURITIES ACT (AND THAT CONTINUES TO BE EFFECTIVE) AND (3) AGREES
THAT IT WILL DELIVER TO EACH PERSON TO WHOM THE SECURITY EVIDENCED
HEREBY IS TRANSFERRED A NOTICE
6
<PAGE> 8
SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY
TRANSFER OF THE SECURITY EVIDENCED HEREBY PRIOR TO THE EXPIRATION
OF THE HOLDING PERIOD APPLICABLE TO SALES OF THE SECURITY
EVIDENCED HEREBY UNDER RULE 144(K) UNDER THE SECURITIES ACT (OR
ANY SUCCESSOR PROVISION), THE HOLDER MUST CHECK THE APPROPRIATE
BOX SET FORTH ON THE REVERSE HEREOF RELATING TO THE MANNER OF SUCH
TRANSFER AND SUBMIT THIS CERTIFICATE TO THE BANK OF NEW YORK, AS
INSTITUTIONAL TRUSTEE (OR A SUCCESSOR INSTITUTIONAL TRUSTEE, AS
APPLICABLE). THIS LEGEND WILL BE REMOVED UPON THE EARLIER OF THE
TRANSFER OF THE SECURITY EVIDENCED HEREBY PURSUANT TO CLAUSE 1(E)
ABOVE OR UPON ANY TRANSFER OF THE SECURITY EVIDENCED HEREBY UNDER
RULE 144(K) UNDER THE SECURITIES ACT (OR ANY SUCCESSOR PROVISION).
AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED STATES"
AND "UNITED STATES PERSON" HAVE THE MEANINGS GIVEN TO THEM BY
REGULATION S UNDER THE SECURITIES ACT. EACH PURCHASER OR HOLDER OF
THE SECURITY EVIDENCED HEREBY WILL BE DEEMED TO HAVE REPRESENTED
EITHER THAT (A) IT IS NOT AN EMPLOYEE BENEFIT PLAN SUBJECT TO PART
4 OF SUBTITLE B OF TITLE 1 OF ERISA OR A PLAN DESCRIBED IN SECTION
4975 OF THE CODE OR AN ENTITY WHOSE UNDERLYING ASSETS INCLUDE THE
ASSETS OF ANY SUCH ERISA PLAN OR OTHER PLAN OR (B) ITS
ACQUISITION, HOLDING AND DISPOSITION OF THE SECURITY EVIDENCED
HEREBY WILL NOT RESULT IN A PROHIBITED TRANSACTION UNDER SECTION
406 OF ERISA OR SECTION 4975 OF THE CODE BY REASON OF PROHIBITED
TRANSACTION CLASS EXEMPTION ("PTCE") 91-38, PTCE 84-14, PTCE 90-1,
PTCE 95-60 OR PTCE 96-23.
Following the Transfer Restriction Termination Date or the sale of a
Debenture pursuant to an effective registration statement or Rule 144 (or any
successor provision) under the Securities Act, any Convertible Debenture or
security issued in exchange or substitution therefor (other than (i) Convertible
Debentures acquired by the Company or any Affiliate thereof since the issue date
of the Convertible Preferred Securities and (ii) Common Stock issued upon the
conversion or exchange of any Convertible Debenture described in clause (i)
above) may, upon surrender of such Convertible Debenture for exchange to the
Debenture Registrar in accordance with the provisions of this Section, be
exchanged for a new Convertible Debenture or Convertible Debentures, of like
tenor and aggregate principal amount, which shall not bear the restrictive
legend required by this Section.
Notwithstanding any other provisions of the Indenture (other than the
provisions set forth in this Section), a Global Debenture may not be transferred
as a whole except by the Depositary to a nominee of the Depositary or by a
nominee of the Depositary to the Depositary or another nominee to a successor
Depositary or a nominee of such successor Depositary.
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<PAGE> 9
The Depositary shall be a clearing agency registered under the Exchange
Act. The Company initially appoints The Depository Trust Company ("DTC") to act
as Depositary with respect to the Convertible Debentures in global form.
Initially, the Global Debenture shall be issued to DTC, registered in the name
of Cede & Co. ("CEDE"), as the nominee of DTC, and deposited with the Trustee as
custodian for Cede.
If at any time the Depositary for the Global Debenture notifies the
Company that it is unwilling or unable to continue as Depositary for such
Convertible Debentures, or, at any time, ceases to be a clearing agency
registered under the Exchange Act when the Depositary is required to be so
registered to act as such depositary, the Company may appoint a successor
Depositary with respect to such Convertible Debentures. If a successor
Depositary for the Convertible Debentures is not appointed by the Company within
90 days after the Company receives such notice, the Company will execute, and
the Trustee, upon receipt of an Officers' Certificate for authentication and
delivery of Convertible Debentures, will authenticate and deliver, Convertible
Debentures in definitive form, in an aggregate principal amount equal to the
principal amount of the Global Debentures, in exchange for such Global
Debentures.
Similarly, either (i) if the Company so elects in its sole discretion
or (ii) if there shall have occurred an Indenture Event of Default with respect
to the Convertible Debentures, the Company will execute, and the Trustee, upon
receipt of an Officers' Certificate for authentication and delivery of
Convertible Debentures, will authenticate and deliver, Convertible Debentures in
definitive form, in an aggregate principal amount equal to the principal amount
of the Global Debentures, in exchange for such Global Debentures.
Definitive Convertible Debentures issued in exchange for all or a part
of a Global Debenture pursuant to this Section shall be registered in such names
and in such authorized denominations as the Depositary, pursuant to instructions
from its direct or indirect participants or otherwise, shall instruct the
Trustee. Upon execution and authentication, the Trustee shall deliver such
definitive Convertible Debentures to the person in whose names such definitive
Convertible Debentures are so registered.
At such time as all interests in a Global Debenture have been redeemed,
converted, exchanged, repurchased or canceled, such Global Debenture shall be,
upon receipt thereof, canceled by the Trustee in accordance with standing
procedures and instructions of the Depositary. At any time prior to such
cancellation, if any interest in a Global Debenture is redeemed, converted,
exchanged, repurchased by the Company pursuant to Article 3 or canceled, the
principal amount of such Global Debenture shall, in accordance with the standing
procedures and instructions of the Depositary be reduced or increased, as the
case may be, and an endorsement shall be made on such Global Debenture by, or at
the direction of, the Trustee to reflect such reduction or increase.
(c) Any Convertible Debenture or Common Stock issued upon the
conversion or exchange of a Convertible Debenture that, prior to the Transfer
Restriction Termination Date, is purchased or owned by the Company or any
Affiliate thereof may not be resold by the Company
8
<PAGE> 10
or such Affiliate unless registered under the Securities Act or resold pursuant
to an exemption from the registration requirements of the Securities Act in a
transaction that results in such Convertible Debentures or Common Stock, as the
case may be, no longer being "restricted securities" (as defined under Rule 144
under the Securities Act).
SECTION 2.5. Interest. (a) Each Convertible Debenture will bear
interest at the rate of 7% per annum (the "COUPON RATE") from December 1, 1997
until the principal thereof becomes due and payable, and on any overdue
principal and (to the extent that payment of such interest is enforceable under
applicable law) on any overdue installment of interest at the Coupon Rate,
compounded quarterly, payable (subject to the provisions of Article 4) quarterly
in arrears on March 1, June 1, September 1 and December 1 of each year (each, an
"INTEREST PAYMENT DATE"), commencing on March 1, 1998, to the Person in whose
name such Convertible Debenture or any predecessor Convertible Debenture is
registered at the close of business on the Regular Record Date for such interest
installment, which Regular Record Date shall be one Business Day prior to that
Interest Payment Date (provided, that, in the event that the Convertible
Debentures are not held solely in book-entry form, the Regular Record Date shall
be 15 days prior to that Interest Payment Date).
(b) The amount of interest payable for any period will be computed on
the basis of a 360-day year of twelve 30-day months. Except as provided in the
following sentence, the amount of interest payable for any period shorter than a
full quarterly period for which interest is computed, will be computed on the
basis of the actual number of days elapsed per 30-day month. In the event that
any date on which interest is payable on the Convertible Debentures is not a
Business Day, then payment of interest payable on such date will be made on the
next succeeding day that is a Business Day (and without any interest or other
payment in respect of any such delay), except that, if such Business Day is in
the next succeeding calendar year, such payment shall be made on the immediately
preceding Business Day, in each case with the same force and effect as if made
on such date.
(c) If, at any time while the Institutional Trustee is the Holder of
any Convertible Debentures, the Trust or the Institutional Trustee is required
to pay any taxes, duties, assessments or governmental charges of whatever nature
(other than withholding taxes) imposed by the United States or any other taxing
authority then, in any such case, the Company will pay as additional interest
("ADDITIONAL INTEREST") such additional amounts as shall be required so that the
net amounts received and retained by the Trust after paying such taxes, duties,
assessments or other governmental charges will not be less than the amounts the
Trust would have received had no such taxes, duties, assessments or other
government charges been imposed.
SECTION 2.6. No Satisfaction and Discharge. The Convertible Debentures
are not entitled to the benefit of the Satisfaction and Discharge Provisions of
Article 3 (other than Section 3.01(a)(i) thereof) of the Base Indenture.
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<PAGE> 11
ARTICLE 3
REDEMPTION OF THE CONVERTIBLE DEBENTURES
SECTION 3.1. Tax Event Redemption. (a) If a Tax Event has occurred and
is continuing and, after receipt of a Dissolution Tax Opinion by the
Administrators;
(i) the Company has received a Redemption Tax Opinion of
nationally recognized tax counsel experienced in such matters, or
(ii) the Administrators shall have been informed by such tax
counsel that it cannot deliver a No-Recognition Opinion to the Trust,
then, notwithstanding Section 3.02, the Company shall have the right upon not
less than 30 days nor more than 60 days notice to the Holders of the Convertible
Debentures to redeem the Convertible Debentures, in whole or in part, for cash
within 90 days following the occurrence of such Tax Event (the "90-DAY PERIOD")
at a redemption price equal to 100% of the principal amount to be redeemed plus
any accrued and unpaid interest (including Compound Interest) thereon to the
date of such redemption (the "REDEMPTION PRICE"); provided, that if at the time
there is available to the Company or the Trust the opportunity to eliminate,
within the 90-Day Period, the Tax Event by taking some ministerial action
("MINISTERIAL ACTION"), such as filing a form or making an election, or pursuing
some other similar reasonable measure that will have no adverse effect on the
Company, the Trust or the holders of the Trust Securities and will involve no
material cost, the Company shall pursue such measures in lieu of redemption;
provided further, that the Company shall have no right to redeem the Convertible
Debentures while the Trust is pursuing any Ministerial Action pursuant to the
Declaration. The Redemption Price shall be paid prior to 12:00 noon, New York
time, on the date of such redemption or such earlier time as the Company
determines; provided, that the Company shall deposit with the Trustee an amount
sufficient to pay the Redemption Price prior to the redemption date.
SECTION 3.2. Optional Redemption by Company. Pursuant to the procedures
described in Article 10 of the Base Indenture, the Company shall have the right
to redeem the Convertible Debentures, in whole or in part, from time to time, on
or after December 6, 2000. Any redemption pursuant to this paragraph will be
made upon not less than 30 days nor more than 60 days notice to the Holders of
the Convertible Debentures, at the following prices (expressed as percentages of
the principal amount of the Convertible Debentures) (the "OPTIONAL REDEMPTION
Price") together with accrued and unpaid interest, including Compounded and
Additional Interest to, but excluding, the Redemption Date. If the Convertible
Debentures are redeemed during the period beginning December 6, 2000 and ending
November 30, 2001, the Redemption Price shall be 104.9%. The table below shows
Redemption Prices for Convertible Debentures redeemed during the 12-month period
beginning December 1:
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<PAGE> 12
YEAR REDEMPTION PRICE
2001 104.2%
2002 103.5
2003 102.8
2004 102.1
2005 101.4
2006 100.7
2007 and thereafter 100.0
If Convertible Debentures are redeemed on any March 1, June 1,
September 1 or December 1, accrued and unpaid interest shall be payable to
Holders on the relevant Regular Record Date.
So long as the corresponding Convertible Preferred Securities are
outstanding, the proceeds from the redemption of the Convertible Debentures will
be used to redeem Convertible Preferred Securities.
Notwithstanding the foregoing, the Company may not redeem any
Convertible Debentures, unless all accrued interest thereon (including Compound
Interest) has been paid for all quarterly periods terminating on prior to the
date of notice of redemption.
So long as the corresponding Convertible Preferred Securities are
outstanding, if the Convertible Debentures are only partially redeemed pursuant
to this Section, the Convertible Debentures will be selected for redemption by
any method utilized by the Trustee. Otherwise they will be redeemed pro rata.
The Optional Redemption Price, together with any required interest payment,
shall be paid prior to 12:00 noon, New York time, on the Redemption Date or at
such earlier time as the Company determines; provided, that the Company shall
deposit with the Trustee an amount sufficient to pay the Optional Redemption
Price, together with any required interest payment, by 10:00 a.m., New York
time, on the date such amounts are to be paid.
SECTION 3.3. No Sinking Fund. The Convertible Debentures are not
entitled to the benefit of any sinking fund.
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<PAGE> 13
ARTICLE 4
EXTENSION OF INTEREST PAYMENT PERIOD
SECTION 4.1. Extension of Interest Payment Period. So long as an Event
of Default under Section 4.01(a) of the Base Indenture shall not have occurred
and be continuing, the Company shall have the right at any time, and from time
to time, during the term of the Convertible Debentures to defer payments of
interest by extending the interest payment period of such Convertible Debentures
for a period not exceeding 20 consecutive quarters (the "EXTENSION PERIOD"),
during which Extension Period no interest shall be due and payable; provided,
that no Extension Period may extend beyond the Maturity Date or any earlier
Redemption Date. To the extent permitted by applicable law, interest, the
payment of which has been deferred because of the extension of the interest
payment period pursuant to this Section, will bear interest thereon at the
Coupon Rate compounded quarterly for each quarter of the Extension Period
("COMPOUNDED INTEREST"). At the end of the Extension Period, the Company shall
pay all interest accrued and unpaid on the Convertible Debentures, including any
Additional Interest and Compounded Interest (together, "DEFERRED INTEREST") that
shall be payable to the Holders of the Convertible Debentures in whose names the
Convertible Debentures are registered in the Debenture Register on the first
Regular Record Date after the end of the Extension Period. Before the
termination of any Extension Period, the Company may further extend such period;
provided, that such period together with all such further extensions thereof
shall not exceed 20 consecutive quarters, or extend beyond the Maturity Date or
any earlier Redemption Date. Upon the termination of any Extension Period and
upon the payment of all Deferred Interest then due, the Company may commence a
new Extension Period, subject to the foregoing requirements. No interest shall
be due and payable during an Extension Period, except at the end thereof, but
the Company may prepay at any time all or any portion of the interest accrued
during an Extension Period.
SECTION 4.2. Notice of Extension. (a) If the Institutional Trustee is
the only Holder of the Convertible Debentures at the time the Company selects an
Extension Period, the Company shall give written notice to the Administrators
and the Institutional Trustee of its selection of such Extension Period one
Business Day prior to the earlier of (i) the next succeeding date on which
Distributions on the Trust Securities are payable, or (ii) if applicable, the
date the Administrators are required to give notice of the record date, or the
date such Distributions are payable, to holders of the Convertible Preferred
Securities but in any event at least one Business Day before such record date.
(b) If the Institutional Trustee is not the only Holder of the
Convertible Debentures at the time the Company selects an Extension Period, the
Company shall give the Holders of the Convertible Debentures and the Trustee
written notice of its selection of such Extension Period at least 10 Business
Days before the earlier of (i) the next succeeding Interest Payment Date or (ii)
the date the Company is required to give notice of the record or payment date of
such interest payment to Holders of the Convertible Debentures.
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<PAGE> 14
(c) The quarter in which any notice is given pursuant to paragraphs
(a) or (b) of this Section shall be counted as one of the 20 consecutive
quarters permitted in the maximum Extension Period permitted under Section 4.01.
SECTION 4.3. Limitation of Transactions. If the Company shall exercise
its right to defer payment of interest as provided in Section 4.01, then (i) the
Company shall not declare or pay any dividend on, make any distributions with
respect to, or redeem, purchase, acquire or make a liquidation payment with
respect to, any of its capital stock (other than (A) purchases or acquisitions
of shares of its common stock in connection with satisfaction by the Company or
any of its subsidiaries of their respective obligations under any incentive or
employee benefit plans of the Company of any of its subsidiaries, (B) as a
result of a reclassification of the Company's capital stock or the exchange or
conversion of one class or series of the Company's capital stock for another
class or series of its capital stock or the purchase of fractional interests in
shares of the Company's capital stock pursuant to the conversion or exchange
provisions of such capital stock or the security being converted or exchanged
for the Company's capital stock), (ii) the Company shall not make any payment of
interest, principal or premium, if any, on or repay, repurchase or redeem any
debt securities issued by the Company that rank pari passu with or junior to the
Convertible Debentures and (iii) the Company shall not make any guarantee
payments with respect to the foregoing.
ARTICLE 5
EXPENSES
SECTION 5.1. Payment of Expenses. In connection with the offering, sale
and issuance of the Convertible Debentures to the Institutional Trustee and in
connection with the sale of the Trust Securities by the Trust, the Company, in
its capacity as borrower with respect to the Convertible Debentures, shall:
(a) pay all costs and expenses relating to the offering, sale and
issuance of the Convertible Debentures and Trust Securities, including
commissions to the purchaser payable pursuant to the Purchase Agreement and
compensation of the Trustee under the Indenture in accordance with the
provisions of Section 5.06 of the Base Indenture;
(b) pay all costs and expenses of the Trust (including, but not
limited to, costs and expenses relating to the organization, maintenance and
dissolution of the Trust, the retention of the trustees and the Administrators
of the Trust, the fees and expenses of the Institutional Trustee and the
Delaware Trustee, the costs and expenses relating to the operation of the Trust,
including without limitation, costs and expenses of accountants, attorneys,
statistical or bookkeeping services, expenses for printing and engraving and
computing or accounting equipment, paying agent(s), registrar(s), transfer
agent(s), duplicating, travel and telephone and other
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<PAGE> 15
telecommunications expenses and costs and expenses incurred in connection with
the acquisition, financing, and disposition of Trust assets);
(c) pay all costs and expenses related to the enforcement by the
Institutional Trustee of the rights of the holders of the Convertible Preferred
Securities; and
(d) pay any and all taxes (other than United States withholding taxes
attributable to the Trust or its assets) and all liabilities, costs and expenses
with respect to such taxes of the Trust.
SECTION 5.2. Payment upon Resignation or Removal. Upon termination of
this First Supplemental Indenture or the Base Indenture or the removal or
resignation of the Trustee pursuant to Section 5.07 of the Base Indenture, the
Company shall pay to the Trustee all amounts accrued to the date of such
termination, removal or resignation. Upon termination of the Declaration or the
removal or resignation of the Delaware Trustee or the Institutional Trustee, as
the case may be, pursuant to Section 5.06 of the Declaration, the Company shall
pay to the Delaware Trustee or the Institutional Trustee, and their respective
counsel, as the case may be, all amounts accrued to the date of such
termination, removal or resignation.
ARTICLE 6
CONVERSION OF CONVERTIBLE DEBENTURES
SECTION 6.1. Conversion Rights. Subject to and upon compliance with the
provisions of this Article 6, the Convertible Debentures are convertible, at the
option of the Holder, at any time beginning 90 days following the latest date of
original issuance of any Convertible Debentures through the close of business on
the Business Day before December 1, 2027 (or, in the case of Convertible
Debentures called for redemption, the close of business on the Business Day
prior to the corresponding Redemption Date) into fully paid and nonassessable
shares of Common Stock of the Company at an initial conversion rate of 0.9709
shares of Common Stock for each $50 in aggregate principal amount of Convertible
Debentures (equivalent to a conversion price of $51.50 per share of Common Stock
(the "CONVERSION PRICE")), subject to adjustment as described in this Article.
Within one Business Day after the date (the "DATE OF NON-COMPLETION") which is
the earlier of (a) the date the Company withdraws the Offer, and (b) September
25, 1998, if the Offer has not been declared unconditional in all respects, the
Company will provide notice of such occurrence to the Holders. Effective as of
the fourteenth Trading Day following the Date of Non-Completion, the Conversion
Price will be adjusted to the lower of (a) the Conversion Price in effect
immediately prior to the Date of Non-Completion and (b) the product of (i) the
average of the daily Closing Prices of the Common Stock during the ten
consecutive Trading Days beginning on the third Trading Day after the Date of
Non-Completion and (ii) 1.239; provided, that in no event shall the Conversion
Price be reset to less than $41.51. A Holder of Convertible Debentures may
convert any portion of the principal amount of the Convertible Debentures into
that number of fully paid and nonassessable shares of Common
<PAGE> 16
Stock obtained by dividing the principal amount of the Convertible Debentures to
be converted by such Conversion Price. All calculations under this Article shall
be made to the nearest cent or to the nearest 1/100th of a share, as the case
may be.
SECTION 6.2. Conversion Procedures. (a) In order to convert all or a
portion of the Convertible Debentures, the Holder thereof shall deliver to the
Conversion Agent an irrevocable Notice of Conversion setting forth the principal
amount of Convertible Debentures to be converted, together with the name or
names, if other than the Holder, in which the shares of Common Stock should be
issued upon conversion and, if such Convertible Debentures are definitive
Convertible Debentures, surrender to the Conversion Agent the Convertible
Debentures to be converted, duly endorsed or assigned to the Company or in
blank. In addition, a holder of Convertible Preferred Securities may exercise
its right under the Declaration to convert such Convertible Preferred Securities
into Common Stock by delivering to the Conversion Agent an irrevocable Notice of
Conversion setting forth the information called for by the preceding sentence
and directing the Conversion Agent (i) to exchange such Convertible Preferred
Security for a portion of the Convertible Debentures held by the Trust (at an
exchange rate of $50 principal amount of Convertible Debentures for each
Convertible Preferred Security) and (ii) to immediately convert such Convertible
Debentures, on behalf of such holder, into Common Stock of the Company pursuant
to this Article and, if such Convertible Preferred Securities are in definitive
form, surrendering such Convertible Preferred Securities, duly endorsed or
assigned to the Company or in blank. So long as any Convertible Preferred
Securities are outstanding, the Trust shall not convert any Convertible
Debentures except pursuant to a Notice of Conversion delivered to the Conversion
Agent by a holder of Convertible Preferred Securities.
If a Notice of Conversion is delivered after the close of business on a
Regular Record Date and on or prior to the related Interest Payment Date, the
interest installment payable on such Interest Payment Date shall be payable to
the Holder of record at the close of business on such Regular Record Date,
despite such conversion, and when surrendered for conversion, such Convertible
Debenture (other than a Convertible Debenture or a portion of a Convertible
Debenture called for redemption on a Redemption Date occurring after such
Regular Record Date and on or prior to such Interest Payment Date) must be
accompanied by payment of an amount equal to the interest payable on such
Interest Payment Date. However, if a Redemption Date falls between such record
date and the related Interest Payment Date, the Holder will be entitled to
receive, on such Interest Payment Date, the interest accrued to, but excluding,
such Redemption Date. Except as otherwise provided in the first and second
sentences of this paragraph, in the case of any Convertible Debenture that is
converted, interest whose Stated Maturity is after the date of conversion of
such Convertible Debenture shall not be payable, and the Company shall not make
nor be required to make any other payment, adjustment or allowance with respect
to accrued but unpaid interest on the Convertible Debentures being converted,
which shall be deemed to be paid in full. Each conversion shall be deemed to
have been effected immediately prior to the close of business on the day on
which the Notice of Conversion was received (the "CONVERSION DATE") by the
Conversion Agent from the Holder of the Convertible Debentures or from a holder
of the Convertible Preferred Securities effecting a
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<PAGE> 17
conversion thereof pursuant to its conversion rights under the Declaration, as
the case may be. The Person or Persons entitled to receive the Common Stock
issuable upon such conversion shall be treated for all purposes as the record
holder or holders of such Common Stock as of the Conversion Date. As promptly as
practicable on or after the Conversion Date, the Company shall issue and deliver
at the office of the Conversion Agent, unless otherwise directed by the Holder
in the Notice of Conversion, a certificate or certificates for the number of
full shares of Common Stock issuable upon such conversion, together with the
cash payment, if any, in lieu of any fraction of any share to the Person or
Persons entitled to receive the same. The Conversion Agent shall deliver such
certificate or certificates to such Person or Persons entitled to receive such
Common Stock.
(b) The Company's delivery upon conversion of the fixed number of
shares of Common Stock into which the Convertible Debentures are convertible
(together with the cash payment, if any, in lieu of fractional shares) shall be
deemed to satisfy the Company's obligation to pay the principal amount at
Maturity of the portion of Convertible Debentures so converted and any unpaid
interest (including Compounded Interest) accrued on such Convertible Debentures
at the time of such conversion.
(c) No fractional shares of Common Stock will be issued as a result of
conversion, but in lieu thereof, the Company shall pay to the Conversion Agent a
cash adjustment in an amount equal to the same fraction of the Closing Price of
such fractional interest on the date on which the Convertible Debentures were
duly surrendered to the Conversion Agent for conversion, or, if such day is not
a Trading Day, on the next Trading Day, and the Conversion Agent in turn will
make such payment, if any, to the Holder of the Convertible Debentures or the
holder of the Convertible Preferred Securities so converted.
(d) In the event of the conversion of any Convertible Debenture in
part only, a new Convertible Debenture or Convertible Debentures for the
unconverted portion thereof will be issued in the name of the Holder thereof
upon the cancellation thereof in accordance with Section 12.02 of the Base
Indenture.
(e) In effecting the conversion transactions described in this
Section, the Conversion Agent is acting as agent of the holders of Convertible
Preferred Securities (in the exchange of Convertible Preferred Securities for
Convertible Debentures) and as agent of the Holders of Convertible Debentures
(in the conversion of Convertible Debentures into Common Stock), as the case may
be. The Conversion Agent is hereby authorized (i) to exchange Convertible
Debentures held by the Trust from time to time for Convertible Preferred
Securities in connection with the conversion of such Convertible Preferred
Securities in accordance with this Article and (ii) to convert all or a portion
of the Convertible Debentures into Common Stock and thereupon to deliver such
shares of Common Stock in accordance with the provisions of this Article and to
deliver to the Trust a new Convertible Debenture or Convertible Debentures for
any resulting unconverted principal amount.
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SECTION 6.3. Conversion Price Adjustments. The Conversion Price shall be
adjusted from time to time as follows:
(a) In case the Company shall, while any of the Convertible Debentures
are outstanding, (i) issue shares of Common Stock as a dividend or distribution
with respect to Common Stock, (ii) subdivide outstanding shares of Common Stock,
(iii) combine outstanding shares of Common Stock into a smaller number of shares
or (iv) issue by reclassification of its shares of Common Stock any shares of
capital stock of the Company, the conversion privilege and the Conversion Price
for the Convertible Debentures shall be adjusted so that the Holder of any
Convertible Debenture thereafter surrendered for conversion shall be entitled to
receive the number of shares of capital stock of the Company that such Holder
would have owned immediately following such action had such Convertible
Debenture been converted immediately prior thereto. An adjustment made pursuant
to this subsection shall become effective immediately after the record date in
the case of a dividend or other distribution and shall become effective
immediately after the effective date in case of a subdivision, combination or
reclassification (or immediately after the record date if a record date shall
have been established for such event). If, as a result of an adjustment made
pursuant to this subsection, the Holder of any Convertible Debenture thereafter
surrendered for conversion shall become entitled to receive shares of two or
more classes or series of capital stock of the Company, the board of directors
(whose determination shall be conclusive and shall be described in a board
resolution filed with the Trustee) shall determine the allocation of the
adjusted Conversion Price for the Convertible Debentures between or among shares
of such classes or series of capital stock.
(b) In case the Company shall, while any of the Convertible Debentures
are outstanding, issue rights or warrants to all holders of its Common Stock
entitling them (for a period expiring within 45 days after the date such rights
or warrants are issued) to subscribe for or purchase shares of Common Stock at a
price per share less than the current market price per share of Common Stock (as
determined pursuant to subsection (h) below) on the record date mentioned below,
the Conversion Price for the Convertible Debentures shall be adjusted so that
the same shall equal the price determined by multiplying the Conversion Price in
effect immediately prior to the date of issuance of such rights or warrants by a
fraction of which the numerator shall be the number of shares of Common Stock
outstanding on the date of issuance of such rights or warrants plus the number
of shares that the aggregate offering price of the total number of shares so
offered for subscription or purchase would purchase at such current market
price, and of which the denominator shall be the number of shares of Common
Stock outstanding on the date of issuance of such rights or warrants plus the
number of additional shares of Common Stock offered for subscription or
purchase. Such adjustment shall become effective immediately after the record
date for the determination of stockholders entitled to receive such rights or
warrants. To the extent that no shares of Common Stock are so delivered after
the expiration of such rights or warrants, the Conversion Price shall be
readjusted to the Conversion Price that would then be in effect if such date
fixed for the determination of stockholders entitled to receive such rights or
warrants had not been fixed. For the purposes of this subsection, the number of
shares of Common Stock at any time outstanding shall not include shares held in
the treasury of the Company. The Company shall not issue any rights or warrants
in respect of
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<PAGE> 19
shares of Common Stock held in the treasury of the Company. In case any rights
or warrants referred to in this subsection in respect of which an adjustment
shall have been made shall expire unexercised within 45 days after the same
shall have been distributed or issued by the Company, the Conversion Price shall
be readjusted at the time of such expiration to the Conversion Price that would
have been in effect if no adjustment had been made on account of the
distribution or issuance of such expired rights or warrants.
(c) Subject to the last sentence of this subsection, in case the
Company shall, by dividend or otherwise, distribute to all holders of its Common
Stock evidences of its indebtedness, shares of any class or series of capital
stock, cash or assets or rights or warrants to subscribe for or purchase any of
its securities (excluding any rights or warrants referred to in subsection (b),
any dividend or distribution paid exclusively in cash and any dividend or
distribution referred to in subsection (a) of this Section), the Conversion
Price shall be reduced so that the same shall equal the price determined by
multiplying the Conversion Price in effect immediately prior to the
effectiveness of the Conversion Price reduction contemplated by this subsection
by a fraction of which the numerator shall be the current market price per share
(determined as provided in subsection (h)) of the Common Stock on the date fixed
for the payment of such distribution (the "REFERENCE DATE") less the fair market
value (as determined in good faith by the board of directors, whose
determination shall be conclusive and described in a resolution of the board of
directors), on the Reference Date, of the portion of the evidences of
indebtedness, shares of capital stock, cash and assets so distributed or of such
subscription rights or warrants applicable to one share of Common Stock and the
denominator shall be such current market price per share of the Common Stock,
such reduction to become effective immediately prior to the opening of business
on the day following the Reference Date; provided, that in the event the
numerator shall be less than one, in lieu of the foregoing adjustment, adequate
provision shall be made so that each Holder of Convertible Debentures shall have
the right to receive upon conversion the amount of such distribution such Holder
would have received had such Holder converted each Convertible Debenture
immediately prior to the Reference Date. In the event that no such dividend or
distribution is so paid or made, the Conversion Price shall again be adjusted to
be the Conversion Price that would then be in effect if such dividend or
distribution had not occurred. If the board of directors determines the fair
market value of any distribution for purposes of this subsection by reference to
the actual or when issued trading market for any securities comprising such
distribution, it must in doing so consider the prices in such market over the
same period used in computing the current market price per share of Common Stock
(determined as provided in subsection (h)). For purposes of this subsection, any
dividend or distribution that includes shares of Common Stock or rights or
warrants to subscribe for or purchase shares of Common Stock shall be deemed
instead to be (i) a dividend or distribution of the evidences of indebtedness,
shares of capital stock, cash or assets other than such shares of Common Stock
or such rights or warrants (making any Conversion Price reduction required by
this subsection) immediately followed by (ii) a dividend or distribution of such
shares of Common Stock or such rights or warrants (making any further Conversion
Price reduction required by subsection (a) or (b)), except (A) the Reference
Date of such dividend or distribution as defined in this subsection shall be
substituted for (1) "the record date in the case
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<PAGE> 20
of a dividend or other distribution," and (2) "the record date for the
determination of stockholders entitled to receive such rights or warrants" and
(3) "the date fixed for such determination" within the meaning of subsections
(a) and (b) and (B) any shares of Common Stock included in such dividend or
distribution shall not be deemed outstanding for purposes of computing any
adjustment of the Conversion Price in subsection (a).
(d) In case the Company shall pay or make a dividend or other
distribution on its Common Stock exclusively in cash (excluding any such
distribution that constitutes a Fundamental Change and any quarterly cash
dividend on Common Stock to the extent that the aggregate cash dividend per
share of Common Stock in any quarter does not exceed the greater of (x) the
amount per share of Common Stock of the next preceding quarterly dividend on
Common Stock to the extent that such preceding quarterly dividend did not
require an adjustment of the Conversion Price pursuant to this subsection (d)
(as adjusted to reflect subdivisions or combinations of Common Stock) and (y)
3.75% of the current market price per share (determined as provided in
subsection (h)) of the Common Stock), the Conversion Price shall be reduced so
that the same shall equal the price determined by multiplying the Conversion
Price in effect immediately prior to the effectiveness of the Conversion Price
reduction contemplated by this subsection by a fraction of which the numerator
shall be the current market price per share (determined as provided in
subsection (h)) of the Common Stock on the date fixed for the payment of such
distribution less the amount of cash so distributed (and not excluded as
provided above) applicable to one share of Common Stock and the denominator
shall be such current market price per share of the Common Stock (determined as
provided in subsection (h)), such reduction to become effective immediately
prior to the opening of business on the day following the date fixed for the
payment of such distribution; provided, that in the event the portion of the
cash so distributed applicable to one share of Common Stock is equal to or
greater than the current market price per share (determined as provided in
subsection (h)) of the Common Stock on the record date mentioned above, in lieu
of the foregoing adjustment, adequate provision shall be made so that each
Holder of shares of Convertible Debentures shall have the right to receive upon
conversion the amount of cash such Holder would have received had such Holder
converted each Convertible Debenture immediately prior to the record date for
the distribution of the cash. If an adjustment is required to be made pursuant
to this subsection (d) as a result of a distribution that is a quarterly
dividend, such adjustment shall be based upon the amount by which such
distribution exceeds the amount of the quarterly cash dividend permitted to be
excluded as provided above. If an adjustment is required to be made pursuant to
this subsection as a result of a distribution that is not a quarterly dividend,
such adjustment shall be based upon the full amount of the distribution. In the
event that no such dividend or distribution is so paid or made, the Conversion
Price shall again be adjusted to be the Conversion Price that would then be in
effect if such Record Date had not been fixed.
(e) In case a tender or exchange offer (other than an odd-lot offer)
made by the Company or any Subsidiary of the Company for all or any portion of
the Company's Common Stock shall expire and such tender or exchange offer shall
involve the payment by the Company or such subsidiary of consideration per share
of Common Stock having a fair market value (as
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<PAGE> 21
determined in good faith by the board of directors, whose determination shall be
conclusive and described in a resolution of the board of directors) at the last
time (the "EXPIRATION TIME") tenders or exchanges may be made pursuant to such
tender or exchange offer (as it shall have been amended) that exceeds the
current market price (determined as provided in subsection (h)), the Conversion
Price shall be reduced so that the same shall equal the price determined by
multiplying the Conversion Price in effect immediately prior to the
effectiveness of the Conversion Price reduction contemplated by this subsection
by a fraction (which shall not be greater than one) of which the numerator shall
be the number of shares of Common Stock outstanding (including any tendered or
exchanged shares) at the Expiration Time multiplied by the Closing Price of the
Common Stock on the Trading Day next succeeding the Expiration Time and the
denominator shall be the sum of (i) the fair market value (determined as
aforesaid) of the aggregate consideration payable to stockholders based on the
acceptance (up to any maximum specified in the terms of the tender or exchange
offer) of all shares validly tendered or exchanged and not withdrawn as of the
Expiration Time (the shares deemed so accepted, up to any such maximum, being
referred to as the "PURCHASED SHARES") and (ii) the product of the number of
shares of Common Stock outstanding (less any Purchased Shares) at the Expiration
Time and the Closing Price of the Common Stock on the Trading Day next
succeeding the Expiration Time, such reduction to become retroactively effective
immediately prior to the opening of business on the day following the Expiration
Time.
(f) In case a tender or exchange offer made by a Person other than the
Company or any Subsidiary of the Company for all or any portion of the Common
Stock shall expire and such tender or exchange offer shall involve the payment
by a Person other than the Company or any Subsidiary of the Company of
consideration per share of Common Stock having a fair market value (as
determined in good faith by the board of directors, whose determination shall be
conclusive and described in a resolution of the board of directors) at the
applicable Expiration Time that exceeds the Closing Price of the Common Stock on
the Trading Day next succeeding the applicable Expiration Time in which as of
the closing date of the offer the board of directors of the Company is not
recommending rejection of the offer, the Conversion Price shall be reduced so
that the same shall equal the price determined by multiplying the Conversion
Price in effect immediately prior to the effectiveness of the Conversion Price
reduction contemplated by this subsection by a fraction (which shall not be
greater than one) of which the numerator shall be the number of shares of Common
Stock outstanding (including any tendered or exchanged shares) at the Expiration
Time multiplied by the Closing Price of the Common Stock on the Trading Day next
succeeding the Expiration Time and the denominator shall be the sum of (i) the
fair market value (determined as aforesaid) of the aggregate consideration
payable to stockholders based on the acceptance (up to any maximum specified in
the terms of the tender or exchange offer) of all shares validly tendered or
exchanged and not withdrawn as of the Expiration Time (the shares deemed so
accepted, up to any such maximum, being referred to as the "PURCHASED SHARES")
and, (ii) the product of the number of shares of Common Stock outstanding (less
any Purchased Shares) at the Expiration Time and the Closing Price of the Common
Stock on the Trading Day next succeeding the Expiration Time, such reduction to
become retroactively effective immediately prior to the opening of business on
the day following
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the Expiration Time; provided, that the reduction of the Conversion Price
contemplated by this subsection will only be made if the tender offer or
exchange offer is made for an amount that increases that Person's ownership of
Common Stock to more than 25% of the total shares of Common Stock outstanding;
and provided further, that the reduction of the Conversion Price contemplated by
this subsection will not be made if as of the close of the offer, the offering
documents with respect to such offer disclose a plan or an intention to cause
the Company to engage in a consolidation or merger of the Company or a sale of
all or substantially all of the assets of the Company.
(g) In the event that the Preferred Share Purchase Rights (the
"RIGHTS") of the Company are separated from the Common Stock in accordance with
the provisions of the Company's preferred share purchase rights plan (or any
successor plan) such that the Holders of Convertible Debentures would thereafter
not be entitled to receive any such Rights in respect of the Company's Common
Stock issuable upon conversion of such Convertible Debentures, the Conversion
Price will be adjusted as provided in clause (c) (subject to readjustment in the
event of the expiration, termination or redemption of the Rights). In lieu of
any such adjustment, the Company may amend its preferred share purchase rights
plan to provide that upon conversion of the Convertible Debentures the Holders
will receive, in addition to the Company's Common Stock issuable upon such
conversion, the Rights that would have attached to such shares of Company's
Common Stock if the Rights had not become separated from such Common Stock
pursuant to the provisions of such plan.
(h) For the purpose of any computation under subsection (b), (c), (d)
or (e), the current market price per share of Common Stock on any date in
question shall be deemed to be the average of the daily Closing Prices for the
ten Trading Day period ending on the earlier of the day in question and, if
applicable, the day before the "ex" date with respect to the issuance or
distribution requiring such computation; provided, that if more than one event
occurs that would require an adjustment pursuant to subsections (a) through (f),
inclusive, the board of directors may make such adjustments to the Closing
Prices during such ten Trading Day period as it deems appropriate to effectuate
the intent of the adjustments in this Section, in which case any such
determination by the board of directors shall be set forth in a board resolution
and shall be conclusive. For purposes of this paragraph, the term "ex" date,
when used with respect to any issuance or distribution, means the first date on
which the Common Stock trades regular way on the New York Stock Exchange, Inc.
or on such successor securities exchange as the Common Stock may be listed or in
the relevant market from which the Closing Prices were obtained without the
right to receive such issuance or distribution, and when used with respect to
any tender or exchange offer means the first date on which the Common Stock
trades regular way on such securities exchange or in such market after the
Expiration Time of such offer.
(i) The Company may make such reductions in the Conversion Price, in
addition to those required by subsections (a) through (f), as the board of
directors considers to be advisable to avoid or diminish any income tax to
holders of Common Stock or rights to purchase Common Stock resulting from any
dividend or distribution of stock (or rights to acquire stock) or from any
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event treated as such for income tax purposes. The Company from time to time may
reduce the Conversion Price by any amount for any period of time if the period
is at least twenty (20) days, the reduction is irrevocable during the period,
and the board of directors shall have made a determination that such reduction
would be in the best interest of the Company, which determination shall be
conclusive. Whenever the Conversion Price is reduced pursuant to the preceding
sentence, the Company shall mail to Holders of the Convertible Debentures a
notice of the reduction at least 15 days prior to the date the reduced
Conversion Price takes effect, and such notice shall state the reduced
Conversion Price and the period it will be in effect.
(j) No adjustment in the Conversion Price shall be required unless
such adjustment would require an increase or decrease of at least 1% in the
Conversion Price; provided, that any adjustments that by reason of this
subsection are not required to be made shall be carried forward and taken into
account in determining whether any subsequent adjustment shall be required.
(k) If any action would require adjustment of the Conversion Price
pursuant to more than one of the provisions described above, only one adjustment
shall be made and such adjustment shall be the amount of adjustment that has the
highest absolute value to the Holder of Convertible Debentures.
(l) Except as specifically provided in this First Supplemental
Indenture, the Conversion Price will not be adjusted for the issuance of Common
Stock or any securities convertible into or exchangeable for Common Stock or
carrying the right to purchase any of the foregoing. In addition, no adjustment
of the conversion price will be made upon the issuance of any Common Stock
pursuant to any present or future plan providing for the reinvestment of
dividends or interest payable on securities of the Company and the investment of
additional optional amounts in the Company's Common Stock under any such plan or
the issuance of Common Stock or options or rights to purchase the Company's
Common Stock pursuant to any present or future employee, director or consultant
benefit plan or program of the Company or any of its subsidiaries or pursuant to
any option, warrant, right or exercisable, exchangeable or convertible security
outstanding as of the date the Convertible Debentures are first issued.
SECTION 6.4. Merger, Consolidation, or Sale of Assets. (a) In the event
that the Company shall be a party to any transaction (including without
limitation (i) any recapitalization or reclassification of the Common Stock
(other than a change in par value, or from par value to no par value, or from no
par value to par value, or as a result of a subdivision or combination of the
Common Stock), (ii) any consolidation or merger of the Company with or into
another person or any merger of another person into the Company (other than a
merger that does not result in a reclassification, conversion, exchange or
cancellation of outstanding shares of Common Stock), (iii) any sale or transfer
of all or substantially all of the assets of the Company or (iv) any compulsory
share exchange pursuant to which either shares of Common Stock shall be
converted into the right to receive other securities, cash or other property,
or, in the case of a sale or transfer of all or substantially all of the assets
of the Company, the holders of Common Stock shall be entitled to receive other
securities, cash or other property, then appropriate
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<PAGE> 24
provision shall be made as part of the terms of such transaction whereby the
Holder of each Convertible Debenture then outstanding shall have the right
thereafter to convert such Convertible Debenture only into:
(i) in the case of any such transaction that does not
constitute a Common Stock Fundamental Change and subject to funds being
legally available for such purpose under applicable law at the time of
such conversion, the kind and amount of the securities, cash or other
property that would have been receivable upon such recapitalization,
reclassification, consolidation, merger, sale, transfer or share
exchange by a holder of the number of shares of Common Stock issuable
upon conversion of such Convertible Debenture immediately prior to such
recapitalization, reclassification, consolidation, merger, sale,
transfer or share exchange, after giving effect, in the case of any
Non-Stock Fundamental Change (as defined below), to any adjustment in
the Conversion Price in accordance with clause (i) of subsection (c) of
this Section; and
(ii) in the case of any such transaction that constitutes a
Common Stock Fundamental Change, common stock of the kind received by
holders of Common Stock as a result of such Common Stock Fundamental
Change in an amount determined in accordance with clause (ii) of
subsection (c) of this Section.
(b) The company formed by such consolidation or resulting from such
merger or that acquired such assets or that acquires the Company's shares, as
the case may be, shall enter into a supplemental indenture with the Trustee,
satisfactory in form to the Trustee and executed and delivered to the Trustee,
the provisions of which shall establish such right. Such supplemental indenture
shall provide for adjustments that, for events subsequent to the effective date
of such supplemental indenture, shall be as nearly equivalent as may be
practicable to the adjustments provided for in this Article. The above
provisions shall similarly apply to successive transactions of the foregoing
type.
(c) Notwithstanding any other provision of this Section to the
contrary, if any Fundamental Change occurs, then the Conversion Price in effect
will be adjusted immediately after such Fundamental Change as follows:
(i) in the case of a Non-Stock Fundamental Change, the
Conversion Price of the Convertible Debentures immediately following
such Non-Stock Fundamental Change shall be the lower of (A) the
Conversion Price in effect immediately prior to such Non-Stock
Fundamental Change, but after giving effect to any other prior
adjustments effected pursuant to Section 6.03, and (B) the product of
the greater of the Applicable Price and the then applicable Reference
Market Price and a fraction, the numerator of which is $50 and the
denominator of which is (x) the amount of the Optional Redemption Price
set forth in Section 3.02 for $50 in principal amount of Convertible
Debentures if the redemption date were the date of such Non-Stock
Fundamental Change (or, for the twelve-month periods commencing
December 1, 1997 and December 1, 1998 and the period beginning December
1, 1999 and ending December 5, 2000, the product of 107%,
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<PAGE> 25
106.3% and 105.6% respectively), times $50 plus (y) any then-accrued
and unpaid interest on $50 principal amount of Convertible Debentures;
and
(ii) in the case of a Common Stock Fundamental Change, the
Conversion Price of the Convertible Debentures immediately following
such Common Stock Fundamental Change shall be the Conversion Price in
effect immediately prior to such Common Stock Fundamental Change, but
after giving effect to any other prior adjustments effected pursuant to
Section 6.03, multiplied by a fraction, the numerator of which is the
Purchaser Stock Price and the denominator of which is the Applicable
Price; provided, that in the event of a Common Stock Fundamental Change
in which 100% of the value of the consideration received by a holder of
Common Stock is common stock of the successor, acquirer or other third
party (and cash, if any, paid with respect to any fractional interests
in such common stock resulting from such Common Stock Fundamental
Change) and all of the Common Stock shall have been exchanged for,
converted into or acquired for, common stock of the successor, acquirer
or other third party (and any cash with respect to fractional
interests), the Conversion Price of the Convertible Debentures
immediately following such Common Stock Fundamental Change shall be the
Conversion Price in effect immediately prior to such Common Stock
Fundamental Change multiplied by a fraction, the numerator of which is
one (1) and the denominator of which is the number of shares of common
stock of the successor, acquirer or other third party received by a
holder of one share of Common Stock as a result of such Common Stock
Fundamental Change.
SECTION 6.5. Notice of Adjustments of Conversion Price. Whenever the
Conversion Price is adjusted as herein provided:
(a) the Company shall compute the adjusted Conversion Price and shall
prepare a certificate signed by the Chief Financial Officer or the Treasurer of
the Company setting forth the adjusted Conversion Price and showing in
reasonable detail the facts upon which such adjustment is based, and such
certificate shall forthwith be filed with the Trustee and the transfer agent for
the Convertible Preferred Securities and the Convertible Debentures; and
(b) a notice stating the Conversion Price has been adjusted and
setting forth the adjusted Conversion Price shall as soon as practicable be
mailed by the Company to all record holders of Convertible Preferred Securities
and the Convertible Debentures at their last addresses as they appear upon the
transfer books of the Company and the Trust.
SECTION 6.6. Prior Notice of Certain Events. In case:
(a) the Company shall (i) declare any dividend (or any other
distribution) on its Common Stock, other than a dividend payable in shares of
Common Stock or a dividend payable in cash that would not require an adjustment
pursuant to Section 6.03(c) or (d), (ii) authorize a tender or exchange offer
that would require an adjustment pursuant to Section 6.03(e) or (iii)
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<PAGE> 26
become aware of a tender or exchange offer that would require an adjustment
pursuant to Section 6.03(f).
(b) the Company shall authorize the granting to all holders of Common
Stock of rights or warrants to subscribe for or purchase any shares of stock of
any class or series or of any other rights or warrants;
(c) of any reclassification of Common Stock (other than a subdivision
or combination of the outstanding Common Stock, or a change in par value, or
from par value to no par value, or from no par value to par value), or of any
consolidation or merger to which the Company is a party and for which approval
of any stockholders of the Company shall be required, or of the sale or transfer
of all or substantially all of the assets of the Company or of any compulsory
share exchange whereby the Common Stock is converted into other securities, cash
or other property; or
(d) of the voluntary or involuntary dissolution, liquidation or
winding up of the Company;
then the Company shall (i) if any Convertible Preferred Securities are
outstanding, cause to be filed with Institutional Trustee for the Convertible
Preferred Securities, and cause to be mailed to the holders of record of the
Convertible Preferred Securities, at their last addresses as they shall appear
upon the transfer books of the Trust, and (ii) shall cause to be filed with the
Trustee and cause to be mailed to all Holders at their last addresses as they
shall appear in the Debenture Register, at least 20 days prior to the applicable
record or effective date hereinafter specified, a notice stating (A) the date on
which a record (if any) is to be taken for the purpose of such dividend,
distribution, rights or warrants or, if a record is not to be taken, the date as
of which the holders of Common Stock of record to be entitled to such dividend,
distribution, rights or warrants are to be determined or (B) the date on which
such reclassification, consolidation, merger, sale, transfer, share exchange,
dissolution, liquidation or winding up is expected to become effective or such
tender or exchange offer is expected to expire, and the date as of which it is
expected that holders of Common Stock of record shall be entitled to exchange
their shares of Common Stock for securities, cash or other property deliverable
upon such tender or exchange offer, reclassification, consolidation, merger,
sale, transfer, share exchange, dissolution, liquidation or winding up.
SECTION 6.7. Certain Additional Rights. In case the Company shall, by
dividend or otherwise, declare or make a distribution on the Common Stock
referred to in Section 6.03(c) or 6.03(d), the Holder of the Convertible
Debentures, upon the conversion thereof subsequent to the close of business on
the date fixed for the determination of stockholders entitled to receive such
distribution and prior to the effectiveness of the Conversion Price adjustment
in respect of such distribution, shall also be entitled to receive for each
share of Common Stock into which the Convertible Debentures are converted, the
portion of the shares of Common Stock, rights, warrants, evidences of
indebtedness, shares of capital stock, cash and assets so distributed
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<PAGE> 27
applicable to one share of Common Stock; provided, that, at the election of the
Company (whose election shall be evidenced by a resolution of the board of
directors) with respect to all Holders so converting, the Company may, in lieu
of distributing to such Holder any portion of such distribution not consisting
of cash or securities of the Company, pay such Holder an amount in cash equal to
the fair market value thereof (as determined in good faith by the board of
directors, whose determination shall be conclusive and described in a resolution
of the board of directors). If any conversion of Convertible Debentures
described in the immediately preceding sentence occurs prior to the payment date
for a distribution to holders of Common Stock that the Holder of Convertible
Debentures so converted is entitled to receive in accordance with the
immediately preceding sentence, the Company may elect (such election to be
evidenced by a resolution of the Board of Directors) to distribute to such
Holder a due bill for the shares of Common Stock, rights, warrants, evidences of
indebtedness, shares of capital stock, cash or assets to which such Holder is so
entitled; provided, that such due bill (a) meets any applicable requirements of
the principal national securities exchange or other market on which the Common
Stock is then traded and (b) requires payment or delivery of such shares of
Common Stock, rights, warrants, evidences of indebtedness, shares of capital
stock, cash or assets no later than the date of payment or delivery thereof to
holders of shares of Common Stock receiving such distribution.
SECTION 6.8. Trustee Not Responsible for Determining Conversion Price
or Adjustments. Neither the Trustee nor any Conversion Agent shall at any time
be under any duty or responsibility to any Holder of any Convertible Debenture
to determine whether any facts exist that may require any adjustment of the
Conversion Price, or with respect to the nature or extent of any such adjustment
when made, or with respect to the method employed, or whether this supplemental
indenture need be entered into. Neither the Trustee nor any Conversion Agent
shall be accountable with respect to the validity or value (or the kind of
account) of any shares of Common Stock or of any securities or property that may
at any time be issued or delivered upon the conversion of any Convertible
Debenture; and neither the Trustee nor any Conversion Agent makes any
representation with respect thereto. Neither the Trustee nor any Conversion
Agent shall be responsible for any failure of the Company to make any cash
payment or to issue, transfer or deliver any shares of Common Stock or stock
certificates or other securities or property upon the surrender of any
Convertible Debenture for the purpose of conversion.
ARTICLE 7
FORM OF CONVERTIBLE DEBENTURE
SECTION 7.1. Form of Convertible Debenture. The Convertible Debentures
and the Trustee's Certificate of Authentication to be endorsed thereon are to be
substantially in the following forms:
[(FORM OF FACE OF CONVERTIBLE DEBENTURE)]
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[IF THE DEBENTURE IS TO BE A GLOBAL DEBENTURE, INSERT THE FOLLOWING - -
THIS DEBENTURE IS A GLOBAL DEBENTURE WITHIN THE MEANING OF THE INDENTURE
HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITARY OR A
NOMINEE OF A DEPOSITARY. THIS DEBENTURE IS EXCHANGEABLE FOR CONVERTIBLE
DEBENTURES REGISTERED IN THE NAME OF A PERSON OTHER THAN THE DEPOSITARY OR ITS
NOMINEE ONLY IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE, AND NO
TRANSFER OF THIS DEBENTURE (OTHER THAN A TRANSFER OF THIS DEBENTURE AS A WHOLE
BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE
DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY) MAY BE
REGISTERED EXCEPT IN SUCH LIMITED CIRCUMSTANCES.
UNLESS THIS DEBENTURE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY (55 WATER STREET, NEW YORK, NEW YORK) TO THE ISSUER
OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY
DEBENTURE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY AND
ANY PAYMENT HEREON IS MADE TO CEDE & CO., ANY TRANSFER, PLEDGE OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY A PERSON IS WRONGFUL SINCE THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.]
THE HOLDER OF THIS DEBENTURE IS ENTITLED TO THE BENEFITS OF THE
REGISTRATION RIGHTS AGREEMENT DATED AS OF DECEMBER 1, 1997, AMONG FEDERAL-MOGUL
CORPORATION, FEDERAL-MOGUL FINANCING TRUST AND MORGAN STANLEY & CO.
INCORPORATED. THE HOLDER OF THIS DEBENTURE AGREES TO BE BOUND BY THE TERMS OF
THE REGISTRATION RIGHTS AGREEMENT, A COPY OF WHICH IS AVAILABLE UPON REQUEST
FROM FEDERAL-MOGUL CORPORATION.
No. CUSIP NO.
FEDERAL-MOGUL CORPORATION
7% CONVERTIBLE JUNIOR SUBORDINATED DEBENTURE
THE SECURITY EVIDENCED HEREBY HAS NOT BEEN REGISTERED UNDER THE UNITED
STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE
SECURITIES LAWS, AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED
STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, UNITED STATES PERSONS EXCEPT AS
SET FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF, THE HOLDER (1)
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REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE
144A UNDER THE SECURITIES ACT) OR (B) IT IS NOT A UNITED STATES PERSON AND IS
ACQUIRING THE SECURITY EVIDENCED HEREBY IN AN OFFSHORE TRANSACTION; (2) AGREES
THAT IT WILL NOT, PRIOR TO THE EXPIRATION OF THE HOLDING PERIOD APPLICABLE TO
SALES OF THE SECURITY EVIDENCED HEREBY UNDER RULE 144(K) UNDER THE SECURITIES
ACT (OR ANY SUCCESSOR PROVISION), RESELL OR OTHERWISE TRANSFER THE SECURITY
EVIDENCED HEREBY OR THE COMMON STOCK ISSUABLE UPON CONVERSION OF SUCH SECURITY
EXCEPT (A) TO FEDERAL-MOGUL CORPORATION OR ANY SUBSIDIARY THEREOF, (B) INSIDE
THE UNITED STATES TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE
144A UNDER THE SECURITIES ACT, (C) OUTSIDE THE UNITED STATES IN COMPLIANCE WITH
RULE 904 UNDER THE SECURITIES ACT, (D) PURSUANT TO THE EXEMPTION FROM
REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE) OR (E)
PURSUANT TO A REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE
SECURITIES ACT (AND THAT CONTINUES TO BE EFFECTIVE) AND (3) AGREES THAT IT WILL
DELIVER TO EACH PERSON TO WHOM THE SECURITY EVIDENCED HEREBY IS TRANSFERRED A
NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY
TRANSFER OF THE SECURITY EVIDENCED HEREBY PRIOR TO THE EXPIRATION OF THE HOLDING
PERIOD APPLICABLE TO SALES OF THE SECURITY EVIDENCED HEREBY, UNDER RULE 144(K)
UNDER THE SECURITIES ACT (OR ANY SUCCESSOR PROVISION), THE HOLDER MUST CHECK THE
APPROPRIATE BOX SET FORTH ON THE REVERSE HEREOF RELATING TO THE MANNER OF SUCH
TRANSFER AND SUBMIT THIS CERTIFICATE TO THE BANK OF NEW YORK, AS INSTITUTIONAL
TRUSTEE (OR A SUCCESSOR INSTITUTIONAL TRUSTEE, AS APPLICABLE). THIS LEGEND WILL
BE REMOVED UPON THE EARLIER OF THE TRANSFER OF THE SECURITY EVIDENCED HEREBY
PURSUANT TO CLAUSE 1(E) ABOVE OR UPON ANY TRANSFER OF THE SECURITY EVIDENCED
HEREBY UNDER RULE 144(K) UNDER THE SECURITIES ACT (OR ANY SUCCESSOR PROVISION).
AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED STATES" AND "UNITED
STATES PERSON" HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE
SECURITIES ACT. EACH PURCHASER OR HOLDER OF THE SECURITY EVIDENCED HEREBY WILL
BE DEEMED TO HAVE REPRESENTED EITHER THAT (A) IT IS NOT AN EMPLOYEE BENEFIT PLAN
SUBJECT TO PART 4 OF SUBTITLE B OF TITLE 1 OF ERISA OR A PLAN DESCRIBED IN
SECTION 4975 OF THE CODE OR AN ENTITY WHOSE UNDERLYING ASSETS INCLUDE THE ASSETS
OF ANY SUCH ERISA PLAN OR OTHER PLAN OR (B) ITS ACQUISITION, HOLDING AND
DISPOSITION OF THE SECURITY EVIDENCED HEREBY WILL NOT RESULT IN A PROHIBITED
TRANSACTION UNDER SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE BY REASON OF
PROHIBITED TRANSACTION CLASS EXEMPTION ("PTCE") 91-38, PTCE 84-14, PTCE 90-1,
PTCE 95-60 OR PTCE 96-23.
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Federal-Mogul Corporation, a Michigan corporation (the "COMPANY," which
term includes any successor corporation under the Indenture herein referred to),
for value received, hereby promises to pay to The Bank of New York, as
Institutional Trustee for Federal-Mogul Financing Trust, or registered assigns,
the principal sum set forth on Schedule A hereto on December 1, 2027, and to pay
interest on said principal sum from December 1, 1997, or from the most recent
interest payment date (each such date, an "INTEREST PAYMENT DATE") to which
interest has been paid or duly provided for, quarterly (subject to deferral as
set forth herein) in arrears on March 1, June 1, September 1 and December 1 of
each year commencing March 1 , 1998, at the rate of 7% per annum until the
principal hereof shall have become due and payable, and on any overdue principal
and premium, if any, and (without duplication and to the extent that payment of
such interest is enforceable under applicable law) on any overdue installment of
interest at the same rate per annum compounded quarterly. The amount of interest
payable on any Interest Payment Date shall be computed on the basis of a 360-day
year of twelve 30-day months. Except as provided in the following sentence, the
amount of interest payable for any period shorter than a full quarterly period
for which interest is computed, will be computed on the basis of the actual
number of days elapsed per 30-day month. In the event that any date on which
interest is payable on this Convertible Debenture is not a Business Day, then
payment of interest payable on such date will be made on the next succeeding day
that is a Business Day (and without any interest or other payment in respect of
any such delay), except that, if such Business Day is in the next succeeding
calendar year, such payment shall be made on the immediately preceding Business
Day, in each case with the same force and effect as if made on such date. The
interest installment so payable, and punctually paid or duly provided for, on
any Interest Payment Date will, as provided in the Indenture (referred to on the
reverse hereof) be paid to the person in whose name this Convertible Debenture
(or one or more Predecessor Debentures, as defined in said Indenture) is
registered at the close of business on the Regular Record Date for such interest
installment, which Regular Record Date shall be the Business Day prior to that
Interest Payment Date unless otherwise provided in the Indenture (provided,
that, in the event that this Convertible Debenture is not held solely in
book-entry form, the Regular Record Date shall be 15 days prior to that Interest
Payment Date). Any such interest installment not punctually paid or duly
provided for shall forthwith cease to be payable to the registered Holders on
such record date and may be paid to the person in whose name this Convertible
Debenture (or one or more Predecessor Debentures) is registered at the close of
business on a special record date to be fixed by the Trustee for the payment of
such defaulted interest, notice whereof shall be given to the registered Holders
of the Convertible Debentures not less than 10 days prior to such special record
date, or may be paid at any time in any other lawful manner not inconsistent
with the requirements of any securities exchange on which the Convertible
Debentures may be listed, and upon such notice as may be required by such
exchange, all as more fully provided in the Indenture. The principal of (and
premium, if any) and the interest on this Convertible Debenture shall be payable
at the office or agency of the Company maintained for that purpose in any coin
or currency of the United States of America that at the time of payment is legal
tender for payment of public and private debts; provided, that payment of
interest may be made at the option of the Company by check mailed to the
registered Holder at such address as shall appear in the Debenture Register.
Notwithstanding the foregoing, so long
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<PAGE> 31
as the Holder of this Convertible Debenture is the Institutional Trustee, the
payment of the principal of (and premium, if any) and interest on this
Convertible Debenture will be made at such place and to such account as may be
designated by the Institutional Trustee.
The indebtedness evidenced by this Convertible Debenture is, to the
extent provided in the Indenture, subordinate and junior in right of payment to
the prior payment in full of all Senior Indebtedness, and this Convertible
Debenture is issued subject to the provisions of the Indenture with respect
thereto. In the event and during the continuation of any default by the Company
in the payment of principal, premium, interest or any other payment due on any
Senior Indebtedness of the Company, as the case may be, beyond any applicable
grace period with respect thereto, or in the event that the maturity of any
Senior Indebtedness of the Company, as the case may be, has been accelerated
because of a default, then, in any such case, no payment shall be made by the
Company with respect to the principal (including redemption and sinking fund
payments) of, or premium, if any, or interest on the Convertible Debentures
until such default is cured or waived or ceases to exist or any such
acceleration or demand for payment has been rescinded. Upon any payment by the
Company or distribution of assets of the Company of any kind or character,
whether in cash, property or securities, to creditors upon any dissolution or
winding-up or liquidation or reorganization of the Company, whether voluntary or
involuntary or in bankruptcy, insolvency, receivership or other proceedings, all
amounts due upon all Senior Indebtedness of the Company shall first be paid in
full, or payment thereof provided for in money in accordance with its terms,
before any payment is made by the Company on account of the principal (and
premium, if any) or interest on the Convertible Debentures. Upon satisfaction of
all claims of all Senior Indebtedness then outstanding, the rights of the
holders of the Convertible Debentures will be subrogated to the rights of the
holders of Senior Indebtedness of the Company to receive payments or
distributions applicable to Senior Indebtedness as provided in the Indenture
until all amounts owing on the Convertible Debentures are paid in full. Each
Holder of this Convertible Debenture, by accepting the same, (a) agrees to and
shall be bound by such provisions, (b) authorizes and directs the Trustee on his
or her behalf to take such action as may be necessary or appropriate to
acknowledge or effectuate the subordination so provided and (c) appoints the
Trustee his or her attorney-in-fact for any and all such purposes. Each Holder
hereof, by his or her acceptance hereof, hereby waives all notice of the
acceptance of the subordination provisions contained herein and in the Indenture
by each holder of Senior Indebtedness, whether now outstanding or hereafter
incurred, and waives reliance by each such holder upon said provisions.
The Holder of a Convertible Debenture may be treated as its owner for
all purposes.
If money for the payment of principal or interest remains unclaimed for
two years, the Trustee and the Paying Agent shall pay the money back to the
Company at its written request.
A director, officer, employee or stockholder, as such, of the Company
shall not have any liability for any obligations of the Company under the
Convertible Debentures or the Indenture or for any claim based on, in respect of
or by reason of such obligations or their creation. Each Holder of the
Convertible Debentures by accepting a Convertible Debenture waives and releases
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<PAGE> 32
all such liability. The waiver and release are part of the consideration for the
issue of the Convertible Debentures.
This Convertible Debenture shall not be entitled to any benefit under
the Indenture hereinafter referred to, be valid or become obligatory for any
purpose, until the Certificate of Authentication hereon shall have been signed
by or on behalf of the Trustee.
The provisions of this Convertible Debenture are continued on the
reverse side hereof and such continued provisions shall for all purposes have
the same effect as though fully set forth at this place.
IN WITNESS WHEREOF, the Company has caused this instrument to
be executed manually or by facsimile.
FEDERAL-MOGUL CORPORATION
By:___________________________
Name:
Title
Attest:
By:_________________________________
Name:
Title:
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[FORM OF CERTIFICATE OF AUTHENTICATION]
CERTIFICATE OF AUTHENTICATION
This is one of the Convertible Debentures of the series of Convertible
Debentures described in the within-mentioned Indenture.
Dated:
THE BANK OF NEW YORK,
as Trustee
By______________________
Authorized Signatory
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[FORM OF REVERSE OF DEBENTURE]
This Convertible Debenture is one of a duly authorized series of
Debentures of the Company (herein sometimes referred to as the "DEBENTURES"),
specified in the Indenture, all issued or to be issued in one or more series
under and pursuant to an Indenture dated as of December 1, 1997, duly executed
and delivered between the Company and The Bank of New York, as Trustee (the
"TRUSTEE"), as supplemented by the First Supplemental Indenture dated as of
December 1, 1997, between the Company and the Trustee (the Indenture as so
supplemented, the "INDENTURE"), to which Indenture and all indentures
supplemental thereto reference is hereby made for a description of the rights,
limitations of rights, obligations, duties and immunities thereunder of the
Trustee, the Company and the Holders of the Convertible Debentures. By the terms
of the Indenture, the Debentures are issuable thereunder in series that may vary
as to amount, date of maturity, rate of interest and in other respects as
provided in the Indenture. This series of Debentures is limited in aggregate
principal amount as specified in said First Supplemental Indenture and herein
sometimes referred to as the "CONVERTIBLE DEBENTURES."
Because of the occurrence and continuation of a Special Event (as
defined in the Indenture), in certain circumstances, this Convertible Debenture
may become due and payable at the principal amount specified on the face hereof
together with any interest accrued thereon (the "REDEMPTION PRICE"). The
Redemption Price shall be paid prior to 12:00 noon, New York City time, on the
date of such redemption or at such earlier time as the Company determines. The
Company shall have the right to redeem this Convertible Debenture at the option
of the Company, upon not less than 30 nor more than 60 days notice, without
premium or penalty, in whole or in part at any time on or after December 6, 2000
(an "OPTIONAL REDEMPTION") at the following prices (expressed as percentages of
the principal amount of the Convertible Debentures) (the "OPTIONAL REDEMPTION
PRICE") together with accrued and unpaid interest, including Additional Interest
and Compounded Interest to, but excluding, the redemption date. If this
Convertible Debenture is redeemed during the period beginning December 6, 2000
and ending November 30, 2001, the Redemption Price shall be 104.9%. The table
below shows Redemption Prices for Convertible Debentures redeemed during the
12-month period beginning December 1.
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YEAR REDEMPTION PRICE
2001 104.2%
2002 103.5
2003 102.8
2004 102.1
2005 101.4
2006 100.7
2007 and thereafter 100.0
If Convertible Debentures are redeemed on any March 1, June 1,
September 1 or December 1, accrued and unpaid interest shall be payable to
Holders on the relevant record date.
So long as the corresponding Convertible Preferred Securities are
outstanding, the proceeds from the redemption of any of the Convertible
Debentures will be used to redeem Convertible Preferred Securities.
Notwithstanding the foregoing, the Company may not redeem any
Convertible Debentures unless all accrued interest thereon (including Compound
Interest) has been paid for all quarterly periods terminating on or prior to the
date of notice of redemption.
If the Convertible Debentures are only partially redeemed by the
Company pursuant to an Optional Redemption, the Convertible Debentures will be
redeemed pro rata or by lot or by any other method utilized by the Trustee;
In the event of redemption of this Convertible Debenture in part only,
a new Convertible Debenture or Convertible Debentures of this series for the
unredeemed portion hereof will be issued in the name of the Holder hereof upon
the cancellation hereof.
In case an Event of Default, as defined in the Indenture, shall have
occurred and be continuing, the principal of all of the Convertible Debentures
may be declared, and upon such declaration shall become, due and payable, in the
manner, with the effect and subject to the conditions provided in the Indenture.
The Indenture contains provisions permitting the Company and the
Trustee, with the consent of the Holders of not less than a majority in
aggregate principal amount of the Debentures of each series affected at the time
outstanding, as defined in the Indenture, to execute supplemental indentures for
the purpose of adding any provisions to or changing in any manner or eliminating
any of the provisions of the Indenture or of any supplemental indenture or of
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modifying in any manner the rights of the Holders of the Debentures of such
series; provided, that no such supplemental indenture shall (a) extend the
stated maturity of any Debenture of any series, or reduce the principal amount
thereof, or reduce the rate or extend the time of payment of interest thereon,
or reduce any premium payable upon the redemption thereof, or make any change
that adversely affects the right to convert any Debenture of any series or make
any change in the subordination provisions that adversely affects the rights of
any Holders of any Debenture of any series, without the consent of the Holder of
each Debenture so affected, or (b) reduce the aforesaid percentage in aggregate
principal amount of Debentures of such series, the Holders of which are required
to consent to any such supplemental indenture, without the consent of the
Holders of each Debenture of any series then outstanding and affected thereby.
In addition, the Company and the Trustee may execute, without the consent of any
Holder of any Debenture, any supplemental indenture to cure any ambiguities, to
comply with the Trust Indenture Act and for certain other customary purposes,
subject to certain exceptions. The Indenture also contains provisions permitting
the Holders of a majority in aggregate principal amount of the Debentures of any
series at the time outstanding affected thereby, on behalf of all of the Holders
of the Debentures of such series, to waive any past default in the performance
of any of the covenants contained in the Indenture, or established pursuant to
the Indenture with respect to such series, and its consequences, except a
default in the payment of the principal of or premium, if any, or interest on
any Debentures of such series; provided, that a failure to convert any
Debentures of such series in accordance with its terms may only be waived by the
Holders affected thereby. Any such consent or waiver by the Holder of this
Convertible Debenture (unless revoked as provided in the Indenture) shall be
conclusive and binding upon such Holder and upon all future Holders and owners
of this Convertible Debenture and of any Convertible Debenture issued in
exchange therefor or in place hereof (whether by registration of transfer or
otherwise), irrespective of whether or not any notation of such consent or
waiver is made upon this Convertible Debenture.
Notwithstanding any provision of the Indenture nor any provision of
this Convertible Debenture, but subject to Article 13 of the Base Indenture, the
Holder of this Convertible Debenture shall have the right, which is absolute and
unconditional, to receive payment of the principal of and any premium and,
subject to Section 2.03 of the Base Indenture, interest on this Convertible
Debenture and to institute suit for the enforcement of any such payment, and
such rights shall not be impaired without the consent of such Holder.
As long as an Event of Default under Section 4.01(a) of the Indenture
shall not have occurred and be continuing, the Company shall have the right at
any time during the term of the Convertible Debentures and from time to time to
extend the interest payment period of such Convertible Debentures for up to 20
consecutive quarters (an "EXTENSION PERIOD"), at the end of which period the
Company shall pay all interest then accrued and unpaid (together with interest
thereon at the rate specified for the Convertible Debentures to the extent that
payment of such interest is enforceable under applicable law). Before the
termination of any such Extension Period, the Company may further extend such
Extension Period; provided, that such Extension Period together with all such
further extensions thereof shall not exceed 20 consecutive quarters. At the
termination of any such Extension Period and upon the payment of all accrued and
unpaid
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interest and any additional amounts then due, the Company may commence a
new Extension Period.
As provided in the Indenture and subject to certain limitations therein
set forth, this Convertible Debenture is transferable by the Holder hereof on
the Debenture Register of the Company, upon surrender of this Convertible
Debenture for registration of transfer at the office or agency of the Trustee in
the City and State of New York accompanied by a written instrument or
instruments of transfer in form satisfactory to the Company or the Trustee duly
executed by the Holder hereof or his attorney duly authorized in writing, and
thereupon one or more new Convertible Debentures of authorized denominations and
for the same aggregate principal amount and series will be issued to the
designated transferee or transferees. No service charge will be made for any
such transfer, but the Company may require payment of a sum sufficient to cover
any tax or other governmental charge payable in relation thereto.
Prior to due presentment for registration of transfer of this
Convertible Debenture, the Company, the Trustee, any paying agent and the
Debenture Registrar may deem and treat the Holder hereof as the absolute owner
hereof (whether or not this Convertible Debenture shall be overdue and
notwithstanding any notice of ownership or writing hereon made by anyone other
than the Debenture Registrar) for the purpose of receiving payment of or on
account of the principal hereof and premium, if any, and interest due hereon and
for all other purposes, and neither the Company nor the Trustee nor any paying
agent nor any Debenture Registrar shall be affected by any notice to the
contrary.
No recourse shall be had for the payment of the principal of or the
interest on this Convertible Debenture, or for any claim based hereon, or
otherwise in respect hereof, or based on or in respect of the Indenture, against
any incorporator, stockholder, officer or director, past, present or future, as
such, of the Company or of any predecessor or successor corporation, whether by
virtue of any constitution, statute or rule of law, or by the enforcement of any
assessment or penalty or otherwise, all such liability being, by the acceptance
hereof and as part of the consideration for the issuance hereof, expressly
waived and released.
The Holder of any Convertible Debenture has the right, exercisable at
any time beginning 90 days following the latest date of original issuance of any
Convertible Preferred Securities through the close of business (New York time)
on the Business Day before December 1, 2027 (or, in the case of a Convertible
Debenture called for redemption, prior to the close of business on the Business
Day prior to the corresponding redemption date), to convert the principal amount
thereof (or any portion thereof that is an integral multiple of $50) into shares
of Common Stock at the initial conversion rate of 0.9709 shares of Common Stock
for each $50 in principal amount of Convertible Debentures (equivalent to a
Conversion Price of $51.50 per share of Common Stock), subject to adjustment
under certain circumstances.
To convert a Convertible Debenture, a Holder must (a) complete and sign
a conversion notice substantially in the form attached hereto, (b) surrender the
Convertible Debenture to a Conversion Agent, (c) furnish appropriate
endorsements or transfer documents if required by the
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Conversion Agent and (d) pay any transfer or similar tax, if required. Upon
conversion, no adjustment or payment will be made for interest or dividends, but
if a Notice of Conversion is delivered on or after a Regular Record Date and
prior to the related Interest Payment Date, the interest installment payable on
such Interest Payment Date shall be payable to the Holder of record at the close
of business on such Regular Record Date, despite such conversion, and when
surrendered for conversion, such Convertible Debenture (other than a Convertible
Debenture or a portion of a Convertible Debenture called for redemption on a
Redemption Date occurring after such Regular Record Date and on or prior to such
Interest Payment Date) must be accompanied by payment of an amount equal to the
interest payable on such Interest Payment Date. However, if a Redemption Date
falls between a record date and the subsequent Interest Payment Date, the Holder
will be entitled to receive, on such Redemption Date, the interest accrued to,
but excluding, the Redemption Date. The number of shares issuable upon
conversion of a Convertible Debenture is determined by dividing the principal
amount of the Convertible Debenture converted by the Conversion Price in effect
on the Conversion Date. No fractional shares will be issued upon conversion but
a cash adjustment will be made for any fractional interest. The outstanding
principal amount of any Convertible Debenture shall be reduced by the portion of
the principal amount thereof converted into shares of Common Stock.
This Global Debenture is exchangeable for Convertible Debentures in
definitive form only under certain limited circumstances set forth in the
Indenture. Convertible Debentures of this series so issued are issuable only in
registered form without Coupons in denominations of $50 and any integral
multiple thereof. As provided in the Indenture and subject to certain
limitations therein set forth, Convertible Debentures of this series are
exchangeable for a like aggregate principal amount of Convertible Debentures of
this series of a different authorized denomination, as requested by the Holder
surrendering the same.
All terms used in this Convertible Debenture that are defined in the
Indenture shall have the meanings assigned to them in the Indenture.
THE LAWS OF THE STATE OF NEW YORK SHALL GOVERN THE INDENTURE AND THE
CONVERTIBLE DEBENTURES, WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES THEREOF.
[FORM OF ELECTION TO CONVERT]
ELECTION TO CONVERT
To: Federal-Mogul Corporation
The undersigned owner of this Convertible Debenture hereby irrevocably
exercises the option to convert this Convertible Debenture, or the portion below
designated, into Common Stock of Federal-Mogul Corporation in accordance with
the terms of the Indenture referred to in this Convertible Debenture, and
directs that the shares issuable and deliverable upon conversion, together with
any check in payment for fractional shares, be issued in the name of and
delivered to the undersigned, unless a different name has been indicated in the
assignment below. If shares are
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to be issued in the name of a person other than the undersigned, the
undersigned will pay all transfer taxes payable with respect thereto.
Date: ,
In whole portions of Convertible Debenture to be converted ($50 or
integral multiples-thereof):$
Signature (for conversion only)
Please Print or Typewrite Name and Address,
Including Zip Code, and Social Security or
Other Identifying Number
______________________________________
______________________________________
______________________________________
Signature Guarantee:(1)
______________
(1) Signature must be guaranteed by an "eligible guarantor institution"
that is a bank, stockbroker, savings and loan association or credit union
meeting the requirements of the Conversion Agent, which requirements include
membership of participation in the Securities Transfer Agents Medallion Program
("STAMP") or such other "signature guarantee program" as may be determined by
the Conversion Agent in addition to, or in substitution for, STAMP, all in
accordance with the Securities and Exchange Act of 1934, as amended.
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[FORM OF ASSIGNMENT FOR CONVERTIBLE DEBENTURES THAT ARE NOT GLOBAL
DEBENTURES]
ASSIGNMENT
For value received ___________________ hereby sell(s), assign(s) and
transfer(s) unto __________________________ (Please insert name, address, zip
code and Social security or other taxpayer identification number of assignee)
the within Security and hereby irrevocably constitutes and appoints
______________ attorney to transfer the said Convertible Debenture on the books
of the Company, with full power of substitution in the premises.
In connection with any transfer of the within Convertible Debenture
occurring prior to the Transfer Restriction Termination Date, the undersigned
confirms that such Security is being transferred:
/ / To Federal-Mogul Corporation or a subsidiary thereof; or
/ / Pursuant to and in compliance with Rule 144A under the
Securities Act of 1933, as amended; or
/ / Pursuant to and in compliance with Regulation S under the
Securities Act of 1933, as amended; or
/ / Pursuant to and in compliance with Rule 144 under the Securities
Act of 1933, as amended;
Unless one of the boxes is checked, the Trustee will refuse to register
any of the Convertible Debentures evidenced by the certificate in the name of
any person other than the registered Holder thereof; provided, however, that if
the third or fourth box above is checked, the Trustee may require, prior to
registering any such transfer of the Convertible Debentures, such legal
opinions, certifications and other information as the Company has reasonably
requested to confirm that such transfer is being made pursuant to an exemption
from, or in a transaction not subject to, the registration requirements of the
Securities Act of 1933, such as the exemption provided by rule 144 under such
Act.
Unless the box below is checked, the undersigned confirms that such
Security is not being transferred to an "AFFILIATE" of the Company as defined in
Rule 144 under the Securities Act of 1933, as amended (an "AFFILIATE"):
/ / The transferee is an Affiliate of the Company.
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Dated: __________________________
___________________________
___________________________
Signature(s)
Signature(s) must be guaranteed by a commercial bank or trust company or a
member firm of a major stock exchange.
_________________________
Signature Guarantee
NOTICE: The above signatures of the holder(s) hereof must correspond with the
name as written upon the face of this Security in every particular without
alteration or enlargement or any change whatever.
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[FORM OF SCHEDULE FOR ENDORSEMENTS ON GLOBAL
DEBENTURES TO REFLECT CHANGES IN PRINCIPAL AMOUNT]
Schedule A
Changes to Principal Amount of Global Debentures
The initial principal amount of this Global Debenture shall be $[ ].
The following increases or decreases in the principal amount of this Global
Debenture have been made:
<TABLE>
<CAPTION>
DATE PRINCIPAL AMOUNT OF REMAINING PRINCIPAL SIGNATURE
SECURITIES BY WHICH AMOUNT OF THIS OF
THIS GLOBAL DEBENTURE GLOBAL DEBENTURE AUTHORIZED
IS TO BE REDUCED OR OFFICIAL OF
INCREASED, AND REASON THE TRUSTEE
FOR REDUCTION OR
INCREASE
<S> <C> <C> <C>
- -------- -------------------- ------------------ ---------
-
- -------- -------------------- ------------------ ---------
-
- -------- -------------------- ------------------ ---------
-
- -------- -------------------- ------------------ ---------
-
- -------- -------------------- ------------------ ---------
-
- -------- -------------------- ------------------ ---------
-
- -------- -------------------- ------------------ ---------
-
- -------- -------------------- ------------------ ---------
-
</TABLE>
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<TABLE>
<CAPTION>
DATE PRINCIPAL AMOUNT OF REMAINING PRINCIPAL SIGNATURE
SECURITIES BY WHICH AMOUNT OF THIS OF
THIS GLOBAL DEBENTURE GLOBAL DEBENTURE AUTHORIZED
IS TO BE REDUCED OR OFFICIAL OF
INCREASED, AND REASON THE TRUSTEE
FOR REDUCTION OR
INCREASE
- -------- -------------------- ------------------ ---------
<S> <C> <C> <C>
</TABLE>
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ARTICLE 8
ORIGINAL ISSUE OF CONVERTIBLE DEBENTURES
SECTION 8.1. Original Issue of Convertible Debentures. Convertible
Debentures in the aggregate principal amount of up to the
sum of (a) $515,463,950 and (b) such aggregate principal amount (which may not
exceed $77,319,600 aggregate principal amount) of Convertible Debentures as
shall be purchased by the Trust pursuant to an over-allotment option in
accordance with the terms of the Purchase Agreement may, upon execution of this
First Supplemental Indenture, be executed by the Company and delivered to the
Trustee for authentication, and the Trustee shall thereupon authenticate and
make available for delivery said Convertible Debentures to or upon the written
order of the Company, signed by its Chairman, its Executive Vice President, its
President, or any Vice President and its Treasurer or an Assistant Treasurer,
without any further action by the Company.
ARTICLE 9
MISCELLANEOUS
SECTION 9.1. Ratification of Indenture; First Supplemental Indenture
Controls. The Indenture, as supplemented by this First Supplemental Indenture,
is in all respects ratified and confirmed, and this First Supplemental Indenture
shall be deemed part of the Indenture in the manner and to the extent herein and
therein provided. The provisions of this First Supplemental Indenture shall
supersede the provisions of the Indenture to the extent the Indenture is
inconsistent herewith.
SECTION 9.2 Trustee Not Responsible for Recitals. The recitals herein
contained are made by the Company and not by the Trustee, and the Trustee
assumes no responsibility for the correctness thereof. The Trustee makes no
representation as to the validity or sufficiency of this First Supplemental
Indenture.
SECTION 9.3. Governing Law. This First Supplemental Indenture and each
Debenture shall be governed by and construed in accordance with the laws of the
State of New York, without regard to conflict of laws principles thereof.
SECTION 9.4. Separability. In case any one or more of the provisions
contained in this First Supplemental Indenture or in the Convertible Debentures
shall for any reason be held to be invalid, illegal or unenforceable in any
respect, such invalidity, illegality or unenforceability shall not affect any
other provisions of this First Supplemental Indenture or of the Convertible
Debentures, but this First Supplemental Indenture and the Convertible Debentures
shall be construed as if such invalid or illegal or unenforceable provision had
never been contained herein or therein.
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SECTION 9.5. Counterparts. This First Supplemental Indenture may be
executed in any number of counterparts each of which shall be an original; but
such counterparts shall together constitute but one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have caused this First
Supplemental Indenture to be duly executed as of the day and year first above
written.
FEDERAL-MOGUL CORPORATION
By___________________________
Name:
Title:
THE BANK OF NEW YORK,
as Trustee
By___________________________
Name:
Title:
<PAGE> 1
EXHIBIT 4.10
REGISTRATION AGREEMENT
THIS REGISTRATION AGREEMENT (this "AGREEMENT"), dated as of
January 9, 1998, is by and among Federal-Mogul Corporation, a Michigan
corporation (the "CORPORATION"), and the Persons identified on Schedule 1 hereto
(the "INVESTORS").
RECITALS
A. Pursuant to that certain Equity Purchase Agreement dated as of
January 9, 1998 (the "AGREEMENT") among the Corporation and the Investors, as
partial consideration for the acquisition of the Equity Interests (as defined in
the Agreement), the Corporation will issue to the Investors shares of the Series
E Mandatory Exchangeable Preferred Stock of the Corporation (the "PREFERRED
SHARES").
B. As a condition to the consummation of the transactions contemplated
by the Agreement, the Corporation has agreed to grant certain securities
registration rights to the Investors as set forth herein.
AGREEMENTS
In consideration of the premises and the mutual covenants herein
contained and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto hereby agree as follows:
1. DEFINITIONS. In addition to the capitalized terms defined elsewhere
in this Agreement, the following capitalized terms shall have the following
meaning when used in this Agreement:
"AFFILIATE" means, as to any specified Person, any other Person
which, directly or indirectly, controls, is controlled by or is under common
control with, such specified Person. For the purposes of this definition,
"control" means the possession of the power to direct or cause the direction of
the management and policies of such Person, whether through the ownership of
voting securities, by contract or otherwise.
"CERTIFICATE" shall have the meaning given such term in SECTION 3(A)
hereof.
"COMMISSION" means the Securities and Exchange Commission.
"COMMITTED PORTION" means those shares of Common Stock to be
included in a Qualified Public Offering that are not subject to an
over-allotment option.
"COMMON STOCK" means the Corporation's common stock.
<PAGE> 2
"EXPIRATION TIME" means the first time at which (i) the
Holders hold, in the aggregate, fewer than 3,000,000 Registrable Shares (as such
number may be proportionately adjusted in the event the Common Stock is
subdivided into a greater number of shares or combined into a fewer number of
shares), and (ii) such securities may be sold by the Holders without restriction
pursuant to Rule 144(k) under the Securities Act.
"HOLDERS" means the holders of Registrable Shares who are
parties to this Agreement or successors or assigns or subsequent holders
contemplated by SECTION 14 hereof.
"OVER-ALLOTMENT AMOUNT" means a number of shares of Common
Stock which shall be determined by the Corporation and shall not be less than
the product of (i) 0.5, multiplied by (ii) the number of shares of Common Stock
to be included in the over-allotment option, if any, requested by the managing
underwriter or underwriters in connection with a Qualified Public Offering.
"PERSON" means a natural person, a partnership, a corporation,
a limited liability company, an association, a joint stock company, a trust, a
joint venture, an unincorporated organization or other entity, or a governmental
entity or any department, agency or political subdivision thereof.
"QUALIFIED PUBLIC OFFERING" means the first underwritten
offering of Common Stock made by the Corporation for its own account after the
date hereof and on or prior to January 1, 1999 pursuant to an effective
registration statement under the Securities Act.
"REGISTRABLE SHARES" means at any time (i) any outstanding
shares of Common Stock issued or issuable upon conversion or exchange of the
Preferred Shares (assuming the conditions precedent to such conversion or
exchange had occurred in accordance with the terms of the Certificate); and (ii)
any outstanding shares of Common Stock issued as, or issued upon the conversion,
exchange or exercise of other securities issued as, a dividend or other
distribution with respect to or in replacement of Preferred Shares or
Registrable Shares; provided, however, that Registrable Shares shall not include
(a) any share that has been sold under an effective registration statement
pursuant to the Securities Act, or (b) any share that has been otherwise
transferred (other than to an Investor or an Affiliate of an Investor) and (i)
in respect of which the Corporation has delivered a new certificate or other
evidence of ownership not bearing the legend set forth on the Preferred Shares
upon the initial issuance thereof (or other legend of similar import) and (ii)
in the opinion of counsel to the Corporation, the subsequent disposition of such
share shall not require registration under the Securities Act. For purposes of
requesting registration of securities pursuant to this Agreement, a Person will
be deemed to be a holder of Registrable Shares whenever such Person has the
right to acquire such Registrable Shares (by conversion, exchange or exercise),
whether or not such acquisition has actually been effected.
"REGISTRATION EXPENSES" has the meaning ascribed to it in
SECTION 6 of this Agreement.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
-2-
<PAGE> 3
"SECURITIES EXCHANGE ACT" means the Securities Exchange Act of 1934,
as amended.
"SUBSIDIARY" means any corporation, association or other entity of
which securities or other ownership interests representing more than fifty
percent (50%) of the ordinary voting power are, at the time as of which any
determination is being made, owned or controlled by the Corporation or one or
more Subsidiaries of the Corporation or by the Corporation and one or more
Subsidiaries of the Corporation.
2. DEMAND REGISTRATIONS.
(a) REQUESTS FOR REGISTRATION. At any time after January 1, 1999 and
prior to the Expiration Time, the Holder or Holders of a majority of the
Registrable Shares may request registration under the Securities Act of all or
part of their Registrable Shares; provided, however, such Holder or Holders may
only request registration pursuant to this SECTION 2(A) if the Corporation's
Second Restated Articles of Incorporation (the "ARTICLES") have been amended to
authorize additional shares of Common Stock for issuance. Within ten days after
receipt of any request pursuant to this SECTION 2(A), the Corporation will give
written notice of such request to all other holders of Registrable Shares and,
subject to the terms hereof and applicable law, will use its best efforts to
effect such registration and will include in such registration all Registrable
Shares with respect to which the Corporation has received written requests for
inclusion therein within 14 days after the Corporation's notice has been given.
All registrations requested pursuant to this SECTION 2(A) are referred to herein
as "DEMAND REGISTRATIONS." Subject to the terms hereof, the Corporation shall
have the right to include securities for its own account in any Demand
Registration, and holders of the Corporation's securities who have the right to
participate in any Demand Registration pursuant to an agreement with the
Corporation shall have the right to include securities (the "REQUIRED SHARES")
in such Demand Registration.
(b) NUMBER OF DEMAND REGISTRATIONS. The Holders may request no more
than, and the Corporation will be obligated to effect no more than, three Demand
Registrations pursuant to SECTION 2(A). A registration will not count as a
Demand Registration hereunder until the related registration statement has
become effective.
(c) PAYMENT OF EXPENSES FOR DEMAND REGISTRATIONS. The Holders will
pay all Registration Expenses for any Demand Registration (regardless of whether
the related registration statement becomes effective but not if such
registration statement fails to become effective because of the fault of the
Corporation); provided, however, that in the event securities other than those
of the Holders are included in any Demand Registration, the Holders, in the
aggregate, will pay that proportion of such expenses as the number of
Registrable Shares included in such Demand Registration bears to the total
number of securities included in such Demand Registration. Registration Expenses
to be borne by the Holders pursuant to this Section 2(c) shall be borne pro rata
on the basis of the number of Registrable Shares owned by such Holders which are
included in such Demand Registration.
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<PAGE> 4
(d) PRIORITY ON DEMAND REGISTRATIONS. The Holder or Holders
initiating the Demand Registration may elect whether the offering of such
Registrable Shares pursuant to such Demand Registration shall be in the form of
a firm commitment underwritten offering or otherwise; provided, however, that
the Corporation shall not be obligated to register any offering pursuant to Rule
415 under the Securities Act (or any successor provision thereto). In any case
in which an offering is in the form of a firm commitment underwritten offering,
if the managing underwriter or underwriters of such offering advises the
Corporation in writing that in its or their opinion it is probable that
inclusion of the number of Registrable Shares, Required Shares, if any, and
securities of the Corporation ("CORPORATION SHARES"), if any, proposed to be
included in such offering would adversely affect the marketability of the Common
Stock, the Corporation will include in such registration the number of
Registrable Shares, Required Shares, if any, and Corporation Shares, if any,
that in the opinion of such managing underwriter or underwriters can be sold
without adversely affecting the market for the Common Stock. In such event, (a)
first, the number of Required Shares, if any, and Corporation Shares, if any, to
be offered shall be reduced to the extent necessary to reduce the total number
of shares to be included in such offering to the number recommended by such
managing underwriter or underwriters and (b) then, if necessary, the number of
Registrable Shares to be offered shall be reduced pro rata on the basis of the
relative number of Registrable Shares requested by each such Holder to be
included in such registration to the extent necessary to reduce the total number
of shares to be included in such offering to the number recommended by such
managing underwriter or underwriters.
(e) RESTRICTIONS ON REGISTRATIONS. (i) The Corporation may
postpone for a reasonable period not to exceed 90 days, the filing, amendment or
the effectiveness of a registration statement for a Demand Registration if the
board of directors of the Corporation determines reasonably and in good faith
that such filing would be significantly disadvantageous to the Corporation or
its stockholders.
(ii) A Holder shall not request the registration of
Registrable Shares pursuant to SECTION 2(A) hereof during the period commencing
on the seventh day prior to the effective date of an offering by the Company
that is registered under the Securities Act and ending on the ninetieth day
after such offering is completed.
(f) SHORT-FORM REGISTRATIONS. If an underwritten Demand
Registration is registered pursuant to Form S-3 (or any successor form thereto),
and if the managing underwriter reasonably requests the inclusion in the
registration statement of information which is not required under the Securities
Act to be included on Form S-3, the Corporation will provide such information
for inclusion by the managing underwriter.
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3. PIGGYBACK REGISTRATIONS.
(a) RIGHT TO INITIAL PIGGYBACK. In connection with the
registration under the Securities Act of a Qualified Public Offering, if the
registration form to be used may be used for the registration of Registrable
Shares (an "INITIAL PIGGYBACK REGISTRATION"), the Corporation will give written
notice (the "OFFERING NOTICE") at least 21 days prior to the anticipated filing
date to all holders of Registrable Shares of its intention to effect such a
registration, and the Corporation will use its best efforts to effect such
registration and will include in such registration all Registrable Shares with
respect to which the Corporation has received written requests for inclusion
therein within 14 days after the Corporation's notice has been given.
Notwithstanding the foregoing, (i) the Holders of the Registrable Shares may
only include shares in such Initial Piggyback Registration if the Articles have
been amended to authorize additional shares of Common Stock for issuance, (ii)
the aggregate number of Registrable Shares that may be included in the Committed
Portion of such Initial Piggyback Registration may not exceed, in the aggregate,
a number (as may be adjusted in accordance with the proviso below, the "MAXIMUM
NUMBER") equal to 25% of the product of (A) the number of Preferred Shares
initially issued, multiplied by (B) the Exchange Ratio (as such term is defined
in the Certificate of Designations (the "CERTIFICATE") for the Preferred Shares)
in effect on the tenth day prior to the date the registration statement with
respect to the Initial Piggyback Registration becomes effective, provided,
however, that such Maximum Number may be reduced if, and to the extent, that the
managing underwriter or underwriters of the offering advise the Corporation that
in its or their opinion it is probable that the inclusion of the Maximum Number
of Registrable Shares in the Qualified Public Offering would adversely affect
the marketability of the shares to be sold in such offering. In the event that
the number of Registrable Shares that Holders have requested be included in the
Initial Piggyback Registration exceeds the Maximum Number (such excess, the
"EXCESS SHARES"), the number of Registrable Shares, if any, to be included in
the Committed Portion of such Initial Piggyback Registration shall be reduced
pro rata on the basis of the relative number of Registrable Shares requested by
each such Holder to be included in such registration to the extent necessary to
reduce the total number of Registrable Shares to be included in the Committed
Portion of such Initial Piggyback Registration to the Maximum Number. Excess
Shares shall be included in any over-allotment option granted to the
underwriters of the Qualified Public Offering by the Corporation; provided,
however, in the event the number of Excess Shares exceeds the Over-Allotment
Amount, the number of Excess Shares to be included in such over-allotment option
shall be reduced pro rata on the basis of the relative number of Excess Shares
held by each holder of Excess Shares to the extent necessary to reduce the total
number of Excess Shares to be included in such over-allotment option to the
Over-Allotment Amount. Notwithstanding anything to the contrary set forth
herein, in no event shall the number of shares of Common Stock included in such
Initial Piggyback Registration for the account of each of Kenneth A. Lehman and
David A. Weinberg, in his individual capacity, exceed a number equal to 25% of
the product of (i) the number of Preferred Shares initially issued to such
person, multiplied by (ii) the Exchange Ratio (as such term is defined in the
Certificate) in effect on the tenth day prior to the date the registration
statement with respect to the Initial Piggyback Registration becomes effective.
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(b) RIGHT TO ADDITIONAL PIGGYBACK. At any time after January
1, 1999 and prior to the Expiration Time, whenever Common Stock is to be
registered under the Securities Act (other than pursuant to a Demand
Registration), and the registration form to be used may be used for the
registration of Registrable Shares (a "PIGGYBACK REGISTRATION"), the Corporation
will give an Offering Notice at least 21 days prior to the anticipated filing
date to all holders of Registrable Shares of its intention to effect such a
registration, and the Corporation will use its best efforts to effect such
registration and will include in such registration all Registrable Shares with
respect to which the Corporation has received a written request for inclusion
therein within 14 days after the Offering Notice has been given.
(c) PRIORITY ON PRIMARY REGISTRATIONS. If a Piggyback
Registration (including, without limitation, the Initial Piggyback Registration)
is an underwritten primary offering on behalf of the Corporation, and the
managing underwriter or underwriters advise the Corporation in writing that in
its or their opinion it is probable that the inclusion of the number of
securities requested to be included in the registration would adversely affect
the marketability of the shares to be sold in such offering, the Corporation
will include in such registration (i) first, the securities the Corporation
proposes to sell, (ii) second, the Registrable Shares requested to be included
in such registration which in the opinion of such underwriters can be sold
without having such effect, pro rata among the Holders of such Registrable
Shares on the basis of the number of Registrable Shares owned by such Holders,
with further successive pro rata allocations among the Holders of Registrable
Shares if any such Holder has requested the registration of less than all the
Registrable Shares it is entitled to register, and (iii) third, other securities
requested to be included in such registration.
(d) PRIORITY ON SECONDARY REGISTRATIONS. If a Piggyback
Registration is an underwritten secondary offering on behalf of holders of the
Corporation's securities (other than the Holders of Registrable Shares), and the
managing underwriter or underwriters advise the Corporation in writing that in
their opinion it is probable that the inclusion of the number of securities
requested to be included in such registration would adversely affect the
marketability of the shares to be sold in such offering, the Corporation will
include in such registration the Registrable Shares requested to be included in
such registration and the securities requested to be included therein by the
holders of the Corporation's securities requesting such registration (all such
Registrable Shares and other securities requesting such registration being
collectively referred to as the "SECONDARY SHARES") which in the opinion of such
underwriters can be sold without having such effect, pro rata among the holders
of such Secondary Shares on the basis of the number of Secondary Shares owned or
deemed to be owned by such holders, with further successive pro rata allocations
among the holders of Secondary Shares if any such holder of Secondary Shares has
requested the registration of less than all such Secondary Shares it is entitled
to register.
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4. HOLDBACK AGREEMENTS.
(a) The Corporation agrees, if reasonably requested by the
managing underwriter or underwriters, not to effect any public sale or
distribution of its equity securities, or any securities convertible into or
exchangeable or exercisable for such securities, during the seven days prior to,
and during the 90-day period beginning on, the effective date of any
underwritten Demand Registration or any underwritten Piggyback Registration
(except as part of such underwritten registration or pursuant to a registration
on Form S-4 or S-8 or any successor form or pursuant to any commitment to do so,
conditional or otherwise, existing on the date hereof).
(b) Each Holder agrees, if reasonably requested by the
managing underwriter or underwriters, not to effect any public sale or
distribution (including pursuant to Rule 144) of any equity securities of the
Corporation or any securities convertible into or exchangeable or exercisable
for such securities, during the seven days prior to, and during the 90-day
period beginning on, the effective date of any underwritten Piggyback
Registration (which included such Holder's shares) or any underwritten Demand
Registration (regardless of whether such Demand Registration included such
Holder's shares).
(c) Nothing herein shall prevent a Holder of Registrable
Shares that is a partnership from making a distribution of Registrable Shares to
its partners, a Holder of Registrable Shares that is a trust from making a
distribution of Registrable Shares to its beneficiaries or a Holder of
Registrable Shares that is a corporation from making a distribution of
Registrable Shares to its shareholders. The Holders agree that any such
distribution will be made in accordance with applicable law (including, without
limitation, applicable federal and state securities laws) and that any
distributees of Registrable Shares will take such shares subject to the terms of
this Agreement.
5. REGISTRATION PROCEDURES. Whenever the Holders of Registrable Shares
have requested that any Registrable Shares be registered pursuant to the terms
of this Agreement, the Corporation will use its best efforts to effect the
registration and the sale of such Registrable Shares in accordance with the
terms hereof and the intended method of disposition thereof, and pursuant
thereto the Corporation will as expeditiously as is practicable in connection
with such an offering:
(a) prepare and file with the Commission, on any registration
form for which the Corporation then qualifies and which the Corporation deems
appropriate, a registration statement with respect to such Registrable Shares
and use its best efforts to cause such registration statement to become
effective as soon as practicable after such filing;
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(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective and
to comply with the provisions of the Securities Act with respect to the
disposition of all securities covered by such registration statement until such
time as the Registrable Shares registered thereunder have been disposed of in
accordance with the intended methods of disposition by the sellers thereof set
forth in such registration statement; provided, however, except as required by
the Securities Act and the rules and regulations promulgated thereunder, the
Corporation shall not be obligated to keep any registration statement effective
for a period in excess of 45 days;
(c) furnish to each seller of such Registrable Shares and the
underwriters of the securities being registered such number of copies of such
registration statement, each amendment and supplement thereto, the prospectus
included in such registration statement (including each preliminary prospectus)
and such other documents as such seller or underwriters may reasonably request
in order to facilitate the disposition of the Registrable Shares owned by such
seller or the sale of such securities by such underwriters;
(d) register or qualify such Registrable Shares under such
other securities laws of such jurisdictions as any seller reasonably requests
and do any and all other acts and things which may be reasonably necessary or
desirable to enable such seller to consummate the public sale or other
disposition in such jurisdictions of the Registrable Shares owned by such
seller; provided, however, that the Corporation shall not be required to (i)
qualify generally to do business in any jurisdiction where it is not then so
qualified, (ii) subject itself to taxation in any such jurisdiction, (iii)
consent to general service of process in any such jurisdiction, or (iv) provide
any undertaking required by such other securities or "blue sky" laws or make any
change in its charter or by-laws that the board of directors of the Corporation
determines in good faith to be contrary to the best interest of the corporation
and its stockholders;
(e) cause all such Registrable Shares to be listed on each
securities exchange on which similar securities issued by the Corporation are
then listed, provided that all applicable listing requirements are satisfied;
(f) provide a transfer agent and registrar for all such
Registrable Shares not later than the effective date of such registration
statement;
(g) enter into such customary agreements (including
underwriting agreements) and take all such other actions as are reasonably
required in order to expedite or facilitate the disposition of such Registrable
Shares in accordance with the Holders' intended methods of disposition;
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<PAGE> 9
(h) make available for inspection by any seller of such
Registrable Shares, any underwriter participating in any disposition pursuant to
such registration statement, and any attorney, accountant or other agent
designated by any such seller or underwriter (collectively, the "INSPECTORS"),
all financial and other records, pertinent corporate documents and properties of
the Corporation (collectively, the "RECORDS") as shall be reasonably necessary
to exercise their due diligence responsibilities, and cause the Corporation's
officers, directors, employees and independent accountants to supply all
information reasonably requested by any such Inspector in connection with such
registration statement. Records that the Corporation determines, in good faith,
to be confidential and that it notifies the Inspectors are confidential shall
not be disclosed by the Inspectors unless the contents of such Records become
publicly available or the release of such Records is ordered pursuant to a
subpoena or other order from a court or governmental agency of competent
jurisdiction or required pursuant to applicable state or federal law. Each
seller of Registrable Shares agrees that it will, upon learning that disclosure
of such Records are sought by a court or governmental agency, give notice to the
Corporation and allow the Corporation, at the Corporation's expense, to
undertake appropriate action to prevent disclosure of the Records deemed
confidential;
(i) notify each seller of such Registrable Shares, promptly
after it shall receive notice thereof, of the time when such registration
statement has become effective or a supplement to any prospectus forming a part
of such registration statement has been filed;
(j) notify each seller of such Registrable Shares of any
request by the Commission for the amending or supplementing of such registration
statement or prospectus or for additional information;
(k) prepare and promptly file with the Commission and promptly
notify each seller of such Registrable Shares of the filing of such amendment or
supplement to such registration statement or prospectus as may be necessary to
correct any statements or omissions if, at the time when a prospectus relating
to such securities is required to be delivered under the Securities Act, any
event shall have occurred as the result of which any such prospectus or any
other prospectus as then in effect would include an untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein, in the light of the circumstances in which they were made,
not misleading;
(l) advise each seller of such Registrable Shares, promptly
after it shall receive notice or obtain knowledge thereof, of the issuance of
any stop order by the Commission suspending the effectiveness of such
registration statement or the initiation or threatening of any proceeding for
such purpose and promptly use all reasonable efforts to prevent the issuance of
any stop order or to obtain its withdrawal if such stop order should be issued;
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(m) prior to the filing of any registration statement or
prospectus or any amendment or supplement to such registration statement or
prospectus, furnish a copy thereof to each seller of such Registrable Shares and
refrain from filing any such registration statement, prospectus, amendment or
supplement to which counsel selected by the Holders of a majority of the
Registrable Shares being registered shall have reasonably objected on the
grounds that such amendment or supplement does not comply in all material
respects with the requirements of the Securities Act or the rules and
regulations thereunder, unless, in the case of an amendment or supplement, in
the opinion of counsel for the Corporation the filing of such amendment or
supplement is reasonably necessary to protect the Corporation from any
liabilities under any applicable federal or state law and such filing will not
violate applicable laws; and
(n) at the request of the managing underwriter or underwriters
in connection with an underwritten offering, furnish on the date or dates
provided for in the underwriting agreement: (i) an opinion of counsel, addressed
to the underwriters, covering such customary matters as such underwriters may
reasonably request; and (ii) a letter or letters from the independent certified
public accountants of the Corporation addressed to the underwriters, covering
such customary matters as such underwriters may reasonably request.
Each Holder of Registrable Shares agrees that, upon receipt of
any notice from the Corporation of the happening of any event of the kind
described in paragraph (k) of this SECTION 5, such Holder shall forthwith
discontinue disposition of Registrable Shares pursuant to the registration
statement covering such Registrable Shares until such Holder's receipt of the
copies of the supplemented or amended prospectus contemplated by paragraph (k)
of this SECTION 5 and, if so directed by the Corporation, such Holder shall
deliver to the Corporation (at the Corporation's expense) all copies of the
prospectus covering such Registrable Shares current at the time of receipt of
such notice.
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6. REGISTRATION EXPENSES. Subject to SECTION 2(C), all expenses
incident to the Corporation's performance of or compliance with this Agreement,
including, but not limited to, all registration and filing fees, fees and
expenses of compliance with federal, state and foreign securities laws, printing
expenses, messenger and delivery expenses, and fees and disbursements of counsel
for the Corporation and its independent certified public accountants,
underwriters (excluding discounts and commissions attributable to the
Registrable Shares included in such registration which shall be borne by the
holder of such Registrable Shares) and other Persons retained by the Corporation
(all such expenses being herein called "REGISTRATION EXPENSES"), will be borne
by the Corporation. In addition, the Corporation will pay its internal expenses
(including, but not limited to, all salaries and expenses of its officers and
employees performing legal or accounting duties), the expense of any annual
audit or quarterly review and the expense of any liability insurance obtained by
the Corporation and the expenses and fees for listing the securities to be
registered on each securities exchange. Registration Expenses shall not include
expenses incurred by the Holders in connection with a Piggyback Registration
(such expenses of the Holders shall include, but not be limited to, underwriting
discounts and commissions relating to the Registrable Shares, brokerage fees,
transfer taxes, and the fees and expenses of any counsel, accountants or other
representatives retained by the Holders) which expenses shall be borne by the
Holders.
7. INDEMNIFICATION.
(a) The Corporation agrees to indemnify, to the fullest extent
permitted by law, each seller of Registrable Shares, its partners, officers,
directors trustees and beneficiaries and each Person who controls such seller
(within the meaning of the Securities Act) against all losses, claims, damages,
liabilities and expenses (including, but not limited to, reasonable attorneys'
fees except as limited by SECTION 7(C)) caused by any untrue or alleged untrue
statement of a material fact contained in any registration statement, prospectus
or preliminary prospectus or any amendment thereof or supplement thereto or any
omission or alleged omission of a material fact required to be stated therein or
necessary to make the statements therein, in the case of a prospectus, in light
of the circumstances in which they were made, not misleading, except insofar as
the same are caused by or contained in any information furnished in writing to
the Corporation by such seller expressly for use therein or by such seller's
failure to deliver a copy of the prospectus or any amendments or supplements
thereto after the Corporation has furnished such seller with a sufficient number
of copies of the same or by the seller's delivery of a prospectus after the
Corporation notified such seller to discontinue delivery of prospectuses. In
connection with an underwritten offering, the Corporation, if requested, will
indemnify such underwriters, their officers and directors and each Person who
controls such underwriters (within the meaning of the Securities Act) to the
same extent as provided above with respect to the indemnification of the sellers
of Registrable Shares.
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(b) In connection with any registration statement in which a
seller of Registrable Shares is participating, each such seller will furnish to
the Corporation in writing such information and affidavits as the Corporation
reasonably requests for use in connection with any such registration statement
or prospectus and, to the fullest extent permitted by law, will indemnify the
Corporation, its directors and officers and each Person who controls the
Corporation (within the meaning of the Securities Act) against any losses,
claims, damages, liabilities and expenses (including, but not limited to,
reasonable attorneys' fees except as limited by SECTION 7(C)) resulting from any
untrue statement of a material fact contained in the registration statement,
prospectus or preliminary prospectus or any amendment thereof or supplement
thereto or any omission of a material fact required to be stated therein or
necessary to make the statements therein, in the case of a prospectus, in light
of the circumstances in which they were made, not misleading, but only to the
extent that such untrue statement or omission is contained in or improperly
omitted from, as the case may be, any information or affidavit so furnished in
writing by such seller; provided that the obligation to indemnify will be
several, not joint and several, among such sellers of Registrable Shares, and
the liability of each such seller of Registrable Shares will be in proportion
to, and provided further that such liability will be limited to, in any event,
the net amount received by such seller from the sale of Registrable Shares
pursuant to such registration statement. In connection with an underwritten
offering, each seller of Registrable Shares will, if requested, agree to
indemnify such underwriters, their officers and directors and each Person who
controls such underwriters (within the meaning of the Securities Act) to the
same extent as provided in this SECTION 7(B) with respect to the Corporation.
(c) Any Person entitled to indemnification hereunder will (i)
give prompt written notice to the indemnifying party of any claim with respect
to which it seeks indemnification and (ii) unless in such indemnified party's
reasonable judgment a conflict of interest between such indemnified and
indemnifying parties may exist with respect to such claim, permit such
indemnifying party to assume the defense of such claim with counsel reasonably
satisfactory to the indemnified party. If such defense is assumed, the
indemnifying party will not be subject to any liability for any settlement made
by the indemnified party without its consent (but such consent will not be
unreasonably withheld). An indemnifying party who is not entitled to, or elects
not to, assume the defense of a claim will not be obligated to pay the fees and
expenses of more than one counsel for all parties indemnified by such
indemnifying party with respect to such claim, unless in the reasonable judgment
of any indemnified party a conflict of interest may exist between such
indemnified party and any other of such indemnified parties with respect to such
claim.
(d) The indemnification provided for under this Agreement will
remain in full force and effect regardless of any investigation made by or on
behalf of the indemnified party or any officer, director or controlling Person
of such indemnified party and will survive the transfer of securities. Each
indemnifying party also agrees to make such provisions as are reasonably
requested by any indemnified party for contribution to such party in the event
such indemnifying party's indemnification is unavailable for any reason.
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8. COMPLIANCE WITH RULE 144. The Corporation covenants that it shall
file the reports required to be filed by it under the Securities Exchange Act,
and the rules and regulations thereunder so long as the Corporation is obligated
to file such reports, and it shall take such further action as any Holder may
reasonably request, all to the extent required from time to time to enable such
Holder to sell Registrable Shares without registration under the Securities Act
within the limitation of the exemptions provided by (a) Rule 144 under the
Securities Act, as such Rule may be amended from time to time or (b) any similar
rules or regulations hereafter adopted by the Commission. Upon the written
request of any Holder, the Corporation shall deliver to such Holder a written
statement as to whether it has complied with such requirements.
9. PARTICIPATION IN UNDERWRITTEN REGISTRATIONS. No Person may
participate in any registration hereunder which is underwritten unless such
Person (a) agrees to sell such Person's securities on the basis provided in any
underwriting arrangements approved by the Person or Persons entitled hereunder
to approve such arrangements and (b) completes and executes all questionnaires,
powers of attorney, indemnities, underwriting agreements and other documents
required under the terms of such underwriting arrangements. The Holders of a
majority of the Registrable Shares requested to be registered will have the
right to select the managing underwriters to administer any offering relating to
a Demand Registration, subject to the prior approval of the Corporation, which
approval shall not be unreasonably withheld.
10. REDUCTIONS OF REGISTRABLE SHARES IN AN OFFERING. In the event the
aggregate number of Registrable Shares to be included in a Demand Registration,
Piggyback Registration or related over-allotment option is reduced by operation
of the terms hereof to a number less than the number requested by the Holders to
be included in such registration or related over-allotment option, such
aggregate reduction may be allocated among, and borne by, the Holders in any
manner agreed upon by the Holders notwithstanding any provision herein regarding
the manner in which such reduction shall be allocated among, and borne by, the
Holders.
11. TRANSFER RESTRICTIONS.
(a) Except as otherwise specified in SECTION 11(D) hereof, the
certificates evidencing Preferred Shares or shares of Common Stock for which
Preferred Shares have been exchanged or into which Preferred Shares have been
converted, shall bear a legend (the "PRIVATE PLACEMENT LEGEND") to the following
effect:
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This Security (or its predecessor) was originally issued in a
transaction exempt from registration under Section 5 of the
Securities Act of 1933, as amended (the "SECURITIES ACT"), and
this security and any securities issued in exchange therefor
may not be offered, sold or otherwise transferred in the
absence of such registration or an applicable exemption
therefrom. By accepting this security, the holder agrees for
the benefit of Federal-Mogul Corporation that, until the
expiration of the holding period applicable to offers and
sales of the securities evidenced hereby under Rule 144(k)
under the Securities Act (or any successor provision), (A) it
will not resell or otherwise transfer the security represented
hereby except pursuant to (i) a registration statement that
has been declared effective under the Securities Act (and that
continues to be effective at the time of such transfer) or
(ii) an applicable exemption from registration under the
Securities Act and (B) it will deliver to each person whom the
security evidenced hereby is transferred (other than a
transfer pursuant to clause (A)(i) above) a notice
substantially to the effect of this legend.
(b) By its acceptance of any Preferred Shares represented by a
certificate bearing the Private Placement Legend, or the shares of Common Stock
for which such Preferred Shares have been exchanged or into which such Preferred
Shares have been converted, the holder of such securities shall be deemed to
have acknowledged the restrictions set forth in the Private Placement Legend and
shall be deemed to have agreed that it will transfer such Preferred Shares, and
any such shares of Common Stock for which such Preferred Shares have been
exchanged or into which such Preferred Shares have been converted, only in
accordance with the Private Placement Legend.
(c) In connection with any transfer of any Preferred Shares
represented by a certificate bearing the Private Placement Legend, or the shares
of Common Stock for which such Preferred Shares have been exchanged or into
which such Preferred Shares have been converted, each holder thereof agrees to
deliver to the Corporation such satisfactory evidence, which may include an
opinion of independent counsel, as reasonably may be requested by the
Corporation to confirm that such transfer is being made in accordance with the
limitations set forth in the Private Placement Legend or that the limitations
set forth in the Private Placement Legend no longer are applicable. In the event
the Corporation determines that any such transfer is not in accordance with the
Private Placement Legend or the restrictions set forth herein, the Corporation
shall not effect such transfer or shall so inform the transfer agent, if any,
who shall not effect such transfer.
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(d) The Private Placement Legend may be removed from a
certificate representing Preferred Shares or the certificate representing shares
of Common Stock for which such Preferred Shares have been exchanged or into
which such Preferred Shares have been converted, if (i) such shares are
transferred pursuant to an effective registration statement under the Securities
Act, or (ii) there is delivered to the Corporation such satisfactory evidence,
which may include an opinion of independent counsel, as reasonably may be
requested by the Corporation to confirm that neither such legend nor the
restrictions on transfer set forth therein are required to ensure that transfers
of such shares will not violate the registration and prospectus delivery
requirements of the Securities Act.
12. REMEDIES. Any Person having rights under any provision of this
Agreement will be entitled to enforce such rights specifically, to recover
damages caused by reason of any breach of any provision of this Agreement and to
exercise all other rights granted by law.
13. AMENDMENTS AND WAIVERS. The provisions of this Agreement may be
amended or waived at any time only by the written agreement of the Corporation
and the Holders of a majority of the Registrable Shares. Any waiver, permit,
consent or approval of any kind or character on the part of any such holders of
any provision or condition of this Agreement must be made in writing and shall
be effective only to the extent specifically set forth in writing. Any amendment
or waiver effected in accordance with this paragraph shall be binding upon each
Holder of Registrable Shares and the Corporation. Each Holder acknowledges that
by operation of this paragraph the Holders of a majority of the Registrable
Shares, acting in conjunction with the Corporation, will have the right and
power to diminish or eliminate all rights pursuant to this Agreement.
14. SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided
herein, all covenants and agreements contained in this Agreement by or on behalf
of any of the parties hereto will bind and inure to the benefit of the
respective successors and assigns of the parties hereto, whether so expressed or
not. In addition and whether or not any express assignment has been made, the
provisions of this Agreement which are for the benefit of purchasers or holders
of Registrable Shares are also for the benefit of, and enforceable by, any
subsequent holder of Registrable Shares.
15. FINAL AGREEMENT. This Agreement constitutes the final agreement of
the parties concerning the matters referred to herein, and supersedes all prior
agreements and understandings.
16. SEVERABILITY. Whenever possible, each provision of this Agreement
will be interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Agreement is held to be prohibited by or
invalid under applicable law, such provision will be ineffective only to the
extent of such prohibition or invalidity, without invalidating the remainder of
this Agreement.
-15-
<PAGE> 16
17. DESCRIPTIVE HEADINGS. The descriptive headings of this Agreement
are inserted for convenience of reference only and do not constitute a part of
and shall not be utilized in interpreting this Agreement.
18. NOTICES. Any notices required or permitted to be sent hereunder
shall be delivered personally, telecopied (and confirmed) or mailed, certified
mail, return receipt requested, or delivered by overnight courier service to the
following addresses, or such other addresses as shall be given by notice
delivered hereunder, and shall be deemed to have been given upon delivery, if
delivered personally or telecopied, three business days after mailing, if
mailed, or one business day after delivery to the courier, if delivered by
overnight courier service:
If to the initial Holders of the Registrable Shares, to the addresses
set forth on Schedule 1 hereto.
If to the Holders of Registrable Shares other than the initial Holders
of the Registrable Shares, to the addresses set forth on the stock record books
of the Corporation.
If to the Corporation, to:
Federal-Mogul Corporation
26555 Northwestern Highway
Southfield, Michigan 48034
Facsimile: (248) 354-7999
Attention: Charles B. Grant
Vice President - Corporate Development
Diane L. Kaye, Esq.
Vice President, General Counsel and
Secretary
19. GOVERNING LAW. The validity, meaning and effect of this Agreement
shall be determined in accordance with the laws of the State of Illinois
applicable to contracts made and to be performed in that state.
20. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be deemed an
original, and such counterparts together shall constitute one instrument. Each
party shall receive a duplicate original of the counterpart copy or copies
executed by it and the Corporation.
[Remainder of page intentionally left blank.
Signature pages follow.]
-16-
<PAGE> 17
This Registration Agreement was executed as of the date first set forth
above.
FEDERAL-MOGUL CORPORATION
By:_________________________________________
Its:_____________________________________
INVESTORS:
THE INVESTORS AS LISTED ON
SCHEDULE 1 HERETO
By:__________________________________________
Richard A. Morris, under power-of-attorney
By:__________________________________________
Kenneth A. Lehman, under power-of-attorney
By:__________________________________________
David A. Weinberg, under power-of-attorney
-17-
<PAGE> 18
SCHEDULE 1
INVESTORS
- --------------------------------------------------------------------------------
MORRIS FAMILY
- --------------------------------------------------------------------------------
BRUCE MORRIS 1993 DESCENDANTS TRUST U/A/D 4/1/93
- --------------------------------------------------------------------------------
Bruce E. Morris, as Trustee and as Business Advisor
- --------------------------------------------------------------------------------
890 N W Torreyview Lane
Portland, OR 97229
- --------------------------------------------------------------------------------
Richard A. Morris, as Business Advisor
- --------------------------------------------------------------------------------
2323 Marcy
Evanston, IL 60202
- --------------------------------------------------------------------------------
Ellen J. Morris, as Business Advisor
- --------------------------------------------------------------------------------
4711 Golf Road
Suite 800
Skokie, IL 60076
- --------------------------------------------------------------------------------
BRUCE MORRIS 1997 CHILDREN'S TRUST U/A/D 11/3/97
- --------------------------------------------------------------------------------
Richard A. Morris, as Trustee and as Business Advisor
- --------------------------------------------------------------------------------
2323 Marcy
Evanston, IL 60202
- --------------------------------------------------------------------------------
BRUCE E. MORRIS FAMILY GIFT TRUST U/A/D 9/27/85
- --------------------------------------------------------------------------------
Bruce E. Morris, as Trustee and as Business Advisor
- --------------------------------------------------------------------------------
890 N W Torreyview Lane
Portland, OR 97229
- --------------------------------------------------------------------------------
Linda Morris, as Trustee
- --------------------------------------------------------------------------------
2323 Marcy
Evanston, IL 60202
- --------------------------------------------------------------------------------
CLARA MORRIS TRUST U/A/D 12/20/55
- --------------------------------------------------------------------------------
Robert J. Morris, as Trustee
MORRIS FAMILY
- --------------------------------------------------------------------------------
335 Sheridan Road
Winnetka, IL 60093
S-1
<PAGE> 19
- --------------------------------------------------------------------------------
Howard Gilbert, as Trustee
- --------------------------------------------------------------------------------
55 East Monroe
Suite 4100
Chicago, IL 60603
- --------------------------------------------------------------------------------
ELLEN J. MORRIS 1993 DESCENDANTS TRUST U/A/D 4/1/93
- --------------------------------------------------------------------------------
Ellen J. Morris, as Trustee and as Business Advisor
- --------------------------------------------------------------------------------
4711 Golf Road
Suite 800
Skokie, IL 60076
- --------------------------------------------------------------------------------
Bruce E. Morris, as Business Advisor
- --------------------------------------------------------------------------------
890 N W Torreyview Lane
Portland, OR 97229
- --------------------------------------------------------------------------------
Richard A. Morris, as Business Advisor
- --------------------------------------------------------------------------------
2323 Marcy
Evanston, IL 60202
- --------------------------------------------------------------------------------
ELLEN J. MORRIS 1997 CHILDREN'S TRUST U/A/D 11/3/97
- --------------------------------------------------------------------------------
Richard A. Morris, as Trustee and as Business Advisor
- --------------------------------------------------------------------------------
2323 Marcy
Evanston, IL 60202
- --------------------------------------------------------------------------------
ELLEN J. MORRIS FAMILY GIFT TRUST U/A/D 9/27/85
- --------------------------------------------------------------------------------
Ellen J. Morris, as Trustee and as Business Advisor
- --------------------------------------------------------------------------------
4711 Golf Road
Suite 800
Skokie, IL 60076
- --------------------------------------------------------------------------------
Linda Morris, as Trustee
- --------------------------------------------------------------------------------
2323 Marcy
Evanston, IL 60202
S-3
<PAGE> 20
- --------------------------------------------------------------------------------
MORRIS MGP TRUST FOR BRUCE U/A/D 6/23/96
- --------------------------------------------------------------------------------
Richard A. Morris, as Trustee and as Business Advisor
- --------------------------------------------------------------------------------
2323 Marcy
Evanston, IL 60202
- --------------------------------------------------------------------------------
Linda Morris, as Trustee
- --------------------------------------------------------------------------------
2323 Marcy
Evanston, IL 60202
- --------------------------------------------------------------------------------
MORRIS 1992 GIFT TRUST FOR ELLEN U/A/D 12/10/92
- --------------------------------------------------------------------------------
Ellen J. Morris, as Trustee and as Business Advisor
- --------------------------------------------------------------------------------
4711 Golf Road
Suite 800
Skokie, IL 60076
- --------------------------------------------------------------------------------
Audrey Morris, as Trustee
- --------------------------------------------------------------------------------
335 Sheridan Road
Winnetka, IL 60093
- --------------------------------------------------------------------------------
MORRIS 1992 GIFT TRUST FOR RICHARD U/A/D 12/10/92
- --------------------------------------------------------------------------------
Richard A. Morris, as Trustee and as Business Advisor
- --------------------------------------------------------------------------------
2323 Marcy
Evanston, IL 60202
- --------------------------------------------------------------------------------
Audrey Morris, as Trustee
- --------------------------------------------------------------------------------
335 Sheridan Road
Winnetka, IL 60093
- --------------------------------------------------------------------------------
MORRIS MERIDIAN TRUST FOR BRUCE U/A/D 6/23/96
- --------------------------------------------------------------------------------
Richard A. Morris, as Trustee and as Business Advisor
- --------------------------------------------------------------------------------
2323 Marcy
Evanston, IL 60202
- --------------------------------------------------------------------------------
Linda Morris, as Trustee
- --------------------------------------------------------------------------------
2323 Marcy
Evanston, IL 60202
S-4
<PAGE> 21
- --------------------------------------------------------------------------------
MORRIS 1992 GIFT TRUST FOR BRUCE U/A/D 12/10/92
- --------------------------------------------------------------------------------
Bruce E. Morris, as Trustee and as Business Advisor
- --------------------------------------------------------------------------------
890 N W Torreyview Lane
Portland, OR 97229
- --------------------------------------------------------------------------------
Audrey Morris, as Trustee
- --------------------------------------------------------------------------------
335 Sheridan Road
Winnetka, IL 60093
- --------------------------------------------------------------------------------
MORRIS MGP TRUST FOR ELLEN U/A/D 3/1/96
- --------------------------------------------------------------------------------
Ellen J. Morris, as Trustee and as Business Advisor
- --------------------------------------------------------------------------------
4711 Golf Road
Suite 800
Skokie, IL 60076
- --------------------------------------------------------------------------------
Linda Morris, as Trustee
- --------------------------------------------------------------------------------
2323 Marcy
Evanston, IL 60202
- --------------------------------------------------------------------------------
MORRIS MERIDIAN TRUST FOR RICHARD U/A/D 3/1/96
- --------------------------------------------------------------------------------
Richard A. Morris, as Trustee and as Business Advisor
- --------------------------------------------------------------------------------
2323 Marcy
Evanston, IL 60202
- --------------------------------------------------------------------------------
Linda Morris, as Trustee
- --------------------------------------------------------------------------------
2323 Marcy
Evanston, IL 60202
- --------------------------------------------------------------------------------
MORRIS MGP TRUST FOR RICHARD U/A/D 3/1/96
- --------------------------------------------------------------------------------
Richard A. Morris, as Trustee
- --------------------------------------------------------------------------------
2323 Marcy
Evanston, IL 60202
- --------------------------------------------------------------------------------
Linda Morris, as Trustee
- --------------------------------------------------------------------------------
2323 Marcy
Evanston, IL 60202
S-5
<PAGE> 22
- --------------------------------------------------------------------------------
MORRIS MERIDIAN TRUST FOR ELLEN U/A/D 3/1/96
- --------------------------------------------------------------------------------
Ellen J. Morris, as Trustee and as Business Advisor
- --------------------------------------------------------------------------------
4711 Golf Road
Suite 800
Skokie, IL 60076
- --------------------------------------------------------------------------------
Linda Morris, as Trustee
- --------------------------------------------------------------------------------
2323 Marcy
Evanston, IL 60202
- --------------------------------------------------------------------------------
RICHARD A. MORRIS 1993 DESCENDANTS TRUST U/A/D 4/1/93
- --------------------------------------------------------------------------------
Richard A. Morris, as Trustee and as Business Advisor
- --------------------------------------------------------------------------------
2323 Marcy
Evanston, IL 60202
- --------------------------------------------------------------------------------
Ellen J. Morris, as Business Advisor
- --------------------------------------------------------------------------------
4711 Golf Road
Suite 800
Skokie, IL 60076
- --------------------------------------------------------------------------------
Bruce E. Morris, as Business Advisor
- --------------------------------------------------------------------------------
890 N W Torreyview Lane
Portland, OR 97229
- --------------------------------------------------------------------------------
RICHARD A. MORRIS FAMILY GIFT TRUST U/A/D 9/27/85
- --------------------------------------------------------------------------------
Richard A. Morris, as Trustee
- --------------------------------------------------------------------------------
2323 Marcy
Evanston, IL 60202
- --------------------------------------------------------------------------------
Linda Morris, as Trustee
- --------------------------------------------------------------------------------
2323 Marcy
Evanston, IL 60202
- --------------------------------------------------------------------------------
Lowell Krischer, as Trustee
- --------------------------------------------------------------------------------
Apex Floor Covering
1714 South Halsted
Chicago, IL 60608
S-6
<PAGE> 23
- --------------------------------------------------------------------------------
Richard A. Morris, as Business Advisor
- --------------------------------------------------------------------------------
2323 Marcy
Evanston, IL 60202
- --------------------------------------------------------------------------------
RICHARD A. MORRIS 1997 CHILDREN'S TRUST U/A/D 10/31/97
- --------------------------------------------------------------------------------
Linda Morris, as Trustee and as Business Advisor
- --------------------------------------------------------------------------------
2323 Marcy
Evanston, IL 60202
- --------------------------------------------------------------------------------
Lowell Krischer, as Trustee
- --------------------------------------------------------------------------------
Apex Floor Covering
1714 South Halsted
Chicago, IL 60608
- --------------------------------------------------------------------------------
ROBERT J. MORRIS 1993 DESCENDANTS TRUST U/A/D 4/1/93
- --------------------------------------------------------------------------------
Robert J. Morris, as Trustee
- --------------------------------------------------------------------------------
335 Sheridan Road
Winnetka, IL 60093
- --------------------------------------------------------------------------------
Richard A. Morris, as Business Advisor
- --------------------------------------------------------------------------------
2323 Marcy
Evanston, IL 60202
- --------------------------------------------------------------------------------
Ellen J. Morris, as Business Advisor
- --------------------------------------------------------------------------------
4711 Golf Road
Suite 800
Skokie, IL 60076
- --------------------------------------------------------------------------------
Bruce E. Morris, as Business Advisor
- --------------------------------------------------------------------------------
890 N W Torreyview Lane
Portland, OR 97229
- --------------------------------------------------------------------------------
ROBERT J. MORRIS TRUST U/A/D 7/26/65
- --------------------------------------------------------------------------------
Robert J. Morris, as Trustee
- --------------------------------------------------------------------------------
335 Sheridan Road
Winnetka, IL 60093
S-7
<PAGE> 24
- --------------------------------------------------------------------------------
Howard Gilbert, as Trustee
- --------------------------------------------------------------------------------
55 East Monroe
Suite 4100
Chicago, IL 60603
- --------------------------------------------------------------------------------
ROBERT J. MORRIS REVOCABLE TRUST U/A/D 2/16/83
- --------------------------------------------------------------------------------
Robert J. Morris, as Trustee
- --------------------------------------------------------------------------------
335 Sheridan Road
Winnetka, IL 60093
- --------------------------------------------------------------------------------
ELLEN J. MORRIS
- --------------------------------------------------------------------------------
4711 Golf Road
Suite 800
Skokie, IL 60076
- --------------------------------------------------------------------------------
BRUCE E. MORRIS
- --------------------------------------------------------------------------------
890 N W Torreyview Lane
Portland, OR 97229
- --------------------------------------------------------------------------------
RICHARD A. MORRIS
- --------------------------------------------------------------------------------
2323 Marcy
Evanston, IL 60202
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
LEHMAN FAMILY
- --------------------------------------------------------------------------------
ELLIOT LEHMAN TRUST DATED 5/20/87
- --------------------------------------------------------------------------------
Elliot Lehman, as Trustee
- --------------------------------------------------------------------------------
1420 Sheridan Road, Apt. 9A
Wilmette, IL 60091
- --------------------------------------------------------------------------------
FRANCES M. LEHMAN TRUST DATED 5/20/87
- --------------------------------------------------------------------------------
Frances M. Lehman, as Trustee
- --------------------------------------------------------------------------------
1420 Sheridan Road, Apt. 9A
Wilmette, IL 60091
- --------------------------------------------------------------------------------
E. LEHMAN FIFTEEN YEAR INCOME TRUST
- --------------------------------------------------------------------------------
Kenneth A. Lehman, as Trustee
- --------------------------------------------------------------------------------
2715 Sheridan Road
S-8
<PAGE> 25
Evanston, IL 60201
- --------------------------------------------------------------------------------
Paul A. Lehman, as Trustee
- --------------------------------------------------------------------------------
1126 Michigan
Evanston, IL 60202
- --------------------------------------------------------------------------------
Kay Schlozman, as Trustee
- --------------------------------------------------------------------------------
45 Warren Street
Brookline, MA 02146
- --------------------------------------------------------------------------------
F. LEHMAN FIFTEEN YEAR INCOME TRUST
- --------------------------------------------------------------------------------
Kenneth A. Lehman, as Trustee
- --------------------------------------------------------------------------------
2715 Sheridan Road
Evanston, IL 60201
- --------------------------------------------------------------------------------
Paul A. Lehman, as Trustee
- --------------------------------------------------------------------------------
1126 Michigan
Evanston, IL 60202
- --------------------------------------------------------------------------------
Kay Schlozman, as Trustee
- --------------------------------------------------------------------------------
45 Warren Street
Brookline, MA 02146
- --------------------------------------------------------------------------------
KENNETH A. LEHMAN 1996 E FAMILY TRUST U/A/D 6/11/96
- --------------------------------------------------------------------------------
Paul A. Lehman, as Trustee
- --------------------------------------------------------------------------------
1126 Michigan
Evanston, IL 60202
- --------------------------------------------------------------------------------
Kenneth A. Lehman, as Trustee
- --------------------------------------------------------------------------------
2715 Sheridan Road
Evanston, IL 60201
- --------------------------------------------------------------------------------
Arthur W. Friedman, as Trustee
- --------------------------------------------------------------------------------
Miller Shakman Hamilton
208 S. LaSalle Street
Chicago, IL 60604
- --------------------------------------------------------------------------------
KENNETH A. LEHMAN 1996 F FAMILY TRUST U/A/D 6/11/96
- --------------------------------------------------------------------------------
Paul A. Lehman, as Trustee
- --------------------------------------------------------------------------------
1126 Michigan
Evanston, IL 60202
- --------------------------------------------------------------------------------
Kenneth A. Lehman, as Trustee
- --------------------------------------------------------------------------------
S-9
<PAGE> 26
2715 Sheridan Road
Evanston, IL 60201
- --------------------------------------------------------------------------------
Arthur W. Friedman, as Trustee
- --------------------------------------------------------------------------------
Miller Shakman Hamilton
208 S. LaSalle Street
Chicago, IL 60604
- --------------------------------------------------------------------------------
PAUL LEHMAN 1996 E FAMILY TRUST U/A/D 6/11/96
- --------------------------------------------------------------------------------
Paul A. Lehman, as Trustee
- --------------------------------------------------------------------------------
1126 Michigan
Evanston, IL 60202
- --------------------------------------------------------------------------------
Kenneth A. Lehman, as Trustee
- --------------------------------------------------------------------------------
2715 Sheridan Road
Evanston, IL 60201
- --------------------------------------------------------------------------------
Arthur W. Friedman, as Trustee
- --------------------------------------------------------------------------------
Miller Shakman Hamilton
208 S. LaSalle Street
Chicago, IL 60604
- --------------------------------------------------------------------------------
PAUL LEHMAN 1996 F FAMILY TRUST U/A/D 6/11/96
- --------------------------------------------------------------------------------
Paul A. Lehman, as Trustee
- --------------------------------------------------------------------------------
1126 Michigan
Evanston, IL 60202
- --------------------------------------------------------------------------------
Kenneth A. Lehman, as Trustee
- --------------------------------------------------------------------------------
2715 Sheridan Road
Evanston, IL 60201
- --------------------------------------------------------------------------------
Arthur W. Friedman, as Trustee
- --------------------------------------------------------------------------------
Miller Shakman Hamilton
208 S. LaSalle Street
Chicago, IL 60604
- --------------------------------------------------------------------------------
KAY LEHMAN SCHLOZMAN 1996 E FAMILY TRUST U/A/D 6/11/96
- --------------------------------------------------------------------------------
Kay Lehman Schlozman, as Trustee
- --------------------------------------------------------------------------------
45 Warren Street
Brookline, MA 02146
- --------------------------------------------------------------------------------
Kenneth A. Lehman, as Trustee
- --------------------------------------------------------------------------------
2715 Sheridan Road
S-10
<PAGE> 27
Evanston, IL 60201
- -------------------------------------------------------------------------------
Arthur W. Friedman, as Trustee
- --------------------------------------------------------------------------------
Miller Shakman Hamilton
208 S. LaSalle Street
Chicago, IL 60604
- --------------------------------------------------------------------------------
KAY LEHMAN SCHLOZMAN 1996 F FAMILY TRUST U/A/D 6/11/96
- --------------------------------------------------------------------------------
Kay Lehman Schlozman, Individually and as Trustee
- --------------------------------------------------------------------------------
45 Warren Street
Brookline, MA 02146
- --------------------------------------------------------------------------------
Kenneth A. Lehman, Individually and as Trustee
- --------------------------------------------------------------------------------
2715 Sheridan Road
Evanston, IL 60201
- --------------------------------------------------------------------------------
Arthur W. Friedman, as Trustee
- --------------------------------------------------------------------------------
Miller Shakman Hamilton
208 S. LaSalle Street
Chicago, IL 60604
- --------------------------------------------------------------------------------
LUCY G. LEHMAN
- --------------------------------------------------------------------------------
2715 Sheridan Road
Evanston, IL 60201
S-11
<PAGE> 28
- --------------------------------------------------------------------------------
STANLEY SCHLOZMAN
- --------------------------------------------------------------------------------
45 Warren Street
Brookline, MA 02146
- --------------------------------------------------------------------------------
PAUL A. LEHMAN
- --------------------------------------------------------------------------------
1126 Michigan
Evanston, IL 60202
- --------------------------------------------------------------------------------
RONNA STAMM
- --------------------------------------------------------------------------------
1126 Michigan
Evanston, IL 60202
- --------------------------------------------------------------------------------
KENNETH LEHMAN CHILDREN'S TRUST U/A/D 9/30/85 F/B/O BETSY GANFORD LEHMAN
- --------------------------------------------------------------------------------
Kenneth A. Lehman, as Trustee
- --------------------------------------------------------------------------------
2715 Sheridan Road
Evanston, IL 60201
- --------------------------------------------------------------------------------
Arthur W. Friedman, as Trustee
- --------------------------------------------------------------------------------
Miller Shakman Hamilton
208 S. LaSalle Street
Chicago, IL 60604
- --------------------------------------------------------------------------------
KENNETH LEHMAN CHILDREN'S TRUST U/A/D 9/30/85 F/B/O AMY GANFORD LEHMAN
- --------------------------------------------------------------------------------
Kenneth A. Lehman, as Trustee
- --------------------------------------------------------------------------------
2715 Sheridan Road
Evanston, IL 60201
- --------------------------------------------------------------------------------
Arthur W. Friedman, as Trustee
- --------------------------------------------------------------------------------
Miller Shakman Hamilton
208 S. LaSalle Street
Chicago, IL 60604
- --------------------------------------------------------------------------------
KENNETH LEHMAN CHILDREN'S TRUST U/A/D 9/30/85 F/B/O PETER GANFORD LEHMAN
- --------------------------------------------------------------------------------
Kenneth A. Lehman, as Trustee
- --------------------------------------------------------------------------------
2715 Sheridan Road
Evanston, IL 60201
- --------------------------------------------------------------------------------
Arthur W. Friedman, as Trustee
- --------------------------------------------------------------------------------
Miller Shakman Hamilton
208 S. LaSalle Street
Chicago, IL 60604
- --------------------------------------------------------------------------------
KAY SCHLOZMAN CHILDREN'S TRUST U/A/D 12/20/82
S-12
<PAGE> 29
- --------------------------------------------------------------------------------
Kay Schlozman, as Trustee
- --------------------------------------------------------------------------------
45 Warren Street
Brookline, MA 02146
- --------------------------------------------------------------------------------
Stanley Schlozman, as Trustee
- --------------------------------------------------------------------------------
45 Warren Street
Brookline, MA 02146
- --------------------------------------------------------------------------------
Kenneth A. Lehman, as Trustee
- --------------------------------------------------------------------------------
2715 Sheridan Road
Evanston, IL 60201
- --------------------------------------------------------------------------------
Paul A. Lehman, as Trustee
- --------------------------------------------------------------------------------
1126 Michigan
Evanston, IL 60202
- --------------------------------------------------------------------------------
SCHLOZMAN FAMILY TRUST U/A/D 9/30/85
- --------------------------------------------------------------------------------
Paul A. Lehman, as Trustee
- --------------------------------------------------------------------------------
1126 Michigan
Evanston, IL 60202
- --------------------------------------------------------------------------------
Arthur W. Friedman, as Trustee
- --------------------------------------------------------------------------------
Miller Shakman Hamilton
208 S. LaSalle Street
Chicago, IL 60604
- --------------------------------------------------------------------------------
Stanley Schlozman, as Business Advisor
- --------------------------------------------------------------------------------
45 Warren Street
Brookline, MA 02146
- --------------------------------------------------------------------------------
SCHLOZMAN FAMILY GIFT TRUST U/A/D 9/30/85
- --------------------------------------------------------------------------------
Kay L. Schlozman, as Trustee and Business Advisor
- --------------------------------------------------------------------------------
45 Warren Street
Brookline, MA 02146
- ------------------------------------------------------------------------------
Arthur W. Friedman, as Trustee
- --------------------------------------------------------------------------------
Miller Shakman Hamilton
208 S. LaSalle Street
Chicago, IL 60604
- --------------------------------------------------------------------------------
Stanley Schlozman, as Business Advisor
- --------------------------------------------------------------------------------
45 Warren Street
Brookline, MA 02146
S-13
<PAGE> 30
- --------------------------------------------------------------------------------
PAUL LEHMAN CHILDREN'S TRUST U/T/A DTD 12/20/82
- --------------------------------------------------------------------------------
Paul A. Lehman, as Trustee
- --------------------------------------------------------------------------------
1126 Michigan
Evanston, IL 60202
- --------------------------------------------------------------------------------
Ronna Stamm, as Trustee
- --------------------------------------------------------------------------------
1126 Michigan
Evanston, IL 60202
- --------------------------------------------------------------------------------
Kenneth A. Lehman, as Trustee
- --------------------------------------------------------------------------------
2715 Sheridan Road
Evanston, IL 60201
- --------------------------------------------------------------------------------
Kay Schlozman, as Trustee
- --------------------------------------------------------------------------------
45 Warren Street
Brookline, MA 02146
- --------------------------------------------------------------------------------
PAUL LEHMAN IRREVOCABLE CHILDREN'S TRUST U/A/D 9/30/85
- --------------------------------------------------------------------------------
Ronna Stamm, as Trustee
- --------------------------------------------------------------------------------
1126 Michigan
Evanston, IL 60202
- --------------------------------------------------------------------------------
Arthur W. Friedman, as Trustee
- --------------------------------------------------------------------------------
Miller Shakman Hamilton
208 S. LaSalle Street
Chicago, IL 60604
- --------------------------------------------------------------------------------
Kenneth A. Lehman, as Business Advisor
- --------------------------------------------------------------------------------
2715 Sheridan Road
Evanston, IL 60201
- --------------------------------------------------------------------------------
PAUL LEHMAN CHILDREN'S TRUST U/A/D 9/30/85
- --------------------------------------------------------------------------------
Paul A. Lehman, as Trustee
- --------------------------------------------------------------------------------
1126 Michigan
Evanston, IL 60202
S-14
<PAGE> 31
- --------------------------------------------------------------------------------
Arthur W. Friedman, as Trustee
- --------------------------------------------------------------------------------
Miller Shakman Hamilton
208 S. LaSalle Street
Chicago, IL 60604
- --------------------------------------------------------------------------------
BETSY GANFORD LEHMAN IRREVOCABLE TRUST NO. 1 U/A/D 12/22/83
- --------------------------------------------------------------------------------
Lucy G. Lehman, as Trustee
- --------------------------------------------------------------------------------
2715 Sheridan Road
Evanston, IL 60201
- --------------------------------------------------------------------------------
Stanley F. Schlozman, as Trustee
- --------------------------------------------------------------------------------
45 Warren Street
Brookline, MA 02146
- --------------------------------------------------------------------------------
BETSY GANFORD LEHMAN IRREVOCABLE TRUST NO. 2 U/A/D 9/30/85
- --------------------------------------------------------------------------------
Lucy G. Lehman, as Trustee
- --------------------------------------------------------------------------------
2715 Sheridan Road
Evanston, IL 60201
- --------------------------------------------------------------------------------
Arthur W. Friedman, as Trustee and Business Advisor
- --------------------------------------------------------------------------------
Miller Shakman Hamilton
208 S. LaSalle Street
Chicago, IL 60604
- --------------------------------------------------------------------------------
KENNETH LEHMAN CHILDREN'S TRUST U/A/D 12/20/82 F/B/O BETSY GANFORD LEHMAN
- --------------------------------------------------------------------------------
Kenneth A. Lehman, as Trustee
- --------------------------------------------------------------------------------
2715 Sheridan Road
Evanston, IL 60201
- --------------------------------------------------------------------------------
Lucy Lehman, as Trustee
- --------------------------------------------------------------------------------
2715 Sheridan Road
Evanston, IL 60201
- --------------------------------------------------------------------------------
Paul A. Lehman, as Trustee
- --------------------------------------------------------------------------------
1126 Michigan
Evanston, IL 60202
- --------------------------------------------------------------------------------
Kay Schlozman, as Trustee
- --------------------------------------------------------------------------------
45 Warren Street
Brookline, MA 02146
- --------------------------------------------------------------------------------
AMY GANFORD LEHMAN IRREVOCABLE TRUST NO. 1 DATED 12/22/83
S-15
<PAGE> 32
- --------------------------------------------------------------------------------
Lucy G. Lehman, as Trustee
- --------------------------------------------------------------------------------
2715 Sheridan Road
Evanston, IL 60201
- --------------------------------------------------------------------------------
Stanley F. Schlozman, as Trustee
- --------------------------------------------------------------------------------
45 Warren Street
Brookline, MA 02146
- --------------------------------------------------------------------------------
AMY GANFORD LEHMAN IRREVOCABLE TRUST NO. 2 U/A/D 9/30/85
- --------------------------------------------------------------------------------
Lucy G. Lehman, as Trustee
- --------------------------------------------------------------------------------
2715 Sheridan Road
Evanston, IL 60201
- --------------------------------------------------------------------------------
Arthur W. Friedman, as Trustee and Business Advisor
- --------------------------------------------------------------------------------
Miller Shakman Hamilton
208 S. LaSalle Street
Chicago, IL 60604
- --------------------------------------------------------------------------------
KENNETH LEHMAN CHILDREN'S TRUST U/A/D 12/20/82 F/B/O AMY GANFORD LEHMAN
- --------------------------------------------------------------------------------
Kenneth A. Lehman, as Trustee
- --------------------------------------------------------------------------------
2715 Sheridan Road
Evanston, IL 60201
- --------------------------------------------------------------------------------
Lucy Lehman, as Trustee
- --------------------------------------------------------------------------------
2715 Sheridan Road
Evanston, IL 60201
- --------------------------------------------------------------------------------
Paul A. Lehman, as Trustee
- --------------------------------------------------------------------------------
1126 Michigan
Evanston, IL 60202
- --------------------------------------------------------------------------------
Kay Schlozman, as Trustee
- --------------------------------------------------------------------------------
45 Warren Street
Brookline, MA 02146
- --------------------------------------------------------------------------------
PETER GANFORD LEHMAN IRREVOCABLE TRUST NO. 1 DATED 12/22/83
- --------------------------------------------------------------------------------
Lucy G. Lehman, as Trustee
- --------------------------------------------------------------------------------
2715 Sheridan Road
Evanston, IL 60201
- --------------------------------------------------------------------------------
Stanley F. Schlozman, as Trustee
- --------------------------------------------------------------------------------
45 Warren Street
S-16
<PAGE> 33
- --------------------------------------------------------------------------------
Brookline, MA 02146
- --------------------------------------------------------------------------------
PETER GANFORD LEHMAN IRREVOCABLE TRUST NO. 2 U/A/D 9/30/85
- --------------------------------------------------------------------------------
Lucy G. Lehman, as Trustee
- --------------------------------------------------------------------------------
2715 Sheridan Road
Evanston, IL 60201
- --------------------------------------------------------------------------------
Arthur W. Friedman, as Trustee and Business Advisor
- --------------------------------------------------------------------------------
Miller Shakman Hamilton
208 S. LaSalle Street
Chicago, IL 60604
- --------------------------------------------------------------------------------
KENNETH LEHMAN CHILDREN'S TRUST U/A/D 12/20/82 F/B/O PETER GANFORD LEHMAN
- --------------------------------------------------------------------------------
Kenneth A. Lehman, as Trustee
- --------------------------------------------------------------------------------
2715 Sheridan Road
Evanston, IL 60201
- --------------------------------------------------------------------------------
Lucy Lehman, as Trustee
- --------------------------------------------------------------------------------
2715 Sheridan Road
Evanston, IL 60201
- --------------------------------------------------------------------------------
Paul A. Lehman, as Trustee
- --------------------------------------------------------------------------------
1126 Michigan
Evanston, IL 60202
- --------------------------------------------------------------------------------
Kay Schlozman, as Trustee
- --------------------------------------------------------------------------------
45 Warren Street
Brookline, MA 02146
- --------------------------------------------------------------------------------
SCHLOZMAN 1994 GIFT TRUST FOR JULIA U/A/D 1/3/94
- --------------------------------------------------------------------------------
Stanley F. Schlozman, as Trustee
- --------------------------------------------------------------------------------
45 Warren Street
Brookline, MA 02146
- --------------------------------------------------------------------------------
Arthur W. Friedman, as Trustee
- --------------------------------------------------------------------------------
Miller Shakman Hamilton
208 S. LaSalle Street
Chicago, IL 60604
- --------------------------------------------------------------------------------
Paul A. Lehman, as Business Advisor
- --------------------------------------------------------------------------------
1126 Michigan
Evanston, IL 60202
S-17
<PAGE> 34
- --------------------------------------------------------------------------------
JONATHAN LEHMAN IRREVOCABLE TRUST NO. 1 DATED 12/22/83
- --------------------------------------------------------------------------------
Ronna Stamm, as Trustee
- --------------------------------------------------------------------------------
1126 Michigan
Evanston, IL 60202
- --------------------------------------------------------------------------------
Stanley F. Schlozman, as Trustee
- --------------------------------------------------------------------------------
45 Warren Street
Brookline, MA 02146
- --------------------------------------------------------------------------------
MICHAEL LEHMAN IRREVOCABLE TRUST NO. 1 DATED 12/22/83
- --------------------------------------------------------------------------------
Ronna Stamm, as Trustee
- --------------------------------------------------------------------------------
1126 Michigan
Evanston, IL 60202
- --------------------------------------------------------------------------------
Stanley F. Schlozman, as Trustee
- --------------------------------------------------------------------------------
45 Warren Street
Brookline, MA 02146
- --------------------------------------------------------------------------------
ELIZABETH LEHMAN IRREVOCABLE TRUST NO. 2 U/A/D 5/12/97
- --------------------------------------------------------------------------------
Arthur W. Friedman, as Trustee
- --------------------------------------------------------------------------------
Miller Shakman Hamilton
208 S. LaSalle Street
Chicago, IL 60604
- --------------------------------------------------------------------------------
Stanley F. Schlozman, as Trustee
- --------------------------------------------------------------------------------
45 Warren Street
Brookline, MA 02146
- --------------------------------------------------------------------------------
KAY LEHMAN SCHLOZMAN 1992E FAMILY TRUST U/A/D 12/11/92
- --------------------------------------------------------------------------------
Kay Lehman Schlozman, as Trustee
- --------------------------------------------------------------------------------
45 Warren Street
Brookline, MA 02146
S-18
<PAGE> 35
- --------------------------------------------------------------------------------
Arthur W. Friedman, as Trustee
- --------------------------------------------------------------------------------
Miller Shakman Hamilton
208 S. LaSalle Street
Chicago, IL 60604
- --------------------------------------------------------------------------------
Kenneth A. Lehman, as Trustee
- --------------------------------------------------------------------------------
2715 Sheridan Road
Evanston, IL 60201
- --------------------------------------------------------------------------------
KAY LEHMAN SCHLOZMAN 1992F FAMILY TRUST U/A/D 12/11/92
- --------------------------------------------------------------------------------
Kay Lehman Schlozman, as Trustee
- --------------------------------------------------------------------------------
45 Warren Street
Brookline, MA 02146
- --------------------------------------------------------------------------------
Arthur W. Friedman, as Trustee
- --------------------------------------------------------------------------------
Miller Shakman Hamilton
208 S. LaSalle Street
Chicago, IL 60604
- --------------------------------------------------------------------------------
Kenneth A. Lehman, as Trustee
- --------------------------------------------------------------------------------
2715 Sheridan Road
Evanston, IL 60201
- --------------------------------------------------------------------------------
KENNETH A. LEHMAN 1992E FAMILY TRUST U/A/D 12/11/92
- --------------------------------------------------------------------------------
Kenneth A. Lehman, as Trustee
- --------------------------------------------------------------------------------
2715 Sheridan Road
Evanston, IL 60201
- --------------------------------------------------------------------------------
Arthur W. Friedman, as Trustee
- --------------------------------------------------------------------------------
Miller Shakman Hamilton
208 S. LaSalle Street
Chicago, IL 60604
- --------------------------------------------------------------------------------
Paul A. Lehman, as Trustee
- --------------------------------------------------------------------------------
1126 Michigan
Evanston, IL 60202
- --------------------------------------------------------------------------------
KENNETH A. LEHMAN 1992F FAMILY TRUST U/A/D 12/11/92
- --------------------------------------------------------------------------------
Kenneth A. Lehman, as Trustee
- --------------------------------------------------------------------------------
2715 Sheridan Road
Evanston, IL 60201
- --------------------------------------------------------------------------------
Arthur W. Friedman, as Trustee
S-19
<PAGE> 36
- --------------------------------------------------------------------------------
Miller Shakman Hamilton
208 S. LaSalle Street
Chicago, IL 60604
- --------------------------------------------------------------------------------
Paul A. Lehman, as Trustee
- --------------------------------------------------------------------------------
1126 Michigan
Evanston, IL 60202
- --------------------------------------------------------------------------------
KENNETH A. LEHMAN 1993 DESCENDANTS TRUST U/A/D 4/1/93
- --------------------------------------------------------------------------------
Kenneth A. Lehman, as Trustee and Business Advisor
- --------------------------------------------------------------------------------
2715 Sheridan Road
Evanston, IL 60201
- --------------------------------------------------------------------------------
Paul A. Lehman, as Business Advisor
- --------------------------------------------------------------------------------
1126 Michigan
Evanston, IL 60202
- --------------------------------------------------------------------------------
Kay Lehman Schlozman, as Business Advisor
- --------------------------------------------------------------------------------
45 Warren Street
Brookline, MA 02146
- --------------------------------------------------------------------------------
LEHMAN 1993E DESCENDANTS TRUST U/A/D 4/1/93
- --------------------------------------------------------------------------------
Elliot Lehman, as Trustee
- --------------------------------------------------------------------------------
1420 Sheridan Road, Apt. 9A
Wilmette, IL 60091
- --------------------------------------------------------------------------------
Kenneth A. Lehman, as Business Advisor
- --------------------------------------------------------------------------------
2715 Sheridan Road
Evanston, IL 60201
- --------------------------------------------------------------------------------
Paul A. Lehman, as Business Advisor
- --------------------------------------------------------------------------------
1126 Michigan
Evanston, IL 60202
- --------------------------------------------------------------------------------
Kay Lehman Schlozman, as Business Advisor
- --------------------------------------------------------------------------------
45 Warren Street
Brookline, MA 02146
S-20
<PAGE> 37
- --------------------------------------------------------------------------------
LEHMAN 1993F DESCENDANTS TRUST U/A/D 4/1/93
- --------------------------------------------------------------------------------
Frances M. Lehman, as Trustee
- --------------------------------------------------------------------------------
1420 Sheridan Road, Apt. 9A
Wilmette, IL 60091
- --------------------------------------------------------------------------------
Kenneth A. Lehman, as Business Advisor
- --------------------------------------------------------------------------------
2715 Sheridan Road
Evanston, IL 60201
- --------------------------------------------------------------------------------
Paul A. Lehman, as Business Advisor
- --------------------------------------------------------------------------------
1126 Michigan
Evanston, IL 60202
- --------------------------------------------------------------------------------
Kay Lehman Schlozman, as Business Advisor
- --------------------------------------------------------------------------------
45 Warren Street
Brookline, MA 02146
- --------------------------------------------------------------------------------
PAUL A. LEHMAN 1993 DESCENDANTS TRUST U/A/D 4/1/93
- --------------------------------------------------------------------------------
Paul A. Lehman, as Trustee and Business Advisor
- --------------------------------------------------------------------------------
1126 Michigan
Evanston, IL 60202
- --------------------------------------------------------------------------------
Kenneth A. Lehman, as Business Advisor
- --------------------------------------------------------------------------------
2715 Sheridan Road
Evanston, IL 60201
- --------------------------------------------------------------------------------
Kay Lehman Schlozman, as Business Advisor
- --------------------------------------------------------------------------------
45 Warren Street
Brookline, MA 02146
- --------------------------------------------------------------------------------
PAUL LEHMAN 1992E FAMILY TRUST U/A/D 12/11/92
- --------------------------------------------------------------------------------
Paul A. Lehman, as Trustee
- --------------------------------------------------------------------------------
1126 Michigan
Evanston, IL 60202
- --------------------------------------------------------------------------------
Arthur W. Friedman, as Trustee
- --------------------------------------------------------------------------------
Miller Shakman Hamilton
208 S. LaSalle Street
Chicago, IL 60604
S-21
<PAGE> 38
- --------------------------------------------------------------------------------
Kenneth A. Lehman, as Trustee
- --------------------------------------------------------------------------------
2715 Sheridan Road
Evanston, IL 60201
- --------------------------------------------------------------------------------
PAUL LEHMAN 1992F FAMILY TRUST U/A/D 12/11/92
- --------------------------------------------------------------------------------
Paul A. Lehman, as Trustee
- --------------------------------------------------------------------------------
1126 Michigan
Evanston, IL 60202
- --------------------------------------------------------------------------------
Arthur W. Friedman, as Trustee
- --------------------------------------------------------------------------------
Miller Shakman Hamilton
208 S. LaSalle Street
Chicago, IL 60604
- --------------------------------------------------------------------------------
Kenneth A. Lehman, as Trustee
- --------------------------------------------------------------------------------
2715 Sheridan Road
Evanston, IL 60201
- --------------------------------------------------------------------------------
SCHLOZMAN 1993 DESCENDANTS TRUST U/A/D 4/1/93
- --------------------------------------------------------------------------------
Kay L. Schlozman, as Trustee and Business Advisor
- --------------------------------------------------------------------------------
45 Warren Street
Brookline, MA 02146
- --------------------------------------------------------------------------------
Kenneth A. Lehman, as Business Advisor
- --------------------------------------------------------------------------------
2715 Sheridan Road
Evanston, IL 60201
- --------------------------------------------------------------------------------
Paul A. Lehman, as Business Advisor
- --------------------------------------------------------------------------------
1126 Michigan
Evanston, IL 60202
- --------------------------------------------------------------------------------
DANIEL A. SCHLOZMAN TRUST NO. 1 U/A/D 12/31/81
- --------------------------------------------------------------------------------
Kenneth A. Lehman, as Trustee
- --------------------------------------------------------------------------------
2715 Sheridan Road
Evanston, IL 60201
- --------------------------------------------------------------------------------
Paul A. Lehman, as Trustee
- --------------------------------------------------------------------------------
1126 Michigan
Evanston, IL 60202
S-22
<PAGE> 39
- --------------------------------------------------------------------------------
DANIEL A. SCHLOZMAN TRUST NO. 2 U/A/D 12/31/81
- --------------------------------------------------------------------------------
Arthur W. Friedman, as Trustee
- --------------------------------------------------------------------------------
Miller Shakman Hamilton
208 S. LaSalle Street
Chicago, IL 60604
- --------------------------------------------------------------------------------
Paul A. Lehman, as Trustee
- --------------------------------------------------------------------------------
1126 Michigan
Evanston, IL 60202
- --------------------------------------------------------------------------------
KAY LEHMAN SCHLOZMAN 1997 CHILDREN'S TRUST U/A/D 11/3/97
- --------------------------------------------------------------------------------
Stanley F. Schlozman, as Trustee and Business Advisor
- --------------------------------------------------------------------------------
45 Warren Street
Brookline, MA 02146
- --------------------------------------------------------------------------------
Paul A. Lehman, as Trustee
- --------------------------------------------------------------------------------
1126 Michigan
Evanston, IL 60202
- --------------------------------------------------------------------------------
PAUL A. LEHMAN IRREVOCABLE FAMILY TRUST A U/A/D 11/3/97
- --------------------------------------------------------------------------------
Ronna Stamm, as Trustee
- --------------------------------------------------------------------------------
1126 Michigan
Evanston, IL 60202
- --------------------------------------------------------------------------------
Arthur W. Friedman, as Trustee
- --------------------------------------------------------------------------------
Miller Shakman Hamilton
208 S. LaSalle Street
Chicago, IL 60604
- --------------------------------------------------------------------------------
Kenneth A. Lehman, as Trustee
- --------------------------------------------------------------------------------
2715 Sheridan Road
Evanston, IL 60201
- --------------------------------------------------------------------------------
Kay L. Schlozman, as Trustee
- --------------------------------------------------------------------------------
45 Warren Street
Brookline, MA 02146
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
WEINBERG/RADOV/KESSLER FAMILY
- --------------------------------------------------------------------------------
SYLVIA M. RADOV
- --------------------------------------------------------------------------------
5757 Gulf of Mexico Drive
S-23
<PAGE> 40
- --------------------------------------------------------------------------------
Apt. 305
Longboat Key, FL 34228
- --------------------------------------------------------------------------------
SYLVIA M. RADOV REVOCABLE TRUST U/A/D 10/23/85
- --------------------------------------------------------------------------------
Sylvia M. Radov, as Trustee
- --------------------------------------------------------------------------------
5757 Gulf of Mexico Drive
Apt. 305
Longboat Key, FL 34228
- --------------------------------------------------------------------------------
LEWIS C. WEINBERG IRREVOCABLE TRUST DATED 8/12/76
- --------------------------------------------------------------------------------
Sylvia M. Radov, as Trustee
- --------------------------------------------------------------------------------
5757 Gulf of Mexico Drive
Apt. 305
Longboat Key, FL 34228
- --------------------------------------------------------------------------------
Barbara W. Kessler, as Trustee
- --------------------------------------------------------------------------------
170 Lakeside Place
Highland Park, IL 60035
- --------------------------------------------------------------------------------
David A. Weinberg, as Trustee
- --------------------------------------------------------------------------------
2135 N. Cleveland
Chicago, IL 60614
- --------------------------------------------------------------------------------
Daniel C. Weinberg, as Trustee
- --------------------------------------------------------------------------------
2581 Mace Rd.
Camino, CA 95709
- --------------------------------------------------------------------------------
Lewis C. Weinberg, as Trustee
- --------------------------------------------------------------------------------
505 N. Lake Shore Drive
#3707
Chicago, IL 60611
- --------------------------------------------------------------------------------
SYLVIA 1996 GIFT TRUST FOR BARBARA U/A/D 4/4/96
- --------------------------------------------------------------------------------
Barbara W. Kessler, as Trustee and as Business Advisor
- --------------------------------------------------------------------------------
170 Lakeside Place
Highland Park, IL 60035
S-24
<PAGE> 41
- --------------------------------------------------------------------------------
Allan B. Muchin, as Trustee
- --------------------------------------------------------------------------------
Katten Muchin & Zavis
525 West Monroe Street
Suite 1600
Chicago, IL 60661-13693
- --------------------------------------------------------------------------------
SYLVIA 1996 GIFT TRUST FOR DAVID U/A/D 4/4/96
- --------------------------------------------------------------------------------
David A. Weinberg, as Trustee and as Business Advisor
- --------------------------------------------------------------------------------
2135 N. Cleveland
Chicago, IL 60614
- --------------------------------------------------------------------------------
Allan B. Muchin, as Trustee
- --------------------------------------------------------------------------------
Katten Muchin & Zavis
525 West Monroe Street
Suite 1600
Chicago, IL 60661-13693
- --------------------------------------------------------------------------------
SYLVIA 1996 GIFT TRUST FOR DANIEL U/A/D 4/4/96
- --------------------------------------------------------------------------------
Daniel C. Weinberg, as Trustee and as Business Advisor
- --------------------------------------------------------------------------------
2581 Mace Rd.
Camino, CA 95709
- --------------------------------------------------------------------------------
Allan B. Muchin, as Trustee and as Business Advisor
- --------------------------------------------------------------------------------
Katten Muchin & Zavis
525 West Monroe Street
Suite 1600
Chicago, IL 60661-13693
- --------------------------------------------------------------------------------
David A. Weinberg, as Trustee and as Business Advisor
- --------------------------------------------------------------------------------
2135 N. Cleveland
Chicago, IL 60614
- --------------------------------------------------------------------------------
Dennis L. Kessler, as Trustee and as Business Advisor
- --------------------------------------------------------------------------------
170 Lakeside Place
Highland Park, IL 60035
- --------------------------------------------------------------------------------
BARBARA W. KESSLER REVOCABLE TRUST U/A/D 7/26/82
- --------------------------------------------------------------------------------
Barbara W. Kessler, as Trustee
- --------------------------------------------------------------------------------
170 Lakeside Place
Highland Park, IL 60035
S-25
<PAGE> 42
- --------------------------------------------------------------------------------
DENNIS L. KESSLER REVOCABLE TRUST U/A/D 7/26/82
- --------------------------------------------------------------------------------
Dennis L. Kessler, as Trustee
- --------------------------------------------------------------------------------
170 Lakeside Place
Highland Park, IL 60035
- --------------------------------------------------------------------------------
KESSLER FAMILY TRUST U/A/D 9/30/85
- --------------------------------------------------------------------------------
Dennis L. Kessler, as Trustee and as Business Advisor
- --------------------------------------------------------------------------------
170 Lakeside Place
Highland Park, IL 60035
- --------------------------------------------------------------------------------
Allan B. Muchin, as Trustee
- --------------------------------------------------------------------------------
Katten Muchin & Zavis
525 West Monroe Street
Suite 1600
Chicago, IL 60661-13693
- --------------------------------------------------------------------------------
DAVID A. WEINBERG ESTATE TRUST U/A/D 6/5/84
- --------------------------------------------------------------------------------
David A. Weinberg, as Trustee
- --------------------------------------------------------------------------------
2135 N. Cleveland
Chicago, IL 60614
- --------------------------------------------------------------------------------
DAW FAMILY TRUST U/A/D 9/30/85
- --------------------------------------------------------------------------------
Dennis L. Kessler, as Trustee and as Business Advisor
- --------------------------------------------------------------------------------
170 Lakeside Place
Highland Park, IL 60035
- --------------------------------------------------------------------------------
LCW-DCW FAMILY GIFT TRUST U/A/D 9/30/85
- --------------------------------------------------------------------------------
Daniel C. Weinberg, as Trustee and as Business Advisor
- --------------------------------------------------------------------------------
2581 Mace Rd.
Camino, CA 95709
- --------------------------------------------------------------------------------
Dennis L. Kessler, as Trustee and as Co-Business Advisor
- --------------------------------------------------------------------------------
170 Lakeside Place
Highland Park, IL 60035
- --------------------------------------------------------------------------------
David A. Weinberg, as Trustee and as Business Advisor
- --------------------------------------------------------------------------------
2135 N. Cleveland
Chicago, IL 60614
S-26
<PAGE> 43
- --------------------------------------------------------------------------------
Allan B. Muchin, as Trustee and as Co-Business Advisor
- --------------------------------------------------------------------------------
Katten Muchin & Zavis
525 West Monroe Street
Suite 1600
Chicago, IL 60661-13693
- --------------------------------------------------------------------------------
SMR-DCW FAMILY GIFT TRUST U/A/D 9/30/85
- --------------------------------------------------------------------------------
Daniel C. Weinberg, as Trustee and Business Advisor
- --------------------------------------------------------------------------------
2581 Mace Rd.
Camino, CA 95709
- --------------------------------------------------------------------------------
Dennis L. Kessler, as Trustee and Business Advisor
- --------------------------------------------------------------------------------
170 Lakeside Place
Highland Park, IL 60035
- --------------------------------------------------------------------------------
David A. Weinberg, as Trustee and Business Advisor
- --------------------------------------------------------------------------------
2135 N. Cleveland
Chicago, IL 60614
- --------------------------------------------------------------------------------
Allan B. Muchin, as Trustee and Business Advisor
- --------------------------------------------------------------------------------
Katten Muchin & Zavis
525 West Monroe Street
Suite 1600
Chicago, IL 60661-13693
- --------------------------------------------------------------------------------
DCW FAMILY TRUST U/A/D 9/30/85
- --------------------------------------------------------------------------------
Dennis L. Kessler, as Trustee
- --------------------------------------------------------------------------------
170 Lakeside Place
Highland Park, IL 60035
- --------------------------------------------------------------------------------
David A. Weinberg, as Trustee and as Business Advisor
- --------------------------------------------------------------------------------
2135 N. Cleveland
Chicago, IL 60614
- --------------------------------------------------------------------------------
Allan B. Muchin, as Trustee
- --------------------------------------------------------------------------------
Katten Muchin & Zavis
525 West Monroe Street
Suite 1600
Chicago, IL 60661-13693
S-27
<PAGE> 44
- --------------------------------------------------------------------------------
LEWIS C. WEINBERG GRANDCHILDRENS GIFT TRUST FOR KEITH ALBERT U/A/D 12/1/82
- --------------------------------------------------------------------------------
Barbara W. Kessler, as Trustee and as Business Advisor
- --------------------------------------------------------------------------------
170 Lakeside Place
Highland Park, IL 60035
- --------------------------------------------------------------------------------
Dennis L. Kessler, as Trustee
- --------------------------------------------------------------------------------
170 Lakeside Place
Highland Park, IL 60035
- --------------------------------------------------------------------------------
KEITH A. KESSLER
- --------------------------------------------------------------------------------
7391 S W 165th St.
Miami, FL 33157
- --------------------------------------------------------------------------------
LEWIS C. WEINBERG GRANDCHILDRENS GIFT TRUST FOR ARTHUR JAY U/A/D 12/1/82
- --------------------------------------------------------------------------------
Barbara W. Kessler, as Trustee and as Business Advisor
- --------------------------------------------------------------------------------
170 Lakeside Place
Highland Park, IL 60035
- --------------------------------------------------------------------------------
Dennis L. Kessler, as Trustee
- --------------------------------------------------------------------------------
170 Lakeside Place
Highland Park, IL 60035
- --------------------------------------------------------------------------------
LEWIS C. WEINBERG GRANDCHILDRENS GIFT TRUST FOR ERIC JOSEPH U/A/D 12/1/82
- --------------------------------------------------------------------------------
Barbara W. Kessler, as Trustee and as Business Advisor
- --------------------------------------------------------------------------------
170 Lakeside Place
Highland Park, IL 60035
- --------------------------------------------------------------------------------
Dennis L. Kessler, as Trustee
- --------------------------------------------------------------------------------
170 Lakeside Place
Highland Park, IL 60035
- --------------------------------------------------------------------------------
ERIC JOSEPH KESSLER IRREVOCABLE TRUST U/A/D 12/27/77
- --------------------------------------------------------------------------------
Barbara W. Kessler, as Trustee
- --------------------------------------------------------------------------------
170 Lakeside Place
Highland Park, IL 60035
- --------------------------------------------------------------------------------
Dennis L. Kessler, as Trustee
- --------------------------------------------------------------------------------
170 Lakeside Place
Highland Park, IL 60035
S-28
<PAGE> 45
- --------------------------------------------------------------------------------
David A. Weinberg, as Trustee
- --------------------------------------------------------------------------------
2135 N. Cleveland
Chicago, IL 60614
- --------------------------------------------------------------------------------
LEWIS C. WEINBERG GRANDCHILDRENS GIFT TRUST FOR MINDY JOY U/A/D 12/1/82
- --------------------------------------------------------------------------------
David A. Weinberg, as Trustee and as Business Advisor
- --------------------------------------------------------------------------------
2135 N. Cleveland
Chicago, IL 60614
- --------------------------------------------------------------------------------
Dennis L. Kessler, as Trustee
- --------------------------------------------------------------------------------
170 Lakeside Place
Highland Park, IL 60035
- --------------------------------------------------------------------------------
MINDY JOY WEINBERG IRREVOCABLE TRUST U/A/D 12/27/77
- --------------------------------------------------------------------------------
David A. Weinberg, as Trustee
- --------------------------------------------------------------------------------
2135 N. Cleveland
Chicago, IL 60614
- --------------------------------------------------------------------------------
Barbara W. Kessler, as Trustee
- --------------------------------------------------------------------------------
170 Lakeside Place
Highland Park, IL 60035
- --------------------------------------------------------------------------------
SMR-DAW CHILDREN'S GIFT TRUST FOR MINDY JOY U/A/D 12/13/82
- --------------------------------------------------------------------------------
David A. Weinberg, as Trustee and as Business Advisor
- --------------------------------------------------------------------------------
2135 N. Cleveland
Chicago, IL 60614
- --------------------------------------------------------------------------------
Dennis L. Kessler, as Trustee
- --------------------------------------------------------------------------------
170 Lakeside Place
Highland Park, IL 60035
- --------------------------------------------------------------------------------
LEWIS C. WEINBERG GRANDCHILDRENS GIFT TRUST FOR BRIAN LEE U/A/D 12/1/82
- --------------------------------------------------------------------------------
David A. Weinberg, as Trustee and as Business Advisor
- --------------------------------------------------------------------------------
2135 N. Cleveland
Chicago, IL 60614
- --------------------------------------------------------------------------------
Dennis L. Kessler, as Trustee
- --------------------------------------------------------------------------------
170 Lakeside Place
Highland Park, IL 60035
S-29
<PAGE> 46
- --------------------------------------------------------------------------------
BRIAN L. WEINBERG
- --------------------------------------------------------------------------------
1100 Meredith Ln.
Apt. 1012
Plano, TX 75093
- --------------------------------------------------------------------------------
SMR-DAW CHILDREN'S GIFT TRUST FOR BRIAN U/A/D 12/13/82
- --------------------------------------------------------------------------------
David A. Weinberg, as Trustee and as Business Advisor
- --------------------------------------------------------------------------------
2135 N. Cleveland
Chicago, IL 60614
- --------------------------------------------------------------------------------
Dennis L. Kessler, as Trustee
- --------------------------------------------------------------------------------
170 Lakeside Place
Highland Park, IL 60035
- --------------------------------------------------------------------------------
LEWIS C. WEINBERG GRANDCHILDRENS GIFT TRUST FOR ZACHARY DANIEL U/A/D 12/1/82
- --------------------------------------------------------------------------------
Daniel C. Weinberg, as Trustee and as Business Advisor
- --------------------------------------------------------------------------------
2581 Mace Rd.
Camino, CA 95709
- --------------------------------------------------------------------------------
Carol Jung (formerly known as Carol J. Weinberg), as Trustee
- --------------------------------------------------------------------------------
2010 Copperton Rd.
Camino, CA 95709
- --------------------------------------------------------------------------------
Allan B. Muchin, as Trustee
- --------------------------------------------------------------------------------
Katten Muchin & Zavis
525 West Monroe Street
Suite 1600
Chicago, IL 60661-13693
- --------------------------------------------------------------------------------
David A. Weinberg, as Trustee and as Business Advisor
- --------------------------------------------------------------------------------
2135 N. Cleveland
Chicago, IL 60614
- --------------------------------------------------------------------------------
ZACHARY DANIEL WEINBERG IRREVOCABLE TRUST U/A/D 12/31/81
- --------------------------------------------------------------------------------
Daniel C. Weinberg, as Trustee
- --------------------------------------------------------------------------------
2581 Mace Rd.
Camino, CA 95709
S-30
<PAGE> 47
- --------------------------------------------------------------------------------
Allan B. Muchin, as Trustee
- --------------------------------------------------------------------------------
Katten Muchin & Zavis
525 West Monroe Street
Suite 1600
Chicago, IL 60661-13693
- --------------------------------------------------------------------------------
Carol Jung (formerly known as Carol J. Weinberg), as Trustee
- --------------------------------------------------------------------------------
2010 Copperton Rd.
Camino, CA 95709
- --------------------------------------------------------------------------------
David A. Weinberg, as Trustee
- --------------------------------------------------------------------------------
2135 N. Cleveland
Chicago, IL 60614
- --------------------------------------------------------------------------------
ABIGAIL WEINBERG GIFT TRUST U/A/D 2/20/90
- --------------------------------------------------------------------------------
Daniel C. Weinberg, as Trustee and Business Advisor
- --------------------------------------------------------------------------------
2581 Mace Rd.
Camino, CA 95709
- --------------------------------------------------------------------------------
Dennis L. Kessler, as Trustee and Business Advisor
- --------------------------------------------------------------------------------
170 Lakeside Place
Highland Park, IL 60035
- --------------------------------------------------------------------------------
David A. Weinberg, as Trustee and Business Advisor
- --------------------------------------------------------------------------------
2135 N. Cleveland
Chicago, IL 60614
- --------------------------------------------------------------------------------
Allan B. Muchin, as Trustee and Business Advisor
- --------------------------------------------------------------------------------
Katten Muchin & Zavis
525 West Monroe Street
Suite 1600
Chicago, IL 60661-13693
- --------------------------------------------------------------------------------
ABIGAIL WEINBERG ANNUAL GIFT TRUST U/A/D 12/3/91
- --------------------------------------------------------------------------------
Dennis L. Kessler, as Trustee
- --------------------------------------------------------------------------------
170 Lakeside Place
Highland Park, IL 60035
- --------------------------------------------------------------------------------
David A. Weinberg, as Trustee and as Business Advisor
- --------------------------------------------------------------------------------
2135 N. Cleveland
Chicago, IL 60614
- --------------------------------------------------------------------------------
Allan B. Muchin, as Trustee
S-31
<PAGE> 48
- --------------------------------------------------------------------------------
Katten Muchin & Zavis
525 West Monroe Street
Suite 1600
Chicago, IL 60661-13693
- --------------------------------------------------------------------------------
CAROL JUNG
- --------------------------------------------------------------------------------
2010 Copperton Rd.
Camino, CA 95709
- --------------------------------------------------------------------------------
ARTHUR J. KESSLER
- --------------------------------------------------------------------------------
1039 W. Altgeld
Chicago, IL 60614
- --------------------------------------------------------------------------------
DANIEL C. WEINBERG 1993 DESCENDANTS TRUST U/A/D 4/1/93
- --------------------------------------------------------------------------------
Daniel C. Weinberg, as Trustee and as Business Advisor
- --------------------------------------------------------------------------------
2581 Mace Rd.
Camino, CA 95709
- --------------------------------------------------------------------------------
David A. Weinberg, as Business Advisor
- --------------------------------------------------------------------------------
2135 N. Cleveland
Chicago, IL 60614
- --------------------------------------------------------------------------------
Barbara W. Kessler, as Business Advisor
- --------------------------------------------------------------------------------
170 Lakeside Place
Highland Park, IL 60035
- --------------------------------------------------------------------------------
DANIEL C. WEINBERG REVOCABLE TRUST U/A/D 7/29/97
- --------------------------------------------------------------------------------
Daniel C. Weinberg, as Trustee
- --------------------------------------------------------------------------------
2581 Mace Rd.
Camino, CA 95709
- --------------------------------------------------------------------------------
DAVID A. WEINBERG 1993 DESCENDANTS TRUST U/A/D 4/1/93
- --------------------------------------------------------------------------------
David A. Weinberg, as Trustee and as Business Advisor
- --------------------------------------------------------------------------------
2135 N. Cleveland
Chicago, IL 60614
- --------------------------------------------------------------------------------
Daniel C. Weinberg, as Business Advisor
- --------------------------------------------------------------------------------
2581 Mace Rd.
Camino, CA 95709
S-32
<PAGE> 49
- --------------------------------------------------------------------------------
Barbara W. Kessler, as Business Advisor
- --------------------------------------------------------------------------------
170 Lakeside Place
Highland Park, IL 60035
- --------------------------------------------------------------------------------
KESSLER 1993 DESCENDANTS TRUST U/A/D 4/1/93
- --------------------------------------------------------------------------------
Barbara W. Kessler, as Trustee and as Business Advisor
- --------------------------------------------------------------------------------
170 Lakeside Place
Highland Park, IL 60035
- --------------------------------------------------------------------------------
David A. Weinberg, as Business Advisor
- --------------------------------------------------------------------------------
2135 N. Cleveland
Chicago, IL 60614
- --------------------------------------------------------------------------------
Daniel C. Weinberg, as Business Advisor
- --------------------------------------------------------------------------------
2581 Mace Rd.
Camino, CA 95709
- --------------------------------------------------------------------------------
KESSLER 1996 GIFT TRUST FOR DANIEL U/A/D 12/16/96
- --------------------------------------------------------------------------------
Daniel C. Weinberg, as Trustee and Business Advisor
- --------------------------------------------------------------------------------
2581 Mace Rd.
Camino, CA 95709
- --------------------------------------------------------------------------------
Allan B. Muchin, as Trustee and Business Advisor
- --------------------------------------------------------------------------------
Katten Muchin & Zavis
525 West Monroe Street
Suite 1600
Chicago, IL 60661-13693
- --------------------------------------------------------------------------------
Brian Weinberg, as Trustee and Business Advisor
- --------------------------------------------------------------------------------
1100 Meredith Ln.
Apt. 1012
Plano, TX 75093
- --------------------------------------------------------------------------------
Eric Kessler, as Trustee and Business Advisor
- --------------------------------------------------------------------------------
512 Elm Avenue
Tacoma Park, MD 20912
- --------------------------------------------------------------------------------
KESSLER 1996 GIFT TRUST FOR DAVID U/A/D 12/16/96
- --------------------------------------------------------------------------------
David A. Weinberg, as Trustee and as Business Advisor
- --------------------------------------------------------------------------------
2135 N. Cleveland
Chicago, IL 60614
- --------------------------------------------------------------------------------
Allan B. Muchin, as Trustee
S-33
<PAGE> 50
- --------------------------------------------------------------------------------
Katten Muchin & Zavis
525 West Monroe Street
Suite 1600
Chicago, IL 60661-13693
- --------------------------------------------------------------------------------
LEWIS 1992 GIFT TRUST FOR BARBARA U/A/D 12/10/92
- --------------------------------------------------------------------------------
Barbara W. Kessler, as Trustee and as Business Advisor
- --------------------------------------------------------------------------------
170 Lakeside Place
Highland Park, IL 60035
- --------------------------------------------------------------------------------
Allan B. Muchin, as Trustee
- --------------------------------------------------------------------------------
Katten Muchin & Zavis
525 West Monroe Street
Suite 1600
Chicago, IL 60661-13693
- --------------------------------------------------------------------------------
LEWIS 1992 GIFT TRUST FOR DANIEL U/A/D 12/10/92
- --------------------------------------------------------------------------------
Daniel C. Weinberg, as Trustee and Business Advisor
- --------------------------------------------------------------------------------
2581 Mace Rd.
Camino, CA 95709
- --------------------------------------------------------------------------------
Allan B. Muchin, as Trustee and Business Advisor
- --------------------------------------------------------------------------------
Katten Muchin & Zavis
525 West Monroe Street
Suite 1600
Chicago, IL 60661-13693
- --------------------------------------------------------------------------------
Dennis L. Kessler, as Trustee and Business Advisor
- --------------------------------------------------------------------------------
170 Lakeside Place
Highland Park, IL 60035
- --------------------------------------------------------------------------------
David A. Weinberg, as Trustee and Business Advisor
- --------------------------------------------------------------------------------
2135 N. Cleveland
Chicago, IL 60614
- --------------------------------------------------------------------------------
LEWIS 1992 GIFT TRUST FOR DAVID U/A/D 12/10/92
- --------------------------------------------------------------------------------
David A. Weinberg, as Trustee and as Business Advisor
- --------------------------------------------------------------------------------
2135 N. Cleveland
Chicago, IL 60614
S-34
<PAGE> 51
- --------------------------------------------------------------------------------
Allan B. Muchin, as Trustee
- --------------------------------------------------------------------------------
Katten Muchin & Zavis
525 West Monroe Street
Suite 1600
Chicago, IL 60661-13693
- --------------------------------------------------------------------------------
LEWIS 1993 DESCENDANTS TRUST U/A/D 4/1/93
- --------------------------------------------------------------------------------
Lewis C. Weinberg, as Trustee
- --------------------------------------------------------------------------------
505 N. Lake Shore Drive
#3707
Chicago, IL 60611
- --------------------------------------------------------------------------------
David A. Weinberg, as Business Advisor
- --------------------------------------------------------------------------------
2135 N. Cleveland
Chicago, IL 60614
- --------------------------------------------------------------------------------
Daniel C. Weinberg, as Business Advisor
- --------------------------------------------------------------------------------
2581 Mace Rd.
Camino, CA 95709
- --------------------------------------------------------------------------------
Barbara W. Kessler, as Business Advisor
- --------------------------------------------------------------------------------
170 Lakeside Place
Highland Park, IL 60035
- --------------------------------------------------------------------------------
SYLVIA 1992 GIFT TRUST FOR BARBARA U/A/D 12/10/92
- --------------------------------------------------------------------------------
Barbara W. Kessler, as Trustee and as Business Advisor
- --------------------------------------------------------------------------------
170 Lakeside Place
Highland Park, IL 60035
- --------------------------------------------------------------------------------
Allan B. Muchin, as Trustee
- --------------------------------------------------------------------------------
Katten Muchin & Zavis
525 West Monroe Street
Suite 1600
Chicago, IL 60661-13693
- --------------------------------------------------------------------------------
SYLVIA 1992 GIFT TRUST FOR DANIEL U/A/D 12/10/92
- --------------------------------------------------------------------------------
Daniel C. Weinberg, as Trustee and Business Advisor
- --------------------------------------------------------------------------------
2581 Mace Rd.
Camino, CA 95709
S-35
<PAGE> 52
- --------------------------------------------------------------------------------
Allan B. Muchin, as Trustee and Business Advisor
- --------------------------------------------------------------------------------
Katten Muchin & Zavis
525 West Monroe Street
Suite 1600
Chicago, IL 60661-13693
- --------------------------------------------------------------------------------
Dennis L. Kessler, as Trustee and Business Advisor
- --------------------------------------------------------------------------------
170 Lakeside Place
Highland Park, IL 60035
- --------------------------------------------------------------------------------
David A. Weinberg, as Trustee and Business Advisor
- --------------------------------------------------------------------------------
2135 N. Cleveland
Chicago, IL 60614
- --------------------------------------------------------------------------------
SYLVIA 1992 GIFT TRUST FOR DAVID U/A/D 12/10/92
- --------------------------------------------------------------------------------
David A. Weinberg, as Trustee and as Business Advisor
- --------------------------------------------------------------------------------
2135 N. Cleveland
Chicago, IL 60614
- --------------------------------------------------------------------------------
Allan B. Muchin, as Trustee
- --------------------------------------------------------------------------------
Katten Muchin & Zavis
525 West Monroe Street
Suite 1600
Chicago, IL 60661-13693
- --------------------------------------------------------------------------------
SYLVIA 1993 DESCENDANTS TRUST U/A/D 4/1/93
- --------------------------------------------------------------------------------
Sylvia M. Radov, as Trustee
- --------------------------------------------------------------------------------
5757 Gulf of Mexico Drive
Apt. 305
Longboat Key, FL 34228
- --------------------------------------------------------------------------------
David A. Weinberg, as Business Advisor
- --------------------------------------------------------------------------------
2135 N. Cleveland
Chicago, IL 60614
- --------------------------------------------------------------------------------
Daniel C. Weinberg, as Business Advisor
- --------------------------------------------------------------------------------
2581 Mace Rd.
Camino, CA 95709
- --------------------------------------------------------------------------------
Barbara W. Kessler, as Business Advisor
- --------------------------------------------------------------------------------
170 Lakeside Place
Highland Park, IL 60035
S-36
<PAGE> 53
- --------------------------------------------------------------------------------
SYLVIA MGP TRUST FOR BARBARA U/A/D 6/1/96
- --------------------------------------------------------------------------------
Barbara W. Kessler, as Trustee and as Business Advisor
- --------------------------------------------------------------------------------
170 Lakeside Place
Highland Park, IL 60035
- --------------------------------------------------------------------------------
Allan B. Muchin, as Trustee
- --------------------------------------------------------------------------------
Katten Muchin & Zavis
525 West Monroe Street
Suite 1600
Chicago, IL 60661-13693
- --------------------------------------------------------------------------------
SYLVIA MGP TRUST FOR DANIEL U/A/D 6/1/96
- --------------------------------------------------------------------------------
Daniel C. Weinberg, as Trustee and Business Advisor
- --------------------------------------------------------------------------------
2581 Mace Rd.
Camino, CA 95709
- --------------------------------------------------------------------------------
Allan B. Muchin, as Trustee and Business Advisor
- --------------------------------------------------------------------------------
Katten Muchin & Zavis
525 West Monroe Street
Suite 1600
Chicago, IL 60661-13693
- --------------------------------------------------------------------------------
Dennis L. Kessler, as Trustee and Business Advisor
- --------------------------------------------------------------------------------
170 Lakeside Place
Highland Park, IL 60035
- --------------------------------------------------------------------------------
David A. Weinberg, as Trustee and Business Advisor
- --------------------------------------------------------------------------------
2135 N. Cleveland
Chicago, IL 60614
- --------------------------------------------------------------------------------
SYLVIA MGP TRUST FOR DAVID U/A/D 6/1/96
- --------------------------------------------------------------------------------
David A. Weinberg, as Trustee and as Business Advisor
- --------------------------------------------------------------------------------
2135 N. Cleveland
Chicago, IL 60614
- --------------------------------------------------------------------------------
Allan B. Muchin, as Trustee
- --------------------------------------------------------------------------------
Katten Muchin & Zavis
525 West Monroe Street
Suite 1600
Chicago, IL 60661-13693
S-37
<PAGE> 54
- --------------------------------------------------------------------------------
WEINBERG 1992 GIFT TRUST FOR BARBARA U/A/D 12/10/92
- --------------------------------------------------------------------------------
Barbara W. Kessler, as Trustee and as Business Advisor
- --------------------------------------------------------------------------------
170 Lakeside Place
Highland Park, IL 60035
- --------------------------------------------------------------------------------
Allan B. Muchin, as Trustee
- --------------------------------------------------------------------------------
Katten Muchin & Zavis
525 West Monroe Street
Suite 1600
Chicago, IL 60661-13693
- --------------------------------------------------------------------------------
WEINBERG 1992 GIFT TRUST FOR DANIEL U/A/D 12/10/92
- --------------------------------------------------------------------------------
Daniel C. Weinberg, as Trustee and Business Advisor
- --------------------------------------------------------------------------------
2581 Mace Rd.
Camino, CA 95709
- --------------------------------------------------------------------------------
Allan B. Muchin, as Trustee and Business Advisor
- --------------------------------------------------------------------------------
Katten Muchin & Zavis
525 West Monroe Street
Suite 1600
Chicago, IL 60661-13693
- --------------------------------------------------------------------------------
Dennis L. Kessler, as Trustee and Business Advisor
- --------------------------------------------------------------------------------
170 Lakeside Place
Highland Park, IL 60035
- --------------------------------------------------------------------------------
David A. Weinberg, as Trustee and Business Advisor
- --------------------------------------------------------------------------------
2135 N. Cleveland
Chicago, IL 60614
- --------------------------------------------------------------------------------
WEINBERG 1992 GIFT TRUST FOR DAVID U/A/D 12/10/92
- --------------------------------------------------------------------------------
David A. Weinberg, as Trustee and as Business Advisor
- --------------------------------------------------------------------------------
2135 N. Cleveland
Chicago, IL 60614
- --------------------------------------------------------------------------------
Allan B. Muchin, as Trustee
- --------------------------------------------------------------------------------
Katten Muchin & Zavis
525 West Monroe Street
Suite 1600
Chicago, IL 60661-13693
S-38
<PAGE> 55
- --------------------------------------------------------------------------------
DENNIS L. KESSLER 1997 CHILDREN'S TRUST U/A/D 11/3/97
- --------------------------------------------------------------------------------
David A. Weinberg, as Trustee
- --------------------------------------------------------------------------------
2135 N. Cleveland
Chicago, IL 60614
- --------------------------------------------------------------------------------
Barbara W. Kessler, as Trustee and as Business Advisor
- --------------------------------------------------------------------------------
170 Lakeside Place
Highland Park, IL 60035
- --------------------------------------------------------------------------------
KEITH A. KESSLER 1997 CHILDREN'S TRUST U/A/D 11/3/97
- --------------------------------------------------------------------------------
Barbara W. Kessler, as Trustee and as Business Advisor
- --------------------------------------------------------------------------------
170 Lakeside Place
Highland Park, IL 60035
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
S-39
<PAGE> 1
EXHIBIT 4.11
CERTIFICATE OF DESIGNATIONS
OF
SERIES E MANDATORY EXCHANGEABLE PREFERRED STOCK
OF
FEDERAL-MOGUL CORPORATION
PURSUANT TO SECTION 21.200(302) OF THE
MICHIGAN BUSINESS CORPORATION ACT
FEDERAL-MOGUL CORPORATION (the "Corporation"), a corporation organized and
existing under the Michigan Business Corporation Act, hereby certifies, pursuant
to Section 21.200(302) of the Michigan Business Corporation Act, that on
February 4, 1998 the following resolution was adopted by the Board of Directors
of the Corporation:
RESOLVED, that, pursuant to the authority granted to and vested in the
Board of Directors of the Corporation (hereinafter referred to as the "Board of
Directors" or the "Board") by the provisions of the Second Restated Articles of
Incorporation, as amended, of the Corporation and the Michigan Business
Corporation Act, the Board of Directors hereby creates a series of Preferred
Stock of the Corporation and hereby states the designation and number of
shares, and fixes the relative rights, preferences and limitations thereof, as
follows:
Section 1. Designation; Number of Shares; Special Purpose.
(a) The shares of this series of Preferred Stock shall be designated as
Series E Mandatory Exchangeable Preferred Stock (the "Exchangeable Preferred
Stock"), and the number of shares constituting such series shall be 1,050,000.
(b) Shares of Exchangeable Preferred Stock shall be issued by the
Corporation only as consideration in connection with the Corporation's
acquisition of certain equity interests pursuant to the Equity Purchase
Agreement (the "Agreement"), dated as of January 9, 1998, by and among the
Corporation and the Sellers named therein, and such shares of Exchangeable
Preferred Stock shall be issued to the Sellers upon the consummation of the
transactions contemplated by the Agreement.
Section 2. Dividends and Distributions.
(a) The holders of outstanding shares of Exchangeable Preferred Stock
shall be entitled to receive, when, as and if declared by the Board of
Directors, out of funds at the time legally available therefor, a cash dividend
(a "Cash Dividend") in an amount equal to $2.40 per share per annum, which
shall be fully cumulative, and shall be payable quarterly in arrears, in an
amount of $0.60 per quarter, on the last day of each of March, June, September
and December (each such date, a "Cash Dividend Payment Date"), commencing on
March 31, 1998, to holders
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<PAGE> 2
of record of Exchangeable Preferred Stock at the start of business on the tenth
Business Day (as defined in Section 8(f) hereof) prior to such Cash Dividend
Payment Date; provided, however, that in the event that the outstanding shares
of Exchangeable Preferred Stock are not exchanged for common stock of the
Corporation ("Common Stock") by the Corporation pursuant to Section 6(a) hereof
on or prior to February 24, 1999, the amount of the Cash Dividend thereafter
shall equal the Increased Dividend Amount for the relevant period, and shall be
payable quarterly in arrears. The amount of the Cash Dividend payable in
respect of any period in which the applicable per annum dividend amount is
increased pursuant to the preceding sentence shall be computed based on the
actual number of days in such period during which each per annum dividend
amount is in effect. The amount of the Cash Dividend payable in respect of the
initial Cash Dividend Payment Date and in respect of any other period shorter
than a full quarterly period shall be computed on the basis of the actual
number of days in such period and the actual number of days in the year. In
the event that any Cash Dividend Payment Date shall fall on any day other than
a Business Day, the dividend payment due on such Cash Dividend Payment Date
shall be paid on the Business Day immediately preceding such Cash Dividend
Payment Date. Cash Dividends shall begin to accrue on outstanding shares of
Exchangeable Preferred Stock from the initial issuance thereof and shall accrue
on a daily basis whether or not the Corporation shall have earnings or surplus
at the time. Unpaid Cash Dividends shall cumulate as of the Cash Dividend
Payment Date on which they first become payable. No interest shall be payable
in respect of any Cash Dividend that may be in arrears. With respect to any
share of Exchangeable Preferred Stock, all accrued and unpaid Cash Dividends to
the Exchange Date (as defined in Section 2(e) hereof) with respect to such
share shall be payable by the Corporation out of funds legally available
therefor on such Exchange Date.
(b) The "Increased Dividend Amount" shall equal: (i) from 12 months after
closing to 13 months after closing, $14.35 per annum, (ii) from 13 months after
closing to 14 months after closing, $16.40 per annum, (iii) from 14 months after
closing to 15 months after closing, $18.45 per annum, (iv) from 15 months after
closing to 16 months after closing, $20.50 per annum, (v) from 16 months after
closing to 17 months after closing, $22.55 per annum, (vi) from 17 months after
closing to 18 months after closing, $24.60 per annum, and (vii) thereafter
$26.65 per annum.
(c) In the event that the Corporation declares or pays or sets apart for
payment any dividend (a "Securities Dividend") with respect to the Common Stock
that is payable in the form of securities of the Corporation (other than
pursuant to a transaction of the type described in Section 8(b) hereof), the
Corporation shall declare or pay or set apart for payment, as the case may be,
a per share dividend (a "Preferred Securities Dividend") with respect to the
Exchangeable Preferred Stock in the same form of the Securities Dividend and
equal to the Securities Dividend paid or declared or set apart for payment, as
the case may be, on that number of shares of Common Stock equal to the number
of shares of Common Stock for which such share of Exchangeable Preferred Stock
would be exchanged (assuming the conditions precedent to such exchange had
occurred in accordance with the terms hereof) pursuant to Section 6 hereof on
the record date for such Securities Dividend. Any Preferred Securities
Dividend shall be payable to the holders of record of Exchangeable Preferred
Stock at the start of business on the record date for the related Securities
Dividend.
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<PAGE> 3
(d) In the event that full cumulative Cash Dividends on the Exchangeable
Preferred Stock and any payable Preferred Securities Dividend have not been
declared and paid or set apart for payment, the Corporation shall not declare
or pay or set apart for payment any dividends or make any other distributions
on, or make any payment on account of the purchase, redemption or other
retirement of the Common Stock until full cumulative Cash Dividends on the
Exchangeable Preferred Stock and any payable Preferred Securities Dividend
shall have been paid or declared and set apart for payment; provided, however,
that the foregoing shall not apply to (i) any dividend payable solely in shares
of Common Stock or in shares of any stock of the Corporation ranking, as to
dividends or as to distributions in the event of a liquidation, dissolution or
winding-up of the Corporation, on parity with or junior to the Exchangeable
Preferred Stock, or (ii) the acquisition of shares of Common Stock either (A)
pursuant to any employee or director incentive or benefit plan or arrangement
of the Corporation or any subsidiary of the Corporation (including any
employment, severance or consulting agreement) heretofore or hereafter adopted,
(B) pursuant to any contractual or other obligation of the Company existing as
of the date of the initial issuance of the Exchangeable Preferred Stock, as the
same may be amended, extended or renewed, or (C) in exchange solely for shares
of Common Stock or any other stock ranking, as to dividends and as to
distributions in the event of a liquidation, dissolution or winding-up of the
Corporation, on parity with or junior to the Exchangeable Preferred Stock.
(e) With respect to any share of Exchangeable Preferred Stock, from and
after the earlier of the effective date of the conversion of such share
pursuant to Section 5 hereof and the Effective Date (such earlier date, the
"Exchange Date"), no dividends shall accrue with respect to such share.
Section 3. Voting Rights. Except as otherwise required by law, holders
of Exchangeable Preferred Stock shall have no voting rights and their consent
shall not be required for the taking of any corporate action; provided,
however, that in the event the Exchangeable Preferred Stock is not exchanged
for Common Stock pursuant to Section 6 hereof on or prior to February 24, 1999,
the holders of Exchangeable Preferred Stock shall thereafter be entitled to
vote with the holders of Common Stock as a single class, and for such purposes,
each share of Exchangeable Preferred Stock shall be treated as equal to the
number of shares of Common Stock for which such share of Exchangeable Preferred
Stock would be exchanged (assuming the conditions precedent to such exchange
had occurred in accordance with the terms hereof) pursuant to Section 6 hereof
on the record date with respect to the matter to be voted upon.
Section 4. Liquidation, Dissolution or Winding-Up.
(a) Upon any voluntary or involuntary liquidation, dissolution or
winding-up of the Corporation, the holders of Exchangeable Preferred Stock
shall be entitled to receive out of assets of the Corporation which remain
after satisfaction in full of all valid claims of creditors of the Corporation
and which are available for payment to stockholders, and subject to the rights
of the holders of any stock of the Corporation ranking senior to or on parity
with the Exchangeable Preferred Stock in respect of distributions upon
liquidation, dissolution or winding-up of the
3
<PAGE> 4
Corporation, an amount per share of Exchangeable Preferred Stock equal to the
amount that shall be paid or distributed with respect to the number of shares
of Common Stock for which such share of Exchangeable Preferred Stock would be
exchanged pursuant to Section 6 hereof (assuming the conditions precedent to
such exchange had occurred in accordance with the terms hereof) on the record
date for such payment or distribution, rounded to the nearest one-tenth of a
share; it being understood that whenever the Exchange Ratio is adjusted as
provided in Section 8 hereof, the rights of the holders of Exchangeable
Preferred Stock to receive distributions and payments pursuant to this Section
4(a) shall be similarly adjusted. The holders of shares of Exchangeable
Preferred Stock shall be treated as holders of the number of shares of Common
Stock for which such shares of Exchangeable Preferred Stock would then be
exchanged pursuant to Section 6 hereof (assuming the conditions precedent to
such exchange had occurred in accordance with the terms hereof) for all
purposes in connection with determining the payments and distributions such
holders may be entitled to pursuant to this Section 4(a), including, without
limitation, the determination of the aggregate and per share amounts to be
distributed to the holders of Common Stock and Exchangeable Preferred Stock.
(b) Neither the merger or consolidation of the Corporation with or into
any other corporation, nor the merger or consolidation of any other corporation
with or into the Corporation, nor the sale, lease, transfer or other exchange
of all or any portion of the assets of the Corporation, shall be deemed to be a
dissolution, liquidation or winding-up of the affairs of the Corporation for
purposes of this Section 4.
Section 5. Optional Conversion into Common Stock.
(a) In the event the Corporation makes a Qualified Public Offering (as
defined below), each holder of shares of Exchangeable Preferred Stock shall be
entitled to have a number of shares (determined pursuant to Section 5(b)
hereof) of Exchangeable Preferred Stock converted upon the closing of such
Qualified Public Offering into shares of Common Stock for the purpose of the
secondary sale of such shares of Common Stock in such Qualified Public
Offering; provided, however, that, with respect to any shares of Common Stock
to be included in any over-allotment option granted in connection with such
Qualified Public Offering, the corresponding shares of Exchangeable Preferred
Stock shall be converted into Common Stock only upon the closing of a sale
pursuant to such over-allotment option. Shares of Exchangeable Preferred Stock
to be converted into Common Stock in connection with a Qualified Public
Offering shall be converted at the Exchange Ratio in effect at the time of the
closing of the Qualified Public Offering; provided, however, that, with respect
to any shares of Common Stock to be included in any over-allotment option
granted in connection with such Qualified Public Offering, the corresponding
shares of Exchangeable Preferred Stock shall be converted at the Exchange Ratio
in effect at the time of the closing of a sale pursuant to such over-allotment
option. The term "Qualified Public Offering" shall mean the first underwritten
offering of Common Stock made by the Corporation for its own account after the
date hereof and prior to January 1, 1999 pursuant to an effective registration
statement under the Securities Act of 1933, as amended (the "Securities Act").
4
<PAGE> 5
(b) In the event that the Corporation proposes to file a registration
statement under the Securities Act with respect to a Qualified Public Offering,
the Corporation shall give written notice (the "Offering Notice") of such
proposed filing to the holders of Exchangeable Preferred Stock at least 21 days
prior to the anticipated filing date. The maximum aggregate number of shares of
Common Stock which holders may receive upon conversion of Exchangeable
Preferred Stock in connection with the Qualified Public Offering shall equal
the aggregate number of shares of Common Stock that is to be sold by holders of
Exchangeable Preferred Stock in such Qualified Public Offering and in the
over-allotment option granted to the underwriters in connection with such
Qualified Public Offering.
(c) Within 14 days after the Offering Notice is given, any holder that
elects to have shares of Exchangeable Preferred Stock converted into shares of
Common Stock pursuant to this Section 5 shall surrender the certificate or
certificates representing such shares of Exchangeable Preferred Stock, duly
assigned or endorsed for transfer to the underwriters of the Qualified Public
Offering (or accompanied by duly executed stock powers relating thereto), at
the principal executive office of the Corporation or such other place as the
Corporation shall direct. Such shares shall be accompanied by a signed notice
of conversion which shall state that such holder elects to convert shares
pursuant to, and in accordance with, this Section 5 and shall specify (i) the
number of shares of Exchangeable Preferred Stock such holder elects to convert,
(ii) the name or names in which a check or checks from the underwriters shall
be made payable in consideration for any shares of Common Stock sold in the
Qualified Public Offering and in which a new certificate or certificates
representing shares of Exchangeable Preferred Stock not converted shall be
issued, and (iii) the address to which such holder wishes delivery to be made
of such checks and certificates.
(d) On the closing date of the Qualified Public Offering or the closing
date of the sale pursuant to the related over-allotment option, as the case may
be, the Corporation shall issue and send to the managing underwriter or
underwriters or to the designee of the managing underwriter or underwriters, in
the name and at the address designated by the managing underwriter or
underwriters, a certificate or certificates representing the number of shares
of Common Stock into which shares of Exchangeable Preferred Stock shall have
been converted pursuant to this Section 5. In the event that there shall have
been surrendered a certificate or certificates representing shares of
Exchangeable Preferred Stock only a portion of which are converted pursuant to
this Section 5, after the closing or expiration of any over-allotment option
granted in connection with the Qualified Public Offering, the Corporation shall
issue and deliver to the surrendering holder of such shares or such holder's
designee a new certificate or certificates representing the number of shares of
Exchangeable Preferred Stock which shall not have been converted.
(e) The issuance by the Corporation of shares of Common Stock upon a
conversion of shares of Exchangeable Preferred Stock pursuant to this Section 5
shall be effective as of the closing of the Qualified Public Offering or the
closing of the related over-allotment option, as the case may be. On and after
the effective date of such conversion, the person or persons entitled to
receive the Common Stock issuable upon such conversion shall be treated for all
purposes as the record holder or holders of such shares of Common Stock, but no
payment, allowance or
5
<PAGE> 6
adjustment shall be made in respect of dividends or distributions
payable to holders of Common Stock the record date for which coincides with or
is prior to such effective date. In the event a proposed Qualified Public
Offering is not completed or a sale pursuant to the related over-allotment
option is not made, as the case may be, the shares of Exchangeable Preferred
Stock that a holder elected to convert into Common Stock in connection with
such proposed offering or such over-allotment option, as the case may be, shall
not be converted to Common Stock, and the certificates for such shares of
Exchangeable Preferred Stock shall be returned to the holder that surrendered
such shares to the Corporation.
(f) The Corporation shall not be obligated to deliver to holders of
Exchangeable Preferred Stock any fractional share or shares of Common Stock
issuable upon any conversion of such shares of Exchangeable Preferred Stock,
but in lieu thereof may make a cash payment in respect thereof in any manner
permitted by law.
Section 6. Mandatory Exchange.
(a) On the earlier of (i) the date which is fifteen business days after
the date on which the Corporation receives from the holders of at least
two-thirds of the outstanding shares of Exchangeable Preferred Stock written
consents to the exchange of Exchangeable Preferred Stock for Common Stock
pursuant to this Section 6(a), (ii) the effective date of the registration
statement filed in connection with the first request for registration pursuant
to Section 2(a) of the Registration Agreement, and (iii) February 24, 1999, all
outstanding shares of Exchangeable Preferred Stock shall be exchanged by the
Corporation for shares of Common Stock at the Exchange Ratio in effect at the
time such exchange is consummated, which exchange shall be effective as of such
date; provided, however, that no shares of Exchangeable Preferred Stock shall
be exchanged for shares of Common Stock until the Corporation's Second Restated
Articles of Incorporation have been amended to authorize additional shares of
Common Stock for issuance; and provided, further, that in the event that by
operation of the preceding proviso the Exchangeable Preferred Stock has not
been exchanged for Common Stock by February 24, 1999, all outstanding shares of
Exchangeable Preferred Stock shall be exchanged by the Corporation for shares
of Common Stock on the date which is fifteen business days after the date on
which the Corporation's Second Restated Articles of Incorporation are amended
to authorize additional shares of Common Stock for issuance.
(b) At least 5 days prior to the effective date (the "Effective Date") of
the exchange made pursuant to this Section 6, the Corporation shall give
written notice (an "Exchange Notice") of such exchange and the Effective Date
to the Sellers' Representatives. On or after the Effective Date, the
Corporation shall issue, upon surrender at the Corporation's principal
executive office or such other place as the Corporation shall direct of a
certificate representing a share or shares of Exchangeable Preferred Stock, to
the holder of such Exchangeable Preferred Stock or to such holder's designee,
at the address designated by such holder, a certificate or certificates for the
number of shares of Common Stock to which such holder shall be entitled upon
such exchange.
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<PAGE> 7
(c) On and after the Effective Date, the person or persons entitled to
receive the Common Stock issuable upon the exchange made pursuant to this
Section 6 shall be treated for all purposes as the record holder or holders of
such shares of Common Stock, but no payment, allowance or adjustment shall be
made in respect of dividends or distributions payable to holders of Common
Stock the record date for which coincides with or is prior to such Effective
Date.
(d) The Corporation shall not be obligated to deliver to holders of
Exchangeable Preferred Stock any fractional share or shares of Common Stock
issuable upon the exchange of such shares of Exchangeable Preferred Stock, but
in lieu thereof may make a cash payment in respect thereof in any manner
permitted by law.
(e) So long as the Corporation uses its best efforts to take such steps
as are necessary so that the Corporation's Second Amended Restated Articles of
Incorporation are amended to authorize additional shares of Common Stock, in
the event the Exchangeable Preferred Stock is not exchanged for shares of
Common Stock pursuant to Section 6(a) hereof on or prior to February 24, 1999,
the exclusive remedy available to holders of Exchangeable Preferred Stock shall
be the right to receive the Increased Dividend Amount pursuant to Section 2(a)
hereof.
Section 7. Consolidation, Merger and Similar Transactions.
In the event that the Corporation shall consummate any consolidation,
merger, recapitalization or similar transaction, however named, pursuant to
which the outstanding shares of Common Stock are exchanged for or changed,
reclassified or converted into other stock or securities or cash or any other
property, or any combination thereof, outstanding shares of Exchangeable
Preferred Stock shall, without any action on the part of the Corporation or any
holder thereof, be automatically converted by virtue of such transaction, into
the right to receive, on the same terms as apply to the holders of Common
Stock, the aggregate amount of stock, securities, cash or other property
(payable in like kind) receivable by a holder of the number of shares of Common
Stock for which such shares of Exchangeable Preferred Stock would have been
exchanged immediately prior to such transaction (assuming the conditions
precedent to such exchange had occurred in accordance with the terms hereof),
based on the Exchange Ratio then in effect. In the event that, in connection
with such transaction, the holders of Common Stock may elect the kind of stock,
securities, cash or other property receivable upon such transaction, the
holders of Exchangeable Preferred Stock shall have the same rights and
obligations with respect to such election as apply to the holders of Common
Stock, and the failure of a holder of shares of Exchangeable Preferred Stock to
exercise any such rights will result in such shares of Exchangeable Preferred
Stock being converted in the same manner as would shares of Common Stock, the
holder of which had failed to exercise such rights.
Section 8. Exchange Ratio; Anti-Dilution Adjustments.
(a) The term "Exchange Ratio" shall mean, at any time, that number of
shares of Common Stock into which a share of Exchangeable Preferred Stock is
convertible or for which a share of Exchangeable Preferred Stock is
exchangeable pursuant to Section 5 or Section 6,
7
<PAGE> 8
respectively, at such time. Upon issuance of the Exchangeable Preferred Stock,
the Exchange Ratio shall equal 5.
(b) In the event the Corporation shall, at any time or from time to time
while any of the shares of the Exchangeable Preferred Stock are outstanding,
(i) pay a dividend or make a distribution in respect of the Common Stock in
shares of Common Stock, (ii) subdivide the outstanding shares of Common Stock
into a greater number of shares, or (iii) combine the outstanding shares of
Common Stock into a smaller number of shares, in each case whether by
reclassification of shares, recapitalization of the Corporation (including a
recapitalization to which Section 7 hereof does not apply), or otherwise, the
Exchange Ratio in effect immediately prior to such action shall be adjusted by
multiplying such Exchange Ratio by a fraction, the numerator of which is the
number of shares of Common Stock outstanding immediately after such event, and
the denominator of which is the number of shares of Common Stock outstanding
immediately before such event. An adjustment made pursuant to this Section
8(b) shall be given effect, in the case of the payment of such a dividend or
distribution, as of the record date for the determination of shareholders
entitled to receive such dividend or distribution, and in the case of a
subdivision or combination, immediately as of the effective date thereof.
(c) Notwithstanding any other provisions of this Section 8, the
Corporation shall not be required to make any adjustment of the Exchange Ratio
unless such adjustment would require an increase or decrease of at least one
percent (1%) in the Exchange Ratio. Any lesser adjustment shall be carried
forward and shall be made no later than the earlier of (i) the time of the next
subsequent adjustment which, together with any adjustment or adjustments so
carried forward, shall amount to an increase or decrease of at least one
percent (1%) in the Exchange Ratio (in which case such adjustments shall be
aggregated and effected simultaneously), and (ii) immediately prior to the
exchange of Exchangeable Preferred Stock made pursuant to Section 6 hereof.
(d) If the Corporation shall make any dividend or distribution on the
Common Stock or issue any Common Stock, other capital stock or other security
of the Corporation or any rights or warrants to purchase or acquire any such
security, which transaction does not result in an adjustment to the Exchange
Ratio pursuant to the foregoing provisions of this Section 8, the Board of
Directors shall in its sole discretion consider whether such action is of such
a nature that an adjustment to the Exchange Ratio should equitably be made in
respect of such transaction. If in such case the Board of Directors determines
that an adjustment to the Exchange Ratio should be made, an adjustment shall be
made as determined by the Board of Directors of the Corporation. The
determination of the Board of Directors as to whether an adjustment to the
Exchange Ratio should be made pursuant to the foregoing provisions of this
Section 8(d), and, if so, as to what adjustment should be made and when, shall
be final and binding on the Corporation and all stockholders of the
Corporation.
(e) Whenever an adjustment to the Exchange Ratio is required pursuant to
this Resolution, the Corporation shall forthwith place on file with the
transfer agent for the Common Stock and the Exchangeable Preferred Stock, if
any, and with the Secretary of the Corporation, a statement signed by an
officer of the Corporation stating the adjusted Exchange Ratio determined
8
<PAGE> 9
as provided herein of the Exchangeable Preferred Stock. Promptly after each
adjustment to the Exchange Ratio, the Corporation shall mail a notice thereof
and of the then prevailing Exchange Ratio to the Sellers' Representatives.
(f) The term "Business Day" shall mean a day that is not a Saturday,
Sunday or a day on which state or federally chartered banking institutions in
Detroit, Michigan or Chicago, Illinois are authorized to close.
Section 9. Ranking; Outstanding Shares; Retirement of Shares.
(a) Except as set forth in Section 2 hereof, the Exchangeable Preferred
Stock shall rank in parity with the Common Stock as to payment of dividends and
the distribution of assets on liquidation, dissolution and winding-up of the
Corporation, and unless otherwise provided in the Second Restated Articles of
Incorporation of the Corporation, as the same may be amended from time to time,
or a Certificate of Designations relating to a subsequent series of Preferred
Stock of the Corporation, the Exchangeable Preferred Stock shall rank junior to
all other series of the Corporation's Preferred Stock as to payment of
dividends and the distribution of assets on liquidation, dissolution or
winding-up of the Corporation; provided, however, that the Corporation shall
not designate a series of the Corporation's preferred stock that would prohibit
the exchange of Exchangeable Preferred Stock as provided herein or the payment
of dividends thereon as provided herein.
(b) For purposes of this Resolution, prior to the Effective Date, all
shares of Exchangeable Preferred Stock issued by the Corporation shall be
deemed outstanding except (i) from the date of the closing of a Qualified
Public Offering or the closing of a sale pursuant to the related over-allotted
option, as the case may be, all shares of Exchangeable Preferred Stock
converted to Common Stock in connection with such Qualified Public Offering or
such over-allotment option, as the case may be, pursuant to Section 5 hereof,
and (ii) from the date of registration of transfer, all shares of Exchangeable
Preferred Stock held of record by the Corporation or any majority-owned
subsidiary of the Corporation. On and after the Effective Date, no shares of
Exchangeable Preferred Stock shall be deemed outstanding, regardless of whether
certificates representing such shares have been delivered to the Corporation
for cancellation.
(c) Any shares of Exchangeable Preferred Stock acquired by the
Corporation by reason of the conversion or exchange of such shares as provided
by this Resolution, or otherwise so acquired, shall be canceled as shares of
Exchangeable Preferred Stock and restored to the status of authorized but
unissued shares of Preferred Stock of the Corporation, undesignated as to
series, and may thereafter be reissued as part of a new series of such
Preferred Stock as permitted by law.
Section 10. Miscellaneous.
(a) All notices referred to herein shall be given in writing, by first
class mail postage prepaid, overnight courier or facsimile and shall be deemed
effective upon receipt. Notices to the
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<PAGE> 10
Corporation, shall be addressed to its office at 26555 Northwestern Highway,
Southfield, Michigan, 48034 (Attention: Secretary), facsimile (248) 354-7999.
Notices to the Sellers' Representatives shall be addressed to the address of
such Representatives as it appears from time to time on the books and records
of the Corporation.
(b) The Corporation shall pay any and all stock transfer and documentary
stamp taxes that may be payable in respect of any issuance or delivery of
shares of Exchangeable Preferred Stock or shares of Common Stock or other
securities issued on account of Exchangeable Preferred Stock pursuant hereto or
certificates representing such shares or securities. The Corporation shall
not, however, be required to pay any such tax which may be payable in respect
of any transfer involved in the issuance or delivery of shares of Exchangeable
Preferred Stock or Common Stock or other securities in a name other than that
in which the shares of Exchangeable Preferred Stock with respect to which such
shares or other securities are issued or delivered were registered, or in
respect of any payment to any person with respect to any such shares or
securities other than a payment to the registered holder thereof, and shall not
be required to make any such issuance, delivery or payment unless and until the
person otherwise entitled to such issuance, delivery or payment has paid to the
Corporation the amount of any such tax or has established, to the reasonable
satisfaction of the Corporation, that such tax has been paid or is not payable.
(c) In the event that a holder of shares of Exchangeable Preferred Stock
shall not by written notice designate the name in which shares of Common Stock
to be issued upon conversion of such shares should be registered or to whom
payment upon redemption of shares of Exchangeable Preferred Stock should be
made or the address to which the certificate or certificates representing such
shares, or such payment, should be sent, the Corporation shall be entitled to
register such shares, and make such payment, in the name of the holder of such
Exchangeable Preferred Stock as shown on the records of the Corporation and to
send the certificate or certificates representing such shares, or such payment,
to the address of such holder shown on the records of the Corporation.
(d) Unless otherwise provided in the Second Restated Articles of
Incorporation, as the same may be amended, of the Corporation, all payments in
the form of dividends, distributions on voluntary or involuntary dissolution,
liquidation or winding-up or otherwise made upon the shares of Exchangeable
Preferred Stock and any other stock ranking on a parity with the Exchangeable
Preferred Stock with respect to such dividend or distribution shall be made pro
rata, so that amounts paid per share on the Exchangeable Preferred Stock and
such other stock shall in all cases bear to each other the same ratio that the
required dividends, distributions or payments, as the case may be, then payable
per share on the shares of the Exchangeable Preferred Stock and such other
stock bear to each other.
(e) The Corporation may appoint, and from time to time discharge and
change, a transfer agent for the Exchangeable Preferred Stock. Upon any such
appointment or discharge of a transfer agent, the Corporation shall send notice
thereof to each holder of record of Exchangeable Preferred Stock.
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(f) The Corporation may amend this Resolution and the related Certificate
of Designations from time to time as permitted by law; provided, however, that
no such amendment adverse to the holders of Exchangeable Preferred Stock may be
made without the written consent of the holders of a majority of the
outstanding shares of Exchangeable Preferred Stock.
(g) The Corporation shall use its best efforts to take such steps as are
necessary so that the Common Stock into which Exchangeable Preferred Stock is
converted pursuant to Section 5 hereof or for which Exchange Preferred Stock is
exchanged pursuant to Section 6 hereof, shall be duly authorized and validly
issued, and fully paid and nonassessable.
IN WITNESS WHEREOF, I have executed and subscribed this Certificate of
Designations and do affirm the foregoing as true under the penalties of perjury
this 20th day of February, 1998.
/s/ Thomas W. Ryan
Name: THOMAS W. RYAN
Title: Senior Vice President and
Chief Financial Officer
Attest:
/s/ David A. Bozynski
Name: DAVID A. BOZYNSKI
Title: Vice President and Treasurer
11
<PAGE> 1
EXHIBIT 10.34
- --------------------------------------------------------------------------------
AMENDED AND RESTATED DECLARATION
OF TRUST
FEDERAL-MOGUL FINANCING TRUST
Dated as of December 1, 1997
- --------------------------------------------------------------------------------
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TABLE OF CONTENTS
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PAGE
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ARTICLE 1 INTERPRETATION AND DEFINITIONS
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SECTION 1.01. Definitions.............................................................2
ARTICLE 2 TRUST INDENTURE ACT
SECTION 2.01. Trust Indenture Act: Application.......................................10
SECTION 2.02. Lists of Holders of Securities.........................................10
SECTION 2.03. Reports by the Institutional Trustee...................................11
SECTION 2.04. Periodic Reports to Institutional Trustee..............................11
SECTION 2.05. Evidence of Compliance with Conditions.................................11
SECTION 2.06. Events of Default; Waiver..............................................12
SECTION 2.07. Event of Default: Notice...............................................14
ARTICLE 3 ORGANIZATION
SECTION 3.01. Name...................................................................14
SECTION 3.02. Office.................................................................15
SECTION 3.03. Issuance of Trust Securities...........................................15
SECTION 3.04. Purchase of Debentures.................................................15
SECTION 3.05. Purpose................................................................16
SECTION 3.06. Title to Property of the Trust.........................................16
SECTION 3.07. Authorization to Enter into Certain Transactions.......................16
SECTION 3.08. Prohibition of Actions by the Trust,
the Trustees and the Administrators....................................22
SECTION 3.09. Certain Duties and Responsibilities of the
Institutional Trustee..................................................23
SECTION 3.10. Certain Rights of Institutional Trustee................................26
SECTION 3.11. Delaware Trustee.......................................................29
SECTION 3.12. Execution of Documents.................................................29
SECTION 3.13. Not Responsible for Recitals or Issuance of Securities.................29
SECTION 3.14. Duration of Trust......................................................29
SECTION 3.15. Mergers................................................................29
ARTICLE 4 SPONSOR
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<TABLE>
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<S> <C> <C> <C>
SECTION 4.01. Sponsor's Purchase of Common Securities................................31
SECTION 4.02. Responsibilities of the Sponsor........................................31
ARTICLE 5 TRUSTEES AND ADMINISTRATORS
SECTION 5.01. Number of Trustees and Administrators..................................32
SECTION 5.02. Delaware Trustee; Eligibility..........................................33
SECTION 5.03. Institutional Trustee; Eligibility.....................................33
SECTION 5.04. Certain Qualifications of Administrators and the
Delaware Trustee Generally.............................................34
SECTION 5.05. Initial Administrators.................................................34
SECTION 5.06. Delaware Trustee.......................................................34
SECTION 5.07. Appointment, Removal and Resignation of Trustees and Administrators....35
SECTION 5.08. Vacancies among Trustees...............................................36
SECTION 5.09. Effect of Vacancies....................................................36
SECTION 5.10. Meetings...............................................................37
SECTION 5.11. Delegation of Power....................................................37
SECTION 5.12. Merger, Conversion, Consolidation or Succession to Business............38
ARTICLE 6 DISTRIBUTIONS
SECTION 6.01. Distributions..........................................................38
ARTICLE 7 ISSUANCE OF SECURITIES
SECTION 7.01. General Provisions Regarding Securities................................39
SECTION 7.02. Execution and Authentication...........................................39
SECTION 7.03. Form and Dating........................................................40
SECTION 7.04. Paying Agent, Registrar and Conversion Agent...........................40
ARTICLE 8 DISSOLUTION OF TRUST
SECTION 8.01. Dissolution of Trust...................................................42
ARTICLE 9 TRANSFER OF INTERESTS
</TABLE>
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<TABLE>
<CAPTION>
<S> <C> <C> <C>
SECTION 9.01. Transfer of Securities.................................................43
SECTION 9.02. Transfer of Certificates...............................................47
SECTION 9.03. Deemed Holders.........................................................48
SECTION 9.04. Book Entry Interests...................................................48
SECTION 9.05. Notices to Clearing Agency.............................................49
SECTION 9.06. Appointment of Successor Clearing Agency...............................50
SECTION 9.07. Definitive Convertible Preferred Security Certificates
Under Certain Circumstances............................................50
SECTION 9.08. Mutilated, Destroyed, Lost or Stolen Certificates......................51
ARTICLE 10 LIMITATION OF LIABILITY OF HOLDERS OF SECURITIES, TRUSTEES OR
OTHERS
SECTION 10.01. Liability.............................................................52
SECTION 10.02. Exculpation...........................................................52
SECTION 10.03. Fiduciary Duty........................................................53
SECTION 10.04. Indemnification.......................................................54
SECTION 10.05. Outside Business......................................................57
ARTICLE 11 ACCOUNTING
SECTION 11.01. Fiscal Year...........................................................58
SECTION 11.02. Certain Accounting Matters............................................58
SECTION 11.03. Banking...............................................................59
SECTION 11.04. Withholding...........................................................59
ARTICLE 12 AMENDMENTS AND MEETINGS
SECTION 12.01. Amendments............................................................59
SECTION 12.02. Meetings of the Holders of Securities; Action by Written Consent......62
ARTICLE 13 REPRESENTATIONS OF INSTITUTIONAL TRUSTEE AND DELAWARE
TRUSTEE
SECTION 13.01. Representations and Warranties of Institutional Trustee...............63
SECTION 13.02. Representations and Warranties of Delaware Trustee....................64
</TABLE>
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<TABLE>
<CAPTION>
ARTICLE 14 MISCELLANEOUS
<S> <C> <C> <C>
SECTION 14.01. Notices...............................................................65
SECTION 14.02. Governing Law.........................................................67
SECTION 14.03. Intention of the Parties..............................................67
SECTION 14.04. Headings..............................................................67
SECTION 14.05. Successors and Assigns................................................67
SECTION 14.06. Partial Enforceability................................................67
SECTION 14.07. Counterparts..........................................................67
</TABLE>
<PAGE> 6
AMENDED AND RESTATED
DECLARATION OF TRUST
OF
FEDERAL-MOGUL FINANCING TRUST
December 1, 1997
AMENDED AND RESTATED DECLARATION OF TRUST (this "DECLARATION") dated
and effective as of December 1, 1997, by the Trustees (as defined herein), the
Administrators (as defined herein), the Sponsor (as defined herein) and by the
holders, from time to time, of undivided beneficial interests in the assets of
the Trust to be issued pursuant to this Declaration;
WHEREAS, the Trustees and the Sponsor created Federal-Mogul Financing
Trust (the "TRUST"), a statutory business trust under the Delaware Business
Trust Act pursuant to a Declaration of Trust dated as of November 21, 1997 (the
"ORIGINAL DECLARATION"), and a Certificate of Trust filed with the Secretary of
State of the State of Delaware on November 21 , 1997, for the sole purposes of
(i) issuing and selling certain securities representing undivided beneficial
interests in the assets of the Trust, (ii) investing the proceeds thereof in
certain Debentures of the Debenture Issuer and (iii) engaging in only those
other activities necessary or incidental thereto;
WHEREAS, the parties hereto, by this Declaration, amend and restate
each and every term and provision of the Original Declaration; and
NOW, THEREFORE, it being the intention of the parties hereto to
continue the Trust as a statutory business trust under the Business Trust Act
and that this Declaration constitute the governing instrument of such statutory
business trust, the Trustees declare that all assets contributed to the Trust
will be held in trust for the benefit of the holders, from time to time, of the
securities representing undivided beneficial interests in the assets of the
Trust issued hereunder, subject to the provisions of this Declaration and in
consideration of the mutual covenants contained herein and other good and
valuable consideration, the receipt of which is hereby acknowledged, the parties
hereto, intending to be legally bound hereby, agree as follows:
ARTICLE I
INTERPRETATION AND DEFINITIONS
<PAGE> 7
SECTION 1.1. Definitions
Unless the context otherwise requires:
(a) capitalized terms used in this Declaration but not defined in the
preamble above have the respective meanings assigned to them in this Section
1.01;
(b) a term defined anywhere in this Declaration has the same meaning
throughout;
(c) all references to "the Declaration" or "this Declaration" are to
this Declaration and each Annex and Exhibit hereto, as modified, supplemented or
amended from time to time;
(d) all references in this Declaration to Articles and Sections and
Annexes and Exhibits are to Articles and Sections of and Annexes and Exhibits to
this Declaration unless otherwise specified;
(e) a term defined in the Trust Indenture Act (as defined herein) has
the same meaning when used in this Declaration unless otherwise defined in this
Declaration or unless the context otherwise requires; and
(f) a reference to the singular includes the plural and vice versa.
"ADMINISTRATORS" means each of Thomas W. Ryan, David A. Bozynski and
Diane L. Kaye, solely in such Person's capacity as Administrator of the Trust
and not in such Person's individual capacity, or such Administrator's successor
in interest in such capacity, or any successor appointed as herein provided.
"AFFILIATE" has the same meaning as given to that term in Rule 405 of
the Securities Act or any successor rule thereunder.
"AGENT" means any Paying Agent or Conversion Agent.
"AUTHORIZED OFFICER" of a Person means any Person that is authorized to
bind such Person; provided, that the Authorized Officer signing an Officers'
Certificate given pursuant to Section 314(a)(4) of the Trust Indenture Act shall
be the principal executive, financial or accounting officer of such Person.
"BASE INDENTURE" means the Indenture dated as of December 1, 1997,
among the Debenture Issuer and the Debenture Trustee, as modified or amended
2
<PAGE> 8
from time to time.
"BOOK ENTRY INTEREST" means a beneficial interest in a Global
Certificate registered in the name of the Clearing Agency or its nominee,
ownership and transfers of which shall be maintained and made through book
entries by a Clearing Agency as described in Section 9.04.
"BUSINESS DAY" means any day other than a Saturday, Sunday or any other
day on which banking institutions in New York, New York are permitted or
required by any applicable law to close.
"BUSINESS TRUST ACT" means Chapter 38 of Title 12 of the Delaware Code,
12 Del. Code ss.3801 et seq., as it may be amended from time to time, or any
successor legislation.
"CERTIFICATE" means a Common Security Certificate or a Convertible
Preferred Security Certificate.
"CLEARING AGENCY" means an organization registered as a "Clearing
Agency" pursuant to Section 17A of the Exchange Act that is acting as depositary
for the Convertible Preferred Securities and in whose name or in the name of a
nominee of that organization shall be registered a Global Certificate and that
shall undertake to effect book entry transfers and pledges of the Convertible
Preferred Securities.
"CLEARING AGENCY PARTICIPANT" means a broker, dealer, bank, other
financial institution or other Person for whom from time to time the Clearing
Agency effects book entry transfers and pledges of securities deposited with the
Clearing Agency.
"CLOSING DATE" means December 1, 1997.
"CODE" means the Internal Revenue Code of 1986, as amended from time to
time, or any successor legislation.
"COMMISSION" means the Securities and Exchange Commission.
"COMMON SECURITY" has the meaning specified in Section 7.01.
"COMMON SECURITIES GUARANTEE" means the guarantee agreement to be dated
as of the date hereof, as modified or amended from time to time, of the Sponsor
in respect of the Common Securities.
3
<PAGE> 9
"COMMON SECURITY CERTIFICATE" means a definitive certificate in fully
registered form representing a Common Security substantially in the form of
Exhibit A-2.
"COMMON STOCK" means the common stock of Federal-Mogul Corporation, a
Michigan corporation, without par value and any other shares of common stock as
may constitute "Common Stock" under the Indenture.
"COMPANY INDEMNIFIED PERSON" means (a) any Administrator; (b) any
Affiliate of any Administrator; (c) any officers, directors, shareholders,
members, partners, employees, representatives or agents of any Administrator; or
(d) any officer, employee or agent of the Trust or its Affiliates.
"CONVERSION AGENT" has the meaning specified in Section 7.04.
"CONVERTIBLE PREFERRED SECURITIES GUARANTEE" means the guarantee
agreement to be dated as of the date hereof, as modified or amended from time to
time, of the Sponsor in respect of the Convertible Preferred Securities.
"CONVERTIBLE PREFERRED SECURITY" has the meaning specified in Section
7.01.
"CONVERTIBLE PREFERRED SECURITY BENEFICIAL OWNER" means, with respect
to a Book Entry Interest, a Person who is the beneficial owner of such Book
Entry Interest, as reflected on the books of the Clearing Agency, or on the
books of a Person maintaining an account with such Clearing Agency (directly as
a Clearing Agency Participant or as an indirect participant, in each case in
accordance with the rules of such Clearing Agency).
"CONVERTIBLE PREFERRED SECURITY CERTIFICATE" means a definitive
certificate representing a Preferred Security substantially in the form of
Exhibit A-1.
"CORPORATE TRUST OFFICE" means the office of the Institutional Trustee
at which the corporate trust business of the Institutional Trustee shall, at any
particular time, be principally administered, which office at the date of
execution of this Agreement is located at 101 Barclay Street, Floor 21 West, New
York, New York 10286.
"COVERED PERSON" means: (a) any officer, director, shareholder,
partner, member, representative, employee or agent of (i) the Trust or (ii) the
Trust's Affiliates; and (b) any Holder of Securities.
4
<PAGE> 10
"DEBENTURE ISSUER" means Federal-Mogul Corporation, a Michigan
corporation, in its capacity as issuer of the Debentures under the Indenture.
"DEBENTURE TRUSTEE" means The Bank of New York, as trustee under the
Indenture until a successor is appointed thereunder, and thereafter means such
successor trustee.
"DEBENTURES" means the series of Debentures to be issued by the
Debenture Issuer under the Indenture to be held by the Institutional Trustee, a
specimen certificate for such series of Debentures being Exhibit B.
"DELAWARE TRUSTEE" has the meaning set forth in Section 5.01.
"DIRECT ACTION" has the meaning set forth in Section 3.07(a)(vi).
"DISTRIBUTION" means a distribution payable to Holders of Securities in
accordance with Section 6.01.
"DTC" means The Depository Trust Company, the initial Clearing Agency.
"EVENT OF DEFAULT" in respect of the Securities means an Event of
Default as defined in the Indenture in respect of the Debentures that has
occurred and is continuing.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended
from time to time, or any successor legislation.
"FIDUCIARY INDEMNIFIED PERSON" has the meaning set forth in Section
10.04(b).
"FISCAL YEAR" has the meaning set forth in Section 11.01.
"GLOBAL CERTIFICATE" has the meaning set forth in Section 9.04.
"HOLDER" means a Person in whose name a Certificate representing a
Security is registered, such Person being a beneficial owner within the meaning
of the Business Trust Act.
"INDEMNIFIED PERSON" means a Company Indemnified Person or a Fiduciary
Indemnified Person.
"INDENTURE" means the Base Indenture as supplemented by the
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<PAGE> 11
Supplemental Indenture and as may be further supplemented from time to time.
"INSTITUTIONAL TRUSTEE" has the meaning set forth in Section 5.01.
"INSTITUTIONAL TRUSTEE ACCOUNT" has the meaning set forth in Section
3.07(a)(ii)(A).
"INVESTMENT COMPANY" means an investment company as defined in the
Investment Company Act.
"INVESTMENT COMPANY ACT" means the Investment Company Act of 1940, as
amended from time to time, or any successor legislation.
"INVESTMENT COMPANY EVENT" has the meaning set forth in Annex I hereto.
"LEGAL ACTION" has the meaning set forth in Section 3.07(a)(vi).
"LIQUIDATION DISTRIBUTION" has the meaning specified in the terms of
the Securities as set forth in Annex I.
"MAJORITY IN LIQUIDATION AMOUNT" of the Securities means, except as
provided in the terms of the Convertible Preferred Securities or by the Trust
Indenture Act, Holder(s) of outstanding Securities voting together as a single
class or, as the context may require, Holders of outstanding Convertible
Preferred Securities or Holders of outstanding Common Securities voting
separately as a class, who are the record owners of more than 50% of the
aggregate liquidation amount (including the stated amount that would be paid on
redemption, liquidation or otherwise, plus accrued and unpaid Distributions to
the date upon which the voting percentages are determined) of all outstanding
Securities of the relevant class.
"MINISTERIAL ACTION" has the meaning set forth in the terms of the
Securities as set forth in Annex I.
"NON-U.S. PERSON" means a Person other than a U.S. person (as such term
is defined in Regulation S).
"OFFER" means the recommended cash offer announced by the boards of
directors of the Sponsor and T&N plc ("T&N") on October 16, 1997 to be made on
behalf of a wholly-owned indirect subsidiary of the Sponsor to acquire the
entire issued share capital of T&N.
6
<PAGE> 12
"OFFERING MEMORANDUM" has the meaning set forth in Section 4.02(a).
"OFFICERS' CERTIFICATE" means, with respect to any Person, a
certificate signed by two Authorized Officers of such Person. Any Officers'
Certificate delivered with respect to compliance with a condition or covenant
provided for in this Declaration shall include:
(i) a statement that each officer signing the Certificate has
read the covenant or condition and the definitions relating thereto;
(ii) a brief statement of the nature and scope of the
examination or investigation undertaken by each officer in rendering
the Certificate;
(iii) a statement that each such officer has made such
examination or investigation as, in such officer's opinion, is
necessary to enable such officer to express an informed opinion as to
whether or not such covenant or condition has been complied with; and
(iv) a statement as to whether, in the opinion of each such
officer, such condition or covenant has been complied with.
"OPTION CLOSING DATE" means the date of closing of any sale of
Additional Securities (as defined in the Purchase Agreement).
"PAYING AGENT" has the meaning specified in Section 7.04.
"PAYMENT AMOUNT" has the meaning set forth in Section 6.01.
"PERSON" means a legal person, including any individual, corporation,
estate, partnership, joint venture, association, joint stock company, limited
liability company, trust, unincorporated association, or government or any
agency or political subdivision thereof, or any other entity of whatever nature.
"PURCHASE AGREEMENT" means the Purchase Agreement for the offering and
sale of Convertible Preferred Securities in the form of Exhibit C.
"PORTAL MARKET" means the Private Offerings, Resales and Trading
through Automated Linkages Market operated by the National Association of
Securities Dealers, Inc., or any successor thereto.
"QIB" means a "qualified institutional buyer" as defined in Rule 144A.
7
<PAGE> 13
"QUORUM" means a majority of the Administrators or, if there are only
two Administrators, both of them.
"REGISTRAR" has the meaning set forth in Section 7.04.
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights Agreement
dated as of the date hereof among Federal-Mogul Corporation, the Trust
and Morgan Stanley & Co. Incorporated, as Initial Purchaser.
"REGULATION S" means Regulation S under the Securities Act or any
successor provision.
"RELATED PARTY" means, with respect to the Sponsor, any direct or
indirect wholly owned subsidiary of the Sponsor or any other Person that owns,
directly or indirectly, 100% of the outstanding voting securities of the
Sponsor.
"RESPONSIBLE OFFICER" means, with respect to the Institutional Trustee,
any officer within the Corporate Trust Office of the Institutional Trustee,
including any vice president, any assistant vice president, any assistant
secretary, the treasurer, any assistant treasurer or other officer of the
Corporate Trust Office of the Institutional Trustee customarily performing
functions similar to those performed by any of the above designated officers and
also means, with respect to a particular corporate trust matter, any other
officer to whom such matter is referred because of that officer's knowledge of
and familiarity with the particular subject.
"RESTRICTED SECURITY" has the meaning specified in Section 9.01(f).
"RULE 144A" means Rule 144A as promulgated under the Securities Act, or
any successor rule.
"RULE 144(K)" means Rule 144(k) as promulgated under the Securities
Act, or any successor rule.
"RULE 3A-5" means Rule 3a-5 as promulgated under the Investment Company
Act, or any successor rule.
"SECURITIES" means the Common Securities and the Convertible Preferred
Securities.
"SECURITIES ACT" means the Securities Act of 1933, as amended from time
to time, or any successor legislation.
8
<PAGE> 14
"SECURITIES GUARANTEES" means the Common Securities Guarantee and the
Convertible Preferred Securities Guarantee.
"SPECIAL EVENT" has the meaning set forth in Annex I hereto.
"SPONSOR" or "FEDERAL-MOGUL" means Federal-Mogul Corporation, a
Michigan corporation, or any successor entity in a merger, consolidation or
amalgamation, in its capacity as sponsor of the Trust.
"SUCCESSOR DELAWARE TRUSTEE" has the meaning set forth in Section
5.07(b).
"SUCCESSOR INSTITUTIONAL TRUSTEE" has the meaning set forth in Section
5.07(b).
"SUPER MAJORITY" has the meaning set forth in Section 2.06(a)(ii).
"SUPPLEMENTAL INDENTURE" means the First Supplemental Indenture dated
as of December 1, 1997 among the Debenture Issuer and the Debenture Trustee
pursuant to which the Debentures are to be issued, as modified or amended from
time to time.
"TAX EVENT" has the meaning set forth in Annex I hereto.
"10% IN LIQUIDATION AMOUNT" of the Securities means, except as provided
in the terms of the Convertible Preferred Securities or by the Trust Indenture
Act, Holders of outstanding Securities voting together as a single class or, as
the context may require, Holders of outstanding Convertible Preferred Securities
or Holders of outstanding Common Securities voting separately as a class, who
are the record owners of 10% or more of the aggregate liquidation amount
(including the stated amount that would be paid on redemption, liquidation or
otherwise, plus accrued and unpaid Distributions to the date upon which the
voting percentages are determined) of all outstanding Securities of the relevant
class.
"TRANSFER RESTRICTION TERMINATION DATE" means the first date on which
the Securities and any Common Stock issued or issuable upon the conversion or
exchange thereof (other than (i) Securities acquired by the Trust or any
Affiliate thereof and (ii) Common Stock issued upon the conversion or exchange
of any Security described in clause (i) above) may be sold pursuant to Rule
144(k).
"TREASURY REGULATIONS" means the income tax regulations, including
temporary and proposed regulations, promulgated under the Code by the United
9
<PAGE> 15
States Treasury, as such regulations may be amended from time to time (including
corresponding provisions of succeeding regulations).
"TRUSTEE" or "TRUSTEES" means each Person who has signed this
Declaration as a trustee, so long as such Person shall continue in office in
accordance with the terms hereof, and all other Persons who may from time to
time be duly appointed, qualified and serving as Trustees in accordance with the
provisions hereof, and references herein to a Trustee or the Trustees shall
refer to such Person or Persons solely in their capacity as trustees hereunder.
"TRUST INDENTURE ACT" means the Trust Indenture Act of 1939, as amended
from time to time, or any successor legislation.
ARTICLE 2
TRUST INDENTURE ACT
SECTION 2.1. Trust Indenture Act: Application. (a) This Declaration is
subject to the provisions of the Trust Indenture Act that are required to be
part of this Declaration and shall, to the extent applicable, be governed by
such provisions.
(b) The Institutional Trustee shall be the only Trustee which is a
Trustee for the purposes of the Trust Indenture Act.
(c) If and to the extent that any provision of this Declaration
limits, qualifies or conflicts with the duties imposed by Sections 310 to 317,
inclusive, of the Trust Indenture Act, such imposed duties shall control.
(d) The application of the Trust Indenture Act to this Declaration
shall not affect the nature of the Securities as equity securities representing
undivided beneficial interests in the assets of the Trust.
SECTION 2.2. Lists of Holders of Securities. (a) Each of the Sponsor
and the Administrators on behalf of the Trust shall provide the Institutional
Trustee (i) within 14 days after each record date for payment of Distributions,
a list in such form as the Institutional Trustee may reasonably require of the
names and addresses of the Holders of the Securities ("LIST OF HOLDERS") as of
such record date; provided, that neither the Sponsor nor the Administrators on
behalf of the Trust shall be obligated to provide such List of Holders at any
time the List of
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Holders does not differ from the most recent List of Holders given to the
Institutional Trustee by the Sponsor and the Administrators on behalf of the
Trust, and (ii) at any other time, within 30 days of receipt by the Trust of a
written request for a List of Holders, a List of Holders as of a date no more
than 14 days before such List of Holders is given to the Institutional Trustee.
The Institutional Trustee shall preserve, in as current a form as is reasonably
practicable, all information contained in Lists of Holders given to it or which
it receives in the capacity as Paying Agent (if acting in such capacity);
provided, that the Institutional Trustee may destroy any List of Holders
previously given to it on receipt of a new List of Holders.
(b) The Institutional Trustee shall comply with its obligations under
Sections 310(b), 311(a), 311(b) and 312(b) of the Trust Indenture Act.
SECTION 2.3. Reports by the Institutional Trustee. Within 60 days after
May 15 of each year, the Institutional Trustee shall provide to the Holders of
the Convertible Preferred Securities such reports as are required by Section 313
of the Trust Indenture Act, if any, in the form, in the manner and at the times
provided by Section 313 of the Trust Indenture Act. The Institutional Trustee
shall also comply with the requirements of Section 313(d) of the Trust Indenture
Act.
SECTION 2.4. Periodic Reports to Institutional Trustee. Each of the
Sponsor and the Administrators on behalf of the Trust shall provide to the
Institutional Trustee such documents, reports and information as required by
Section 314 of the Trust Indenture Act (if any) and the compliance certificate
required by Section 314 of the Trust Indenture Act in the form, in the manner
and at the times required by Section 314 of the Trust Indenture Act.
Delivery of such reports, information and documents to the
Institutional Trustee is for informational purposes only and the Institutional
Trustee's receipt of such shall not constitute constructive notice of any
information contained therein or determinable from information contained
therein, including the Sponsor's compliance with any of its covenants hereunder
(as to which the Institutional Trustee is entitled to rely exclusively on
Officers' Certificates).
SECTION 2.5. Evidence of Compliance with Conditions. Each of the
Sponsor and the Administrators on behalf of the Trust shall provide to the
Institutional Trustee such evidence of compliance with any conditions precedent,
if any, provided for in this Declaration that relate to any of the matters set
forth in Section 314(c) of the Trust Indenture Act. Any certificate or opinion
required to be given by an officer pursuant to Section 314(c)(1) of the Trust
Indenture Act may be given in the form of an Officers' Certificate.
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SECTION 2.6. Events of Default; Waiver. (a) The Holders of a Majority
in Liquidation Amount of Convertible Preferred Securities may, by vote or
consent, on behalf of the Holders of all of the Convertible Preferred
Securities, waive any past Event of Default in respect of the Convertible
Preferred Securities and its consequences; provided, that if the underlying
Event of Default under the Indenture:
(i) is not waivable under the Indenture, the Event of Default
under this Declaration shall also not be waivable; or
(ii) requires the consent or vote of greater than a majority in
principal amount of the holders of the Debentures (a "SUPER MAJORITY")
to be waived under the Indenture, the Event of Default under this
Declaration may only be waived by the vote or consent of the Holders of
at least the proportion in liquidation amount (including the stated
amount that would be paid on redemption, liquidation or otherwise, plus
accrued and unpaid Distributions to the date upon which the voting
percentages are determined) of the Convertible Preferred Securities
that the relevant Super Majority represents of the aggregate principal
amount of the Debentures outstanding.
The foregoing provisions of this Section 2.06(a) shall be in lieu of
Section 316(a)(1)(B) of the Trust Indenture Act and such Section 316(a)(1)(B) of
the Trust Indenture Act is hereby expressly excluded from this Declaration and
the Securities, as permitted by the Trust Indenture Act. Upon such waiver, any
such default shall cease to exist, and any Event of Default with respect to the
Convertible Preferred Securities arising therefrom shall be deemed to have been
cured, for every purpose of this Declaration, but no such waiver shall extend to
any subsequent or other default or an Event of Default with respect to the
Convertible Preferred Securities or impair any right consequent thereon. Any
waiver by the Holders of the Convertible Preferred Securities of an Event of
Default with respect to the Convertible Preferred Securities shall also be
deemed to constitute a waiver by the Holders of the Common Securities of any
such Event of Default with respect to the Common Securities for all purposes of
this Declaration without any further act, vote, or consent of the Holders of the
Common Securities.
(b) The Holders of a Majority in Liquidation Amount of the Common
Securities may, by vote or consent, on behalf of the Holders of all of the
Common Securities, waive any past Event of Default with respect to the Common
Securities and its consequences; provided, that if the underlying Event of
Default
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under the Indenture:
(i) is not waivable under the Indenture, except where the
Holders of the Common Securities are deemed to have waived such Event
of Default under this Declaration as provided below in this Section
2.06(b), the Event of Default under this Declaration shall also not be
waivable; or
(ii) requires the consent or vote of a Super Majority to be
waived, except where the Holders of the Common Securities are deemed to
have waived such Event of Default under this Declaration as provided
below in this Section 2.06(b), the Event of Default under this
Declaration may only be waived by the vote of the Holders of at least
the proportion in liquidation amount of the Common Securities that the
relevant Super Majority represents of the aggregate principal amount of
the Debentures outstanding;
provided further, that notwithstanding (i) or (ii) above, each Holder of Common
Securities will be deemed to have waived any such Event of Default and all
Events of Default with respect to the Common Securities and its or their
consequences until all Events of Default with respect to the Convertible
Preferred Securities have been cured, waived or otherwise eliminated, and until
such Events of Default have been so cured, waived or otherwise eliminated, the
Institutional Trustee will be deemed to be acting solely on behalf of the
Holders of the Convertible Preferred Securities and only the Holders of the
Convertible Preferred Securities will have the right to direct the Institutional
Trustee in accordance with the terms of the Securities. The foregoing provisions
of this Section 2.06(b) shall be in lieu of Sections 316(a)(1)(A) and
316(a)(1)(B) of the Trust Indenture Act and such Sections 316(a)(1)(A) and
316(a)(1)(B) of the Trust Indenture Act are hereby expressly excluded from this
Declaration and the Securities, as permitted by the Trust Indenture Act. Subject
to the foregoing provisions of this Section 2.06(b), upon such waiver, any such
default shall cease to exist and any Event of Default with respect to the Common
Securities arising therefrom shall be deemed to have been cured for every
purpose of this Declaration, but no such waiver shall extend to any subsequent
or other default or Event of Default with respect to the Common Securities or
impair any right consequent thereon.
(c) A waiver of an Event of Default under the Indenture by the
Institutional Trustee at the direction of the Holders of the Preferred
Securities constitutes a waiver of the corresponding Event of Default under this
Declaration. The foregoing provisions of this Section 2.06(c) shall be in lieu
of
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Section 316(a)(1)(B) of the Trust Indenture Act and such Section 316(a)(1)(B)
of the Trust Indenture Act is hereby expressly excluded from this Declaration
and the Securities, as permitted by the Trust Indenture Act.
SECTION 2.7. Event of Default: Notice. (a) The Institutional Trustee
shall, within 90 days after the occurrence of an Event of Default, transmit by
mail, first class postage prepaid, to the Holders of the Securities, notices of
all defaults with respect to the Securities actually known to a Responsible
Officer of the Institutional Trustee, unless such defaults have been cured
before the giving of such notice (the term "DEFAULTS" for the purposes of this
Section 2.07(a) being hereby defined to be Events of Default as defined in the
Indenture, not including any periods of grace provided for therein and
irrespective of the giving of any notice provided therein); provided, that
except for a default in the payment of principal of (or premium, if any) or
interest on any of the Debentures, the Institutional Trustee shall be protected
in withholding such notice if and so long as a Responsible Officer of the
Institutional Trustee in good faith determines that the withholding of such
notice is in the interests of the Holders of the Securities.
(b) The Institutional Trustee shall not be deemed to have knowledge of
any default except:
(i) a default under Sections 4.01(a) and 4.01(b) of the
Indenture; or
(ii) a default as to which the Institutional Trustee shall have
received written notice or of which a Responsible Officer of the
Institutional Trustee charged with the administration of this
Declaration shall have actual knowledge.
ARTICLE 3
ORGANIZATION
SECTION 3.1. Name. The Trust is named "Federal-Mogul Financing Trust"
as such name may be modified from time to time by the Administrators following
written notice to the Holders of Securities. The Trust's activities may be
conducted under the name of the Trust or any other name deemed advisable by the
Administrators.
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SECTION 3.2. Office. The address of the principal office of the Trust
is c/o Federal-Mogul Corporation, 26555 Northwestern Highway, Southfield,
Michigan 48034. On ten Business Days written notice to the Holders of
Securities, the Administrators may designate another principal office.
SECTION 3.3. Issuance of Trust Securities. On November 24, 1997, the
Sponsor, on behalf of the Trust and pursuant to the Original Declaration,
executed and delivered the Purchase Agreement. On the Closing Date and
contemporaneously with the execution and delivery of this Declaration, the
Administrators, on behalf of the Trust, shall execute and deliver to (i) the
initial purchaser named in the Purchase Agreement (the "INITIAL PURCHASER"), a
Global Certificate, registered in the name of the nominee of the initial
Clearing Agency as specified in Section 9.04, in an aggregate amount of
10,000,000 Convertible Preferred Securities having an aggregate liquidation
amount of $500,000,000, against receipt of the aggregate purchase price of such
Convertible Preferred Securities of $500,000,000, and (ii) the Sponsor, Common
Securities Certificates, registered in the name of the Sponsor, in an aggregate
amount of 309,279 Common Securities having an aggregate liquidation amount of
$15,463,950, against receipt of the aggregate purchase price of such Common
Securities of $15,463,950. In the event and to the extent the overallotment
option granted by the Trust pursuant to the Purchase Agreement is exercised by
such Initial Purchaser, on the Option Closing Date the Administrators, on behalf
of the Trust, shall execute and deliver to (i) such Initial Purchaser a Global
Certificate, registered in the name of the nominee of the initial Clearing
Agency as specified in Section 9.04, in an aggregate amount of up to 1,500,000
Convertible Preferred Securities having an aggregate liquidation amount of up to
$75,000,000 against receipt of the aggregate purchase price of such Convertible
Preferred Securities of up to $75,000,000, and (ii) the Sponsor, Common Security
Certificates, registered in the name of the Sponsor, in an aggregate amount of
46,392 Common Securities having an aggregate liquidation amount of $2,319,600,
against receipt of the aggregate purchase price of such Common Securities of up
to $2,319,600.
SECTION 3.4. Purchase of Debentures. On the Closing Date and
contemporaneously with the execution and delivery of this Declaration, the
Institutional Trustee, on behalf of the Trust, shall purchase from the Sponsor
with the proceeds received by the Trust from the sale of the Securities on such
date pursuant to Section 3.03, at a purchase price of 100% of the principal
amount thereof, Debentures, registered in the name of the Institutional Trustee
and having an aggregate principal amount equal to $515,463,950, and, in
satisfaction of the purchase price for such Debentures, the Institutional
Trustee, on behalf of the Trust, shall deliver or cause to be delivered to the
Sponsor the sum of
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$515,463,950. In the event the overallotment option granted by the Trust with
respect to the Convertible Preferred Securities pursuant to the Purchase
Agreement is exercised by the Initial Purchaser named therein, on the Option
Closing Date the Administrators, on behalf of the Trust, shall purchase from the
Sponsor with the proceeds received by the Trust from the sale of the Convertible
Preferred Securities on such date pursuant to Section 3.03, at a purchase price
of 100% of the principal amount thereof, additional Debentures, registered in
the name of the Institutional Trustee and having an aggregate principal amount
of up to $77,319,600, and, in satisfaction of the purchase price for such
Debentures, the Administrators, on behalf of the Trust, shall deliver or cause
to be delivered to the Sponsor an amount equal to the aggregate principal amount
being purchased.
SECTION 3.5. Purpose. The exclusive purposes and functions of the Trust
are (a) to issue and sell Securities and use the proceeds from such sale to
acquire the Debentures, and (b) except as otherwise limited herein, to engage in
only those other activities necessary or incidental thereto. The Trust shall not
borrow money, issue debt or reinvest proceeds derived from investments, pledge
any of its assets, or otherwise undertake (or permit to be undertaken) any
activity that would cause the Trust not to be classified for United States
federal income tax purposes as a grantor trust.
SECTION 3.6. Title to Property of the Trust. Except as provided in
Section 3.07 with respect to the Debentures and the Institutional Trustee
Account or as otherwise provided in this Declaration, legal title to all assets
of the Trust shall be vested in the Trust. The Holders shall not have legal
title to any part of the assets of the Trust, but shall have an undivided
beneficial interest in the assets of the Trust.
SECTION 3.7. Authorization to Enter into Certain Transactions. (a) The
Trustees and the Administrators shall conduct the affairs of the Trust in
accordance with the terms of this Declaration. Subject to the limitations set
forth in paragraph (b) of this Section, and in accordance with the following
provisions (i) and (ii), the Trustees and the Administrators shall have the
authority to enter into all transactions and agreements determined by the
Trustees and the Administrators to be appropriate in exercising the authority,
express or implied, otherwise granted to the Trustees or the Administrators, as
the case may be, under this Trust Agreement, and to perform all acts in
futherance thereof, including without limitation, the following:
(i) Each Administrator shall have the power and authority to
act on behalf of the Trust with respect to the following matters:
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(A) the issuance and sale of the Securities;
(B) the receipt of the Debentures;
(C) to cause the Trust to enter into, and to execute
and deliver on behalf of the Trust, such agreements as may be
necessary or desirable in connection with the purposes and
function of the Trust, including agreements with the Clearing
Agency, any Registrar, any Transfer Agent and any Paying
Agent;
(D) ensuring compliance with the Securities Act,
applicable state securities or blue sky laws, and assisting in
the compliance with the Trust Indenture Act;
(E) to execute and file one or more registration
statements relating to the Convertible Preferred Securities
contemplated by the Registration Rights Agreement and the
preparation and filing of all periodic and other reports and
other documents pursuant to the foregoing;
(F) to register the Convertible Preferred Securities
under the Exchange Act, as amended, if required, and the
preparation and filing of all periodic and other reports and
other documents pursuant to the foregoing;
(G) assisting in the designation of the Convertible
Preferred Securities for trading in the PORTAL Market;
(H) the sending of notices (other than notices of
default) and other information regarding the Securities and
the Debentures to the Holders in accordance with this
Declaration;
(I) the consent to the appointment of a Paying Agent,
Transfer Agent and Registrar in accordance with this
Declaration, which consent shall not be unreasonably withheld;
(J) execution of the Securities in accordance with
this Declaration;
(K) execution and delivery of closing certificates
pursuant to the Purchase Agreement and the application for a
taxpayer
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identification number;
(L) except as otherwise required by the Business
Trust Act or the Trust Indenture Act, to execute on behalf of
the Trust (either acting along or together with any or all of
the Administrators) any documents that the Administrators have
the power to execute pursuant to this Declaration;
(M) the taking of any action incidental to the
foregoing as the Institutional Trustee may from time to time
determine is necessary or advisable to give effect to the
terms of this Declaration for the benefit of the Holders
(without consideration of the effect of any such action on any
particular Holder);
(N) execution and delivery of letters or documents to
or instruments with DTC relating to the Convertible Preferred
Securities;
(O) execution and delivery of the Registration Rights
Agreement and other related agreements relating to the sale of
the Convertible Preferred Securities;
(P) to establish a record date with respect to all
actions to be taken hereunder that require a record date be
established, including and with respect to, for the purposes
of Section 316(c) of the Trust Indenture Act, Distributions,
voting rights, redemptions and exchanges, and to issue
relevant notices to the Holders of Convertible Preferred
Securities and Holders of Common Securities as to such actions
and applicable record dates;
(Q) to duly prepare and file all applicable tax
returns and tax information reports that are required to be
filed with respect to the Trust on behalf of the Trust; and
(R) to give prompt written notice to the Holders of
the Securities of any notice received from the Debenture
Issuer of its election to defer payments of interest on the
Debentures by extending the interest payment period under the
Indenture.
(ii) As among the Trustees and the Administrators, the
Institutional Trustee shall have the power, duty and authority to act
on
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behalf of the Trust with respect to the following matters:
(A) establish and maintain a segregated non-interest
bearing trust account (the "INSTITUTIONAL TRUSTEE ACCOUNT") in
the name of and under the exclusive control of the
Institutional Trustee on behalf of the Holders of the
Securities and, upon the receipt of payments of funds made in
respect of the Debentures held by the Institutional Trustee,
deposit such funds into the Institutional Trustee Account and
make payments to the Holders of the Convertible Preferred
Securities and Holders of the Common Securities from the
Institutional Trustee Account in accordance with Section 6.01;
funds in the Institutional Trustee Account shall be held
uninvested until disbursed in accordance with this
Declaration; the Institutional Trustee Account shall be an
account that is maintained with a banking institution the
rating on whose long-term unsecured indebtedness is at least
equal to the rating assigned to the outstanding long-term debt
of the Debenture Issuer by a "nationally recognized
statistical rating organization," as that term is defined for
purposes of Rule 436(g)(2) under the Securities Act;
(B) the collection of interest, principal and any
other payments made in respect of the Debentures in the
Institutional Trustee Account;
(C) engage in such ministerial activities as shall be
necessary or appropriate to effect the redemption of the
Convertible Preferred Securities and the Common Securities to
the extent the Debentures are redeemed or mature;
(D) upon written notice of a Special Event issued by
the Administrators in accordance with the terms of the
Securities, engage in such ministerial activities as shall be
necessary or appropriate to effect the distribution of the
Debentures to Holders of Securities;
(E) the distribution through the Paying Agent of
amounts owed to the Holders in respect of the Securities;
(F) the exercise of all of the rights, powers and
privileges of a holder of the Debentures;
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(G) the sending of notices of default and other
information regarding the Securites and the Debentures to the
Holders in accordance with this Declaration;
(H) the distribution of the Trust property in
accordance with the terms of this Declaration;
(I) to the extent provided in this Declaration, the
winding up of the affairs of and liquidation of the Trust and
the preparation, execution and filing of the certificate of
cancellation with the Secretary of State of the State of
Delaware;
(J) after any Event of Default (provided that such
Event of Default is not by or with respect to the
Institutional Trustee), the taking of any action incidental to
the foregoing as the Institutional Trustee may from time to
time determine is necessary or advisable to give effect to the
terms of this Declaration and protect and conserve the Trust
property for the benefit of the Holders (without consideration
of the effect of any such action on any particular Holder);
and
(K) to take all action that may be necessary or
appropriate for the preservation and the continuation of the
Trust's valid existence, rights, franchises and privileges as
a statutory business trust under the laws of the State of
Delaware and of each other jurisdiction in which such
existence is necessary to protect the limited liability of the
Holders of the Convertible Preferred Securities or to enable
the Trust to effect the purposes for which the Trust was
created.
(iii) The Institutional Trustee shall have the power and
authority to act on behalf of the Trust with respect to any of the
duties, liabilities, powers or the authority of the Administrators set
forth in Section 3.07(a)(i)(G) and (I) herein but shall not have a duty
to do any such act unless specifically requested to do so in writing by
the Sponsor, and shall then be fully protected in acting pursuant to
such written request; and in the event of a conflict between the action
of the Administrators and the action of the Instituional Trustee, the
action of the Institutional Trustee shall prevail.
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(iv) All monies deposited in the Institutional Trustee Account,
and all Debentures held by the Institutional Trustee for the benefit of
Holders of Securities, will not be subject to any right, charge,
security interest, lien or claim of any kind in favor of, or for the
benefit of, the Institutional Trustee or its agents or their creditors.
(v) The Institutional Trustee shall take all actions and
perform such duties as may be specifically required of the
Institutional Trustee pursuant to the terms of the Securities.
(vi) The Institutional Trustee may bring or defend, pay,
collect, compromise, arbitrate, resort to legal action or otherwise
adjust claims or demands of or against the Trust ("LEGAL ACTION")
arising out of or in connection with an Event of Default of which a
Responsible Officer of the Institutional Trustee has actual knowledge
or the Institutional Trustee's duties and obligations under this
Declaration or the Trust Indenture Act; provided, that if an Event of
Default has occurred and is continuing and such event is attributable
to the failure of the Debenture Issuer to pay interest or principal on
the Debentures on the date such interest or principal is otherwise
payable (or in the case of redemption, on the redemption date), then a
Holder of Convertible Preferred Securities may to the fullest extent
permitted by law directly institute a proceeding for enforcement of
payment to such Holder of the principal of or interest on the
Debentures having a principal amount equal to the aggregate liquidation
amount of the Convertible Preferred Securities of such Holder (a
"DIRECT ACTION") on or after the respective due date specified in the
Debentures. In connection with such Direct Action, the rights of the
Holders of the Common Securities will be subrogated to the rights of
such Holder of Preferred Securities to the extent of any payment made
by the Debenture Issuer to such Holder of Preferred Securities in such
Direct Action; provided, however, that no Holder of the Common
Securities may exercise any such right of subrogation so long as an
Event of Default with respect to the Convertible Preferred Securities
has occurred and is continuing. Except as provided in the preceding
sentences, the Holders of Preferred Securities will not be able to
exercise directly any other remedy available to the holders of the
Debentures.
(vii) The Institutional Trustee shall have the legal power to
exercise all of the rights, powers and privileges of a holder of
Debentures under the Indenture and, if an Event of Default actually
known to a Responsible Officer of the Institutional Trustee occurs and
is continuing,
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the Institutional Trustee shall, subject to the provisions of this
Declaration, for the benefit of Holders of the Securities, enforce its
rights as holder of the Debentures subject to the rights of the Holders
pursuant to the terms of this Declaration and such Securities.
(viii) The Institutional Trustee shall continue to serve as
Trustee until either:
(A) the Trust has been completely liquidated and the
proceeds of the liquidation distributed to the Holders of
Convertible Preferred Securities pursuant to the terms of the
Convertible Preferred Securities; or
(B) a Successor Institutional Trustee has been
appointed and has accepted that appointment in accordance with
Section 5.06.
(b) Notwithstanding anything herein to the contrary, the Institutional
Trustee and Administrators are authorized and directed to conduct the affairs of
the Trust and to operate the Trust so that the Trust will not be deemed to be an
Investment Company required to be registered under the Investment Company Act or
fail to be classified as a grantor trust for United States Federal income tax
purposes and so that the Debentures will be treated as indebtedness of the
Debenture Issuer for United States Federal income tax purposes. In this
connection, the Institutional Trustee, the Administrators and the Holders of a
Majority in Liquidation Amount of the Common Securities are authorized to take
any action, not inconsistent with applicable law, the Certificate of Trust or
this Declaration, as amended from time to time, that each of the Institutional
Trustee, any Administrator and the Holders of a Majority in Liquidation Amount
of the Common Securities determines in its discretion to be necessary or
desirable for such purposes, so long as such action does not adversely affect in
any material respect the interests of the Holders of the Convertible Preferred
Securities.
(c) All expenses incurred by the Administrators or the Trustees
pursuant to this Section 3.07 shall be reimbursed by the Sponsor, and the
Trustees shall have no obligations with respect to such expenses.
SECTION 3.8. Prohibition of Actions by the Trust, the Trustees and the
Administrators. (a) The Trust shall not, and the Institutional Trustee and the
Administrators shall not cause the Trust to, engage in any activity other than
as required or authorized by this Declaration. In particular neither the
Trustees nor
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the Administrators shall cause the Trust to:
(i) invest any proceeds received by the Trust from holding the
Debentures, but shall distribute all such proceeds to Holders of
Securities pursuant to the terms of this Declaration and of the
Securities;
(ii) acquire any assets other than as expressly provided
herein;
(iii) possess Trust property for other than a Trust purpose;
(iv) make any loans or incur any indebtedness other than loans
represented by the Debentures;
(v) possess any power or otherwise act in such a way as to
vary the Trust assets or the terms of the Securities in any way
whatsoever;
(vi) issue any securities or other evidences of beneficial
ownership of, or beneficial interest in, the Trust other than the
Securities; or
(vii) other than as provided in this Declaration or Annex I
hereto, (A) direct the time, method and place of exercising any trust
or power conferred upon the Debenture Trustee with respect to the
Debentures, (B) waive any past default that is not waivable under the
Indenture, (C) exercise any right to rescind or annul any declaration
that the principal of all the Debentures shall be due and payable, or
(D) consent to any amendment, modification or termination of the
Indenture or the Debentures where such consent shall be required unless
the Trust shall have received an opinion of counsel to the effect that
such amendment, modification or termination will not cause more than an
insubstantial risk that (x) the Trust will be deemed an Investment
Company required to be registered under the Investment Company Act or
(y) for United States federal income tax purposes the Trust will not be
classified as a grantor trust.
SECTION 3.9. Certain Duties and Responsibilities of the Institutional
Trustee. (a) The Institutional Trustee, before the occurrence of any Event of
Default and after the curing of all Events of Default that may have occurred,
shall undertake to perform only such duties as are specifically set forth in
this Declaration and no implied covenants shall be read into this Declaration
against the Institutional Trustee. In case an Event of Default has occurred (and
has not
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been cured or waived pursuant to Section 2.06) and a Responsible Officer
of the Institutional Trustee has actual knowledge thereof, the Institutional
Trustee shall exercise such of the rights and powers vested in it by this
Declaration, and use the same degree of care and skill in their exercise, as a
prudent person would exercise or use under the circumstances in the conduct of
his or her own affairs.
(b) No provision of this Declaration shall be construed to relieve the
Institutional Trustee from liability for its own negligent action, its own
negligent failure to act, or its own willful misconduct, except that:
(i) prior to the occurrence of an Event of Default and after
the curing or waiving of all such Events of Default that may have
occurred:
(A) the duties and obligations of the Institutional
Trustee shall be determined solely by the express provisions
of this Declaration and the Institutional Trustee shall not be
liable except for the performance of such duties and
obligations as are specifically set forth in this Declaration,
and no implied covenants or obligations shall be read into
this Declaration against the Institutional Trustee; and
(B) in the absence of bad faith on the part of the
Institutional Trustee, the Institutional Trustee may
conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon any
certificates or opinions furnished to the Institutional
Trustee and conforming to the requirements of this
Declaration; but in the case of any such certificates or
opinions that by any provision hereof are specifically
required to be furnished to the Institutional Trustee, the
Institutional Trustee shall be under a duty to examine the
same to determine whether or not they conform to the
requirements of this Declaration (but need not confirm or
investigate the accuracy of mathematical calculations or other
facts stated therein);
(ii) the Institutional Trustee shall not be liable for any
error of judgment made in good faith by a Responsible Officer of the
Institutional Trustee, unless it shall be proved that the Institutional
Trustee was negligent in ascertaining the pertinent facts;
(iii) the Institutional Trustee shall not be liable with respect
to any action taken or omitted to be taken by it in good faith in
accordance with
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the direction of the Holders of not less than a Majority in Liquidation
Amount of the Securities relating to the time, method and place of
conducting any proceeding for any remedy available to the Institutional
Trustee, or exercising any trust or power conferred upon the
Institutional Trustee under this Declaration;
(iv) no provision of this Declaration shall require the
Institutional Trustee to expend or risk its own funds or otherwise
incur personal financial liability in the performance of any of its
duties or in the exercise of any of its rights or powers, if it shall
have reasonable grounds for believing that the repayment of such funds
or liability is not reasonably assured to it under the terms of this
Declaration or indemnity reasonably satisfactory to the Institutional
Trustee against such risk or liability is not reasonably assured to it;
(v) the Institutional Trustee's sole duty with respect to the
custody, safe keeping and physical preservation of the Debentures and
the Institutional Trustee Account shall be to deal with such property
in a similar manner as the Institutional Trustee deals with similar
property for its own account, subject to the protections and
limitations on liability afforded to the Institutional Trustee under
this Declaration and the Trust Indenture Act;
(vi) the Institutional Trustee shall have no duty or liability
for or with respect to the value, genuineness, existence or sufficiency
of the Debentures or the payment of any taxes or assessments levied
thereon or in connection therewith;
(vii) the Institutional Trustee shall not be liable for any
interest on any money received by it except as it may otherwise agree
in writing with the Sponsor. Money held by the Institutional Trustee
need not be segregated from other funds held by it except in relation
to the Institutional Trustee Account maintained by the Institutional
Trustee pursuant to Section 3.07(a)(ii)(A) and except to the extent
otherwise required by law; and
(viii) the Institutional Trustee shall not be responsible for
monitoring the compliance by the Administrators or the Sponsor with
their respective duties under this Declaration, nor shall the
Institutional Trustee be liable for any default or misconduct of the
Administrators or the Sponsor.
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SECTION 3.10. Certain Rights of Institutional Trustee. (a) Subject to
the provisions of Section 3.09:
(i) the Institutional Trustee may conclusively rely and shall
be fully protected in acting or refraining from acting upon any
resolution, certificate, statement, instrument, opinion, report,
notice, request, direction, consent, order, bond, debenture, note,
other evidence of indebtedness or other paper or document believed by
it to be genuine and to have been signed, sent or presented by the
proper party or parties;
(ii) if (A) in performing its duties under this Declaration the
Institutional Trustee is required to decide between alternative courses
of action, or (B) in construing any of the provisions of this
Declaration, the Institutional Trustee finds the same ambiguous or
inconsistent with any other provision contained herein, or (C) the
Institutional Trustee is unsure of the application of any provision of
this Declaration, then, except as to any matter as to which the Holders
of Convertible Preferred Securities are entitled to vote under the
terms of this Declaration, the Institutional Trustee may deliver a
notice to the Sponsor requesting the Sponsor's opinion as to the course
of action to be taken and the Institutional Trustee shall take such
action, or refrain from taking such action, as the Institutional
Trustee in its sole discretion shall deem advisable and in the best
interest of the Holders, in which event the Institutional Trustee shall
have no liability except for its own bad faith, negligence or willful
misconduct;
(iii) any direction or act of the Sponsor or the Administrators
contemplated by this Declaration shall be sufficiently evidenced by an
Officers' Certificate;
(iv) whenever, in the administration of this Declaration, the
Institutional Trustee shall deem it desirable that a matter be proved
or established before taking, suffering or omitting any action
hereunder, the Institutional Trustee (unless other evidence is herein
specifically prescribed) may, in the absence of bad faith on its part,
request and conclusively rely upon an Officers' Certificate as to
factual matters (other than the interpretation of this Declaration),
which, upon receipt of such request, shall be promptly delivered by the
Sponsor or the Administrators;
(v) the Institutional Trustee shall have no duty to see to any
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recording, filing or registration of any instrument (including any
financing or continuation statement or any filing under tax or
securities laws) or any rerecording, refiling or reregistration
thereof;
(vi) the Institutional Trustee may consult with counsel of its
selection or other experts and the advice or opinion of such counsel
and experts with respect to legal matters or advice within the scope of
such experts' area of expertise shall be full and complete
authorization and protection in respect of any action taken, suffered
or omitted by it hereunder in good faith and in reliance thereon and in
accordance with such advice or opinion. Such counsel may be counsel to
the Sponsor or any of its Affiliates, and may include any of its
employees. The Institutional Trustee shall have the right at any time
to seek instructions concerning the administration of this Declaration
from any court of competent jurisdiction;
(vii) the Institutional Trustee shall be under no obligation to
exercise any of the rights or powers vested in it by this Declaration
at the request or direction of any Holder pursuant to this Declaration,
unless such Holder shall have provided to the Institutional Trustee
security and indemnity, reasonably satisfactory to the Institutional
Trustee, against the costs, expenses (including reasonable attorneys'
fees and expenses and the expenses of the Institutional Trustee's
agents, nominees or custodians) and liabilities that might be incurred
by it in complying with such request or direction, including such
reasonable advances as may be requested by the Institutional Trustee;
provided, that, nothing contained in this Section 3.10(a)(vii) shall be
taken to relieve the Institutional Trustee, upon the occurrence of an
Event of Default, of its obligation to exercise the rights and powers
vested in it by this Declaration;
(viii) the Institutional Trustee shall not be bound to make any
investigation into the facts or matters stated in any resolution,
certificate, statement, instrument, opinion, report, notice, request,
direction, consent, order, approval, bond, debenture, note, other
evidence of indebtedness or other paper or document, but the
Institutional Trustee, in its discretion, may make such further inquiry
or investigation into such facts or matters as it may see fit;
(ix) the Institutional Trustee may execute any of the trusts or
powers hereunder or perform any duties hereunder either directly or by
or through agents, custodians, nominees or attorneys and the
Institutional
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Trustee shall not be responsible for any misconduct or negligence on
the part of any agent, custodians, nominees or attorney appointed with
due care by it hereunder;
(x) any action taken by the Institutional Trustee or its
agents hereunder shall bind the Trust and the Holders of the
Securities, and the signature of the Institutional Trustee or its
agents alone shall be sufficient and effective to perform any such
action and no third party shall be required to inquire as to the
authority of the Institutional Trustee to so act or as to its
compliance with any of the terms and provisions of this Declaration,
both of which shall be conclusively evidenced by the Institutional
Trustee's or its agent's taking such action;
(xi) whenever in the administration of this Declaration the
Institutional Trustee shall deem it desirable to receive written
instructions with respect to enforcing any remedy or right or taking
any other action hereunder, the Institutional Trustee (A) may request
written instructions from the Holders of the Securities, which
instructions may only be given by the Holders of the same proportion in
liquidation amount of the Securities as would be entitled to direct the
Institutional Trustee under the terms of the Securities in respect of
such remedy, right or action, (B) may refrain from enforcing such
remedy or right or taking such other action until such instructions are
received, and (C) shall be protected in conclusively relying on or
acting in or accordance with such instructions;
(xii) except as otherwise expressly provided by this
Declaration, the Institutional Trustee shall not be under any
obligation to take any action that is discretionary under the
provisions of this Declaration; and
(xiii) the Institutional Trustee shall not be liable for any
action taken, suffered, or omitted to be taken by it in good faith and
reasonably believed by it to be authorized or within the discretion or
rights or powers conferred upon it by this Declaration.
(b) No provision of this Declaration shall be deemed to impose any
duty or obligation on the Institutional Trustee to perform any act or acts or
exercise any right, power, duty or obligation conferred or imposed on it in any
jurisdiction in which it shall be illegal, or in which the Institutional Trustee
shall be unqualified or incompetent in accordance with applicable law, to
perform any such act or acts or to exercise any such right, power, duty or
obligation. No permissive power or authority available to the Institutional
Trustee shall be construed to be a duty.
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SECTION 3.11. Delaware Trustee. Notwithstanding any other provision of
this Declaration other than Section 5.02, the Delaware Trustee, acting in its
capacity as such, shall not be entitled to exercise any powers, nor shall the
Delaware Trustee, acting in its capacity as such, have any of the duties and
responsibilities of the Administrators or the Institutional Trustee described in
this Declaration. The Delaware Trustee shall be a Trustee for the sole and
limited purpose of fulfilling the requirements of Section 3807 of the Business
Trust Act.
SECTION 3.12. Execution of Documents. Except as otherwise required by
the Business Trust Act or applicable law, the Institutional Trustee or any
Administrator, as the case may be, is authorized to execute on behalf of the
Trust any documents, agreements, instruments or certificates that the
Institutional Trustee or the Administrators, as the case may be, have the power
and authority to execute pursuant to Section 3.07; provided, that the
registration statement referred to in Section 3.07(a)(i)(D), including any
amendments thereto, shall be signed by a majority of Administrators.
SECTION 3.13. Not Responsible for Recitals or Issuance of Securities .
The recitals contained in this Declaration and the Securities shall be taken as
the statements of the Sponsor, and the Trustees do not assume any responsibility
for their correctness. The Trustees make no representations as to the value or
condition of the property of the Trust or any part thereof. The Trustees make no
representations as to the validity or sufficiency of this Declaration, the
Debentures or the Securities.
SECTION 3.14. Duration of Trust. The Trust, unless dissolved pursuant
to the provisions of Article 7.04 hereof, shall have existence for forty (40)
years from December 1, 1997.
SECTION 3.15. Mergers. (a) The Trust may not consolidate, amalgamate,
merge with or into, or be replaced by, or convey, transfer or lease its
properties and assets substantially as an entirety to any Person, except as
described in Section 3.15(b) and (c) of this Declaration or Sections 3 and 4 of
Annex I.
(b) The Trust may, with the consent of the Administrators or, if there
are more than two, a majority of the Administrators and without the consent of
the Holders of the Securities, the Delaware Trustee or the Institutional
Trustee, consolidate, amalgamate, merge with or into, or be replaced by a trust
organized as such under the laws of any State; provided, that:
(i) such successor entity ( the "SUCCESSOR ENTITY") either:
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(A) expressly assumes all of the obligations of the
Trust under the Securities; or
(B) substitutes for the Convertible Preferred
Securities other securities having substantially the same
terms as the Convertible Preferred Securities (the "SUCCESSOR
SECURITIES") so long as the Successor Securities rank the same
as the Convertible Preferred Securities rank with respect to
Distributions and payments upon liquidation, redemption and
otherwise;
(ii) the Debenture Issuer expressly acknowledges a trustee of
the Successor Entity possessing the same powers and duties as the
Institutional Trustee as the Holder of the Debentures;
(iii) such merger, consolidation, amalgamation or replacement
does not cause the Convertible Preferred Securities (including any
Successor Securities) to be downgraded by any nationally recognized
statistical rating organization;
(iv) such merger, consolidation, amalgamation or replacement
does not adversely affect the Holders of the Securities (including any
Successor Securities) in any material respect;
(v) such Successor Entity has a purpose substantially
identical to that of the Trust;
(vi) prior to such merger, consolidation, amalgamation or
replacement, the Sponsor has received an opinion of independent counsel
to the Trust experienced in such matters to the effect that:
(A) such merger, consolidation, amalgamation or
replacement does not adversely affect the Holders of the
Securities (including any successor Securities) in any
material respect;
(B) following such merger, consolidation,
amalgamation or replacement, neither the Trust nor the
Successor Entity will be required to register as an Investment
Company;
(C) following such merger, consolidation,
amalgamation or replacement, the Trust (or such Successor
Entity) will continue
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to be classified as a grantor trust for United States federal
income tax purposes; and
(vii) the Sponsor guarantees the obligations of such Successor
Entity under the Successor Securities at least to the extent provided
by the Securities Guarantees.
(c) Notwithstanding Section 3.15(b), the Trust shall not, except with
the consent of Holders of 100% in liquidation amount of the Securities,
consolidate, amalgamate, merge with or into, or be replaced by any other entity
or permit any other entity to consolidate, amalgamate, merge with or into, or
replace it if such consolidation, amalgamation, merger or replacement would
cause the Trust or Successor Entity to be classified as other than a grantor
trust for United States federal income tax purposes.
ARTICLE 4
SPONSOR
SECTION 4.1. Sponsor's Purchase of Common Securities. On the Closing
Date the Sponsor will purchase all of the Common Securities issued by the Trust,
in an aggregate liquidation amount at least equal to 3% of the capital of the
Trust, at the same time as the Convertible Preferred Securities are sold.
SECTION 4.2. Responsibilities of the Sponsor. In connection with the
issue and sale of the Convertible Preferred Securities, the Sponsor shall have
the exclusive right and responsibility to engage in the following activities:
(a) to prepare and distribute an offering memorandum (the "OFFERING
MEMORANDUM") in preliminary and final form and any supplements and amendments
thereto, in relation to the offering and sale by the Trust of Convertible
Preferred Securities to qualified institutional buyers in reliance on Rule 144A
under the Securities Act and outside the United States to non-U.S. persons in
offshore transactions in reliance on Regulation S under the Securities Act and
to prepare for filing by the Trust and the Debenture Issuer with the Commission
any registration statement, including any amendment thereto, as contemplated by
the Registration Rights Agreement;
(b) to prepare or cause to be prepared for filing by the Trust an
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application to the PORTAL Market;
(c) to prepare for filing by the Trust of documents, or instruments to
be delivered to DTC relating to the Convertible Preferred Securities;
(d) to prepare for execution and filing by the Trust with the
Commission a registration statement on Form 8-A, including any supplements and
amendments thereto, relating to the registration of the Convertible Preferred
Securities under Section 12(b) of the Exchange Act;
(e) to determine the States in which to take appropriate action to
qualify or register for sale or resale all or part of the Convertible Preferred
Securities and to do any and all such acts, other than actions which must be
taken by the Trust, and advise the Trust of actions it must take, and prepare
for execution and filing any documents to be executed and filed by the Trust, as
the Sponsor deems necessary or advisable in order to comply with the applicable
laws of any such States;
(f) to negotiate the terms of and execute the Purchase Agreement
providing for the sale of the Convertible Preferred Securities; and
(g) to negotiate the terms of the Registration Rights Agreement
providing for, among other things, the registration under the Securities Act of
resales from time to time of the Convertible Preferred Securities.
(h) to provide any Holder of Securities originally issued in an
offering not registered pursuant to the Securities Act, at the request of such
Holder, if prior to the Transfer Restriction Termination Date the Company is
neither subject to Section 13 or 15(d) of the Exchange Act, such information, if
any, required by Rule 144A(d)(4) under the Securities Act.
ARTICLE 5
TRUSTEES AND ADMINISTRATORS
SECTION 5.1. Number of Trustees and Administrators. (a) The number of
Trustees initially shall be two (2) and the number of Administrators shall
initially be three (3).
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(b) At any time before the issuance of any Securities, the Sponsor
may, by written instrument, increase or decrease the number of Trustees or
Administrators.
(c) After the issuance of any Securities, the number of Trustees may
be increased or decreased by vote of the Holders of a Majority in Liquidation
Amount of the Convertible Preferred Securities voting as a class at a meeting of
the Holders of the Convertible Preferred Securities; provided, that (i) if
required by the Business Trust Act, there shall be one Trustee (the "DELAWARE
TRUSTEE") that shall meet the requirements of Sections 5.02 and 5.04 and (ii)
there shall be one Trustee (the "INSTITUTIONAL TRUSTEE") that shall meet the
requirements of 5.03 at such time and for so long as this Declaration is
required to qualify as an indenture under the Trust Indenture Act.
SECTION 5.2. Delaware Trustee; Eligibility. (a) If required by the
Business Trust Act, the Delaware Trustee shall be:
(i) a natural person who is a resident of the State of
Delaware; or
(ii) if not a natural person, an entity that has its principal
place of business in the State of Delaware, and otherwise meets the
requirements of applicable law.
(b) The initial Delaware Trustee shall be The Bank of New York
(Delaware).
(c) If at any time, the Institutional Trustee has its principal place
of business in the State of Delaware and otherwise meets the requirements of
applicable law, then the Institutional Trustee shall also be the Delaware
Trustee and Section 3.11 shall have no application.
SECTION 5.3. Institutional Trustee; Eligibility. (a) The Institutional
Trustee shall:
(i) not be an Affiliate of the Sponsor; and
(ii) be a corporation organized and doing business under the
laws of the United States of America or any State or Territory thereof
or of the District of Columbia, or a corporation permitted by the
Commission to act as an institutional trustee under the Trust Indenture
Act, authorized under such laws to exercise corporate trust powers,
having a combined capital
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and surplus of at least 500 million U.S. dollars ($500,000,000), and
subject to supervision or examination by federal, state, territorial or
District of Columbia authority. If such corporation publishes reports
of condition at least annually, pursuant to law or to the requirements
of the supervising or examining authority referred to above, then for
the purposes of this Section 5.03(a)(ii), the combined capital and
surplus of such corporation shall be deemed to be its combined capital
and surplus as set forth in its most recent report of condition so
published.
(b) If at any time the Institutional Trustee shall cease to be
eligible to so act under Section 5.03(a), the Institutional Trustee shall
immediately resign in the manner and with the effect set forth in Section
5.07(c).
(c) If the Institutional Trustee has or shall acquire any "conflicting
interest" within the meaning of Section 310(b) of the Trust Indenture Act, the
Institutional Trustee and the Holder of the Common Securities (as if it were the
obligor referred to in Section 310(b) of the Trust Indenture Act) shall in all
respects comply with the provisions of Section 310(b) of the Trust Indenture
Act.
(d) The Indenture, the Debentures, the Convertible Preferred
Securities and the Preferred Securities Guarantee shall be deemed to be
specifically described in this Declaration for purposes of clause (i) of the
first provision contained in Section 310(b) of the Trust Indenture Act.
(e) The initial Institutional Trustee shall be The Bank of New York.
SECTION 5.4. Certain Qualifications of Administrators and the Delaware
Trustee Generally. Each Administrator and the Delaware Trustee (unless the
Institutional Trustee also acts as Delaware Trustee) shall be either a natural
person who is at least 21 years of age or a legal entity that shall act through
one or more Authorized Officers.
SECTION 5.5. Initial Administrators. The initial Administrators shall
be:
Thomas W. Ryan,
David A. Bozynski and
Diane L. Kaye.
SECTION 5.6. Delaware Trustee. The initial Delaware Trustee shall be
The Bank of New York (Delaware).
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SECTION 5.7. Appointment, Removal and Resignation of Trustees and
Administrators. (a) Subject to Section 5.07(b), Trustees may be appointed or
removed without cause at any time:
(i) until the issuance of any Securities, by written
instrument executed by the Sponsor; and
(ii) after the issuance of any Securities, by vote of the
Holders of a Majority in Liquidation Amount of the Convertible
Preferred Securities voting as a class at a meeting of the Holders of
the Convertible Preferred Securities.
(b) The Trustee that acts as Institutional Trustee shall not be
removed in accordance with Section 5.07(a) until a successor Trustee possessing
the qualifications set forth in Section 5.03 (a "SUCCESSOR INSTITUTIONAL
TRUSTEE") has been appointed and has accepted such appointment by written
instrument executed by such Successor Institutional Trustee and delivered to the
Administrators and the Sponsor. The Trustee that acts as Delaware Trustee shall
not be removed in accordance with Section 5.07(a) until a successor Trustee
possessing the qualifications to act as Delaware Trustee under Sections 5.02 and
5.04 (a "SUCCESSOR DELAWARE TRUSTEE") has been appointed and has accepted such
appointment by written instrument executed by such Successor Delaware Trustee
and delivered to the Administrators and the Sponsor.
(c) A Trustee appointed to office shall hold office until his
successor shall have been appointed or until his death, removal or resignation.
Any Trustee may resign from office (without need for prior or subsequent
accounting) by an instrument in writing signed by the Trustee and delivered to
the Sponsor and the Trust, which resignation shall take effect upon such
delivery or upon such later date as is specified therein; provided, that:
(i) no such resignation of the Trustee that acts as the
Institutional Trustee shall be effective:
(A) until a Successor Institutional Trustee has been
appointed and has accepted such appointment by instrument
executed by such Successor Institutional Trustee and delivered
to the Trust, the Sponsor and the resigning Institutional
Trustee; or
(B) until the assets of the Trust have been
completely liquidated and the proceeds thereof distributed to
the holders of the
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Securities; and
(ii) no such resignation of the Trustee that acts as the
Delaware Trustee shall be effective until a Successor Delaware Trustee
has been appointed and has accepted such appointment by instrument
executed by such Successor Delaware Trustee and delivered to the Trust,
the Sponsor and the resigning Delaware Trustee.
(d) The Holders of the Common Securities shall use their best efforts
to promptly appoint a Successor Delaware Trustee or Successor Institutional
Trustee, as the case may be, if the Institutional Trustee or the Delaware
Trustee delivers an instrument of resignation in accordance with this Section
5.07.
(e) If no Successor Institutional Trustee or Successor Delaware
Trustee shall have been appointed and accepted appointment as provided in this
Section 5.07 within 60 days after delivery to the Sponsor and the Trust of an
instrument of resignation or removal, the Institutional Trustee or Delaware
Trustee resigning or being removed, as applicable, may petition any court of
competent jurisdiction for appointment of a Successor Institutional Trustee or
Successor Delaware Trustee. Such court may thereupon, after prescribing such
notice, if any, as it may deem proper, appoint a Successor Institutional Trustee
or Successor Delaware Trustee, as the case may be.
(f) No Institutional Trustee or Delaware Trustee shall be liable for
the acts or omissions to act of any Successor Institutional Trustee or Successor
Delaware Trustee, as the case may be.
(g) The Holders of the Convertible Preferred Securities will have no
right to vote to appoint, remove, replace or change the number of the
Administrators, which voting rights are vested exclusively in the Holders of the
Common Securities.
SECTION 5.8. Vacancies among Trustees. If a Trustee ceases to hold
office for any reason and the number of Trustees is not reduced pursuant to
Section 5.01, or if the number of Trustees is increased pursuant to Section
5.01, a vacancy shall occur. A resolution certifying the existence of such
vacancy by the Trustees or, if there are more than two, a majority of the
Trustees shall be conclusive evidence of the existence of such vacancy. The
vacancy shall be filled with a Trustee appointed in accordance with Section
5.07.
SECTION 5.9. Effect of Vacancies. The death, resignation, retirement,
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removal, bankruptcy, dissolution, liquidation, incompetence or incapacity to
perform the duties of a Trustee shall not operate to dissolve, terminate or
annul the Trust. Whenever a vacancy in the number of Trustees shall occur, until
such vacancy is filled by the appointment of a Trustee in accordance with
Section 5.07, the Trustees in office, regardless of their number, shall have all
the powers granted to the Trustees and shall discharge all the duties imposed
upon the Trustees by this Declaration.
SECTION 5.10. Meetings. Meetings of the Trustees or the Administrators
shall be held from time to time upon the call of any Trustee or Administrator,
as applicable. Regular meetings of the Trustees and the Administrators,
respectively, may be held at a time and place fixed by resolution of the
Trustees or the Administrators, as applicable. Notice of any in-person meetings
of the Trustees or the Administrators shall be hand delivered or otherwise
delivered in writing (including by facsimile, with a hard copy by overnight
courier) not less than 48 hours before such meeting. Notice of any telephonic
meetings of the Trustees or the Administrators or any committee thereof shall be
hand delivered or otherwise delivered in writing (including by facsimile, with a
hard copy by overnight courier) not less than 24 hours before a meeting. Notices
shall contain a brief statement of the time, place and anticipated purposes of
the meeting. The presence (whether in person or by telephone) of a Trustee or an
Administrator, as the case may be, at a meeting shall constitute a waiver of
notice of such meeting except where a Trustee or an Administrator, as the case
may be, attends a meeting for the express purpose of objecting to the
transaction of any activity on the ground that the meeting has not been lawfully
called or convened. Unless provided otherwise in this Declaration, any action of
the Trustees or the Administrators, as the case may be, may be taken at a
meeting by vote of a majority of the Trustees or Administrators present (whether
in person or by telephone) and eligible to vote with respect to such matter,
provided that a Quorum is present, or without a meeting by the unanimous written
consent of the Trustees or the Administrators. In the event there is only one
Trustee or Administrator, any and all action of such Trustee or Administrator
shall be evidenced by a written consent of such Trustee or Administrator.
Meetings of the Trustees and the Administrators together shall be held from time
to time upon the call of any Trustee or Administrator.
SECTION 5.11. Delegation of Power. (a) Any Trustee or Administrator
may, by power of attorney consistent with applicable law, delegate to any other
natural person over the age of 21 his or her power for the purpose of executing
any documents contemplated in Section 3.07, including any registration statement
or amendment thereto filed with the Commission, or making any other
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governmental filing; and
(b) The Trustees and the Administrators shall have power to delegate
from time to time to such of their number or to officers of the Trust the doing
of such things and the execution of such instruments either in the name of the
Trust or the names of the Trustees or otherwise as the Trustees may deem
expedient, to the extent such delegation is not prohibited by applicable law or
contrary to the provisions of the Trust, as set forth herein.
SECTION 5.12. Merger, Conversion, Consolidation or Succession to
Business. Any Person into which the Institutional Trustee or the Delaware
Trustee, as the case may be, may be merged or converted or with which either may
be consolidated, or any Person resulting from any merger, conversion or
consolidation to which the Institutional Trustee or the Delaware Trustee, as the
case may be, shall be a party, or any Person succeeding to all or substantially
all the corporate trust business of the Institutional Trustee or the Delaware
Trustee, as the case may be, shall be the successor of the Institutional Trustee
or the Delaware Trustee, as the case may be, hereunder, provided such Person
shall be otherwise qualified and eligible under this Article, without the
execution or filing of any paper or any further act on the part of any of the
parties hereto.
ARTICLE 6
DISTRIBUTIONS
SECTION 6.1. Distributions. Holders of Securities shall receive
Distributions (as defined herein) in accordance with the applicable terms of the
relevant Holder's Securities. Distributions shall be made on the Convertible
Preferred Securities and the Common Securities in accordance with the
preferences set forth in their respective terms. If and to the extent that the
Debenture Issuer makes a payment of interest (including Compounded Interest (as
defined in the Indenture) and Additional Interest (as defined in the
Indenture)), premium and/or principal on the Debentures held by the
Institutional Trustee (the amount of any such payment being a "PAYMENT AMOUNT"),
the Institutional Trustee shall and is directed, to the extent funds are
available for that purpose, to make a distribution (a "DISTRIBUTION") of the
Payment Amount to Holders.
ARTICLE 7
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ISSUANCE OF SECURITIES
SECTION 7.1. General Provisions Regarding Securities. (a) The
Administrators shall on behalf of the Trust issue one class of convertible
preferred securities representing undivided beneficial interests in the assets
of the Trust having such terms as are set forth in Annex I (the "CONVERTIBLE
PREFERRED SECURITIES") and one class of convertible common securities
representing undivided beneficial interests in the assets of the Trust having
such terms as are set forth in Annex I (the "COMMON SECURITIES"). The Trust
shall issue no securities or other interests in the assets of the Trust other
than the Convertible Preferred Securities and the Common Securities.
(b) The consideration received by the Trust for the issuance of the
Securities shall constitute a contribution to the capital of the Trust and shall
not constitute a loan to the Trust.
(c) Upon issuance of the Securities as provided in this Declaration,
the Securities so issued shall be deemed to be validly issued, fully paid and
non-assessable.
(d) Every Person, by virtue of having become a Holder or a Convertible
Preferred Security Beneficial Owner in accordance with the terms of this
Declaration, shall be deemed to have expressly assented and agreed to the terms
of and shall be bound by this Declaration and the Preferred Securities
Guarantee.
SECTION 7.2. Execution and Authentication. (a) The Certificates shall
be signed on behalf of the Trust by an Administrator. In case any Administrator
of the Trust who shall have signed any of the Securities shall cease to be such
Administrator before the Certificates so signed shall be delivered by the Trust,
such Certificates nevertheless may be delivered as though the person who signed
such Certificates had not ceased to be such Administrator; and any Certificate
may be signed on behalf of the Trust by such persons who, at the actual date of
execution of such Security, shall be the Administrators of the Trust, although
at the date of the execution and delivery of this Declaration any such person
was not such an Administrator.
(b) One Administrator shall sign the Convertible Preferred Securities
for the Trust by manual or facsimile signature. Unless otherwise determined by
the Trust, such signature shall, in the case of Common Securities, be a manual
signature.
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A Convertible Preferred Security shall not be valid until authenticated
by the manual signature of an authorized signatory of the Institutional Trustee.
The signature shall be conclusive evidence that the Convertible Preferred
Security has been authenticated under this Declaration.
Upon a written order of the Trust signed by one Administrator, the
Institutional Trustee shall authenticate the Convertible Preferred Securities
for original issue.
The Institutional Trustee may appoint an authenticating agent
acceptable to the Trust to authenticate Convertible Preferred Securities. A
Common Security need not be authenticated or countersigned. An authenticating
agent may authenticate Convertible Preferred Securities whenever the
Institutional Trustee may do so. Each reference in this Declaration to
authentication by the Institutional Trustee includes authentication by such
agent. An authenticating agent has the same rights as the Institutional Trustee
to deal with the Company or an Affiliate.
SECTION 7.3. Form and Dating. The Convertible Preferred Securities and
the Institutional Trustee's certificate of authentication shall be substantially
in the form of Exhibit A-1 and the Common Securities shall be substantially in
the form of Exhibit A-2, each of which is hereby incorporated in and expressly
made a part of this Declaration. Certificates may be typed, printed,
lithographed or engraved or may be produced in any other manner as is reasonably
acceptable to the Administrators, as evidenced by their execution thereof. The
Securities may have letters, numbers, notations or other marks of identification
or designation and such legends or endorsements required by law, stock exchange
rule, agreements to which the Trust is subject, if any, or usage (provided that
any such notation, legend or endorsement is in a form acceptable to the Trust).
The Trust, at the direction of the Sponsor, shall furnish any such legend not
contained in Exhibit A-1 to the Institutional Trustee in writing. Each
Convertible Preferred Security Certificate shall be dated the date of its
authentication. The terms and provisions of the Securities set forth in Annex I
and the forms of Securities set forth in Exhibits A-1 and A-2 are part of the
terms of this Declaration and, to the extent applicable, the Institutional
Trustee, the Delaware Trustee, the Administrators and the Sponsor, by their
execution and delivery of this Declaration, expressly agree to such terms and
provisions and to be bound thereby.
SECTION 7.4. Paying Agent, Registrar and Conversion Agent. The Trust
shall maintain in the Borough of Manhattan, City of New York, State of New York,
an office or agency where Convertible Preferred Securities not held in
book-entry only form may be presented for payment (the "PAYING AGENT"). The
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Trust shall maintain an office or agency where Securities may be presented for
conversion (the "CONVERSION AGENT"). The Trust shall keep or cause to be kept at
such office or agency a register for the purpose of registering Securities and
transfers and exchanges of Securities, such register to be held by a registrar
(the "REGISTRAR"). The Trust may appoint the Paying Agent, the Registrar and the
Conversion Agent and may appoint one or more additional paying agents, one or
more additional registrars and one or more additional conversion agents in such
other locations as it shall determine. Any such Paying Agent shall comply with
Section 317(b) of the Trust Indenture Act. The term "PAYING AGENT" includes any
additional paying agent, the term "REGISTRAR" includes any additional registrar
and the term "CONVERSION AGENT" includes any additional conversion agent. The
Trust may change any Paying Agent, Registrar or Conversion Agent at any time
without prior notice to any Holder. The Trust shall notify the Institutional
Trustee in writing of the name and address of any Agent not a party to this
Declaration. If the Trust fails to appoint or maintain another entity as Paying
Agent, Registrar or Conversion Agent, the Institutional Trustee shall act as
such.
The Trust initially appoints the Institutional Trustee as Paying Agent,
Registrar and Conversion Agent for the Convertible Preferred Securities and the
Common Securities.
The Trust shall require each Paying Agent other than the Institutional
Trustee to agree in writing that the Paying Agent will hold in trust for the
benefit of Holders of the Institutional Trustee all money held by the Paying
Agent for the payment of liquidation amounts, redemption amounts or Distribution
on the Securities, and will notify the Institutional Trustee in writing if there
are insufficient funds. While any such insufficiency continues, the
Institutional Trustee may require a Paying Agent to pay all money held by it to
the Institutional Trustee. The Trust at any time may require a Paying Agent to
pay all money held by it to the Institutional Trustee and to account for any
money disbursed by it. Upon payment over to the Institutional Trustee, the
Paying Agent (if other than the Trust or an Affiliate of the Trust) shall have
no further liability for the money. If the Trust or the Sponsor or an Affiliate
of the Trust or the Sponsor acts as Paying Agent, it shall segregate and hold in
a separate trust fund for the benefit of the Holders all money held by it as
Paying Agent.
ARTICLE 8
DISSOLUTION OF TRUST
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SECTION 8.1. Dissolution of Trust. (a) The Trust shall dissolve, and
its affairs shall be wound up, upon the earliest to occur of the following:
(i) upon the bankruptcy of the Holder of the Common Securities
or the Sponsor;
(ii) (other than in connection with a merger, consolidation or
similar transaction not prohibited by the Indenture, this Declaration
or the Securities Guaranties) upon the filing of a certificate of
dissolution or its equivalent with respect to the Sponsor; the consent
of a Majority in Liquidation Amount of the Securities voting together
as a single class to dissolve the Trust or the revocation of the
Sponsor's charter and the expiration of 90 days after the date of
revocation without a reinstatement thereof;
(iii) upon the entry of a decree of judicial dissolution of the
Sponsor or the Trust;
(iv) when all of the Securities shall have been called for
redemption and the amounts necessary for redemption thereof shall have
been paid to the Holders in accordance with the terms of the
Securities;
(v) upon the occurrence and continuation of a Special Event
pursuant to which the Trust shall have been dissolved in accordance
with the terms of the Securities and all of the Debentures held by the
Institutional Trustee shall have been distributed to the Holders of
Securities in exchange for all of the Securities;
(vi) upon the distribution of the Sponsor's Common Stock to all
Holders of Convertible Preferred Securities upon conversion of all
outstanding Convertible Preferred Securities;
(vii) the expiration of the term of the Trust on December 1,
2037; or
(viii) before the issuance of any Securities, with the consent of
all of the Administrators and the Sponsor.
(b) As soon as is practicable after the occurrence of an event
referred to in Section 8.01(a), after the completion of the winding up of the
affairs of the Trust, the Trustees shall file a certificate of cancellation with
the Secretary of
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State of the State of Delaware.
(c) The provisions of Sections 3.09 and 3.10 and Article 10 shall
survive the termination of the Trust.
ARTICLE 9
TRANSFER OF INTERESTS
SECTION 9.1. Transfer of Securities. (a) Securities may only be
transferred, in whole or in part, in accordance with the terms and conditions
set forth in this Declaration and in the terms of the Securities. Any transfer
or purported transfer of any Security not made in accordance with this
Declaration shall be null and void.
(b) Upon issuance of the Common Securities, the Sponsor shall acquire
and retain beneficial and record ownership of the Common Securities and, for so
long as the Convertible Preferred Securities remain outstanding, the Sponsor
shall maintain 100% ownership of the Common Securities, provided that any
permitted successor of the Sponsor under the Indenture may succeed to the
Sponsor's ownership of the Common Securities.
(c) Subject to this Article 9, Convertible Preferred Securities shall
be freely transferable.
(d) Subject to this Article 9, the Sponsor and any Related Party may
only transfer Common Securities to the Sponsor or a Related Party of the
Sponsor, and that any such transfer is subject to the condition precedent that
the transferor obtain the written opinion of nationally recognized independent
counsel experienced in such matters that such transfer would not cause more than
an insubstantial risk that:
(i) the Trust would not be classified for United States
federal income tax purposes as a grantor trust; or
(ii) the Trust would be an Investment Company required to
register under the Investment Company Act or the transferee would
become an Investment Company required to register under the Investment
Company Act.
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(e) The Trust shall not be required (i) to issue, register the
transfer of or exchange any Convertible Preferred Securities during a period
beginning at the opening of business 15 days before the day of any selection of
Convertible Preferred Securities for redemption and ending at the close of
business on the earliest date on which the relevant notice of redemption is
deemed to have been given to all Holders of Convertible Preferred Securities to
be redeemed, or (ii) to register the transfer or exchange of any Convertible
Preferred Security so selected for redemption in whole or in part, except the
unredeemed portion of any Convertible Preferred Security being redeemed in part.
(f) Each Security that bears or is required to bear the legend set
forth in this Section 9.01(f) (a "RESTRICTED SECURITY") shall be subject to the
restrictions on transfer provided in the legend set forth in this Section
9.01(f), unless such restrictions on transfer shall be waived by the written
consent of the Administrators, and the Holder of each Restricted Security, by
such Holder's acceptance thereof, agrees to be bound by such restrictions on
transfer. As used in this Section 9.01(f) and in Section 9.01(f), the terms
"transfer" encompasses any sale, pledge, transfer or other disposition of any
Restricted Security.
Prior to the Transfer Restriction Termination Date, any certificate
representing Convertible Preferred Securities shall bear the following legend
(unless such Convertible Preferred Securities have been sold pursuant to a
registration statement that has been declared effective under the Securities
Act):
THE SECURITY EVIDENCED HEREBY HAS NOT BEEN REGISTERED UNDER THE UNITED
STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR
ANY STATE SECURITIES LAWS, AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD
WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF,
UNITED STATES PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY
ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A
"QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT) OR (B) IT IS NOT A UNITED STATES PERSON AND IS
ACQUIRING THE CONVERTIBLE PREFERRED SECURITY EVIDENCED HEREBY IN AN
OFFSHORE TRANSACTION; (2) AGREES THAT IT WILL NOT, PRIOR TO THE
EXPIRATION OF THE HOLDING PERIOD APPLICABLE TO SALES OF THE SECURITY
EVIDENCED HEREBY UNDER RULE 144(K) UNDER THE SECURITIES ACT (OR ANY
SUCCESSOR PROVISION), RESELL OR OTHERWISE
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TRANSFER THE SECURITY EVIDENCED HEREBY OR THE COMMON STOCK ISSUABLE
UPON CONVERSION OF SUCH SECURITY EXCEPT (A) TO FEDERAL-MOGUL
CORPORATION OR ANY SUBSIDIARY THEREOF, (B) INSIDE THE UNITED STATES TO
A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE
SECURITIES ACT, (C) OUTSIDE THE UNITED STATES IN COMPLIANCE WITH RULE
904 UNDER THE SECURITIES ACT, (D) PURSUANT TO THE EXEMPTION FROM
REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF
AVAILABLE) OR (E) PURSUANT TO A REGISTRATION STATEMENT THAT HAS BEEN
DECLARED EFFECTIVE UNDER THE SECURITIES ACT (AND THAT CONTINUES TO BE
EFFECTIVE AT THE TIME OF SUCH TRANSFER) AND (3) AGREES THAT IT WILL
DELIVER TO EACH PERSON TO WHOM THE SECURITY EVIDENCED HEREBY IS
TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN
CONNECTION WITH ANY TRANSFER OF THE SECURITY EVIDENCED HEREBY PRIOR TO
THE EXPIRATION OF THE HOLDING PERIOD APPLICABLE TO SALES OF THE
SECURITY EVIDENCED HEREBY, UNDER RULE 144(K) UNDER THE SECURITIES ACT
(OR ANY SUCCESSOR PROVISION), THE HOLDER MUST CHECK THE APPROPRIATE BOX
SET FORTH ON THE REVERSE HEREOF RELATING TO THE MANNER OF SUCH TRANSFER
AND SUBMIT THIS CERTIFICATE TO THE BANK OF NEW YORK, AS INSTITUTIONAL
TRUSTEE (OR A SUCCESSOR INSTITUTIONAL TRUSTEE, AS APPLICABLE). THIS
LEGEND WILL BE REMOVED UPON THE EARLIER OF THE TRANSFER OF THE SECURITY
EVIDENCED HEREBY PURSUANT TO CLAUSE 1(E) ABOVE OR UPON ANY TRANSFER OF
THE SECURITY EVIDENCED HEREBY UNDER RULE 144(K) UNDER THE SECURITIES
ACT (OR ANY SUCCESSOR PROVISION). AS USED HEREIN, THE TERMS "OFFSHORE
TRANSACTION," "UNITED STATES" AND "UNITED STATES PERSON" HAVE THE
MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT. EACH
PURCHASER OR HOLDER OF THE SECURITY EVIDENCED HEREBY WILL BE DEEMED TO
HAVE REPRESENTED EITHER THAT (A) IT IS NOT AN EMPLOYEE BENEFIT PLAN
SUBJECT TO PART 4 OF SUBTITLE B OF TITLE 1 OF ERISA OR A PLAN DESCRIBED
IN SECTION 4975 OF THE CODE OR AN ENTITY WHOSE UNDERLYING ASSETS
INCLUDE THE ASSETS OF ANY SUCH ERISA PLAN OR OTHER PLAN OR (B)
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ITS ACQUISITION, HOLDING AND DISPOSITION OF THE SECURITY EVIDENCED
HEREBY WILL NOT RESULT IN A PROHIBITED TRANSACTION UNDER SECTION 406 OF
ERISA OR SECTION 4975 OF THE CODE BY REASON OF PROHIBITED TRANSACTION
CLASS EXEMPTION ("PTCE") 91-38, PTCE 84-14, PTCE 90-1, PTCE 95-60 OR
PTCE 96-23.
Prior to the Transfer Restriction Termination Date, any certificate
representing Common Stock issued upon conversion of the
Convertible Debentures shall bear the following legend (unless
such Common Stock has been sold pursuant to a registration
statement that has been declared effective under the
Securities Act):
THE COMMON STOCK EVIDENCED HEREBY HAS NOT BEEN REGISTERED UNDER THE
UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), OR ANY STATE SECURITIES LAWS, AND, ACCORDINGLY, MAY NOT BE
OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR
BENEFIT OF, UNITED STATES PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING
SENTENCE. THE HOLDER HEREOF AGREES THAT UNTIL THE EXPIRATION OF THE
HOLDING PERIOD APPLICABLE TO SALES OF THE SECURITY EVIDENCED HEREBY
UNDER RULE 144(K) UNDER THE SECURITIES ACT (OR ANY SUCCESSOR
PROVISION), (1) IT WILL NOT RESELL OR OTHERWISE TRANSFER THE COMMON
STOCK EVIDENCED HEREBY EXCEPT (A) TO FEDERAL-MOGUL CORPORATION OR ANY
SUBSIDIARY THEREOF, (B) INSIDE THE UNITED STATES TO A "QUALIFIED
INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT)
IN COMPLIANCE WITH RULE 144A, (C) OUTSIDE THE UNITED STATES IN
COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT, (D) PURSUANT TO THE
EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES
ACT (IF AVAILABLE), OR (E) PURSUANT TO A REGISTRATION STATEMENT THAT
HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT (AND THAT
CONTINUES TO BE EFFECTIVE AT THE TIME OF SUCH TRANSFER) AND (2) IT WILL
DELIVER TO EACH PERSON TO WHOM THE COMMON STOCK EVIDENCED HEREBY IS
TRANSFERRED (OTHER THAN A TRANSFER PURSUANT TO
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CLAUSE 1(E) ABOVE) A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND.
THIS LEGEND WILL BE REMOVED UPON THE EARLIER OF THE TRANSFER OF THE
COMMON STOCK EVIDENCED HEREBY PURSUANT TO CLAUSE 1(E) ABOVE OR UPON ANY
TRANSFER OF THE COMMON STOCK EVIDENCED HEREBY AFTER THE EXPIRATION OF
THE HOLDING PERIOD APPLICABLE TO SALES OF THE COMMON STOCK EVIDENCED
HEREBY UNDER RULE 144(K) UNDER THE SECURITIES ACT (OR ANY SUCCESSOR
PROVISION). AS USED HEREIN, THE TERMS "UNITED STATES" AND "UNITED
STATES PERSON" HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER
THE SECURITIES ACT.
Following the Transfer Restriction Termination Date, any Security or
security issued in exchange or substitution therefor (other than (i) Securities
acquired by the Sponsor or any Affiliate of the Sponsor and (ii) Common Stock
issued upon the conversion or exchange of any Security described in clause (i)
above) may, upon surrender of such Security for exchange to any Administrator on
behalf of the Trust in accordance with the provisions of this Section 9.01, be
exchanged for a new Security or Securities, of like tenor and aggregate
liquidation amount, which shall not bear the restrictive legend required by this
Section 9.01(f).
(g) Any Convertible Preferred Security or Common Stock issued upon the
conversion or exchange of a Convertible Preferred Security that, prior to the
Transfer Restriction Termination Date, is purchased or owned by the Sponsor or
any Affiliate thereof may not be resold by the Sponsor or such Affiliate unless
registered under the Securities Act or resold pursuant to an exemption from the
registration requirements of the Securities Act in a transaction that results in
such Convertible Preferred Securities or Common Stock, as the case may be, no
longer being "restricted securities" (as defined under Rule 144).
SECTION 9.2. Transfer of Certificates. The Registrar shall provide for
the registration of Certificates and of transfers of Certificates, which will be
effected without charge, but only upon payment (with such indemnity as the
Registrar may require) in respect of any tax or other government charges that
may be imposed in relation to it. Upon surrender for registration of transfer of
any Certificate, the Trust shall cause one or more new Certificates to be issued
in the name of the designated transferee or transferees. Every Certificate
surrendered for registration of transfer shall be accompanied by a written
instrument of transfer in form
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satisfactory to the Registrar duly executed by the Holder or such Holder's
attorney duly authorized in writing. Each Certificate surrendered for
registration of transfer shall be canceled by the Registrar. A transferee of a
Certificate shall be entitled to the rights and subject to the obligations of a
Holder hereunder upon the receipt by such transferee of a Certificate. By
acceptance of a Certificate, each transferee shall be deemed to have agreed to
be bound by this Declaration.
SECTION 9.3. Deemed Holders. The Trust, the Administrators, the
Trustees, the Paying Agent, the Transfer Agent or the Registrar may treat the
Person in whose name any Certificate shall be registered on the books and
records of the Trust as the sole Holder of such Certificate and of the
Securities represented by such Certificate for purposes of receiving
Distributions and for all other purposes whatsoever and, accordingly, shall not
be bound to recognize any equitable or other claim to or interest in such
Certificate or in the Securities represented by such Certificate on the part of
any Person, whether or not the Trust, the Administrators or the Institutional
Trustee shall have actual or other notice thereof.
SECTION 9.4. Book Entry Interests. (a) So long as Convertible Preferred
Securities are eligible for book-entry settlement with the Clearing Agency or
unless otherwise required by law, all Convertible Preferred Securities that are
so eligible may be represented by one or more fully registered Convertible
Preferred Security Certificates (each a "GLOBAL CERTIFICATE") in global form to
be delivered to DTC, the initial Clearing Agency, by, or on behalf of, the
Trust. Such Global Certificates shall initially be registered on the books and
records of the Trust in the name of Cede & Co., the nominee of DTC, and no
Convertible Preferred Security Beneficial Owner will receive a definitive
Convertible Preferred Security Certificate representing such Convertible
Preferred Security Beneficial Owner's interests in such Global Certificates,
except as provided in Section 9.07 below. The transfer and exchange of
beneficial interests in any such Security in global form shall be effected
through the Clearing Agency in accordance with this Declaration and the
procedures of the Clearing Agency therefor.
(b) Any Global Certificate may be endorsed with or have incorporated
in the text thereof such legends or recitals or changes not inconsistent with
the provisions of this Declaration as may be required by the Clearing Agency, by
any national securities exchange or by the National Association of Securities
Dealers, Inc. in order for the Convertible Preferred Securities to be tradeable
on the PORTAL Market or as may be required for the Convertible Preferred
Securities to be tradeable on any other market developed for trading of
securities pursuant to Rule 144A or required to comply with any applicable law
or any regulation
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thereunder or with the rules and regulations of any securities exchange upon
which the Convertible Preferred Securities may be listed or traded or to conform
with any usage with respect thereto, or to indicate any special limitations or
restrictions to which any particular Convertible Preferred Securities are
subject.
(c) Unless and until definitive, fully registered Convertible
Preferred Security Certificates have been issued to the Convertible Preferred
Security Beneficial Owners of a Convertible Preferred Security represented by a
Global Certificate pursuant to Section 9.07:
(i) the provisions of this Section 9.04 shall be in full force
and effect with respect to such Convertible Preferred Securities;
(ii) the Trust and the Trustees shall be entitled to deal with
the Clearing Agency for all purposes of this Declaration (including the
payment of Distributions on the Global Certificates and receiving
approvals, votes or consents hereunder) as the Holder of such
Convertible Preferred Securities and the sole holder of the Global
Certificates and shall have no obligation to the Convertible Preferred
Security Beneficial Owners of such Convertible Preferred Securities;
(iii) to the extent that the provisions of this Section 9.04
conflict with any other provisions of this Declaration, the provisions
of this Section 9.04 shall control; and
(iv) the rights of the Convertible Preferred Security
Beneficial Owners of Convertible Preferred Securities in global form
shall be exercised only through the Clearing Agency and shall be
limited to those established by law and agreements between such
Convertible Preferred Security Beneficial Owners and the Clearing
Agency and/or the Clearing Agency Participants.
(d) Notwithstanding any other provisions of this Declaration, a
Convertible Preferred Security represented by a Global Certificate may not be
transferred as a whole except by the Clearing Agency to a nominee of the
Clearing Agency or by a nominee of the Clearing Agency to the Clearing Agency or
another nominee to a successor Clearing Agency or a nominee of such successor
Clearing Agency.
SECTION 9.5. Notices to Clearing Agency. Whenever a notice or other
communication to the Convertible Preferred Security Holders is required under
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this Declaration, unless and until definitive Convertible Preferred Security
Certificates shall have been issued to the Convertible Preferred Security
Beneficial Owners pursuant to Section 9.07, the Administrators shall give all
such notices and communications specified herein to be given to the Convertible
Preferred Security Holders to the Clearing Agency, and shall have no notice
obligations to the Convertible Preferred Security Beneficial Owners.
SECTION 9.6. Appointment of Successor Clearing Agency. If any Clearing
Agency elects to discontinue its services as securities depositary with respect
to the Convertible Preferred Securities, the Administrators may, in their sole
discretion, appoint a successor Clearing Agency with respect to such Convertible
Preferred Securities.
SECTION 9.7. Definitive Convertible Preferred Security Certificates
Under Certain Circumstances. (a) If:
(i) a Clearing Agency elects to discontinue its services as
securities depositary with respect to the Convertible Preferred
Securities and a successor Clearing Agency is not appointed within 90
days after such discontinuance pursuant to Section 9.06; or
(ii) the Administrators elect after consultation with the
Sponsor to terminate the book entry system through the Clearing Agency
with respect to the Convertible Preferred Securities in global form,
then:
(A) definitive Convertible Preferred Security
Certificates shall be prepared by the Administrators on behalf
of the Trust with respect to such Convertible Preferred
Securities; and
(B) upon surrender of the Global Certificates by the
Clearing Agency, accompanied by registration instructions, the
Administrators shall cause definitive Global Preferred
Security Certificates to be delivered to Convertible Preferred
Security Beneficial Owners of such Convertible Preferred
Securities in accordance with the instructions of the Clearing
Agency. Neither the Trustees nor the Trust shall be liable for
any delay in delivery of such instructions and each of them
may conclusively rely on and shall be protected in relying on,
said instructions of the Clearing Agency. The definitive
Convertible Preferred Security Certificates
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shall be printed, lithographed or engraved or may be produced
in any other manner as is reasonably acceptable to the
Administrators, as evidenced by their execution thereof, and
may have such letters, numbers or other marks of
identification or designation and such legends or endorsements
as the Administrators may deem appropriate, or as may be
required to comply with any law or with any rule or regulation
made pursuant thereto or with any rule or regulation of any
stock exchange on which Convertible Preferred Securities may
be listed, or to conform to usage.
(b) At such time as all interests in a Global Certificate have been
redeemed, converted, exchanged, repurchased or canceled, such Global Certificate
shall be, upon receipt thereof, canceled by the Trust in accordance with
standing procedures and instructions of the Clearing Agency.
SECTION 9.8. Mutilated, Destroyed, Lost or Stolen Certificates. If:
(i) any mutilated Certificates should be surrendered to the
Administrators, or if the Administrators shall receive evidence to
their satisfaction of the destruction, loss or theft of any
Certificate; and
(ii) there shall be delivered to the Registrar and the
Institutional Trustee or the Administrators such security or indemnity
as may be required by them to keep each of them harmless,
then:
in the absence of notice that such Certificate shall have been acquire by a bona
fide purchaser, the Institutional Trustee or any Administrator on behalf of the
Trust shall execute and deliver, in exchange for, or in lieu of, any such
mutilated, destroyed, lost or stolen Certificate, a new Certificate of like
denomination. In connection with the issuance of any new Certificate under this
Section 9.08, the Institutional Trustee or the Administrators may require the
payment of a sum sufficient to cover any tax or other governmental charge that
may be imposed in connection therewith. Any duplicate Certificate issued
pursuant to this Section 9.08 shall constitute conclusive evidence of an
ownership interest in the relevant Securities, as if originally issued, whether
or not the lost, stolen or destroyed Certificate shall be found at any time.
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ARTICLE 10
LIMITATION OF LIABILITY OF HOLDERS OF SECURITIES, TRUSTEES OR OTHERS
SECTION 10.1. Liability. (a) Except as expressly set forth in this
Declaration, the Securities Guarantees and the terms of the Securities, the
Sponsor shall not be:
(i) personally liable for the return of any portion of the
capital contributions (or any return thereon) of the Holders of the
Securities, which shall be made solely from assets of the Trust; or
(ii) required to pay to the Trust or to any Holder of
Securities any deficit upon dissolution of the Trust or otherwise.
(b) The Holder of the Common Securities shall be liable for all of the
debts and obligations of the Trust (other than with respect to the Securities)
to the extent not satisfied out of the Trust's assets.
(c) Pursuant to Section 3803(a) of the Business Trust Act, the Holders
of the Convertible Preferred Securities shall be entitled to the same limitation
of personal liability extended to stockholders of private corporations for
profit organized under the General Corporation Law of the State of Delaware.
SECTION 10.2. Exculpation. (a) No Indemnified Person shall be liable,
responsible or accountable in damages or otherwise to the Trust or any Covered
Person for any loss, damage or claim incurred by reason of any act or omission
performed or omitted by such Indemnified Person in good faith on behalf of the
Trust and in a manner such Indemnified Person reasonably believed to be within
the scope of the authority conferred on such Indemnified Person by this
Declaration or by law, except that an Indemnified Person shall be liable for any
such loss, damage or claim incurred by reason of such Indemnified Person's
negligence or willful misconduct with respect to such acts or omissions.
(b) An Indemnified Person shall be fully protected in relying in good
faith upon the records of the Trust and upon such information, opinions, reports
or statements presented to the Trust by any Person as to matters the Indemnified
Person reasonably believes are within such other Person's professional or expert
competence and who has been selected with reasonable care by or on behalf of the
Trust, including information, opinions, reports or statements as to the value
and amount of the assets, liabilities, profits, losses, or any other facts
pertinent to the
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existence and amount of assets from which Distributions to Holders of Securities
might properly be paid.
SECTION 10.3. Fiduciary Duty. (a) To the extent that, at law or in
equity, an Indemnified Person has duties (including fiduciary duties) and
liabilities relating thereto to the Trust or to any other Covered Person, an
Indemnified Person acting under this Declaration shall not be liable to the
Trust or to any other Covered Person for its good faith reliance on the
provisions of this Declaration. The provisions of this Declaration, to the
extent that they restrict the duties and liabilities of an Indemnified Person
otherwise existing at law or in equity (other than the duties imposed on the
Institutional Trustee under the Trust Indenture Act), are agreed by the parties
hereto to replace such other duties and liabilities of such Indemnified Person.
(b) Unless otherwise expressly provided herein:
(i) whenever a conflict of interest exists or arises between
any Covered Persons and any Indemnified Person; or
(ii) whenever this Declaration or any other agreement
contemplated herein or therein provides that an Indemnified Person
shall act in a manner that is, or provides terms that are, fair and
reasonable to the Trust or any Holder of Securities, the Indemnified
Person shall resolve such conflict of interest, take such action or
provide such terms, considering in each case the relative interest of
each party (including its own interest) to such conflict, agreement,
transaction or situation and the benefits and burdens relating to such
interests, any customary or accepted industry practices, and any
applicable generally accepted accounting practices or principles. In
the absence of bad faith by the Indemnified Person, the resolution,
action or term so made, taken or provided by the Indemnified Person
shall not constitute a breach of this Declaration or any other
agreement contemplated herein or of any duty or obligation of the
Indemnified Person at law or in equity or otherwise.
(c) Whenever in this Declaration an Indemnified Person is permitted or
required to make a decision:
(i) in its "discretion" or under a grant of similar authority,
the Indemnified Person shall be entitled to consider such interests and
factors as it desires, including its own interests, and shall have no
duty or obligation to give any consideration to any interest of or
factors affecting
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the Trust or any other Person; or
(ii) in its "good faith" or under another express standard, the
Indemnified Person shall act under such express standard and shall not
be subject to any other or different standard imposed by this
Declaration or by applicable law.
SECTION 10.4. Indemnification. (a) (i) The Debenture Issuer shall
indemnify, to the full extent permitted by law, any Company Indemnified Person
who was or is a party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of the
Trust), by reason of the fact that he is or was a Company Indemnified Person,
against expenses (including reasonable attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by him in connection
with such action, suit or proceeding if he acted in good faith and in a manner
that he reasonably believed to be in or not opposed to the best interests of the
Trust, and, with respect to any criminal action or proceeding, had no reasonable
cause to believe that his 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 Company Indemnified Person did not act in good faith and in a manner
that he reasonably believed to be in or not opposed to the best interests of the
Trust, and, with respect to any criminal action or proceeding, had reasonable
cause to believe that his conduct was unlawful.
(ii) The Debenture Issuer shall indemnify, to the full extent
permitted by law, any Company Indemnified Person who was or is a party
or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding by or in the right of the Trust to
procure a judgment in its favor by reason of the fact that he is or was
a Company Indemnified Person, against expenses (including reasonable
attorneys' fees) actually and reasonably incurred by him in connection
with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the Trust and except that no such
indemnification shall be made in respect of any claim, issue or matter
as to which such Company Indemnified Person shall have been adjudged to
be liable to the Trust unless and only to the extent that the Court of
Chancery of Delaware or the court in which such action or suit was
brought shall determine upon application that, despite the adjudication
of liability but in view of all the
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circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses that such Court of Chancery or
such other court shall deem proper.
(iii) To the extent that a Company Indemnified Person shall be
successful on the merits or otherwise (including dismissal of an action
without prejudice or the settlement of an action without admission of
liability) in defense of any action, suit or proceeding referred to in
paragraphs (i) and (ii) of this Section 10.04(a), or in defense of any
claim, issue or matter therein, he shall be indemnified by the
Debenture Issuer, to the full extent permitted by law, against expenses
(including reasonable attorneys' fees) actually and reasonably incurred
by him in connection therewith.
(iv) Any indemnification under paragraphs (i) and (ii) of this
Section 10.04(a) (unless ordered by a court) shall be made by the
Debenture Issuer upon a determination that indemnification of the
Company Indemnified Person is proper in the circumstances because he
has met the applicable standard of conduct set forth in paragraphs (i)
and (ii). Such determination shall be made (1) by the Administrators by
a majority vote of a quorum consisting of such Administrators who were
not parties to such action, suit or proceeding, (2) if such a quorum is
not obtainable, or, even if obtainable, if a quorum of disinterested
Administrators so directs, by independent legal counsel in a written
opinion, or (3) by the Holders of a Majority in Liquidation Amount of
the Common Securities.
(v) Expenses (including reasonable attorneys' fees) incurred
by a Company Indemnified Person in defending a civil, criminal,
administrative or investigative action, suit or proceeding referred to
in paragraphs (i) and (ii) of this Section 10.04(a) shall be paid by
the Debenture Issuer in advance of the final disposition of such
action, suit or proceeding upon receipt of an undertaking by or on
behalf of such Company Indemnified Person to repay such amount if it
shall ultimately be determined that he is not entitled to be
indemnified by the Debenture Issuer as authorized in this Section
10.04(a). Notwithstanding the foregoing, no advance shall be made by
the Debenture Issuer if a determination is reasonably and promptly made
(i) by the Administrators by a majority vote of a quorum of
disinterested Administrators, (ii) if such a quorum is not obtainable,
or, even if obtainable, if a quorum of disinterested Administrators so
directs, by independent legal counsel in a
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written opinion or (iii) by the Holders of a Majority in Liquidation
Amount of the Common Securities, that, based upon the facts known to
the Administrators, such counsel or such Holders at the time such
determination is made, such Company Indemnified Person acted in bad
faith or in a manner that such person did not believe to be in or not
opposed to the best interests of the Trust, or, with respect to any
criminal proceeding, that such Company Indemnified Person believed or
had reasonable cause to believe his conduct was unlawful. In no event
shall any advance be made in instances where the Administrators, such
counsel or such Holders reasonably determine that such person
deliberately breached his duty to the Trust or the Holders.
(vi) The indemnification and advancement of expenses provided
by, or granted pursuant to, the other paragraphs of this Section
10.04(a) shall not be deemed exclusive of any other rights to which
those seeking indemnification and advancement of expenses may be
entitled under any agreement, vote of stockholders or disinterested
directors of the Debenture Issuer or Holders of Convertible Preferred
Securities or otherwise. All rights to indemnification under this
Section 10.04(a) shall be deemed to be provided by a contract between
the Debenture Issuer and each Company Indemnified Person who serves in
such capacity at any time while this Section 10.04(a) is in effect. Any
repeal or modification of this Section 10.04(a) shall not affect any
rights or obligations then existing.
(vii) The Debenture Issuer or the Trust may purchase and
maintain insurance on behalf of any person who is or was a Company
Indemnified Person against any liability asserted against him and
incurred by him in any such capacity, or arising out of his status as
such, whether or not the Debenture Issuer would have the power to
indemnify him against such liability under the provisions of this
Section 10.04(a).
(viii) For purposes of this Section 10.04(a), references to "the
Trust" shall include, in the event of a consolidation or merger, in
addition to the resulting or surviving entity, any constituent entity
(including any constituent of a constituent) absorbed in such
consolidation or merger, so that any person who is or was a director,
trustee, officer or employee of such constituent entity, or is or was
serving at the request of such constituent entity as a director,
trustee, officer, employee or agent of another entity, shall stand in
the same position under the provisions of this Section 10.04(a) with
respect to the resulting or surviving entity as he would have with
respect to such constituent entity if its separate existence had
continued.
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(ix) The indemnification and advancement of expenses provided
by, or granted pursuant to, this Section 10.04(a) shall, unless
otherwise provided when authorized or ratified, continue as to a person
who has ceased to be a Company Indemnified Person and shall inure to
the benefit of the heirs, executors and administrators of such a
person. The provisions of this Section 10.04 shall survive the
termination of this Declaration, the dissolution of the Trust or the
resignation or removal of any Administrator or Trustee.
(b) The Debenture Issuer agrees to indemnify the (i) Institutional
Trustee, (ii) the Delaware Trustee, (iii) any Affiliate of the Institutional
Trustee and the Delaware Trustee, and (iv) any officers, directors,
shareholders, members, partners, employees, representatives, custodians,
nominees or agents of the Institutional Trustee and the Delaware Trustee (each
of the Persons in (i) through (iv) being referred to as a "FIDUCIARY INDEMNIFIED
PERSON") for, and to hold each Fiduciary Indemnified Person harmless against,
any loss, liability or expense incurred without negligence or bad faith on its
part, arising out of or in connection with the acceptance or administration or
the trust or trusts hereunder, including the costs and expenses (including
reasonable legal fees and expenses) of defending itself against or investigating
any claim or liability in connection with the exercise or performance of any of
its powers or duties hereunder. The obligation to indemnify as set forth in this
Section 10.04(b) shall survive the satisfaction and discharge of this
Declaration.
SECTION 10.5. Outside Business. Any Covered Person, the Sponsor, the
Delaware Trustee and the Institutional Trustee (subject to Section 5.03(c)) may
engage in or possess an interest in other business ventures of any nature or
description, independently or with others, similar or dissimilar to the business
of the Trust, and the Trust and the Holders of Securities shall have no rights
by virtue of this Declaration in and to such independent ventures or the income
or profits derived therefrom, and the pursuit of any such venture, even if
competitive with the business of the Trust, shall not be deemed wrongful or
improper. No Covered Person, the Sponsor, the Delaware Trustee, or the
Institutional Trustee shall be obligated to present any particular investment or
other opportunity to the Trust even if such opportunity is of a character that,
if presented to the Trust, could be taken by the Trust, and any Covered Person,
the Sponsor, the Delaware Trustee and the Institutional Trustee shall have the
right to take for its own account (individually or as a partner or fiduciary) or
to recommend to others any such particular investment or other opportunity. Any
Covered Person, the Delaware Trustee and the Institutional Trustee may engage or
be interested in any
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financial or other transaction with the Sponsor or any Affiliate of the Sponsor,
or may act as depositary for, trustee or agent for, or act on any committee or
body of holders of, securities or other obligations of the Sponsor of its
Affiliates.
ARTICLE 11
ACCOUNTING
SECTION 11.1. Fiscal Year. The fiscal year ("FISCAL YEAR") of the Trust
shall be the calendar year, or such other year as is required by the Code.
SECTION 11.2. Certain Accounting Matters. (a) At all times during the
existence of the Trust, the Administrators shall keep, or cause to be kept, full
books, records and supporting documents, which shall reflect in reasonable
detail, each transaction of the Trust. The books of account shall be maintained
on the accrual method of accounting in compliance with generally accepted
accounting principles, consistently applied. The Trust shall use the accrual
method of accounting for United States federal income tax purposes. The books of
account and the records of the Trust shall be examined by and reported upon as
of the end of each Fiscal Year of the Trust by a firm of independent certified
public accountants selected by the Administrators. The books of account and the
records of the Trust, together with a copy of this Declaration and a certified
copy of the Certificate of Trust, or any amendment thereto, shall at all times
be maintained at the principal office of the Trust or its duly authorized
representative for any purpose reasonably related to its interest in the Trust
during normal business hours.
(b) The Administrators shall cause to be prepared and delivered to
each of the Holders of Securities, within 90 days after the end of each Fiscal
Year of the Trust, annual financial statements of the Trust, including a balance
sheet of the Trust as of the end of such Fiscal Year, and the related income or
loss.
(c) The Administrators shall cause to be duly prepared and delivered
to each of the Holders of Securities any annual United States federal income tax
information statement required by the Code containing such information with
regard to the Securities held by each Holder as is required by the Code and the
Treasury Regulations. Notwithstanding any right under the Code to deliver any
such statement at a later date, the Administrators shall endeavor to deliver all
such statements within 30 days after the end of each Fiscal Year of the Trust.
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(d) The Administrators shall cause to be duly prepared and filed with
the appropriate taxing authority, an annual United States federal income tax
return, on a Form 1041 or such other form required by United States federal
income tax law, and any other annual income tax returns required to be filed by
the Administrators on behalf of the Trust with any state or local taxing
authority.
SECTION 11.3. Banking. The Trust shall maintain one or more bank
accounts in the name and for the sole benefit of the Trust; provided, that all
payments of funds in respect of the Debentures held by the Institutional Trustee
shall be made directly to the Institutional Trustee Account and no other funds
of the Trust shall be deposited in the Institutional Trustee Account. The sole
signatories for such accounts (including the Institutional Trustee Account)
shall be designated by the Administrators; provided, that the Institutional
Trustee shall designate the signatories for the Institutional Trustee Account.
SECTION 11.4. Withholding. The Trust and the Administrators shall
comply with all withholding requirements under United States federal, state and
local law. The Trust shall request, and the Holders shall provide to the Trust,
such forms or certificates as are necessary to establish an exemption from
withholding with respect to each Holder, and any representations and forms as
shall reasonably be requested by the Trust to assist it in determining the
extent of, and in fulfilling, its withholding obligations. The Administrators
shall file required forms with applicable jurisdictions and, unless an exemption
from withholding is properly established by a Holder, shall remit amounts
withheld with respect to the Holder to applicable jurisdictions. To the extent
that the Trust is required to withhold and pay over any amounts to any authority
with respect to distributions or allocations to any Holder, the amount withheld
shall be deemed to be a distribution in the amount of the withholding to the
Holder. In the event of any claimed overwithholding, Holders shall be limited to
an action against the applicable jurisdiction. If the amount required to be
withheld was not withheld from actual Distributions made, the Trust may reduce
subsequent Distributions by the amount of such withholding.
ARTICLE 12
AMENDMENTS AND MEETINGS
SECTION 12.1. Amendments. (a) Except as otherwise provided in this
Declaration or by any applicable terms of the Securities, this Declaration may
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only be amended by a written instrument approved and executed by:
(i) the Administrators (or, if there are more than two
Administrators, a majority of the Administrators);
(ii) if the amendment affects the rights, powers, duties,
obligations or immunities of the Institutional Trustee, the
Institutional Trustee; and
(iii) if the amendment affects the rights, powers, duties,
obligations or immunities of the Delaware Trustee, the Delaware
Trustee.
(b) No amendment shall be made, and any such purported amendment shall
be void and ineffective:
(i) unless, in the case of any proposed amendment, the
Institutional Trustee shall have first received an Officers'
Certificate from each of the Trust and the Sponsor that such amendment
is permitted by, and conforms to, the terms of this Declaration
(including the terms of the Securities);
(ii) unless, in the case of any proposed amendment that affects
the rights, powers, duties, obligations or immunities of the
Institutional Trustee, the Institutional Trustee shall have first
received:
(A) an Officers' Certificate from each of the Trust
and the Sponsor that such amendment is permitted by, and
conforms to, the terms of this Declaration (including the
terms of the Securities); and
(B) an opinion of counsel (who may be counsel to the
Sponsor or the Trust) that such amendment is permitted by, and
conforms to, the terms of this Declaration (including the
terms of the Securities); and
(iii) to the extent the result of such amendment would be to:
(A) cause the trust to fail to continue to be
classified for purposes of United States federal income
taxation as a grantor trust;
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(B) reduce or otherwise adversely affect the powers
of the Institutional Trustee in contravention of the Trust
Indenture Act; or
(C) cause the Trust to be deemed to be an Investment
Company required to be registered under the Investment Company
Act.
(c) At any time the Trust has issued any Securities that remain
outstanding, any amendment that would adversely affect the rights, privileges or
preferences of any Holder of Securities may be effected only with such
additional requirements as may be set forth in the terms of such Securities.
(d) Section 9.01(d) and this Section 12.01 shall not be amended
without the consent of all of the Holders of the Securities.
(e) Article 4 shall not be amended without the consent of the Holders
of a Majority in Liquidation Amount of the Common Securities.
(f) The rights of the Holders of the Common Securities under Article 5
to increase or decrease the number of, and appoint and remove, Trustees shall
not be amended without the consent of the Holders of a Majority in Liquidation
Amount of the Common Securities.
(g) Notwithstanding Section 12.01(c), this Declaration may be amended
without the consent of the Holders of the Securities to:
(i) cure any ambiguity;
(ii) correct or supplement any provision in this Declaration
that may be defective or inconsistent with any other provision of this
Declaration;
(iii) add to the covenants, restrictions or obligations of the
Sponsor; and
(iv) to conform to any change in Rule 3a-5 of the Investment
Company Act or written change in interpretation or application of Rule
3a-5 of the Investment Company Act by any legislative body, court,
government agency or regulatory authority, which amendment does not
have a material adverse effect on the right, preferences or privileges
of the Holders.
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SECTION 12.2. Meetings of the Holders of Securities; Action by Written
Consent. (a) Meetings of the Holders of any class of Securities may be called at
any time by the Administrators (or as provided in the terms of the Securities)
to consider and act on any matter on which Holders of such class of Securities
are entitled to act under the terms of this Declaration, the terms of the
Securities or the rules of any stock exchange on which the Convertible Preferred
Securities are listed or admitted for trading. The Administrators shall call a
meeting of the Holders of such class if directed to do so by the Holders of at
least 10% in Liquidation Amount of such class of Securities. Such direction
shall be given by delivering to the Administrators one or more calls in a
writing stating that the signing Holders of Securities wish to call a meeting
and indicating the general or specific purpose for which the meeting is to be
called. Any Holders of Securities calling a meeting shall specify in writing the
Certificates held by the Holders of Securities exercising the right to call a
meeting and only those Securities specified shall be counted for purposes of
determining whether the required percentage set forth in the second sentence of
this paragraph has been met.
(b) Except to the extent otherwise provided in the terms of the
Securities, the following provisions shall apply to meetings of Holders of
Securities:
(i) notice of any such meeting shall be given to all the
Holders of Securities having a right to vote thereat at least 7 days
and not more than 60 days before the date of such meeting. Whenever a
vote, consent or approval of the Holders of Securities is permitted or
required under this Declaration or the rules of any stock exchange on
which the Convertible Preferred Securities are listed or admitted for
trading, such vote, consent or approval may be given at a meeting of
the Holders of Securities. Any action that may be taken at a meeting of
the Holders of Securities may be taken without a meeting if a consent
in writing setting forth the action so taken is signed by the Holders
of Securities owning not less than the minimum amount of Securities in
liquidation amount that would be necessary to authorize or take such
action at a meeting at which all Holders of Securities having a right
to vote thereon were present and voting. Prompt notice of the taking of
action without a meeting shall be given to the Holders of Securities
entitled to vote who have not consented in writing. The Administrators
may specify that any written ballot submitted to the Security Holder
for the purpose of taking any action without a meeting shall be
returned to the Trust within the time specified by the Administrators;
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(ii) each Holder of a Security may authorize any Person to act
for it by proxy on all matters in which a Holder of Securities is
entitled to participate, including waiving notice of any meeting, or
voting or participating at a meeting. No proxy shall be valid after the
expiration of 11 months from the date thereof unless otherwise provided
in the proxy. Every proxy shall be revocable at the pleasure of the
Holder of Securities executing it. Except as otherwise provided herein,
all matters relating to the giving, voting or validity of proxies shall
be governed by the General Corporation Law of the State of Delaware
relating to proxies, and judicial interpretations thereunder, as if the
Trust were a Delaware corporation and the Holders of the Securities
were stockholders of a Delaware corporation;
(iii) each meeting of the Holders of the Securities shall be
conducted by the Administrators or by such other Person that the
Administrators may designate; and
(iv) unless the Business Trust Act, this Declaration, the terms
of the Securities, the Trust Indenture Act or the listing rules of any
stock exchange on which the Convertible Preferred Securities are then
listed or trading, otherwise provides, the Administrators, in their
sole discretion, shall establish all other provisions relating to
meetings of Holders of Securities, including notice of the time, place
or purpose of any meeting at which any matter is to be voted on by any
Holders of Securities, waiver of any such notice, action by consent
without a meeting, the establishment of a record date, quorum
requirements, voting in person or by proxy or any other matter with
respect to the exercise of any such right to vote.
ARTICLE 13
REPRESENTATIONS OF INSTITUTIONAL TRUSTEE AND DELAWARE TRUSTEE
SECTION 13.1. Representations and Warranties of Institutional Trustee .
The Trustee that acts as initial Institutional Trustee represents and warrants
to the Trust and to the Sponsor at the date of this Declaration, and each
Successor Institutional Trustee represents and warrants, as applicable, to the
Trust and the Sponsor at the time of the Successor Institutional Trustee's
acceptance of its appointment as Institutional Trustee, that:
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(i) the Institutional Trustee is a New York banking
corporation with trust powers, duly organized, validly existing and in
good standing, with trust power and authority to execute and deliver,
and to carry out and perform its obligations under the terms of, this
Declaration;
(ii) the execution, delivery and performance by the
Institutional Trustee of the Declaration has been duly authorized by
all necessary corporate action on the part of the Institutional
Trustee. This Declaration has been duly executed and delivered by the
Institutional Trustee, and it constitutes a legal, valid and binding
obligation of the Institutional Trustee, enforceable against it in
accordance with its terms, subject to applicable bankruptcy,
reorganization, moratorium, insolvency, and other similar laws
affecting creditors' rights generally and to general principles of
equity and the discretion of the court (regardless of whether the
enforcement of such remedies is considered in a proceeding in equity or
at law);
(iii) the execution, delivery and performance of this
Declaration by the Institutional Trustee does not conflict with or
constitute a breach of the charter or bylaws of the Institutional
Trustee; and
(iv) no consent, approval or authorization of, or registration
with or notice to, any state or federal banking authority is required
for the execution, delivery or performance by the Institutional
Trustee, of this Declaration.
SECTION 13.2. Representations and Warranties of Delaware Trustee . The
Trustee that acts as initial Delaware Trustee represents and warrants to the
Trust and to the Sponsor at the date of this Declaration, and each Successor
Delaware Trustee represents and warrants to the Trust and the Sponsor at the
time of the Successor Delaware Trustee's acceptance of its appointment as
Delaware Trustee, that:
(i) The Delaware Trustee is a natural person, who is a
resident of the state of Delaware, or, if not a natural person, is a
corporation with trust powers, that has its principal place of business
in the State of Delaware, is duly organized, validly existing and in
good standing, with authority to execute and deliver, and to carry out
and perform its obligations under the terms of, this Declaration and,
in either case, a Person that satisfies for the Trust the requirements
of Section 3807 of the Business Trust Act.
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(ii) The Delaware Trustee has been authorized to perform its
obligations under the Certificate of Trust and this Declaration. This
Declaration under Delaware law constitutes a legal, valid and binding
obligation of the Delaware Trustee, enforceable against it in
accordance with its terms, subject to applicable bankruptcy,
reorganization, moratorium, insolvency, and other similar laws
affecting creditors' rights generally and to general principles of
equity and the discretion of the court (regardless of whether the
enforcement of such remedies is considered in a proceeding in equity or
at law).
(iii) No consent, approval or authorization of, or registration
with or notice to, any Delaware or federal banking authority is
required for the execution, delivery or performance by the Delaware
Trustee, of this Declaration.
(iv) The execution, delivery and performance of this
Declaration by the Delaware Trustee does not conflict with or
constitute a breach of the charter or bylaws of the Delaware Trustee.
ARTICLE 14
MISCELLANEOUS
SECTION 14.1. Notices. All notices provided for in this Declaration
shall be in writing, duly signed by the party giving such notice, and shall be
delivered, telecopied or mailed by first class mail, as follows:
(a) if given to the Trust, in care of the Administrators at the
Trust's mailing address set forth below (or such other address as the Trust may
give notice of to the Holders of the Securities):
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Federal-Mogul Financing Trust
c/o Federal-Mogul Corporation
26555 Northwestern Highway
Southfield, MI 48034
Attention: Corporate Secretary
(b) if given to the Delaware Trustee, at the mailing address set forth
below (or such other address as Delaware Trustee may give notice of to the
Holders of the Securities):
The Bank of New York (Delaware)
23 White Clay Center
Route 273
Newark, Delaware 19711
Attention: Corporate Trust Department
(c) if given to the Institutional Trustee, at its Corporate Trust
Office to the attention of Corporate Trust Trustee Administration (or such other
address as the Institutional Trustee may give notice of to the Holders of the
Securities).
(d) if given to any Holder of Common Securities, at the mailing
address of the Sponsor set forth below (or such other address as such Holder of
Common Securities may give notice to the Trust):
Federal-Mogul Corporation
26555 Northwestern Highway
Southfield, MI 48034
Attention: Corporate Secretary
(e) if given to any other Holder, at the address set forth on the
books and records of the Trust.
All such notices shall be deemed to have been given when received in
person, telecopied with receipt confirmed, or mailed by first class mail,
postage prepaid except that if a notice or other document is refused delivery or
cannot be delivered because of a changed address of which no notice was given,
such notice or other document shall be deemed to have been delivered on the date
of such refusal or inability to deliver.
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SECTION 14.2. Governing Law. This Declaration and the rights of the
parties hereunder shall be governed by and construed in accordance with the laws
of the State of Delaware and all rights and remedies shall be governed by such
laws without regard to principles of conflict of laws.
SECTION 14.3. Intention of the Parties. It is the intention of the
parties hereto that the Trust be classified for United States federal income tax
purposes as a grantor trust. The provisions of this Declaration shall be
interpreted to further this intention of the parties.
SECTION 14.4. Headings. Headings contained in this Declaration are
inserted for convenience of reference only and do not affect the interpretation
of this Declaration or any provision hereof.
SECTION 14.5. Successors and Assigns. Whenever in this Declaration any
of the parties hereto is named or referred to, the successors and assigns of
such party shall be deemed to be included, and all covenants and agreements in
this Declaration by the Sponsor and the Trustees shall bind and inure to the
benefit of their respective successors and assigns, whether so expressed.
SECTION 14.6. Partial Enforceability. If any provision of this
Declaration, or the application of such provision to any Person or circumstance,
shall be held invalid, the remainder of this Declaration, or the application of
such provision to persons or circumstances other than those to which it is held
invalid, shall not be affected thereby.
SECTION 14.7. Counterparts. This Declaration may contain more than one
counterpart of the signature page and this Declaration may be executed by the
affixing of the signature of each of the Trustees to one of such counterpart
signature pages. All of such counterpart signature pages shall be read as though
one, and they shall have the same force and effect as though all of the signers
had signed a single signature page.
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IN WITNESS WHEREOF, the undersigned has caused these presents to be
executed as of the day and year first above written.
--------------------------------
Thomas W. Ryan, as Administrator
------------------------------------
David A. Bozynski, as Administrator
------------------------------------
Diane L. Kaye, as Administrator
THE BANK OF NEW YORK (Delaware),
as Delaware Trustee
By:
---------------------------------
Name:
Title:
THE BANK OF NEW YORK,
as Institutional Trustee
By:
---------------------------------
Name:
Title:
FEDERAL-MOGUL CORPORATION,
as Sponsor and Debenture Issuer
By:
---------------------------------
Name:
Title:
<PAGE> 74
ANNEX I
TERMS OF
7% CONVERTIBLE PREFERRED SECURITIES
7% CONVERTIBLE COMMON SECURITIES
Pursuant to Section 7.01 of the Amended and Restated Declaration of
Trust, dated as of December 1, 1997 (as amended from time to time, the
"DECLARATION"), the designation, rights, privileges, restrictions, preferences
and other terms and provisions of the Convertible Preferred Securities and the
Common Securities are set out below (each capitalized term used but not defined
herein having the meaning set forth in the Declaration or, if not defined in
such Declaration, as defined in the Prospectus referred to below):
1. Designation and Number.
(a) Convertible Preferred Securities. 10,000,000 Convertible Preferred
Securities of the Federal-Mogul Financing Trust (the "Trust") with an aggregate
liquidation amount with respect to the assets of the Trust of $500,000,000 (plus
up to an additional 1,500,000 ($75,000,000) issuable upon exercise of the
over-allotment option set forth in the Purchase Agreement) and a liquidation
amount with respect to such assets of $50 per convertible preferred security,
are hereby designated for the purposes of identification only as "7% Trust
Convertible Preferred Securities" (the "CONVERTIBLE PREFERRED SECURITIES"). The
Convertible Preferred Security Certificates evidencing the Convertible Preferred
Securities shall be substantially in the form of Exhibit A-1 to the Declaration,
with such changes and additions thereto or deletions therefrom as may be
required by ordinary usage, custom or practice or to conform to the rules of any
stock exchange on which the Convertible Preferred Securities are listed.
(b) Common Securities. 309,279 Common Securities of the Trust with an
aggregate liquidation amount with respect to the assets of the Trust of
$15,463,950, (plus up to an additional 46,392 ($2,319,600) issuable upon
exercise of the over-allotment option set forth in the Purchase Agreement) and a
liquidation amount with respect to such assets of the Trust of $50 per common
security, are hereby designated for the purposes of identification only as "7%
Common Securities" (the "COMMON SECURITIES" and, together with the Convertible
Preferred Securities, "the SECURITIES"). The Common Securities Certificates
evidencing the Common Securities shall be in the form of Exhibit A-2 to the
Declaration, with and additions thereto or deletions therefrom as may be
required by ordinary usage, custom or practice.
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2. Distributions.
(a) Distributions payable on each Security will be fixed at a rate per
annum of 7% (the "COUPON RATE") of the stated liquidation amount of $50 per
Security, such rate being the rate of interest payable on the Debentures to be
held by the Institutional Trustee. Distributions in arrears for more than one
quarter will bear interest thereon compounded quarterly at the Coupon Rate (to
the extent permitted by applicable law). The term "DISTRIBUTIONS" as used herein
includes such cash distributions and any such interest payable unless otherwise
stated. A Distribution is payable only to the extent that payments are made in
respect of the Debentures held by the Institutional Trustee and to the extent
the Institutional Trustee has funds available therefor. The amount of
Distributions payable for any period will be computed for any full quarterly
Distribution period on the basis of a 360-day year of twelve 30-day months, and
for any period shorter than a full quarterly Distribution period for which
Distributions are computed, Distributions will be computed on the basis of the
actual number of days elapsed per 30-day month.
(b) Except as otherwise provided herein, distributions on the
Securities will be cumulative, will accrue from December 1, 1997 and will be
payable quarterly in arrears, on March 1, June 1, September 1 and December 1 of
each year, commencing on March 1, 1998, except as otherwise described below. So
long as the Debenture Issuer shall not be in default in the payment of interest
on the Debentures, the Debenture Issuer has the right under the Indenture to
defer payments of interest by extending the interest payment period from time to
time on the Debenture for a period not exceeding 20 consecutive quarters (each
an "EXTENSION PERIOD"), during which Extension Period no interest shall be due
and payable on the Debentures; provided, that no Extension Period shall last
beyond the date of maturity or any redemption date of the Debentures. As a
consequence of such deferral, Distributions will also be deferred. Despite such
deferral, quarterly Distributions will continue to accrue with interest thereon
(to the extent permitted by applicable law) at the Coupon Rate compounded
quarterly during any such Extension Period. Prior to the termination of any such
Extension Period, the Debenture Issuer may further extend such Extension Period;
provided, that such Extension Period together with all such previous and further
extensions thereof may not exceed 20 consecutive quarters or extend beyond the
maturity or any redemption date of the Debentures. Payments of accrued
Distributions will be payable to Holders as they appear on the books and records
of the Trust on the first record date after the end of the Extension Period.
Upon the termination of
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any Extension Period and the payment of all amounts then due, the Debenture
Issue may commence a new Extension Period, subject to the above requirements.
(c) Distributions on the Securities will be payable to the Holders
thereof as they appear on the books and records of the Trust on the relevant
record dates, which shall be one Business Day prior to the relevant payment
dates (provided, that, if, at any time, the Securities are not held in
book-entry form, the relevant record dates shall be 15 days prior to the
relevant payment dates), which record and payment dates correspond to the record
and interest payment dates on the Debentures. Such Distributions will be paid
through the Institutional Trustee who will hold amounts received in respect of
the Debentures in the Institutional Trustee Account for the benefit of the
Holders of the Securities. The relevant record dates for the Common Securities
shall be the same record date as for the Convertible Preferred Securities. If
any date on which Distributions are payable on the Securities is not a Business
Day, then payment of the Distribution payable on such date will be made on the
next succeeding day that is a Business Day (and without any interest or other
payment in respect of any such delay) except that, if such Business Day is in
the next succeeding calendar year, such payment shall be made on the immediately
preceding Business Day, in each case with the same force and effect as if made
on such date.
(d) In the event of an election by the Holder to convert its
Securities through the Conversion Agent into Common Stock pursuant to the terms
of the Securities as set forth in this Annex I to the Declaration, no payment,
allowance or adjustment shall be made with respect to accumulated and unpaid
Distributions on such Securities, or be required to be made; provided, that if
any Security is converted on or after a record date for payment of Distributions
thereon and prior to the opening of business on the related Distribution payment
date, the Distribution payable on such payment date with respect to such
Security shall be distributed to the holder of record at the close of business
on such record date, despite such conversion; provided further, that if the date
of any redemption of related Debentures falls between such record date and such
corresponding payment date, the amount of such Distribution shall include
accumulated and unpaid Distributions accrued to but excluding such date of
redemption.
(e) In the event that there is any money or other property held by or
for the Trust that is not accounted for hereunder, such property shall be
distributed Pro Rata (as defined herein) among the Holders of the Securities.
3. Liquidation Distribution Upon Dissolution.
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In the event of any voluntary or involuntary liquidation, dissolution
or winding-up of the Trust (each a "LIQUIDATION"), the Holders of the Securities
on the date of such Liquidation, will be entitled to receive out of the assets
of the Trust, after satisfaction of liabilities of creditors of the Trust as
provided by applicable law, an amount equal to the aggregate of the stated
liquidation amount of $50 per Security plus accrued and unpaid Distributions
thereon to the date of payment (the "LIQUIDATION DISTRIBUTION"), unless, in
connection with such Liquidation, Debentures in an aggregate stated principal
amount equal to the aggregate stated liquidation amount of, with an interest
rate identical to the distribution rate of, and accrued and unpaid interest
equal to accrued and unpaid distributions on, the Securities have been
distributed on a pro rata basis to the Holders of the Securities.
If, upon any such dissolution, the Liquidation Distribution can be paid
only in part because the Trust has insufficient assets available to pay in full
the aggregate Liquidation Distribution, then the amounts payable directly by the
Trust on the Convertible Preferred Securities shall be paid on a pro rata basis.
The Holders of the Common Securities will be entitled to receive distributions
upon any such Liquidation pro rata with the holders of the Convertible Preferred
Securities, except that if a Declaration Event of Default has occurred and is
continuing, the Convertible Preferred Securities shall have a preference over
the Common Securities with regard to such distributions.
4. Redemption and Distribution.
(a) Upon the repayment of the Debentures in whole or in part, whether
at maturity or upon redemption (either at the option of the Debenture Issuer or
pursuant to a Special Event as described below), the proceeds from such
repayment or payment shall be simultaneously applied to redeem Securities having
an aggregate liquidation amount equal to the aggregate principal amount of the
Debentures so repaid or redeemed at a redemption price per Security equal to the
redemption price of the Debentures, together with accrued and unpaid
Distributions thereon through the date of the redemption, payable in cash (the
"REDEMPTION PRICE").
(b) If fewer than all the outstanding Securities are to be so
redeemed, the Common Securities and the Convertible Preferred Securities will be
redeemed pro rata.
(c) If, at any time, a Tax Event or an Investment Company Event (each,
as defined below, a "SPECIAL EVENT") shall occur and be continuing, the Trust
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shall, except as provided below, be dissolved and Debentures with an aggregate
principal amount equal to the aggregate stated liquidation amount of, with an
interest rate identical to the Coupon Rate of, and accrued and unpaid interest
equal to accrued and unpaid Distributions on, the Securities, shall be
distributed, after satisfaction of liabilities to creditors of the Trust as
provided by applicable law, to the Holders of the Securities in liquidation of
such Holders' interests in the Trust on a pro rata basis within 90 days
following the occurrence of such Special Event (the "90 DAY PERIOD"), upon not
less than 30 or more than 60 days notice; provided, that, in the case of a Tax
Event, such dissolution and distribution shall be conditioned on (i) the
Administrators' receipt of an opinion of nationally recognized independent tax
counsel experienced in such matters (a "NO RECOGNITION OPINION"), which opinion
may rely on published revenue rulings of the Internal Revenue Service, to the
effect that the Holders of the Securities will not recognize any gain or loss
for United States federal income tax purposes as a result of such dissolution of
the Trust and distribution of Debentures, (ii) the Debenture Issuer or the Trust
being unable to avoid such Tax Event within such 90 Day Period by taking some
ministerial action or pursuing some other reasonable measure that will have no
adverse effect on the Trust, the Debenture Issuer or the Holders of the
Securities and will involve no material cost (a "MINISTERIAL ACTION") and (iii)
the Debenture Issuer's prior written consent to such dissolution and
distribution.
If, in the event of a Tax Event, after receipt of a Dissolution Tax
Opinion (as defined herein) by the Administrators, (i) the Debenture Issuer has
received an opinion (a "REDEMPTION TAX OPINION") of nationally recognized
independent tax counsel experienced in such matters that, as a result of a Tax
Event, there is more than an insubstantial risk that the Debenture Issuer would
be precluded from deducting the interest on the Debentures for United States
federal income tax purposes even after the Debentures were distributed to the
Holders of Securities in liquidation of such Holders' interests in the Trust as
described in this Section 4(c), or (ii) the Administrators shall have been
informed by such tax counsel that a No Recognition Opinion cannot be delivered
to the Trust, the Debenture Issuer shall have the right at any time, upon not
less than 30 nor more than 60 days' notice, to redeem the Debentures in whole or
in part, at a redemption price equal to 100% of the principal amount thereof
plus accrued and unpaid interest thereon for cash within 90 days following the
occurrence of such Tax Event. Following such redemption, Securities with an
aggregate liquidation amount equal to the aggregate principal amount of the
Debentures so redeemed shall be redeemed by the Trust at the Redemption Price on
a pro rata basis; provided, that, if at the time there is available to the
Debenture Issuer or the Trust the opportunity to eliminate, within such 90 day
period, the Tax Event by taking some Ministerial Action, the
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Trust or the Debenture Issuer will pursue such Ministerial Action in lieu of
redemption.
"TAX EVENT" means that the Administrators shall have received an
opinion of nationally recognized independent tax counsel experienced in such
matters (a "DISSOLUTION TAX OPINION") to the effect that as a result of (a) any
amendment to, clarification of, or change (including any announced prospective
change) in the laws, or any regulations thereunder, of the United States or any
political subdivision or taxing authority thereof or therein, (b) any judicial
decision, official administrative pronouncement, ruling, regulatory procedure,
notice or announcement, including any notice or announcement of intent to adopt
such procedures or regulations (an "ADMINISTRATIVE ACTION") or (c) any amendment
to, clarification of, or change in the official position or the interpretation
of such Administrative Action or judicial decision that differs from the
theretofore generally accepted position, in each case, by any legislative body,
court, governmental authority or regulatory body, irrespective of the manner in
which such amendment, clarification or change is made known, which amendment,
clarification, or change is effective or such pronouncement or decision is
announced, in each case, on or after the date of the Offering Memorandum, there
is the creation by such change in tax law of more than an insubstantial risk
that (i) the Trust is or will be within 90 days of the date of such change
subject to United States federal income tax with respect to interest accrued or
received on the Debentures, (ii) the Trust is or will be within 90 days of the
date of such change subject to more than a de minimis amount of taxes (other
than withholding taxes), duties or other governmental charges, or (iii) interest
paid in cash by the Debenture Issuer to the Trust on the Debentures is not, or
within 90 days of the date of such change will not be, deductible, in whole or
in part, by the Debenture Issuer for United States federal income tax purposes.
Notwithstanding the foregoing, a Tax Event shall not include any change in tax
law that requires the Debenture Issuer for United States federal income tax
purposes to defer taking a deduction for any original issue discount ("OID")
that accrues with respect to the Debentures until the interest payment related
to such OID is paid by the Debenture Issuer in cash; provided, that such change
in tax law does not create more than an insubstantial risk that the Debenture
Issuer will be prevented from taking a deduction for OID accruing with respect
to the Debentures at a date that is no later than the date the interest payment
related to such OID is actually paid by the Debenture Issuer in cash.
"INVESTMENT COMPANY EVENT" means that the Administrators shall have
received an opinion of nationally recognized independent counsel experienced in
such matters to the effect that, as a result of the occurrence of a change in
law or
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regulation or a written change in interpretation or application of law or
regulations by any legislative body, court, governmental agency or regulatory
authority which became effective on or after the date of the Offering Memorandum
(a "CHANGE IN 1940 ACT LAW"), there is more than an insubstantial risk that the
Trust is or will be considered an "investment company" that is required to be
registered under the Investment Company Act of 1940, as amended (the "1940
ACT").
After the date for any distribution of Debentures upon dissolution of
the Trust: (i) the Securities will no longer be deemed to be outstanding and
(ii) certificates representing Securities held in definitive form, except for
certificates representing Convertible Preferred Securities held by the DTC or
its nominee, will be deemed to represent Debentures having an aggregate
principal amount equal to the aggregate stated liquidation amount of, with an
interest rate identical to the Coupon Rate of, and accrued and unpaid interest
(including Compound Interest) equal to accrued and unpaid Distributions on, such
Securities until such certificates are presented to the Debenture Issuer or its
agent for transfer or reissue.
(d) Notice of any redemption of, or notice of distribution of
Debentures in exchange for the Securities (a "REDEMPTION/DISTRIBUTION NOTICE")
will be given by the Trust not fewer than 30 nor more than 60 days before the
date fixed for redemption or exchange thereof which, in the case of a
redemption, will be the date fixed for redemption of the Debentures by mail to
each Holder of Securities to be redeemed or exchanged and, in the case of a
notice of redemption to be given to all Holders, by release made to Reuters
Economic Services and Bloomberg Business News. For purposes of the calculation
of the date of redemption or exchange and the dates on which notices are given
pursuant to this Section 4, a Redemption/Distribution Notice shall be deemed to
be given on the day such notice is first mailed by first-class mail, postage
prepaid, or by such other means suitable to assure delivery of such written
notice, to Holders of Securities and, if required, released as set forth in the
preceding sentence. Each Redemption/Distribution Notice shall be addressed to
the Holders of Securities at the address of each such Holder appearing in the
books and records of the Trust. No defect in the Redemption/Distribution Notice
or in the mailing of either thereof with respect to any Holder of Securities
shall affect the validity of the redemption or exchange proceedings with respect
to any other Holder of Securities.
(e) If Securities are to be redeemed and the Trust gives a
Redemption/Distribution Notice, which notice may only be issued if the
Debentures are redeemed as set out in this Section 4 (which notice will be
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irrevocable), then provided that the Debenture Issuer has paid the Institutional
Trustee a sufficient amount of cash in connection with the related redemption or
maturity of the Debentures, the Institutional Trustee will pay the relevant
Redemption Price to the Holders of such Securities by check mailed to the
address of the relevant Holder appearing on the books and records of the Trust
on the redemption date. If a Redemption/Distribution Notice shall have been
given, then immediately prior to the close of business on the required date of
such payment, Distributions will cease to accrue on the Securities so called for
redemption and all rights of Holders of such Securities so called for redemption
will cease, except the right of the Holders of such Securities to receive the
Redemption Price, but without interest on such Redemption Price. In the event of
any redemption in part, the Trust shall not be required to (i) issue, register
the transfer of or exchange any Convertible Preferred Securities during a period
beginning at the opening of business 15 days before any selection for redemption
of Convertible Preferred Securities and ending at the close of business on the
earliest date on which the relevant notice of redemption is deemed to have been
given to all Holders of Convertible Preferred Securities so selected for
redemption or (ii) register the transfer of or exchange any Convertible
Preferred Securities so selected for redemption, in whole or in part, except for
the unredeemed portion of any Convertible Preferred Securities being redeemed in
part. If any date fixed for redemption of Securities is not a Business Day, then
payment of the Redemption Price payable on such date will be made on the next
succeeding Business Day (and without any interest or other payment in respect of
any such delay) except that, if such Business Day falls in the next calendar
year, such payment will be made on the immediately preceding Business Day, in
each case with the same force and effect as if made on such date fixed for
redemption. If payment of the Redemption Price in respect of any Securities is
improperly withheld or refused and not paid either by the Institutional Trustee
or by the Sponsor as guarantor pursuant to the relevant Securities Guarantee,
Distributions on such Securities will continue to accrue from the original
redemption date to the actual date of payment, in which case the actual payment
date will be considered the date fixed for redemption for purposes of
calculating the Redemption Price.
(f) Subject to the foregoing and applicable law (including, without
limitation, United States federal securities laws), the Sponsor or any of its
subsidiaries may at any time and from time to time purchase outstanding
Securities by tender, in the open market or by private agreement.
5. Conversion Rights.
The Holders of Securities shall have the right at any time, beginning
90
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days following the latest date of original issuance of any Convertible
Preferred Securities through the close of business on the Business Day prior to
December 1, 2027 (or, in the case of Securities called for redemption, prior to
the close of business on the Business Day prior to the redemption date), at
their option, to cause the Conversion Agent to convert Securities, on behalf of
the converting Holders, into shares of Common Stock in the manner described
herein on and subject to the following terms and conditions:
(a) The Securities will be convertible at the office of the Conversion
Agent into fully paid and nonassessable shares of Federal-Mogul Common Stock
pursuant to the Holder's direction to the Conversion Agent to exchange such
Securities for a portion of the Debentures theretofore held by the Trust on the
basis of one Security per $50 principal amount of Debentures, and immediately
convert such amount of Debentures into fully paid and nonassessable shares of
Common Stock at an initial rate of 0.9709 shares of Common Stock for each $50 in
principal amount of Debentures (which is equivalent to a conversion price of
$51.50 per share of Common Stock, subject to certain adjustments and resets set
forth in Sections 6.03 and 6.04 of the Supplemental Indenture (as so adjusted,
"CONVERSION PRICE")). Within one Business Day after the date which is the
earlier of (a) the date the Company withdraws the Offer, and (b) September 25,
1998, if the Offer has not been declared unconditional in all respects, the
Company will provided notice of such occurrence to the Holders.
(b) In order to convert Securities into Common Stock the Holder shall
surrender such Securities to the Conversion Agent and submit to the Conversion
Agent at the office referred to above an irrevocable request to convert
Securities on behalf of such Holder (the "CONVERSION REQUEST"). The Conversion
Request shall (i) set forth the number of Securities to be converted and the
name or names, if other than the Holder, in which the shares of Common Stock
should be issued and (ii) direct the Conversion Agent (a) to exchange such
Securities for a portion of the Debentures held by the Trust (at the rate of
exchange specified in the preceding paragraph) and (b) to immediately convert
such Debentures on behalf of such Holder, into Common Stock (at the conversion
rate specified in the preceding paragraph). The Conversion Agent shall notify
the Trust of the Holder's election to exchange Securities for a portion of the
Debentures held by the Trust and the Trust shall, upon receipt of such notice,
deliver to the Conversion Agent the appropriate principal amount of Debentures
for exchange in accordance with this Section. The Conversion Agent shall
thereupon notify Debenture Issuer of the Holder's election to convert such
Debentures into shares of Common Stock. If any Security is surrendered for
conversion on or after a record date for payment of Distributions thereon and
prior to the opening of
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business on the related Distribution payment date, such Security (other than a
Security or a portion of a Security called for redemption on a redemption date
occurring after such record date and on or prior to such distribution payment
date) must be accompanied by payment of an amount equal to the Distribution
payable on such Distribution payment date; provided further, that if the date of
any redemption of the related Debentures falls between such record date and the
related Distribution payment date, the amount of such payment shall include
Distributions accrued to, but excluding, such date of redemption. Except as
provided above, neither the Trust nor the Sponsor will make, or be required to
make, any payment, allowance or adjustment upon any conversion on account of any
accumulated and unpaid Distributions accrued on the Securities surrendered for
conversion, or on account of any accumulated and unpaid dividends on the shares
of Common Stock issued upon such conversion. Securities shall be deemed to have
been converted immediately prior to the close of business on the day on which a
Notice of Conversion relating to such Securities is received by the Trust in
accordance with the foregoing provision (the "CONVERSION DATE"). The Person or
Persons entitled to receive Common Stock issuable upon conversion of the
Debentures shall be treated for all purposes as the record holder or holders of
such Common Stock at such time. As promptly as practicable on or after the
Conversion Date, the Debenture Issuer shall issue and deliver at the office of
the Conversion Agent a certificate or certificates for the number of full shares
of Common Stock issuable upon such conversion, together with the cash payment,
if any, in lieu of any fraction of any share to the Person or Persons entitled
to receive the same, unless otherwise directed by the Holder in the notice of
conversion and the Conversion Agent shall distribute such certificate or
certificates to such Person or Persons.
(c) Each Holder of a Security by his acceptance thereof appoints The
Bank of New York as "CONVERSION AGENT" for the purpose of effecting the
conversion of Securities in accordance with this Section. In effecting the
conversion and transactions described in this Section, the Conversion Agent
shall be acting as agent of the Holders of Securities directing it to effect
such conversion transactions. The Conversion Agent is hereby authorized (i) to
exchange Securities from time to time for Debentures held by the Trust in
connection with the conversion of such Securities in accordance with this
Section and (ii) to convert all or a portion of the Debentures into Common Stock
and thereupon to deliver such shares of Common Stock in accordance with the
provisions of this Section and to deliver to the Trust a new Debenture or
Debentures for any resulting unconverted principal amount.
(d) No fractional shares of Common Stock will be issued as a result of
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conversion, but in lieu thereof, such fractional interest will be paid in cash
by the Debenture Issuer to the Conversion Agent, which in turn will make such
payment to the Holder or Holders of Securities so converted.
(e) The Debenture Issuer shall at all times reserve and keep available
out of its authorized and unissued Common Stock, solely for issuance upon the
conversion of the Debentures, free from any preemptive or other similar rights,
such number of shares of Common Stock as shall from time to time be issuable
upon the conversion of all the Debentures then outstanding. Notwithstanding the
foregoing, the Debenture Issuer shall be entitled to deliver upon conversion of
Debentures, shares of Common Stock reacquired and held in the treasury of the
Debenture Issuer (in lieu of the issuance of authorized and unissued shares of
Common Stock), so long as any such treasury shares are free and clear of all
liens, charges, security interests or encumbrances. Any shares of Common Stock
issued upon conversion of the Debentures shall be duly authorized, validly
issued and fully paid and nonassessable. The Trust shall deliver the shares of
Common Stock received upon conversion of the Debentures to the converting Holder
free and clear of all liens, charges, security interests and encumbrances,
except for United States withholding taxes. Each of the Debenture Issuer and the
Trust shall prepare and shall use its best efforts to obtain and keep in force
such governmental or regulatory permits or other authorizations as may be
required by law, and shall comply with all applicable requirements as to
registration or qualification of Common Stock (and all requirements to list
Common Stock issuable upon conversion of Debentures that are at the time
applicable), in order to enable the Debenture Issuer to lawfully issue Common
Stock to the Trust upon conversion of the Debentures and the Trust to lawfully
deliver Common Stock to each Holder upon conversion of the Securities.
(f) The Debenture Issuer will pay any and all taxes that may be
payable in respect of the issue or delivery of shares of Common Stock on
conversion of Debentures and the delivery of the shares of Common Stock by the
Trust upon conversion of the Securities. The Debenture Issuer shall not,
however, be required to pay any tax which may be payable in respect of any
transfer involved in the issue and delivery of shares of Common Stock in a name
other than that in which the Securities so converted were registered, and no
such issue or delivery shall be made unless and until the person requesting such
issue has paid to the Trust the amount of any such tax, or has established to
the satisfaction of the Trust that such tax has been paid.
(g) Nothing in the preceding Paragraph (f) shall limit the requirement
of the Trust to withhold taxes pursuant to the terms of the Securities or set
forth in
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this Annex I to the Declaration or to the Declaration itself or otherwise
require the Institutional Trustee or the Trust to pay any amounts on account of
such withholdings.
6. Voting Rights - Convertible Preferred Securities.
(a) Except as provided under Sections 6(b) and 8 and as otherwise
required by law and provided in the Declaration (including rights to appoint and
remove the Institutional Trustee), the Holders of the Convertible Preferred
Securities will not have voting rights.
(b) Subject to the requirements set forth in this paragraph, the
Holders of a Majority in Liquidation Amount of the Convertible Preferred
Securities, voting separately as a class, may direct the time, method, and place
of conducting any proceeding for any remedy available to the Institutional
Trustee, or exercising any trust or power conferred upon the Institutional
Trustee under the Declaration, including the right to direct the Institutional
Trustee, as holder of the Debentures, to (i) exercise the remedies available
under the Indenture with respect to the Debentures, (ii) waive any past default
and its consequences that is waivable under Section 5.13 of the Indenture, or
(iii) exercise any right to rescind or annul a declaration that the principal of
all the Debentures shall be due and payable or (iv) consent to any amendment,
modification or termination of the Indenture or the Debentures where such
consent shall be required; provided, that if an Indenture Event of Default has
occurred and is continuing, the holders of 25% of the aggregate liquidation
amount of the Convertible Preferred Securities may direct the Institutional
Trustee to declare the principal of and interest on the Debentures immediately
due and payable; provided, further, that, where a consent under the Indenture
would require the consent or act of a Super Majority, only the holders of at
least such Super Majority in aggregate liquidation amount of the Convertible
Preferred Securities may direct the Institutional Trustee to give such consent
or take such action. The Institutional Trustee shall not revoke any action
previously authorized or approved by a vote of the Holders of the Convertible
Preferred Securities. Other than with respect to directing the time, method and
place of conducting any remedy available to the Institutional Trustee or the
Debenture Trustee as set forth above, the Institutional Trustee shall not take
any action in accordance with the directions of the Holders of the Convertible
Preferred Securities under this paragraph unless the Institutional Trustee has
obtained an opinion of tax counsel to the effect that for the purposes of United
States federal income tax the Trust will not be classified as other than a
grantor trust on account of such action. If the Institutional Trustee fails to
enforce its rights under the Declaration, any Holder of Convertible Preferred
Securities may, to the fullest
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extent permitted by law, institute a legal proceeding directly against any
Person to enforce the Institutional Trustee's rights under the Declaration,
without first instituting a legal proceeding against the Institutional Trustee
or any other Person.
Any approval required or direction of Holders of Convertible Preferred
Securities may be given at a separate meeting of Holders of Convertible
Preferred Securities convened for such purpose, at a meeting of all of the
Holders of Securities in the Trust or pursuant to written consent. The
Administrators will cause a notice of any meeting at which Holders of
Convertible Preferred Securities are entitled to vote, or of any matter upon
which action by written consent of such Holders is to be taken, to be mailed to
each Holder of record of Convertible Preferred Securities. Each such notice will
include a statement setting forth (i) the date of such meeting or the date by
which such action is to be taken, (ii) a description of any resolution proposed
for adoption at such meeting on which such Holders are entitled to vote or of
such matter upon which written consent is sought and (iii) instructions for the
delivery of proxies or consents.
No vote or consent of the Holders of the Convertible Preferred
Securities will be required for the Trust to redeem and cancel Convertible
Preferred Securities or to distribute the Debentures in accordance with the
Declaration and the terms of the Securities.
Notwithstanding that Holders of Convertible Preferred Securities are
entitled to vote or consent under any of the circumstances described above, any
of the Convertible Preferred Securities that are owned by the Sponsor or any
Affiliate of the Sponsor shall not be entitled to vote or consent and shall, for
purposes of such vote or consent, be treated as if they were not outstanding.
Holders of Convertible Preferred Securities will have no rights to
appoint or remove the Administrators, who may be appointed, removed or replaced
solely by the Debenture Issuer as the indirect or direct holder of all of the
Common Securities.
7. Voting Rights - Common Securities.
(a) Except as provided under these Sections 7(b), (c) and 8 and as
otherwise required by law and provided in the Declaration, the Holders of the
Common Securities will not have voting rights.
(b) Subject to Section 2.06 of the Declaration and only after any
Event of Default with respect to the Convertible Preferred Securities has been
cured, waived or otherwise eliminated and subject to the requirements of the
second to
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last sentence of this paragraph, the Holders of a Majority in Liquidation Amount
of the Common Securities, voting separately as a class, may direct the time,
method, and place of conducting any proceeding for any remedy available to the
Institutional Trustee, or exercising any trust or power conferred upon the
Institutional Trustee under the Declaration, including (i) directing the time,
method, and place of conducting any proceeding for any remedy available to the
Debenture Trustee, or exercising any trust or power conferred on the Debenture
Trustee with respect to the Debentures, (ii) waive any past default and its
consequences that is waivable under Section 5.13 of the Indenture, or (iii)
exercise any right to rescind or annul a declaration that the principal of all
the Debentures shall be due and payable, provided, that where a consent or
action under the Indenture would require the consent or act of a Super Majority,
the Institutional Trustee may only give such consent or take such action at the
written direction of the Holders of at least the proportion in liquidation
amount of the Common Securities that the relevant Super Majority represents of
the aggregate principal amount of the Debentures outstanding. Pursuant to this
Section 7(b), the Institutional Trustee shall not revoke, or take any action
inconsistent with, any action previously authorized or approved by a vote of the
Holders of the Convertible Preferred Securities, and shall not take any action
in accordance with the direction of the Holders of the Common Securities under
this Section 7(c) if the action is prejudicial to the Holders of the Convertible
Preferred Securities. Other than with respect to directing the time, method and
place of conducting any remedy available to the Institutional Trustee or the
Debenture Trustee as set forth above, the Institutional Trustee shall not take
any action in accordance with the directions of the Holders of the Common
Securities under this paragraph unless the Institutional Trustee has obtained an
opinion of tax counsel to the effect that for the purposes of United States
federal income tax the Trust will not be classified as other than a grantor
trust on account of such action. If the Institutional Trustee fails to enforce
its rights under the Declaration, any Holder of Common Securities may, to the
fullest extent permitted by law, institute a legal proceeding directly against
any Person to enforce the Institutional Trustee's rights under the Declaration,
without first instituting a legal proceeding against the Institutional Trustee
or any other Person.
Any approval or direction of Holders of Common Securities may be given
at a separate meeting of Holders of Common Securities convened for such purpose,
at a meeting of all of the Holders of Securities in the Trust or pursuant to
written consent. The Administrators will cause a notice of any meeting at which
Holders of Common Securities are entitled to vote, or of any matter upon which
action by written consent of such Holders is to be taken, to be mailed to each
Holder of record of Common Securities. Each such notice will include a
I-14
<PAGE> 88
statement setting forth (i) the date of such meeting or the date by which such
action is to be taken, (ii) a description of any resolution proposed for
adoption at such meeting on which such Holders are entitled to vote or of such
matter upon which written consent is sought and (iii) instructions for the
delivery of proxies or consents.
No vote or consent of the Holders of the Common Securities will be
required for the Trust to redeem and cancel Common Securities or to distribute
the Debentures in accordance with the Declaration and the terms of the
Securities.
8. Amendments to Declaration.
(a) In addition to any requirements under Section 12.01 of the
Declaration, if any proposed amendment to the Declaration provides for, or the
Administrators otherwise propose to effect, (i) any action that would adversely
affect the powers, preferences or special rights of the Securities, whether by
way of amendment to the Declaration or otherwise, or (ii) the liquidation,
dissolution or winding-up of the Trust, other than as described in Section 8.01
of the Declaration, then the Holders of outstanding Securities voting together
as a single class, will be entitled to vote on such amendment or proposal (but
not on any other amendment or proposal) and such amendment or proposal shall not
be effective except with the approval of the Holders of at least a Majority in
Liquidation Amount of the Securities affected thereby; provided, if any
amendment or proposal referred to in clause (i) above would adversely affect
only the Convertible Preferred Securities or only the Common Securities, then
only the affected class will be entitled to vote on such amendment or proposal
and such amendment or proposal shall not be effective except with the approval
of a Majority in Liquidation Amount of such class of Securities.
(b) In the event the consent of the Institutional Trustee as the
holder of the Debentures is required under the Indenture with respect to any
amendment, modification or termination on the Indenture or the Debentures, the
Institutional Trustee shall request the written direction of the Holders of the
Securities with respect to such amendment, modification or termination and shall
vote with respect to such amendment, modification or termination as directed by
a Majority in Liquidation Amount of the Securities voting together as a single
class; provided, that where a consent under the Indenture would require the
consent of the holders of a Super Majority, the Institutional Trustee may only
give such consent at the direction of the Holders of at least the proportion in
liquidation amount of the Securities that the relevant Super Majority represents
of the aggregate principal amount of the Debentures outstanding; provided
further, that
I-15
<PAGE> 89
the Institutional Trustee shall not take any action in accordance with the
directions of the Holders of the Securities under this Section 8(b) unless the
Institutional Trustee has obtained an opinion of tax counsel to the effect that
for the purposes of United States federal income tax the Trust will not be
classified as other than a grantor trust on account of such action.
9. pro rata.
A reference in these terms of the Securities to any distribution or
treatment as being "pro rata" shall mean pro rata to each Holder of Securities
according to the aggregate liquidation amount of the Securities held by the
relevant Holder in relation to the aggregate liquidation amount of all
Securities outstanding unless, in relation to a payment, an Event of Default
under the Declaration has occurred and is continuing, in which case any funds
available to make such payment shall be paid first to each Holder of the
Convertible Preferred Securities pro rata according to the aggregate liquidation
amount of Convertible Preferred Securities held by the relevant Holder relative
to the aggregate liquidation amount of all Convertible Preferred Securities
outstanding, and only after satisfaction of all amounts owed to the Holders of
the Convertible Preferred Securities, to each Holder of Common Securities pro
rata according to the aggregate liquidation amount of Common Securities held by
the relevant Holder relative to the aggregate liquidation amount of all Common
Securities outstanding.
10. Ranking.
The Convertible Preferred Securities rank pari passu and payment
thereon shall be made pro rata with the Common Securities except that, where a
Declaration Event of Default occurs and is continuing, the rights of Holders of
the Common Securities to payment in respect of Distributions and payments upon
liquidation, redemption and otherwise are subordinated to the rights to payment
of the Holders of the Convertible Preferred Securities.
11. Acceptance of Securities Guarantee and Indenture.
Each Holder of Convertible Preferred Securities and Common Securities,
by the acceptance thereof, agrees to the provisions of the Convertible Preferred
Securities Guarantee and the Common Securities Guarantee, respectively,
including the subordination provisions therein and to the provisions of the
Indenture.
12. No Preemptive Rights.
I-16
<PAGE> 90
The Holders of the Securities shall have no preemptive rights or
similar rights to subscribe for any additional securities.
13. Miscellaneous.
These terms constitute a part of the Declaration.
The Sponsor will provide a copy of the Declaration, the Convertible
Preferred Securities Guarantee or the Common Securities Guarantee (as may be
appropriate) and the Indenture to a Holder without charge on written request to
the Sponsor at its principal place of business.
I-17
<PAGE> 91
EXHIBIT A-1
FORM OF CONVERTIBLE PREFERRED SECURITY CERTIFICATE
IF THE CONVERTIBLE PREFERRED SECURITY IS TO BE A GLOBAL CERTIFICATE
INSERT __ THIS CONVERTIBLE PREFERRED SECURITY IS A GLOBAL CERTIFICATE WITHIN THE
MEANING OF THE DECLARATION HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME
OF THE DEPOSITORY TRUST COMPANY (THE "DEPOSITARY") OR A NOMINEE OF THE
DEPOSITARY. THIS CONVERTIBLE PREFERRED SECURITY IS EXCHANGEABLE FOR CONVERTIBLE
PREFERRED SECURITIES REGISTERED IN THE NAME OF A PERSON OTHER THAN THE
DEPOSITARY OR ITS NOMINEE ONLY IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE
DECLARATION AND NO TRANSFER OF THIS CONVERTIBLE PREFERRED SECURITY (OTHER THAN A
TRANSFER OF THIS CONVERTIBLE PREFERRED SECURITY AS A WHOLE BY THE DEPOSITARY TO
A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY
OR ANOTHER NOMINEE OF THE DEPOSITARY) MAY BE REGISTERED EXCEPT IN LIMITED
CIRCUMSTANCES.
UNLESS THIS CONVERTIBLE PREFERRED SECURITY IS PRESENTED BY AN
AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (55 WATER STREET, NEW
YORK, NEW YORK) TO THE TRUST OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE
OR PAYMENT, AND ANY CONVERTIBLE PREFERRED SECURITY ISSUED IS REGISTERED IN THE
NAME OF CEDE & CO. OR SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY AND ANY PAYMENT HEREON IS MADE TO
CEDE & CO., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY A
PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN
INTEREST HEREIN.
THE HOLDER OF THIS CONVERTIBLE PREFERRED SECURITY IS ENTITLED TO THE
BENEFITS OF THE REGISTRATION RIGHTS AGREEMENT DATED AS OF DECEMBER 1, 1997,
AMONG FEDERAL-MOGUL CORPORATION, FEDERAL-MOGUL FINANCING TRUST AND MORGAN
STANLEY & CO. INCORPORATED. THE HOLDER OF THIS CONVERTIBLE PREFERRED SECURITY
AGREES TO BE BOUND BY THE TERMS OF THE REGISTRATION RIGHTS AGREEMENT, A COPY OF
WHICH IS AVAILABLE UPON REQUEST FROM FEDERAL-MOGUL
A1-1
<PAGE> 92
CORPORATION.
CERTIFICATE NUMBER:
NUMBER OF CONVERTIBLE PREFERRED SECURITIES:
CUSIP NO. 313552 20 0
Certificate Evidencing Convertible Preferred Securities
of
FEDERAL-MOGUL FINANCING TRUST
THE SECURITY EVIDENCED HEREBY HAS NOT BEEN REGISTERED UNDER THE UNITED
STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR
ANY STATE SECURITIES LAWS, AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD
WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF,
UNITED STATES PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY
ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A
"QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT) OR (B) IT IS NOT A UNITED STATES PERSON AND IS
ACQUIRING THE CONVERTIBLE PREFERRED SECURITY EVIDENCED HEREBY IN AN
OFFSHORE TRANSACTION; (2) AGREES THAT IT WILL NOT, PRIOR TO THE
EXPIRATION OF THE HOLDING PERIOD APPLICABLE TO SALES OF THE SECURITY
EVIDENCED HEREBY UNDER RULE 144(K) UNDER THE SECURITIES ACT (OR ANY
SUCCESSOR PROVISION), RESELL OR OTHERWISE TRANSFER THE SECURITY
EVIDENCED HEREBY OR THE COMMON STOCK ISSUABLE UPON CONVERSION OF SUCH
SECURITY EXCEPT (A) TO FEDERAL-MOGUL CORPORATION OR ANY SUBSIDIARY
THEREOF, (B) INSIDE THE UNITED STATES TO A QUALIFIED INSTITUTIONAL
BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C)
OUTSIDE THE UNITED STATES IN COMPLIANCE WITH RULE 904 UNDER THE
SECURITIES ACT, (D) PURSUANT TO THE EXEMPTION FROM REGISTRATION
PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE) OR (E)
PURSUANT TO A
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<PAGE> 93
REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE
SECURITIES ACT (AND THAT CONTINUES TO BE EFFECTIVE AT THE TIME OF SUCH
TRANSFER) AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM
THE SECURITY EVIDENCED HEREBY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO
THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF THE
SECURITY EVIDENCED HEREBY PRIOR TO THE EXPIRATION OF THE HOLDING PERIOD
APPLICABLE TO SALES OF THE SECURITY EVIDENCED HEREBY, UNDER RULE 144(K)
UNDER THE SECURITIES ACT (OR ANY SUCCESSOR PROVISION), THE HOLDER MUST
CHECK THE APPROPRIATE BOX SET FORTH ON THE REVERSE HEREOF RELATING TO
THE MANNER OF SUCH TRANSFER AND SUBMIT THIS CERTIFICATE TO THE BANK OF
NEW YORK, AS INSTITUTIONAL TRUSTEE (OR A SUCCESSOR INSTITUTIONAL
TRUSTEE, AS APPLICABLE). THIS LEGEND WILL BE REMOVED UPON THE EARLIER
OF THE TRANSFER OF THE SECURITY EVIDENCED HEREBY PURSUANT TO CLAUSE
1(E) ABOVE OR UPON ANY TRANSFER OF THE SECURITY EVIDENCED HEREBY UNDER
RULE 144(K) UNDER THE SECURITIES ACT (OR ANY SUCCESSOR PROVISION). AS
USED HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED STATES" AND
"UNITED STATES PERSON" HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S
UNDER THE SECURITIES ACT. EACH PURCHASER OR HOLDER OF THE SECURITY
EVIDENCED HEREBY WILL BE DEEMED TO HAVE REPRESENTED EITHER THAT (A) IT
IS NOT AN EMPLOYEE BENEFIT PLAN SUBJECT TO PART 4 OF SUBTITLE B OF
TITLE 1 OF ERISA OR A PLAN DESCRIBED IN SECTION 4975 OF THE CODE OR AN
ENTITY WHOSE UNDERLYING ASSETS INCLUDE THE ASSETS OF ANY SUCH ERISA
PLAN OR OTHER PLAN OR (B) ITS ACQUISITION, HOLDING AND DISPOSITION OF
THE SECURITY EVIDENCED HEREBY WILL NOT RESULT IN A PROHIBITED
TRANSACTION UNDER SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE BY
REASON OF PROHIBITED TRANSACTION CLASS EXEMPTION ("PTCE") 91-38, PTCE
84-14, PTCE 90-1, PTCE 95-60 OR PTCE 96-23.
7% Trust Convertible Preferred Securities (liquidation amount $50 per
Trust Convertible Preferred Security)
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<PAGE> 94
Federal-Mogul Financing Trust, a statutory business trust created under
the laws of the State of Delaware (the "TRUST"), hereby certifies that Cede &
Co. (the "HOLDER") is the registered owner of convertible preferred securities
of the Trust representing undivided beneficial interests in the assets of the
Trust designated the 7% Trust Convertible Preferred Securities (liquidation
amount $50 per Trust Convertible Preferred Security) (the "CONVERTIBLE PREFERRED
SECURITIES"). The Convertible Preferred Securities are transferable on the books
and records of the Trust, in person or by a duly authorized attorney, upon
surrender of this certificate duly endorsed and in proper form for transfer.
The designation, rights, privileges, restrictions, preferences and
other terms and provisions of the Convertible Preferred Securities represented
hereby are issued and shall in all respects be subject to the provisions of the
Amended and Restated Declaration of Trust of the Trust dated as of December 1,
1997, as the same may be amended from time to time (the "DECLARATION"),
including the designation of the terms of the Convertible Preferred Securities
as set forth in Annex I to the Declaration. Capitalized terms used herein but
not defined shall have the meaning given them in the Declaration.
The Holder is entitled to the benefits of the Convertible Preferred
Securities Guarantee to the extent provided therein. The Sponsor will provide a
copy of the Declaration, the Convertible Preferred Securities Guarantee and the
Indenture to a Holder without charge upon written request to the Trust at its
principal place of business.
Upon receipt of this certificate, the Holder is bound by the
Declaration and is entitled to the benefits thereunder.
By acceptance of this certificate, the Holder agrees to treat, for
United States federal income tax purposes, the Debentures as indebtedness and
the Convertible Preferred Securities as evidence of indirect beneficial
ownership in the Debentures.
Unless the Institutional Trustee's Certificate of Authentication hereon
has been properly executed, these Convertible Preferred Securities shall not be
entitled to any benefit under the Declaration or be valid or obligatory for any
purpose.
This certificate and the rights of the parties hereunder shall be
governed by, and construed in accordance with, the laws of the State of Delaware
and all rights and remedies shall be governed by such laws without regard to
principles of conflict of laws.
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<PAGE> 95
IN WITNESS WHEREOF, the Trust has executed this certificate this 1st
day of December , 1997.
Federal-Mogul Financing Trust
By:
---------------------------
Name:
Title: Administrator
[FORM OF CERTIFICATE OF AUTHENTICATION]
INSTITUTIONAL TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Convertible Preferred Securities referred to in the
within-mentioned Declaration.
Dated: December 1, 1997
The Bank of New York,
as Institutional Trustee or as Authentication Agent
By: By:
-------------------------------
Authorized Signatory Authorized Signatory
A1-5
<PAGE> 96
[FORM OF REVERSE OF SECURITY]
Distributions payable on each Convertible Preferred Security will be
fixed at a rate per annum of 7% (the "COUPON RATE") of the stated liquidation
amount of $50 per Convertible Preferred Security, such rate being the rate of
interest payable on the Debentures to be held by the Institutional Trustee.
Distributions in arrears for more than one quarter will bear interest thereon
compounded quarterly at the Coupon Rate (to the extent permitted by applicable
law). The term "DISTRIBUTIONS" as used herein includes such cash distributions
and any such interest payable unless otherwise stated. A Distribution is payable
only to the extent that payments are made in respect of the Debentures held by
the Institutional Trustee and to the extent the Institutional Trustee has funds
available therefor. The amount of Distributions payable for any period will be
computed for any full quarterly Distribution period on the basis of a 360-day
year of twelve 30-day months and, for any period shorter than a full quarterly
Distribution period, will be computed on the basis of the actual number of days
elapsed per 30-day month.
Except as otherwise described below, Distributions on the Convertible
Preferred Securities will be cumulative, will accrue from the first date that
any Convertible Preferred Securities are issued and will be payable quarterly in
arrears, on March 1, June 1, September 1 and December 1 of each year, commencing
on March 1, 1998, which payment dates correspond to the interest payment dates
on the Debentures, to Holders of record at the close of business on the regular
record date for such Distribution, which shall be the close of business one
Business Day prior to such Distribution payment date (provided, that, if, at any
time, the Securities are not held in book-entry form, the relevant record dates
shall be 15 days prior to the relevant payment dates) unless otherwise provided
in the Declaration. The Debenture Issuer has the right under the Indenture to
defer payments of interest by extending the interest payment period from time to
time on the Debentures for a period not exceeding 20 consecutive quarters (each
an "EXTENSION PERIOD"); provided, that no Extension Period shall last beyond the
date of the maturity or any redemption date of the Debentures and, as a
consequence of such deferral, Distributions will also be deferred. Despite such
deferral, quarterly Distributions will continue to accrue with interest thereon
(to the extent permitted by applicable law) at the Coupon Rate compounded
quarterly during any such Extension Period. Prior to the termination of any such
Extension Period, the Debenture Issuer may further extend such Extension Period;
provided, that such Extension Period together with all such previous and further
extensions thereof may not exceed 20 consecutive quarters or extend beyond the
maturity or any redemption date of the Debentures. Payments of accrued
Distributions will be payable to Holders as they appear on the books and records
of the Trust on the first record date after the end of the Extension Period.
Upon the termination of any Extension Period and the payment of all amounts then
due, the Debenture Issuer may commence a new Extension Period, subject to the
above requirements.
The Convertible Preferred Securities shall be redeemable as provided in
the Declaration.
The Convertible Preferred Securities shall be convertible into shares
of Common Stock,
A1-6
<PAGE> 97
through (i) the exchange of Preferred Securities for a portion of the Debentures
and (ii) the immediate conversion of such Debentures into Common Stock, in the
manner and according to the terms set forth in the Declaration.
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<PAGE> 98
CONVERSION REQUEST
To: The Bank of New York,
as Institutional Trustee of
Federal-Mogul Financing Trust
The undersigned owner of these Convertible Preferred Securities hereby
irrevocably exercises the option to convert these Convertible Preferred
Securities, or the portion below designated, into Common Stock of Federal-Mogul
Corporation (the "COMMON STOCK") in accordance with the terms of the Amended and
Restated Declaration of Trust (the "DECLARATION"), dated as of December 1, 1997,
among Thomas W. Ryan, David A. Bozynski and Diane L. Kaye, as Administrators,
The Bank of New York (Delaware), as Delaware Trustee, The Bank of New York, as
Institutional Trustee, Federal-Mogul Corporation, as Sponsor, and the Holders,
from time to time, of undivided beneficial interests in the assets of the Trust
to be issued pursuant to the Declaration. Pursuant to the aforementioned
exercise of the option to convert these Convertible Preferred Securities, the
undersigned hereby directs the Conversion Agent (as that term is defined in the
Declaration) to (i) exchange such Convertible Preferred Securities for a portion
of the Debentures (as that term is defined in the Declaration) held by the Trust
(at the rate of exchange specified in the terms of the Convertible Preferred
Securities set forth as Annex I to the Declaration) and (ii) immediately convert
such Debentures on behalf of the undersigned, into Common Stock (at the
conversion rate specified in the terms of the Convertible Preferred Securities
set forth as Annex I to the Declaration).
The undersigned does also hereby direct the Conversion Agent that the
shares issuable and deliverable upon conversion, together with any check in
payment for fractional shares, be issued in the name of and delivered to the
undersigned, unless a different name has been indicated in the assignment below.
If shares are to be issued in the name of a person other than the undersigned,
the undersigned will pay all transfer taxes payable with respect thereto.
A1-8
<PAGE> 99
Date: , ___________
in whole in part
-----
Number of Convertible Preferred
Securities to be converted:
-----------------------------------
If a name or names other than the
undersigned, please indicate in the
spaces below the name or names in
which the shares of Common Stock are
to be issued, along with the address
or addresses of such person or
persons
-------------------------------------------
-------------------------------------------
-------------------------------------------
-------------------------------------------
-------------------------------------------
-------------------------------------------
-------------------------------------------
Signature (for conversion only)
Please Print or Typewrite Name and
Address, Including Zip Code, and
Social Security or Other Identifying
Number
-------------------------------------------
-------------------------------------------
-------------------------------------------
---------------------
Signature Guarantee:(1)
- -------------------------
(1) (Signature must be guaranteed by an "eligible guarantor institution" that
is, a bank, stockbroker, savings and loan association or credit union
meeting the requirements of the Conversion Agent, which requirements include
membership or participation in the Securities Transfer Agents Medallion Program
("STAMP") or such other "signature guarantee program" as may be determined by
the Conversion Agent in addition to, or in substitution for, STAMP, all in
accordance with the Securities Exchange Act of 1934, as amended.)
A1-9
<PAGE> 100
FORM OF ASSIGNMENT FOR
DEFINITIVE CONVERTIBLE PREFERRED SECURITY OR COMMON STOCK
ISSUABLE UPON THE CONVERSION THEREOF
For value received ___________________ hereby sell(s), assign(s)
and transfer(s) unto ___________________________________________
(Please insert social security or other
taxpayer identification number of assignee.)
the within security and hereby irrevocably constitutes and appoints
______________ attorney to transfer the said security on the books of the
issuer, with full power of substitution in the premises.
In connection with any transfer of the within security occurring prior to the
Transfer Restriction Termination Date, the undersigned confirms that such
security is being transferred:
[ ] To Federal-Mogul Corporation or a subsidiary thereof; or
[ ] Pursuant to and in compliance with Rule 144A under the Securities
Act of 1933, as amended; or
[ ] Pursuant to and in compliance with Regulation S under the
Securities Act of 1933, as amended; or
[ ] Pursuant to and in compliance with Rule 144 under the Securities
Act of 1933, as amended;
and unless the box below is checked, the undersigned confirms that such security
is not being transferred to an "affiliate" of the Company as defined in Rule 144
under the Securities Act of 1933, as amended (an "AFFILIATE"):
[ ] The transferee is an Affiliate of the Company.
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<PAGE> 101
Dated:
--------------------------------
Signature(s) --------------------------------------
--------------------------------------
Signature(s) must be guaranteed by a
commercial bank or trust company or a
member firm of a major stock exchange.
--------------------------------------
Signature Guarantee
NOTICE: The above signatures of the holder(s) hereof must correspond with the
name as written upon the face of this Security in every particular without
alteration or enlargement or any change whatever.
A1-11
<PAGE> 102
<TABLE>
<CAPTION>
SCHEDULE I
CHANGES TO NUMBER OF CONVERTIBLE PREFERRED SECURITIES
IN GLOBAL SECURITY
- --------------------- ------------------------------------- ----------------------------------- --------------------
<S> <C> <C> <C>
DATE NUMBER OF CONVERTIBLE PREFERRED REMAINING CONVERTIBLE PREFERRED NOTATION
SECURITIES BY WHICH THIS GLOBAL SECURITIES REPRESENTED BY THIS MADE BY
SECURITY IS TO BE REDUCED OR GLOBAL SECURITY
INCREASED, AND REASON FOR REDUCTION
OR INCREASE
- --------------------- ------------------------------------- ----------------------------------- --------------------
- --------------------- ------------------------------------- ----------------------------------- --------------------
- --------------------- ------------------------------------- ----------------------------------- --------------------
- --------------------- ------------------------------------- ----------------------------------- --------------------
- --------------------- ------------------------------------- ----------------------------------- --------------------
- --------------------- ------------------------------------- ----------------------------------- --------------------
- --------------------- ------------------------------------- ----------------------------------- --------------------
- --------------------- ------------------------------------- ----------------------------------- --------------------
</TABLE>
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<PAGE> 103
EXHIBIT A-2
FORM OF COMMON SECURITY CERTIFICATE
CERTIFICATE NUMBER: NUMBER OF COMMON SECURITIES:
Certificate Evidencing Common Securities
of
FEDERAL-MOGUL FINANCING TRUST
7% Common Securities
(liquidation amount $50 per Common Security)
THE SECURITY EVIDENCED HEREBY HAS NOT BEEN REGISTERED UNDER THE UNITED
STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR
ANY STATE SECURITIES LAWS, AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD
WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF,
UNITED STATES PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY
ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A
"QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT) OR (B) IT IS NOT A UNITED STATES PERSON AND IS
ACQUIRING THE CONVERTIBLE PREFERRED SECURITY EVIDENCED HEREBY IN AN
OFFSHORE TRANSACTION; (2) AGREES THAT IT WILL NOT, PRIOR TO THE
EXPIRATION OF THE HOLDING PERIOD APPLICABLE TO SALES OF THE SECURITY
EVIDENCED HEREBY UNDER RULE 144(K) UNDER THE SECURITIES ACT (OR ANY
SUCCESSOR PROVISION), RESELL OR OTHERWISE TRANSFER THE SECURITY
EVIDENCED HEREBY OR THE COMMON STOCK ISSUABLE UPON CONVERSION OF SUCH
SECURITY EXCEPT (A) TO FEDERAL-MOGUL CORPORATION OR ANY SUBSIDIARY
THEREOF, (B) INSIDE THE UNITED STATES TO A QUALIFIED INSTITUTIONAL
BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C)
OUTSIDE THE UNITED STATES IN COMPLIANCE WITH RULE 904 UNDER THE
SECURITIES ACT, (D) PURSUANT TO THE EXEMPTION FROM REGISTRATION
PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE) OR (E)
PURSUANT TO A REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE
UNDER THE SECURITIES ACT (AND THAT
A2-1
<PAGE> 104
CONTINUES TO BE EFFECTIVE AT THE TIME OF SUCH TRANSFER) AND (3) AGREES
THAT IT WILL DELIVER TO EACH PERSON TO WHOM THE SECURITY EVIDENCED
HEREBY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS
LEGEND. IN CONNECTION WITH ANY TRANSFER OF THE SECURITY EVIDENCED
HEREBY PRIOR TO THE EXPIRATION OF THE HOLDING PERIOD APPLICABLE TO
SALES OF THE SECURITY EVIDENCED HEREBY, UNDER RULE 144(K) UNDER THE
SECURITIES ACT (OR ANY SUCCESSOR PROVISION), THE HOLDER MUST CHECK THE
APPROPRIATE BOX SET FORTH ON THE REVERSE HEREOF RELATING TO THE MANNER
OF SUCH TRANSFER AND SUBMIT THIS CERTIFICATE TO THE BANK OF NEW YORK,
AS INSTITUTIONAL TRUSTEE (OR A SUCCESSOR INSTITUTIONAL TRUSTEE, AS
APPLICABLE). THIS LEGEND WILL BE REMOVED UPON THE EARLIER OF THE
TRANSFER OF THE SECURITY EVIDENCED HEREBY PURSUANT TO CLAUSE 1(E) ABOVE
OR UPON ANY TRANSFER OF THE SECURITY EVIDENCED HEREBY UNDER RULE 144(K)
UNDER THE SECURITIES ACT (OR ANY SUCCESSOR PROVISION). AS USED HEREIN,
THE TERMS "OFFSHORE TRANSACTION," "UNITED STATES" AND "UNITED STATES
PERSON" HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE
SECURITIES ACT. EACH PURCHASER OR HOLDER OF THE SECURITY EVIDENCED
HEREBY WILL BE DEEMED TO HAVE REPRESENTED EITHER THAT (A) IT IS NOT AN
EMPLOYEE BENEFIT PLAN SUBJECT TO PART 4 OF SUBTITLE B OF TITLE 1 OF
ERISA OR A PLAN DESCRIBED IN SECTION 4975 OF THE CODE OR AN ENTITY
WHOSE UNDERLYING ASSETS INCLUDE THE ASSETS OF ANY SUCH ERISA PLAN OR
OTHER PLAN OR (B) ITS ACQUISITION, HOLDING AND DISPOSITION OF THE
SECURITY EVIDENCED HEREBY WILL NOT RESULT IN A PROHIBITED TRANSACTION
UNDER SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE BY REASON OF
PROHIBITED TRANSACTION CLASS EXEMPTION ("PTCE") 91-38, PTCE 84-14, PTCE
90-1, PTCE 95-60 OR PTCE 96-23.
Federal-Mogul Financing Trust, a statutory business trust created under
the laws of the State of Delaware (the "TRUST"), hereby certifies that
Federal-Mogul Corporation, a Michigan corporation (the "HOLDER") is the
registered owner of common securities of the Trust representing undivided
beneficial interests in the assets of the Trust designated the 7% Common
Securities (liquidation amount $50 per Common Security) (the "COMMON
SECURITIES"). Subject to the Declaration (as defined below), the Common
Securities are transferable on the books and records of the Trust, in person or
by a duly authorized attorney, upon surrender of this certificate duly endorsed
and in proper form for transfer.
The designation, rights, privileges, restrictions, preferences and
other terms and
A2-2
<PAGE> 105
provisions of the Common Securities represented hereby are issued and shall in
all respects be subject to the provisions of the Amended and Restated
Declaration of Trust of the Trust dated as of December 1, 1997, as the same may
be amended from time to time (the "DECLARATION"), including the designation of
the terms of the Common Securities as set forth in Annex I to the Declaration.
Capitalized terms used herein but not defined shall have the meaning given them
in the Declaration.
The Holder is entitled to the benefits of the Common Securities
Guarantee to the extent provided therein. The Sponsor will provide a copy of the
Declaration, the Common Securities Guarantee and the Indenture to a Holder
without charge upon written request to the Sponsor at its principal place of
business.
Upon receipt of this certificate, the Sponsor is bound by the
Declaration and is entitled to the benefits thereunder.
By acceptance of this certificate, the Holder agrees to treat, for
United States federal income tax purposes, the Debentures as indebtedness and
the Common Securities as evidence of indirect beneficial ownership in the
Debentures.
This certificate and the rights of the parties hereunder shall be
governed by and construed in accordance with the laws of the State of Delaware
and all rights and remedies shall be governed by such laws without regard to
principles of conflicts of laws.
IN WITNESS WHEREOF, the Trust has executed this certificate this 1st
day of December, 1997.
FEDERAL-MOGUL FINANCING TRUST
By:
-----------------------------------
Name:
Title: Administrator
A2-3
<PAGE> 106
[FORM OF REVERSE OF SECURITY]
Distributions payable on each Common Security will be fixed at a rate
per annum of 7% (the "COUPON RATE") of the stated liquidation amount of $50 per
Common Security, such rate being the rate of interest payable on the Debentures
to be held by the Institutional Trustee. Distributions in arrears for more than
one quarter will bear interest thereon compounded quarterly at the Coupon Rate
(to the extent permitted by applicable law). The term "DISTRIBUTIONS" as used
herein includes such cash distributions and any such interest payable unless
otherwise stated. A Distribution is payable only to the extent that payments are
made in respect of the Debentures held by the Institutional Trustee and to the
extent the Institutional Trustee has funds available therefor. The amount of
Distributions payable for any period will be computed for any full quarterly
Distribution period on the basis of a 360-day year of twelve 30-day months and,
for any period shorter than a full quarterly Distribution period, will be
computed on the basis of the actual number of days elapsed per 30-day month.
Except as otherwise described below, Distributions on the Common
Securities will be cumulative, will accrue from the first date that any
Convertible Preferred Securities are issued and will be payable quarterly in
arrears, on March 1, June 1, September 1 and December 1, which payment dates
correspond to the interest payment dates on the Debentures, to Holders of record
at the close of business on the regular record date for such Distribution, which
shall be the close of business 15 days prior to such Distribution payment date
unless otherwise provided in the Declaration. The Debenture Issuer has the right
under the Indenture to defer payments of interest by extending the interest
payment period from time to time on the Debentures for a period not exceeding 20
consecutive quarters (each an "EXTENSION PERIOD"); provided, that no Extension
Period shall last beyond the date of maturity of the Debentures and, as a
consequence of such deferral, Distributions will also be deferred. Despite such
deferral, quarterly Distributions will continue to accrue with interest thereon
(to the extent permitted by applicable law) at the Coupon Rate compounded
quarterly during any such Extension Period. Prior to the termination of any such
Extension Period, the Debenture Issuer may further extend such Extension Period;
provided, that such Extension Period together with all such previous and further
extensions thereof may not exceed 20 consecutive quarters or extend beyond the
date of maturity of the Debentures. Payments of accrued Distributions will be
payable to Holders as they appear on the books and records of the Trust on the
first record date after the end of the Extension Period. Upon the termination of
any Extension Period and the payment of all amounts then due, the Debenture
Issuer may commence a new Extension Period, subject to the above requirements.
The Common Securities shall be redeemable as provided in the
Declaration.
The Common Securities shall be convertible into shares of Common Stock
through (i) the exchange of Common Securities for a portion of the Debentures
and (ii) the immediate conversion of such Debentures into Common Stock, in the
manner and according to the terms set
A2-4
<PAGE> 107
----
forth in the Declaration.
A2-5
<PAGE> 108
----
CONVERSION REQUEST
To: The Bank of New York
as Institutional Trustee of
Financing Trust
The undersigned owner of these Common Securities hereby irrevocably
exercises the option to convert these Common Securities, or the portion below
designated, into Common Stock of Federal-Mogul Corporation (the "COMMON STOCK")
in accordance with the terms of the Amended and Restated Declaration of Trust
(the "DECLARATION"), dated as of December 1, 1997, among Thomas W. Ryan, David
A. Bozynski and Diane L. Kaye, as Administrators, The Bank of New York
(Delaware), as Delaware Trustee, The Bank of New York, as Institutional Trustee,
Federal-Mogul Corporation, as Sponsor, and the Holders, from time to time, of
undivided beneficial interests in the assets of the Trust to be issued pursuant
to the Declaration. Pursuant to the aforementioned exercise of the option to
convert these Common Securities, the undersigned hereby directs the Conversion
Agent (as that term is defined in the Declaration) to (i) exchange such Common
Securities for a portion of the Debentures (as that term is defined in the
Declaration) held by the Trust (at the rate of exchange specified in the terms
of the Common Securities set forth as Annex I to the Declaration) and (ii)
immediately convert such Debentures on behalf of the undersigned, into Common
Stock (at the conversion rate specified in the terms of the Common Securities
set forth as Annex I to the Declaration).
The undersigned does also hereby direct the Conversion Agent that the
shares issuable and deliverable upon conversion, together with any check in
payment for fractional shares, be issued in the name of and delivered to the
undersigned, unless a different name has been indicated in the assignment below.
If shares are to be issued in the name of a person other than the undersigned,
the undersigned will pay all transfer taxes payable with respect thereto.
A2-6
<PAGE> 109
Date: , ___________
in whole in part
-----
Number of Convertible Preferred
Securities to be converted:
------------------------------------
If a name or names other than the
undersigned, please indicate in the
spaces below the name or names in
which the shares of Common Stock are
to be issued, along with the address
or addresses of such person or
persons
-------------------------------------------
-------------------------------------------
-------------------------------------------
-------------------------------------------
-------------------------------------------
-------------------------------------------
-------------------------------------------
Signature (for conversion only)
Please Print or Typewrite Name and
Address, Including Zip Code, and
Social Security or Other Identifying
Number
-------------------------------------------
-------------------------------------------
-------------------------------------------
---------------------
(2)
Signature Guarantee:
- -------------------------
(2) (Signature must be guaranteed by an "eligible guarantor institution" that
is, a bank, stockbroker, savings and loan association or credit union meeting
the requirements of the Conversion Agent, which requirements include membership
or participation in the Securities Transfer Agents Medallion Program ("STAMP")
or such other "signature guarantee program" as may be determined by the
Conversion Agent in addition to, or in substitution for, STAMP, all in
accordance with the Securities Exchange Act of 1934, as amended.)
A2-7
<PAGE> 110
EXHIBIT B
SPECIMEN OF DEBENTURE
A2-8
<PAGE> 111
EXHIBIT C
PURCHASE AGREEMENT
C-1
<PAGE> 1
EXHIBIT 10.35
-------------------------------------------------
COMMON SECURITIES GUARANTEE AGREEMENT
Federal-Mogul Financing Trust
Dated as of December 1, 1997
-------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
--------------
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE 1 DEFINITIONS AND INTERPRETATION
SECTION 1.01. Definitions and Interpretation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
ARTICLE 2 GUARANTEE
SECTION 2.01. Guarantee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
SECTION 2.02. Subordination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
SECTION 2.03. Waiver of Notice and Demand . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
SECTION 2.05. Rights of Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
SECTION 2.06. Guarantee of Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
SECTION 2.07. Subrogation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
SECTION 2.08. Independent Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE 3 LIMITATION OF TRANSACTIONS; SUBORDINATION
SECTION 3.01. Limitation of Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
SECTION 3.02. Subordination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
ARTICLE 4 TERMINATION
SECTION 4.01. Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
ARTICLE 5 MISCELLANEOUS
SECTION 5.01. Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 5.02. Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 5.03. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 5.04. Benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
SECTION 5.05. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
</TABLE>
<PAGE> 3
THE SECURITY EVIDENCED HEREBY HAS NOT BEEN REGISTERED UNDER THE UNITED
STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE
SECURITIES LAWS, AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED
STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, UNITED STATES PERSONS EXCEPT AS
SET FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF, THE HOLDER (1)
REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE
144A UNDER THE SECURITIES ACT) OR (B) IT IS NOT A UNITED STATES PERSON AND IS
ACQUIRING THE SECURITY EVIDENCED HEREBY IN AN OFFSHORE TRANSACTION; (2) AGREES
THAT IT WILL NOT, PRIOR TO THE EXPIRATION OF THE HOLDING PERIOD APPLICABLE TO
SALES OF THE SECURITY EVIDENCED HEREBY UNDER RULE 144(K) UNDER THE SECURITIES
ACT (OR ANY SUCCESSOR PROVISION), RESELL OR OTHERWISE TRANSFER THE SECURITY
EVIDENCED HEREBY OR THE COMMON STOCK ISSUABLE UPON CONVERSION OF SUCH SECURITY
EXCEPT (A) TO FEDERAL-MOGUL CORPORATION OR ANY SUBSIDIARY THEREOF, (B) INSIDE
THE UNITED STATES TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE
144A UNDER THE SECURITIES ACT, (C) OUTSIDE THE UNITED STATES IN COMPLIANCE WITH
RULE 904 UNDER THE SECURITIES ACT, (D) PURSUANT TO THE EXEMPTION FROM
REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE) OR
(E) PURSUANT TO A REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER
THE SECURITIES ACT (AND THAT CONTINUES TO BE EFFECTIVE AT THE TIME OF SUCH
TRANSFER) AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THE
SECURITY EVIDENCED HEREBY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT
OF THIS LEGEND. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED
STATES" AND "UNITED STATES PERSON" HAVE THE MEANINGS GIVEN TO THEM BY REGULATION
S UNDER THE SECURITIES ACT. EACH PURCHASER OR HOLDER OF THE SECURITY EVIDENCED
HEREBY WILL BE DEEMED TO HAVE REPRESENTED EITHER THAT (A) IT IS NOT AN EMPLOYEE
BENEFIT PLAN SUBJECT TO PART 4 OF SUBTITLE B OF TITLE 1 OF ERISA OR A PLAN
DESCRIBED IN SECTION 4975 OF THE CODE OR AN ENTITY WHOSE UNDERLYING ASSETS
INCLUDE THE ASSETS OF ANY SUCH ERISA PLAN OR OTHER PLAN OR (B) ITS ACQUISITION,
HOLDING AND DISPOSITION OF THE SECURITY EVIDENCED HEREBY WILL NOT RESULT IN A
PROHIBITED TRANSACTION UNDER SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE BY
REASON OF PROHIBITED TRANSACTION CLASS EXEMPTION ("PTCE") 91-38, PTCE 84-14,
PTCE 90-1, PTCE 95-60 OR PTCE 96-23.
<PAGE> 4
COMMON SECURITIES GUARANTEE AGREEMENT
This GUARANTEE AGREEMENT (the "COMMON SECURITIES GUARANTEE"), dated as
of December 1, 1997, is executed and delivered by Federal-Mogul Corporation, a
Michigan corporation (the "GUARANTOR"), for the benefit of the Holders (as
defined herein) from time to time of the Common Securities (as defined herein)
of Federal-Mogul Financing Trust, a Delaware business trust (the "ISSUER").
WHEREAS, pursuant to an Amended and Restated Declaration of Trust (the
"DECLARATION"), dated as of the date hereof, among the trustees and
administrators of the Issuer named therein, the Guarantor, as sponsor, and the
holders from time to time of undivided beneficial interests in the assets of
the Issuer, the Issuer is issuing on the date hereof 309,279 common securities,
having an aggregate liquidation amount of $15,463,950, designated the Common
Securities (and may issue up to an additional 46,392 Common Securities having
an aggregate liquidation amount of $2,319,600 solely to cover over-allotments)
(collectively the "COMMON SECURITIES");
WHEREAS, as an incentive for the Holders to purchase the Common
Securities, the Guarantor desires to irrevocably and unconditionally agree, to
the extent set forth in this Common Securities Guarantee, to pay to the Holders
of the Common Securities the Guarantee Payments (as defined herein) and to make
certain other payments on the terms and conditions set forth herein; and
WHEREAS, as of the date hereof, the Guarantor is also executing and
delivering a guarantee agreement (the "PREFERRED SECURITIES GUARANTEE") with
substantially identical terms to this Common Securities Guarantee for the
benefit of the holders of the Convertible Preferred Securities (as defined
herein), except that if an Event of Default (as defined in the Indenture (as
defined herein)), has occurred and is continuing, the rights of Holders of the
Common Securities to receive Guarantee Payments under this Common Securities
Guarantee are subordinated to the rights of holders of Convertible Preferred
Securities to receive Guarantee Payments under the Convertible Preferred
Securities Guarantee.
NOW, THEREFORE, in consideration of the purchase by each Holder of
Common Securities, which purchase the Guarantor hereby agrees shall benefit the
Guarantor, the Guarantor executes and delivers this Common Securities Guarantee
for the benefit of the Holders.
<PAGE> 5
ARTICLE 1
DEFINITIONS AND INTERPRETATION
SECTION 1.1. Definitions and Interpretation. In this Common
Securities Guarantee, unless the context otherwise requires:
(a) capitalized terms used in this Common Securities Guarantee but
not defined in the preamble above have the respective meanings assigned to them
in this Section 1.01;
(b) terms defined in the Declaration as at the date of execution
of this Common Securities Guarantee have the same meaning when used in this
Common Securities Guarantee unless otherwise defined in this Common Securities
Guarantee;
(c) a term defined anywhere in this Common Securities Guarantee
has the same meaning throughout;
(d) all references to "the Common Securities Guarantee" or "this
Common Securities Guarantee" are to this Common Securities Guarantee as
modified, supplemented or amended from time to time;
(e) all references in this Common Securities Guarantee to Articles
and Sections are to Articles and Sections of this Common Securities Guarantee,
unless otherwise specified; and
(f) a reference to the singular includes the plural and vice
versa.
"GUARANTEE PAYMENTS" means the following payments or distributions,
without duplication, with respect to the Common Securities, to the extent not
paid or made by the Issuer: (i) any accrued and unpaid Distributions that are
required to be paid on such Common Securities to the extent the Issuer shall
have funds available therefor, (ii) the redemption price (the "REDEMPTION
PRICE"), plus all accrued and unpaid Distributions to the date of redemption
with respect to any Common Securities called for redemption by the Issuer, to
the extent the Issuer has funds available therefor, and (iii) upon a voluntary
or involuntary liquidation, dissolution, winding-up or termination of the
Issuer (other than in connection with a distribution of the Debentures to the
Holders or the redemption of all the Common Securities), the lesser of (a) the
aggregate of liquidation amount and all accrued and unpaid Distributions on the
Common Securities to the date of payment, to the extent the Issuer has funds
available therefor, and (b) the amount of assets of the Issuer remaining
available for distribution to Holders in liquidation of the Issuer (in either
case, the "LIQUIDATION DISTRIBUTION"). If an
<PAGE> 6
Event of Default has occurred and is continuing, the rights of Holders of the
Common Securities to receive Guarantee Payments under this Common Securities
Guarantee are subordinated to the rights of holders of Convertible Preferred
Securities to receive Guarantee Payments.
"HOLDER" means any holder, as registered on the books and records of
the Issuer, of any Common Securities.
"MAJORITY IN LIQUIDATION AMOUNT" of the Common Securities means,
except as provided in the terms of the Common Securities, a vote by Holder(s),
voting separately as a class, of more than 50% of the Liquidation Amount
(including the stated amount that would be paid on redemption, liquidation or
otherwise, plus accrued and unpaid Distributions to the date upon which the
voting percentages are determined) of all Common Securities.
"TRUST SECURITIES" means the Common Securities and the Preferred
Securities.
ARTICLE 2
GUARANTEE
SECTION 2.1. Guarantee. The Guarantor irrevocably and
unconditionally agrees to pay in full to the Holders the Guarantee Payments
(without duplication of amounts theretofore paid by the Issuer), as and when
due, regardless of any defense, right of set-off or counterclaim that the
Issuer may have or assert. The Guarantor's obligation to make a Guarantee
Payment may be satisfied by direct payment of the required amounts by the
Guarantor to the Holders or by causing the Issuer to pay such amounts to the
Holders.
SECTION 2.2. Subordination. If an Event of Default (as defined in
the Indenture) has occurred and is continuing, the rights of the Holders of the
Common Securities to receive Guarantee Payments under this Common Securities
Guarantee are subordinated to the rights of the Holders of the Preferred
Securities to receive guarantee payments under the Preferred Securities
Guarantee.
SECTION 2.3. Waiver of Notice and Demand. The Guarantor hereby
waives notice of acceptance of this Common Securities Guarantee and of any
liability to which it applies or may apply, presentment, demand for payment,
any right to require a proceeding first against the Issuer or any other Person
before proceeding against the Guarantor, protest, notice of nonpayment, notice
of dishonor, notice of redemption and all other notices and demands.
<PAGE> 7
SECTION 2.4. Obligations Not Affected. The obligations, covenants,
agreements and duties of the Guarantor under this Common Securities Guarantee
shall in no way be affected or impaired by reason of the happening from time to
time of any of the following:
(a) the release or waiver, by operation of law or otherwise, of
the performance or observance by the Issuer of any express or implied
agreement, covenant, term or condition relating to the Common Securities to be
performed or observed by the Issuer;
(b) the extension of time for the payment by the Issuer of all or
any portion of the Distributions, Redemption Price, Liquidation Distribution or
any other sums payable under the terms of the Common Securities or the
extension of time for the performance of any other obligation under, arising
out of, or in connection with, the Common Securities (other than an extension
of time for payment of Distributions, the Redemption Price, Liquidation
Distribution or other sum payable that results from the extension of any
interest payment period on the Debentures permitted by the Indenture);
(c) any failure, omission, delay or lack of diligence on the part
of the Holders to enforce, assert or exercise any right, privilege, power or
remedy conferred on the Holders pursuant to the terms of the Common Securities,
or any action on the part of the Issuer granting indulgence or extension of any
kind;
(d) the voluntary or involuntary liquidation, dissolution, sale of
any collateral, receivership, insolvency, bankruptcy, assignment for the
benefit of creditors, reorganization, arrangement, composition or readjustment
of debt of, or other similar proceedings affecting, the Issuer or any of the
assets of the Issuer;
(e) any invalidity of, or defect or deficiency in, the Common
Securities;
(f) the settlement or compromise of any obligation guaranteed
hereby or hereby incurred; or
(g) any other circumstance whatsoever that might otherwise
constitute a legal or equitable discharge or defense of a guarantor, it being
the intent of this Section 2.04 that the obligations of the Guarantor hereunder
shall be absolute and unconditional under any and all circumstances.
There shall be no obligation of the Holders to give notice to, or
obtain consent of, the Guarantor with respect to the happening of any of the
foregoing.
SECTION 2.5. Rights of Holders. The Guarantor expressly acknowledges
that any Holder of Common Securities may institute a legal proceeding directly
<PAGE> 8
against the Guarantor to enforce its rights under this Common Securities
Guarantee, without instituting a legal proceeding against the Issuer or any
other Person.
SECTION 2.6. Guarantee of Payment. This Common Securities Guarantee
creates a guarantee of payment and not of collection.
SECTION 2.7. Subrogation. The Guarantor shall be subrogated to all
(if any) rights of the Holders of Common Securities against the Issuer in
respect of any amounts paid to such Holders by the Guarantor under this Common
Securities Guarantee; provided, that the Guarantor shall not (except to the
extent required by mandatory provisions of law) be entitled to enforce or
exercise any right that it may acquire by way of subrogation or any indemnity,
reimbursement or other agreement, in all cases as a result of payment under
this Common Securities Guarantee, if, at the time of any such payment, any
amounts are due and unpaid under this Common Securities Guarantee. If any
amount shall be paid to the Guarantor in violation of the preceding sentence,
the Guarantor agrees to hold such amount in trust for the Holders and to pay
over such amount to the Holders. If an Event of Default has occurred and is
continuing, the rights of Holders of the Common Securities to receive Guarantee
Payments under this Common Securities Guarantee are subordinated to the
rights of holders of Convertible Preferred Securities to receive Guarantee
Payments under the Convertible Securities Guarantee.
SECTION 2.8. Independent Obligations. The Guarantor acknowledges
that its obligations hereunder are independent of the obligations of the Issuer
with respect to the Common Securities and that the Guarantor shall be liable as
principal and as debtor hereunder to make Guarantee Payments pursuant to the
terms of this Common Securities Guarantee notwithstanding the occurrence of any
event referred to in subsections (a) through (g), inclusive, of Section 2.04
hereof.
ARTICLE 3
LIMITATION OF TRANSACTIONS; SUBORDINATION
SECTION 3.1. Limitation of Transactions. So long as any Convertible
Preferred Securities remain outstanding, if (i) the Guarantor has exercised its
option to defer interest payments on the Debentures by extending the interest
payment period and such extension shall be continuing, (ii) the Guarantor shall
be in default with respect to its Guarantee Payments or other obligations under
the Guarantee or (ii) there shall have occurred and be continuing any event
that, with the giving of notice, would constitute a Declaration Event of
Default then the
<PAGE> 9
Guarantor (a) shall not declare or pay any dividend on, make distributions with
respect to, or redeem, purchase or acquire, or make a liquidation payment with
respect to, any of its capital stock (other than (i) purchases or acquisitions
of shares of Common Stock in connection with the satisfaction by the Guarantor
or any of its subsidiaries of their respective obligations under any employee
benefit plans, (ii) as a result of a reclassification of the Guarantor's
capital stock or the exchange or conversion of one class or series of the
Guarantor's capital stock for another class or series of capital stock, or
(iii) the purchase of fractional interests in shares of the Guarantor's capital
stock pursuant to the conversion or exchange provisions of such capital stock
or the security being converted or exchanged for the Guarantor's capital stock)
or make any guarantee payments with respect to the foregoing and (b) shall not
make any payment of interest, principal or premium, if any, on, or repay,
repurchase or redeem, any debt securities (including guarantees) issued by the
Guarantor that rank pari passu with or junior to the Debentures.
SECTION 3.2. Subordination. This Common Securities Guarantee will
constitute an unsecured obligation of the guarantor and will rank (i)
subordinate and junior in right of payment to all other liabilities of the
Guarantor, (ii) pari passu with the most senior preferred or preference stock
now or hereafter issued by the Guarantor and with any guarantee now or
hereafter entered into by the Guarantor in respect of the most senior preferred
or preference stock of any Affiliate of the Guarantor, and (iii) senior to the
Guarantor's common stock.
ARTICLE 4
TERMINATION
SECTION 4.1. Termination. This Common Securities Guarantee shall
terminate as to each Holder upon (i) full payment of the Redemption Price and
accrued and unpaid Distributions with respect to all Common Securities, (ii)
upon the distribution of the Debentures held by the Trust to the Holders of the
Common Securities, (iii) upon liquidation of the Trust, or (iv) upon
distribution of Common Stock to such Holder in respect of the conversion of
such Holder's Common Securities into Common Stock and will terminate completely
upon full payment of the amounts payable in accordance with the Declaration.
Notwithstanding the foregoing, this Common Securities Guarantee will continue
to be effective or will be reinstated, as the case may be, if at any time any
Holder of Common Securities must restore payment of any sums paid under the
Common Securities or under this Common Securities Guarantee.
<PAGE> 10
ARTICLE 5
MISCELLANEOUS
SECTION 5.1. Successors and Assigns. All guarantees and agreements
contained in this Common Securities Guarantee shall bind the successors,
assigns, receivers, trustees and representatives of the Guarantor and shall
inure to the benefit of the Holders of the Common Securities then outstanding.
SECTION 5.2. Amendments. Except with respect to any changes that do
not adversely affect the rights of Holders (in which case no consent of Holders
will be required), this Common Securities Guarantee may only be amended with
the prior approval of the Holders of at least a Majority in Liquidation Amount
of the Common Securities. The provisions of Section 12.02 of the Declaration
with respect to meetings of Holders of the Securities apply to the giving of
such approval. Except in connection with any permitted merger or consolidation
of the Guarantor with or into another entity or any permitted sale, transfer or
lease of the Guarantor's assets to another entity (as described in Article 7 of
the Indenture), the Guarantor may not assign its rights or delegate its
obligations under the Guarantee without the prior approval of the Holders of at
least a Majority in Liquidation Amount of the Common Securities then
outstanding.
SECTION 5.3. Notices. All notices provided for in this Common
Securities Guarantee shall be in writing, duly signed by the party giving such
notice, and shall be delivered, telecopied or mailed by first class mail, as
follows:
(a) if given to the Guarantor, at the Guarantor's mailing address
set forth below (or such other address as the Guarantor may give notice of to
the Holders of the Common Securities):
Federal-Mogul Corporation
26555 Northwestern Highway
Southfield, Michigan
Attention: Corporate Secretary
(b) if given to any Holder of Common Securities, at the address
set forth on the books and records of the Issuer.
All such notices shall be deemed to have been given when received in
person, telecopied with receipt confirmed, or mailed by first class mail,
postage prepaid except that if a notice or other document is refused delivery
or cannot be delivered because of a changed address of which no notice was
given, such notice or other document shall be deemed to have been delivered on
the date of such refusal or inability to deliver.
<PAGE> 11
SECTION 5.4. Benefit. This Common Securities Guarantee is solely for
the benefit of the Holders of the Common Securities and is not separately
transferable from the Common Securities.
SECTION 5.5. Governing Law. THIS COMMON SECURITIES GUARANTEE SHALL
BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW
YORK, WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES THEREOF.
THIS COMMON SECURITIES GUARANTEE is executed as of the day and year
first above written.
FEDERAL-MOGUL CORPORATION
By:
--------------------------------
Name:
Title:
<PAGE> 1
EXHIBI 10.36
================================================
FEDERAL-MOGUL CORPORATION
THE FOREIGN SUBSIDIARY BORROWERS
--------------------------
$2,750,000,000
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
DATED AS OF DECEMBER 18, 1997
-------------------------------
THE CHASE MANHATTAN BANK,
as Administrative Agent
================================================
<PAGE> 2
TABLE OF CONTENTS
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ARTICLE I. DEFINITIONS......................................................................................... 2
SECTION 1.01. Defined Terms................................................................................ 2
SECTION 1.02. Other Definitional Provisions................................................................ 32
ARTICLE II. AMOUNT AND TERMS OF REVOLVING CREDIT COMMITMENTS AND SWING LINE COMMITMENT......................... 33
SECTION 2.01. Revolving Credit Commitments................................................................. 33
SECTION 2.02. Repayment of Revolving Credit Loans; Evidence of Debt........................................ 33
SECTION 2.03. Procedure for Revolving Credit Borrowing..................................................... 34
SECTION 2.04. Termination or Reduction of Revolving Credit Commitments..................................... 34
SECTION 2.05. Borrowings of Revolving Credit Loans and Refunding of Loans.................................. 35
SECTION 2.06. Swing Line Commitments....................................................................... 36
SECTION 2.07. Procedure for Swing Line Borrowings; Interest Rate........................................... 37
SECTION 2.08. Repayment of Swing Line Loans; Evidence of Debt.............................................. 37
SECTION 2.09. Refunding of Swing Line Borrowings........................................................... 38
SECTION 2.10. Participating Interests...................................................................... 38
ARTICLE III. AMOUNT AND TERMS OF TERM LOAN COMMITMENTS......................................................... 39
SECTION 3.01. Term Loan Commitments........................................................................ 39
SECTION 3.02. Repayment of Term Loans; Evidence of Debt.................................................... 39
SECTION 3.03. Procedure for Term Loan Borrowing............................................................ 42
ARTICLE IV. AMOUNT AND TERMS OF MULTICURRENCY COMMITMENTS...................................................... 42
SECTION 4.01. Multicurrency Commitments.................................................................... 42
SECTION 4.02. Repayment of Multicurrency Loans; Evidence of Debt........................................... 42
SECTION 4.03. Procedure for Multicurrency Borrowing........................................................ 43
SECTION 4.04. Termination or Reduction of Multicurrency Commitments........................................ 43
ARTICLE V. LOCAL CURRENCY FACILITIES........................................................................... 44
SECTION 5.01. Terms of Local Currency Facilities........................................................... 44
SECTION 5.02. Reporting of Local Currency Outstandings..................................................... 45
ARTICLE VI. GENERAL PROVISIONS APPLICABLE TO THE LOANS ........................................................ 46
SECTION 6.01. Interest Rates and Payment Dates............................................................. 46
SECTION 6.02. Conversion and Continuation Options.......................................................... 46
SECTION 6.03. Minimum Amounts of Tranches.................................................................. 47
SECTION 6.04. Optional and Mandatory Prepayments........................................................... 47
SECTION 6.05. Facility Fees; Commitment Fee; Other Fees.................................................... 51
SECTION 6.06. Computation of Interest and Fees............................................................. 52
SECTION 6.07. Inability to Determine Interest Rate......................................................... 53
SECTION 6.08. Pro Rata Treatment and Payments.............................................................. 53
SECTION 6.09. Illegality................................................................................... 56
SECTION 6.10. Requirements of Law.......................................................................... 56
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SECTION 6.11. Taxes........................................................................................ 58
SECTION 6.12. Indemnity.................................................................................... 60
SECTION 6.13. Use of Proceeds.............................................................................. 61
SECTION 6.14. Change of Lending Office; Replacement of Lenders............................................. 61
ARTICLE VII. REPRESENTATIONS AND WARRANTIES.................................................................... 62
SECTION 7.01. Financial Condition.......................................................................... 62
SECTION 7.02. No Change.................................................................................... 63
SECTION 7.03. Corporate Existence; Compliance with Law..................................................... 63
SECTION 7.04. Corporate Power; Authorization; Enforceable Obligations...................................... 64
SECTION 7.05. No Legal Bar................................................................................. 64
SECTION 7.06. No Material Litigation....................................................................... 64
SECTION 7.07. No Default................................................................................... 65
SECTION 7.08. Ownership of Property; Liens................................................................. 65
SECTION 7.09. Intellectual Property........................................................................ 65
SECTION 7.10. No Burdensome Restrictions................................................................... 65
SECTION 7.11. Taxes........................................................................................ 65
SECTION 7.12. Federal Regulations.......................................................................... 65
SECTION 7.13. ERISA........................................................................................ 66
SECTION 7.14. Investment Company Act; Other Regulations.................................................... 66
SECTION 7.15. Subsidiaries................................................................................. 66
SECTION 7.16. Environmental Matters........................................................................ 66
SECTION 7.17. Accuracy and Completeness of Information..................................................... 67
SECTION 7.18. Other Unsecured Indebtedness................................................................. 68
SECTION 7.19. Foreign Subsidiary Borrowers................................................................. 68
SECTION 7.20. Security Documents........................................................................... 68
SECTION 7.21. Solvency..................................................................................... 68
ARTICLE VIII. CONDITIONS PRECEDENT............................................................................. 69
SECTION 8.01. Conditions to Effective Date................................................................. 69
SECTION 8.02. Conditions to Initial Revolving Credit Funding Date.......................................... 70
SECTION 8.03. Conditions to Initial Term Loan Funding Date................................................. 71
SECTION 8.04. Conditions to each Term Loan after Initial Term Loan Funding Date............................ 73
SECTION 8.05. Conditions to each Revolving Credit and Multicurrency Loan after Initial Revolving Credit
Funding Date................................................................................. 73
ARTICLE IX. AFFIRMATIVE COVENANTS.............................................................................. 75
SECTION 9.01. Financial Statements......................................................................... 75
SECTION 9.02. Certificates; Other Information.............................................................. 76
SECTION 9.03. Accrual of Liabilities; Payment of Obligations............................................... 76
SECTION 9.04. Maintenance of Corporate Existence; Maintenance of Properties................................ 77
SECTION 9.05. Insurance.................................................................................... 77
SECTION 9.06. Notices...................................................................................... 77
SECTION 9.07. Compliance with Contractual Obligations and Laws............................................. 77
SECTION 9.08. Access to Books and Inspection............................................................... 78
</TABLE>
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SECTION 9.09. Use of Proceeds.............................................................................. 78
SECTION 9.10. Environmental Laws........................................................................... 78
SECTION 9.11. Additional Collateral and Guaranties......................................................... 79
SECTION 9.12. Interest Rate Protection..................................................................... 80
SECTION 9.13. Consummation of Compulsory Acquisition....................................................... 80
SECTION 9.14. Capital Markets Transaction.................................................................. 80
SECTION 9.15. U.K. Acquisition I Corporate Documents....................................................... 80
ARTICLE X. NEGATIVE COVENANTS.................................................................................. 81
SECTION 10.01. Cash Flow Coverage.......................................................................... 81
SECTION 10.02. Consolidated Leverage Ratio................................................................. 81
SECTION 10.03. Maintenance of Consolidated Net Worth....................................................... 82
SECTION 10.04. Limitation on Liens......................................................................... 82
SECTION 10.05. Limitation on Indebtedness.................................................................. 84
SECTION 10.06. Limitation on Guaranties.................................................................... 85
SECTION 10.07. Limitation on Fundamental Changes........................................................... 85
SECTION 10.08. Limitation on Sale of Assets................................................................ 86
SECTION 10.09. Limitation on Restricted Payments........................................................... 86
SECTION 10.10. Restrictions on Special Purpose Subsidiaries................................................ 87
SECTION 10.11. Limitation on Investments, Loans and Advances............................................... 88
SECTION 10.12. Limitation on Optional Payments and Modifications of Debt Instruments, etc. ................ 89
SECTION 10.13. Limitation on Sales and Leasebacks.......................................................... 89
SECTION 10.14. Limitation on Restrictions on Subsidiary Distributions...................................... 89
SECTION 10.15. Multiemployer Plans......................................................................... 90
SECTION 10.16. Limitation on More Restrictive Covenants.................................................... 90
SECTION 10.17. Affiliates.................................................................................. 90
ARTICLE XI. GUARANTEE.......................................................................................... 90
SECTION 11.01. Guarantee................................................................................... 90
SECTION 11.02. Right of Set-off............................................................................ 91
SECTION 11.03. No Subrogation.............................................................................. 91
SECTION 11.04. Amendments, etc. with respect to the Obligations; Waiver of Rights.......................... 92
SECTION 11.05. Guarantee Absolute and Unconditional........................................................ 92
SECTION 11.06. Reinstatement............................................................................... 93
SECTION 11.07. Payments.................................................................................... 94
ARTICLE XII. EVENTS OF DEFAULT................................................................................. 94
ARTICLE XIII. THE ADMINISTRATIVE AGENT......................................................................... 97
SECTION 13.01. Appointment................................................................................. 97
SECTION 13.02. Delegation of Duties........................................................................ 97
SECTION 13.03. Exculpatory Provisions...................................................................... 97
SECTION 13.04. Reliance by Administrative Agent............................................................ 97
SECTION 13.05. Notice of Default........................................................................... 98
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SECTION 13.06. Non-Reliance on Agents and Other Lenders.................................................... 98
SECTION 13.07. Indemnification............................................................................. 99
SECTION 13.08. Administrative Agent in Its Individual Capacity............................................. 99
SECTION 13.09. Successor Administrative Agent.............................................................. 99
SECTION 13.10. Authorization to Release Liens..............................................................100
ARTICLE XIV. MISCELLANEOUS.....................................................................................100
SECTION 14.01. Amendments and Waivers......................................................................100
SECTION 14.02. Notices.....................................................................................101
SECTION 14.03. No Waiver; Cumulative Remedies..............................................................103
SECTION 14.04. Survival of Representations and Warranties..................................................103
SECTION 14.05. Payment of Expenses and Taxes...............................................................103
SECTION 14.06. Successors and Assigns; Participations and Assignments......................................104
SECTION 14.07. Adjustments; Set-Off........................................................................106
SECTION 14.08. Loan Conversion/Participations..............................................................107
SECTION 14.09. Counterparts................................................................................108
SECTION 14.10. Severability................................................................................108
SECTION 14.11. Integration.................................................................................108
SECTION 14.12. GOVERNING LAW...............................................................................108
SECTION 14.13. Submission To Jurisdiction; Waivers.........................................................109
SECTION 14.14. Acknowledgements............................................................................110
SECTION 14.15. WAIVERS OF JURY TRIAL.......................................................................110
SECTION 14.16. Power of Attorney...........................................................................110
SECTION 14.17. Release of Collateral.......................................................................110
SECTION 14.18. Judgment....................................................................................111
SECTION 14.19. Confidentiality.............................................................................111
SECTION 14.20. Unification of Certain Currencies...........................................................111
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ANNEXES:
Annex A Pricing Grid
Annex B Alternative Covenants
SCHEDULES:
I Commitments; Addresses
II Subsidiaries; Foreign Subsidiary Borrowers
III Existing Liens
IV Existing Indebtedness and Existing Guaranties
V Information Concerning Local Currency Loans
6.13 Use of Proceeds
7.20 Perfection Actions
10.8 Excluded Assets
EXHIBITS:
A-1 Form of Revolving Credit Note
A-2 Form of Term Note
B Form of Domestic Subsidiary Guarantee
C Form of Security Agreement
D-1 Form of Domestic Pledge Agreement
D-2 Form of Trust Agreement
E Form of Joinder Agreement
F Form of Responsible Officer's Certificate
G Form of Assignment and Acceptance
H-1 Form of Opinion of Diane L. Kaye, Esq., General Counsel of the
Company (Effective Date)
H-2 Form of Opinion of Cleary Gottlieb Steen & Hamilton (Effective Date)
H-3 Form of Opinion of Diane L. Kaye, Esq., General Counsel of the
Company (Initial Revolving Credit Funding Date)
H-4 Form of Opinion of Cleary Gottlieb Steen & Hamilton (Initial
Revolving Credit Funding Date)
H-5 Form of Opinion of Local Counsel (Initial Revolving Credit Funding
Date)
I Matters to be Covered by Foreign Subsidiary Opinion
J Form of Local Currency Facility Addendum
K Form of Prepayment Option Notice
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<PAGE> 7
CREDIT AGREEMENT, dated as of December 18, 1997, among
FEDERAL-MOGUL CORPORATION, a Michigan corporation (the "Company"), each FOREIGN
SUBSIDIARY BORROWER (as hereinafter defined) (together with the Company, the
"Borrowers"), the several banks and other financial institutions from time to
time parties hereto (the "Lenders") and THE CHASE MANHATTAN BANK, a New York
banking corporation (as hereinafter defined, the "Administrative Agent"), as
administrative agent for the Lenders hereunder.
W I T N E S S E T H:
WHEREAS, the Company is party to the Revolving Credit, Competitive
Advance and Multicurrency Facility Agreement, dated as of June 16, 1997 (the
"Existing Credit Agreement"), with the several banks and other financial
institutions party thereto and The Chase Manhattan Bank, as the administrative
agent;
WHEREAS, the Company, through an indirect, wholly owned Subsidiary
organized under the laws of England ("U.K. Acquisition II"), intends to acquire
(the "Acquisition") T & N PLC, a company organized under the laws of England
(the "Target");
WHEREAS, the Acquisition will be accomplished by means of a tender
offer (the "Tender Offer") to be made by U.K. Acquisition II for up to 100% (but
in any event not less than 90%) (the "Minimum Number of Shares") of the issued
and outstanding ordinary shares, pound 1 par value (the "Target Shares"), of
the Target, and/or Options related thereto followed by a compulsory acquisition
of any remaining such shares not acquired in the Tender Offer;
WHEREAS, in order to finance, in part, the Acquisition, to
refinance the Existing Credit Agreement and other existing indebtedness of the
Company and the Target, to pay fees and expenses in connection with the
Acquisition and the financing thereof, and to provide for the working capital
and general corporate needs of the Company and its Subsidiaries prior to and
following the Acquisition, the Company, The Chase Manhattan Bank, as Lender, and
the Administrative Agent have entered into the Credit Agreement, dated as of
September 26, 1997 (the "September 26, 1997 Credit Agreement"), which was
amended and restated by the Amended and Restated Credit Agreement, dated as of
October 15, 1997 (the "Amended and Restated Credit Agreement");
WHEREAS, the Acquisition will be financed, in part, with the
proceeds of senior subordinated loans in the aggregate principal amount of
$500,000,000 to be borrowed by the Company (the "Senior Subordinated Bridge
Loans");
WHEREAS, the Company, the Lenders and the Administrative Agent
desire to amend and restate the Amended and Restated Credit Agreement upon and
subject to the terms and conditions hereinafter set forth; and
WHEREAS, in order to effect the Acquisition, proceeds of Loans made
under this Agreement and proceeds of the Senior Subordinated Bridge Loans will
be invested indirectly
<PAGE> 8
through wholly owned Subsidiaries, in U.K. Acquisition II in the manner
described in Schedule 6.13;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements contained herein, the parties hereto agree that on the Effective Date
the Amended and Restated Agreement shall be further amended and restated in its
entirety as follows:
ARTICLE I. DEFINITIONS
SECTION I.01. Defined Terms. As used in this Agreement, the
following terms shall have the following meanings:
"Accumulated Funding Deficiency": any accumulated funding
deficiency within the meaning of Section 412 of the Code or Section 302 of
ERISA.
"Acquisition": as defined in the recitals hereto.
"Adjusted Aggregate Committed Outstandings": with respect to each
Revolving Credit Lender, the Aggregate Committed Outstandings of such
Lender, plus the amount of any participating interests purchased by such
Lender pursuant to Section 14.08, minus the amount of any participating
interests sold by such Lender pursuant to Section 14.08.
"Adjustment Date": as defined in the Pricing Grid.
"Administrative Agent": Chase, together with its affiliates, as
arranger of the Commitments and as administrative agent for the Lenders under
this Agreement or any successor thereto appointed pursuant to Section 13.09.
"Affiliate": of any Person, shall mean any Person that, directly or
indirectly, controls or is controlled by or is under common control with
such Person, or in the case of any Lender which is an investment fund, (i)
the investment advisor thereof and (ii) any other investment fund having the
same investment advisor. For the purposes of this definition, "control"
(including, with correlative meanings, the terms "controlled by" and "under
common control with"), as used with respect to any Person, shall mean the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities or by contract or otherwise.
"Aggregate Available Multicurrency Commitments": as at any date of
determination with respect to all Multicurrency Lenders, an amount in U.S.
Dollars equal to the Available Multicurrency Commitments of all Multicurrency
Lenders on such date.
"Aggregate Available Revolving Credit Commitments": as at any date
of determination with respect to all Revolving Credit Lenders, an amount in U.S.
Dollars equal to the Available Revolving Credit Commitments of all Revolving
Credit Lenders on such date.
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"Aggregate Committed Outstandings": as at any date of determination
with respect to any Revolving Credit Lender, an amount in U.S. Dollars equal
to the sum of (a) the Aggregate Revolving Credit Outstandings of such
Revolving Credit Lender on such date, (b) the U.S. Dollar Equivalent of the
Aggregate Multicurrency Outstandings of such Revolving Credit Lender on such
date and (c) the U.S. Dollar Equivalent of the Aggregate Local Currency
Outstandings of such Revolving Credit Lender on such date.
"Aggregate Local Currency Outstandings": as at any date of
determination with respect to any Revolving Credit Lender, an amount in the
applicable Local Currencies equal to the aggregate unpaid principal amount of
such Revolving Credit Lender's Local Currency Loans.
"Aggregate Multicurrency Outstandings": as at any date of
determination with respect to any Revolving Credit Lender, an amount in the
applicable Available Foreign Currencies equal to the aggregate unpaid principal
amount of such Revolving Credit Lender's Multicurrency Loans.
"Aggregate Revolving Credit Commitments": the aggregate amount of
the Revolving Credit Commitments of all of the Revolving Credit Lenders.
"Aggregate Revolving Credit Outstandings": as at any date of
determination with respect to any Revolving Credit Lender, an amount equal
to the sum of (a) the aggregate unpaid principal amount of such Revolving
Credit Lender's Revolving Credit Loans on such date and (b) such Revolving
Credit Lender's Revolving Credit Commitment Percentage of the aggregate
unpaid principal amount of all Swing Line Loans on such date.
"Agreement": this Second Amended and Restated Credit Agreement, as
the same may be amended, supplemented or otherwise modified from time to time.
"Agreement Currency": as defined in Section 14.18(b).
"Amended and Restated Credit Agreement": as defined in the
recitals hereto.
"Applicable Margin": for each Type and Class of Loan, the rate per
annum set forth under the relevant column heading below:
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Base Eurodollar Loans/
Rate Loans Multicurrency Loans
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Revolving Credit Loans .50% 1.50%
Multicurrency Loans N.A. 1.50%
Tranche A Term Loans 1.00% 2.00%
Tranche B Term Loans 1.25% 2.25%
Interim Term Loans 1.00% 2.00%
</TABLE>
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;provided, that on and after the first Adjustment Date occurring after
the Interim Term Loans have been repaid in full, the Applicable Margin
with respect to Revolving Credit Loans, Multicurrency Loans, Tranche A
Term Loans and Tranche B Term Loans will be determined pursuant to the
Pricing Grid.
"Asset Sale": any Disposition of Property or series of related
Dispositions of Property (excluding any such Disposition permitted by
clauses (b), (c), (d) and (e) of Section 10.08 as in effect prior to
the Covenant Transition Date, and excluding any transfer of assets by
the Company or any Subsidiary to the Company or any Subsidiary) which
yields gross proceeds to the Company or any of its Subsidiaries (valued
at the initial principal amount thereof in the case of non-cash
proceeds consisting of notes or other debt securities and valued at
fair market value in the case of other non-cash proceeds) in excess of
$5,000,000.
"Asset Sale Prepayment Percentage": 100%; provided, that the
Asset Sale Prepayment Percentage shall be (a) 75% with respect to any
Asset Sale consummated when the Consolidated Leverage Ratio as of the
end of the most recently ended fiscal quarter was greater than or equal
to 3.50 to 1.00 but less than 4.00 to 1.00, (b) 50% with respect to any
Asset Sale consummated when the Consolidated Leverage Ratio as of the
end of the most recently completed fiscal quarter was greater than or
equal to 3.0 to 1.0 but less than 3.5 to 1.0 and (c) 0%, with respect
to any Asset Sale consummated when the Consolidated Leverage Ratio as
of the end of the most recently completed fiscal quarter was less than
3.0 to 1.0.
"Assignee": as defined in Section 14.06(c).
"Available Foreign Currencies": Deutsche Marks, Pounds
Sterling, French Francs, Italian Lira, Australian Dollars and any other
available and freely-convertible non-U.S. Dollar currency selected by
the Company and approved by the Administrative Agent and the Majority
Multicurrency Lenders.
"Available Multicurrency Commitment": as at any date of
determination with respect to any Multicurrency Lender (after giving
effect to the making and payment of any Revolving Credit Loans required
on such date pursuant to Section 2.05), an amount equal to the lesser
of (a) the excess, if any, of (i) such Multicurrency Lender's
Multicurrency Commitment in effect on such date over (ii) the U.S.
Dollar Equivalent of the Aggregate Multicurrency Outstandings of such
Multicurrency Lender on such date and (b) the excess, if any, of (i)
the amount of such Lender's Revolving Credit Commitment in effect on
such date over (ii) the Aggregate Committed Outstandings of such Lender
on such date.
"Available Revolving Credit Commitment": as at any date of
determination with respect to any Revolving Credit Lender (after giving
effect to the making and payment of any Revolving Credit Loans required
on such date pursuant to Section 2.05), an amount equal to the excess,
if any, of (a) the amount of such Revolving Credit Lender's Revolving
Credit Commitment in effect on such date over (b) the Aggregate
Committed
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Outstandings of such Revolving Credit Lender on such date.
"Base Rate": for any day, a rate per annum (rounded upwards,
if necessary, to the next 1/16 of 1%) equal to the greater of (a) the
Prime Rate in effect on such day and (b) the Federal Funds Effective
Rate in effect on such day plus 1/2 of 1%. If for any reason the
Administrative Agent shall have determined (which determination shall
be conclusive absent manifest error) that it is unable to ascertain the
Federal Funds Effective Rate for any reason, including the inability or
failure of the Administrative Agent to obtain sufficient quotations in
accordance with the terms thereof, the Base Rate shall be determined
without regard to clause (b) of the first sentence of this definition
until the circumstances giving rise to such inability no longer exist.
Any change in the Base Rate due to a change in the Prime Rate or the
Federal Funds Effective Rate shall be effective on the effective day of
such change in the Prime Rate or the Federal Funds Effective Rate,
respectively.
"Base Rate Loans": Loans the rate of interest applicable to
which is based upon the Base Rate.
"Benefitted Lender": as defined in Section 14.07.
"Board": the Board of Governors of the Federal Reserve System
(or any successor thereto).
"Borrowers": as defined in the preamble hereto.
"Borrowing Date": any Business Day specified in a notice
pursuant to Section 2.03, 2.07, 3.03 or 4.03 as a date on which a
Borrower requests the Lenders to make Loans hereunder or, with respect
to Local Currency Loans, the date on which a Local Currency Borrower
requests Local Currency Lenders to make Local Currency Loans to such
Local Currency Borrower pursuant to the Local Currency Facility to
which such Local Currency Borrower and Local Currency Lenders are
parties.
"Business": as defined in Section 7.16.
"Business Day": (a) when such term is used in respect of a day
on which a Loan denominated in an Available Foreign Currency or Local
Currency is to be made, a payment is to be made in respect of such
Loan, an interest rate or Exchange Rate is to be set in respect of such
Available Foreign Currency or Local Currency or any other dealing in
such Available Foreign Currency or Local Currency is to be carried out
pursuant to this Agreement, such term shall mean a London Banking Day
which is also a day on which banks are open for general banking
business in the city which is the principal financial center of the
country of issuance of such Available Foreign Currency or Local
Currency, (b) when such term is used in respect of a day on which a
Eurodollar Loan is to be made, an interest rate is to be set in respect
thereof or any payment is to be made in respect thereof, such term
shall mean a London Banking Day, and (c) when such term is used in any
context in this Agreement (including as described in the foregoing
clauses (a) and
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<PAGE> 12
(b)), such term shall mean a day which, in addition to complying with
any applicable requirements set forth in the foregoing clauses (a) and
(b), is a day other than a Saturday, Sunday or other day on which
commercial banks in New York City are authorized or required by law to
close.
"Capital Expenditures": all expenditures of the Company and
its Subsidiaries on a consolidated basis for any fixed assets or
improvements, or for replacements, substitutions or additions thereto,
which have a useful life of more than one year, including, but not
limited to, the direct or indirect acquisition of such assets by way of
increased product or service charges, offset items or otherwise,
including all expenditures under capital leases, all determined in
accordance with GAAP.
"Capital Stock": any and all shares, interests, participations
or other equivalents (however designated) of capital stock of a
corporation, any and all equivalent ownership interests in a Person
other than a corporation and any and all warrants or options to
purchase any of the foregoing. For all purposes of this Agreement,
"Capital Stock" shall include the 10,000,000 7% Trust Convertible
Preferred Securities (Liquidation Amount $50 Per Convertible Preferred
Security) issued by Federal-Mogul Financing Trust and guaranteed by the
Company upon terms described in the Offering Memorandum issued November
24, 1997 and any other substantially equivalent securities hereafter
issued by a financing vehicle for the benefit of the Company, and such
Trust Convertible Securities and substantially equivalent securities
will be treated as preferred stock of the Company and the Company shall
not be deemed to have issued any Indebtedness or Guarantee in
connection therewith.
"Cash Equivalents": (a) securities with maturities of one year
or less from the date of acquisition issued or fully guaranteed or
insured by the United States Government or any agency thereof, (b)
certificates of deposit and eurodollar time deposits with maturities of
one year or less from the date of acquisition and overnight bank
deposits of any Lender or of any commercial bank having capital and
surplus in excess of $500,000,000, (c) repurchase obligations of any
Lender or of any commercial bank satisfying the requirements of clause
(b) of this definition, having a term of not more than 30 days with
respect to securities issued or fully guaranteed or insured by the
United States Government, (d) commercial paper of a domestic issuer
rated at least A-2 by S&P or P-2 by Moody's, (e) securities with
maturities of one year or less from the date of acquisition issued or
fully guaranteed by any state, commonwealth or territory of the United
States, by any political subdivision or taxing authority of any such
state, commonwealth or territory or by any foreign government, the
securities of which state, commonwealth, territory, political
subdivision, taxing authority or foreign government (as the case may
be) are rated at least A by S&P or A by Moody's (or an equivalent
rating for such foreign securities), (f) securities with maturities of
one year or less from the date of acquisition backed by standby letters
of credit issued by any Lender or any commercial bank satisfying the
requirements of clause (b) of this definition or (g) shares of money
market mutual or similar funds which invest exclusively in assets
satisfying the requirements of clauses (a) through (f) of this
definition, provided that, in the case of any investment by a Foreign
Subsidiary, "Cash Equivalents" shall also include: (i) direct
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<PAGE> 13
obligations of the sovereign nation (or any agency thereof) in which
such Foreign Subsidiary is organized and is conducting business or in
obligations fully and unconditionally guaranteed by such sovereign
nation (or any agency thereof), (ii) investments of the type and
maturity described in clauses (a) through (f) above of foreign
obligors, which Investments or obligors (or the parents of such
obligors) have ratings described in such clauses or equivalent ratings
from comparable foreign rating agencies and (iii) shares of money
market mutual or similar funds which invest exclusively in assets
otherwise satisfying the requirements of this definition (including
this proviso).
"Cash Flow Coverage": for any period, the ratio of (a)
Consolidated EBITDA less Capital Expenditures, divided by (b) (i)
Interest Expenses plus (ii) dividends paid on any class of the
Company's Capital Stock in each case determined for such period.
"Change of Control": (a) any "person" or "group" within the
meaning of Sections 13(d) and 14(d)(2) of the Securities Exchange Act
of 1934, as amended, shall become the "beneficial owner" (as defined in
Rule 13d-3 under the Securities Exchange Act of 1934, as amended) of
more than 50% of the then outstanding voting stock of the Company other
than in a transaction having the approval of the board of directors of
the Company at least a majority of which members are Continuing
Directors or (b) Continuing Directors shall cease to constitute at
least a majority of the directors constituting the board of directors
of the Company.
"Chase": The Chase Manhattan Bank, a New York banking
corporation.
"City Code": the City Code on Take-overs and Mergers, as
published by the Panel and as amended from time to time.
"Class": the collective reference to Loans outstanding under a
single Facility.
"Code": the Internal Revenue Code of 1986, as amended from
time to time.
"Collateral": all Property of the Loan Parties, now owned or
hereafter acquired, upon which a Lien is purported to be created by any
Security Document.
"Collateral Release Date": the date of receipt by the
Administrative Agent of a written request by the Company to release the
Collateral following either (i) the date on which there is in effect
either (A) an S&P Bond Rating of at least BBB- or equivalent or (B) a
Moody's Bond Rating of at least Baa3 or equivalent or (ii) the date on
which the Consolidated Leverage Ratio is less than or equal to 2.0 to
1.0.
"Commitment": as to any Lender, the sum of the Tranche A Term
Loan Commitment, the Tranche B Term Loan Commitment, the Interim Term
Loan Commitment and the Revolving Credit Commitment (and, without
duplication, the Multicurrency Commitment) of such Lender.
"Committed Outstandings Percentage": on any date with respect
to any Lender,
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<PAGE> 14
the percentage which the Adjusted Aggregate Committed
Outstandings of such Lender constitutes of the Adjusted Aggregate
Committed Outstandings of all Lenders.
"Commonly Controlled Entity": an entity, whether or not
incorporated, which is under common control with the Company within the
meaning of Section 4001 of ERISA or is part of a group which includes
the Company and which is treated as a single employer under Section 414
of the Code.
"Company": as defined in the preamble hereto.
"Company Guaranty: the guarantee contained in Article 11.
"Compulsory Acquisition": the acquisition by U.K. Acquisition
II, pursuant to Sections 428 to 430F of the Companies Act 1985, of
England, of all of the issued and outstanding Target Shares not then
owned by U.K. Acquisition II.
"Consolidated Current Assets": at any date, all amounts (other
than cash and Cash Equivalents) which would, in conformity with GAAP,
be set forth opposite the caption "total current assets" (or any like
caption) on a consolidated balance sheet of the Company and its
Subsidiaries at such date.
"Consolidated Current Liabilities": at any date, all amounts
which would, in conformity with GAAP, be set forth opposite the caption
"total current liabilities" (or any like caption) on a consolidated
balance sheet of the Company and its Subsidiaries at such date, but
excluding (a) the current portion of any Funded Debt of the Company and
its Subsidiaries and (b) without duplication of clause (a) above, all
Indebtedness consisting of Revolving Credit Loans and Multicurrency
Loans to the extent otherwise included therein.
"Consolidated EBITDA": for any period, the sum of (a) the
consolidated net income (or loss) of the Company and its Subsidiaries
for such period before deduction of income and franchise taxes and
depreciation, determined in conformity with GAAP, but excluding the
income of any Person (other than Subsidiaries of the Company) in which
the Company or any of its Subsidiaries has an ownership interest, until
such income has been received by the Company or a Subsidiary in a cash
distribution, plus (b) any Interest Expenses reported during such
period, plus (c) amortization of Intangible Assets deducted in
determining net income for such period.
"Consolidated Leverage Ratio": as at the last day of any
period of four consecutive fiscal quarters, the ratio of (a)
Consolidated Total Debt on such day to (b) Consolidated EBITDA for such
period; provided, that for purposes of calculating Consolidated EBITDA
for any period of four consecutive fiscal quarters, the Consolidated
EBITDA of any Person acquired by the Company or its Subsidiaries during
such period shall be included on a pro forma basis for such period
(assuming the consummation of each such acquisition and the incurrence
or assumption of any Indebtedness in connection therewith occurred on
the first day of such period) if the
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<PAGE> 15
consolidated balance sheet of such acquired Person and its
consolidated Subsidiaries as at the end of the period preceding the
acquisition of such Person and the related consolidated statements of
income and stockholders' equity and of cash flows for the period in
respect of which Consolidated EBITDA is to be calculated (i) have been
provided to the Administrative Agent and the Lenders and (ii) either
(A) have been reported on without a qualification arising out of the
scope of the audit (other than a "going concern" or like qualification
or exception) by independent certified public accountants of
nationally recognized standing or (B) have been found acceptable by
the Administrative Agent.
"Consolidated Net Income": for any period, the consolidated
net income (or loss) of the Company and its Subsidiaries for such
period, determined in conformity with GAAP, but excluding the income of
any Person (other than Subsidiaries of the Company) in which the
Company or any of its Subsidiaries has an ownership interest, until
such income has been received by the Company or a Subsidiary in a cash
distribution.
"Consolidated Net Worth": at any date, shareholders equity
(including, but not limited to, Capital Stock, additional paid-in
capital and retained earnings after deducting treasury stock and
unearned compensation) of the Company and its Subsidiaries on a
consolidated basis as at such date determined in accordance with GAAP;
provided, that Consolidated Net Worth shall not reflect any additions
or deductions resulting from foreign currency translation gains or
losses.
"Consolidated Total Debt": all Indebtedness of the Company and
its Subsidiaries, determined on a consolidated basis.
"Consolidated Working Capital": at any date, the excess of
Consolidated Current Assets on such date over Consolidated Current
Liabilities on such date.
"Continuing Directors": the collective reference to (a) all
members of the board of directors of the Company who have held office
continually since September 26, 1997, and (b) all members of the board
of directors of the Company who were elected as directors after
September 26, 1997 and whose nomination for election by the Company's
shareholders was approved by a vote of at least 50% of the Continuing
Directors.
"Contractual Obligation": as to any Person, any provision of
any security issued by such Person or of any agreement, instrument or
other undertaking to which such Person is a party or by which it or any
of its property is bound.
"Conversion Date": any date on which either (a) an Event of
Default under paragraph (f) of Article XII has occurred or (b) the
Commitments shall have been terminated and/or the Loans shall have been
declared immediately due and payable pursuant to Article XII.
"Conversion Sharing Percentage": on any date with respect to
any Revolving Credit Lender and any Multicurrency Loans or Local
Currency Loans of such Revolving
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<PAGE> 16
Credit Lender, the percentage of such Loans such that, after giving
effect to the conversion of such Loans to U.S. Dollars and the purchase
and sale by such Revolving Credit Lender of participating interests as
contemplated by Section 14.08, the Committed Outstandings Percentage of
such Revolving Credit Lender will equal such Revolving Credit Lender's
Revolving Credit Commitment Percentage on such date (calculated
immediately prior to giving effect to any termination or expiration of
the Revolving Credit Commitments on the Conversion Date).
"Converted Loans": as defined in Section 14.08(a).
"Covenant Transition Date": the date, on or after the
repayment in full of the Interim Term Loans, on which the
Administrative Agent receives a written notice signed by a Responsible
Officer (which notice the Administrative Agent will promptly transmit
to each Lender) to the effect that the Company has elected that the
covenants set forth in Article X will be replaced in their entirety by
the covenants set forth in Annex B.
"Default": any of the events specified in Article XII whether
or not any requirement for the giving of notice, the lapse of time, or
both, or any other condition has been satisfied.
"Disposition": with respect to any Property, any sale, lease,
sale and leaseback, assignment, conveyance, transfer or other
disposition thereof; and the terms "Dispose" and "Disposed of" shall
have correlative meanings.
"Dollars": dollars in lawful currency of the United States of
America.
"$": dollars in lawful currency of the United States of
America.
"Domestic Pledge Agreement": the Domestic Pledge Agreement,
substantially in the form of Exhibit D-1, to be executed by the Company
and certain of its Domestic Subsidiaries (pledging 100% of the Capital
Stock owned by the Company and each of its Domestic Subsidiaries of
each Domestic Subsidiary of the Company, including, but not limited to,
100% of the Capital Stock of U.S. Finance Subsidiary I, U.S. Finance
Subsidiary II and U.S. Finance Subsidiary III), in favor of the
Trustee.
"Domestic Reference Lenders": Chase and two other Lenders
selected by Chase and the Company on the Syndication Date; provided,
that prior to the Syndication Date, all references to "Domestic
Reference Lenders" shall be deemed to be references to Chase.
"Domestic Subsidiary": any Subsidiary of the Company organized
under the laws of any jurisdiction within the United States, other than
any Subsidiary which is a Subsidiary of an Excluded Foreign Subsidiary.
"Domestic Subsidiary Guarantee": the Domestic Subsidiary
Guarantee, substantially in the form of Exhibit B, to be executed and
delivered by each Domestic
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<PAGE> 17
Subsidiary, including, but not limited to, U.S. Finance Subsidiary I,
U.S. Finance Subsidiary II and U.S. Finance Subsidiary III, as the same
may from time to time be amended, supplemented or otherwise modified.
"Effective Date": as defined in Section 8.01.
"Environmental Laws": any and all foreign, Federal, state,
local or municipal, laws, rules, orders, regulations, statutes,
ordinances, codes, decrees, requirements of any Governmental Authority
or other Requirements of Law (including common law) regulating,
relating to or imposing liability or standards of conduct concerning
protection of human health or the environment, as now or may at any
time hereafter be in effect.
"ERISA": the Employee Retirement Income Security Act of 1974,
as amended from time to time.
"Eurocurrency Base Rate": (a) with respect to each Interest
Period pertaining to a Multicurrency Loan denominated in any currency
other than Pounds Sterling, the rate per annum determined by the
Administrative Agent to be the offered rate for deposits in such
currency with a term comparable to such Interest Period that appears on
the applicable Telerate Page at approximately 11:00 A.M., London time,
two Business Days prior to the beginning of such Interest Period;
provided, however, that if at any time for any reason such offered rate
for any such currency does not appear on a Telerate Page, "Eurocurrency
Base Rate" shall mean, with respect to each day during each Interest
Period pertaining to a Multicurrency Loan denominated in such currency,
the rate per annum equal to the average (rounded upward to the nearest
1/16th of 1%) of the respective rates notified to the Administrative
Agent by each of the Multicurrency Reference Lenders as the rate at
which such Multicurrency Reference Lender is offered deposits in such
currency at or about 11:00 A.M., London time, two Business Days prior
to the beginning of such Interest Period in the London interbank market
for delivery on the first day of such Interest Period for the number of
days comprised therein; and (b) with respect to each day during each
Interest Period pertaining to a Multicurrency Loan denominated in
Pounds Sterling, the rate per annum equal to the average (rounded
upward to the nearest 1/16th of 1%) of the respective rates notified to
the Administrative Agent by each of the Multicurrency Reference Lenders
as the rate at which such Multicurrency Reference Lender is offered
deposits in Pounds Sterling at or about 11:00 A.M., London time, two
Business Days prior to the beginning of such Interest Period in the
Paris interbank market for delivery on the first day of such Interest
Period for the number of days comprised therein.
"Eurocurrency Rate": with respect to each day during each
Interest Period pertaining to a Multicurrency Loan, a rate per annum
determined for such day in accordance with the following formula
(rounded upward to the nearest 1/100th of 1%):
Eurocurrency Base Rate
-----------------------------------------------------
1.00 - Eurocurrency Reserve Requirements
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<PAGE> 18
"Eurocurrency Reserve Requirements": for any day as applied to
a Eurodollar Loan or a Multicurrency Loan, the aggregate (without
duplication) of the rates (expressed as a decimal fraction) of reserve
requirements in effect on such day (including, without limitation,
basic, supplemental, marginal and emergency reserves) under any
regulations of the Board of Governors of the Federal Reserve System or
other Governmental Authority having jurisdiction with respect thereto
dealing with reserve requirements prescribed for eurocurrency funding
(currently referred to as "Eurocurrency Liabilities" in Regulation D of
such Board) maintained by a member bank of such System.
"Eurodollar Base Rate": with respect to each day during each
Interest Period pertaining to a Eurodollar Loan, the rate per annum
equal to the average (rounded upward to the nearest 1/16th of 1%) of
the respective rates notified to the Administrative Agent by each of
the Domestic Reference Lenders as the rate at which such Domestic
Reference Lender is offered Dollar deposits at or about 11:00 A.M.,
London time, two Business Days prior to the beginning of such Interest
Period in the London interbank market for delivery on the first day of
such Interest Period for the number of days comprised therein.
"Eurodollar Loans": Loans the rate of interest applicable to
which is based upon the Eurodollar Rate.
"Eurodollar Rate": with respect to each day during each
Interest Period pertaining to a Eurodollar Loan, a rate per annum
determined for such day in accordance with the following formula
(rounded upward to the nearest 1/100th of 1%):
Eurodollar Base Rate
--------------------------------------------------
1.00 - Eurocurrency Reserve Requirements
"Event of Default": any of the events specified in Article
XII, provided that all requirements for the giving of notice, the lapse
of time, or both, or any other condition, have been satisfied.
"Excess Cash Flow": for any fiscal year of the Company, the
excess, if any, of (a) the sum, without duplication, of (i)
Consolidated Net Income for such fiscal year, (ii) an amount equal to
the amount of all non-cash charges and/or losses (including
depreciation and amortization) deducted in arriving at such
Consolidated Net Income, (iii) decreases in Consolidated Working
Capital for such fiscal year, (iv) the net increase during such fiscal
year (if any) in deferred tax asset or liability accounts of the
Company, and (v) the net increase during such fiscal year (if any) in
the Company's accrued long-term liability account over (b) the sum,
without duplication, of (i) an amount equal to the amount of all
non-cash credits and/or gain included in arriving at such Consolidated
Net Income, (ii) the aggregate amount actually paid by the Company and
its Subsidiaries in cash during such fiscal year on account of Capital
Expenditures (excluding the principal amount of Indebtedness incurred
in connection with such expenditures and any such expenditures financed
with the proceeds of any Reinvestment Deferred Amount), (iii) the
aggregate amount of all prepayments of Revolving Credit Loans during
such fiscal year to the
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<PAGE> 19
extent accompanying permanent optional reductions of the Revolving
Credit Commitments and all prepayments of the Term Loans during such
fiscal year (other than mandatory prepayments pursuant to Section
6.04(d), (e) or (f)), (iv) the aggregate amount of all regularly
scheduled principal payments of Funded Debt of the Company and its
Subsidiaries made during such fiscal year (other than payments in
respect of any revolving credit facility, including the Revolving
Credit Facility, to the extent there is not an equivalent permanent
reduction in commitments thereunder, and other than payments in respect
of the Interim Term Loans made with the proceeds of issuance or
incurrence of equity or debt securities), (v) increases in Consolidated
Working Capital for such fiscal year, (vi) the net decrease during such
fiscal year (if any) in deferred tax asset or liability accounts of the
Company, (vii) the net decrease during such fiscal year (if any) in the
Company's accrued long-term liability account, (viii) the amount of
cash dividends paid by the Company during such fiscal year as permitted
by this Agreement and (ix) the amount of cash used in connection with
acquisitions of all or part of the Capital Stock or assets of any
Person, including investments in joint ventures, made by the Company
and its Subsidiaries during such fiscal year as permitted by this
Agreement.
"Excess Cash Flow Application Date": as defined in Section
6.04(f).
"Excess Cash Flow Prepayment Percentage": 75%; provided, that
the Excess Cash Flow Prepayment Percentage shall be (a) 50% for any
fiscal year in respect of which the Consolidated Leverage Ratio on the
last day thereof was greater than or equal to 3.50 to 1.00 but less
than 4.00 to 1.00 and (b) 0% for any fiscal year in respect of which
the Consolidated Leverage Ratio on the last day thereof was less than
3.50 to 1.00.
"Exchange Notes": the "Exchange Notes" referred to in the
Senior Subordinated Loan Documentation issued in exchange for the
Senior Subordinated Bridge Loans.
"Exchange Rate": with respect to any non-U.S. Dollar currency
on any date, the rate at which such currency may be exchanged into U.S.
Dollars, as set forth on such date on the relevant Reuters currency
page at or about 11:00 A.M., London time, on such date. In the event
that such rate does not appear on any Reuters currency page, the
"Exchange Rate" with respect to such non-U.S. Dollar currency shall be
determined by reference to such other publicly available service for
displaying exchange rates as may be agreed upon by the Administrative
Agent and the Company or, in the absence of such agreement, such
"Exchange Rate" shall instead be the Administrative Agent's spot rate
of exchange in the interbank market where its foreign currency exchange
operations in respect of such non-U.S. Dollar currency are then being
conducted, at or about 10:00 A.M., local time, on such date for the
purchase of U.S. Dollars with such non-U.S. Dollar currency, for
delivery two Business Days later; provided, that if at the time of any
such determination, no such spot rate can reasonably be quoted, the
Administrative Agent may use any reasonable method as it deems
applicable to determine such rate, and such determination shall be
conclusive absent manifest error.
"Excluded Foreign Subsidiary": any Foreign Subsidiary (and any
Domestic Subsidiary which is a Subsidiary of an Excluded Foreign
Subsidiary) if the pledge of
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<PAGE> 20
more than 65% of the Capital Stock of such Foreign Subsidiary (or
Domestic Subsidiary, as the case may be) or the execution by such
Foreign Subsidiary (or Domestic Subsidiary, as the case may be) of a
Subsidiary Guarantee would, in the good faith judgment of the Company,
result in adverse tax consequences to the Company or would be unlawful
for such Foreign Subsidiary (or Domestic Subsidiary, as the case may
be).
"Existing Accounts Receivable Financing Program": the
collective reference to (i) the Amended and Restated Pooling and
Servicing Agreement dated as of February 1, 1997, among the Receivables
Subsidiary, as Seller, the Company, as Servicer, and Chase, as Trustee,
(ii) the Series 1997-1 Supplement dated as of February 1, 1997, among
the Receivables Subsidiary, as Seller, the Company, as Servicer, and
Chase, as Trustee, (iii) the Amended and Restated Receivables Purchase
Agreement dated as of February 28, 1997, between the Receivables
Subsidiary, as Buyer, and the Company, as Seller, (iv) the Amended and
Restated Receivables Purchase Agreement dated as of February 28, 1997,
between the Receivables Subsidiary, as Buyer, and Carter Automotive
Company, Inc., a Delaware corporation, as Seller, (v) the Amended and
Restated Receivables Purchase Agreement dated as of February 28, 1997,
between the Receivables Subsidiary, as Buyer, and Mather Seal Company,
Inc., a Michigan corporation, as Seller, and (vi) all other documents
entered into in connection with any of the foregoing, as each of the
foregoing are amended, restated, supplemented or otherwise modified
from time to time.
"Existing Credit Agreement": as defined in the recitals
hereto.
"Existing Plan": any Plan existing on the date of this
Agreement without giving effect to any amendment thereof made after the
date of this Agreement.
"Existing Public Securities": the Company's Medium Term Notes
and 8.8% Notes outstanding under the Indenture.
"Facility": each of (a) the Tranche A Term Loan Commitments
and the Tranche A Term Loans made thereunder (the "Tranche A Term Loan
Facility"), (b) the Tranche B Term Loan Commitments and the Tranche B
Term Loans made thereunder (the "Tranche B Term Loan Facility"), (c)
the Interim Term Loan Commitments and the Interim Term Loans made
thereunder (the "Interim Term Loan Facility"), (d) the Revolving Credit
Commitments and the Revolving Credit Loans (including the Swing Line
Loans) made thereunder (the "Revolving Credit Facility") and (e) the
Multicurrency Commitments and the Multicurrency Loans made thereunder
(the "Multicurrency Facility").
"Facility Fee Rate": .50% per annum; provided, that on and
after the first Adjustment Date occurring after the date on which the
Interim Term Loans are repaid in full, the Facility Fee Rate will be
determined pursuant to the Pricing Grid.
"Federal Funds Effective Rate": for any day, the weighted
average of the rates per annum on overnight federal funds transactions
with members of the Federal Reserve System arranged by federal funds
brokers, as published on the next succeeding Business Day by the
Federal Reserve Bank of New York, or, if such rate is not so published
for
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<PAGE> 21
any day which is a Business Day, the average of the quotations for the
day of such transactions received by the Administrative Agent from
three federal funds brokers of recognized standing selected by it, in
each case rounded up to the nearest 1/100th of 1%.
"Foreign Subsidiary": any Subsidiary of the Company other than
a Domestic Subsidiary.
"Foreign Subsidiary Borrower": each Foreign Subsidiary listed
as a Foreign Subsidiary Borrower in Schedule II as amended from time to
time in accordance with Section 14.01(b).
"Foreign Subsidiary Opinion": with respect to any Foreign
Subsidiary Borrower, a legal opinion of counsel to such Foreign
Subsidiary Borrower addressed to the Administrative Agent and the
Lenders concluding that such Foreign Subsidiary Borrower and the Loan
Documents to which it is a party substantially comply with the matters
listed on Exhibit I, with such assumptions, qualifications and
deviations therefrom as the Administrative Agent shall approve (such
approval not to be unreasonably withheld).
"Funded Debt": all Indebtedness of the Company and its
Subsidiaries on a consolidated basis maturing one year or more after
incurrence thereof or that matures within one year from the date on
which it was created, but is renewable or extendible under terms such
that under GAAP such Indebtedness would be treated as long-term
indebtedness.
"Funding Commitment Percentage": as at any date of
determination (after giving effect to the making and payment of any
Loans made on such date pursuant to Section 2.05), with respect to any
Revolving Credit Lender, that percentage which the Available Revolving
Credit Commitment of such Revolving Credit Lender then constitutes of
the Aggregate Available Revolving Credit Commitments.
"GAAP": generally accepted accounting principles in the United
States of America in effect from time to time; provided, that if at any
time after the date hereof there shall occur any change in respect of
such generally accepted accounting principles from those used in the
preparation of the audited financial statements referred to in Section
7.01 in a manner which would have a material effect on any matter which
is material to Article X, the Company and the Administrative Agent
will, within five Business Days of a notice from the Administrative
Agent or the Company, as the case may be, to that effect, commence, and
continue in good faith, negotiations with a view towards making
appropriate amendments to the provisions hereof acceptable to the
Required Lenders, to reflect as nearly as possible the effect of the
provisions of Article X as in effect on the date hereof.
"Governmental Authority": any nation or government, any state,
or other political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government.
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<PAGE> 22
"Gross Cash Proceeds": in connection with any issuance or sale
of Capital Stock, the gross cash proceeds of such issuance before
deduction for investment banking fees, underwriting discounts and
commissions and other fees and expenses incurred in connection
therewith.
"Guaranty": any guaranty by any Person of Indebtedness or
other obligations of any other Person that is not a consolidated
subsidiary of such Person or any assurance with respect to the
financial condition of any other Person that is not a consolidated
subsidiary of such Person (including, without limitation, any purchase
or repurchase agreement, any indemnity or any keep-well, take-or-pay,
through-put or other arrangement having the effect of assuring or
holding harmless any third Person against loss with respect to any
Indebtedness or other obligation of such other Person) except
endorsements of negotiable instruments for collection in the ordinary
course of business.
"Indenture": the Indenture, dated as of August 12, 1994,
between the Company and First Trust National Association (as successor
to Continental Bank), as trustee.
"Indebtedness": with respect to any Person, (a) all
indebtedness of such Person which in accordance with GAAP would be
shown as a liability on the balance sheet of such Person and (b)
obligations under leases which, in accordance with GAAP, are to be
recorded as capital leases; provided, however, that the term
"Indebtedness" shall not include short-term obligations payable to
suppliers incurred in the ordinary course of business or indebtedness
incurred by a special purpose, Wholly Owned Subsidiary of the Company
that purchases accounts receivable from the Company and its other
Subsidiaries to the extent that such indebtedness is nonrecourse to the
Company and each such other Subsidiary and is not required under GAAP
to be reflected on the consolidated balance sheet of the Company.
"Initial Measurement Date": the last day of the first full
fiscal quarter commencing after the Initial Term Loan Funding Date.
"Initial Revolving Credit Funding Date": as defined in Section
8.02.
"Initial Term Loan Funding Date": as defined in Section 8.03.
"Insolvency": with respect to any Multiemployer Plan, the
condition that such Plan is insolvent within the meaning of Section
4245 of ERISA.
"Insolvent": pertaining to a condition of Insolvency.
"Intangible Assets": assets having no physical existence and
that, in conformity with GAAP, should be classified as intangible
assets, including, without limitation, patents, patent rights,
trademarks, trade names, copyrights, franchises, licenses, customer
lists, organizational expenses and goodwill.
"Intellectual Property": as defined in Section 7.09.
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<PAGE> 23
"Interest Expenses": with respect to any period, the aggregate
of all interest expense reported by the Company and its Subsidiaries in
accordance with GAAP during such period. As used in this definition,
the term "interest" shall include, without limitation, all interest,
fees and costs payable with respect to the obligations under this
Agreement (other than fees and costs which may be capitalized as
transaction costs in accordance with GAAP), any discount in respect of
sales of accounts receivable and/or related contract rights and the
interest portion of capitalized lease payments during such period, all
as determined in accordance with GAAP.
"Interest Payment Date": (a) as to any Base Rate Loan, the
last day of each March, June, September and December to occur while
such Loan is outstanding, (b) as to any Eurodollar Loan or
Multicurrency Loan having an Interest Period of three months or less,
the last day of such Interest Period and (c) as to any Eurodollar Loan
or Multicurrency Loan having an Interest Period longer than three
months, (i) each day which is three months, or a whole multiple
thereof, after the first day of such Interest Period and (ii) the last
day of such Interest Period.
"Interest Period": with respect to any Eurodollar Loan or
Multicurrency Loan:
(a) initially, the period commencing on the borrowing or
conversion date, as the case may be, with respect to such Eurodollar
Loan or Multicurrency Loan and ending one, two, three, or six or (if
available) twelve months thereafter, as selected by the relevant
Borrower in its notice of borrowing or notice of conversion, as the
case may be, given with respect thereto; and
(b) thereafter, each period commencing on the last day of the
next preceding Interest Period applicable to such Eurodollar Loan or
Multicurrency Loan and ending one, two, three, six or (if applicable)
twelve months thereafter, as selected by the relevant Borrower by
irrevocable notice to the Administrative Agent not less than three
Business Days prior to the last day of the then current Interest Period
with respect thereto;
provided that, all of the foregoing provisions relating to Interest
Periods are subject to the following:
(i) if any Interest Period pertaining to a
Eurodollar Loan or Multicurrency Loan would otherwise end on a
day that is not a Business Day, such Interest Period shall be
extended to the next succeeding Business Day unless the result
of such extension would be to carry such Interest Period into
another calendar month in which event such Interest Period
shall end on the immediately preceding Business Day;
(ii) any Interest Period applicable to a
Eurodollar Loan or Multicurrency Loan that would otherwise
extend beyond the Revolving Credit Termination Date shall end
on the Revolving Credit Termination Date;
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<PAGE> 24
(iii) any Interest Period pertaining to a
Eurodollar Loan or Multicurrency Loan that begins on the last
Business Day of a calendar month (or on a day for which there
is no numerically corresponding day in the calendar month at
the end of such Interest Period) shall end on the last
Business Day of a calendar month;
(iv) any Interest Period pertaining to a
Multicurrency Loan denominated in an Available Foreign
Currency being replaced by the "euro" upon the effectiveness
of European Monetary Union that would otherwise extend beyond
the date on which such replacement becomes effective shall end
on such date; and
(v) each Borrower shall select Interest Periods
so as not to require a payment or prepayment of any Eurodollar
Loan or Multicurrency Loan during an Interest Period for such
Eurodollar Loan or Multicurrency Loan.
"Interim Term Loan": as defined in Section 3.01.
"Interim Term Loan Commitment": as to each Interim Term Loan
Lender, the obligation of such Lender, if any, to make a Interim Term
Loan to the Company hereunder in a principal amount not to exceed the
amount set forth under the heading "Interim Term Loan Commitment"
opposite such Lender's name on Schedule I.
"Interim Term Loan Exposure": as to any Interim Term Loan
Lender at any time, the sum of (a) the aggregate outstanding principal
amount of the Interim Term Loans of such Interim Term Loan Lender and
(b) the undrawn amount of such Interim Term Loan Lender's Interim Term
Loan Commitment.
"Interim Term Loan Lender": each Lender which has a Interim
Term Loan Commitment or which has made a Interim Term Loan.
"Interim Term Loan Percentage": as to any Lender at any time,
the percentage which such Lender's Interim Term Loan Exposure then
constitutes of the aggregate Interim Term Loan Exposures.
"Investments": as defined in Section 10.11 (as in effect prior
to the Covenant Transition Date).
"Joinder Agreement": the Joinder Agreement to be entered into
by each Foreign Subsidiary Borrower subsequent to the date hereof
pursuant to Section 14.01(b)(i), substantially in the form of Exhibit
E.
"Judgment Currency": as defined in Section 14.18(b).
"Lenders": as defined in the preamble hereto.
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"Lien": (i) any judgment lien or execution, attachment, levy,
distraint or similar legal process and (ii) any mortgage, pledge,
hypothecation, assignment, lien, charge, encumbrance or other security
interest of any kind or nature whatsoever (including, without
limitation, the interest of the lessor under any capital lease and the
interest of the seller under any conditional sale or other title
retention agreement), which secures or purports to secure any
Indebtedness or other indebtedness or obligations.
"Loan Documents": this Agreement, any Notes, the Security
Documents, the Subsidiary Guarantees, the Trust Agreement, the
Syndication Letter Agreement and any document or instrument evidencing
or governing any Local Currency Facility.
"Loan Parties": the Company and each Subsidiary of the Company
which is a party to a Loan Document.
"Loans": the collective reference to the Revolving Credit
Loans, the Swing Line Loans, the Term Loans, the Multicurrency Loans
and the Local Currency Loans.
"Loans to be Converted": as defined in Section 14.08(a).
"Local Currency": any available and freely convertible
non-U.S. Dollar currency selected by a Local Currency Borrower and
approved by the Administrative Agent.
"Local Currency Borrower": each Foreign Subsidiary that the
Company designates as a "Local Currency Borrower" in a Local Currency
Facility Addendum.
"Local Currency Facility": any Qualified Credit Facility that
the Company designates as a "Local Currency Facility" pursuant to a
Local Currency Facility Addendum.
"Local Currency Facility Addendum": a Local Currency Facility
Addendum received by the Administrative Agent, substantially in the
form of Exhibit J, and conforming to the requirements of Article V.
"Local Currency Facility Agent": with respect to each Local
Currency Facility, the Local Currency Lender acting as agent for the
Local Currency Lenders parties thereto (and, in the case of any Local
Currency Facility to which only one Lender is a party, such Lender).
"Local Currency Facility Maximum Borrowing Amount": as defined
in Section 5.01(b).
"Local Currency Lender": any Lender (or, if applicable, any
affiliate, branch or agency thereof) party to a Local Currency
Facility.
"Local Currency Lender Maximum Borrowing Amount": as defined
in Section 5.01(b).
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"Local Currency Loan": any loan made pursuant to a Local
Currency Facility.
"London Banking Day": any day on which banks in London are
open for general banking business, including dealings in foreign
currency and exchange.
"Majority Facility Lenders": with respect to any Facility, the
holders of more than 50% of the aggregate unpaid principal amount of
the Term Loans or the Aggregate Committed Outstandings, as the case may
be, outstanding under such Facility (or, in the case of the Revolving
Credit Facility or Multicurrency Facility, prior to any termination of
the Commitments, the holders of more than 50% of the total Revolving
Credit Commitments or Multicurrency Commitments, respectively).
"Majority Multicurrency Lenders": the Majority Facility
Lenders in respect of the Multicurrency Facility.
"Majority Revolving Credit Facility Lenders": the Majority
Facility Lenders in respect of the Revolving Credit Facility.
"Material Adverse Effect": a material adverse effect on (a)
the business, operations, property, condition (financial or otherwise)
or prospects of the Company and its Subsidiaries taken as a whole, (b)
the ability of any Borrower to perform its obligations under this
Agreement or any of the Notes or any of the other Loan Documents to
which it is a party or (c) the validity or enforceability of this
Agreement or any of the Notes or any of the other Loan Documents or the
rights or remedies of the Administrative Agent or the Lenders hereunder
or thereunder.
"Material Environmental Amount": an amount payable by the
Company (net of the proceeds of any applicable insurance and amount
reasonably expected to be paid by Persons that are not Affiliates of
the Company and that are jointly liable with the Company in respect of
such amount) and/or its Subsidiaries in excess of $20,000,000 in any
year or $100,000,000 in the aggregate for remedial costs, compliance
costs, compensatory damages, punitive damages, fines, penalties or any
combination thereof.
"Materials of Environmental Concern": any gasoline or
petroleum (including crude oil or any fraction thereof) or petroleum
products or any hazardous or toxic substances, materials or wastes,
defined or regulated as such in or under any Environmental Law,
including, without limitation, asbestos, polychlorinated biphenyls and
urea-formaldehyde insulation.
"Minority Interest": the minority interest of Persons other
than the Company and its Subsidiaries in the Company's Subsidiaries as
shown from time to time in the most recent consolidated balance sheet
of the Company and its Subsidiaries.
"Moody's Bond Rating": for any day, the rating of the
Company's senior long-term unsecured debt by Moody's Investor Service,
Inc. ("Moody's") in effect at 11:00
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A.M., New York City time, on such day.
"Multicurrency Commitment": as to any Multicurrency Lender at
any time, its obligation to make Multicurrency Loans to the Borrowers
in an aggregate amount in Dollars or in Available Foreign Currencies of
which the U.S. Dollar Equivalent does not exceed at any time
outstanding the amount set forth opposite such Multicurrency Lender's
name in Schedule I under the heading "Multicurrency Commitment", as
such amount may be reduced from time to time as provided in Section
4.04 and the other applicable provisions hereof.
"Multicurrency Commitment Percentage": as to any Multicurrency
Lender at any time, the percentage which such Multicurrency Lender's
Multicurrency Commitment then constitutes of the aggregate
Multicurrency Commitments.
"Multicurrency Lender": each Lender having an amount greater
than zero set forth opposite such Revolving Credit Lender's name in
Schedule I under the heading "Multicurrency Commitment"; provided that
any Revolving Credit Lender may cause an affiliate of such Revolving
Credit Lender to become a party to this Agreement as a Multicurrency
Lender, whereupon such affiliate shall, on behalf of such Revolving
Credit Lender, fulfill such Revolving Credit Lender's obligations and
enjoy such Revolving Credit Lender's rights, as a Multicurrency Lender,
and the term "Multicurrency Lender" shall, when the context requires,
be deemed to refer to such affiliate.
"Multicurrency Loans": as defined in Section 4.01.
"Multicurrency Reference Lenders": Chase and two Lenders
selected by Chase and the Company on the Syndication Date; provided,
that prior to the Syndication Date all references to "Multicurrency
Reference Lenders" shall be deemed to be references to Chase.
"Multiemployer Plan": a Plan which is a multiemployer plan as
defined in Section 4001(a)(3) of ERISA or any successor statute.
"Net Cash Proceeds": (a) in connection with any Asset Sale or
any Recovery Event, the proceeds thereof in the form of cash and Cash
Equivalents (including any such proceeds received by way of deferred
payment of principal pursuant to a note or installment receivable or
purchase price adjustment receivable or otherwise, but only as and when
received) of such Asset Sale or Recovery Event, net of attorneys' fees,
accountants' fees, investment banking fees, amounts required to be
applied to the repayment of Indebtedness secured by a Lien expressly
permitted hereunder on any asset which is the subject of such Asset
Sale or Recovery Event (other than any Lien pursuant to a Security
Document) and other customary fees and expenses actually incurred in
connection therewith and net of taxes paid or reasonably estimated to
be payable as a result thereof (after taking into account any available
tax credits or deductions and any tax sharing arrangements), including
any taxes resulting from the transfer of the proceeds of such sale to
the Company and (b) in connection with any issuance or sale of equity
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securities or debt securities or instruments or the incurrence of
loans, the cash proceeds received from such issuance or incurrence, net
of attorneys' fees, investment banking fees, accountants' fees,
underwriting discounts and commissions and other customary fees and
expenses actually incurred in connection therewith.
"Netherlands BV I": a special purpose Netherlands corporation
to be formed as an indirect Subsidiary of the Company prior to the
Initial Revolving Credit Funding Date.
"Netherlands BV II": a special purpose Netherlands corporation
to be formed as an indirect Subsidiary of the Company prior to the
Initial Revolving Credit Funding Date.
"Netherlands BV III": a special purpose Netherlands
corporation to be formed as an indirect Subsidiary of the Company prior
to the Initial Revolving Credit Funding Date.
"Netherlands BV IV": a special purpose Netherlands corporation
to be formed as an indirect Subsidiary of the Company prior to the
Initial Revolving Credit Funding Date.
"Netherlands Pledge Agreements": the collective reference to
(i) the Netherlands Pledge Agreement, to be executed and delivered by
U.S. Finance Subsidiary I, in form and substance satisfactory to the
Administrative Agent, creating a security interest in 100% of the
Capital Stock of Netherlands BV I in favor of the Trustee to secure the
obligations of the Borrowers hereunder and, (ii) the Netherlands Pledge
Agreement, to be executed and delivered by U.S. Finance Subsidiary II,
in form and substance satisfactory to the Administrative Agent,
creating a security interest in 100% of the Capital Stock of
Netherlands BV III in favor of the Trustee to secure the obligations of
the Borrowers hereunder, each as amended, supplemented or otherwise
modified from time to time.
"Non-Excluded Taxes": as defined in Section 6.11(a).
"Non-Multicurrency Lender": each Revolving Credit Lender which
is not a Multicurrency Lender.
"Notes": the collective reference to the Revolving Credit
Notes and the Term Notes.
"Notice of Local Currency Outstandings": with respect to each
Local Currency Facility Agreement, a notice from the relevant Local
Currency Facility Agent containing the information, delivered to the
Person, in the manner and by the time, specified for a Notice of Local
Currency Outstandings in Schedule V.
"Obligations": collectively, the unpaid principal of and
interest on the Loans and all other obligations and liabilities of (a)
each Foreign Subsidiary Borrower under this Agreement and the other
Loan Documents and (b) each Local Currency Borrower under any Local
Currency Facility to which it is a party and under this Agreement and
the other Loan Documents (including, without limitation, interest
accruing at the then applicable rate provided in this Agreement or any
other applicable Loan Document after the
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maturity of the Loans and interest accruing at the then applicable rate
provided in this Agreement or any other applicable Loan Document after
the filing of any petition in bankruptcy, or the commencement of any
insolvency, reorganization or like proceeding, relating to the Company,
any Foreign Subsidiary Borrower or any Local Currency Borrower, as the
case may be, whether or not a claim for post-filing or post-petition
interest is allowed in such proceeding), whether direct or indirect,
absolute or contingent, due or to become due, or now existing or
hereafter incurred, which may arise under, out of, or in connection
with, this Agreement, the Notes, the other Loan Documents or any other
document made, delivered or given in connection therewith, in each case
whether on account of principal, interest, reimbursement obligations,
fees, indemnities, costs, expenses or otherwise (including, without
limitation, all fees and disbursements of counsel to the Administrative
Agent or to the Lenders that are required to be paid by any Borrower or
Local Currency Borrower pursuant to the terms of this Agreement or any
other Loan Document).
"Offer Documents": the Press Release and the Tender Offer
documentation subsequently to be posted by U.K. Acquisition II setting
out the detailed terms of the Tender Offer.
"Optionholders": the holders of Options.
"Options": options to purchase up to 25,000,000 Target Shares.
"Panel": The Panel of Take-overs and Mergers in the City of
London.
"Participants": as defined in Section 14.06(b).
"PBGC": the Pension Benefit Guaranty Corporation established
pursuant to Subtitle A of Title IV of ERISA or any successor
corporation.
"Person": an individual, partnership, corporation, business
trust, joint stock company, trust, unincorporated association, joint
venture, Governmental Authority or other entity of whatever nature.
"Plan": at a particular time, any employee benefit plan which
is covered by ERISA and in respect of which the Company or a Commonly
Controlled Entity is (or, if such plan were terminated at such time,
would under Section 4069 of ERISA be deemed to be) an "employer" as
defined in Section 3(5) of ERISA.
"Pledge Agreements": the collective reference to (i) the
Domestic Pledge Agreement, (ii) the U.K. Acquisition I Share Mortgage,
(iii) the U.K. Acquisition II Share Mortgage, (iii) the Netherlands
Pledge Agreements and (iv) other pledge agreements in form and
substance reasonably satisfactory to the Administrative Agent pursuant
to which shares of Foreign Subsidiaries (other than Excluded Foreign
Subsidiaries) and 65% (or such lesser percentage as owned by the
Company or such Domestic Subsidiary) of the shares of Excluded Foreign
Subsidiaries held directly by the Company or any Domestic
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Subsidiary are pledged, in each case, as the same may be amended,
supplemented or otherwise modified.
"Pledged Stock": the Capital Stock pledged pursuant to a
Pledge Agreement.
"Press Release": the press announcement released by or on
behalf of the U.K. Acquisition II on October 16, 1997 publicly
announcing a firm intention to make the Tender Offer.
"Pricing Grid": the pricing grid attached hereto as Annex A.
"Pro Forma Balance Sheet": as defined in Section 7.01(b).
"Prime Rate": the rate of interest per annum publicly
announced from time to time by Chase as its prime rate in effect at its
principal office in New York City (each change in the Prime Rate to be
effective on the date such change is publicly announced). The Prime
Rate is not intended to be the lowest rate of interest charged by Chase
in connection with extensions of credit to debtors.
"Prohibited Transaction": any "prohibited transaction" as
defined in Section 406 of ERISA or Section 4975 of the Code.
"Properties": as defined in Section 7.16(a).
"Property": any right or interest in or to property of any
kind whatsoever, whether real, personal or mixed and whether tangible
or intangible, including without limitation, Capital Stock.
"Qualified Credit Facility": a credit facility (a) providing
for one or more Local Currency Lenders to make loans denominated in a
Local Currency to a Local Currency Borrower, (b) providing for such
loans to bear interest at a rate or rates determined by the Company and
such Local Currency Lender or Local Currency Lenders and (c) otherwise
conforming to the requirements of Article V.
"Receivables Subsidiary": Federal-Mogul Funding Corporation, a
Michigan corporation.
"Recovery Event": any settlement of or payment in respect of
any property or casualty insurance claim or any condemnation proceeding
relating to any asset of the Company or any of its Subsidiaries.
"Reduction Period": the period from November 30, 1997 to the
date which is four months after the Initial Term Loan Funding Date.
"Reference Lenders": the collective reference to the Domestic
Reference Lenders and the Multicurrency Reference Lenders.
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"Register": as defined in Section 14.06(d).
"Reinvestment Deferred Amount": with respect to any
Reinvestment Event, the aggregate Net Cash Proceeds received by the
Company or any of its Subsidiaries in connection therewith which are
not applied to prepay the Term Loans pursuant to Section 6.04(e) as a
result of the delivery of a Reinvestment Notice.
"Reinvestment Event": any Asset Sale or Recovery Event in
respect of which the Company has delivered a Reinvestment Notice.
"Reinvestment Notice": a written notice executed by a
Responsible Officer stating that no Event of Default has occurred and
is continuing and that the Company (directly or indirectly through a
Subsidiary) intends and expects to use all or a specified portion of
the Net Cash Proceeds of an Asset Sale or Recovery Event to acquire
assets useful in its business.
"Reinvestment Prepayment Amount": with respect to any
Reinvestment Event, the Reinvestment Deferred Amount relating thereto
less any amount expended prior to the relevant Reinvestment Prepayment
Date to acquire assets useful in the Company's business.
"Reinvestment Prepayment Date": with respect to any
Reinvestment Event, the earlier of (a) the date occurring one year
after such Reinvestment Event (provided, that in the case of a Recovery
Event, a Reinvestment Prepayment Date shall not occur under this clause
(a) in respect of the portion of the proceeds of such Recovery Event
that will be applied to the repair or reconstruction of the affected
assets so long as within one year after the date of such Recovery Event
the Company has commenced repair or reconstruction in respect of the
affected assets) and (b) the date on which the Company shall have
determined not to acquire assets useful in the Company's business with
all or any portion of the relevant Reinvestment Deferred Amount.
"Reorganization": with respect to any Multiemployer Plan, the
condition that such plan is in reorganization within the meaning of
Section 4241 of ERISA.
"Replacement Lender": a bank or financial institution (other
than a Subsidiary of the Company) acceptable to the Administrative
Agent and the Company.
"Reportable Event": any of the events set forth in Section
4043(b) of ERISA or the regulations thereunder.
"Requested Local Currency Loans": as defined in Section
2.05(b).
"Requested Multicurrency Loans": as defined in Section
2.05(a).
"Required Lenders": the holders of more than 50% of (a) until
the date on which
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all Commitments are terminated, the sum of (i) the aggregate undrawn
amount of the Commitments, (ii) the aggregate unpaid principal amount
of the Term Loans and (iii) the Aggregate Committed Outstandings and
(b) thereafter, the sum of (i) the aggregate unpaid principal amount
of the Term Loans and (ii) the Aggregate Committed Outstandings;
provided that for purposes of this definition the Aggregate Committed
Outstandings of each Lender shall be adjusted up or down so as to give
effect to any participations purchased or sold pursuant to Section
14.08.
"Required Prepayment Lenders": the Majority Facility Lenders
in respect of the Tranche A Term Loan Facility, the Tranche B Term Loan
Facility and the Interim Term Loan Facility.
"Requirement of Law": as to any Person, the certificate of
incorporation and by-laws or other organizational or governing
documents of such Person, and any law, treaty, rule or regulation or
determination of an arbitrator or a court or other Governmental
Authority, in each case applicable to or binding upon such Person or
any of its property or to which such Person or any of its property is
subject.
"Responsible Officer": (i) as to the Company, the chief
executive officer, the president, the chief financial officer, the
treasurer, any assistant treasurer or the controller of the Company and
(ii) as to any other Borrower, those of its officers or representatives
whose signatures and incumbency shall have been certified to the
Administrative Agent and the Lenders pursuant to Section 8.01(c) or
8.02(e).
"Revolving Credit Commitment": as to any Lender at any time,
its obligation to make Revolving Credit Loans to, and/or participate in
Swing Line Loans made to, the Company in an aggregate amount not to
exceed at any time outstanding the U.S. Dollar amount set forth
opposite such Lender's name in Schedule I under the heading "Revolving
Credit Commitment", as such amount may be reduced from time to time
pursuant to Section 2.04 and the other applicable provisions hereof.
"Revolving Credit Commitment Percentage": as to any Revolving
Credit Lender at any time, the percentage which such Revolving Credit
Lender's Revolving Credit Commitment then constitutes of the aggregate
Revolving Credit Commitments of all Revolving Credit Lenders.
"Revolving Credit Commitment Period": the period from and
including the Initial Revolving Credit Funding Date to but not
including the Revolving Credit Termination Date, or such earlier date
on which the Revolving Credit Loans shall terminate as provided herein.
"Revolving Credit Loan": as defined in Section 2.01.
"Revolving Credit Note": as defined in Section 2.02(e).
"Revolving Credit Termination Date": the date which is 6 years
after the Initial
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Revolving Credit Funding Date.
"Revolving Credit Lender": each Lender which has a Revolving
Credit Commitment or which has made Revolving Credit Loans.
"Secured Obligations": as defined in each Security Document,
as applicable.
"Secured Reimbursement Obligations": at any time, the
aggregate undrawn face amount of, plus the aggregate unreimbursed
amount of all drawings under, all letters of credit issued by any
Lender for the account of any Borrower, other than any such letter of
credit in respect of which the issuing Lender shall have delivered a
written acknowledgement to the Administrative Agent to the effect that
the obligations of the account party in respect of such letter of
credit shall not be secured pursuant to the Security Documents or
guaranteed pursuant to a Subsidiary Guarantee.
"Security Agreement": the Security Agreement, substantially in
the form of Exhibit C, to be executed and delivered by the Company and
its Domestic Subsidiaries, as the same may be amended, supplemented or
otherwise modified.
"Security Documents": the collective reference to the Security
Agreement, the Pledge Agreements, the Trust Agreement, and all other
security documents hereafter delivered to the Administrative Agent (or
the Trustee, as the case may be) granting a Lien on any Property of any
Person to secure the obligations and liabilities of any Loan Party
under any Loan Document.
"Senior Subordinated Bridge Loans": as defined in the recitals
hereto.
"Senior Subordinated Bridge Loan Commitments": the commitments
of the lenders under the Senior Subordinated Loan Documentation to make
Senior Subordinated Bridge Loans to the Company.
"Senior Subordinated Debt": the Senior Subordinated Bridge
Loans, the Exchange Notes and the Senior Subordinated Term Notes.
"Senior Subordinated Loan Documentation": collectively, (a)
the Amended and Restated Senior Subordinated Credit Agreement, dated as
of December 18, 1997, among the Company, the several lenders from time
to time parties thereto and Chase as administrative agent, (b) the
Notes (as defined in such Senior Subordinated Credit Agreement) issued
under such Senior Subordinated Credit Agreement, (c) the Senior
Subordinated Note Indenture (as defined in such Senior Subordinated
Credit Agreement) and (d) all other agreements, schedules, certificates
and other documents executed in connection therewith, including but not
limited to, any guarantees of the Senior Subordinated Debt, as the same
may be entered into, amended, supplemented or otherwise modified from
time to time in accordance with the terms hereof and thereof.
"Senior Subordinated Term Notes": the "Term Notes" issued
under (and as
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defined in) the Senior Subordinated Loan Documentation.
"September 26, 1997 Credit Agreement": as defined in the
recitals hereto.
"Single Employer Plan": any Plan which is covered by Title IV
of ERISA, but which is not a Multiemployer Plan.
"Solvent": when used with respect to any Person, means that,
as of any date of determination, (a) the amount of the "present fair
saleable value" of the assets of such Person will, as of such date,
exceed the amount of all "liabilities of such Person, contingent or
otherwise", as of such date, as such quoted terms are determined in
accordance with applicable federal and state laws governing
determinations of the insolvency of debtors, (b) the present fair
saleable value of the assets of such Person will, as of such date, be
greater than the amount that will be required to pay the liability of
such Person on its debts as such debts become absolute and matured, (c)
such Person will not have, as of such date, an unreasonably small
amount of capital with which to conduct its business, and (d) such
Person will be able to pay its debts as they mature. For purposes of
this definition, (i) "debt" means liability on a "claim", and (ii)
"claim" means any (x) right to payment, whether or not such a right is
reduced to judgment, liquidated, unliquidated, fixed, contingent,
matured, unmatured, disputed, undisputed, legal, equitable, secured or
unsecured or (y) right to an equitable remedy for breach of performance
if such breach gives rise to a right to payment, whether or not such
right to an equitable remedy is reduced to judgment, fixed, contingent,
matured or unmatured, disputed, undisputed, secured or unsecured.
"Special Purpose Subsidiaries": the collective reference to
U.S. Finance Subsidiary I, U.S. Finance Subsidiary II, U.S. Finance
Subsidiary III, Netherlands BV I, Netherlands BV II, Netherlands BV
III, Netherlands BV IV, U.K. Acquisition I and U.K. Acquisition II.
"S&P Bond Rating": for any day, the rating of the Company's
senior long-term unsecured debt by Standard & Poor's Ratings Service
("S&P") in effect at 11:00 A.M., New York City time, on such day.
"Subordinated Debt": (a) the Senior Subordinated Debt and (b)
other unsecured Indebtedness of the Company having a final maturity
date at least 91 days after the final maturity date of the Tranche B
Term Loans and a weighted average life at least as long as the weighted
average life of the Tranche B Term Loans, and having subordination
terms acceptable to the Administrative Agent, acting reasonably.
"Subsidiary": at any particular time, any Person which could
be included as a consolidated subsidiary of the Company in the
financial statements prepared and filed with the Company's annual
reports on Form 10-K under the Securities Exchange Act of 1934, as
amended, if such financial statements were prepared at, and as of, such
time. Unless otherwise qualified, all references to a "Subsidiary" or
to "Subsidiaries" in this Agreement shall refer to a Subsidiary or
Subsidiaries of the Company.
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"Subsidiary Guarantees": the collective reference to the
Domestic Subsidiary Guarantee and the U.K. Acquisition I Guarantee, and
any other guarantee by a Subsidiary of the Indebtedness and obligations
of the Borrowers hereunder that may be executed and delivered to the
Administrative Agent hereunder.
"Swing Line Commitment": as to the Swing Line Lender, in its
capacity as a Swing Line Lender, its obligation to make Swing Line
Loans to the Company in an aggregate principal amount not to exceed, at
any one time outstanding $25,000,000.
"Swing Line Lender": Chase, in its capacity as provider of the
Swing Line Loans.
"Swing Line Loan": as defined in Section 2.06.
"Swing Line Loans": as defined in Section 2.06.
"Syndication Date": the date on which Chase completes the
primary syndication of the Facilities and the entities selected in such
syndication process become parties to this Agreement.
"Syndication Letter Agreement": the letter agreement, dated as
of September 26, 1997, between the Company and Chase relating to the
syndication of the Facilities, as amended by the Amended and Restated
Fee Letter, dated as of October 15, 1997, between the Company and
Chase.
"Takeover Code": The City Code on Takeovers and Mergers in
effect in England.
"Target": as defined in the recitals hereto.
"Target Shareholders": the holders of the Target Shares.
"Target Shares": as defined in the recitals hereto.
"Target U.S. Subsidiary": the collective reference to the
Subsidiaries of Target organized under the laws of a State of the
United States.
"Tender Offer": as defined in the recitals hereto.
"Term Loan Commitment Period": the period commencing on the
Initial Term Loan Funding Date and ending on the earlier of (a) the day
immediately following the date on which the Tender Offer lapses or is
withdrawn by U.K. Acquisition II and (b) May 1, 1998.
"Term Loan Commitments": the collective reference to the
Tranche A Term Loan Commitments, the Tranche B Term Loan Commitments
and the Interim Term Loan Commitments.
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"Term Loan Lenders": the collective reference to the Tranche A
Term Loan Lenders, the Tranche B Term Loan Lenders and the Interim Term
Loan Lenders.
"Term Loans": the collective reference to the Tranche A Term
Loans, Tranche B Term Loans and Interim Term Loans.
"Tranche": the collective reference to Eurodollar Loans or
Multicurrency Loans of any Class the then current Interest Periods with
respect to all of which begin on the same date and end on the same
later date (whether or not such Loans shall originally have been made
on the same day).
"Tranche A Term Loan": as defined in Section 3.01
"Tranche A Term Loan Commitment": as to any Lender, the
obligation of such Lender, if any, to make a Tranche A Term Loan to the
Company hereunder in a principal amount not to exceed the amount set
forth under the heading "Tranche A Term Loan Commitment" opposite such
Lender's name on Schedule I.
"Tranche A Term Loan Exposure": as to any Tranche A Term Loan
Lender, the sum of (a) the aggregate outstanding principal amount of
the Tranche A Term Loans of such Tranche A Term Loan Lender and (b) the
undrawn amount of such Tranche A Term Loan Lender's Tranche A Term Loan
Commitment.
"Tranche A Term Loan Lender": each Lender which has a Tranche
A Term Loan Commitment or which has made a Tranche A Term Loan.
"Tranche A Term Loan Percentage": as to Tranche A Term Loan
Lender at any time, the percentage which such Lender's Tranche A Term
Loan Exposure then constitutes of the aggregate Tranche A Term Loan
Exposures.
"Tranche B Term Loan": as defined in Section 3.01.
"Tranche B Term Loan Commitment": as to Tranche B Term Loan
Lender, the obligation of such Lender, if any, to make a Tranche B Term
Loan to the Company hereunder in a principal amount not to exceed the
amount set forth under the heading "Tranche B Term Loan Commitment"
opposite such Lender's name on Schedule I.
"Tranche B Term Loan Exposure": as to any Tranche B Term Loan
Lender at any time, the sum of (a) the aggregate outstanding principal
amount of the Tranche B Term Loans of such Tranche B Term Loan Lender
and (b) the undrawn amount of such Tranche B Term Loan Lender's Tranche
B Term Loan Commitment.
"Tranche B Term Loan Lender": each Lender which has a Tranche
B Term Loan Commitment or which has made a Tranche B Term Loan.
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"Tranche B Term Loan Percentage": as to any Lender at any
time, the percentage which such Lender's Tranche B Term Loan Exposure
then constitutes of the aggregate Tranche B Term Loan Exposures.
"Transactions": the collective reference to the Tender Offer
and the Compulsory Acquisition.
"Transferee": as defined in Section 14.06(f).
"Trust Agreement": the Trust Agreement, substantially in the
form of Exhibit D-2, to be entered into by the Company, each other
grantor pursuant to the Security Agreement and each other pledgor
pursuant to a Pledge Agreement and a trustee acceptable to the
Administrative Agent, pursuant to which such trustee shall hold certain
of the Collateral to secure equally and ratably the obligations of the
Company in respect of the Facilities and in respect of certain other
indebtedness.
"Trustee": the trustee named in the Trust Agreement.
"Type": as to any Revolving Credit Loan or Term Loan, its
nature as a Base Rate Loan or a Eurodollar Loan.
"U.K. Acquisition I": a Wholly Owned Subsidiary of the Company
to be organized under the laws of England prior to the Initial
Revolving Credit Funding Date.
"U.K. Acquisition I Guarantee": the U.K. Acquisition I
Guarantee, in form and substance reasonably satisfactory to the
Administrative Agent, to be executed and delivered by U.K. Acquisition
I pursuant to Section 9.15, guaranteeing all of the obligations of the
Borrowers hereunder, as the same may from time to time be amended,
supplemented or otherwise modified.
"U.K. Acquisition I Share Mortgage": the Deed of Charge, in
form and substance reasonably satisfactory to the Administrative Agent,
to be executed and delivered by U.S. Finance Subsidiary III creating in
favor of the Trustee a security interest in 100% of the Capital Stock
of U.K. Acquisition I, as the same may from time to time be amended,
supplemented or otherwise modified.
"U.K. Acquisition II": as defined in the recitals hereto.
"U.K. Acquisition II Share Mortgage": the Deed of Charge, and
related documents, in form and substance reasonably satisfactory to the
Administrative Agent, to be executed and delivered by UK Acquisition I
pursuant to Section 9.15, creating in favor of the Trustee, a security
interest (i) in all of the Capital Stock of U.K. Acquisition II owned
by U.K. Acquisition I (but in any event not in excess of 65% of the
voting stock of U.K. Acquisition II) and (ii) any loans or advances
made by U.K. acquisition I to U.K. Acquisition II, in each case
securing the obligations of U.K. Acquisition I under the U.K.
Acquisition I Guarantee, as the same may from time to time be amended,
supplemented
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or otherwise modified.
"U.S. Dollar Equivalent": with respect to an amount
denominated in any currency other than U.S. Dollars, the equivalent in
U.S. Dollars of such amount determined at the Exchange Rate on the date
of determination of such equivalent. In making any determination of the
U.S. Dollar Equivalent for purposes of calculating the amount of Loans
to be borrowed from the respective Lenders on any Borrowing Date, the
Administrative Agent shall use the relevant Exchange Rate in effect on
the date on which the interest rate for such Loans is determined
pursuant to the provisions of this Agreement and the other Loan
Documents.
"U.S. Dollars": dollars in lawful currency of the United
States of America.
"U.S. Finance Subsidiary I": a special purpose corporation to
be organized as a direct or indirect Subsidiary of the Company under
the laws of a State of the United States prior to the Initial Revolving
Credit Funding Date.
"U.S. Finance Subsidiary II": a special purpose corporation to
be organized as a direct or indirect Subsidiary of the Company under
the laws of a State of the United States prior to the Initial Revolving
Credit Funding Date.
"U.S. Finance Subsidiary III": a special purpose corporation
to be organized as a direct or indirect Subsidiary of the Company under
the laws of a State of the United States prior to the Initial Revolving
Credit Funding Date.
"Wholly Owned Subsidiary": as to any Person, any other Person
all of the Capital Stock of which (other than directors' qualifying
shares required by law) is owned by such Person directly and/or through
other Wholly Owned Subsidiaries.
SECTION I.02. Other Definitional Provisions. (a) Unless
otherwise specified therein, all terms defined in this Agreement shall
have the defined meanings when used in the Notes, the other Loan
Documents or any certificate or other document made or delivered
pursuant hereto.
(b) As used herein and in the Notes and any other Loan
Document, and any certificate or other document made or delivered pursuant
hereto or thereto, accounting terms relating to the Company and its Subsidiaries
not defined in Section 1.01 and accounting terms partly defined in Section 1.01,
to the extent not defined, shall have the respective meanings given to them
under GAAP.
(c) The words "hereof", "herein" and "hereunder" and words of
similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement, and Section,
subsection, Schedule and Exhibit references are to this Agreement unless
otherwise specified.
(d) The meanings given to terms defined herein shall be
equally applicable to
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both the singular and plural forms of such terms.
ARTICLE II. AMOUNT AND TERMS OF REVOLVING CREDIT COMMITMENTS AND
SWING LINE COMMITMENT
SECTION II.01. Revolving Credit Commitments. (a) Subject to
the terms and conditions hereof, each Revolving Credit Lender severally agrees
to make revolving credit loans (each, a "Revolving Credit Loan") in U.S. Dollars
to the Company from time to time during the Revolving Credit Commitment Period
so long as after giving effect thereto and to any concurrent repayment or
prepayment of Loans (i) the Available Revolving Credit Commitment of each
Revolving Credit Lender is greater than or equal to zero and (ii) the Aggregate
Committed Outstandings of all Revolving Credit Lenders do not exceed the
Aggregate Revolving Credit Commitments. During the Revolving Credit Commitment
Period the Company may use the Revolving Credit Commitments by borrowing,
prepaying the Revolving Credit Loans in whole or in part, and reborrowing, all
in accordance with the terms and conditions hereof.
(b) The Revolving Credit Loans may from time to time be (i)
Eurodollar Loans, (ii) Base Rate Loans or (iii) a combination thereof, as
determined by the Company and notified to the Administrative Agent in accordance
with Sections 2.03 and 6.02, provided that no Revolving Credit Loan shall be
made as a Eurodollar Loan after the day that is one month prior to the Revolving
Credit Termination Date.
SECTION II.02. Repayment of Revolving Credit Loans; Evidence
of Debt. (a) The Company hereby unconditionally promises to pay to the
Administrative Agent for the account of each Revolving Credit Lender the then
unpaid principal amount of each Revolving Credit Loan of such Revolving Credit
Lender on the Revolving Credit Termination Date and on such other dates and in
such other amounts as may be required from time to time pursuant to this
Agreement. The Company hereby further agrees to pay interest on the unpaid
principal amount of the Revolving Credit Loans from time to time outstanding
until payment thereof in full at the rates per annum, and on the dates, set
forth in Section 6.01.
(b) Each Revolving Credit Lender shall maintain in accordance
with its usual practice an account or accounts evidencing indebtedness of the
Company to such Revolving Credit Lender resulting from each Revolving Credit
Loan of such Revolving Credit Lender from time to time, including the amounts of
principal and interest payable thereon and paid to such Revolving Credit Lender
from time to time under this Agreement.
(c) The Administrative Agent shall maintain the Register
pursuant to Section 14.06(d), and a subaccount therein for each Revolving Credit
Lender, in which Register and subaccounts shall be recorded (i) the amount of
each Revolving Credit Loan made hereunder, the Type thereof and each Interest
Period applicable thereto, (ii) the amount of any principal or interest due and
payable or to become due and payable from the Company to each Revolving Credit
Lender hereunder in respect of the Revolving Credit Loans and (iii) both the
amount of any sum received by the Administrative Agent hereunder from the
Company in respect of the Revolving Credit Loans and each Revolving Credit
Lender's share thereof.
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(d) The entries made in the Register and the accounts of each
Revolving Credit Lender maintained pursuant to Section 2.02(b) shall, to the
extent permitted by applicable law, be prima facie evidence of the existence and
amounts of the obligations of the Company therein recorded; provided, however,
that the failure of any Revolving Credit Lender or the Administrative Agent to
maintain the Register or any such account, or any error therein, shall not in
any manner affect the obligation of the Company to repay (with applicable
interest) the Revolving Credit Loans made to the Company by such Revolving
Credit Lender in accordance with the terms of this Agreement.
(e) The Company agrees that, upon the request to the
Administrative Agent by any Revolving Credit Lender, the Company will execute
and deliver to such Revolving Credit Lender a promissory note of the Company
evidencing the Revolving Credit Loans of such Revolving Credit Lender,
substantially in the form of Exhibit A-1 with appropriate insertions as to date
and principal amount (each, a "Revolving Credit Note"); provided, that the
delivery of such Revolving Credit Notes shall not be a condition precedent to
the Effective Date.
SECTION II.03. Procedure for Revolving Credit Borrowing. The
Company may borrow under the Revolving Credit Commitments during the Revolving
Credit Commitment Period on any Business Day, provided that the Company shall
give the Administrative Agent irrevocable notice (which notice must be received
by the Administrative Agent prior to 10:00 A.M., New York City time, (a) three
Business Days prior to the requested Borrowing Date, if all or any part of the
requested Revolving Credit Loans are to be initially Eurodollar Loans, or (b) on
the requested Borrowing Date, otherwise), specifying in each case (i) the amount
to be borrowed, (ii) the requested Borrowing Date, (iii) whether the borrowing
is to be of Eurodollar Loans, Base Rate Loans or a combination thereof and (iv)
if the borrowing is to be entirely or partly of Eurodollar Loans, the amount of
such Type of Loan and the length of the initial Interest Periods therefor. Each
borrowing under the Revolving Credit Commitments (other than a borrowing under
Section 2.05) shall be in an amount equal to (A) in the case of Base Rate Loans,
$1,000,000 or a whole multiple of $1,000,000 in excess thereof (or, if the then
Aggregate Available Revolving Credit Commitments are less than $1,000,000, such
lesser amount) and (B) in the case of Eurodollar Loans, $10,000,000 or a whole
multiple of $1,000,000 in excess thereof. Upon receipt of any such notice from
the Company, the Administrative Agent shall promptly notify each Revolving
Credit Lender thereof. Not later than 11:00 A.M., New York City time, on each
requested Borrowing Date each Revolving Credit Lender shall make an amount equal
to its Funding Commitment Percentage of the principal amount of the Revolving
Credit Loans requested to be made on such Borrowing Date available to the
Administrative Agent at its New York office specified in Section 14.02 in U.S.
Dollars and in immediately available funds. Except as otherwise provided in
Section 2.05, the Administrative Agent shall on such date credit the account of
the Company on the books of such office with the aggregate of the amounts made
available to the Administrative Agent by the Revolving Credit Lenders and in
like funds as received by the Administrative Agent.
SECTION II.04. Termination or Reduction of Revolving Credit
Commitments. The Company shall have the right, upon not less than three Business
Days' notice to the Administrative Agent, to terminate the Revolving Credit
Commitments or, from time to time, to
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reduce the amount of the Revolving Credit Commitments; provided that no such
termination or reduction shall be permitted if, after giving effect thereto and
to any prepayments of the Loans made on the effective date thereof, either (a)
the Aggregate Available Revolving Credit Commitments would not be greater than
or equal to zero or (b) the Available Revolving Credit Commitments of any
Revolving Credit Lender would not be greater than or equal to zero. Any such
reduction shall be in an amount equal to $10,000,000 or a whole multiple of
$1,000,000 in excess thereof and shall reduce permanently the Revolving Credit
Commitments then in effect.
SECTION II.05. Borrowings of Revolving Credit Loans and
Refunding of Loans. (a) If on any Borrowing Date on which a Borrower has
requested the Multicurrency Lenders to make Multicurrency Loans (the "Requested
Multicurrency Loans"), (i) the aggregate principal amount of the Requested
Multicurrency Loans exceeds the Aggregate Available Multicurrency Commitments on
such Borrowing Date (before giving effect to the making and payment of any Loans
required to be made pursuant to this Section 2.05 on such Borrowing Date) and
(ii) the U.S. Dollar Equivalent of the amount of such excess is less than or
equal to the aggregate Available Revolving Credit Commitments of all
Non-Multicurrency Lenders (before giving effect to the making and payment of any
Loans pursuant to this Section 2.05 on such Borrowing Date), each
Non-Multicurrency Lender shall make a Revolving Credit Loan to the Company on
such Borrowing Date, and the proceeds of such Revolving Credit Loans shall be
simultaneously applied to repay outstanding Revolving Credit Loans and/or Local
Currency Loans of the Multicurrency Lenders (as directed by the Company), in
each case in amounts such that, after giving effect to (1) such borrowings and
repayments and (2) the borrowing from the Multicurrency Lenders of the Requested
Multicurrency Loans, the Committed Outstandings Percentage of each Revolving
Credit Lender will equal (as nearly as possible) its Revolving Credit Commitment
Percentage. To effect such borrowings and repayments, (x) not later than 11:00
A.M., New York City time, on such Borrowing Date, the proceeds of such Revolving
Credit Loans shall be made available by each Non-Multicurrency Lender to the
Administrative Agent at its office specified in Section 14.02 in U.S. Dollars
and in immediately available funds and the Administrative Agent shall apply the
proceeds of such Revolving Credit Loans toward repayment of outstanding
Revolving Credit Loans and/or Local Currency Loans of the Multicurrency Lenders
(as directed by the Company) and (y) concurrently with the repayment of such
Loans on such Borrowing Date, (I) the Multicurrency Lenders shall, in accordance
with the applicable provisions hereof, make the Requested Multicurrency Loans in
an aggregate amount equal to the amount so requested by such Borrower (but not
in any event greater than the Aggregate Available Multicurrency Commitments
after giving effect to the making of such repayment of any Loans on such
Borrowing Date) and (II) the relevant Borrower or Local Currency Borrower shall
pay to the Administrative Agent for the account of the Lenders whose Loans to
such Borrower or Local Currency Borrower are repaid on such Borrowing Date
pursuant to this Section 2.05 all interest accrued on the amounts repaid to the
date of repayment, together with any amounts payable pursuant to Section 6.12 in
connection with such repayment.
(b) If on any Borrowing Date on which a Local Currency
Borrower has requested Local Currency Lenders to make Local Currency Loans (the
"Requested Local Currency Loans") under a Local Currency Facility to which such
Local Currency Borrower and Local Currency Lenders are parties (i) the aggregate
principal amount of the Requested Local Currency Loans exceeds the aggregate
available amount of the commitments of such Local Currency Lenders
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under such Local Currency Facility on such Borrowing Date (before giving effect
to the making and payment of any Revolving Credit Loans required to be made
pursuant to this Section 2.05 on such Borrowing Date), (ii) after giving effect
to the Requested Local Currency Loans, the U.S. Dollar Equivalent of the
aggregate outstanding principal amount of Local Currency Loans of such Local
Currency Borrower will be less than or equal to the aggregate commitments of
such Local Currency Lenders under such Local Currency Facility and (iii) the
U.S. Dollar Equivalent of the amount of the excess described in clause (i) above
is less than or equal to the Aggregate Available Revolving Credit Commitments of
all Lenders other than such Local Currency Lenders (before giving effect to the
making and payment of any Revolving Credit Loans pursuant to this Section 2.05
on such Borrowing Date), each such other Lender shall make a Revolving Credit
Loan to the Company, on such Borrowing Date, and the proceeds of such Revolving
Credit Loans shall be simultaneously applied to repay outstanding Revolving
Credit Loans, Multicurrency Loans and/or Local Currency Loans of such Local
Currency Lenders (as directed by the Company) in each case in amounts such that,
after giving effect to (1) such borrowings and repayments and (2) the borrowing
from such Local Currency Lenders of the Requested Local Currency Loans, the
Committed Outstandings Percentage of each Revolving Credit Lender will equal (as
nearly as possible) its Revolving Credit Commitment Percentage. To effect such
borrowings and repayments, (x) not later than 12:00 Noon, New York City time, on
such Borrowing Date, the proceeds of such Revolving Credit Loans shall be made
available by each such other Lender to the Administrative Agent at its office
specified in Section 14.02 in U.S. Dollars and in immediately available funds
and the Administrative Agent shall apply the proceeds of such Revolving Credit
Loans toward the repayment of outstanding Revolving Credit Loans, Multicurrency
Loans and/or Local Currency Loans of such Local Currency Lenders (as directed by
the Company) and (y) concurrently with the repayment of such Loans on such
Borrowing Date, (I) such Local Currency Lenders shall, in accordance with the
applicable provisions hereof, make the Requested Local Currency Loans in an
aggregate amount equal to the amount so requested by such Local Currency
Borrower and (II) the relevant Borrower or Local Currency Borrower shall pay to
the Administrative Agent for the account of the Lenders whose Loans to such
Borrower or Local Currency Borrower are repaid on such Borrowing Date pursuant
to this Section 2.05 all interest accrued on the amounts repaid to the date of
repayment, together with any amounts payable pursuant to Section 6.12 in
connection with such repayment.
(c) If any borrowing of Revolving Credit Loans is required
pursuant to this Section 2.05, the Company shall notify the Administrative Agent
in the manner provided for Revolving Credit Loans in Section 2.03, except that
the minimum borrowing amounts set forth in Section 2.03 shall not be applicable
to the extent that such minimum borrowing amounts exceed the amounts of
Revolving Credit Loans required to be made pursuant to this Section 2.05.
SECTION II.06. Swing Line Commitments. Subject to the terms
and conditions hereof, the Swing Line Lender agrees to make swing line loans
(individually, a "Swing Line Loan"; collectively, the "Swing Line Loans") in
U.S. Dollars to the Company from time to time during the Revolving Credit
Commitment Period in an aggregate principal amount at any one time outstanding
not to exceed the amount of the Swing Line Commitment, so long as after giving
effect thereto (i) the Available Revolving Credit Commitment of each Revolving
Credit Lender is greater than or equal to zero and (ii) the Aggregate Revolving
Credit Outstandings of all Lenders do not exceed the Aggregate Revolving Credit
Commitments. Amounts borrowed by
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the Company under this Section 2.06 may be repaid and, during the Revolving
Credit Commitment Period, reborrowed.
SECTION II.07. Procedure for Swing Line Borrowings; Interest
Rate. (a) The Company shall give the Swing Line Lender irrevocable notice (which
notice must be received by the Swing Line Lender prior to 10:00 A.M., New York
City time on the requested Borrowing Date) specifying the amount of the
requested Swing Line Loan, which shall be in an aggregate principal amount of
not less than $5,000,000 or a whole multiple of $100,000 in excess thereof. The
proceeds of the requested Swing Line Loan will be made available by the Swing
Line Lender to the Company at the office of the Swing Line Lender by crediting
the account of the Company at such office with such proceeds in U.S. Dollars.
(b) All Swing Line Loans shall be either (i) Base Rate Loans
bearing interest at the same rate as Revolving Credit Loans which are Base Rate
Loans or (ii) bear interest at such rate as shall be agreed from time to time by
the Company and the Swing Line Lender. No Swing Line Loan may be converted into
a Eurodollar Loan.
SECTION II.08. Repayment of Swing Line Loans; Evidence of
Debt. (a) The Company hereby unconditionally promises to pay to the Swing Line
Lender the then unpaid principal amount of the Swing Line Loans on the Revolving
Credit Termination Date and on such other dates and in such other amounts as may
be required from time to time pursuant to this Agreement. The Company hereby
further agrees to pay interest on the unpaid principal amount of the Swing Line
Loans from time to time outstanding until payment thereof in full at the rates
per annum, and on the dates, set forth in Section 6.01.
(b) The Swing Line Lender shall maintain in accordance with
its usual practice an account or accounts evidencing indebtedness of the Company
resulting from each Swing Line Loan made by it from time to time, including the
amounts of principal and interest payable thereon and paid from time to time
under this Agreement.
(c) The Administrative Agent shall maintain the Register
pursuant to Section 14.06(d), and a subaccount therein for the Swing Line
Lender, in which shall be recorded (i) the date and amount of each Swing Line
Loan made hereunder, (ii) the amount of each Revolving Credit Lender's
participating interest in such Swing Line Loans, (iii) the date and amount of
any principal or interest due and payable or to become due and payable from the
Company hereunder in respect of the Swing Line Loans and (iv) both the date and
amount of any sum received by the Administrative Agent hereunder from the
Company in respect of the Swing Line Loans, each Revolving Credit Lender's
participating interest therein (if any) and the amount thereof payable to the
Swing Line Lender.
(d) The entries made in the Register and the accounts of the
Swing Line Lender maintained pursuant to this Section 2.08 shall, to the extent
permitted by applicable law, be prima facie evidence of the existence and
amounts of the obligations of the Company therein recorded; provided, however,
that the failure of the Swing Line Lender or the Administrative Agent to
maintain the Register or any such account, or any error therein, shall not in
any manner affect the obligation of the Company to repay (with applicable
interest) the Swing Line Loans
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made to the Company by the Swing Line Lender in accordance with the terms of
this Agreement.
SECTION II.09. Refunding of Swing Line Borrowings. (a) The
Swing Line Lender, at any time in its sole and absolute discretion may, on
behalf of the Company (which hereby irrevocably directs and authorizes the Swing
Line Lender to act on its behalf), request each Revolving Credit Lender,
including Chase, to make a Revolving Credit Loan (which shall be a Base Rate
Loan) in an amount equal to such Revolving Credit Lender's Funding Commitment
Percentage of the principal amount of the Swing Line Loans (the "Refunded Swing
Line Loans") outstanding on the date such notice is given; provided that the
provisions of this Section shall not affect the Company's obligations to repay
Swing Line Loans in accordance with the provisions of Sections 2.08 and 6.04(c)
and (j). Unless the Revolving Credit Commitments shall have expired or
terminated (in which event the procedures of Section 2.10 shall apply), each
Revolving Credit Lender will make the proceeds of the Revolving Credit Loan made
by it pursuant to the immediately preceding sentence available to the
Administrative Agent at the office of the Administrative Agent specified in
Section 14.02 prior to 10:00 A.M., New York City time, in funds immediately
available on the Business Day next succeeding the date such notice is given. The
proceeds of such Revolving Credit Loans shall be immediately made available by
the Administrative Agent to the Swing Line Lender for application to the payment
in full of the Refunded Swing Line Loans. Upon any request by the Swing Line
Lender to the Revolving Credit Lenders pursuant to this Section 2.09, the
Administrative Agent shall promptly give notice to the Company of such request.
SECTION .10. Participating Interests. (a) If the Revolving
Credit Commitments shall expire or terminate at any time while Swing Line Loans
are outstanding, at the request of the Swing Line Lender in its sole discretion,
either (i) each Revolving Credit Lender (including Chase) shall, notwithstanding
the expiration or termination of the Revolving Credit Commitments, make a
Revolving Credit Loan (which shall be a Base Rate Loan) or (ii) each Revolving
Credit Lender (other than Chase) shall purchase an undivided participating
interest in the Swing Line Loans of the Swing Line Lender, in either case in an
amount equal to such Revolving Credit Lender's Funding Commitment Percentage
(determined on the date of, and immediately prior to, expiration or termination
of the Revolving Credit Commitments) of the aggregate principal amount of such
Swing Line Loans. Each Revolving Credit Lender will make the proceeds of any
Revolving Credit Loan made by it pursuant to the immediately preceding sentence
available to the Administrative Agent for the account of the Swing Line Lender
at the office of the Administrative Agent specified in Section 14.02 prior to
10:00 A.M., New York City time, in funds immediately available on the Business
Day next succeeding the date of the request by the Swing Line Lender. The
proceeds of such Revolving Credit Loans shall be immediately applied to repay
the Swing Line Loans outstanding on the date of termination or expiration of the
Revolving Credit Commitments. In the event that any of the Revolving Credit
Lenders purchase undivided participating interests pursuant to the first
sentence of this Section 2.10(a), each Revolving Credit Lender shall immediately
transfer to the Swing Line Lender, in immediately available funds, the amount of
its participation in the Swing Line Loans of the Swing Line Lender and upon
receipt thereof the Swing Line Lender will deliver to any such Revolving Credit
Lender that so requests a confirmation of such Revolving Credit Lender's
undivided participating interest in the Swing Line Loans of the Swing Line
Lender dated the date of receipt of such funds and in such amount.
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(b) Whenever, at any time after the Swing Line Lender has
received payment from any Revolving Credit Lender in respect of such Revolving
Credit Lender's participating interest in a Swing Line Loan of the Swing Line
Lender, the Swing Line Lender receives any payment on account thereof, the Swing
Line Lender will distribute to such Revolving Credit Lender its participating
interest in such amount (appropriately adjusted, in the case of interest
payments, to reflect the period of time during which such Revolving Credit
Lender's participating interest was outstanding and funded); provided, however,
that in the event that any such payment received by the Swing Line Lender is
required to be returned, such Revolving Credit Lender will return to the Swing
Line Lender any portion thereof previously distributed by the Swing Line Lender
to it.
ARTICLE III. AMOUNT AND TERMS OF TERM LOAN COMMITMENTS
SECTION III.01. Term Loan Commitments. Subject to the terms
and conditions hereof, (a) each Tranche A Term Loan Lender severally agrees to
make term loans ("Tranche A Term Loans") to the Company in an aggregate
principal amount not to exceed the amount of the Tranche A Term Loan Commitment
of such Lender, (b) each Tranche B Term Loan Lender severally agrees to make
term loans ("Tranche B Term Loans") to the Company in an aggregate principal
amount not to exceed the amount of the Tranche B Term Loan Commitment of such
Lender and (c) each Interim Term Loan Lender severally agrees to make term loans
("Interim Term Loans") to the Company in an aggregate principal amount not to
exceed the amount of the Interim Term Loan Commitment of such Lender. The Term
Loans shall be made (i) on the Initial Term Loan Funding Date, in an amount
equal to the aggregate purchase price of Target Shares purchased on such date
and the amount applied to repay existing indebtedness of the Target on such date
and to pay fees and expenses in respect of the transactions contemplated hereby
and (ii) thereafter, until the last day of the Term Loan Commitment Period, on
up to ten Borrowing Dates, in a minimum aggregate principal amount of
$75,000,000 on each such Borrowing Date unless otherwise agreed by the
Administrative Agent and Borrower. Each borrowing of Term Loans shall utilize
ratably the Tranche A Term Loan Commitments, the Tranche B Term Loan Commitments
and the Interim Term Loan Commitments. The Term Loans may from time to time be
Eurodollar Loans or Base Rate Loans, as determined by the Company and notified
to the Administrative Agent in accordance with Sections 3.03 and 6.02.
SECTION III.02. Repayment of Term Loans; Evidence of Debt. (a)
The Tranche A Term Loan of each Tranche A Lender shall mature in 20 consecutive
quarterly installments, commencing on March 31, 1999, each of which shall be in
an amount equal to such Lender's Tranche A Term Loan Percentage multiplied by
the amount set forth below opposite such installment:
<TABLE>
<CAPTION>
Installment Principal Amount
----------- ----------------
<S> <C>
March 31, 1999 $19,000,000
June 30, 1999 $19,000,000
September 30, 1999 $19,000,000
December 31, 1999 $19,000,000
</TABLE>
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<PAGE> 46
<TABLE>
<S> <C>
March 31, 2000 $19,000,000
June 30, 2000 $19,000,000
September 30, 2000 $19,000,000
December 31, 2000 $19,000,000
March 31, 2001 $30,000,000
June 30, 2001 $30,000,000
September 30, 2001 $30,000,000
December 31, 2001 $30,000,000
March 31, 2002 $41,000,000
June 30, 2002 $41,000,000
September 30, 2002 $41,000,000
December 31, 2002 $41,000,000
March 31, 2003 $41,000,000
June 30, 2003 $41,000,000
September 30, 2003 $41,000,000
December 31, 2003 $41,000,000
</TABLE>
(b) The Tranche B Term Loan of each Tranche B Lender shall
mature in 28 consecutive quarterly installments, commencing on March 31, 1999,
each of which shall be in an amount equal to such Lender's Tranche B Term Loan
Percentage multiplied by the amount set forth below opposite such installment:
<TABLE>
<CAPTION>
Installment Principal Amount
----------- ----------------
<S> <C>
March 31, 1999 $1,250,000
June 30, 1999 $1,250,000
September 30, 1999 $1,250,000
December 31, 1999 $1,250,000
March 31, 2000 $1,250,000
June 30, 2000 $1,250,000
September 30, 2000 $1,250,000
December 31, 2000 $1,250,000
March 31, 2001 $1,250,000
June 30, 2001 $1,250,000
September 30, 2001 $1,250,000
December 31, 2001 $1,250,000
March 31, 2002 $1,250,000
June 30, 2002 $1,250,000
September 30, 2002 $1,250,000
December 31, 2002 $1,250,000
March 31, 2003 $1,250,000
June 30, 2003 $1,250,000
September 30, 2003 $1,250,000
December 31, 2003 $1,250,000
March 31, 2004 $75,000,000
June 30, 2004 $75,000,000
September 30, 2004 $75,000,000
</TABLE>
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<PAGE> 47
<TABLE>
<S> <C>
December 31, 2004 $75,000,000
March 31, 2005 $106,250,000
June 30, 2005 $106,250,000
September 30, 2005 $106,250,000
December 31, 2005 $106,250,000
</TABLE>
(c) The Interim Term Loan of each Interim Lender shall mature
on the date which is 18 months after the Initial Term Loan Funding Date.
(d) The Company hereby unconditionally promises to pay to the
Administrative Agent for the account of the appropriate Term Loan Lender the
principal amount of each Term Loan of such Term Loan Lender in installments
according to the amortization schedule set forth in paragraphs (a), (b) or (c)
above, as applicable (or on such earlier date on which the Loans become due and
payable pursuant to Article XII). The Company hereby further agrees to pay
interest on the unpaid principal amount of the Term Loans from time to time
outstanding from the date hereof until payment in full thereof at the rates per
annum, and on the dates, set forth in Section 6.01.
(e) Each Lender shall maintain in accordance with its usual
practice an account or accounts evidencing indebtedness of the Company to such
Lender resulting from each Term Loan of such Lender from time to time, including
the amounts of principal and interest payable and paid to such Lender from time
to time in respect of such Term Loans under this Agreement.
(f) The Administrative Agent, on behalf of the Company, shall
maintain the Register pursuant to Section 14.06(d), and a subaccount therein for
each Lender, in which shall be recorded (i) the amount of each Term Loan made
hereunder and any Note evidencing such Term Loan, the Type thereof and each
Interest Period applicable thereto, (ii) the amount of any principal or interest
due and payable or to become due and payable from the Company to each Lender
hereunder and (iii) both the amount of any sum received by the Administrative
Agent hereunder from the Company and each Lender's share thereof.
(g) The entries made in the Register and the accounts of each
Lender maintained pursuant to Section 3.02(e) shall, to the extent permitted by
applicable law, be prima facie evidence of the existence and amounts of the
obligations of the Company therein recorded; provided, however, that the failure
of any Lender or the Administrative Agent to maintain the Register or any such
account, or any error therein, shall not in any manner affect the obligation of
the Company to repay (with applicable interest) the Term Loans by such Lender in
accordance with the terms of this Agreement.
(h) The Company agrees that, upon the request to the
Administrative Agent by any Lender, the Company will execute and deliver to such
Lender a promissory note of the Company evidencing any Term Loans of such
Lender, substantially in the form of Exhibit A-2, with appropriate insertions as
to date and principal amount.
SECTION III.03. Procedure for Term Loan Borrowing. The Company
may borrow under the Term Loans during the Term Loan Commitment Period,
provided that the
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<PAGE> 48
Company shall give the Administrative Agent irrevocable notice (which
notice must be received by the Administrative Agent prior to 10:00 A.M., New
York City time, (a) three Business Days prior to the requested Borrowing Date,
if all or any part of the requested Term Loans are to be initially Eurodollar
Loans, or (b) one Business Day prior to the requested Borrowing Date,
otherwise), specifying in each case (i) the amount to be borrowed, (ii) the
requested Borrowing Date, (iii) whether the borrowing is to be of Eurodollar
Loans, Base Rate Loans or a combination thereof and (iv) if the borrowing is to
be entirely or partly of Eurodollar Loans, the amount of such Type of Loan and
the length of the initial Interest Periods therefor. Upon receipt of any such
notice from the Company, the Administrative Agent shall promptly notify each
Term Loan Lender thereof. Not later than 11:00 A.M., New York City time, on each
requested Borrowing Date each Term Loan Lender shall make the amount of the Term
Loans to be made by it on such Borrowing Date available to the Administrative
Agent at its New York office specified in Section 14.02 in U.S. Dollars and in
immediately available funds. The Administrative Agent shall on such date credit
the account of the Company on the books of such office with the aggregate of the
amounts made available to the Administrative Agent by the Term Loan Lenders and
in like funds as received by the Administrative Agent.
ARTICLE IV. AMOUNT AND TERMS OF MULTICURRENCY COMMITMENTS
SECTION IV.01. Multicurrency Commitments. Subject to the terms
and conditions hereof, each Multicurrency Lender severally agrees to make
revolving credit loans (each, a "Multicurrency Loan") in U.S. Dollars or any
Available Foreign Currency to any Borrower from time to time during the
Revolving Credit Commitment Period so long as after giving effect thereto and to
any concurrent repayment or prepayment of Loans (a) the Available Multicurrency
Commitment of each Multicurrency Lender is greater than or equal to zero, (b)
the aggregate outstanding principal amount of Multicurrency Loans does not
exceed an amount of which the U.S. Dollar Equivalent is $120,000,000 and (c) the
Aggregate Committed Outstandings of all Revolving Credit Lenders do not exceed
the Aggregate Revolving Credit Commitments. During the Revolving Credit
Commitment Period, any Borrower may use the Multicurrency Commitments by
borrowing, repaying the Multicurrency Loans in whole or in part, and
reborrowing, all in accordance with the terms and conditions hereof.
SECTION IV.02. Repayment of Multicurrency Loans; Evidence of
Debt. (a) Each Borrower hereby unconditionally promises to pay to the
Administrative Agent for the account of each Multicurrency Lender the then
unpaid principal amount of each Multicurrency Loan of such Multicurrency Lender
to such Borrower on the Revolving Credit Termination Date and on such other
date(s) and in such other amounts as may be required from time to time pursuant
to this Agreement. Each Borrower hereby further agrees to pay interest on the
unpaid principal amount of the Multicurrency Loans advanced to it and from time
to time outstanding until payment thereof in full at the rates per annum, and on
the dates, set forth in Section 6.01.
(b) Each Multicurrency Lender shall maintain in accordance
with its usual practice an account or accounts evidencing indebtedness of each
Borrower to such Multicurrency Lender resulting from each Multicurrency Loan of
such Multicurrency Lender from time to time, including the amounts of principal
and interest payable thereon and paid to such Multicurrency
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<PAGE> 49
Lender from time to time under this Agreement.
(c) The Administrative Agent shall maintain the Register
pursuant to Section 14.06(d), and a subaccount therein for each Multicurrency
Lender, in which shall be recorded (i) the amount of each Multicurrency Loan
made hereunder, (ii) the amount of any principal or interest due and payable or
to become due and payable from each Borrower to each Multicurrency Lender
hereunder in respect of the Multicurrency Loans and (iii) both the amount of any
sum received by the Administrative Agent hereunder from each Borrower in respect
of the Multicurrency Loans and each Multicurrency Lender's share thereof.
(d) The entries made in the Register and the accounts of each
Multicurrency Lender maintained pursuant to Section 4.02(b) shall, to the extent
permitted by applicable law, be prima facie evidence of the existence and
amounts of the obligations of each Borrower therein recorded; provided, however,
that the failure of any Multicurrency Lender or the Administrative Agent to
maintain the Register or any such account, or any error therein, shall not in
any manner affect the obligation of such Borrower to repay (with applicable
interest) the Multicurrency Loans made to such Borrower by such Multicurrency
Lender in accordance with the terms of this Agreement.
SECTION IV.03. Procedure for Multicurrency Borrowing. Any
Borrower may request the Multicurrency Lenders to make Multicurrency Loans
during the Revolving Credit Commitment Period on any Business Day provided that
such Borrower shall give the Administrative Agent irrevocable notice (which
notice must be received by the Administrative Agent prior to 10:00 A.M., London
time, three Business Days prior to the requested Borrowing Date), specifying in
each case (i) the amount and currency to be borrowed, (ii) the requested
Borrowing Date and (iii) the length of the initial Interest Period therefor.
Each borrowing under the Multicurrency Commitments shall be in an amount in U.S.
Dollars equal to, or an amount in an Available Foreign Currency of which the
U.S. Dollar Equivalent is equal to, at least $5,000,000 (or, if the then
Aggregate Available Multicurrency Commitments are less than $5,000,000, such
lesser amount). Upon receipt of any such notice from any Borrower, the
Administrative Agent shall promptly notify each Multicurrency Lender thereof.
Not later than 12:00 P.M. Noon, London time, on the requested Borrowing Date,
each Multicurrency Lender shall make an amount equal to its Multicurrency
Commitment Percentage of the principal amount of Multicurrency Loans requested
to be made on such Borrowing Date available to the Administrative Agent at the
Administrative Agent's funding office for the applicable currency specified by
the Administrative Agent from time to time by notice to the Multicurrency
Lenders and in immediately available funds. The amounts made available by each
Multicurrency Lender will then be made available to the relevant Borrower at the
funding office for the relevant Available Foreign Currency specified from time
to time by the Administrative Agent by notice to the Multicurrency Lenders and
in like funds as received by the Administrative Agent.
SECTION IV.04. Termination or Reduction of Multicurrency
Commitments. The Company shall have the right, upon not less than three Business
Days' notice to the Administrative Agent, to terminate the Multicurrency
Commitments or, from time to time, to reduce the amount of the Multicurrency
Commitments; provided that no such termination or reduction shall be permitted
if, after giving effect thereto and to any prepayments of the Loans
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<PAGE> 50
made on the effective date thereof, the Available Multicurrency Commitment of
any Multicurrency Lender would be less than zero. Any such reduction shall be in
an amount equal to $5,000,000 or a whole multiple of $1,000,000 in excess
thereof and shall reduce permanently the Multicurrency Commitments then in
effect.
ARTICLE V. LOCAL CURRENCY FACILITIES
SECTION V.01. Terms of Local Currency Facilities. (a) Subject
to the provisions of this Article 5, the Company may in its discretion from time
to time designate any Subsidiary of the Company organized under the laws of any
jurisdiction outside the United States as a "Local Currency Borrower" and any
Qualified Credit Facility to which such Local Currency Borrower and any one or
more Lenders (or its affiliates, agencies or branches) is a party as a "Local
Currency Facility", with the consent of each such Lender in its sole discretion,
by delivering a Local Currency Facility Addendum to the Administrative Agent and
the Lenders (through the Administrative Agent) executed by the Company, each
such Local Currency Borrower and each such Lender, provided, that on the
effective date of such designation no Event of Default shall have occurred and
be continuing. Concurrently with the delivery of a Local Currency Facility
Addendum, the Company or the relevant Local Currency Borrower shall furnish to
the Administrative Agent copies of all documentation executed and delivered by
such Local Currency Borrower in connection therewith, together with, if
applicable, an English translation thereof. Except as otherwise provided in this
Article V or in the definition of "Qualified Credit Facility" in Section 1.01,
the terms and conditions of each Local Currency Facility shall be determined by
mutual agreement of the relevant Local Currency Borrower(s) and Local Currency
Lender(s). The documentation governing each Local Currency Facility shall (i)
contain an express acknowledgement that such Local Currency Facility shall be
subject to the provisions of this Article V and (ii) if more than one Lender is
a party thereto, designate a Local Currency Facility Agent for such Local
Currency Facility. Each of the Company and, by agreeing to any Local Currency
Facility designation as contemplated hereby, each relevant Local Currency Lender
(if any) party thereto which is an affiliate, branch or agency of a Lender,
acknowledges and agrees that each reference in this Agreement to any Lender
shall, to the extent applicable, be deemed to be a reference to such Local
Currency Lender. In the event of any inconsistency between the terms of this
Agreement and the terms of any Local Currency Facility, the terms of this
Agreement shall prevail.
(b) The documentation governing each Local Currency Facility
shall set forth (i) the maximum amount (expressed in U.S. Dollars) available to
be borrowed from all Local Currency Lenders under such Local Currency Facility
(as the same may be reduced from time to time, a "Local Currency Facility
Maximum Borrowing Amount") and (ii) with respect to each Local Currency Lender
party to such Local Currency Facility, the maximum amount (expressed in U.S.
Dollars) available to be borrowed from such Local Currency Lender thereunder (as
the same may be reduced from time to time, a "Local Currency Lender Maximum
Borrowing Amount").
(c) Except as otherwise required by applicable law, in no
event shall the Local Currency Lenders party to a Local
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<PAGE> 51
Currency Facility have the right to accelerate the Local Currency Loans
outstanding thereunder, or to terminate their commitments (if any) to make such
Local Currency Loans prior to the earlier of the stated termination date in
respect thereof or the Revolving Credit Termination Date, except, in each case,
in connection with an acceleration of the Loans or a termination of the
Commitments pursuant to Article XII hereof, provided, that nothing in this
paragraph (c) shall be deemed to require any Local Currency Lender to make a
Local Currency Loan if the applicable conditions precedent to the making of such
Local Currency Loan set forth in the documentation governing the relevant Local
Currency Facility have not been satisfied. No Local Currency Loan may be made
under a Local Currency Facility if (i) after giving effect thereto, the
conditions precedent in Section 8.02 hereof would not be satisfied or (ii) after
giving effect to the making of such Local Currency Loan and the simultaneous
application of the proceeds thereof, the Aggregate Committed Outstandings of all
Lenders at any time exceed the Aggregate Revolving Credit Commitments.
(d) The relevant Local Currency Borrower shall furnish to the
Administrative Agent copies of any amendment, supplement or other modification
(including any change in commitment amounts or in the Local Currency Lenders
participating in any Local Currency Facility) to the terms of any Local Currency
Facility promptly after the effectiveness thereof (together with, if applicable,
an English translation thereof). If any such amendment, supplement or other
modification to a Local Currency Facility shall (i) add a Local Currency Lender
as a Local Currency Lender thereunder or (ii) change the Local Currency Facility
Maximum Borrowing Amount or any Local Currency Lender Maximum Borrowing Amount
with respect thereto, the Company shall promptly furnish an appropriately
revised Local Currency Facility Addendum, executed by the Company, the relevant
Local Currency Borrower and the affected Local Currency Lenders (or any agent
acting on their behalf), to the Administrative Agent and the Lenders (through
the Administrative Agent).
(e) The Company may terminate its designation of a facility as
a Local Currency Facility, with the consent of each Local Currency Lender party
thereto in its sole discretion, by written notice to the Administrative Agent,
which notice shall be executed by the Company, the relevant Local Currency
Borrower and each Local Currency Lender party to such Local Currency Facility
(or any agent acting on their behalf). Once notice of such termination is
received by the Administrative Agent, such Local Currency Facility and the loans
and other obligations outstanding thereunder shall immediately cease to be
subject to the terms of this Agreement.
SECTION V.02. Reporting of Local Currency Outstandings. (a) On
the date of the making of any Local Currency Loan having a maturity of 30 or
more days to a Local Currency Borrower and on the last Business Day of each
month on which a Local Currency Borrower has any outstanding Local Currency
Loans, the Local Currency Facility Agent for such Local Currency Borrower shall
deliver to the Administrative Agent a Notice of Local Currency Outstandings. The
Administrative Agent will, at the request of any Local Currency Facility Agent,
advise such Local Currency Facility Agent of the Exchange Rate used by the
Administrative Agent in calculating the U.S. Dollar Equivalent of Local Currency
Loans under the related Local Currency Facility on any date.
(b) For purposes of any calculation under this Agreement in
which the amount of the Aggregate Local Currency Outstandings of any Lender is a
component, the Administrative
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<PAGE> 52
Agent shall make such calculation on the basis of the Notices of Local Currency
Outstandings received by it at least two Business Days prior to the date of such
calculation.
ARTICLE VI. GENERAL PROVISIONS APPLICABLE TO THE LOANS
SECTION VI.01. Interest Rates and Payment Dates. (a) Each
Eurodollar Loan of each Class shall bear interest for each day during each
Interest Period with respect thereto at a rate per annum equal to the Eurodollar
Rate determined for such Interest Period plus the Applicable Margin for such
Class of Loans in effect for such day.
(b) Each Base Rate Loan of each Class shall bear interest for
each day that it is outstanding at a rate per annum equal to the Base Rate for
such day plus the Applicable Margin for such Class of Loans in effect for such
day.
(c) Each Multicurrency Loan shall bear interest for each day
during each Interest Period with respect thereto at a rate per annum equal to
the applicable Eurocurrency Rate determined for such Interest Period plus the
Applicable Margin for such Class of Loans in effect for such day.
(d) If all or a portion of (i) the principal amount of any
Loan, (ii) any interest payable thereon or (iii) any fee or other amount payable
hereunder shall not be paid when due (whether at the stated maturity, by
acceleration or otherwise), such overdue amount shall bear interest at a rate
per annum equal to the rate that would otherwise be applicable thereto pursuant
to the foregoing provisions of this Section plus 2% or, if higher, in the case
of amounts required to be paid in U.S. Dollars, the rate described in paragraph
(b) of this Section plus 2%.
(e) Interest shall be payable in arrears on each Interest
Payment Date, provided that interest accruing pursuant to paragraph (d) of this
Section shall be payable from time to time on demand.
SECTION VI.02. Conversion and Continuation Options. (a) The
Company may elect from time to time to convert outstanding Eurodollar Loans of
any Class (in whole or in part) to Base Rate Loans of the same Class by giving
the Administrative Agent at least two Business Days' prior irrevocable notice of
such election, provided that any such conversion of Eurodollar Loans may only be
made on the last day of an Interest Period with respect thereto. The Company may
elect from time to time to convert outstanding Base Rate Loans (other than Swing
Line Loans) of any Class (in whole or in part) to Eurodollar Loans of the same
Class by giving the Administrative Agent at least three Business Days' prior
irrevocable notice of such election. Any such notice of conversion to Eurodollar
Loans shall specify the length of the initial Interest Period or Interest
Periods therefor. Upon receipt of any such notice the Administrative Agent shall
promptly notify each Lender thereof. All or any part of outstanding Eurodollar
Loans and Base Rate Loans may be converted as provided herein, provided that (i)
no Base Rate Loan may be converted into a Eurodollar Loan when any Default or
Event of Default has occurred and is continuing and the Administrative Agent or
the Required Lenders have determined that such conversion is not appropriate,
(ii) any such conversion may only be made
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<PAGE> 53
if, after giving effect thereto, Section 6.03 shall not have been violated,
(iii) no Base Rate Loan of any Class may be converted into a Eurodollar Loan
after the date that is one month prior to the Revolving Credit Termination Date
(in the case of Revolving Credit Loans) or the date of final maturity of the
Loans of such Class (in the case of Term Loans) and (iv) Swing Line Loans may
not be converted to Eurodollar Loans.
(b) Any Eurodollar Loans may be continued as such upon the
expiration of the then current Interest Period with respect thereto by the
Company giving notice to the Administrative Agent of the length of the next
Interest Period to be applicable to such Loans in accordance with the applicable
provisions of the term "Interest Period" set forth in Section 1.01, provided
that no Eurodollar Loan may be continued as such (i) when any Default or Event
of Default has occurred and is continuing and the Administrative Agent or the
Required Lenders have determined that such continuation is not appropriate, (ii)
if, after giving effect thereto, Section 6.03 would be contravened or (iii)
after the date that is one month prior to the Revolving Credit Termination Date,
and provided, further, that if the Company shall fail to give such notice or if
such continuation is not permitted pursuant to the preceding proviso such
Eurodollar Loans shall be automatically converted to Base Rate Loans on the last
day of such then expiring Interest Period.
(c) Any Multicurrency Loans may be continued as such upon the
expiration of the then current Interest Period with respect thereto by the
relevant Borrower giving the Administrative Agent at least two Business Days'
prior irrevocable notice of such election, provided, that if the relevant
Borrower shall fail to give such notice or if any Default or Event of Default
has occurred and is continuing and the Administrative Agent or the Required
Lenders have determined that such continuation would not be appropriate, such
Multicurrency Loans shall automatically be continued for an Interest Period of
one month.
SECTION VI.03. Minimum Amounts of Tranches. All borrowings,
conversions and continuations of Loans hereunder and all selections of Interest
Periods hereunder shall be in such amounts and be made pursuant to such
elections so that, immediately after giving effect thereto, (a) the aggregate
principal amount of the Eurodollar Loans comprising each Tranche shall be equal
to $10,000,000 or a whole multiple of $1,000,000 in excess thereof, (b) the
aggregate principal amount of the Multicurrency Loans comprising each Tranche
shall be in an amount which is, or of which the U.S. Dollar Equivalent is, at
least $5,000,000 and (c) there shall not be more than 25 Tranches at any one
time outstanding.
SECTION VI.04. Optional and Mandatory Prepayments. (a) The
Company may at any time and from time to time prepay Revolving Credit Loans,
Swing Line Loans and/or Term Loans, in whole or in part, upon at least three
Business Days' irrevocable notice to the Administrative Agent (in the case of
Eurodollar Loans) and at least one Business Day's irrevocable notice to the
Administrative Agent (in the case of Base Rate Loans), specifying the date and
amount of prepayment, which Class of Loans will be prepaid, and whether the
prepayment is of Eurodollar Loans, Base Rate Loans or a combination thereof,
and, if a combination thereof, the amount allocable to each; provided, the Swing
Line Loans may be prepaid without prior notice. Upon the receipt of any such
notice the Administrative Agent shall promptly notify each Lender thereof. If
any such notice is given, the amount specified in such
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<PAGE> 54
notice shall be due and payable on the date specified therein, together with any
amounts payable pursuant to Section 6.12. Partial prepayments of Loans of any
Class shall be in an aggregate principal amount of $10,000,000 or a whole
multiple of $1,000,000 in excess thereof. Partial prepayments of the Swing Line
Loans shall be in aggregate principal amount of $1,000,000 or a whole multiple
of $100,000 in excess thereof.
(b) The Borrowers may at any time and from time to time
prepay, without premium or penalty, the Multicurrency Loans, in whole or in
part, upon at least three Business Days' irrevocable notice to the
Administrative Agent specifying the date and amount of prepayment. Upon the
receipt of any such notice, the Administrative Agent shall promptly notify each
Multicurrency Lender thereof. If any such notice is given, the amount specified
in such notice shall be due and payable on the date specified therein. Partial
prepayments of Multicurrency Loans shall be in an aggregate principal amount of
which the U.S. Dollar Equivalent is at least $5,000,000.
(c) (i) If, at any time during the Revolving Credit Commitment
Period, for any reason the Aggregate Committed Outstandings of all Revolving
Credit Lenders exceed the Aggregate Revolving Credit Commitments then in effect,
(A) the Company shall, without notice or demand, immediately prepay the Swing
Line Loans and the Revolving Credit Loans and/or (B) the Borrowers shall,
without notice or demand, immediately prepay the Multicurrency Loans such that
the sum of (I) the aggregate principal amount of the Swing Line Loans and the
Revolving Credit Loans so prepaid and (II) the U.S. Dollar Equivalent of the
aggregate principal amount of the Multicurrency Loans so prepaid, equals or
exceeds the amount of such excess.
(ii) If, at any time during the Revolving Credit Commitment
Period, for any reason either (A) the Aggregate Committed Outstandings of all
Multicurrency Lenders exceed the aggregate Revolving Credit Commitments of the
Multicurrency Lenders or (B) the Aggregate Multicurrency Outstandings exceed the
aggregate Multicurrency Commitments, (I) the Company shall, without notice or
demand, immediately prepay the Revolving Credit Loans and/or, as applicable,
(II) the Borrowers shall, without notice or demand, immediately prepay
Multicurrency Loans in amounts such that the sum of (x) the aggregate principal
amount of the Revolving Credit Loans so prepaid and (y) the U.S. Dollar
Equivalent of the Multicurrency Loans so prepaid, equals or exceeds the amount
of such excess.
(d) Unless the Required Prepayment Lenders and the Required
Lenders shall otherwise agree, if any Capital Stock or Indebtedness (other than
Indebtedness permitted by paragraphs (a) through (c), paragraphs (e) through (g)
and paragraph (i) of Section 10.05 as in effect prior to the Covenant Transition
Date) shall be issued or incurred by the Company or any of its Subsidiaries at
any time after November 30, 1997, an amount equal to 100% of the Net Cash
Proceeds thereof shall be applied on the date of such issuance or Incurrence
toward the prepayment of the Term Loans as set forth in Section 6.08(b);
provided, that, notwithstanding the foregoing:
(i) on the Business Day immediately preceding the
Initial Revolving Credit Funding Date (or on such earlier date
as the Company shall elect), the Company shall reduce the Term
Loan Commitments (in the same order as
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prepayments of the Term Loans are to be applied pursuant to
Section 6.08(b)) by an amount equal to (A) the Net Cash
Proceeds received by the Company from the issuance on December
1, 1997 of the $500,000,000 aggregate liquidation amount of 7%
Trust Convertible Preferred Securities and (B) the Net Cash
Proceeds of any subsequent issuance prior to the Initial
Revolving Credit Funding Date of Capital Stock yielding Gross
Cash Proceeds in an amount which, together with the Gross Cash
Proceeds of all prior such issuances during the Reduction
Period, aggregates less than $875,000,000;
(ii) if subsequent to December 1, 1997 and prior to
the Initial Term Loan Funding Date the Company receives Gross
Cash Proceeds from the issuance of its Capital Stock in an
amount which, together with the amount of Gross Cash Proceeds
received in all prior Capital Stock issuance transactions
consummated during the Reduction Period, aggregates
$875,000,000 or more, the Company may, on the Business Day
immediately preceding the Initial Revolving Credit Funding
Date (or on such earlier date as the Company shall elect),
reduce the Senior Subordinated Bridge Loan Commitments by an
aggregate amount up to the amount of the Net Cash Proceeds of
such subsequent issuance, and the Term Loan Commitments shall
be reduced, in the same order as prepayments of the Term Loans
are to be applied pursuant to Section 6.08(b), by an amount
equal to the excess of such Net Cash Proceeds over the amount
by which the Company has reduced the Senior Subordinated
Bridge Loan Commitments pursuant to this clause) (such
reduction of the Term Loan Commitments to occur simultaneously
with any reduction of the Senior Subordinated Bridge Loan
Commitments and in any event not later than the Business Day
immediately preceding the Initial Revolving Credit Funding
Date);
(iii) if on or after the Initial Term Loan Funding
Date the Company receives Gross Cash Proceeds from the
issuance of its Capital Stock in an amount which, together
with the amount of Gross Cash Proceeds received in the prior
Capital Stock issuance transactions consummated during the
Reduction Period, aggregates $875,000,000 or more, the Company
may apply the Net Cash Proceeds of such issuance to prepay the
Senior Subordinated Debt, and the remainder of such Net Cash
Proceeds not so applied shall be applied on the date of
receipt thereof to prepay the Term Loans as set forth in
Section 6.08(b);
(iv) Net Cash Proceeds of Subordinated Debt (other
than Senior Subordinated Debt) issued prior to the date of
repayment in full of the Interim Term Loans and the Senior
Subordinated Debt shall be applied on the date of receipt
thereof toward the prepayment of the Interim Term Loans or, at
the Company's option (if no Default or Event of Default is in
existence), the Senior Subordinated Debt, and after the
repayment in full of the Interim Term Loans, the Company shall
not be required to apply proceeds of Subordinated Debt toward
prepayment of the Loans;
(v) the Company shall not be required to make
mandatory prepayments
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with the proceeds of Capital Stock issued to employees
pursuant to stock option plans or similar arrangements, or
Capital Stock issued as consideration for acquisitions made
by the Company and its Subsidiaries;
(vi) after the Interim Term Loans have been repaid in
full, the Company shall not be required to make mandatory
prepayments with proceeds of issuances by the Company of
Capital Stock or Subordinated Debt, and the Company may use
such Net Cash Proceeds to prepay the Senior Subordinated Debt
or for other corporate purposes to the extent not prohibited
hereunder; and
(vii) after the Collateral Release Date, the Company
shall not be required to make mandatory prepayments with the
proceeds of Indebtedness.
(e) Unless the Required Prepayment Lenders and the Required
Lenders shall otherwise agree, if on any date the Company or any of its
Subsidiaries shall receive Net Cash Proceeds from any Asset Sale or Recovery
Event then, unless a Reinvestment Notice shall be delivered in respect thereof,
the Asset Sale Prepayment Percentage of such Net Cash Proceeds shall be applied
on such date toward the prepayment of the Term Loans as set forth in Section
6.08(b); provided, that, notwithstanding the foregoing, (i) the aggregate Net
Cash Proceeds of Asset Sales that may be excluded from the foregoing requirement
pursuant to a Reinvestment Notice shall not exceed $35,000,000 in any fiscal
year of the Company and (ii) on each Reinvestment Prepayment Date, an amount
equal to the Reinvestment Prepayment Amount with respect to the relevant
Reinvestment Event shall be applied toward the prepayment of the Term Loans as
set forth in Section 6.08(b); and provided, further that Net Cash Proceeds of
any Asset Sale made by the Target or its Subsidiaries in order to comply with
antitrust requirements shall not be required to be applied toward prepayment of
the Term Loans until the date which is six months after the date of such Asset
Sale.
(f) Unless the Required Prepayment Lenders and the Required
Lenders shall otherwise agree, if, for any fiscal year of the Company commencing
with the fiscal year ending December 31, 1998, there shall be Excess Cash Flow,
the Company shall, on the relevant Excess Cash Flow Application Date, apply the
Excess Cash Flow Prepayment Percentage of such Excess Cash Flow toward the
prepayment of the Term Loans as set forth in Section 6.08(b). Each such
prepayment shall be made on a date (an "Excess Cash Flow Application Date") no
later than five days after the earlier of (i) the date on which the financial
statements of the Company referred to in Section 9.01(a), for the fiscal year
with respect to which such prepayment is made, are required to be delivered to
the Lenders and (ii) the date such financial statements are actually delivered.
(g) Each prepayment of Loans pursuant to this Section 6.04
shall be accompanied by accrued and unpaid interest on the amount prepaid to the
date of prepayment and any amounts payable under Section 6.12 in connection with
such prepayment.
(h) Notwithstanding the foregoing, mandatory prepayments of
Revolving Credit Loans or Multicurrency Loans that would otherwise be required
pursuant to this Section 6.04 solely as a result of fluctuations in Exchange
Rates from time to time shall only be required to be
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made pursuant to this Section 6.04 on the last Business Day of each month on the
basis of the Exchange Rate in effect on such Business Day.
(i) Prepayments of any Class of Loans pursuant to this Section
6.04 shall be applied as follows: (i) in the case of prepayments made by the
Company, first, to prepay Base Rate Loans of such Class then outstanding and
second, to prepay Eurodollar Loans of such Class then outstanding and (ii) in
case of prepayments of Multicurrency Loans made by a Borrower, to prepay
Multicurrency Loans borrowed by such Borrower. Optional prepayments of the
Tranche A Term Loans or the Tranche B Term Loans shall be applied to the
installments thereof in the direct order of scheduled maturity. Mandatory
prepayments of the Tranche A Term Loans or the Tranche B Term Loans shall be
applied to the installments thereof ratably in accordance with the then
outstanding amounts thereof.
(j) The Company shall prepay all Swing Line Loans then
outstanding simultaneously with each borrowing of Revolving Credit Loans.
SECTION VI.05. Facility Fees; Commitment Fee; Other Fees. (a)
The Company agrees to pay to the Administrative Agent for the account of each
Revolving Credit Lender, a facility fee for the period from and including
September 26, 1997 to but excluding October 15, 1997, computed at the Facility
Fee Rate on the daily average amount of such Lender's Revolving Credit
Commitment under the September 26, 1997 Credit Agreement (drawn and undrawn).
The Company agrees to pay to the Administrative Agent for the account of each
Revolving Credit Lender, a facility fee for the period from and including
October 15, 1997 to but excluding the Revolving Credit Termination Date (or such
earlier date on which the Revolving Credit Commitments shall terminate as
provided herein), computed at the Facility Fee Rate on the daily average amount
of such Lender's Revolving Credit Commitment (drawn and undrawn). Such facility
fees shall be payable quarterly in arrears on the last day of each March, June,
September and December and on the Revolving Credit Termination Date or such
earlier date on which the Revolving Credit Commitments shall terminate as
provided herein, commencing on the first of such dates to occur after the date
hereof.
(b) The Company agrees to pay to the Administrative Agent for
the account of each Term Loan Lender, a commitment fee for the period from and
including September 26, 1997 to but excluding October 15, 1997, computed at the
rate of .50% per annum on the daily average undrawn amount of such Term Loan
Lender's Term Loan Commitments under the September 26, 1997 Credit Agreement.
The Company agrees to pay to the Administrative Agent for the account of each
Term Loan Lender, a commitment fee for the period from and including October 15,
1997 to but excluding the earlier of the last day of the Term Loan Commitment
Period or the date on which the Term Loan Commitments are fully utilized or
terminated, computed at the rate of .50% per annum on the daily average undrawn
amount of such Term Loan Lender's Term Loan Commitments. Such commitment fees
shall be payable quarterly in arrears on the last day of each March, June,
September and December and on the date on which the Term Loan Commitments are
fully utilized or terminated, commencing on the first of such dates to occur
after the date hereof.
(c) The Company shall pay (without duplication of any other
fee payable under
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this Section 6.05) to Chase, for its own account, fees in the amounts and on
the dates separately agreed to by the Company and Chase.
(d) The Company shall (without duplication of any other fee
payable under this Section 6.05) pay to the Administrative Agent, for its own
amount, fees in the amounts and on the dates separately agreed to by the Company
and the Administrative Agent.
SECTION VI.06. Computation of Interest and Fees. (a) Interest
based on the Eurodollar Rate, the Eurocurrency Rate or (when it is based on the
Federal Funds Effective Rate) the Base Rate shall be calculated on the basis of
a 360-day year for the actual days elapsed; and facility fees and interest
(other than as specified above) shall be calculated on the basis of a 365- (or
366-, as the case may be) day year for the actual days elapsed. The
Administrative Agent shall as soon as practicable notify the Company and the
Lenders of each determination of a Eurodollar Rate or a Eurocurrency Rate. Any
change in the interest rate on a Loan resulting from a change in the Base Rate
or a change in the Prime Rate shall become effective as of the opening of
business on the day on which such change becomes effective provided that such
change becomes effective prior to 5:00 p.m., New York City time, on such day.
The Administrative Agent shall as soon as practicable notify the Company and the
Lenders of the effective date and the amount of each such change in the Base
Rate.
(b) Each determination of an interest rate by the
Administrative Agent pursuant to any provision of this Agreement shall be
conclusive and binding on the Borrowers and the Lenders in the absence of
manifest error. The Administrative Agent shall, at the request of a Borrower or
any Lender, deliver to such Borrower or such Lender a statement showing in
reasonable detail the quotations and calculations used by the Administrative
Agent in determining any interest rate pursuant to Section 6.01(a) or (c).
(c) (i) If any Domestic Reference Lender shall for any reason
no longer have a Revolving Credit Commitment or any Revolving Credit Loans, such
Domestic Reference Lender shall thereupon cease to be a Domestic Reference
Lender, and if, as a result, there shall only be one Domestic Reference Lender
remaining (at any time after the Syndication Date), the Administrative Agent
(after consultation with the Company and the Lenders) shall, by notice to the
Company and the Lenders, designate another Lender as a Domestic Reference Lender
so that there shall at all times be at least two Domestic Reference Lenders.
(ii) If any Multicurrency Reference Lender shall for any
reason no longer have a Multicurrency Commitment or any Multicurrency Loans,
such Multicurrency Reference Lender shall thereupon cease to be a Multicurrency
Reference Lender, and if, as a result, there shall only be one Multicurrency
Reference Lender remaining (at any time after the Syndication Date), the
Administrative Agent (after consultation with the Company and the Lenders)
shall, by notice to the Company and the Lenders, designate another Multicurrency
Lender as a Multicurrency Reference Lender so that there shall at all times be
at least two Multicurrency Reference Lenders.
(d) Each Reference Lender shall use its best efforts to
furnish quotations of rates to the Administrative Agent as contemplated hereby.
If any of the Reference Lenders shall be unable or shall otherwise fail to
supply such rates to the Administrative Agent upon its request,
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the rate of interest shall, subject to the provisions of Section 6.07, be
determined on the basis of the quotations of the remaining applicable Reference
Lenders or Reference Lender, as applicable.
SECTION VI.07. Inability to Determine Interest Rate. If prior
to the first day of any Interest Period:
(a) the Administrative Agent shall have determined
(which determination shall be conclusive and binding upon the
Borrowers) that, by reason of circumstances affecting the relevant
market generally, adequate and reasonable means do not exist for
ascertaining the Eurodollar Rate or the Eurocurrency Rate with respect
to the currency in which a Loan or a requested Loan is denominated (the
"Affected Currency"), as the case may be, for such Interest Period, or
(b) the Administrative Agent has received notice from
the Required Lenders or the Majority Multicurrency Lenders, as the case
may be, that the Eurodollar Rate or Eurocurrency Rate, as the case may
be, determined or to be determined with respect to the Affected
Currency for such Interest Period will not adequately and fairly
reflect the cost to such Lenders (as certified by such Lenders) of
making or maintaining their Eurodollar Loans or Multicurrency Loans, as
the case may be, during such Interest Period,
the Administrative Agent shall give telecopy or telephonic notice thereof to the
Company and the Lenders as soon as practicable thereafter. If such notice is
given (i) any Eurodollar Loans or Multicurrency Loans, as the case may be,
requested to be made on the first day of such Interest Period shall be made as
Base Rate Loans in U.S. Dollars, (ii) any Revolving Credit Loans that were to
have been converted on the first day of such Interest Period to or continued as
Eurodollar Loans shall be converted to or continued as Base Rate Loans, (iii)
any outstanding Eurodollar Loans shall be converted on the first day of such
Interest Period to Base Rate Loans and (iv) any Multicurrency Loans to which
such Interest Period relates shall be repaid on the first day of such Interest
Period. Until such notice has been withdrawn by the Administrative Agent, no
further Eurodollar Loans or Multicurrency Loans shall be made or continued as
such, nor shall the Company have the right to convert Base Rate Loans to
Eurodollar Loans, as the case may be, provided that Loans may continue to be
made, converted or continued, as the case may be, in U.S. Dollars or Available
Foreign Currencies other than the Affected Currency.
SECTION VI.08. Pro Rata Treatment and Payments. (a) (i) Except
as provided in Section 2.05, each borrowing of Revolving Credit Loans by the
Company from the Lenders hereunder shall be made pro rata according to the
Funding Commitment Percentages of the Lenders in effect on the date of such
borrowing. Each payment by the Company on account of any facility fee hereunder
shall be allocated by the Administrative Agent among the Lenders in accordance
with the respective amounts which such Lenders are entitled to receive pursuant
to Section 6.05(a). Any reduction of the Revolving Credit Commitments of the
Lenders shall be allocated by the Administrative Agent among the Lenders pro
rata according to the Revolving Credit Commitment Percentages of the Lenders.
Except as provided in Section 2.05, each payment (other than any optional
prepayment) by the Company on account of principal of the Revolving Credit Loans
shall be allocated by the Administrative Agent pro rata according to the
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respective principal amounts thereof then due and owing to each Revolving Credit
Lender. Each optional prepayment by the Company on account of principal of or
interest on the Revolving Credit Loans shall be allocated by the Administrative
Agent pro rata according to the respective outstanding principal amounts
thereof.
(ii) Each borrowing by the Company of Term Loans hereunder,
each payment by the Company on account of any commitment fee and any reduction
of the Term Loan Commitments of the Lenders shall be made pro rata according to
the respective Tranche A Term Loan Percentages, Tranche B Term Loan Percentages
or Interim Term Loan Percentages, as the case may be, of the relevant Lenders.
Each payment (including each prepayment) by the Company on account of principal
of and interest on the Term Loans shall be made pro rata according to the
respective outstanding principal amounts of the Term Loans then held by the Term
Loan Lenders (except as otherwise provided in Section 6.08(b)). The amount of
each principal prepayment of the Tranche A Term Loans, Tranche B Term Loans and
Interim Term Loans, as the case may be, shall be applied to reduce the
installments thereof pro rata based upon the then remaining principal amount
thereof. Amounts prepaid on account of the Term Loans may not be reborrowed.
(iii) All payments (including prepayments) to be made by the
Company hereunder in respect of amounts denominated in Dollars, whether on
account of principal, interest, fees or otherwise, shall be made without set-off
or counterclaim and shall be made prior to 12:00 Noon, New York City time, on
the due date thereof to the Administrative Agent, for the account of the
Lenders, at the Administrative Agent's office specified in Section 14.02, in
Dollars and in immediately available funds. The Administrative Agent shall
distribute such payments to the Lenders entitled to receive the same promptly
upon receipt in like funds as received.
(iv) Each borrowing of Multicurrency Loans by any Borrower
shall be made, and any reduction of the Multicurrency Commitments shall be
allocated by the Administrative Agent, pro rata according to the Multicurrency
Commitment Percentages of the Multicurrency Lenders in effect on the date of
such Loans or reductions. Each payment (including each prepayment) by a Borrower
on account of principal of and interest on Multicurrency Loans shall be
allocated by the Administrative Agent pro rata according to the respective
principal amounts of the Multicurrency Loans then due and owing by such Borrower
to each Multicurrency Lender.
(v) All payments (including prepayments) to be made by a
Borrower on account of Multicurrency Loans hereunder, whether on account of
principal, interest, fees or otherwise, shall be made without set-off or
counterclaim and shall be made prior to 12:00 Noon, London time, on the due date
thereof to the Administrative Agent, for the account of the Multicurrency
Lenders, at the payment office for the currency of such Multicurrency Loans
specified from time to time by the Administrative Agent by notice to the
Multicurrency Lenders, in the currency of such Multicurrency Loans and in
immediately available funds. The Administrative Agent shall distribute such
payments to the Multicurrency Lenders entitled to receive the same promptly upon
receipt in like funds as received.
(vi) If any payment hereunder (other than payments on the
Eurodollar Loans or the Multicurrency Loans) becomes due and payable on a day
other than a Business Day, the
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maturity of such payment shall be extended to the next succeeding Business Day,
and, with respect to payments of principal, interest thereon shall be payable at
the then applicable rate during such extension. If any payment on a Eurodollar
Loan or a Multicurrency Loan becomes due and payable on a day other than a
Business Day, the maturity of such payment shall be extended to the next
succeeding Business Day (and, with respect to payments of principal, interest
thereon shall be payable at the then applicable rate during such extension)
unless the result of such extension would be to extend such payment into another
calendar month, in which event such payment shall be made on the immediately
preceding Business Day.
(b) Notwithstanding anything to the contrary in Sections 6.04
or 6.08, (i) all optional prepayments and mandatory prepayments of the Term
Loans shall be applied first to the Interim Term Loans, and after repayment in
full of the Interim Term Loans, to prepay the Tranche A Term Loans and Tranche B
Term Loans ratably and (ii) so long as any Tranche A Term Loans are outstanding,
each Tranche B Term Loan Lender may, at its option, decline any optional
prepayment or mandatory payment applicable to the Tranche B Term Loans of such
Lender; accordingly, with respect to the amount of any optional prepayment or
mandatory prepayment described in Section 6.04 that is allocated to Tranche B
Term Loans (such amounts, the "Tranche B Prepayment Amount"), at any time when
Tranche A Term Loans remain outstanding, the Company will, (i) in the case of
any optional prepayment which the Company wishes to make, not later than 10
Business Days prior to the date on which the Company wishes to make such
optional prepayment, and (ii) in the case of any mandatory prepayment required
to be made pursuant to Section 6.04, in lieu of applying such amount to the
prepayment of Tranche B Term Loans, as provided in paragraph Section 6.04, on
the date specified in Section 6.04 for such prepayment, give the Administrative
Agent telephonic notice (promptly confirmed in writing) requesting that the
Administrative Agent prepare and provide to each Tranche B Lender a notice
(each, a "Prepayment Option Notice") as described below. As promptly as
practicable after receiving such notice from the Company, the Administrative
Agent will send to each Tranche B Lender a Prepayment Option Notice, which shall
be in the form of Exhibit K, and shall include an offer by the Company to prepay
on the date (each a "Prepayment Date") that is 5 Business Days after the date of
the Prepayment Option Notice, the Tranche B Term Loans of such Lender by an
amount equal to the portion of the Prepayment Amount indicated in such Lender's
Prepayment Option Notice as being applicable to such Lender's Tranche B Term
Loans. On the Prepayment Date, (i) the Company shall pay to the Administrative
Agent the aggregate amount necessary to prepay that portion of the outstanding
Tranche B Term Loans in respect of which Tranche B Lenders have accepted
prepayment as described above (such Lenders, the "Accepting Lenders"), and such
amount shall be applied to prepay the Tranche B Term Loans of each Accepting
Lender and (ii) the Company shall pay to the Administrative Agent an amount
equal to the portion of the Tranche B Prepayment Amount not accepted by the
Accepting Lenders, and such amount shall be applied to the prepayment of the
Tranche A Term Loans.
(c) Unless the Administrative Agent shall have been notified
in writing by any Lender prior to a Borrowing Date that such Lender will not
make the amount that would constitute its share of such borrowing available to
the Administrative Agent, the Administrative Agent may assume that such Lender
is making such amount available to the Administrative Agent, and the
Administrative Agent may, in reliance upon such assumption, make available to
the applicable Borrower a corresponding amount. If such amount is not made
available to the
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Administrative Agent by the required time on the Borrowing Date therefor, such
Lender shall pay to the Administrative Agent, on demand, such amount with
interest thereon at a rate per annum equal to (i) the daily average Federal
Funds Effective Rate (in the case of a borrowing of Revolving Credit Loans or
Term Loans) and (ii) the Administrative Agent's reasonable estimate of its
average daily cost of funds (in the case of a borrowing of Multicurrency Loans),
in each case for the period until such Lender makes such amount immediately
available to the Administrative Agent. A certificate of the Administrative Agent
submitted to any Lender with respect to any amounts owing under this Section
shall be conclusive in the absence of manifest error. If such Lender's share of
such borrowing is not made available to the Administrative Agent by such Lender
within three Business Days of such Borrowing Date, the applicable Borrower shall
repay such Lender's share of such borrowing (together with interest thereon from
the date such amount was made available to such Borrower (i) at the rate per
annum applicable to Base Rate Loans hereunder (in the case of a borrowing of
Revolving Credit Loans or Term Loans) or (ii) the Administrative Agent's
reasonable estimate of its average daily cost of funds plus the Applicable
Margin applicable to Multicurrency Loans (in the case of a borrowing of
Multicurrency Loans)) to the Administrative Agent not later than three Business
Days after receipt of written notice from the Administrative Agent specifying
such Lender's share of such borrowing that was not made available to the
Administrative Agent.
SECTION VI.09. Illegality. Notwithstanding any other provision
herein, if the adoption of or any change in any Requirement of Law or in the
interpretation or application thereof shall make it unlawful for any Lender to
make or maintain Eurodollar Loans or Multicurrency Loans, as the case may be, as
contemplated by this Agreement, (a) such Lender shall immediately notify the
Company and the Agent, (b) the commitment of such Lender hereunder to make
Eurodollar Loans or Multicurrency Loans, as the case may be, continue Eurodollar
Loans or Multicurrency Loans, as the case may be, as such and convert Base Rate
Loans to Eurodollar Loans shall forthwith be suspended until such time as it
shall no longer be unlawful for such Lender to make or maintain the affected
Loans, (c) as applicable, such Lender's Loans then outstanding as Eurodollar
Loans, if any, shall be converted automatically to Base Rate Loans on the
respective last days of the then current Interest Periods with respect to such
Eurodollar Loans or within such earlier period as may be required by law and (d)
as applicable, such Lender's Multicurrency Loans shall be prepaid on the last
day of the then current Interest Period with respect thereto. If any such
conversion of a Eurodollar Loan or a Multicurrency Loan, as the case may be,
occurs on a day which is not the last day of the then current Interest Period
with respect thereto, the Company shall pay to such Lender such amounts, if any,
as may be required pursuant to Section 6.12.
SECTION .10. Requirements of Law. (a) If the adoption of or
any change in any Requirement of Law or in the interpretation or application
thereof or compliance by any Lender with any request or directive (whether or
not having the force of law) from any central bank or other Governmental
Authority, made subsequent to the date hereof:
(i) shall subject such Lender to any tax of any kind
whatsoever with respect to this Agreement, any Note, any Eurodollar
Loan made by it or any Multicurrency Loan made by it or its obligation
to make any Eurodollar Loan or Multicurrency Loan or change the basis
of taxation of payments to such Lender in respect
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thereof (except for taxes covered by Section 6.11 and changes in rate
of tax on the overall net income of such Lender);
(ii) shall impose, modify or hold applicable any reserve,
special deposit, compulsory loan or similar requirement against assets
held by, deposits or other liabilities in or for the account of,
advances, loans or other extensions of credit by, or any other
acquisition of funds by, any office of such Lender which is not
otherwise included in the determination of the Eurodollar Rate or the
Eurocurrency Rate hereunder, including, without limitation, the
imposition of any reserves with respect to Eurocurrency Liabilities
under Regulation D of the Board; or
(iii) shall impose on such Lender any other condition;
and the result of any of the foregoing is to increase the cost to such Lender,
by an amount which such Lender deems to be material, of making, converting into,
continuing or maintaining Eurodollar Loans or Multicurrency Loans or to reduce
any amount receivable hereunder in respect thereof, then, in any such case, the
applicable Borrower shall promptly pay such Lender, upon its demand, any
additional amount or amounts as will compensate such Lender for such increased
cost or reduced amount receivable. If any Lender becomes entitled to claim any
additional amounts pursuant to this Section, it shall promptly notify the
Company (with a copy to the Administrative Agent) of the event by reason of
which it becomes so entitled. A certificate as to any additional amounts payable
pursuant to this Section submitted by such Lender to the Company (with a copy to
the Administrative Agent) shall be conclusive in the absence of manifest error.
This covenant shall survive the termination of this Agreement and the payment of
the Loans and all other amounts payable hereunder.
(b) If any Lender shall have determined that the adoption of
or any change in any Requirement of Law regarding capital adequacy or in the
interpretation or application thereof or compliance by such Lender or any
corporation controlling such Lender with any request or directive regarding
capital adequacy (whether or not having the force of law) from any Governmental
Authority made subsequent to the date hereof shall have the effect of reducing
the rate of return on such Lender's or such corporation's capital as a
consequence of its obligations hereunder to a level below that which such Lender
or such corporation could have achieved but for such adoption, change or
compliance (taking into consideration such Lender's or such corporation's
policies with respect to capital adequacy) by an amount deemed by such Lender to
be material, then from time to time, after submission by such Lender to the
Company (with a copy to the Administrative Agent) of a prompt written request
therefor, the Company shall promptly pay to such Lender such additional amount
or amounts as will compensate such Lender for such reduction.
(c) No Lender shall be entitled to compensation under this
Section 6.10 for any costs incurred or reductions suffered with respect to any
date that it has such costs unless it shall have notified the Company that it
will demand compensation for such costs or reductions under paragraph (a) or (b)
above, not more than 120 days after the later of (i) such date and (ii) the date
on which it shall have become aware of such costs or reductions; provided that
the foregoing shall in no way operate in derogation of the undertaking contained
in the penultimate sentence of
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this paragraph (c). Notwithstanding any other provision of this Section 6.10, no
Lender shall demand compensation for any increased cost or reduction referred to
above if it shall not at the time be the general policy or practice of such
Lender to demand such compensation in similar circumstances under comparable
provisions of other credit agreements. In the event that any Lender determines
that any event or circumstances that will lead to a claim under this Section
6.10 has occurred or will occur, such Lender will use its best efforts to so
notify the Company; provided, that any failure to provide such notice shall in
no way impair the rights of any Lender to demand and receive compensation under
this Section 6.10, but without prejudice to any claims of the Company for
compensation for actual damages sustained as a result of any failure to observe
this undertaking. The agreements of this Section shall survive the termination
of this Agreement and the payment of the Loans and all other amounts payable
hereunder.
SECTION .11. Taxes. (a) All payments of principal and interest
made by the Borrowers under this Agreement and any Note shall be made free and
clear of, and without deduction or withholding for or on account of, any present
or future income, stamp or other taxes, levies, imposts, duties, charges, fees,
deductions or withholdings, now or hereafter imposed, levied, collected,
withheld or assessed by any Governmental Authority, excluding income taxes and
franchise taxes (imposed in lieu of income taxes) imposed on the Administrative
Agent or any Lender as a result of a present or former connection between the
Administrative Agent or such Lender and the jurisdiction of the Governmental
Authority imposing such tax or any political subdivision or taxing authority
thereof or therein (other than any such connection arising solely from the
Administrative Agent or such Lender having executed, delivered or performed its
obligations or received a payment under, or enforced, this Agreement, any Note
or any other Loan Document). If any such non-excluded taxes, levies, imposts,
duties, charges, fees, deductions or withholdings ("Non-Excluded Taxes") are
required to be withheld from any amounts payable to the Administrative Agent or
any Lender hereunder or under any Note, the amounts so payable to the
Administrative Agent or such Lender shall be increased to the extent necessary
to yield to the Administrative Agent or such Lender (after payment of all
Non-Excluded Taxes) interest or any such other amounts payable hereunder at the
rates and in the amounts specified in this Agreement, provided, however, that
(i) the Company shall not be required to increase any such amounts payable to
any Lender that is not organized under the laws of the United States of America
or a state thereof if such Lender fails to comply with the requirements of
paragraph (b) of this Section, and (ii) a Foreign Subsidiary Borrower shall not
be required to increase any such amounts payable to any Lender if such Lender
fails to comply with the requirements of paragraph (c) of this Section. Whenever
any Non-Excluded Taxes are payable by a Borrower, as promptly as possible
thereafter such Borrower shall send to the Administrative Agent for its own
account or for the account of such Lender, as the case may be, a certified copy
of an original official receipt received by such Borrower showing payment
thereof. If a Borrower fails to pay any Non-Excluded Taxes when due to the
appropriate taxing authority or fails to remit to the Administrative Agent the
required receipts or other required documentary evidence, such Borrower shall
indemnify the Administrative Agent and the Lenders for any incremental taxes,
interest or penalties that may become payable by the Administrative Agent or any
Lender as a result of any such failure. The agreements in this Section shall
survive the termination of this Agreement and the payment of the Loans and all
other amounts payable hereunder.
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(b) Each Lender that is not incorporated or organized under
the laws of the United States of America or a state thereof shall:
(i) at least five Business Days before the date of the
initial payment to be made by the Company under this Agreement to such
Lender, deliver to the Company and the Administrative Agent (A) two
duly completed copies of United States Internal Revenue Service Form
1001 or 4224, or successor applicable form, as the case may be,
certifying that it is entitled to receive payments under this Agreement
without deduction or withholding of any United States federal income
taxes and (B) an Internal Revenue Service Form W-8 or W-9, or successor
applicable form, as the case may be, certifying that it is entitled to
an exemption from United States backup withholding tax;
(ii) deliver to the Company and the Administrative Agent
two further copies of any such form or certification at least five
Business Days before the date that any such form or certification
expires or becomes obsolete and after the occurrence of any event
requiring a change in the most recent form previously delivered by it
to the Administrative Agent and the Company;
(iii) obtain such extensions of time for filing and complete
such forms or certifications as may reasonably be requested by the
Company or the Administrative Agent; and
(iv) file amendments to such forms as and when required;
and each Lender (or Transferee) that is incorporated or organized under the laws
of the United States of America or a State thereof shall provide two properly
completed and duly executed copies of Form W-9, or successor applicable form, at
the times specified for delivery of forms under paragraph (b)(i) of this
Section, in each case unless an event (including, without limitation, any change
in treaty, law or regulation) has occurred after the date such Person becomes a
Lender hereunder which renders all such forms inapplicable or which would
prevent such Lender from duly completing and delivering any such form with
respect to it and such Lender so advises the Company and the Administrative
Agent; provided, however, that the Company may rely upon such forms provided to
the Company for all periods prior to the occurrence of such event. Each Person
that shall become a Lender or a Participant pursuant to Section 14.06 shall,
upon the effectiveness of the related transfer, be required to provide all of
the forms, certifications and statements required pursuant to this Section,
provided that in the case of such Participant, the obligations of such
Participant pursuant to this Section 6.11(b) shall be determined as if such
Participant were a Lender, except that such Participant shall furnish all such
required forms, certifications and statements to the Lender from which the
related participation shall have been purchased.
(c) Each Lender that is not incorporated or organized under
the laws of the jurisdiction under which a Foreign Subsidiary Borrower is
incorporated or organized shall, upon request by such Foreign Subsidiary
Borrower, within a reasonable period of time after such request, deliver to such
Foreign Subsidiary Borrower or the applicable governmental or taxing authority,
as the case may be, any form or certificate required in order that any payment
by such
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Foreign Subsidiary Borrower under this Agreement or any Notes to such Lender may
be made free and clear of, and without deduction or withholding for or on
account of any Non-Excluded Tax (or to allow any such deduction or withholding
to be at a reduced rate) imposed on such payment under the laws of the
jurisdiction under which such Foreign Subsidiary Borrower is incorporated or
organized, provided that such Lender is legally entitled to complete, execute
and deliver such form or certificate and such completion, execution or
submission would not materially prejudice the legal position of such Lender.
(d) No Lender shall be entitled to payment under this Section
6.11 unless it shall have notified the applicable Borrower that it will demand
such payment not more than 120 days after the date on which it shall become
aware that it was entitled to such payment provided that such notice requirement
shall in no way operate in derogation of the undertaking contained in the second
following sentence of this Section 6.11(d). Notwithstanding any other provision
of this Section 6.11, no Lender shall demand any payment under this Section 6.11
if it shall not at the time be the general policy or practice of such Lender to
demand such compensation in similar circumstances under comparable provisions of
other credit agreements. In the event that any Lender determines that any event
or circumstance that will lead to a claim by it under this Section 6.11 has
occurred or will occur, such Lender will use its best efforts to so notify the
Company provided that any failure to provide such notice shall in no way impair
the rights of any Lender to demand and receive compensation under this Section
6.11, but without prejudice to any claims of the Company for failure to observe
this undertaking.
SECTION .12. Indemnity. Each Borrower agrees to indemnify each
Lender and to hold each Lender harmless from any loss or expense which such
Lender may sustain or incur as a consequence of (a) default by such Borrower in
payment when due of the principal amount of or interest on any Eurodollar Loan
or Multicurrency Loan, (b) default by such Borrower in making a borrowing of,
conversion into or continuation of Eurodollar Loans or Multicurrency Loans after
such Borrower has given a notice requesting the same in accordance with the
provisions of this Agreement, (c) default by such Borrower in making any
prepayment after such Borrower has given a notice thereof in accordance with the
provisions of this Agreement or (d) the making by such Borrower of a prepayment
of Eurodollar Loans or Multicurrency Loans on a day which is not the last day of
an Interest Period with respect thereto, including, without limitation, in each
case, any such loss or expense arising from the reemployment of funds obtained
by it or from fees payable to terminate the deposits from which such funds were
obtained. Such indemnification may include an amount equal to the excess, if
any, of (i) the amount of interest which would have accrued on the amount so
prepaid, or not so borrowed, converted or continued, for the period from the
date of such prepayment or of such failure to borrow, convert or continue to the
last day of such Interest Period (or, in the case of a failure to borrow,
convert or continue, the Interest Period that would have commenced on the date
of such failure) in each case at the applicable rate of interest for such Loans
provided for herein (excluding, however, the Applicable Margin included therein,
if any) over (ii) the amount of interest (as reasonably determined by such
Lender) which would have accrued to such Lender on such amount by placing such
amount on deposit for a comparable period with leading banks in the interbank
eurodollar market. All payments required to be made by any Borrower to any
Lender under this Section 6.12 shall be made no later than 30 days after receipt
by such Borrower of a written notice from such Lender setting forth in
reasonable detail the basis upon
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which such Lender is entitled to receive such payments. This covenant shall
survive the termination of this Agreement and the payment of the Loans and all
other amounts payable hereunder.
SECTION .13. Use of Proceeds. The proceeds of the Revolving
Credit Loans and Multicurrency Loans shall be used (a) to refinance the Existing
Credit Agreement, (b) to pay fees and expenses incurred by the Borrowers in
connection with this Agreement and (c) for working capital and other general
corporate purposes of the Borrowers and their Subsidiaries, including
investments and acquisitions. The proceeds of the Term Loans shall be used in
accordance with Schedule 6.13 (a) to finance the acquisition of the Target
Shares, (b) to refinance existing indebtedness of the Target and (c) to pay fees
and expenses incurred in connection with the Tender Offer and this Agreement.
SECTION .14. Change of Lending Office; Replacement of Lenders.
(a) Each Lender agrees that if it makes any demand for payment under Section
6.10 or 6.11, or if any adoption or change of the type described in Section 6.09
shall occur with respect to it, it shall use reasonable efforts (consistent with
its internal policy and legal and regulatory restrictions and so long as such
efforts would not be disadvantageous to it, as determined in its sole
discretion) to designate a different lending office if the making of such a
designation would reduce or obviate the need for the Borrowers to make payments
under Section 6.10 or 6.11, or would eliminate or reduce the effect of any
adoption or change described in Section 6.09.
(b) If at any time Lender makes any demand for payment under
Section 6.10 or 6.11 as a result of any condition described in any such Section,
then the Borrowers may, if such condition continues to exist after such Lender
shall have used reasonable efforts pursuant to paragraph (a) of this Section
6.14 and on 10 Business Days' prior written notice to the Administrative Agent
and such Lender, replace such Lender by causing such Lender to (and such Lender
shall) assign pursuant to Section 14.06(c) all of its rights and obligations
under this Agreement to another Lender or other bank or financial institution
selected by the Company and acceptable to the Administrative Agent for a
purchase price equal to the outstanding principal amount of all Loans, accrued
interest, fees and other amounts owing to such Lender; provided that (i) the
Borrowers shall have no right to replace the Administrative Agent, (ii) neither
the Administrative Agent nor any Lender shall have any obligation to the
Borrowers to find a replacement Lender or other bank or financial institution,
(iii) such replacement must take place no later than 180 days after such Lender
shall have made any such demand for payment, (iv) in no event shall any Lender
hereby replaced be required to pay or surrender to such replacement Lender or
other bank or financial institution any of the fees received by such Lender
pursuant to this Agreement, (v) the Borrowers shall pay such amounts demanded
under Section 6.10 or 6.11 to such Lender, together with any amounts as may be
required pursuant to Section 6.12, prior to such Lender being replaced and the
payment of such amounts shall be a condition to the replacement of such Lender
and (vi) such Lender shall not be required to pay any fees required by Section
14.06(e) in connection with such replacement, which fees shall be paid by the
Company.
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ARTICLE VII. REPRESENTATIONS AND WARRANTIES
Each of the Company and the Foreign Subsidiary Borrowers
(insofar as the representations and warranties set forth below relate
respectively to such Foreign Subsidiary Borrower) represents and warrants to the
Administrative Agent and each Lender that:
SECTION VII.01. Financial Condition. (a) The consolidated
balance sheets of the Company and its consolidated Subsidiaries as at December
31, 1995 and December 31, 1996, respectively, and the related consolidated
statements of earnings, cash flows and shareholders' equity for the fiscal years
ended on such dates, reported on by Ernst & Young LLP, copies of which have
heretofore been furnished to each Lender, are complete and correct in all
material respects and present fairly the consolidated financial condition of the
Company and its consolidated Subsidiaries as at such dates, and the consolidated
results of their operations and their consolidated cash flows for the fiscal
years then ended. The unaudited consolidated balance sheet of the Company and
its consolidated Subsidiaries as at June 30, 1997 and the related unaudited
consolidated statements of earnings and of cash flows for the six-month period
ended on such date, certified by a Responsible Officer, copies of which have
heretofore been furnished to each Lender, are complete and correct and present
fairly the consolidated financial condition of the Company and its consolidated
Subsidiaries as at such date, and the consolidated results of their operations
and their consolidated cash flows for the six-month period then ended (subject
to normal year-end audit adjustments). All such financial statements, including
the related schedules and notes thereto, have been prepared in accordance with
GAAP applied consistently throughout the periods involved (except as approved by
such accountants or Responsible Officer, as the case may be, and as disclosed
therein). Neither the Company nor any of its consolidated Subsidiaries (taken as
a whole) had, at the date of the most recent balance sheet referred to above,
any material Guaranty, contingent liability or liability for taxes, or any
long-term lease or unusual forward or long-term commitment, including, without
limitation, any interest rate or foreign currency swap or exchange transaction,
which is not reflected in the foregoing statements or in the notes thereto.
During the period from December 31, 1996 to and including the date hereof there
has been no sale, transfer or other disposition by the Company or any of its
consolidated Subsidiaries of any material part of its business or property and
no purchase or other acquisition of any business or property (including any
capital stock of any other Person) material in relation to the consolidated
financial condition of the Company and its consolidated Subsidiaries at December
31, 1996, other than any such sale, transfer or other disposition or purchase or
acquisition that would have been permitted by this Agreement if this Agreement
had been in effect at all times during such period.
(b) The unaudited pro forma consolidated balance sheet of the
Company and its consolidated Subsidiaries as at June 30, 1997 (including the
notes thereto) (the "Pro Forma Balance Sheet"), copies of which have heretofore
been furnished to each Lender, has been prepared giving effect (as if such
events had occurred on such date) to (i) the consummation of the Acquisition,
(ii) the Loans to be made hereunder and the use of proceeds thereof and (iii)
the payment of fees and expenses in connection with the foregoing. The Pro Forma
Balance Sheet has been prepared based on the best information available to the
Company as of the date of delivery thereof, and presents fairly on a pro forma
basis the estimated financial position of the Company and its consolidated
Subsidiaries as at June 30, 1997, assuming that the events
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specified in the preceding sentence had actually occurred at such date.
(c) The consolidated balance sheets of the Target and its
consolidated Subsidiaries as at December 31, 1995 and December 31, 1996,
respectively, and the related consolidated statements of earnings, cash flows
and shareholders' equity for the fiscal years ended on such dates, reported on
by KPMG Audit plc, copies of which have heretofore been furnished to each
Lender, are, to the best of the Company's knowledge, complete and correct in all
material respects and, to the best of the Company's knowledge, present fairly
the consolidated financial condition of the Target and its consolidated
Subsidiaries as at such dates, and the consolidated results of their operations
and their consolidated cash flows for the fiscal years then ended. The unaudited
consolidated balance sheet of the Target and its consolidated Subsidiaries as at
June 30, 1997 and the related unaudited consolidated statements of earnings and
of cash flows for the six-month period ended on such date, copies of which have
heretofore been furnished to each Lender, are, to the best of the Company's
knowledge, complete and correct and, to the best of the company's knowledge,
present fairly the consolidated financial condition of the Target and its
consolidated Subsidiaries as at such date, and the consolidated results of their
operations and their consolidated cash flows for the six-month period then ended
(subject to normal year-end audit adjustments).
SECTION VII.02. No Change. Since December 31, 1996, (a) there
has been no development or event which has had or could reasonably be expected
to have a Material Adverse Effect, except as disclosed in the Company's Annual
Report on Form 10-K/A for fiscal year 1996 and (b) to the best of the Company's
knowledge, there has been no development or event which has had or could
reasonably be expected to have a material adverse effect on the business,
operations, property, condition (material or otherwise) or prospects of the
Target and its Subsidiaries taken as a whole.
SECTION VII.03. Corporate Existence; Compliance with Law. Each
of the Company and its Subsidiaries (a) is duly organized, validly existing and
in good standing under the laws of the jurisdiction of its organization except
to the extent that, with respect to those Subsidiaries that are not Borrowers
hereunder, the lack of such organization, existence or good standing could not,
in the aggregate, reasonably be expected to have a Material Adverse Effect, (b)
has the corporate or other power and authority, and the legal right, to own and
operate its property, to lease the property it operates as lessee and to conduct
the business in which it is currently engaged except to the extent that, with
respect to those Subsidiaries that are not Borrowers hereunder, the lack of such
power, authority or legal right could not, in the aggregate, reasonably be
expected to have a Material Adverse Effect, (c) is duly qualified as a foreign
corporation or other entity and in good standing under the laws of each
jurisdiction where its ownership, lease or operation of property or the conduct
of its business requires such qualification except to the extent that the
failure to qualify or be in good standing could not, in the aggregate,
reasonably be expected to have a Material Adverse Effect and (d) is in
compliance with all Requirements of Law except to the extent that the failure to
comply therewith could not, in the aggregate, reasonably be expected to have a
Material Adverse Effect.
SECTION VII.04. Corporate Power; Authorization; Enforceable
Obligations. Each Loan Party has the corporate or other power and authority;
and the legal right, to execute,
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deliver and perform the Loan Documents to which it is a party and, in
the case of each Borrower, to borrow hereunder and has taken all necessary
corporate or other action to authorize the borrowings on the terms and
conditions of this Agreement and the Notes to which it is a party and to
authorize the execution, delivery and performance of the Loan Documents to
which it is a party. Each of the Company and U.K. Acquisition II has the
corporate power and authority, and the legal right, to consummate the
Transactions. No consent or authorization of, filing with, notice to or other
act by or in respect of, any Governmental Authority or any other Person is
required with respect to the Company or any of its Subsidiaries in connection
with the borrowings hereunder of the consummation of the Transactions or, with
the execution, delivery, performance, validity or enforceability of the Loan
Documents to which it is a party, except for consents, filings, authorizations
or approvals which have been obtained and are in full force and effect, and
except for (i) any such approvals which will be set forth in the Offer
Documents as conditions to the Tender Offer and (ii) other approvals the
failure to obtain which could not reasonably be expected to have a Material
Adverse Effect. This Agreement has been, and each other Loan Document has been
or when executed pursuant hereto will be, duly executed and delivered on behalf
of each of the applicable Loan Parties. This Agreement and each other Loan
Document to which a Loan Party is a party constitutes a legal, valid and
binding obligation of such Person enforceable against such Person in accordance
with its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
the enforcement of creditors' rights generally and by general equitable
principles (whether enforcement is sought by proceedings in equity or at law)
and by an implied covenant of good faith and fair dealing.
SECTION VII.05. No Legal Bar. The execution, delivery and
performance of the Loan Documents, the borrowings hereunder, the use of the
proceeds thereof and the consummation of the Transactions will not violate any
Requirement of Law or Contractual Obligation of the Company or of any of its
Subsidiaries, other than any such violation which could not reasonably be
expected to have a Material Adverse Effect, and will not result in, or require,
the creation or imposition of any Lien on any of its or their respective
properties or revenues pursuant to any such Requirement of Law or Contractual
Obligation, except Liens created pursuant to the Loan Documents and any Lien
which could not reasonably be expected to have a Material Adverse Effect.
SECTION VII.06. No Material Litigation. No litigation,
investigation or proceeding of or before any arbitrator or Governmental
Authority is pending or, to the knowledge of the Company, threatened by or
against the Company or any of its Subsidiaries or against any of its or their
respective properties or revenues (a) with respect to any of the Loan Documents,
the Transactions or any of the transactions contemplated hereby, or (b) which
could reasonably be expected to have a Material Adverse Effect.
SECTION VII.07. No Default. Neither the Company nor any of its
Subsidiaries is in default under or with respect to any of its Contractual
Obligations in any respect which could reasonably be expected to have a Material
Adverse Effect. No Default or Event of Default has occurred and is continuing.
SECTION VII.08. Ownership of Property; Liens. Each of the
Company and its
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Subsidiaries has good record and marketable title in fee simple to, or
a valid leasehold interest in, all its material real property, and good title
to, or a valid leasehold interest in, all its other material property, and none
of such property is subject to any Lien except as permitted by Section 10.04.
SECTION VII.09. Intellectual Property. Each of the Company its
Subsidiaries owns, or is licensed to use, all trademarks, tradenames,
copyrights, technology, know-how and processes necessary for the conduct of its
business as currently conducted except for those the failure to own or license
which could not reasonably be expected to have a Material Adverse Effect (the
"Intellectual Property"). No claim has been asserted and is pending by any
Person challenging or questioning the use of any such Intellectual Property or
the validity or effectiveness of any such Intellectual Property, nor does the
Company know of any valid basis for any such claim which, in the aggregate,
could reasonably be expected to have a Material Adverse Effect. The use of such
Intellectual Property by the Company and its Subsidiaries does not infringe on
the rights of any Person, except for such claims and infringements that, in the
aggregate, could not reasonably be expected to have a Material Adverse Effect.
SECTION .10. No Burdensome Restrictions. No Requirement of Law
or Contractual Obligation of the Company or any of its Subsidiaries could
reasonably be expected to have a Material Adverse Effect.
SECTION .11. Taxes. Each of the Company and its Subsidiaries
has filed or caused to be filed all U.S. tax returns and all other material tax
returns which, to the knowledge of the Borrowers, are required to be filed and
has paid all taxes shown to be due and payable on said returns or on any
assessments made against it or any of its property and all other taxes, fees or
other charges imposed on it or any of its property by any Governmental Authority
(other than any (i) with respect to which the failure to pay, in the aggregate,
would not reasonably be expected to have a Material Adverse Effect or (ii) the
amount or validity of which is currently being contested in good faith by
appropriate proceedings and with respect to which reserves in conformity with
GAAP have been provided on the books of the Company or its Subsidiaries, as the
case may be); no tax Lien has been filed, and, to the knowledge of the Company,
no claim is being asserted, with respect to any such tax, fee or other charge.
SECTION .12. Federal Regulations. No part of the proceeds of
any Loans will be used for "purchasing" or "carrying" any "margin stock" within
the respective meanings of each of the quoted terms under Regulation G and
Regulation U of the Board of Governors of the United States Federal Reserve
System as now and from time to time hereafter in effect or for any purpose which
violates the provisions of the Regulations of such Board of Governors (including
but not limited to the provisions of Regulation G, Regulation U and Regulation
X) or any similar rule of any other Governmental Authority. If any Borrower is
requested by any Lender or the Administrative Agent, such Borrower will furnish
to the Administrative Agent and each Lender a statement to the foregoing effect
in conformity with the requirements of Form FR U-1 or FR G-3 referred to in said
Regulation U and Regulation G, respectively.
SECTION .13. ERISA. Neither a Reportable Event nor an
Accumulated Funding Deficiency has occurred during the five-year period prior
to the date on which this
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representation is made or deemed made with respect to any Plan, and
each Plan has complied in all material respects with the applicable provisions
of ERISA and the Code. No termination of a Single Employer Plan has occurred,
and no Lien in favor of PBGC or a Plan has arisen, during such five-year
period. The present value of all accrued benefits under each Single Employer
Plan (based on those assumptions used to fund such Plans) did not, as of the
last annual valuation date prior to the date on which this representation is
made or deemed made, exceed the value of the assets of such Plan allocable to
such accrued benefits by an amount which could reasonably be expected to have a
Material Adverse Effect, either individually or in the aggregate with all other
Single Employer Plans under which such accrued benefits exceed such assets.
Neither the Company nor any Commonly Controlled Entity has had a complete or
partial withdrawal from any Multiemployer Plan during the five-year period
prior to the date on which this representation is made or deemed made which
could, in the aggregate with other such withdrawals during such period,
reasonably be expected to have a Material Adverse Effect, and neither the
Company nor any Commonly Controlled Entity would become subject to any
liability under ERISA if the Company or any such Commonly Controlled Entity
were to withdraw completely from all Multiemployer Plans as of the valuation
date most closely preceding the date on which this representation is made or
deemed made. No such Multiemployer Plan is in Reorganization or is Insolvent.
SECTION .14. Investment Company Act; Other Regulations. No
Borrower is an "investment company", or a company "controlled" by an "investment
company", within the meaning of the Investment Company Act of 1940, as amended.
No Borrower is subject to any law or regulation which limits its ability to
incur the Indebtedness to be incurred by it under the Loan Documents.
SECTION .15. Subsidiaries. As of the date hereof, the Company
has no Subsidiaries except those Subsidiaries identified on Schedule II to this
Agreement.
SECTION .16. Environmental Matters. (a) The facilities and
properties owned, leased or operated by the Company and/or any of its
Subsidiaries (the "Properties") do not contain, and have not previously
contained, any Materials of Environmental Concern in amounts or concentrations
which (i) constitute or constituted a violation of, or (ii) could reasonably be
expected to give rise to liability under, any Environmental Law except in either
case insofar as such violation or liability, or any aggregation thereof, is not
reasonably likely to result in the payment of a Material Environmental Amount.
(b) The Properties and all operations at the Properties are in
compliance, and have in the last five years been in compliance, in all material
respects with all applicable Environmental Laws, and there is no contamination
at, under or about the Properties or violation of any Environmental Law with
respect to the Properties or the business operated by the Company or any of its
Subsidiaries (the "Business") which could materially interfere with the
continued operation of the Properties or materially impair the aggregate fair
saleable value of the Properties.
(c) Neither the Company nor any of its Subsidiaries has
received any notice of violation, alleged violation, non-compliance, liability
or potential liability regarding
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environmental matters or compliance with Environmental Laws with regard to any
of the Properties or the Business, nor does the Company or any of its
Subsidiaries have knowledge or reason to believe that any such notice will be
received or is being threatened except insofar as such notice or threatened
notice, or any aggregation thereof, does not involve a matter or matters that is
or are reasonably likely to result in the payment of a Material Environmental
Amount.
(d) Materials of Environmental Concern have not been
transported or disposed of from the Properties in violation of, or in a manner
or to a location which could reasonably be expected to give rise to liability
under, any Environmental Law, nor have any Materials of Environmental Concern
been generated, treated, stored or disposed of at, on or under any of the
Properties in violation of, or in a manner that could reasonably be expected to
give rise to liability on the part of the Company or any Subsidiary under, any
applicable Environmental Law except insofar as any such violation or liability
referred to in this paragraph, or any aggregation thereof, is not reasonably
likely to result in the payment of a Material Environmental Amount.
(e) No judicial proceeding or governmental or administrative
action is pending or, to the knowledge of the Company, threatened, under any
Environmental Law to which the Company or any Subsidiary is or will be named as
a party with respect to the Properties or the Business, nor are there any
consent decrees or other decrees, consent orders, administrative orders or other
orders, or other administrative or judicial requirements outstanding under any
Environmental Law with respect to the Properties or the Business except insofar
as such proceeding, action, decree, order or other requirement, or any
aggregation thereof, is not reasonably likely to result in the payment of a
Material Environmental Amount.
(f) There has been no release or threat of release of
Materials of Environmental Concern at or from the Properties, or arising from or
related to the operations of the Company or any Subsidiary in connection with
the Properties or otherwise in connection with the Business, in violation of or
in amounts or in a manner that could reasonably give rise to liability under
Environmental Laws except insofar as any such violation or liability referred to
in this paragraph, or any aggregation thereof, is not reasonably likely to
result in the payment of a Material Environmental Amount.
SECTION .17. Accuracy and Completeness of Information. All
information heretofore furnished by each Loan Party to the Lenders for purposes
of or in connection with this Agreement does not, and all such information
hereafter furnished by such Loan Party to any Lender for purposes of this
Agreement will not, contain any untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements made or to be
made, in the light of the circumstances under which they were or will be made,
not misleading. Prior to the date hereof, the Company has disclosed to the
Lenders in writing any and all facts which materially and adversely affect (to
the extent the Company can as of the date hereof reasonably foresee), the
business, operations or financial condition of the Company and its Subsidiaries,
taken as a whole, or the ability of any Loan Party to perform its obligations
under the Loan Documents. It is understood that no representation or warranty is
made concerning the forecasts, estimates, pro forma information, projections
and statements as to anticipated future performance or conditions, and the
assumptions on which they were based, contained in any such information,
reports, financial statements, exhibits or schedules, except that as of the
date such forecasts,
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estimates, pro forma information, projections and statements were
generated, (a) such forecasts, estimates, pro forma information, projections
and statements were based on the good faith assumptions of the management of
the Company and (b) such assumptions were believed by such management to be
reasonable. It is further understood that the foregoing statements in this
Section 7.17, to the extent they refer to information in respect of the Target,
are made to the best of the Company's knowledge.
SECTION .18. Other Unsecured Indebtedness. The obligations of
each of the Borrowers under this Agreement and the Notes and the other Loan
Documents rank at least pari passu in right of payment with all other
unsubordinated Indebtedness of such Borrowers.
SECTION .19. Foreign Subsidiary Borrowers. (a) Each Foreign
Subsidiary Borrower will be a direct or indirect, Wholly Owned Subsidiary of the
Company (or, with the consent of the Majority Multicurrency Lenders, which
consent shall not be unreasonably withheld, a direct or indirect, majority-owned
Subsidiary of the Company); and
(b) Each Foreign Subsidiary Borrower will have, upon becoming
a party hereto, full right and authority to enter into this Agreement and each
other Loan Document to which it is a party, and to perform all of its
obligations under this and each other Loan Document to which it is a party; all
of the foregoing actions will have been, prior to any request for Loans by such
Borrower, duly authorized by all necessary action on the part of such Borrower;
and when such Foreign Subsidiary Borrower becomes a party hereto, this Agreement
and each other Loan Document to which it is a party will constitute valid and
binding obligations of such Borrower enforceable in accordance with their
respective terms except as such terms may be limited by the application of
bankruptcy, moratorium, insolvency and similar laws affecting the rights of
creditors generally and by equitable principles affecting the availability of
specific performance and other remedies.
SECTION .20. Security Documents. Each Security Document, when
executed and delivered by the Loan Party which is a party thereto, will be
effective to create in favor of the Administrative Agent (or the Trustee, as the
case may be), for the benefit of the Lenders (and, as the case may be, the
holders of the Existing Public Securities), a legal, valid and enforceable
security interest in the Collateral described therein and proceeds thereof. When
the actions described in Schedule 7.20 in respect of each Security Document have
been taken, the Security Documents shall constitute fully perfected Liens on,
and security interests in, all right, title and interest of the Loan Parties in
such Collateral and the proceeds thereof, as security for the Secured
Obligations, in each case prior and superior in right to any other Person.
SECTION .21. Solvency. Each Loan Party is, and after giving
effect to the Acquisition and the incurrence of all Indebtedness and obligations
being incurred in connection herewith and therewith will be and will continue to
be, Solvent.
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ARTICLE VIII. CONDITIONS PRECEDENT
SECTION VIII.01. Conditions to Effective Date. The Agreement
shall become effective on the date of the satisfaction of the conditions
precedent set forth in this Section 8.01 (the date on which such conditions are
satisfied, the "Effective Date"):
(a) Credit Agreement. The Administrative Agent shall have
received this Agreement, executed and delivered by a duly authorized
officer (or a duly authorized representative) of the Company and each
Foreign Subsidiary Borrower that is a party hereto on the Effective
Date, with a counterpart or copy for each Lender.
(b) Corporate Proceedings. The Administrative Agent shall have
received, with a counterpart or copy for each Lender, a copy of the
resolutions, in form and substance satisfactory to the Administrative
Agent, of the Board of Directors of the Company and each other Borrower
that is a party hereto on the Effective Date, authorizing (i) the
execution, delivery and performance by it of this Agreement and the
Loan Documents to which it is a party and (ii) the borrowings by it
contemplated hereunder, certified by the Secretary or an Assistant
Secretary of the Company or such other Borrower, as the case may be, as
of the Effective Date, which certificate shall be in form and substance
satisfactory to the Administrative Agent and shall state that the
resolutions thereby certified have not been amended, modified, revoked
or rescinded.
(c) Incumbency Certificate. The Administrative Agent shall
have received, with a counterpart or copy for each Lender, a
certificate of the Company, dated the Effective Date, as to the
incumbency and signature of the officers or representatives of each
Borrower executing any Loan Document on the Effective Date,
satisfactory in form and substance to the Administrative Agent,
executed by any of the Chief Executive Officer, the President, the
Chief Financial Officer, the Treasurer or the Controller of the Company
and the Secretary or any Assistant Secretary (or a duly authorized
representative, if such representative is also a duly authorized
officer of the Company or otherwise authorized by the Company) of the
Company.
(d) Corporate Documents. The Administrative Agent shall have
received, with a counterpart or copy for each Lender, true and complete
copies of the certificate of incorporation and by-laws of the Company
and each other Borrower that is a party hereto on the Effective Date,
certified as of the Effective Date as complete and correct copies
thereof by the Secretary or an Assistant Secretary or a duly authorized
representative of the Company or such other Borrower, as the case may
be.
(e) Approvals. All governmental and third party approvals
necessary in connection with the transactions contemplated hereby shall
have been obtained and be in full force and effect (other than (i) any
such approvals which will be set forth in the Offer Documents as
conditions to the Tender Offer and (ii) other approvals the failure to
obtain which could not reasonably be expected to have a Material
Adverse Effect). The Administrative Agent shall have received a
certificate of a Responsible Officer of the Company to the foregoing
effect, to which shall be attached copies of any such approvals
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theretofore obtained.
(f) Related Agreements. The Administrative Agent shall have
received, with a copy for each Lender, true and correct copies,
certified as to authenticity by the Company, of the Indenture.
(g) Fees. The Administrative Agent shall have received all
fees to be received by the Administrative Agent or Chase on or prior to
the Effective Date in connection with this Agreement.
(h) Legal Opinions. The Administrative Agent shall have
received the executed legal opinions of (i) Diane L. Kaye, Esq.,
General Counsel of the Company and (ii) Cleary Gottlieb Steen &
Hamilton, counsel to the Company, each given upon the express
instructions of the Company, substantially in the forms of Exhibits H-1
and H-2, respectively.
After the document delivery conditions set forth above in this Section have been
satisfied, the Administrative Agent will, at the request of the Company, provide
to the Company written confirmation that such conditions have been satisfied.
SECTION VIII.02. Conditions to Initial Revolving Credit
Funding Date. The obligation of each Lender to make its initial Revolving Credit
Loan and/or Multicurrency Loan is subject to the satisfaction of the following
conditions precedent on the date of such Loans, which date shall in any event be
on or after the Effective Date and on or prior to the last day of the Term Loan
Commitment Period (the date on which such conditions are satisfied, the "Initial
Revolving Credit Funding Date"):
(a) Existing Credit Agreement. All loans, accrued interest,
fees and any other amounts owing to the respective lenders and agents
under the Existing Credit Agreement shall have been paid in full, and
the commitments to make loans thereunder shall have been cancelled.
(b) Security Documents and Subsidiary Guarantee. The
Administrative Agent shall have received (i) the Domestic Subsidiary
Guarantee, executed and delivered by a duly authorized officer of each
guarantor party thereto and (ii) each of the Security Documents (other
than the U.K. Acquisition II Share Mortgage), executed and delivered by
a duly authorized officer of each party thereto.
(c) Perfection Actions. The perfection actions specified in
Schedule 7.20 in respect of each of the Security Documents (other than
the UK Acquisition II Share Mortgage) shall have been completed (other
than any such action which can not be taken until the applicable
Collateral exists or until the initial Revolving Credit Loans are made,
as the case may be).
(d) Legal Opinions. The Administrative Agent shall have
received the executed legal opinions of (i) Diane L. Kaye, Esq.,
General Counsel of the Company and (ii)
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Cleary Gottlieb Steen & Hamilton, counsel to the Company, substantially
in the forms of Exhibits H-3 and H-4 respectively, and (iii) the legal
opinion of local counsel in such jurisdictions as the Administrative
Agent shall reasonably request, substantially in the form of Exhibit
H-5, in each case given upon the express instructions of the Company.
(e) Representations and Warranties. The representations and
warranties contained in Sections 7.03, 7.04, 7.05, 7.12, 7.14 and 7.20
shall be true and correct in all material respects as if made on and as
of such date.
(f) No Default. No Default or Event of Default shall have
occurred and be continuing under (i) paragraph (a) of Article XII or
(ii) paragraph (f) of Article XII (only to extent such paragraph (f)
relates to the Company or U.K. Acquisition II).
(g) Illegality. (i) The borrowings hereunder and the use of
the proceeds thereof shall not violate any Requirement of Law of the
United States or the United Kingdom applicable to the Borrowers and
(ii) the making of such Loans shall not violate any Requirement of Law
of the United States or the United Kingdom applicable to the Lenders.
(h) Certificate. The Administrative Agent shall have received
a certificate of a Responsible Officer to the effect set forth in
paragraphs (e), (f) and (g)(i) above.
After the document delivery conditions set forth above in this Section have been
satisfied, the Administrative Agent will, at the request of the Company, provide
to the Company written confirmation that such conditions have been satisfied.
It is understood that the Initial Revolving Credit Funding Date may occur prior
to, or contemporaneously with, the Initial Term Loan Funding Date.
SECTION VIII.03. Conditions to Initial Term Loan Funding Date.
The obligation of each Lender to make its Initial Term Loan is subject to the
satisfaction of the following conditions precedent on the date of such Term
Loans, which date shall in any event be on or after the Initial Revolving Credit
Funding Date and on or prior to the last day of the Term Loan Commitment Period
(the date on which such conditions are satisfied, the "Initial Term Loan Funding
Date"):
(a) Offer Documents; Terms of Tender Offer. The terms of the
Tender Offer as set forth in the Press Release shall have been approved
by the Administrative Agent prior to the public announcement thereof by
U.K. Acquisition II. The Administrative Agent shall have received
copies of the Offer Documents, and of all other documents and materials
filed or released publicly by the Company or U.K. Acquisition II in
connection with the Tender Offer, certified as true and correct copies
thereof as of the Initial Term Loan Funding Date by a Responsible
Officer of the Company, and the conditions set forth in such documents
shall conform to the conditions set forth in the Press Release as
approved by the Administrative Agent prior to the release thereof.
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(b) The Tender Offer. The Tender Offer shall have been
declared fully unconditional on behalf of U.K. Acquisition II, without
any amendment, supplement, modification or waiver of the terms thereof
contained in the Press Release not consented to by the Required
Lenders, other than (i) any amendments, supplements, modifications or
waivers which in the aggregate are not material and (ii) any waiver of
the conditions contained in the Press Release, relating to matters
other than aggregate purchase price and minimum acceptance conditions,
that is required by the Panel.
(c) Legal Opinion. The Administrative Agent shall have
received:
(i) the executed legal opinion of Clifford Chance,
special English counsel to the Administrative Agent, in
respect of the U.K. Acquisition I Share Mortgage and matters
related thereto;
(ii) the executed legal opinion of Clifford Chance,
special Netherlands counsel to the Administrative Agent, in
respect of the Netherlands Pledge Agreements and matters
related thereto.
(d) Representations and Warranties. The representations and
warranties contained in Sections 7.03, 7.04, 7.05, 7.12, 7.14 and 7.20
shall be true and correct in all material respects as if made on and as
of such date.
(e) No Default. No Default or Event of Default shall have
occurred and be continuing under (i) paragraph (a) of Article XII or
(ii) paragraph (f) of Article XII (only to extent such paragraph (f)
relates to the Company or U.K. Acquisition II).
(f) Illegality. (i) The borrowings hereunder and the use of
the proceeds thereof shall not violate any Requirement of Law of the
United States or the United Kingdom applicable to the Borrowers and
(ii) the making of such Loans shall not violate any Requirement of Law
of the United States or the United Kingdom applicable to the Lenders.
(g) No Injunction, etc. There shall not be in effect any
injunction or restraining order of any Governmental Authority having
jurisdiction to issue such injunction or restraining order prohibiting
the making of the Term Loans made on such date, the use of the proceeds
thereof or the consummation of the Tender Offer or the Acquisition.
(h) Certificate. The Administrative Agent shall have received
a certificate of a Responsible Officer to the effect set forth in
paragraphs (d), (e), (f)(i) and (g) above.
(i) Senior Subordinated Bridge Loans. Except to the extent
that the Company terminates or reduces the Senior Subordinated Bridge
Loan Commitments as provided in clauses (i) and (ii) of the proviso to
Section 6.04(d), the Company shall have received at least $500,000,000
in cash proceeds from the issuance of the Senior Subordinated Bridge
Loans pursuant to the Senior Subordinated Loan Documentation.
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(j) Related Agreements. The Administrative Agent shall have
received, in form and substance reasonably satisfactory to it, with a
copy for each Lender, true and correct copies, certified as to
authenticity by the Company, of the Senior Subordinated Loan
Documentation.
It is understood that the Initial Term Loan Funding Date may occur
contemporaneously with, or subsequent to, the Initial Revolving Credit Funding
Date.
SECTION VIII.04. Conditions to each Term Loan after Initial
Term Loan Funding Date. The obligation of each Lender to make each Term Loan to
be made by it after the Initial Term Loans is subject to the satisfaction of the
following conditions precedent on the date of such Term Loans:
(a) Representations and Warranties. The representations and
warranties contained in Sections 7.03, 7.04, 7.05, 7.12, 7.14 and 7.20
shall be true and correct in all material respects as if made on and as
of such date.
(b) No Default. No Default or Event of Default shall have
occurred and be continuing under (i) paragraph (a) of Article XII or
(ii) paragraph (f) of Article XII (only to extent such paragraph (f)
relates to the Company or U.K. Acquisition II).
(c) Illegality. (i) The borrowings hereunder and the use of
the proceeds thereof shall not violate any Requirement of Law of the
United States or the United Kingdom applicable to the Borrowers and
(ii) the making of such Loans shall not violate any Requirement of Law
of the United States or the United Kingdom applicable to the Lenders.
(d) No Injunction, etc. There shall not be in effect any
injunction or restraining order of any Governmental Authority having
jurisdiction to issue such injunction or restraining order prohibiting
the making of the Term Loans made on such date, the use of the proceeds
thereof or the consummation of the Tender Offer or the Acquisition.
Each borrowing of Term Loans shall constitute a representation and warranty by
the Company as of the date of such Term Loans that the conditions contained in
this Section 8.04 (other than paragraph (c)(ii)) have been satisfied.
SECTION VIII.05. Conditions to each Revolving Credit and
Multicurrency Loan after Initial Revolving Credit Funding Date. The obligation
of each Lender to make any Revolving Credit Loan and Multicurrency Loan
requested to be made by it on any date (other than the Revolving Credit Loans
and Multicurrency Loans made on the Initial Revolving Credit Funding Date in an
amount sufficient to repay all amounts outstanding under the Existing Credit
Agreement) is subject to the satisfaction of the following conditions precedent:
(a) Representations and Warranties. Each of the
representations and warranties made by the Company and other Borrowers
in or pursuant to the Loan Documents shall be true and correct in all
material respects on and as of such date as if made on and as of
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such date, except if such representation or warranty relates to an
earlier date or refers to Schedules, in which case such representation
and warranty shall be true and correct in all material respects on
such earlier date and after giving effect to any amendments of such
Schedules.
(b) No Default. No Default or Event of Default shall have
occurred and be continuing on such date or after giving effect to the
Loans requested to be made on such date.
(c) Foreign Subsidiary Opinion. If such Loan is the initial
Loan to a Foreign Subsidiary Borrower, the Administrative Agent shall
have received a Foreign Subsidiary Opinion in respect of such Foreign
Subsidiary Borrower.
(d) Corporate Proceedings. If such Loan is the initial Loan to
a Foreign Subsidiary Borrower, the Administrative Agent shall have
received, with a counterpart for each Lender, if applicable, a copy of
the resolutions, in form and substance satisfactory to the
Administrative Agent, of the Board of Directors of such Borrower
authorizing (i) the execution, delivery and performance by it of this
Agreement and the Loan Documents to which it is a party and (ii) the
borrowings by it contemplated hereunder, certified by the Secretary or
an Assistant Secretary of such Borrower as of the date on which such
Loan is requested to be made, which certificate shall be in form and
substance satisfactory to the Administrative Agent and shall state that
the resolutions thereby certified have not been amended, modified,
revoked or rescinded.
(e) Incumbency Certificate. If such Loan is the initial Loan
to a Foreign Subsidiary Borrower, the Administrative Agent shall have
received, with a counterpart for each Lender, a certificate of such
Borrower, dated the date on which such Loan is requested to be made, as
to the incumbency and signature of the officers or representatives of
such Borrower executing any Loan Document, satisfactory in form and
substance to the Administrative Agent, executed by any Responsible
Officer of such Borrower and the Secretary or any Assistant Secretary
(or a duly authorized representative, if such representative is also a
duty authorized officer of such Borrower or otherwise authorized by
such Borrower).
(f) Corporate Documents. If such Loan is the initial Loan to a
Foreign Subsidiary Borrower, the Administrative Agent shall have
received, with a counterpart for each Lender, true and complete copies
of the organic documents of such Borrower, certified as of the date on
which such Loan is required to be made as complete and correct copies
thereof by the Secretary or an Assistant Secretary or a duly authorized
representative of such Borrower.
(g) Additional Matters. All corporate and other proceedings,
and all documents, instruments and other legal matters in connection
with the transactions contemplated by this Agreement and the other Loan
Documents shall be satisfactory in form and substance to the
Administrative Agent, and the Administrative Agent shall have received
such other documents and legal opinions in respect of any aspect or
consequence of the transactions
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contemplated hereby or thereby as it shall reasonably request.
Each borrowing of Revolving Credit Loans or Multicurrency Loans (other than any
such Loans made on the Initial Revolving Credit Funding Date, to the extent the
proceeds thereof are used solely to repay amounts outstanding under the Existing
Credit Agreement) by a Borrower hereunder shall constitute a representation and
warranty by the Company and such Borrower as of the date of such Loan that the
conditions contained in this Section 8.05 have been satisfied.
ARTICLE IX. AFFIRMATIVE COVENANTS
From and after the Initial Revolving Credit Funding Date, each
of the Company and, to the extent the covenants set forth below relate thereto,
each Foreign Subsidiary Borrower, hereby covenants and agrees that so long as
any of the Commitments remain in effect, any Note remains outstanding and unpaid
or any other amount is owing to any Lender or the Administrative Agent
hereunder, the Company or such Foreign Subsidiary Borrower, as applicable, will
comply with the covenants set forth below in this Article IX:
SECTION IX.01. Financial Statements. The Company will furnish
to each Lender:
(a) as soon as available, but in any event within 120 days
after the end of each fiscal year of the Company, a copy of the consolidated
balance sheet of the Company and its Subsidiaries as at the end of such year and
the related consolidated statements of income and cash flows for such year,
setting forth in each case in comparative form the figures for the previous
year, certified without qualification or exception by independent public
accountants of nationally recognized standing selected by the Company, it being
understood and agreed that the delivery of the Company's Annual Report on Form
10-K for such fiscal year signed by a Responsible Officer will satisfy the
requirement set forth in this clause; and
(b) as soon as available, but in any event within 60 days
after the end of each of the first three quarterly periods of each fiscal year
of the Company, a copy of the unaudited consolidated condensed balance sheet of
the Company and its Subsidiaries as at the end of each such quarter and the
related unaudited consolidated condensed statements of income and cash flows of
the Company and its Subsidiaries for the portion of the fiscal year through such
date, setting forth in each case in comparative form such figures for the
previous year, certified by a Responsible Officer, it being understood and
agreed that the delivery of the Company's Quarterly Report on Form 10-Q for the
relevant fiscal quarter signed by a Responsible Officer will satisfy the
requirement set forth in this clause;
all such financial statements to be complete and correct in all material
respects and prepared in reasonable detail and in accordance with GAAP applied
consistently throughout the periods reflected therein (except for such changes
in accounting principles as may be approved by such Responsible Officer and
concurred in by the Company's independent public accountants and disclosed
therein).
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SECTION IX.02. Certificates; Other Information. The Company
will furnish to each Lender:
(a) concurrently with each delivery of the financial
statements referred to in Sections 9.01(a) and (b), a certificate of a
Responsible Officer in the form of Exhibit F (i) stating that such officer has
no knowledge of any Default or Event of Default except as specified in such
certificate and (ii) showing in reasonable detail the calculations supporting
such statement in respect of Sections 10.01, 10.02 and 10.03;
(b) on or prior to February 28 of each year, a copy of the
projections by the Company of the operating budget and cash flow budget of the
Company and its Subsidiaries for the succeeding fiscal year, such projections to
be accompanied by a certificate of a Responsible Officer to the effect that such
projections have been prepared on a reasonable basis and in good faith, it being
understood that no representation or warranty shall be deemed to be made
concerning the projections and budgets and the assumptions on which they were
based, except that as of the date on which such projections and budgets were
generated, (a) they were based on the good faith assumptions of the management
of the Company and (b) such assumptions were believed by such management to be
reasonable;
(c) promptly after the same are sent, copies of all financial
statements and reports which the Company sends to its common or preferred
stockholders as a class, and promptly after the same are filed, copies of all
regular, periodic and special reports which the Company may file with the
Securities and Exchange Commission or any successor or analogous Governmental
Authority;
(d) if requested by the Administrative Agent or by any Lender
through the Administrative Agent, promptly after the same is furnished to PBGC,
copies of all information furnished by the Company, any Subsidiary or any
Commonly Controlled Entity to PBGC, except, in each case, information furnished
as to ordinary operational aspects of the business of the Company or any
Subsidiary and not relating to any deviation by the Company or any Subsidiary
from rules and regulations of PBGC; and
(e) promptly, such additional financial and other information
as any Lender may from time to time reasonably request.
SECTION IX.03. Accrual of Liabilities; Payment of Obligations.
The Company will maintain, and cause each of its Subsidiaries to maintain, in
accordance with GAAP, appropriate reserves for the accrual of taxes and all
other obligations, liabilities and claims and pay, discharge or otherwise
satisfy, and cause each of its Subsidiaries to pay, discharge or otherwise
satisfy, at or before their maturity or before they become delinquent, as the
case may be, all obligations except (a) where the same are being contested in
good faith by appropriate proceedings diligently pursued or (b) where the
failure so to pay, discharge or otherwise satisfy obligations would not, in the
aggregate, reasonably be expected to have a Material Adverse Effect.
SECTION IX.04. Maintenance of Corporate Existence; Maintenance
of
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Properties. The Company will (a) maintain its corporate existence, rights and
franchises necessary to continue its business and the corporate existence,
rights and franchises necessary to continue the business of each of its
Subsidiaries, provided that the foregoing shall not be a limitation (i) on the
right of the Company to discontinue any operations if in the opinion of the
Company such discontinuance is in the best interest of the Company and would not
materially affect the ability of the Company to pay its debts as they become
due, (ii) on asset sales permitted under Section 10.08 and (iii) on the right of
any Subsidiary of the Company to merge with or be liquidated into the Company or
another Subsidiary of the Company if a Default does not then exist and would not
result therefrom; and (b) maintain, and cause each Subsidiary to maintain, the
properties which are used or useful in its respective operations in good working
order and condition.
SECTION IX.05. Insurance. The Company will maintain, and cause
each of its Subsidiaries to maintain, insurance with financially sound and
reputable companies in such form and upon such terms and in such amounts and
against such risks (including liability for bodily injury and property damage)
and subject to such deductibles or retentions as in the reasonable opinion of
the Company is available on commercially reasonable terms and will provide sound
and reasonable protection for the Company's or such Subsidiary's assets and
operations. At the Administrative Agent's request, the Company will furnish to
the Administrative Agent (with copies for each Lender) certificates of insurance
or other evidence that such insurance is being maintained.
SECTION IX.06. Notices. The Company will (a) promptly give
notice in writing to the Administrative Agent (which shall promptly notify each
Lender) of the occurrence of any Default or Event of Default under this
Agreement, or of the commencement of (i) any material litigation or proceedings
affecting the Company or any Subsidiary or (ii) any dispute between the Company
or any Subsidiary and any Governmental Authority or any other party if such
litigation, proceedings or dispute could reasonably be expected to result in a
Material Adverse Effect; and (b) as soon as possible and in any event within 45
days after the Company knows or has reason to know that any Reportable Event
(other than a Reportable Event not subject to the provision for 30-day notice to
PBGC pursuant to the regulations issued under ERISA) has occurred with respect
to any Single Employer Plan or that PBGC or any Borrower or any Commonly
Controlled Entity has instituted or will institute proceedings under Title IV of
ERISA to terminate any Single Employer Plan, deliver to the Administrative Agent
(which shall promptly notify each Lender) a certificate of a Responsible Officer
of the Company setting forth details as to such Reportable Event and the action
that the Company proposes to take with respect thereto, together with a copy of
any notice of such Reportable Event that may be required to be filed with PBGC,
or any notice delivered by PBGC evidencing its intent to institute such
proceedings or any notice to PBGC that such Plan is to be terminated, as the
case may be. For all purposes of clause (b) of this Section 9.06, the Company
shall be deemed to have all knowledge or knowledge of all facts attributable to
the administrator of a Single Employer Plan.
SECTION IX.07. Compliance with Contractual Obligations and
Laws. The Company will, and will cause each of its Subsidiaries to, comply with
all provisions of any Contractual Obligation, applicable law, rule, regulation,
order, writ, judgment, injunction, decree, award or ordinance to which it is
subject, except to the extent that the failure to comply therewith
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could not, in the aggregate, reasonably be expected to have a Material Adverse
Effect.
SECTION IX.08. Access to Books and Inspection. The Company
shall keep proper books of record and account in which full, true and correct
entries in conformity with GAAP and all Requirements of Law shall be made of all
dealings and transactions in relation to its business and activities; and give
the Administrative Agent and any reasonable number of representatives of the
Lenders access, at the Company's principal office, upon reasonable notice during
normal business hours to, and permit any such representatives to examine, copy
or make excerpts from, any and all books, records and documents in the
possession of the Company relating to its affairs and the affairs of the
Subsidiaries, and to inspect any of the properties of the Company or the
Subsidiaries. Notwithstanding any provision in this Section, the Company (i)
shall be given a reasonable opportunity upon reasonable notice to have an
officer or officers of the Company accompany any such representative during any
such visit, and (ii) shall not be responsible for any expenses incurred by any
such representative.
SECTION IX.09. Use of Proceeds. The Borrowers shall use the
proceeds of the Loans for the purposes specified in Section 6.13.
SECTION .10. Environmental Laws. The Company will, and will
cause each Subsidiary to, (a) comply with, and ensure compliance by all tenants
and subtenants, if any, with, all applicable Environmental Laws and obtain and
comply in all material respects with and maintain, and ensure that all tenants
and subtenants obtain and comply in all material respects with and maintain, any
and all licenses, approvals, notifications, registrations or permits required by
applicable Environmental Laws except to the extent that the failure to do so, or
any aggregation thereof, is not reasonably likely to result in the payment of a
Material Environmental Amount, (b) conduct and complete all investigations,
studies, sampling and testing, and all remedial, removal and other actions
required under Environmental Laws and promptly comply in all material respects
with all lawful orders and directives of all Governmental Authorities regarding
Environmental Laws except to the extent that the same are being contested in
good faith by appropriate proceedings and the pendency of such proceedings is
not reasonably likely to result in the payment of a Material Environmental
Amount and (c) defend, indemnify and hold harmless the Administrative Agent and
the Lenders, and their respective employees, agents, officers and directors,
from and against any and all claims, demands, penalties, fines, liabilities,
settlements, damages, costs and expenses of whatever kind or nature known or
unknown, contingent or otherwise, arising out of, or in any way relating to the
violation of, noncompliance with or liability under, any Environmental Law
applicable to the operations of the Company, any of its Subsidiaries or the
Properties, or any orders, requirements or demands of Governmental Authorities
related thereto, including, without limitation, investigation and laboratory
fees, response costs, court costs, litigation expenses and reasonable attorneys'
and consultants' fees, except to the extent that any of the foregoing arise out
of the gross negligence or willful misconduct of the party seeking
indemnification therefor. The agreements in clause (c) of this Section shall
survive repayment of the Notes and all other amounts payable hereunder.
SECTION .11. Additional Collateral and Guaranties.
(a) With respect to any new Subsidiary (other than an Excluded
Foreign
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Subsidiary) created or acquired after the Initial Revolving Credit Funding Date
by the Company or any Domestic Subsidiary (which new Subsidiary, for the
purposes of this paragraph (a), shall include any existing Subsidiary that
ceases to be an Excluded Foreign Subsidiary and, at the request of the
Administrative Agent, shall also include any Foreign Subsidiary (other than any
Excluded Foreign Subsidiary) of the Company or any Domestic Subsidiary which is
in existence on the Initial Revolving Credit Funding Date but does not execute
a Subsidiary Guarantee on the Initial Revolving Credit Funding Date), the
Company or its Subsidiaries, as applicable, shall promptly (i) execute and
deliver to the Trustee such amendments to the applicable Pledge Agreement, or
such additional Pledge Agreement, as the Administrative Agent deems necessary
or advisable in order to grant to the Trustee, as security for the Secured
Obligations secured under such Pledge Agreement, a perfected first priority
security interest in the Capital Stock of such new Subsidiary which is owned by
the Company or any of its Subsidiaries (other than an Excluded Foreign
Subsidiary), (ii) deliver to the Trustee the certificates representing such
Capital Stock, together with undated stock powers, in blank, executed and
delivered by a duly authorized officer of the Company or such pledgor
Subsidiary, as the case may be, or take such other perfection actions in
respect of such Capital Stock as shall be reasonably requested by the
Administrative Agent to perfect its security interest therein, (iii) cause such
new Subsidiary (A) to become a party to the Security Agreement (if such
Subsidiary is a Domestic Subsidiary) and a Subsidiary Guarantee and (B) to take
such actions as shall be necessary or advisable to grant to the Trustee, as
security for the Secured Obligations secured under the Security Agreement, a
perfected first priority security interest in the Collateral described in the
Security Agreement with respect to such new Subsidiary, including, without
limitation, the filing of Uniform Commercial Code financing statements in such
jurisdictions as may be required by the Security Agreement or by law or as may
be reasonably requested by the Administrative Agent, and (iv) if reasonably
requested by the Administrative Agent, deliver to the Administrative Agent
legal opinions relating to the matters described above, which opinions shall be
in form and substance, and from counsel, reasonably satisfactory to the
Administrative Agent.
(b) With respect to any new Excluded Foreign Subsidiary
created or acquired after the Initial Revolving Credit Funding Date by the
Company or any of its Domestic Subsidiaries, the Company or such Domestic
Subsidiary, as applicable, shall promptly (i) execute and deliver to the
Administrative Agent such amendments or supplements to the Pledge Agreement, or
such other security documents, as the Administrative Agent deems necessary or
advisable in order to grant to the Trustee, as security for the Secured
Obligations secured under the Pledge Agreement, a perfected first priority
security interest in the Capital Stock of such new Subsidiary which is owned by
the Company or any of its Domestic Subsidiaries (provided that in no event shall
more than 65% of the total outstanding Capital Stock of any such new Excluded
Foreign Subsidiary be required to be so pledged), (ii) deliver to the Trustee
the certificates representing such Capital Stock, together with undated stock
powers, in blank, executed and delivered by a duly authorized officer of the
Company or such Subsidiary, as the case may be and (iii) if requested by the
Administrative Agent, deliver to the Administrative Agent legal opinions
relating to the matters described above, which opinions shall be in form and
substance, and from counsel, reasonably satisfactory to the Administrative
Agent.
(c) Notwithstanding anything in this Section 9.11 to the
contrary, (i) shares of the Capital Stock of Netherlands BV II and Netherlands
BV IV shall not be required to be pledged
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hereunder, and shares of Capital Stock of any other Foreign Subsidiary shall not
be required to be pledged hereunder to the extent that, in the good faith
judgment of the Company, the pledging of such Capital Stock would result in
adverse tax consequences to the Company or would be unlawful and (ii) so long as
the Existing Accounts Receivable Financing Program is in effect, the Receivables
Subsidiary shall not be required to become a party to a Subsidiary Guarantee or
to create a security interest in any of its assets.
SECTION .12. Interest Rate Protection. The Company shall,
within six months after the Initial Term Loan Funding Date, obtain interest rate
protection in respect of the amount, if any, of the floating rate indebtedness
of the Company and it Subsidiaries in excess of $1,000,000,000, for periods and
pursuant to terms and conditions reasonably acceptable to the Administrative
Agent.
SECTION .13. Consummation of Compulsory Acquisition. As
promptly as reasonably practicable after the Initial Term Loan Funding Date, the
Company shall cause U.K. Acquisition II to consummate the Compulsory Acquisition
in respect of the Target Shares, and related Options, not already owned by U.K.
Acquisition II.
SECTION .14. Capital Markets Transaction. The Company shall
use its best efforts to consummate as promptly as practicable after the
Effective Date one or more public offerings or private placements of debt or
equity securities yielding net proceeds in an aggregate amount sufficient to
prepay in full the Interim Term Loans.
SECTION .15. U.K. Acquisition I Corporate Documents. (a) As
soon as practicable after the Initial Revolving Credit Funding Date, the Company
shall deliver to the Administrative Agent, with a counterpart or copy for each
Lender, the following documents, certified as complete and correct copies
thereof by the Secretary or an Assistant Secretary or a duly authorized
representative of U.K Acquisition I, in each case in form and substance
satisfactory to the Administrative Agent:
(i) the statutory declaration of each member of the
Board of Directors of U.K. Acquisition I;
(ii) the auditor's report in respect of U.K.
Acquisition I;
(iii) the resolutions of the Board of Directors of
U.K. Acquisition I authorizing the execution, delivery and
performance of the Loan Documents to which it is or is
required to be a party (including a U.K. Acquisition I
Guarantee in respect of all obligations of the Borrowers
hereunder without limitation as to amount), certified by the
Secretary or an Assistant Secretary of U.K. Acquisition I,
which certificate shall state that the resolutions thereby
certified have not been amended, modified, revoked or
rescinded; and
(iv) such other documents as shall be required to
effect and evidence an exemption from the financial assistance
requirements of Section 151 of the Companies Act.
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(b) Promptly upon the completion of steps set forth in
paragraph (a) above, the Company shall cause U.K. Acquisition I to (i) execute
and deliver to the Administrative Agent the U.K. Acquisition I Guarantee and the
U.K. Acquisition II Share Mortgage, (ii) deliver to the Trustee the certificates
representing shares of Capital Stock of U.K. Acquisition II charged pursuant to
the U.K. Acquisition II Share Mortgage, together with undated stock transfer
forms in blank, executed and delivered by a duly authorized officer of U.K.
Acquisition I, or take such other perfection actions in respect of such Capital
Stock as shall be reasonably requested by the Administrative Agent to perfect
its security interest therein and (iii) deliver to the Administrative Agent
legal opinions relating to the matters described above, which opinions shall be
in form and substance, and from counsel, reasonably satisfactory to the
Administrative Agent.
ARTICLE X. NEGATIVE COVENANTS
From and after the Initial Revolving Credit Funding Date, the
Company hereby covenants and agrees that so long as any of the Commitments
remain in effect, any Loan remains outstanding and unpaid or any other amount is
owing to any Lender or the Administrative Agent hereunder, the Company will
comply with the covenants set forth below in this Article X (provided, that from
and after the Covenant Transition Date, the covenants set forth below in this
Article X will be deemed replaced by the covenants set forth in Annex B and
cross references to Article X of the Credit Agreement contained in the Loan
Documents will be modified accordingly):
SECTION X.01. Cash Flow Coverage. The Company will not permit
the Cash Flow Coverage for any period of four consecutive fiscal quarters ending
during any period set forth below to be less than the ratio set forth below for
such period:
<TABLE>
<CAPTION>
Period Cash Flow Coverage
------ ------------------
<S> <C>
Initial Measurement Date -
December 30, 1998 1.2 to 1.0
December 31, 1998 and 1.50 to 1.0
thereafter
</TABLE>
SECTION X.02. Consolidated Leverage Ratio. The Company will
not permit the Consolidated Leverage Ratio at the last day of any fiscal quarter
ending during any period set forth below to be greater than the ratio set forth
below for such period:
<TABLE>
<CAPTION>
Period Consolidated Leverage Ratio
------ ---------------------------
<S> <C>
Initial Measurement Date - 5.25 to 1.0
December 30, 1998
December 31, 1998 - 4.50 to 1.0
December 30, 1999
December 31, 1999 - 4.00 to 1.0
</TABLE>
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<TABLE>
<S> <C>
December 30, 2000
December 31, 2000 and 3.50 to 1.0
thereafter
</TABLE>
SECTION X.03. Maintenance of Consolidated Net Worth. The
Company will not permit Consolidated Net Worth at any time to be less than
$270,000,000.
SECTION X.04. Limitation on Liens. The Company will not, nor
will it permit any of its Subsidiaries to, create, assume or incur or suffer to
be created, assumed or incurred or to exist any Lien on any of its properties or
assets, whether now owned or hereafter acquired, provided, however, that the
foregoing restriction shall not apply to the following:
(a) Liens existing on the date of this Agreement and described
on Schedule III, and Liens on assets of the Target and its Subsidiaries
existing on the date of consummation of the Acquisition;
(b) Liens on property or assets of any corporation existing at
the time such corporation becomes a Subsidiary and not created in
contemplation thereof;
(c) Liens in favor of the Company or any Wholly Owned
Subsidiary;
(d) Liens in favor of any Governmental Authority to secure
progress, advance or other payments pursuant to any contract or
provision of any statute;
(e) Liens (including, without limitation, the interest of the
lessor under any capital lease) on property or assets existing at the
time of the acquisition thereof (including acquisition through merger
or consolidation) or to secure the payment of all or any part of the
purchase price or construction cost thereof or to secure any
Indebtedness incurred prior to, at the time of, or within six months
after, the acquisition or completion of such property or assets for the
purpose of financing all or any part of the purchase price or
construction cost thereof;
(f) any extension, renewal or replacement (or successive
extensions, renewals or replacements), as a whole or in part, of any
Lien referred to in the foregoing clauses (a) through (e), inclusive;
provided that (i) no such extension, renewal or replacement shall
result in an increase in the liabilities secured thereby and (ii) such
extension, renewal or replacement Lien shall be limited to all or a
part of the same property that secured the Lien so extended, renewed or
replaced (plus additions, accessions, replacements and improvements to
such property);
(g) Liens for taxes not yet due or which are being contested
in good faith and by appropriate proceedings diligently pursued if
adequate reserves with respect thereto are maintained on the books of
the Company or such Subsidiary, as the case may be, in accordance with
GAAP or in the case of a Subsidiary located outside the United States,
general accounting principles in effect from time to time in their
respective jurisdictions
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of incorporation;
(h) carriers', warehousemen's, mechanics', landlords',
materialmen's, repairmen's or other like Liens arising in the ordinary
course of business (A) which are not overdue for a period of more than
60 days or (B) which are being contested in good faith and by
appropriate proceedings diligently pursued if adequate reserves with
respect thereto are maintained on the books of the Company or such
Subsidiary, as the case may be, in accordance with GAAP;
(i) easements, rights-of-way, zoning and similar restrictions
and other similar encumbrances or title defects incurred in the
ordinary course of business which, in the aggregate, are not greater
than $15,000,000 (to the extent the dollar values of such encumbrances
are calculable) and which do not in any case materially detract from
the value of the property subject thereto or interfere with the
ordinary conduct of the business of the Company or its Subsidiaries;
(j) any attachment or judgment lien, unless the judgment it
secures shall not, within 30 days after the entry thereof, have been
discharged or execution thereof stayed pending appeal, or shall not
have been discharged within 30 days after the expiration of any such
stay;
(k) pledges or deposits in connection with workers'
compensation, unemployment insurance and other social legislation and
deposits securing liability to insurance carriers under insurance or
self-insurance arrangements;
(l) deposits to secure the performance of bids, trade
contracts (other than for borrowed money), leases, statutory
obligations, surety and appeal bonds, performance bonds and other
obligations of a like nature incurred in the ordinary course of
business;
(m) liens created pursuant to the Security Documents;
(n) other Liens incidental to the conduct of the Company's or
any Subsidiary's business or the ownership of its property and assets
that were incurred in connection with the borrowing of money or the
obtaining of advances or credit or capital leases; provided, however,
that the indebtedness secured thereby does not exceed in the aggregate
for the Company and all Subsidiaries of the Company an amount equal to
$50,000,000; and provided, further, that at no time shall the sum of
(i) the Indebtedness secured by the Liens permitted under this Section
10.04(n) plus (ii) all other Indebtedness of the Company's Subsidiaries
(other than Subsidiaries which are parties to a Subsidiary Guarantee)
plus (iii) the aggregate amount of Secured Reimbursement Obligations be
equal to or greater than forty percent (40%) of Consolidated Net Worth
(determined as of the most recent fiscal quarter of the Company); and
(o) Liens granted by a special-purpose, Wholly Owned
Subsidiary of the Company that purchases accounts receivable from the
Company and its Subsidiaries to the extent such Liens are granted on
such accounts receivable to secure the payment of
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indebtedness of such Wholly Owned Subsidiary.
SECTION X.05. Limitation on Indebtedness. The Company will
not, and will not permit any of its Subsidiaries to, create, incur, assume or
suffer to exist any Indebtedness, except:
(a) Indebtedness of any Loan Party pursuant to any Loan
Document;
(b) Indebtedness of the Company to any Subsidiary and of any
Subsidiary which is a party to a Subsidiary Guarantee to the Company or
any other Subsidiary;
(c) (i) Indebtedness of the Special Purpose Subsidiaries
described in Schedule 6.13, (ii) additional Indebtedness of Excluded
Foreign Subsidiaries to the Company or any Subsidiary which is a party
to a Subsidiary Guarantee in an aggregate principal amount not
exceeding $100,000,000 at any time outstanding, (iii) Indebtedness of
any Subsidiary which is not a party to a Subsidiary Guarantee owing to
any other Subsidiary which is not a party to a Subsidiary Guarantee and
(iv) Indebtedness in the form of any investment permitted by Section
10.11;
(d) Indebtedness of the Company having a weighted average life
longer than the combined weighted average life of the Tranche A Term
Loans and the Tranche B Term Loans and a final maturity after the final
maturity of the Tranche B Term Loans, the proceeds of which are used to
prepay the Term Loans;
(e) Subordinated Debt (i) incurred after the prepayment in
full of the Interim Term Loans or (ii) the proceeds of which are used
to prepay (A) the Interim Term Loans or, (B) so long as no Default or
Event of Default is in existence, the Senior Subordinated Debt;
(f) Indebtedness secured by Liens permitted by Section
10.04(e), including capital lease obligations, in an aggregate
principal amount not to exceed $50,000,000 at any one time outstanding
and any refinancings, refundings, renewals or extensions thereof
(without any increase in the principal amount thereof);
(g) Indebtedness outstanding on the date hereof and listed on
Schedule IV and any refinancings, refundings, renewals or extensions
thereof (without any increase in the principal amount thereof), and
Indebtedness of the Target and its Subsidiaries outstanding on the date
of consummation of the Acquisition, but not any refinancings,
refundings, renewals or extensions thereof;
(h) additional Indebtedness of the Company or any of its
Subsidiaries in an aggregate principal amount (for the Company and all
Subsidiaries) at any one time outstanding not to exceed forty percent
(40%) of Consolidated Net Worth (determined as of the end of the most
recent fiscal quarter of the Company); and
(i) the Senior Subordinated Debt.
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SECTION X.06. Limitation on Guaranties. The Company will not,
and will not permit any of its Subsidiaries to, create, incur, assume or suffer
to exist any Guaranty except:
(a) Guaranties in existence on the date hereof and listed on
Schedule IV and Guaranties of any refinancings, refundings, renewals or
extensions of the Indebtedness or obligations guaranteed thereby,
provided that the amount of such Indebtedness or obligations are not
increased, and Guaranties of the Target and its Subsidiaries in
existence on the date of consummation of the Acquisition;
(b) the Subsidiary Guarantees;
(c) Guaranties of Indebtedness permitted under clauses (a)
through (f) and clause (h) of Section 10.05;
(d) additional Guaranties in respect of Indebtedness and other
obligations not exceeding $10,000,000 at any time outstanding;
(e) Guaranties of the Loan Parties in respect of the Senior
Subordinated Debt in accordance with the Senior Subordinated Loan
Documentation; and
(f) Guaranties of the Loan Parties in respect of Subordinated
Debt which Guaranties shall have subordination terms acceptable to the
Administrative Agent, acting reasonably.
SECTION X.07. Limitation on Fundamental Changes. The Company
will not, and will not permit any of its Subsidiaries to, enter into any merger,
consolidation or amalgamation, or liquidate, wind up or dissolve itself (or
suffer any liquidation or dissolution), or Dispose of all or substantially all
of its Property or business, or make any material change in its present method
of conducting business, except:
(a) any Subsidiary of the Company may be merged or
consolidated with or into the Company (provided that the Company shall
be the continuing or surviving corporation) or with or into any
Subsidiary which is a party to a Subsidiary Guarantee (provided that
such Subsidiary which is a party to a Subsidiary Guarantee shall be the
continuing or surviving corporation) and any Subsidiary of the Company
which is not a party to a Subsidiary Guarantee may be merged or
consolidated with or into any other Subsidiary which is not a party to
a Subsidiary Guarantee;
(b) any Subsidiary of the Company may Dispose of any or all of
its assets (upon voluntary liquidation or otherwise) to the Company or
any Subsidiary which is a party to a Subsidiary Guarantee, and any
Subsidiary of the Company which is not a party to a Subsidiary
Guarantee may Dispose of assets to any other Subsidiary which is not a
party to a Subsidiary Guarantee; and
(c) Dispositions permitted by Section 10.08(a), (d), (e), (f),
(g), (i) and (j).
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SECTION X.08. Limitation on Sale of Assets. The Company will
not, and will not permit any of its Subsidiaries to, Dispose of any of its
Property or business (including, without limitation, receivables and leasehold
interests), whether now owned or hereafter acquired, or, in the case of any
Subsidiary, issue or sell any shares of such Subsidiary's Capital Stock to any
Person, except:
(a) the Disposition of obsolete or worn out property in the
ordinary course of business;
(b) the sale of inventory in the ordinary course of business;
(c) Dispositions permitted by Section 10.07(a) and (b) or
Section 10.11;
(d) the sale or issuance of the Capital Stock of any
Subsidiary which is a party to a Subsidiary Guarantee to the Company or
any Subsidiary, or the sale or issuance of Capital Stock of any Foreign
Subsidiary to any other Foreign Subsidiary;
(e) sales of receivables under the Company's existing accounts
receivable financing program as in effect on September 26, 1997;
(f) Dispositions of assets required to comply with anti-trust
laws;
(g) Dispositions of assets listed in Schedule 10.8;
(h) Dispositions pursuant to sale and leaseback transactions
permitted pursuant to Section 10.13;
(i) the Transactions described in Section 10.10 (prior to the
Covenant Transition Date) or Section 10.13 (after the Covenant
Transition Date) may be consummated; and
(j) the sale of other assets having a fair market value not to
exceed $80,000,000 in the aggregate for any fiscal year of the Company.
SECTION X.09. Limitation on Restricted Payments. The Company
will not, and will not permit any of its Subsidiaries to, declare or pay any
dividend (other than dividends payable solely in common stock of the Person
making such dividend) on, or make any payment on account of, or set apart assets
for a sinking or other analogous fund for, the purchase, redemption, defeasance,
retirement or other acquisition of, any shares of any class of Capital Stock of
the Company or any Subsidiary or any warrants or options to purchase any such
Capital Stock, whether now or hereafter outstanding, or make any other
distribution in respect thereof, either directly or indirectly, whether in cash
or property or in obligations of the Company or any Subsidiary (collectively,
"Restricted Payments"), except that:
(a) any Subsidiary may make Restricted Payments to the Company
or any Subsidiary which is a party to a Subsidiary Guarantee, and any
Foreign Subsidiary may
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make Restricted Payments to any Foreign Subsidiary;
(b) so long as no Default or Event of Default shall have
occurred and be continuing, the Company may pay dividends in respect of
its preferred stock at the stated rate, and dividends in respect of its
common stock at a rate not exceeding $.48 per share per year, as
adjusted for stock splits and similar events; and
(c) the Company may issue common stock upon conversion of any
of its convertible preferred stock, or the preferred stock of an
Affiliate described in the second sentence of the definition of
"Capital Stock".
SECTION .10. Restrictions on Special Purpose Subsidiaries. The
Company will not permit any Special Purpose Subsidiary to (a) create, assume,
incur or suffer to exist any Lien, any Indebtedness, any Guaranty or any other
liabilities, direct or contingent, (b) make or suffer to exist any Investment,
(c) conduct, transact or otherwise engage in any business or other operations or
(d) own or lease any Property, except that, notwithstanding the foregoing
prohibitions:
(i) a Special Purpose Subsidiary may make an Investment in the
form of a loan or an equity contribution to, or hold the Capital Stock
of, another Special Purpose Subsidiary (x) as described on Schedule
6.13 or (y) which does not have an adverse impact on the Collateral;
(ii) U.K. Acquisition II may consummate the Acquisition;
(iii) following consummation of the Acquisition, U.K.
Acquisition I may acquire directly from the Target or indirectly
through U.K. Acquisition II, for fair market value, up to 100% of the
Capital Stock of Target U.S.
Subsidiary;
(iv) the Special Purpose Subsidiaries may execute and deliver
the Loan Documents to which they are parties, incur and perform their
obligations thereunder and create and suffer to exist the Liens created
thereby; and
(v) the Special Purpose Subsidiaries may perform obligations
under the Investments permitted above and under their respective
organic documents and other Requirements of Law, may incur obligations
to Governmental Authorities in the ordinary course of business, such as
income and franchise tax liabilities and other incidental liabilities,
and may incur other immaterial liabilities directly related and
incidental to the permitted activities enumerated above.
To the extent permitted by applicable law, the certificate of
incorporation or other charter or other organizational documents of each Special
Purpose Subsidiary shall contain the restrictions on the actions of such Special
Purpose Subsidiary substantially equivalent to those set forth above.
SECTION .11. Limitation on Investments, Loans and Advances.
The Company
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will not, and will not permit any of its Subsidiaries to, make any advance,
loan, extension of credit (by way of guaranty of obligations of such Person or
otherwise) or capital contribution to, or purchase any stock, bonds, notes,
debentures or other securities of or any assets constituting all or a material
part of a business unit of, or make any other investment in, any Person
("Investments"), except:
(a) extensions of trade credit in the ordinary course of
business;
(b) Investments in Cash Equivalents;
(c) Guaranties permitted by Section 10.06;
(d) loans and advances to employees of the Company or its
Subsidiaries in the ordinary course of business (including, without
limitation, for travel, entertainment and relocation expenses);
(e) the Acquisition;
(f) Investments made by the Company or any of its Subsidiaries
with the proceeds of any Reinvestment Deferred Amount (provided that if
such investment is the acquisition of, in a single transaction or in a
series of related transactions, all or substantially all of the equity
interests of any Person, such acquisition is approved by the board of
directors or analogous governing body of such Person);
(g) Investments (x) by any Subsidiary in the Company or (y) by
the Company or any of its Subsidiaries in any Person that, prior to
such investment, is a Subsidiary which is a party to a Subsidiary
Guarantee;
(h) the Investments described in Section 10.10 or otherwise
indicated on Schedule 6.13;
(i) Investments (x) by the Company or any of its Subsidiaries
in any entity which at the time of such Investment is an Excluded
Foreign Subsidiary and which was not acquired or created in
anticipation of the making of such Investment in an aggregate amount
outstanding not exceeding $100,000,000 for all Excluded Foreign
Subsidiaries, and (y) investments by a Subsidiary which is not a party
to a Subsidiary Guarantee in any other Subsidiary which is not a party
to a Subsidiary Guarantee;
(j) Investments for which the consideration paid by the
Company and its Subsidiaries is Capital Stock of the Company (provided
that if such Investment is the acquisition of, in a single transaction
or in a series of related transactions, all or substantially all of the
equity interests of any Person, such acquisition is approved by the
board of directors or analogous governing body of such Person); and
(k) in addition to Investments otherwise expressly permitted
by this Section 10.11, Investments by the Company or any of its
Subsidiaries in an aggregate amount
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(valued at cost) not to exceed at any time outstanding $150,000,000
while this Agreement is outstanding (provided that if such Investment
is the acquisition of, in a single transaction or in a series of
related transactions, all or substantially all of the equity interests
of any Person, such acquisition is approved by the board of directors
or analogous governing body of such Person).
SECTION .12. Limitation on Optional Payments and Modifications
of Debt Instruments, etc. (a) Except as provided in Section 6.04(d) and
10.05(e), the Company will not, and will not permit any of its Subsidiaries to,
make or offer to make any payment, prepayment, repurchase or redemption of or
otherwise defease or segregate funds with respect to the Subordinated Debt
(other than scheduled interest payments required to be made in cash) or (b)
amend, modify, waive or otherwise change, or consent or agree to any amendment,
modification, waiver or other change to, any of the terms of the Subordinated
Debt (other than any such amendment, modification, waiver or other change which
would extend the maturity or reduce the amount of any payment of principal
thereof or which would reduce the rate or extend the date for payment of
interest thereon).
Notwithstanding the foregoing, the Senior Subordinated Bridge
Loans may be refinanced and replaced by the Exchange Notes and the Senior
Subordinated Term Notes.
SECTION .13. Limitation on Sales and Leasebacks. Enter into
any arrangement with any Person providing for the leasing by the Company or any
Subsidiary of real or personal property which has been or is to be sold or
transferred by the Company or such Subsidiary to such Person or to any other
Person to whom funds have been or are to be advanced by such Person on the
security of such property or rental obligations of the Company or such
Subsidiary; provided, that (i) the Company may consummate sale and leaseback
transactions in respect of assets having a book value in the aggregate not
exceeding $50,000,000 and (ii) the Company and its Subsidiaries may consummate
sale and leaseback transactions in which the transferee is the Company or a
Subsidiary which is a party to a Subsidiary Guarantee and any Subsidiary which
is not a party to a Subsidiary Guarantee may consummate sale and leaseback
transactions in which the transferor is another Subsidiary which is not a party
to a Subsidiary Guarantee.
SECTION .14. Limitation on Restrictions on Subsidiary
Distributions. The Company will not, and will not permit any Subsidiary to,
enter into or suffer to exist or become effective any consensual encumbrance or
restriction on the ability of any Subsidiary of the Company to (a) pay dividends
or make any other distributions in respect of any Capital Stock of such
Subsidiary held by, or pay any Indebtedness owed to, the Company or any other
Subsidiary of the Company, (b) make loans or advances to the Company or any
other Subsidiary of the Company or (c) transfer any of its assets to the Company
or any other Subsidiary of the Company, except for such encumbrances or
restrictions existing under or by reason of (i) any restrictions existing under
the Loan Documents, (ii) any restrictions with respect to a Subsidiary imposed
pursuant to an agreement which has been entered into in connection with the
Disposition of all or substantially all of the Capital Stock or assets of such
Subsidiary and (iii) any restrictions with respect to assets encumbered by a
Lien permitted by Section 10.04 so long as such restriction applies only to the
asset encumbered by such permitted Lien.
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SECTION .15. Multiemployer Plans. The Company will not, as of
any date, permit any liability to occur to which the Company or any Commonly
Controlled Entity would become subject under ERISA if the Company or any such
Commonly Controlled Entity were to withdraw completely from all Multiemployer
Plans as of the valuation date most closely preceding such date.
SECTION .16. Limitation on More Restrictive Covenants. The
Company shall not enter into any new debt agreement that would contain, nor
enter into any amendment, supplement or other modification to any indenture,
instrument or other agreement concerning the Funded Debt or any refinancing
thereof, if such indenture, instrument or other agreement at the time entered
into or after giving effect to any such amendment, supplement or other
modification thereto, would contain (a) any covenant or event of default that is
more restrictive on any Borrower than those set forth in this Agreement, (b)
with respect to the Company, any covenant with respect to financial performance
the scope of which is materially different from the covenants respecting such
matters set forth in Sections 10.01, 10.02 or 10.03, (c) any covenant which
would prohibit the granting of liens on its assets by any Borrower or its
Subsidiaries in favor of the Lenders, other than, in the case of this clause
(c), Indebtedness incurred pursuant to Section 10.05(f), and in the case of
clauses (a) and (c), Indebtedness incurred pursuant to Section 10.05(g)
constituting a refinancing, refunding, extension or renewal of existing
Indebtedness and having terms no more restrictive than the Indebtedness
refinanced, refunded, extended or renewed thereby.
SECTION .17. Affiliates. The Company, will not, nor will it
permit any of its Subsidiaries to, enter into any transaction (including,
without limitation, the purchase or sale of any property or service) with, or
make any payment or transfer to, any Affiliate except in the ordinary course of
business and pursuant to the reasonable requirements of the Company's or such
Subsidiary's business and upon fair and reasonable terms no less favorable to
the Company or such Subsidiary than the Company or such Subsidiary would obtain
in a comparable arms-length transaction.
ARTICLE XI. GUARANTEE
SECTION XI.01. Guarantee. (a) The Company hereby
unconditionally and irrevocably guarantees to the Administrative Agent, for the
ratable benefit of the Administrative Agent and the Lenders and their respective
successors, indorsees, transferees and assigns, the prompt and complete payment
and performance by the Foreign Subsidiary Borrowers and the Local Currency
Borrowers when due (whether at the stated maturity, by acceleration or
otherwise) of the Obligations.
(b) The Company further agrees to pay any and all expenses
(including, without limitation, all reasonable fees and disbursements of
counsel) which may be paid or incurred by the Administrative Agent, or any
Lender in enforcing, or obtaining advice of counsel in respect of, any rights
with respect to, or collecting, any or all of the Obligations and/or enforcing
any rights with respect to, or collecting against, the Company under this
Section. This Section shall remain in full force and effect until the
Obligations are paid in full and the Commitments are
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terminated, notwithstanding that from time to time prior thereto the Borrowers
and the Local Currency Borrower may be free from any Obligations.
(c) No payment or payments made by any Borrower or Local
Currency Borrower or any other Person or received or collected by the
Administrative Agent or any Lender from any Borrower or Local Currency Borrower
or any other Person by virtue of any action or proceeding or any set-off or
appropriation or application, at any time or from time to time, in reduction of
or in payment of the Obligations shall be deemed to modify, reduce, release or
otherwise affect the liability of the Company hereunder which shall,
notwithstanding any such payment or payments, remain liable hereunder for the
Obligations until the Obligations are paid in full and the Commitments are
terminated.
(d) The Company agrees that whenever, at any time, or from
time to time, it shall make any payment to the Administrative Agent or any
Lender on account of its liability under this Section, it will notify the
Administrative Agent and such Lender in writing that such payment is made under
this Section for such purpose.
SECTION XI.02. Right of Set-off. The Administrative Agent and
each Lender is hereby irrevocably authorized at any time and from time to time
without notice to the Company, any such notice being expressly waived by the
Company, to set off and appropriate and apply any and all deposits (general or
special, time or demand, provisional or final), in any currency, and any other
credits, indebtedness or claims, in any currency, in each case whether direct or
indirect, absolute or contingent, matured or unmatured, at any time held or
owing by the Administrative Agent or such Lender (or any Affiliate of such
Lender) to or for the credit or the account of the Company, or any part thereof
in such amounts as the Administrative Agent or such Lender may elect, against or
on account of the obligations and liabilities of the Company to the
Administrative Agent or such Lender hereunder which are then due and payable and
claims of every nature and description of the Administrative Agent or such
Lender against the Company, in any currency, whether arising hereunder, under
any other Loan Document or otherwise in connection therewith, as the
Administrative Agent or such Lender may elect, whether or not the Administrative
Agent or such Lender has made any demand for payment. The Administrative Agent
and each Lender shall notify the Company promptly of any such set-off and the
application made by the Administrative Agent or such Lender, as the case may be,
of the proceeds thereof; provided that the failure to give such notice shall not
affect the validity of such set-off and application. The rights of the
Administrative Agent and each Lender under this Section are in addition to other
rights and remedies (including, without limitation, other rights of set-off)
which the Administrative Agent or such Lender may have.
SECTION XI.03. No Subrogation. Notwithstanding any payment or
payments made by the Company hereunder, or any set-off or application of funds
of the Company by the Administrative Agent or any Lender, the Company shall not
be entitled to be subrogated to any of the rights of the Administrative Agent or
any Lender against the Foreign Subsidiary Borrowers or Local Currency Borrowers
or against any collateral security or guarantee or right of offset held by the
Administrative Agent or any Lender for the payment of the Obligations, nor shall
the Company seek or be entitled to seek any contribution or reimbursement from
such Borrowers in respect of payments made by the Company hereunder, until all
amounts owing to
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the Administrative Agent and the Lenders by such Borrowers on account of the
Obligations are paid in full and the Commitments are terminated. If any amount
shall be paid to the Company on account of such subrogation rights at any time
when all of the Obligations shall not have been paid in full, such amount shall
be held by the Company in trust for the Administrative Agent and the Lenders,
segregated from other funds of the Company, and shall, forthwith upon receipt by
the Company, be turned over to the Administrative Agent in the exact form
received by the Company (duly indorsed by the Company to the Administrative
Agent, if required), to be applied against the Obligations, whether matured or
unmatured, in such order as Administrative Agent may determine. The provisions
of this Section shall survive the termination of this Agreement and the payment
in full of the Obligations and the termination of the Commitments.
SECTION XI.04. Amendments, etc. with respect to the
Obligations; Waiver of Rights. The Company shall remain obligated hereunder
notwithstanding that, without any reservation of rights against the Company, and
without notice to or further assent by the Company, any demand for payment of
any of the Obligations made by the Administrative Agent or any Lender may be
rescinded by the Administrative Agent or such Lender, and any of the Obligations
continued, and the Obligations, or the liability of any other party upon or for
any part thereof, or any collateral security or guarantee therefor or right of
offset with respect thereto, may, from time to time, in whole or in part, be
renewed, extended, amended, modified, accelerated, compromised, waived,
surrendered or released by the Administrative Agent or any Lender, and any Loan
Documents and any other documents executed and delivered in connection therewith
may be amended, modified, supplemented or terminated, in whole or in part, in
accordance with the provisions thereof as the Administrative Agent (or the
requisite Lenders, as the case may be) may deem advisable from time to time, and
any collateral security, guarantee or right of offset at any time held by the
Administrative Agent or any Lender for the payment of the Obligations may be
sold, exchanged, waived, surrendered or released. None of the Administrative
Agent or any Lender shall have any obligation to protect, secure, perfect or
insure any Lien at any time held by it as security for the Obligations or for
this Agreement or any property subject thereto. When making any demand hereunder
against the Company, the Administrative Agent or any Lender may, but shall be
under no obligation to, make a similar demand on any Borrower or any other
guarantor, and any failure by the Administrative Agent or any Lender to make any
such demand or to collect any payments from any Foreign Subsidiary Borrower or
Local Currency Borrower or any such other guarantor or any release of any
Foreign Subsidiary Borrower or Local Currency Borrower or such other guarantor
shall not relieve the Company of its obligations or liabilities hereunder, and
shall not impair or affect the rights and remedies, express or implied, or as a
matter of law, of the Administrative Agent or any Lender against the Company.
For the purposes hereof "demand" shall include the commencement and continuance
of any legal proceedings.
SECTION XI.05. Guarantee Absolute and Unconditional. The
Company waives any and all notice of the creation, renewal, extension or accrual
of any of the Obligations and notice of or proof of reliance by the
Administrative Agent or any Lender upon this Agreement or acceptance of this
Agreement; the Obligations, and any of them, shall conclusively be deemed to
have been created, contracted or incurred, or renewed, extended, amended or
waived, in reliance upon this Agreement; and all dealings between the Foreign
Subsidiary Borrower and the Local Currency Borrowers and the Company, on the one
hand, and the Administrative Agent and the
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Lenders, on the other, shall likewise be conclusively presumed to have been had
or consummated in reliance upon this Agreement. The Company waives diligence,
presentment, protest, demand for payment and notice of default or nonpayment to
or upon the Foreign Subsidiary Borrowers and the Local Currency Borrowers and
the Company with respect to the Obligations. This Article XI shall be construed
as a continuing, absolute and unconditional guarantee of payment without regard
to (a) the validity, regularity or enforceability of this Agreement, any other
Loan Document, any of the Obligations or any other collateral security therefor
or guarantee or right of offset with respect thereto at any time or from time to
time held by the Administrative Agent or any Lender, (b) any defense, set-off or
counterclaim (other than a defense of payment or performance) which may at any
time be available to or be asserted by the Foreign Subsidiary Borrowers or the
Local Currency Borrowers against the Administrative Agent or any Lender, or (c)
any other circumstance whatsoever (with or without notice to or knowledge of the
Foreign Subsidiary Borrowers or the Local Currency Borrowers or the Company)
which constitutes, or might be construed to constitute, an equitable or legal
discharge of the Foreign Subsidiary Borrowers or the Local Currency Borrowers
for the Obligations, or of the Company under this Article XI, in bankruptcy or
in any other instance. When pursuing its rights and remedies hereunder against
the Company, the Administrative Agent and any Lender may, but shall be under no
obligation to, pursue such rights and remedies as it may have against the
Foreign Subsidiary Borrowers or the Local Currency Borrowers or any other Person
or against any collateral security or guarantee for the Obligations or any right
of offset with respect thereto, and any failure by the Administrative Agent or
any Lender to pursue such other rights or remedies or to collect any payments
from the Foreign Subsidiary Borrowers or the Local Currency Borrowers or any
such other Person or to realize upon any such collateral security or guarantee
or to exercise any such right of offset, or any release of the Foreign
Subsidiary Borrowers or the Local Currency Borrowers or any such other Person or
of any such collateral security, guarantee or right of offset, shall not relieve
the Company of any liability hereunder, and shall not impair or affect the
rights and remedies, whether express, implied or available as a matter of law,
of the Administrative Agent or any Lender against the Company. This Article XI
shall remain in full force and effect and be binding in accordance with and to
the extent of its terms upon the Company and its successors and assigns, and
shall inure to the benefit of the Administrative Agent and the Lenders, and
their respective successors, indorsees, transferees and assigns, until all the
Obligations and the obligations of the Company under this Agreement shall have
been satisfied by payment in full and the Commitments shall be terminated,
notwithstanding that from time to time during the term of this Agreement the
Foreign Subsidiary Borrowers or the Local Currency Borrowers may be free from
any Obligations.
SECTION XI.06. Reinstatement. This Article XI shall continue
to be effective, or be reinstated, as the case may be, if at any time payment,
or any part thereof, of any of the Obligations is rescinded or must otherwise be
restored or returned by the Administrative Agent or any Lender upon the
insolvency, bankruptcy, dissolution, liquidation or reorganization of any
Foreign Subsidiary Borrower or the Local Currency Borrower or upon or as a
result of the appointment of a receiver, intervenor or conservator of, or
trustee or similar officer for, any Foreign Subsidiary Borrower or the Local
Currency Borrower or any substantial part of its property, or otherwise, all as
though such payments had not been made.
SECTION XI.07. Payments. The Company hereby agrees that all
payments
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required to be made by it hereunder will be made to the Administrative
Agent without set-off or counterclaim in accordance with the terms of the
Obligations, including, without limitation, in the currency in which payment is
due.
ARTICLE XII. EVENTS OF DEFAULT
If any of the following events shall occur and be continuing:
(a) Any Borrower shall fail to pay any principal of any Loan
made to it when due in accordance with the terms hereof; or any
Borrower shall fail to pay any interest, or any other amount payable by
it hereunder, within five days after any such interest or other amount
becomes due in accordance with the terms hereof; or
(b) Any representation or warranty made or deemed made by any
Borrower herein or which is contained in any certificate, document or
financial or other statement furnished at any time under or in
connection with this Agreement or under or in connection with the
Senior Subordinated Loan Documentation shall prove to have been
incorrect in any material respect on or as of the date made or deemed
made; or
(c) Any Borrower shall default in the observance or
performance of any agreement contained in Sections 9.04(a) or 9.06 or
Article X; or
(d) Any Borrower shall default in the observance or
performance of any other agreement contained in this Agreement (other
than as provided in paragraphs (a) through (c) of this Article), and
such default shall continue unremedied for a period of 30 days after
receipt by such Borrower of notice of such default from the
Administrative Agent or any Lender; or
(e) The Company or any of its Subsidiaries shall (i) default
in any payment or payments of principal or interest in an aggregate
amount for the Company and its Subsidiaries of more than $10,000,000
(or its equivalent in another currency) at any one time on any
Indebtedness (other than the Loans) or in the payment of more than
$10,000,000 in the aggregate under any Guaranties (other than the
Company Guaranty), beyond the period of grace (not to exceed 30 days),
if any, provided in the instrument or agreement under which such
Indebtedness or Guaranty was created; or (ii) default in the observance
or performance of any other agreement or condition relating to any
Indebtedness (other than the Loans) the principal amount of which
exceeds $10,000,000 in the aggregate for the Company and its
Subsidiaries or any Guaranty (other than the Company Guaranty)
guaranteeing Indebtedness the principal amount of which exceeds
$10,000,000 in the aggregate for the Company and its Subsidiaries or
contained in any instrument or agreement evidencing, securing or
relating to any such Indebtedness or Guaranty, beyond any applicable
period of grace (not to exceed 30 days), or any other event shall occur
or condition exist, the effect of which default or other event or
condition is to cause, or to permit the holder or holders of such
Indebtedness or beneficiary or beneficiaries of such Guaranty (or a
trustee or agent on behalf of such holder or holders
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or beneficiary or beneficiaries) to cause, with the giving of notice
if required, such Indebtedness to become due prior to its stated
maturity or such Guaranty to become payable; or
(f) (i) Any Borrower or any of its Subsidiaries shall commence
any case, proceeding or other action (A) under any existing or future
law of any jurisdiction, domestic or foreign, relating to bankruptcy,
insolvency, reorganization or relief of debtors, seeking to have an
order for relief entered with respect to it, or seeking to adjudicate
it a bankrupt or insolvent, or seeking reorganization, arrangement,
adjustment, winding-up, liquidation, dissolution, composition or other
relief with respect to it or its debts, or (B) seeking appointment of a
receiver, trustee, custodian, conservator or other similar official for
it or for all or any substantial part of its assets, or any Borrower or
any of its Subsidiaries shall make a general assignment for the benefit
of its creditors; or (ii) there shall be commenced against any Borrower
or any of its Subsidiaries any case, proceeding or other action of a
nature referred to in clause (i) above which (A) results in the entry
of an order for relief or any such adjudication or appointment or (B)
remains undismissed, undischarged or unbonded for a period of 60 days;
or (iii) there shall be commenced against any Borrower or any of its
material Subsidiaries any case, proceeding or other action seeking
issuance of a warrant of attachment, execution, distraint or similar
process against all or any substantial part of its assets which results
in the entry of an order for any such relief which shall not have been
vacated, discharged, or stayed or bonded pending appeal within 60 days
from the entry thereof; or (iv) any Borrower or any of its Subsidiaries
shall take any action in furtherance of, or indicating its consent to,
approval of, or acquiescence in, any of the acts set forth in clause
(i), (ii), or (iii) above; or (v) any Borrower or any of its
Subsidiaries shall generally not, or shall be unable to, or shall admit
in writing its inability to, pay its debts as they become due; or
(g) (i) Any Person shall engage in any Prohibited Transaction
involving any Plan, (ii) any Accumulated Funding Deficiency, whether or
not waived, shall exist with respect to any Plan or any Lien in favor
of the PBGC or a Plan shall arise on the assets of any Borrower or any
Commonly Controlled Entity, (iii) a Reportable Event shall occur with
respect to, or proceedings shall commence to have a trustee appointed,
or a trustee shall be appointed, to administer or to terminate, any
Single Employer Plan, which Reportable Event or commencement of
proceedings or appointment of a trustee is, in the reasonable opinion
of the Required Lenders, likely to result in the termination of such
Plan for purposes of Title IV of ERISA, (iv) any Single Employer Plan
shall terminate for purposes of Title IV of ERISA, (v) any Borrower or
any Commonly Controlled Entity shall, or in the reasonable opinion of
the Required Lenders is likely to, incur any liability in connection
with a withdrawal from, or the Insolvency or Reorganization of, a
Multiemployer Plan or (vi) any other event or condition shall occur or
exist with respect to a Plan; and in each case in clauses (i) through
(vi) above, such event or condition, together with all other such
events or conditions, if any, could reasonably be expected to have a
Material Adverse Effect; or
(h) One or more judgments or decrees shall be entered against
the Company or any of its Subsidiaries involving in the aggregate a
liability (not paid or fully covered by
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insurance as to which the insurance carrier has admitted liability) of
$30,000,000 or more, and all such judgments or decrees shall not have
been vacated, discharged, stayed or bonded pending appeal within 30
days from the entry thereof; or
(i) The validity or enforceability of this Agreement, any Loan
Document or any of the other documents required to be delivered in
connection herewith shall be challenged by the Company or any of its
Subsidiaries or shall fail to remain in full force and effect for any
reason other than in accordance with its express terms; or
(j) A Change of Control shall occur; or
(k) The subordination provisions of any Subordinated Debt
shall cease, for any reason, to be valid or any Loan Party shall so
assert in writing;
then, and in any such event, (A) if such event is an Event of Default specified
in clause (i) or (ii) of paragraph (f) above with respect to the Company,
automatically the Commitments shall immediately terminate and the Loans
hereunder (with accrued interest thereon) and all other amounts owing under this
Agreement and the Notes shall immediately become due and payable, and (B) if
such event is any other Event of Default, either or both of the following
actions may be taken: (i) with the consent of the Required Lenders, the
Administrative Agent may, or upon the request of the Required Lenders, the
Administrative Agent shall, by notice to the Company declare the Commitments to
be terminated forthwith, whereupon the Commitments shall immediately terminate;
and (ii) with the consent of the Required Lenders, the Administrative Agent may,
or upon the request of the Required Lenders, the Administrative Agent shall, by
notice to the Company, declare the Loans hereunder (with accrued interest
thereon) and all other amounts owing under this Agreement and the Notes to be
due and payable forthwith, whereupon the same shall immediately become due and
payable, provided, that, notwithstanding the foregoing, during the Term Loan
Commitment Period (x) if the applicable conditions precedent to any Term Loan
set forth in Article VIII are satisfied, no such declaration under clause (B)(i)
or (B)(ii) above shall relieve the Lenders of their obligations to make such
Term Loan, (y) no acceleration of the Loans under clause (B)(i) or (B)(ii) above
shall apply to any outstanding Term Loans until the end of the Term Loan
Commitment Period and, in any event, no acceleration of the Loans under clause
(B)(i) or (B)(ii) above shall apply to any amount of outstanding Term Loans
(whether such Term Loans were made before or after such acceleration) to the
extent that the proceeds thereof have not been disbursed to pay Target
Shareholders or Optionholders for the purchase of Target Shares or Options
pursuant to the Tender Offer (such undisbursed proceeds, "Acquisition Funds")
and (z) neither the Administrative Agent nor any Lender will take any
enforcement action against any Acquisition Funds or otherwise seek to prevent
the disbursement of any Acquisition Funds to pay Target Shareholders or
Optionholders for the purchase of Target Shares or Options pursuant to the
Tender Offer.
Except as expressly provided above in this Article, presentment,
demand, protest and all other notices of any kind are hereby expressly waived.
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ARTICLE XIII. THE ADMINISTRATIVE AGENT
SECTION XIII.01. Appointment. Each Lender hereby irrevocably
designates and appoints Chase as the Administrative Agent of such Lender under
this Agreement and the other Loan Documents, and each Lender irrevocably
authorizes Chase to act as the Administrative Agent of such Lender, to take such
action on its behalf under the provisions of this Agreement and the other Loan
Documents and to exercise such powers and perform such duties as are expressly
delegated to the Administrative Agent by the terms of this Agreement and the
other Loan Documents, together with such other powers as are reasonably
incidental thereto. Notwithstanding any provision to the contrary elsewhere in
this Agreement, the Administrative Agent shall not have any duties or
responsibilities, except those expressly set forth herein, or any fiduciary
relationship with any Lender, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into this
Agreement or any other Loan Document or otherwise exist against the
Administrative Agent.
SECTION XIII.02. Delegation of Duties. The Administrative
Agent may execute any of its duties under this Agreement and the other Loan
Documents by or through agents or attorneys-in-fact and shall be entitled to
advice of counsel concerning all matters pertaining to such duties. The
Administrative Agent shall not be responsible for the negligence or misconduct
of any agents or attorneys-in-fact selected by it with reasonable care.
SECTION XIII.03. Exculpatory Provisions. Neither the
Administrative Agent nor any of its respective officers, directors, employees,
agents, attorneys-in-fact or affiliates shall be (i) liable for any action
lawfully taken or omitted to be taken by it or such Person under or in
connection with this Agreement or any other Loan Document (except for its or
such Person's gross negligence or willful misconduct) or (ii) responsible in any
manner to any of the Lenders for any recitals, statements, representations or
warranties made by any Borrower or any officer thereof contained in this
Agreement or any other Loan Document or in any certificate, report, statement or
other document referred to or provided for in, or received by the Administrative
Agent under or in connection with, this Agreement or any other Loan Document or
for the value, validity, effectiveness, genuineness, enforceability or
sufficiency of this Agreement or any other Loan Document or for any failure of a
Borrower to perform its obligations hereunder or thereunder. The Administrative
Agent shall not be under any obligation to any Lender to ascertain or to inquire
as to the observance or performance of any of the agreements contained in, or
conditions of, this Agreement or any other Loan Document or to inspect the
properties, books or records of the Borrowers.
SECTION XIII.04. Reliance by Administrative Agent. The
Administrative Agent shall be entitled to rely, and shall be fully protected in
relying, upon any Note, writing, resolution, notice, consent, certificate,
affidavit, letter, telecopy, telex or teletype message, statement, order or
other document or conversation believed by it to be genuine and correct and to
have been signed, sent or made by the proper Person or Persons and upon advice
and statements of legal counsel (including, without limitation, counsel to the
Borrowers or any of them), independent accountants and other experts selected by
the Administrative Agent. The Administrative Agent may deem and treat the payee
of any Note as the owner thereof for all purposes unless a written notice of
assignment or transfer thereof shall have been filed with the
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Administrative Agent. The Administrative Agent shall be fully justified in
failing or refusing to take any action under this Agreement or any other Loan
Document unless it shall first receive such advice or concurrence of the
Required Lenders as it deems appropriate or it shall first be indemnified to its
satisfaction by the Lenders against any and all liability and expense which may
be incurred by it by reason of taking or continuing to take any such action. The
Administrative Agent shall in all cases be fully protected in acting, or in
refraining from acting, under this Agreement and the other Loan Documents in
accordance with a request of the Required Lenders, and such request and any
action taken or failure to act pursuant thereto shall be binding upon all the
Lenders and all future holders of the Loans.
SECTION XIII.05. Notice of Default. The Administrative Agent
shall not be deemed to have knowledge or notice of the occurrence of any Default
or Event of Default hereunder unless the Administrative Agent has received
notice from a Lender or a Borrower referring to this Agreement, describing such
Default or Event of Default and stating that such notice is a "notice of
default". In the event that the Administrative Agent receives such a notice, the
Administrative Agent shall give notice thereof to the Lenders. The
Administrative Agent shall take such action with respect to such Default or
Event of Default as shall be reasonably directed by the Required Lenders;
provided that unless and until the Administrative Agent shall have received such
directions, the Administrative Agent may (but shall not be obligated to) take
such action, or refrain from taking such action, with respect to such Default or
Event of Default as it shall deem advisable in the best interests of the
Lenders.
SECTION XIII.06. Non-Reliance on Agents and Other Lenders.
Each Lender expressly acknowledges that neither the Administrative Agent nor any
of its officers, directors, employees, agents, attorneys-in-fact or affiliates
have made any representations or warranties to it and that no act by the
Administrative Agent hereafter taken, including any review of the affairs of a
Loan Party or any affiliate of a Loan Party, shall be deemed to constitute any
representation or warranty by the Administrative Agent to any Lender. Each
Lender represents to the Administrative Agent that it has, independently and
without reliance upon the Administrative Agent or any other Lender, and based on
such documents and information as it has deemed appropriate, made its own
appraisal of and investigation into the business, operations, property,
financial and other condition and creditworthiness of the Loan Parties and their
affiliates and made its own decision to make its Loans hereunder and enter into
this Agreement. Each Lender also represents that it will, independently and
without reliance upon the Administrative Agent or any other Lender, and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own credit analysis, appraisals and decisions in taking or
not taking action under this Agreement and the other Loan Documents, and to make
such investigation as it deems necessary to inform itself as to the business,
operations, property, financial and other condition and creditworthiness of the
Loan Parties and their affiliates. Except for notices, reports and other
documents expressly required to be furnished to the Lenders by the
Administrative Agent hereunder, the Administrative Agent shall have no duty or
responsibility to provide any Lender with any credit or other information
concerning the business, operations, property, condition (financial or
otherwise), prospects or creditworthiness of any Loan Party or any affiliate of
a Loan Party which may come into the possession of the Administrative Agent or
any of its officers, directors, employees, agents, attorneys-in-fact or
affiliates.
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SECTION XIII.07. Indemnification. The Lenders agree to
indemnify the Administrative Agent in its capacity as such (to the extent not
reimbursed by the Borrowers and without limiting the obligation of the Borrowers
to do so), ratably according to their respective Revolving Credit Percentages,
Tranche A Term Loan Percentages, Tranche B Term Loan Percentages and Interim
Term Loan Percentages in effect on the date on which indemnification is sought
under this Section 13.07 (or, if indemnification is sought after the date upon
which the Commitments shall have terminated and the Loans shall have been paid
in full, ratably in accordance with such Percentages immediately prior to such
date), from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind whatsoever which may at any time (including, without limitation, at any
time following the payment of the Loans) be imposed on, incurred by or asserted
against the Administrative Agent in any way relating to or arising out of, the
Commitments, this Agreement, any of the other Loan Documents or any documents
contemplated by or referred to herein or therein or the transactions
contemplated hereby or thereby or any action taken or omitted by the
Administrative Agent under or in connection with any of the foregoing; provided
that no Lender shall be liable for the payment of any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements which resulted from the Administrative Agent's
gross negligence or willful misconduct. The agreements in this Section 13.07
shall survive the payment of the Loans and all other amounts payable hereunder.
SECTION XIII.08. Administrative Agent in Its Individual
Capacity. The Administrative Agent and its affiliates may make loans to, accept
deposits from and generally engage in any kind of business with any Loan Party
as though the Administrative Agent were not the Administrative Agent. With
respect to its Loans made or renewed by it the Administrative Agent shall have
the same rights and powers under this Agreement and the other Loan Documents as
any Lender and may exercise the same as though it were not the Administrative
Agent, and the terms "Lender" and "Lenders" shall include the Administrative
Agent in its individual capacity.
SECTION XIII.09. Successor Administrative Agent. The
Administrative Agent may resign as Administrative Agent upon 30 days' notice to
the Lenders and the Company. If the Administrative Agent shall resign as
Administrative Agent under this Agreement and the other Loan Documents, then the
Required Lenders shall appoint from among the Lenders a successors agent for the
Lenders, which successor agent shall (unless an Event of Default under paragraph
(a) or (f) of Article XII with respect to the Company shall have occurred and be
continuing) be approved by the Company (which approval shall not be unreasonably
withheld or delayed), whereupon such successor agent shall succeed to the
rights, powers and duties of the Administrative Agent, and the term
"Administrative Agent" shall mean such successor agent effective upon such
appointment and approval, and the former Administrative Agent's rights, powers
and duties as Administrative Agent shall be terminated, without any other or
further act or deed on the part of such former Administrative Agent or any of
the parties to this Agreement or any holders of the Loans. If no successor agent
has accepted appointment as Administrative Agent by the date that is 30 days
following a retiring Administrative Agent's notice of resignation, the retiring
Administrative Agent's resignation shall nevertheless thereupon become effective
and the Lenders shall assume and perform all of the duties of the Administrative
Agent hereunder until such time, if any, as the Required Lenders appoint a
successor agent as provided
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for above. After any retiring Administrative Agent's resignation as
Administrative Agent, the provisions of this Article XIII shall inure to its
benefit as to any actions taken or omitted to be taken by it while it was
Administrative Agent under this Agreement and the other Loan Documents.
SECTION .10. Authorization to Release Liens. The
Administrative Agent is hereby irrevocably authorized by each of the Lenders to
release, or direct the Trustee to release, any Lien created by any Security
Document covering any Property of the Company or any of its Subsidiaries that is
the subject of a Disposition which is permitted by this Agreement or which has
been consented to in accordance with Section 14.01. In addition, the
Administrative Agent is hereby authorized by each of the Lenders to release, and
to direct the Trustee to release, the Liens on the Collateral on the Collateral
Release Date.
ARTICLE XIV. MISCELLANEOUS
SECTION XIV.01. Amendments and Waivers. (a) Neither this
Agreement or any other Loan Document, nor any terms hereof or thereof may be
amended, supplemented, waived or modified except in accordance with the
provisions of this Section 14.01. The Required Lenders may, or, with the written
consent of the Required Lenders, the Administrative Agent may, from time to
time, (i) enter into with the relevant Loan Parties written amendments,
supplements or modifications hereto and to the other Loan Documents for the
purpose of adding any provisions to this Agreement or the other Loan Documents
or changing in any manner the rights or obligations of the Lenders or of the
Loans Parties hereunder or thereunder or (ii) waive at the Loan Parties'
request, on such terms and conditions as the Required Lenders or the
Administrative Agent, as the case may be, may specify in such instrument, any of
the requirements of this Agreement or the other Loan Documents or any Default or
Event of Default and its consequences; provided, however, that no such waiver
and no such amendment, supplement or modification shall:
(_)(_)(A) reduce the amount or extend the scheduled date of
maturity of any Loan or any scheduled installment thereof, or reduce
the stated rate of any interest or fee payable hereunder or extend the
scheduled date of any payment thereof or increase the amount or extend
the expiration date of any Lender's Commitment, in each case without
the consent of each Lender affected thereby;
(B) amend, supplement, modify or waive any provision of
this Section 14.01 or reduce the percentages specified in the
definition of "Required Lenders", "Required Prepayment Lenders" or
"Majority Facility Lenders" or consent to the assignment or transfer by
any Borrower of any of its rights and obligations under this Agreement
and the other Loan Documents or release the Company from its
obligations under the Company Guaranty, in each case without the
consent of all the Lenders;
(C) release all or substantially all of the Collateral
(except as provided in Sections 13.10 and 14.17) or all or
substantially all of the guarantors under the Subsidiary Guarantees, in
each case without the consent of all the Lenders; or
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(D) amend, supplement, modify or waive any provision of
Section 2.06, 2.07, 2.08, 2.09 or 2.10 or any other provision of this
Agreement governing the rights and obligations of the Swing Line
Lender, or the definitions used therein, without the consent of the
Swing Line Lender.
Any such waiver and any amendment, supplement or modification pursuant to this
Section 14.01 shall apply to each of the Lenders and shall be binding upon the
Loan Parties, the Lenders, the Administrative Agent, and all future holders of
the Loans. In the case of any waiver, the Loan Parties, the Lenders and the
Administrative Agent shall be restored to their former positions and rights
hereunder and under the other Loan Documents, and any Default or Event of
Default waived shall be deemed to be cured and not continuing; but no such
waiver shall extend to any subsequent or other Default or Event of Default, or
impair any right consequent thereon.
(b) In addition to amendments effected pursuant to the
foregoing paragraph (a), Schedule II may be amended as follows:
(i) Schedule II will be amended to add Subsidiaries of the
Company as additional Foreign Subsidiary Borrowers upon (A) execution
and delivery by the Company, any such Foreign Subsidiary Borrower and
the Administrative Agent, of a Joinder Agreement providing for any such
Subsidiary to become a Foreign Subsidiary Borrower, and (B) delivery to
the Administrative Agent of (I) a Foreign Subsidiary Opinion in respect
of such additional Foreign Subsidiary Borrower and the documents
required pursuant to Sections 8.02(d), (e) and (f) and (II) such other
documents with respect thereto as the Administrative Agent shall
reasonably request.
(ii) Schedule II will be amended to remove any Subsidiary
as a Foreign Subsidiary Borrower upon (A) written notice by the Company
to the Administrative Agent to such effect and (B) repayment in full of
all outstanding Loans of such Foreign Subsidiary Borrower.
(c) The Administrative Agent shall give prompt notice to each
Lender of any amendment effected pursuant to Section 14.01(b).
(d) Notwithstanding the provisions of this Section 14.01, any
Local Currency Facility may be amended, supplemented or otherwise modified in
accordance with its terms so long as after giving effect thereto either (i) such
Local Currency Facility ceases to be a "Local Currency Facility" and the Company
so notifies the Administrative Agent or (ii) the Local Currency Facility
continues to meet the requirements of a Local Currency Facility set forth
herein.
SECTION XIV.02. Notices. All notices, requests and demands to
or upon the respective parties hereto to be effective shall be in writing
(including by facsimile transmission) and, unless otherwise expressly provided
herein, shall be deemed to have been duly given or made when delivered by hand,
or three days after being deposited in the mail, postage prepaid (or, if later,
the first Business Day after being so deposited), or, in the case of telecopy
notice,
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when received (or if received on a day that is not a Business Day or if received
after 5:00 p.m. local time at the place of reception on a Business Day, on the
next succeeding Business Day), addressed as follows in the case of the Borrowers
and the Administrative Agent, and as set forth in Schedule I in the case of the
other parties hereto, or to such other address as may be hereafter notified by
the respective parties hereto and any future holders of the Notes:
The Company: Federal-Mogul Corporation
World Headquarters
26555 Northwestern Highway
Southfield, Michigan 48034
Attention: Sandra W. Galac
Telephone: 248-354-2653
Telecopy: 248-354-8103
The Foreign
Subsidiary Borrowers: c/o Federal-Mogul Corporation
World Headquarters
26555 Northwestern Highway
Southfield, Michigan 48034
Attention: Sandra W. Galac
Telephone: 248-354-2653
Telecopy: 248-354-8103
The Administrative Agent
(New York Office): The Chase Manhattan Bank
One Chase Manhattan Plaza
8th Floor
New York, New York 10081
Attention: James Tabois
Telephone: 212-552-7952
Telecopy: 212-552-5650
The Administrative Agent
(London Office): Chase Manhattan International Ltd.
9 Thomas Moore Street
London, E1 (YT)
Attention: Steven Hurford
Telephone: 011-44-171-777-2347
Telecopy: 011-44-171-777-2367
provided that any notice, request or demand to or upon (i) the Administrative
Agent or the Lenders pursuant to Section 2.03, 2.05, 3.03, 4.03, 6.02, 6.04,
6.07 or 6.11 or (ii) the Swing Line Lender pursuant to Sections 2.06, 2.07,
2.08, 2.09, or 2.10, shall not be effective until received. All notices to the
Administrative Agent in respect of Multicurrency Loans shall be delivered to the
Administrative Agent's London Office specified above.
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SECTION XIV.03. No Waiver; Cumulative Remedies. No failure to
exercise and no delay in exercising, on the part of any Borrower, the
Administrative Agent or any Lender, any right, remedy, power or privilege
hereunder or under the other Loan Documents shall operate as a waiver thereof;
nor shall any single or partial exercise of any right, remedy, power or
privilege hereunder preclude any other or further exercise thereof or the
exercise of any other right, remedy, power or privilege. The rights, remedies,
powers and privileges herein provided are cumulative and not exclusive of any
rights, remedies, powers and privileges provided by law.
SECTION XIV.04. Survival of Representations and Warranties.
All representations and warranties made hereunder, in the other Loan Documents
and in any certificate delivered pursuant hereto or in connection herewith shall
survive the execution and delivery of this Agreement and the Notes and the
making of the Loans hereunder.
SECTION XIV.05. Payment of Expenses and Taxes. The Company
agrees (a) to pay or reimburse the Administrative Agent for all of its
reasonable out-of-pocket costs and expenses incurred in connection with the
development, preparation, execution and delivery of, and any amendment,
supplement or modification to, this Agreement and the other Loan Documents and
any other documents prepared in connection herewith or therewith, and the
consummation and administration of the transactions contemplated hereby,
including, without limitation, the reasonable fees and disbursements of counsel
(and any special or local counsel retained by such counsel to assist it) to the
Administrative Agent, (b) to pay or reimburse each Lender and the Administrative
Agent for all its costs and expenses incurred in connection with the enforcement
or preservation of any rights under this Agreement, the other Loan Documents and
any such other documents, (c) to pay, indemnify, and hold each Lender and the
Administrative Agent harmless from, any and all recording and filing fees and
any and all liabilities with respect to, or resulting from any delay in paying,
stamp, excise and other similar taxes, if any, which may be payable or
determined to be payable in connection with the execution and delivery of, or
consummation or administration of any of the transactions contemplated by, or
any amendment, supplement or modification of, or any waiver or consent under or
in respect of, this Agreement, the other Loan Documents and any such other
documents, and (d) to pay, indemnify, and hold each Lender and the
Administrative Agent (and their respective directors, officers, employees,
agents, affiliates and successors) harmless from and against any and all other
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind or nature whatsoever with respect
to the execution, delivery, enforcement, performance and administration of this
Agreement, the other Loan Documents and any such other documents, including,
without limitation, any of the foregoing relating to the use of proceeds of the
Loans or the violation of, noncompliance with or liability under, any
Environmental Law applicable to the operations of the Company, any of its
Subsidiaries or any of the Properties (regardless of whether the Administrative
Agent or any Lender is a party to the litigation or other proceeding giving rise
thereto), (all the foregoing in this clause (d), collectively, the "indemnified
liabilities"), provided, that the Company shall have no obligation hereunder to
the Administrative Agent or any Lender with respect to (i) indemnified
liabilities arising from the gross negligence or willful misconduct of the party
seeking indemnification or (ii) expenses incurred by the Administrative Agent or
any Lender in connection with the assignment of Loans to an assignee (except
pursuant to Section 6.14(b)(vi)) or the sale of any Loan to a Participant. The
agreements in this Section shall survive repayment of the Loans and
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all other amounts payable hereunder.
SECTION XIV.06. Successors and Assigns; Participations and
Assignments. (a) This Agreement shall be binding upon and inure to the benefit
of the Borrowers, the Lenders, the Administrative Agent, all future holders of
the Loans and their respective successors and assigns, except that no Borrower
may assign or transfer any of its rights or obligations under this Agreement
without the prior written consent of each Lender.
(b) Any Lender may, in accordance with applicable law, at any
time sell to one or more banks or other entities ("Participants") participating
interests in any Loan owing to such Lender, any Commitment of such Lender or any
other interest of such Lender hereunder and under the other Loan Documents. In
the event of any such sale by a Lender of a participating interest to a
Participant, such Lender's obligations under this Agreement to the other parties
to this Agreement shall remain unchanged, such Lender shall remain solely
responsible for the performance thereof, such Lender shall remain the holder of
any such Loan for all purposes under this Agreement and the other Loan
Documents, and the Borrowers and the Administrative Agent shall continue to deal
solely and directly with such Lender in connection with such Lender's rights and
obligations under this Agreement and the other Loan Documents. No Lender shall
be entitled to create in favor of any Participant, in the participation
agreement pursuant to which the Participant's participating interest shall be
created or otherwise, any right to vote on, consent to or approve any matter
relating to this Agreement or any other Loan Document except for those specified
in clauses (A) and (B) of the proviso to Section 14.01(a). Each Borrower agrees
that if amounts outstanding under this Agreement are due or unpaid, or shall
have been declared or shall have become due and payable upon the occurrence of
an Event of Default, each Participant shall be deemed to have, to the maximum
extent permitted by law, the right of setoff in respect of its participating
interest in amounts owing under this Agreement to the same extent as if the
amount of its participating interest were owing directly to it as a Lender under
this Agreement; provided that, in purchasing such participating interest, such
Participant shall be deemed to have agreed to share with the Lenders the
proceeds thereof as provided in Section 14.07(a) as fully as if it were a Lender
hereunder. Each Borrower agrees that each Participant shall be entitled to the
benefits of Sections 6.09, 6.10, 6.11 and 6.12 with respect to its participation
in the Commitments and the Loans outstanding from time to time hereunder as if
it was a Lender; provided that, in the case of Section 6.11. such Participant
shall have complied with the requirements of said Section and provided, further,
that no Participant shall be entitled to receive any greater amount pursuant to
any such Section than the transferor Lender would have been entitled to receive
in respect of the amount of the participation transferred by such transferor
Lender to such Participant had no such transfer occurred.
(c) Any Lender may, in accordance with applicable law, at any
time and from time to time assign to any Lender or any Affiliate thereof or,
with the prior written consent of the Administrative Agent (such consent not to
be unreasonably withheld) and, prior to the occurrence and continuance of an
Event of Default, the Company (such consent not to be unreasonably withheld), to
an additional bank or financial institution or other entity that is regularly
engaged in making or purchasing loans (an "Assignee") all or any part of its
rights and obligations under this Agreement and the other Loan Documents
including, without limitation, its Commitments and Loans, pursuant to an
Assignment and Acceptance, substantially in the
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form of Exhibit G, executed by such Assignee, such assigning Lender (and, in the
case of an Assignee that is not then a Lender or an Affiliate thereof, by the
Administrative Agent and, prior to the occurrence and continuance of an Event of
Default, the Company) and delivered to the Administrative Agent for their
acceptance and recording in the Register; provided that (i) if any Lender
assigns a part of its rights and obligations in respect of Loans of a Class
and/or Commitment to make Loans of such Class under this Agreement to an
Assignee, such Lender shall assign proportionate interests in its respective
Loans of such Class and Commitment to make Loans of such Class and other related
rights and obligations hereunder to such Assignee, (ii) if any Lender assigns a
part of its rights and obligations under this Agreement in respect of its
Revolving Credit Loans and/or Revolving Credit Commitments to an Assignee, such
Lender shall assign proportionate interests in (A) its participations in the
Swing Line Loans and other rights and obligations hereunder in respect of the
Swing Line Loans to such Assignee and (B) its Multicurrency Loans and
Multicurrency Commitments, (iii) in the case of any such assignment to an
additional bank, financial institution or other entity, the aggregate amount of
any Commitment (or, if the Commitments have terminated or expired, the aggregate
principal amount of any Loans) being assigned shall not be less than $5,000,000
(or (x) if less, the then outstanding amount of such Commitments and/or Loans or
(y) such lesser amount as may be agreed by the Company and the Administrative
Agent). Upon such execution, delivery, acceptance and recording, from and after
the effective date determined pursuant to such Assignment and Acceptance, (I)
the Assignee thereunder shall be a party hereto and, to the extent provided in
such Assignment and Acceptance, have the rights and obligations of a Lender
hereunder with Commitments and rights in respect of Loans as set forth therein,
and (II) the assigning Lender thereunder shall be released from its obligations
under this Agreement to the extent that such obligations shall have been
expressly assumed by the Assignee pursuant to such Assignment and Acceptance
(and, in the case of an Assignment and Acceptance covering all or the remaining
portion of an assigning Lender's rights and obligations under this Agreement,
such assigning Lender shall cease to be a party hereto).
(d) The Administrative Agent, on behalf of the Borrowers,
shall maintain at its address referred to in Section 14.02 a copy of each
Assignment and Acceptance delivered to it and a register (the "Register") for
the recordation of (i) the names and addresses of the Lenders and the
Commitments of, and principal amounts of the Loans owing to, each Lender from
time to time and (ii) the other information required from time to time pursuant
to Section 2.06 in respect of Swing Line Loans. The entries in the Register
shall constitute prima facie evidence of the information recorded therein, and
the Borrowers, the Administrative Agent and the Lenders may (and, in the case of
any Loan or other obligation hereunder not evidenced by a Note, shall) treat
each Person whose name is recorded in the Register as the owner of a Loan or
other obligation hereunder as the owner thereof for all purposes of this
Agreement and the other Loan Documents, notwithstanding any notice to the
contrary. Any assignment of any Loan or other obligation hereunder not evidenced
by a Note shall be effective only upon appropriate entries with respect thereto
being made in the Register. The Register shall be available for inspection by
the Borrowers or any Lender at any reasonable time and from time to time upon
reasonable prior notice.
(e) Upon its receipt of an Assignment and Acceptance executed
by an assigning Lender and an Assignee (and, in the case of an Assignee that is
not then a Lender or an Affiliate
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thereof, executed by the Company and the Administrative Agent), together with
payment to the Administrative Agent by the Lender or the Assignee of a
registration and processing fee of $2,500, the Administrative Agent shall (i)
promptly accept such Assignment and Acceptance and (ii) on the effective date
determined pursuant thereto record the information contained therein in the
Register and give prompt notice of such acceptance and recordation to the
Lenders and the Borrowers.
(f) Each Borrower authorizes each Lender to disclose to any
Participant or Assignee (each, a "Transferee") and any prospective Transferee
any and all financial information in such Lender's possession concerning such
Borrower and its Affiliates which has been delivered to such Lender by or on
behalf of such Borrower pursuant to this Agreement or which has been delivered
to such Lender by or on behalf of such Borrower in connection with such Lender's
credit evaluation of such Borrower and its Affiliates prior to becoming a party
to this Agreement.
(g) For avoidance of doubt, the parties to this Agreement
acknowledge that the provisions of this Section concerning assignments of Loans
and Notes relate only to absolute assignments and that such provisions do not
prohibit assignments creating security interests, including, without limitation,
any pledge or assignment by a Lender of any Loan or Note to any Federal Reserve
Bank in accordance with applicable law.
(h) If, pursuant to this Section, any interest in this
Agreement or any Loan is transferred to any Transferee (which is not a Lender)
which is organized under the laws of any jurisdiction other than the United
States or any state thereof, the transferor Lender shall cause such Transferee,
concurrently with the effectiveness of such transfer, to agree (for the benefit
of the transferor Lender, the Administrative Agent and the Company) to provide
the transferor Lender (and, in the case of any Transferee registered in the
Register, the Administrative Agent and the Company) the tax forms and other
documents required to be delivered pursuant to Section 6.11(b) and to comply
from time to time with all applicable U.S. laws and regulations with regard to
such withholding tax exemption.
(i) If, pursuant to this Section, any interest in this
Agreement or any Loan is transferred to any Transferee, the transferor Lender
shall cause such Transferee, concurrently with the effectiveness of such
transfer, to agree (for the benefit of the transferor Lender, the Administrative
Agent and the Foreign Subsidiary Borrowers) to provide the transferor Lender,
the Administrative Agent and the Foreign Subsidiary Borrowers the tax forms and
other documents required to be delivered pursuant to Section 6.11(c) and to
comply from time to time with all applicable laws and regulations with regard to
such withholding tax exemption.
SECTION XIV.07. Adjustments; Set-Off. (a) If any Lender (a
"Benefitted Lender") shall at any time receive any payment of all or part of its
Loans then due and owing to it by any Borrower, or interest thereon, or receive
any collateral in respect thereof (whether voluntarily or involuntarily, by
set-off, pursuant to events or proceedings of the nature referred to in
paragraph (f) of Article XII, or otherwise), in a greater proportion than any
such payment to or collateral received by any other Lender, if any, in respect
of such other Lender's Loans then due and owing to it by such Borrower, or
interest thereon, such Benefitted Lender shall purchase for
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cash from the other Lenders a participating interest in such portion of each
such other Lender's Loans owing to it by such Borrower, or shall provide such
other Lenders with the benefits of any such collateral, or the proceeds thereof,
as shall be necessary to cause such Benefitted Lender to share the excess
payment or benefits of such collateral or proceeds ratably with each of the
Lenders; provided, however, that if all or any portion of such excess payment or
benefits is thereafter recovered from such benefitted Lender, such purchase
shall be rescinded, and the purchase price and benefits returned, to the extent
of such recovery, but without interest.
(b) In addition to any rights and remedies of the Lenders
provided by law, each Lender shall have the right, without prior notice to any
Borrower, any such notice being expressly waived by the Borrowers to the extent
permitted by applicable law, upon any amount becoming due and payable hereunder
(whether at the stated maturity thereof, by acceleration or otherwise) to
set-off and appropriate and apply against such amount any and all deposits
(general or special, time or demand, provisional or final), in any currency, and
any other credits, indebtedness or claims, in any currency, in each case whether
direct or indirect, absolute or contingent, matured or unmatured, at any time
held or owing by such Lender or any branch, agency or Affiliate thereof to or
for the credit or the account of any Borrower. Each Lender agrees promptly to
notify the Borrowers and the Administrative Agent after any such set-off and
application made by such Lender, provided that the failure to give such notice
shall not affect the validity of such set-off and application.
SECTION XIV.08. Loan Conversion/Participations. (a) (i) On any
Conversion Date, to the extent not otherwise prohibited by a Requirement of Law
or otherwise, all Loans outstanding in any currency other than U.S. Dollars
("Loans to be Converted") shall be converted into U.S. Dollars (calculated on
the basis of the relevant Exchange Rates as of the Business Day immediately
preceding the Conversion Date) ("Converted Loans") and (ii) on the Conversion
Date (with respect to Loans described in the foregoing clause (i)) (A) each
Lender severally, unconditionally and irrevocably agrees that it shall purchase
in U.S. Dollars a participating interest in such Converted Loans in an amount
equal to its Conversion Sharing Percentage of the outstanding principal amount
of the Converted Loans and (B) to the extent necessary to cause the Committed
Outstandings Percentage of each Revolving Credit Lender to equal its Revolving
Credit Commitment Percentage (calculated immediately prior to the termination or
expiration of the Revolving Credit Loans), each Revolving Credit Lender
severally, unconditionally and irrevocably agrees that it shall purchase or sell
a participating interest in Revolving Credit Loans then outstanding. Each
Revolving Credit Lender will immediately transfer to the Administrative Agent,
in immediately available funds, the amounts of its participation(s), and the
proceeds of such participation(s) shall be distributed by the Administrative
Agent to each Revolving Credit Lender from which a participating interest is
being purchased in the amount(s) provided for in the preceding sentence. All
Converted Loans shall bear interest at the rate which would otherwise be
applicable to Base Rate Loans.
(b) If, for any reason, the Loans to be Converted may not be
converted into U.S. Dollars in the manner contemplated by paragraph (a) of this
Section 14.08, (i) effective on such Conversion Date, each Revolving Credit
Lender severally, unconditionally and irrevocably agrees that it shall purchase
a participating interest in such Loans to be Converted, in an amount equal to
its Conversion Sharing Percentage of such Loans to be Converted, and (ii) each
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Revolving Credit Lender shall purchase or sell participating interests as
provided in paragraph (a)(ii)(B) of this Section 14.08. Each Revolving Credit
Lender will immediately transfer to the appropriate Administrative Agent, in
immediately available funds, the amount(s) of its participation(s), and the
proceeds of such participation(s) shall be distributed by the Administrative
Agent to each relevant Revolving Credit Lender in the amount(s) provided for in
the preceding sentence.
(c) To the extent any Non-Excluded Taxes are required to be
withheld from any amounts payable by a Lender to another Lender in connection
with its participating interest in any Converted Loan, each Borrower, with
respect to the relevant Loans made to it, and the Company with respect to Local
Currency Loans, shall be required to pay increased amounts to the Lender
receiving such payments to the same extent they would be required under Section
6.11 if such Borrower were making payments directly to such Lender.
(d) At any time after the actions contemplated by paragraphs
(a) or (b) of this Section 14.08 have been taken, upon the notice of any Lender
to the Borrowers the following shall occur: (i) the Company (through the
guarantee contained in Article XI) shall automatically be deemed to have assumed
the Converted Loans in which such Lender holds a participation, and (ii) such
Loans shall be assigned by the relevant Lender holding such Loans or obligations
to the Lender who gave the notice requesting such assumption by the Company.
SECTION XIV.09. Counterparts. This Agreement may be executed
by one or more of the parties to this Agreement on any number of separate
counterparts (including by facsimile transmission), and all of said counterparts
taken together shall be deemed to constitute one and the same instrument. A set
of the copies of this Agreement signed by all the parties shall be delivered to
the Borrowers and the Administrative Agent.
SECTION .10. Severability. Any provision of this Agreement
which is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
SECTION .11. Integration. This Agreement and the other Loan
Documents represent the agreement of the Borrowers, the Administrative Agent and
the Lenders with respect to the subject matter hereof, and there are no
promises, undertakings, representations or warranties by the Borrowers, the
Administrative Agent or any Lender relative to the subject matter hereof not
expressly set forth or referred to herein or in the other Loan Documents.
SECTION .12. GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
SECTION .13. Submission To Jurisdiction; Waivers. (a) The
Company and each Foreign Subsidiary Borrower hereby irrevocably and
unconditionally:
-108-
<PAGE> 115
(i) submits for itself and its property in any legal
action or proceeding relating to this Agreement and the other Loan
Documents to which it is a party, or for recognition and enforcement of
any judgment in respect thereof, to the non-exclusive general
jurisdiction of the Courts of the State of New York, the courts of the
United States of America for the Southern District of New York, and
appellate courts from any thereof;
(ii) consents that any such action or proceeding may be
brought in such courts and waives any objection that it may now or
hereafter have to the venue of any such action or proceeding in any
such court or that such action or proceeding was brought in an
inconvenient court and agrees not to plead or claim the same;
(iii) agrees that service of process in any such action or
proceeding may be effected by mailing a copy thereof by registered or
certified mail (or any substantially similar form of mail), postage
prepaid, to the Company or such Foreign Subsidiary Borrower, as the
case may be, at the address specified in Section 14.02, or at such
other address of which the Administrative Agent shall have been
notified pursuant thereto;
(iv) agrees that nothing herein shall affect the right to
effect service of process in any other manner permitted by law or shall
limit the right to sue in any other jurisdiction; and
(v) waives, to the maximum extent not prohibited by law,
any right it may have to claim or recover in any legal action or
proceeding referred to in this Section any special, exemplary, punitive
or consequential damages.
(b) Each Foreign Subsidiary Borrower hereby irrevocably
appoints the Company as its agent for service of process in any proceeding
referred to in Section 14.13(a) and agrees that service of process in any such
proceeding may be made by mailing or delivering a copy thereof to it care of
Company at its address for notices set forth in Section 14.02.
SECTION .14. Acknowledgements. Each Borrower hereby
acknowledges that:
(a) it has been advised by counsel in the negotiation,
execution and delivery of this Agreement and the other Loan Documents;
(b) none of the Administrative Agent or any Lender has any
fiduciary relationship with or duty to such Borrower arising out of or
in connection with this Agreement or any of the other Loan Documents,
and the relationship between the Administrative Agents and the Lenders,
on the one hand, and the Borrowers, on the other hand, in connection
herewith or therewith is solely that of debtor and creditor; and
(c) no joint venture is created hereby or by the other Loan
Documents or otherwise exists by virtue of the transactions
contemplated hereby among the Lenders or among the Borrowers and the
Lenders.
-109-
<PAGE> 116
SECTION .15. WAIVERS OF JURY TRIAL. THE BORROWERS, THE
ADMINISTRATIVE AGENT AND THE LENDERS HEREBY IRREVOCABLY AND UNCONDITIONALLY
WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT
OR ANY OTHER LOAN DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN.
SECTION .16. Power of Attorney. Each Foreign Subsidiary
Borrower hereby grants to the Company an irrevocable power of attorney to act as
its attorney-in-fact with regard to matters relating to this Agreement and each
other Loan Document, including, without limitation, execution and delivery of
any amendments, supplements, waivers or other modifications hereto or thereto,
receipt of any notices hereunder or thereunder and receipt of service of process
in connection herewith or therewith. Each Foreign Subsidiary Borrower hereby
explicitly acknowledges that each of the Administrative Agent and each Lender
has executed and delivered this Agreement and each other Loan Document to which
it is a party, and has performed its obligations under this Agreement and each
other Loan Document to which it is a party, in reliance upon the irrevocable
grant of such power of attorney pursuant to this Section. The power of attorney
granted by each Foreign Subsidiary Borrower hereunder is coupled with an
interest.
SECTION .17. Release of Collateral. As promptly as practicable
after the Collateral Release Date, the Administrative Agent shall, and shall
instruct the Trustee to, take all necessary action to release the Liens created
by the Security Documents in all Collateral.
SECTION .18. Judgment. (a) If for the purpose of obtaining
judgment in any court it is necessary to convert a sum due hereunder in one
currency into another currency, the parties hereto agree, to the fullest extent
that they may effectively do so, that the rate of exchange used shall be that at
which in accordance with normal banking procedures the Administrative Agent
could purchase the first currency with such other currency in the city in which
it normally conducts its foreign exchange operation for the first currency on
the Business Day preceding the day on which final judgment is given.
(b) The obligation of each Borrower in respect of any sum due
from it to any Lender hereunder shall, notwithstanding any judgment in a
currency (the "Judgment Currency") other than that in which such sum is
denominated in accordance with the applicable provisions of this Agreement (the
"Agreement Currency"), be discharged only to the extent that on the Business Day
following receipt by such Lender of any sum adjudged to be so due in the
Judgment Currency such Lender may in accordance with normal banking procedures
purchase the Agreement Currency with the Judgment Currency; if the amount of
Agreement Currency so purchased is less than the sum originally due to such
Lender in the Agreement Currency, such Borrower agrees notwithstanding any such
judgment to indemnify such Lender against such loss, and if the amount of the
Agreement Currency so purchased exceeds the sum originally due to any Lender,
such Lender agrees to remit to such Borrower such excess.
SECTION .19. Confidentiality. Each Lender agrees to keep
confidential any written information (a) provided to it by or on behalf of the
Company or any of its Subsidiaries
-110-
<PAGE> 117
pursuant to or in connection with this Agreement or (b) obtained by such Lender
based on a review of the books and records of the Company or any of its
Subsidiaries; provided that nothing herein shall prevent any Lender from
disclosing any such information (i) to the Administrative Agent or any other
Lender, (ii) to any Transferee or prospective Transferee which agrees to comply
with the provisions of this Section, (iii) to its employees, directors, agents,
attorneys, accountants and other professional advisors, or to any direct or
indirect contractual counterparties in swap agreements or such contractual
counterparties' professional advisors provided that such contractual
counterparty or professional advisor to such contractual agrees in writing to
keep such information confidential to the same extent required of the Lenders
hereunder, (iv) upon the request or demand of any Governmental Authority (or
the National Association of Insurance Commissioners) having jurisdiction over
such Lender or as shall be required pursuant to any Requirement of Law, (v) in
response to any order of any court or other Governmental Authority (or the
National Association of Insurance Commissioners) or as may otherwise be
required pursuant to any Requirement of Law, (vi) in connection with any
litigation to which such Lender is a party, (vii) which has been publicly
disclosed other than in breach of this Agreement, or (viii) to the extent
reasonably necessary, in connection with the exercise of any remedy hereunder.
SECTION .20. Unification of Certain Currencies. If the "Euro"
(or some other similar unit of account) becomes a currency in its own right in
connection with European monetary union contemplated by the Maastricht Treaty,
then each of the Borrowers, the Lenders and the Administrative Agent agrees to
negotiate in good faith an amendment to this Agreement satisfactory in form and
substance to the Borrowers, the Lenders and the Administrative Agent to account
therefor.
-111-
<PAGE> 118
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their proper and duly authorized officers as of
the day and year first above written. FEDERAL-MOGUL CORPORATION
By:
--------------------------------------
Name:
Title:
THE CHASE MANHATTAN BANK,
as Administrative Agent and a Lender
By:
--------------------------------------
Name:
Title:
<PAGE> 119
ANNEX A
PRICING GRID(1)
<TABLE>
<CAPTION>
Applicable Margin
for Multicurrency Applicable Margin for Applicable Margin for Applicable Margin for
Consolidated Loans and Revolving Revolving Credit Loans Tranche A Term Loans Tranche A Term Loans
Leverage Credit Loans which which are which are which are
Ratio are Eurodollar Loans ABR Loans Eurodollar Loans ABR Loans
------------ -------------------- ---------------------- --------------------- ------------------
<S> <C> <C> <C> <C>
greater than or
equal to 4.5 to 1 150 50 200 100
less than 4.5 to 1 137.5 37.5 175 75
less than 4.0 to 1 117.5 17.5 150 50
less that 3.5 to 1 95 0 125 25
less than 3.0 to 1 75 0 100 0
<CAPTION>
Applicable Margin for Applicable Margin
Consolidated Tranche B Term Loans for Tranche B Term
Leverage which are Loans which are Facility
Ratio Eurodollar Loans ABR Loans Fee Rate
------------ --------------------- ------------------ --------
<S> <C> <C> <C>
greater than or
equal to 4.5 to 1 225 125 50
less than 4.5 to 1 200 100 37.5
less than 4.0 to 1 175 75 32.5
less that 3.5 to 1 150 50 30.0
less than 3.0 to 1 150 50 25.0
</TABLE>
Changes in the Applicable Margin and Facility Fee Rate resulting from changes in
the Consolidated Leverage Ratio shall become effective on the date (the
"Adjustment Date") on which financial statements are delivered to the Lenders
pursuant to Section 9.01 (but in any event not later than the 60th day after the
end of each of the first three quarterly periods of each fiscal year or the
120th day after the end of each fiscal year, as the case may be) and shall
remain in effect until the next change to be effected pursuant to this
paragraph. Each determination of the Consolidated Leverage Ratio pursuant to
this definition shall be made with respect to the period of four consecutive
fiscal quarters of the Company ending at the end of the period covered by the
relevant financial statements.
- --------------------
(1) Applicable Margins and Facility Fee expressed in basis points.
<PAGE> 120
ANNEX B
From and after the Covenant Transition Date, the following
Article X will be deemed to replace Article X set forth in the Agreement to
which this Annex B is attached and cross references to Article X of the Credit
Agreement contained in the Loan Documents will be modified accordingly.
ARTICLE X. NEGATIVE COVENANTS
The Company hereby covenants and agrees that so long as the
Commitments remain in effect, any Loan remains outstanding and unpaid or any
other amount is owing to any Lender or the Administrative Agent hereunder the
Company will comply with the covenants set forth below in this Article X:
SECTION X.01. Cash Flow Coverage. The Company will not permit
the Cash Flow Coverage to be less than a ratio of 1.50 to 1.00 for any period of
four consecutive fiscal quarters.
SECTION X.02. Consolidated Leverage Ratio. The Company will
not permit the Consolidated Leverage Ratio at the last day of any fiscal quarter
to be greater than 3.00 to 1.00
SECTION X.03. Maintenance of Net Worth. The Company will not
permit Consolidated Net Worth at any time to be less than $270,000,000.
SECTION X.04. Limitation on Liens. The Company will not, nor
will it permit any of its Subsidiaries to, create, assume or incur or suffer to
be created, assumed or incurred or to exist any Lien on any of its properties or
assets, whether now owned or hereafter acquired, provided, however, that the
foregoing restriction shall not apply to the following:
(a) Liens existing on the date of this Agreement and described
on Schedule III, and Liens on assets of the Target and its Subsidiaries
existing on the date of consummation of the Acquisition;
(b) Liens on property or assets of any corporation existing at
the time such corporation becomes a Subsidiary and not created in
contemplation thereof;
(c) Liens in favor of the Company or any Wholly Owned
Subsidiary;
(d) Liens in favor of any Governmental Authority to secure
progress, advance or other payments pursuant to any contract or
provision of any statute;
(e) Liens (including, without limitation, the interest of the
lessor under any capital lease) on property or assets existing at the
time of the acquisition thereof (including acquisition through merger
or consolidation) or to secure the payment of all or any part of the
purchase price or construction cost thereof or to secure any
Indebtedness
<PAGE> 121
2
incurred prior to, at the time of, or within six months after, the
acquisition or completion of such property or assets for the purpose of
financing all or any part of the purchase price or construction cost
thereof;
(f) any extension, renewal or replacement (or successive
extensions, renewals or replacements), as a whole or in part, of any
Lien referred to in the foregoing clauses (a) through (e), inclusive;
provided that (i) no such extension, renewal or replacement shall
result in an increase in the liabilities secured thereby and (ii) such
extension, renewal or replacement Lien shall be limited to all or a
part of the same property that secured the Lien so extended, renewed or
replaced (plus additions, accessions, replacements and improvements to
such property);
(g) Liens for taxes not yet due or which are being contested
in good faith and by appropriate proceedings diligently pursued if
adequate reserves with respect thereto are maintained on the books of
the Company or such Subsidiary, as the case may be, in accordance with
GAAP or in the case of a Subsidiary located outside the United States,
general accounting principles in effect from time to time in their
respective jurisdictions of incorporation;
(h) carriers', warehousemen's, mechanics', landlords',
materialmen's, repairmen's or other like Liens arising in the ordinary
course of business (A) which are not overdue for a period of more than
60 days or (B) which are being contested in good faith and by
appropriate proceedings diligently pursued if adequate reserves with
respect thereto are maintained on the books of the Company or such
Subsidiary, as the case may be, in accordance with GAAP;
(i) easements, rights-of-way, zoning and similar restrictions
and other similar encumbrances or title defects incurred in the
ordinary course of business which, in the aggregate, are not greater
than $15,000,000 (to the extent the dollar values of such encumbrances
are calculable) and which do not in any case materially detract from
the value of the property subject thereto or interfere with the
ordinary conduct of the business of the Company or its Subsidiaries;
(j) any attachment or judgment lien, unless the judgment it
secures shall not, within 30 days after the entry thereof, have been
discharged or execution thereof stayed pending appeal, or shall not
have been discharged within 30 days after the expiration of any such
stay;
(k) pledges or deposits in connection with workers'
compensation, unemployment insurance and other social legislation and
deposits securing liability to insurance carriers under insurance or
self-insurance arrangements;
(l) deposits to secure the performance of bids, trade
contracts (other than for borrowed money), leases, statutory
obligations, surety and appeal bonds, performance bonds and other
obligations of a like nature incurred in the ordinary course of
business;
(m) liens ratably securing the obligations of the Borrowers to
the Lenders hereunder or under the Notes;
<PAGE> 122
3
(n) other Liens incidental to the conduct of the Company's or
any Subsidiary's business or the ownership of its property and assets
that were incurred in connection with the borrowing of money or the
obtaining of advances or credit or capital leases; provided, however,
that the indebtedness secured thereby does not exceed in the aggregate
for the Company and all Subsidiaries of the Company an amount equal to
$50,000,000; and provided, further, that at no time shall the sum of
(i) the Indebtedness secured by the Liens permitted under this Section
10.04(n) plus (ii) all other Indebtedness of the Company's Subsidiaries
(other than Subsidiaries which are parties to a Subsidiary Guarantee)
plus (iii) the aggregate amount of Secured Reimbursement Obligations be
equal to or greater than forty percent (40%) of Consolidated Net Worth
(determined as of the end of the most recent fiscal quarter of the
Company); and
(o) Liens granted by a special-purpose, Wholly Owned
Subsidiary of the Company that purchases accounts receivable from the
Company and its Subsidiaries to the extent such Liens are granted on
such accounts receivable to secure the payment of indebtedness of such
Wholly Owned Subsidiary.
SECTION X.05. Subsidiary Indebtedness. The Company will not
permit any Subsidiary other than a Subsidiary which is a party to a Subsidiary
Guarantee to create, incur or suffer to exist any Indebtedness to any Person
other than the Company or a Subsidiary, except (i) Indebtedness of the Company
and its Subsidiaries and the Target and its Subsidiaries existing on the
Covenant Transition Date and refinancings, refundings, renewals or extensions
thereof, (ii) Indebtedness of any Loan Party pursuant to any Loan Document,
(iii) Indebtedness of the Special Purpose Subsidiaries described in Schedule
6.13, (iv) additional Indebtedness of Excluded Foreign Subsidiaries to the
Company or any Subsidiary which is a party to a Subsidiary Guarantee in an
aggregate principal amount not exceeding $100,000,000 at any time outstanding,
(v) Indebtedness of any Subsidiary which is not a party to a Subsidiary
Guarantee owing to any other Subsidiary which is not a party to a Subsidiary
Guarantee, (vi) Indebtedness in the form of any investment permitted by Section
10.11 as in effect on the Covenant Transition Date, (vii) Indebtedness secured
by Liens permitted by Section 10.04(e), including capital lease obligations, in
an aggregate principal amount not to exceed $50,000,000 at any one time
outstanding and any refinancings, refundings, renewals or extensions thereof
(without any increase in the principal amount thereof) and (viii) Indebtedness
which, together with the secured Indebtedness allowed under Section 10.04(n),
shall not exceed forty percent (40%) of Consolidated Net Worth (determined as of
the end of the most recent fiscal quarter of the Company).
SECTION X.06. Limitation on Mergers. The Company will not, nor
will it permit any of its Subsidiaries to, merge or consolidate with or into any
other corporation except that any Subsidiary may merge or consolidate (i) with
or into the Company (provided that the Company shall be the continuing or
surviving corporation), (ii) with or into any one or more wholly-owned
Subsidiaries or (iii) with or into any Person to be acquired pursuant to Section
10.12.
SECTION X.07. Multiemployer Plans. The Company will not, as of
any date, permit any liability to occur to which the Company or any Commonly
Controlled Entity would become subject under ERISA if the Company or any such
Commonly Controlled Entity were to withdraw completely from all Multiemployer
Plans as of the valuation date most closely preceding such date.
<PAGE> 123
4
SECTION X.08. Asset Sales. The Company will not, nor will it
permit any Subsidiary to, lease, sell or otherwise dispose of all or any portion
of its property, assets or business to any Person other than the Company or a
Subsidiary except for (a) sales of assets in the ordinary course of business,
(b) sales of accounts receivable or related contract rights, (c) dispositions of
assets required to comply with anti-trust laws, (d) dispositions of assets
listed in Schedule 10.8, (e) dispositions in connection with sale and leaseback
transactions in respect of assets having a book value in the aggregate not
exceeding $50,000,000 and (f) any other sales of assets, other than the assets
set forth on Schedule 10.8 and sales of assets occurring prior to the Covenant
Transition Date, having a book value which, when added to the book value of all
other assets sold pursuant to this clause (g) during such fiscal year, does not
exceed 5% of the gross book value of the assets of the Company and its
consolidated Subsidiaries, determined in accordance with GAAP, as of the last
day of the fiscal year ended immediately prior to the date of such sale.
SECTION X.09. Limitation on More Restrictive Covenants. The
Company shall not enter into any new debt agreement that would contain, nor
enter into any amendment, supplement or other modification to any indenture,
instrument or other agreement concerning the Funded Debt or any refinancing
thereof, if such indenture, instrument or other agreement at the time entered
into or after giving effect to any such amendment, supplement or other
modification thereto, would contain (a) any covenant or event of default that is
more restrictive on any Borrower than those set forth in this Agreement, (b)
with respect to the Company, any covenant with respect to financial performance
the scope of which is materially different from the covenants respecting such
matters set forth in Sections 10.01, 10.02 or 10.03, (c) any covenant which
would prohibit the granting of liens on its assets by any Borrower or its
Subsidiaries in favor of the Lenders, other than in the case of this clause (c),
Indebtedness incurred pursuant to Section 10.05(f) as in effect on the Covenant
Transition Date and in the case of clauses (a) and (c), Indebtedness incurred
pursuant to Section 10.05(g) as in effect on the Covenant Transition Date
constituting a refinancing, refunding extension or renewal of existing
Indebtedness and having terms no more restrictive than the Indebtedness
refinanced, refunded, extended or renewed thereby.
SECTION .10. Subsidiary Guaranties. The Company will not, and
will not allow any Subsidiary to, make or suffer to exist any Guaranty except
(a) any Guaranty existing on the Covenant Transition Date and any replacement in
whole or in part of such Guaranty in connection with any extension, refinancing
or refunding of the Indebtedness guarantied thereby, (b) Guaranties of any
Indebtedness permitted to exist hereunder other than Indebtedness outstanding on
the Covenant Transition Date or any extension, renewals or refinancings thereof
and (c) additional Guaranties with respect to Indebtedness or other obligations
not exceeding $10,000,000 in the aggregate at any one time.
SECTION .11. Affiliates. The Company, will not, nor will it
permit any of its Subsidiaries to, enter into any transaction (including,
without limitation, the purchase or sale of any property or service) with, or
make any payment or transfer to, any Affiliate except in the ordinary course of
business and pursuant to the reasonable requirements of the Company's or such
Subsidiary's business and upon fair and reasonable terms no less favorable to
the Company or such Subsidiary than the Company or such Subsidiary would obtain
in a comparable arms-length transaction.
SECTION .12. Acquisitions. The Company will not, nor will it
permit any of its
<PAGE> 124
5
Subsidiaries to, acquire, in a single transaction or in a series of related
transactions, all or substantially all of the equity interests in, or assets
of, any other Person, or all or substantially all of the assets constituting a
division or business segment of any other Person, except that the Company or
any of its Subsidiaries may make any such acquisition if:
(a) after giving effect thereto, no Default or Event of
Default shall be in existence; and
(b) if such acquisition is the acquisition of equity interests
of any Person, such acquisition is approved by the board of directors
or analogous governing body of such Person.
SECTION .13. Restrictions on Special Purpose Subsidiaries. The
Company will not permit any Special Purpose Subsidiary to (a) create, assume,
incur or suffer to exist any Lien, any Indebtedness, any Guaranty or any other
liabilities, direct or contingent, (b) make or suffer to exist any Investment,
(c) conduct, transact or otherwise engage in any business or other operations or
(d) own or lease any Property, except that, notwithstanding the foregoing
prohibitions:
(i) a Special Purpose Subsidiary may make an Investment in the
form of a loan or an equity contribution to, or hold the Capital Stock
of, another Special Purpose Subsidiary (x) as described on Schedule
6.13 or (y) which does not have an adverse impact on the Collateral;
(ii) U.K. Acquisition II may consummate the Acquisition;
(iii) following consummation of the Acquisition, U.K.
Acquisition I may acquire directly from the Target or indirectly
through U.K. Acquisition II, for fair market value, up to 100% of the
Capital Stock of Target U.S. Subsidiary;
(iv) the Special Purpose Subsidiaries may execute and deliver
the Loan Documents to which they are parties, incur and perform their
obligations thereunder and create and suffer to exist the Liens created
thereby; and
(v) the Special Purpose Subsidiaries may perform obligations
under the Investments permitted above and under their respective
organic documents and other Requirements of Law, may incur obligations
to Governmental Authorities in the ordinary course of business, such as
income and franchise tax liabilities and other incidental liabilities,
and may incur other immaterial liabilities directly related and
incidental to the permitted activities enumerated above.
<PAGE> 125
SCHEDULE I
COMMITMENTS; ADDRESSES
Part A. Revolving Credit Commitment and Multicurrency Commitment Amounts
(U.S. Dollars)
<TABLE>
<CAPTION>
Lender Revolving Credit Commitment Multicurrency Commitment
------ --------------------------- ------------------------
<S> <C> <C>
The Chase Manhattan Bank $ $
TOTAL $400,000,000 $120,000,000
</TABLE>
Part B. Term Loan Commitments
<TABLE>
<CAPTION>
Lender Tranche A Tranche B Interim
------ --------- --------- -------
<S> <C>
The Chase Manhattan Bank $ $ $
TOTAL $600,000,000 $750,000,000 $1,000,000,000
</TABLE>
<PAGE> 126
SCHEDULE V
INFORMATION CONCERNING LOCAL CURRENCY LOANS
NOTICE OF LOCAL CURRENCY OUTSTANDINGS
1. Deliver to: Loan & Agency Services Group
One Chase Manhattan Plaza, 8th Floor
New York, New York 10081
Attention: Sandra Miklave
Fax: 212-552-5658
Telephone No.: 212-552-7953
2. Delivery time: By close of business in New York on
the date of making of each Local
Currency Loan and on the last
Business Day of each month on which
the applicable Foreign Subsidiary
Borrower has outstanding any Local
Currency Loans.
3. Information Required: Name of Foreign Subsidiary Borrower,
amount and currency of outstanding
Local Currency Loans.
<PAGE> 127
SCHEDULE 6.13
USE OF PROCEEDS
The Company will own all of the Capital Stock of one or more
special purpose Domestic Subsidiaries (either directly or through one or more
special purpose Domestic Subsidiaries). One or more of such wholly owned special
purpose Domestic Subsidiaries will own all of the Capital Stock of U.K.
Acquisition I. The Capital Stock of U.K. Acquisition II will be owned by U.K.
Acquisition I and one or more other wholly owned Special Purpose Subsidiaries.
The proceeds of the Term Loans will be used to provide debt
and equity financing to the Special Purpose Subsidiaries which shall, directly
or indirectly through other Special Purpose Subsidiaries, invest such funds in
U.K. Acquisition II for use by it to finance the Acquisition, to repay existing
Indebtedness, of the Target and its Subsidiaries and to pay related fees and
expenses or to make loans directly to Target US Subsidiary.
<PAGE> 128
SCHEDULE 7.20
PERFECTION ACTIONS
1. Capital Stock of Domestic Subsidiaries:
The certificates representing the shares of Capital Stock of
issuers organized under the laws of a State of the United States shall be
delivered to the Administrative Agent along with an undated stock power for each
such certificate executed in blank by a duly authorized officer of the pledgor
thereof.
2. Capital Stock of Foreign Subsidiaries:
The customary steps for perfection of a pledge of stock of an
issuer organized under the laws of a jurisdiction outside the United States, as
advised by counsel qualified in such jurisdiction, shall be taken.
3. Pledged Notes:
The promissory notes shall be delivered to the Administrative
Agent along with an undated note allonge for each such note executed in blank by
a duly authorized officer of the pledgor thereof.
4. Inventory and Accounts Receivable:
UCC-1 Financing Statements describing the collateral shall be
filed in the appropriate filing offices.
<PAGE> 1
EXHIBIT 10.37
===============================================================================
FEDERAL-MOGUL CORPORATION
----------------------------------------
$500,000,000
AMENDED AND RESTATED SENIOR SUBORDINATED
CREDIT AGREEMENT
dated as of December 18, 1997
----------------------------------------
THE CHASE MANHATTAN BANK,
as Administrative Agent
----------------------
CHASE SECURITIES INC.,
as Arranger
===============================================================================
[CHASE LOGO]
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
SECTION 1. DEFINITIONS......................................................................................... 2
1.1 Defined Terms................................................................................... 2
1.2 Other Definitional Provisions................................................................... 27
SECTION 2. AMOUNT AND TERMS OF LOANS........................................................................... 27
2.1 Loans........................................................................................... 27
2.2 Procedure for Borrowing and Conversion.......................................................... 28
2.3 Maturity and Exchange Notes..................................................................... 29
2.4 Repayment of Loans; Evidence of Debt............................................................ 29
2.5 Optional and Mandatory Prepayments.............................................................. 30
2.6 Interest Rates and Payment Dates................................................................ 31
2.7 Computation of Interest and Fees................................................................ 33
2.8 Pro Rata Treatment and Payments................................................................. 33
2.9 Requirements of Law............................................................................. 34
2.10 Taxes........................................................................................... 36
2.11 Indemnity....................................................................................... 38
2.12 Replacement Lenders............................................................................. 38
SECTION 3. REPRESENTATIONS AND WARRANTIES...................................................................... 39
3.1 Financial Condition............................................................................. 39
3.2 No Change....................................................................................... 40
3.3 Corporate Existence; Compliance with Law........................................................ 40
3.4 Corporate Power; Authorization; Enforceable Obligations......................................... 41
3.5 No Legal Bar.................................................................................... 41
3.6 No Material Litigation.......................................................................... 42
3.7 No Default...................................................................................... 42
3.8 Ownership of Property; Liens.................................................................... 42
3.9 Intellectual Property........................................................................... 42
3.10 No Burdensome Restrictions...................................................................... 42
3.11 Taxes........................................................................................... 42
3.12 Federal Regulations............................................................................. 42
3.13 ERISA........................................................................................... 43
3.14 Investment Company Act; Other Regulations....................................................... 43
3.15 Subsidiaries.................................................................................... 43
3.16 Environmental Matters........................................................................... 43
3.17 Accuracy and Completeness of Information........................................................ 44
3.18 Other Unsecured Indebtedness.................................................................... 45
3.19 Foreign Subsidiaries............................................................................ 45
3.20 Solvency........................................................................................ 45
3.21 Purpose of Loans................................................................................ 45
3.22 Delivery of the Transaction Documents........................................................... 45
</TABLE>
<PAGE> 3
2
<TABLE>
<CAPTION>
<S> <C> <C>
3.23 Representations and Warranties Contained in the Transaction Documents................ 45
SECTION 4. CONDITIONS PRECEDENT..................................................................... 46
4.1 Conditions to Effective Date......................................................... 46
4.2 Conditions to Closing Date........................................................... 47
SECTION 5. AFFIRMATIVE COVENANTS.................................................................... 48
5.1 Financial Statements................................................................. 49
5.2 Certificates; Other Information...................................................... 49
5.3 Accrual of Liabilities; Payment of Obligations....................................... 50
5.4 Maintenance of Corporate Existence; Maintenance of Properties........................ 50
5.5 Insurance............................................................................ 50
5.6 Notices.............................................................................. 50
5.7 Compliance with Contractual Obligations and Laws..................................... 51
5.8 Access to Books and Inspection....................................................... 51
5.9 Environmental Laws................................................................... 52
5.10 Additional Guarantees................................................................ 52
5.11 Interest Rate Protection............................................................. 52
5.12 Consummation of Compulsory Acquisition............................................... 52
5.13 Take-Out Financing................................................................... 52
5.14 Exchange Notes....................................................................... 53
5.15 U.K. Acquisition I Corporate Documents............................................... 54
5.16 Further Assurances................................................................... 54
SECTION 6. NEGATIVE COVENANTS....................................................................... 54
6.1 Limitation on Indebtedness........................................................... 54
6.2 Limitation on Restricted Payments.................................................... 56
6.3 Limitation on Restrictions on Distributions from Restricted Subsidiaries............. 58
6.4 Limitation on Sales of Assets and Subsidiary Stock................................... 59
6.5 Limitation on Affiliate Transactions................................................. 61
6.6 Change of Control.................................................................... 61
6.7 Limitation on Capital Stock of Subsidiaries.......................................... 62
6.8 Merger, Consolidation, etc........................................................... 62
6.9 Limitation on Lines of Business...................................................... 63
SECTION 7. EVENTS OF DEFAULT........................................................................ 64
SECTION 8. SUBORDINATION............................................................................ 66
8.1 Agreement To Subordinate............................................................. 66
8.2 Liquidation; Dissolution; Bankruptcy................................................. 66
8.3 Default on Senior Indebtedness....................................................... 67
8.4 Acceleration of Payment of Loans..................................................... 67
8.5 When Distribution Must Be Paid Over.................................................. 68
8.6 Subrogation.......................................................................... 68
8.7 Relative Rights...................................................................... 68
8.8 Subordination May Not Be Impaired By the Borrower.................................... 68
8.9 Rights of Administrative Agent....................................................... 68
8.10 Distribution or Notice to Representative............................................. 69
8.11 Section 8 Not To Prevent Events of Default or Limit Right To Accelerate.............. 69
</TABLE>
<PAGE> 4
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<TABLE>
<CAPTION>
<S> <C> <C>
8.12 Administrative Agent Entitled to Rely........................................................... 69
8.13 Administrative Agent to Effectuate Subordination................................................ 69
8.14 Administrative Agent Not Fiduciary for Lenders of Senior Indebtedness........................... 69
8.15 Reliance by Lenders of Senior Indebtedness on Subordination Provisions.......................... 69
8.16 Certain Amendments Prohibited................................................................... 70
SECTION 9. THE ADMINISTRATIVE AGENT............................................................................ 70
9.1 Appointment..................................................................................... 70
9.2 Delegation of Duties............................................................................ 70
9.3 Exculpatory Provisions.......................................................................... 70
9.4 Reliance by Administrative Agent................................................................ 70
9.5 Notice of Default............................................................................... 71
9.6 Non-Reliance on Administrative Agent and Other Lenders.......................................... 71
9.7 Indemnification................................................................................. 71
9.8 Administrative Agent in Its Individual Capacity................................................. 72
9.9 Successor Administrative Agent.................................................................. 72
SECTION 10. MISCELLANEOUS...................................................................................... 73
10.1 Amendments and Waivers......................................................................... 73
10.2 Notices........................................................................................ 73
10.3 No Waiver; Cumulative Remedies................................................................. 74
10.4 Survival of Representations and Warranties..................................................... 74
10.5 Payment of Expenses and Taxes.................................................................. 74
10.6 Successors and Assigns; Participations and Assignments......................................... 75
10.7 Adjustments; Set-off........................................................................... 77
10.8 Counterparts................................................................................... 78
10.9 Severability................................................................................... 78
10.10 Integration.................................................................................... 78
10.11 GOVERNING LAW.................................................................................. 78
10.12 Submission To Jurisdiction; Waivers............................................................ 78
10.13 Acknowledgements............................................................................... 79
10.14 Confidentiality................................................................................ 79
10.15 WAIVERS OF JURY TRIAL.......................................................................... 79
10.16 No Guarantee of Domestic Obligations by Foreign Subsidiary of Borrower......................... 80
</TABLE>
<PAGE> 5
SCHEDULES:
1.1 Commitments
2 Subsidiaries
EXHIBITS:
<TABLE>
<S> <C>
EXHIBIT A Form of Domestic Subsidiary Guarantee
EXHIBIT B Form of Senior Subordinated Indenture
EXHIBIT C-1 Form of Initial Loan Note
EXHIBIT C-2 Form of Term Note
EXHIBIT D Form of Closing Certificate
EXHIBIT E Form of Assignment and Acceptance
EXHIBIT F-1 Form of General Counsel Opinion (Effective Date)
EXHIBIT F-2 Form of Opinion of Cleary Gottlieb Steen & Hamilton (Effective Date)
EXHIBIT F-3 Form of General Counsel Opinion (Closing Date)
EXHIBIT F-4 Form of Opinion of Cleary Gottlieb Steen & Hamilton (Closing Date)
</TABLE>
<PAGE> 6
AMENDED AND RESTATED SENIOR SUBORDINATED CREDIT AGREEMENT,
dated as of December 18, 1997, among FEDERAL-MOGUL CORPORATION, a Michigan
corporation (the "Borrower"), the several lenders from time to time parties
hereto (collectively, the "Lenders"; individually, a "Lender"), and THE CHASE
MANHATTAN BANK, a New York banking corporation, as administrative agent for the
Lenders hereunder (in such capacity, the "Administrative Agent").
W I T N E S S E T H :
WHEREAS, the Borrower is party to the Revolving Credit,
Competitive Advance and Multicurrency Facility Agreement, dated as of June 16,
1997 (the "Existing Credit Agreement"), with the several banks and other
financial institutions party thereto and The Chase Manhattan Bank, as the
administrative agent;
WHEREAS, the Borrower, through an indirect wholly owned
Subsidiary organized under the laws of England ("U.K. Acquisition II"), intends
to acquire (the "Acquisition") T&N PLC, a company organized under the laws of
England (the "Target");
WHEREAS, the Acquisition will be accomplished by means of a
tender offer (the "Tender Offer") to be made by U.K. Acquisition II for up to
100% (but in any event not less than 90%) (the "Minimum Number of Shares") of
the issued and outstanding ordinary shares, (pound)1 par value (the "Target
Shares"), of the Target, and/or Options related thereto, followed by a
compulsory acquisition of any remaining such shares not acquired in the Tender
Offer;
WHEREAS, in order to finance the Acquisition, to refinance the
Existing Credit Agreement and other existing indebtedness of the Borrower and
the Target and to pay fees and expenses in connection with the Acquisition and
the financing thereof, the Borrower has requested the Lenders to establish a
senior subordinated credit facilities aggregating $500,000,000;
WHEREAS, the Lenders are willing to establish such credit
facilities upon and subject to the terms and conditions hereinafter set forth;
WHEREAS, the Borrower and The Chase Manhattan Bank, as Lender
and the Administrative Agent have entered into the Senior Subordinated Credit
Agreement, dated as of October 15, 1997 (the "Senior Subordinated Credit
Agreement");
WHEREAS, the Borrower and the Lenders and the Administrative
Agent desire to amend and restate the Senior Subordinated Credit Agreement upon
and subject to the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and mutual
covenants contained herein, the parties hereto hereby agree that on the
Effective Date the Senior Subordinated Credit Agreement shall be amended and
restated in its entirety as follows:
<PAGE> 7
2
SECTION 1. DEFINITIONS
1.1 Defined Terms. As used in this Agreement, the following
terms shall have the following meanings:
"ABR Borrowing": a Borrowing comprised of ABR Loans.
"ABR Loan": a Loan bearing interest at a rate determined by
reference to the Alternate Base Rate in accordance with the provisions
of Section 2.
"Accepting Holder": as defined in Section 2.5(d).
"Accumulated Funding Deficiency": any accumulated funding
deficiency within the meaning of Section 412 of the Code or Section 302
of ERISA.
"Acquisition": as defined in the recitals hereto.
"Acquisition Documents": the collective reference to each of
the documents effectuating the Acquisition.
"Acquisition Funds": as defined in Section 7.
"Additional Assets": (i) any property or assets (other than
Indebtedness and Capital Stock) to be used by the Borrower or a
Restricted Subsidiary in a Related Business; (ii) the Capital Stock of
a Person that becomes a Restricted Subsidiary as a result of the
acquisition of such Capital Stock by the Borrower or another Restricted
Subsidiary; or (iii) Capital Stock constituting a minority interest in
any Person that at such time is a Restricted Subsidiary; provided,
however, that, in the case of clauses (ii) and (iii), such Restricted
Subsidiary is primarily engaged in a Related Business.
"Administrative Agent": as defined in the recitals hereto
"Adjusted LIBO Rate": with respect to each day during each
Interest Period pertaining to a Eurodollar Loan, a rate per annum
determined for such day in accordance with the following formula
(rounded upward to the nearest 1/100th of 1%):
Eurodollar Base Rate
1.00 - Eurocurrency Reserve Requirements
"Adjusted Margin": with respect to any Loan, 0 basis points
during the three month period commencing on the Initial Maturity Date
and shall increase by an additional 50 basis points at the beginning of
each subsequent three-month period.
"Adjusted Rate": the rate equal to the greatest of (i) 50
basis points plus the interest rate borne by the Loans on the day
immediately preceding the Initial Maturity Date, (ii) 650 basis points
plus the Treasury Rate (as defined below) on the Initial Maturity Date
and (iii) 300 basis points plus the CSI High Yield Index Rate on the
Initial Maturity Date; for purposes hereof, the "Treasury Rate" means
(x) the rate borne by direct obligations of the United States maturing
on the tenth anniversary of the Closing Date or (y) if there are no
<PAGE> 8
3
such obligations, the rate determined by linear interpolation between
the rates borne by the two direct obligations of the United States
maturing closest to, but straddling, the tenth anniversary of the
Closing Date, in each case as published by the Board of Governors.
"Affiliate": as to any Person, any other Person (other than a
Subsidiary) which, directly or indirectly, is in control of, is
controlled by, or is under common control with, such Person, or in the
case of any Lender which is an investment fund, (i) the investment
advisor thereof and (ii) any other investment fund having the same
investment advisor. For purposes of this definition, "control" of a
Person means the power, directly or indirectly, to direct or cause the
direction of the management and policies of such Person, whether
through the ownership of voting securities by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative
to the foregoing.
"Affiliate Transaction": as defined in Section 6.5.
"Agreement": this Amended and Restated Senior Subordinated
Credit Agreement, as amended, supplemented or otherwise modified from
time to time.
"Alternate Base Rate": for any day, a rate per annum (rounded
upwards, if necessary, to the next 1/16 of 1%) equal to (i) the
Applicable Margin less 1% plus (ii) the greatest of (a) the Prime Rate
in effect on such day and (b) the Federal Funds Effective Rate in
effect on such day plus 1/2 of 1%. For purposes hereof: "Prime Rate"
shall mean the rate of interest per annum publicly announced from time
to time by the Administrative Agent as its prime rate in effect at its
principal office in New York City; and "Federal Funds Effective Rate"
shall mean, for any day, the weighted average of the rates per annum on
overnight federal funds transactions with members of the Federal
Reserve System arranged by federal funds brokers, as published on the
next succeeding Business Day by the Federal Reserve Bank of New York,
or, if such rate is not so published for any day which is a Business
Day, the average of the quotations for the day of such transactions
received by the Administrative Agent from three federal funds brokers
of recognized standing selected by it, in each case rounded up to the
nearest 1/100 of 1%. If for any reason the Administrative Agent shall
have determined (which determination shall be conclusive absent
manifest error) that it is unable to ascertain the Federal Funds
Effective Rate for any reason, including the inability or failure of
the Administrative Agent to obtain sufficient quotations in accordance
with the terms thereof, the Alternate Base Rate shall be determined
without regard to clause (b) of the first sentence of this definition,
as appropriate, until the circumstances giving rise to such inability
no longer exist. Any change in the Alternate Base Rate due to a change
in the Prime Rate or the Federal Funds Effective Rate shall be
effective as of the opening of business on the effective day of such
change in the Prime Rate or the Federal Funds Effective Rate,
respectively. The Prime Rate is not intended to be the lowest rate of
interest charged by Chase in connection with extensions of credit to
debtors.
"Applicable Margin": with respect to any Loan, 450 basis
points during the six (6) month period commencing on the Closing Date
and shall increase by (i) an additional 100 basis points commencing on
the date that is six months after the Closing Date, and (ii) an
additional 50 basis points at the end of each successive three month
period thereafter until the Initial Maturity Date.
<PAGE> 9
4
"Asset Disposition": any sale, lease, transfer or other
disposition (or series of related sales, leases, transfers, issuances
or dispositions that are part of a common plan) of shares of Capital
Stock of a Restricted Subsidiary (other than directors' qualifying
shares) of property or other assets (each referred to for the purposes
of this definition as a "disposition") by the Borrower, or any of its
Restricted Subsidiaries (including any disposition by means of a
merger, consolidation or similar transaction), other than (i)
disposition of obsolete or worn out property disposed of in the
ordinary course of business or property that is no longer useful in the
conduct of the Borrower's and/or its Restricted Subsidiaries' business
disposed of in the ordinary course of business; (ii) disposition of
inventory in the ordinary course of business; (iii) transfers resulting
from any casualty or condemnation of property or assets (provided that,
except with respect to the loss or condemnation of all or substantially
all of the assets of the Borrower and its Restricted Subsidiaries, the
proceeds from such casualty or condemnation (including insurance) are
used to commence the replacement or rebuilding the lost or condemned
assets within one year); (iv) intercompany sales or transfers of assets
made in the ordinary course of business; (v) licenses or sublicenses of
intellectual property and general intangibles and licenses, leases or
subleases of other property in the ordinary course of business and
which do not materially interfere with the business of the Borrower and
its Restricted Subsidiaries; (vi) any consignment arrangements or
similar arrangements for the sale of assets in the ordinary course of
business; (vii) the sale or discount of overdue accounts receivable
arising in the ordinary course of business, but only in connection with
the compromise or collection thereof; (viii) a disposition by a
Restricted Subsidiary to the Borrower or by the Borrower or a
Restricted Subsidiary to a Wholly-Owned Subsidiary; (ix) a disposition
subject to Section 6.2; (x) a disposition subject to Section 6.8; and
(xi) sales of receivables under the Borrower's existing accounts
receivable program as in effect on the date hereof.
"Assignee": as defined in Section 10.6(c).
"Attributable Debt": in respect of a Sale/Leaseback
Transaction means, as at the time of determination, the present value
(discounted at the interest rate assumed in making calculations in
accordance with FAS 13, compounded annually) of the total obligations
of the lessee for rental payments during the remaining term of the
lease included in such Sale/Leaseback Transaction (including any period
for which such lease has been extended).
"Average Life": as of the date of determination, with respect
to any Indebtedness, the quotient obtained by dividing (i) the sum of
the products of the numbers of years from the date of determination to
the dates of each successive scheduled principal payment of such
Indebtedness or redemption or similar payment with respect to such
Indebtedness multiplied by the amount of such payment by (ii) the sum
of all such payments.
"Bank Indebtedness": any and all amounts payable under or in
respect of the Senior Credit Facility or any Guarantee thereof,
including principal, premium (if any), interest (including interest
accruing on or after the filing of any petition in bankruptcy or for
reorganization relating to the Borrower whether or not a claim for
postfiling interest is allowed in such proceedings), fees, charges,
expenses, reimbursement obligations, guarantees and all other amounts
payable thereunder or in respect thereof.
"Benefitted Lender": as defined in Section 10.7(a).
<PAGE> 10
5
"Blockage Notice": as defined in Section 8.3.
"Board of Directors": as to any Person the board of directors
of such Person or any committee thereof duly authorized to act on
behalf of such board.
"Board of Governors": the Board of Governors of the Federal
Reserve System (or any successor thereto).
"Borrowing": a group of Loans of a single Type made by the
Lenders on a single date and as to which a single Interest Period is in
effect.
"Borrowing Request": as defined in Section 2.2.
"Business": as defined in subsection 3.16.
"Business Day": a day other than a Saturday, Sunday or other
day on which commercial banks in New York City are authorized or
required by law to close.
"Capitalized Lease Obligations": an obligation that is
required to be classified and accounted for as a capitalized lease for
financial reporting purposes in accordance with GAAP, and the amount of
Indebtedness represented by such obligation shall be the capitalized
amount of such obligation determined in accordance with GAAP; and the
Stated Maturity thereof shall be the date of the last payment of rent
or any other amount due under such lease prior to the first date such
lease may be terminated without penalty.
"Capital Stock": any and all shares, interests, participations
or other equivalents (however designated) of capital stock of a
corporation, any and all equivalent ownership interests in a Person
(other than a corporation) and any and all warrants or options to
purchase any of the foregoing. For all purposes of this Agreement,
"Capital Stock" of the Borrower shall include the 10,000,000 7% Trust
Convertible Preferred Securities (Liquidation Amount $50 per
Convertible Preferred Security) issued by Federal-Mogul Financing Trust
and guaranteed by the Borrower upon terms substantially similar to the
terms described in the Offering Memorandum dated November 24, 1997 and
any other substantially equivalent securities hereafter issued by a
financing vehicle for the benefit of the Borrower, and such Trust
Convertible Preferred Securities and substantially equivalent
securities will be treated as preferred stock of the Borrower and the
Borrower shall not be deemed to have issued any Indebtedness or
Guarantee in connection therewith.
"Cash Equivalents": securities with maturities of 6 months or
less from the date of acquisition which are issued or fully guaranteed
or insured by the United States Government or any agency thereof (or,
in the case of any Senior Indebtedness not denominated in Dollars, the
government which issued such other currency).
"Change of Control" means the occurrence of any of the
following events:
(i) any sale, lease, exchange or other transfer
(in one transaction or a series of related transactions) of
all or substantially all of the assets of the Borrower and its
Subsidiaries to any Person or group of related Persons for
purposes
<PAGE> 11
6
of Section 13(d) of the Exchange Act (a "Group") (whether or
not otherwise in compliance with the provisions of this
Agreement); or
(ii) a majority of the Board of Directors of the
Borrower (but not a committee thereof) shall consist of
Persons who are not Continuing Directors; or
(iii) the acquisition by any Person or Group of the
power, directly or indirectly, to vote or direct the voting of
securities having more than 50% of the ordinary voting power
for the election of directors of the Borrower.
"Chase": The Chase Manhattan Bank, a New York banking
corporation.
"City Code": the City Code on Take-overs and Mergers, as
published by the Panel and as amended from time to time.
"Closing Date": the date of the Initial Loans.
"Code": the Internal Revenue Code of 1986, as amended from
time to time.
"Commitment": as to any Lender, its obligation to make a Loan
to the Borrower on the Closing Date in an amount equal to the amount
set forth opposite such Lender's name in Schedule 1.1 under the heading
"Commitment"; collectively, as to all such Lenders, the "Commitments".
"Commitment Percentage": as to any Lender at any time, the
percentage of the aggregate Commitments then constituted by such
Lender's Commitment (or, after the Loans are made on the Closing Date,
the percentage of the aggregate Loans then constituted by such Lender's
Loans).
"Commonly Controlled Entity": an entity, whether or not
incorporated, which is under common control with the Borrower within
the meaning of Section 4001 of ERISA or is part of a group which
includes the Borrower and which is treated as a single employer under
Section 414 of the Code.
"Compulsory Acquisition": the acquisition by U.K. Acquisition
II, pursuant to Sections 428 to 430F of the Companies Act 1985, of
England, of all of the issued and outstanding Target Shares not then
owned by U.K. Acquisition II.
"Consolidated Coverage Ratio": as of any date of determination
means, with respect to any Person, the ratio of (i) the aggregate
amount of EBITDA of such Person for the period of the most recent four
consecutive fiscal quarters ending prior to the date of such
determination for which consolidated financial statements of such
person are available to (ii) Consolidated Interest Expense for such
four fiscal quarters (in each case, determined, for each fiscal quarter
of the four fiscal quarters ending prior to the Closing Date, on a pro
forma basis to give effect to the Transactions as if the Transactions
had occurred at the beginning of such four-quarter period); provided,
however, that (1) if the Borrower or any Restricted Subsidiary has
Incurred any Indebtedness since the beginning of such period that
remains outstanding on such date of determination or if the transaction
giving rise to the need to calculate the Consolidated Coverage Ratio is
an Incurrence of Indebtedness or both,
<PAGE> 12
7
EBITDA and Consolidated Interest Expense for such period shall be
calculated after giving effect on a pro forma basis to such
Indebtedness as if such Indebtedness had been Incurred on the first day
of such period (except that, in making such computation, the amount of
Indebtedness under any revolving credit facility outstanding on the
date of such calculation shall be computed based on (A) the average
daily balance of such Indebtedness during such four fiscal quarters or
such shorter period when such facility was outstanding or (B) if such
facility was created after the end of such four fiscal quarters, the
average daily balance of such Indebtedness during the period from the
date of creation of such facility to the date of the calculation) and
the discharge of any other Indebtedness repaid, repurchased, defeased
or otherwise discharged with the proceeds of such new Indebtedness as
if such discharge had occurred on the first day of such period, (2) if
since the beginning of such period any Indebtedness of the Borrower or
any of its Restricted Subsidiaries has been repaid, repurchased,
defeased or otherwise discharged (other than Indebtedness under a
revolving credit or similar arrangement unless such revolving credit
Indebtedness has been permanently repaid and has not been replaced),
Consolidated Interest Expense for such period shall be calculated after
giving pro forma effect thereto as if such Indebtedness had been
repaid, repurchased, defeased or otherwise discharged on the first day
of such period, (3) if since the beginning of such period the Borrower
or any Restricted Subsidiary shall have made any Asset Disposition, the
EBITDA for such period shall be reduced by an amount equal to the
EBITDA (if positive) directly attributable to the assets that are the
subject of such Asset Disposition for such period or increased by an
amount equal to the EBITDA (if negative) directly attributable thereto
for such period and Consolidated Interest Expense for such period shall
be reduced by an amount equal to the Consolidated Interest Expense
directly attributable to any Indebtedness of the Borrower or any
Restricted Subsidiary repaid, repurchased, defeased or otherwise
discharged with respect to the Borrower and its continuing Restricted
Subsidiaries in connection with such Asset Disposition for such period
(or, if the Capital Stock of any Restricted Subsidiary is sold, the
Consolidated Interest Expense for such period directly attributable to
the Indebtedness of such Restricted Subsidiary to the extent the
Borrower and its continuing Restricted Subsidiaries are no longer
liable for such Indebtedness after such sale) as if such Asset
Disposition occurred on the first day of such period, (4) if since the
beginning of such period the Borrower or any Restricted Subsidiary (by
merger or otherwise) shall have made an Investment in any Restricted
Subsidiary (or any Person that becomes a Restricted Subsidiary) or an
acquisition of assets, including any acquisition of assets occurring in
connection with a transaction causing a calculation to be made
hereunder, which constitutes all or substantially all of an operating
unit of a business, EBITDA and Consolidated Interest Expense for such
period shall be calculated after giving pro forma effect thereto
(including the Incurrence of any Indebtedness) as if such Investment or
acquisition occurred on the first day of such period and (5) if since
the beginning of such period any Person (that subsequently became a
Restricted Subsidiary or was merged with or into the Borrower or any
Restricted Subsidiary since the beginning of such period) shall have
made any Asset Disposition or any Investment or acquisition of assets
that would have required an adjustment pursuant to clause (3) or (4)
above if made by the Borrower or a Restricted Subsidiary during such
period, EBITDA and Consolidated Interest Expense for such period shall
be calculated after giving pro forma effect thereto as if such Asset
Disposition, Investment or acquisition of assets occurred on the first
day of such period. For purposes of this definition, whenever pro forma
effect is to be given to an acquisition of assets, the amount of income
or earnings relating thereto and the amount of Consolidated Interest
Expense associated with any Indebtedness Incurred or repaid,
repurchased, defeased or
<PAGE> 13
8
otherwise discharged in connection therewith, the pro forma
calculations shall be as determined in good faith by a responsible
financial or accounting officer of the Borrower. If any Indebtedness
bears a floating rate of interest and is being given pro forma effect,
the interest expense on such Indebtedness shall be calculated as if the
rate in effect on the date of determination had been the applicable
rate for the entire period (taking into account any Interest Rate
Agreement applicable to such Indebtedness if such Interest Rate
Agreement has a remaining term as at the date of determination in
excess of 12 months).
"Consolidated Interest Expense": for any period, the total
interest expense of the Borrower and its Restricted Subsidiaries, plus,
to the extent not included in such interest expense, (i) interest
expense attributable to Capitalized Lease Obligations, (ii)
amortization of debt discount, (iii) capitalized interest, (iv)
non-cash interest expense, (v) commissions, discounts and other fees
and charges owed with respect to letters of credit and bankers'
acceptance financing (excluding commissions, discounts and other fees
and charges in respect of trade letters of credit), (vi) interest
actually paid by the Borrower or any such Restricted Subsidiary under
any Guarantee of Indebtedness or other obligation of any other Person,
(vii) net payments (whether positive or negative) pursuant to Interest
Rate Agreements, (viii) the cash contributions to any employee stock
ownership plan or similar trust to the extent such contributions are
used by such plan or trust to pay interest or fees to any Person (other
than the Borrower) in connection with Indebtedness Incurred by such
plan or trust and (ix) cash and Disqualified Stock dividends in respect
of all Preferred Stock of Subsidiaries and Disqualified Stock of the
Borrower held by Persons other than the Borrower or a Wholly-Owned
Subsidiary and less to the extent included in such interest expense,
the amortization of capitalized debt issuance costs. Notwithstanding
the foregoing, the Consolidated Interest Expense with respect to any
Restricted Subsidiary of the Borrower, that was not a Wholly-Owned
Subsidiary, shall be included only to the extent (and in the same
proportion) that the net income of such Restricted Subsidiary was
included in calculating Consolidated Net Income.
"Consolidated Net Income": for any period, the consolidated
net income (loss) of the Borrower and its Restricted Subsidiaries;
provided, however, that there shall not be included in such
Consolidated Net Income:
(i) any net income (loss) of any Person if such
Person is not a Restricted Subsidiary, except that (A) the
Borrower's equity in the net income of any such Person for
such period shall be included in such Consolidated Net Income
up to the aggregate amount of cash actually distributed by
such Person during such period to the Borrower or a Restricted
Subsidiary as a dividend or other distribution (subject, in
the case of a dividend or other distribution to a Restricted
Subsidiary, to the limitations contained in clause (iii)
below) and (B) the Borrower's equity in the net loss of such
Person shall be included to the extent of the aggregate
Investment of the Borrower or any of its Restricted
Subsidiaries in such Person,
(ii) any net income (loss) of any Person acquired
by the Borrower or a Restricted Subsidiary in a pooling of
interests transaction attributable to any period prior to the
date of such combination,
(iii) any net income (loss) of any Restricted
Subsidiary if such Subsidiary is subject to restrictions,
directly or indirectly, on the payment of
<PAGE> 14
9
dividends or the making of distributions by such Restricted
Subsidiary, directly or indirectly, to the Borrower, except
that (A) subject to the limitations contained in (iv) below,
the net income of any such Restricted Subsidiary for such
period shall be included in such Consolidated Net Income up to
the aggregate amount of cash that could have been distributed
by such Restricted Subsidiary during such period to the
Borrower or another Restricted Subsidiary as a dividend
(subject, in the case of a dividend that could have been made
to another Restricted Subsidiary, to the limitation contained
in this clause) and (B) the net loss of such Restricted
Subsidiary shall be included to the extent of the aggregate
Investment of the Borrower or any of its other Restricted
Subsidiaries in such Restricted Subsidiary,
(iv) any gain or loss realized upon the sale or
other disposition of any asset of the Borrower or its
consolidated Restricted Subsidiaries (including pursuant to
any Sale/Leaseback Transaction) that is not in the ordinary
course of business,
(v) any extraordinary gain or loss, and
(vi) the cumulative effect of a change in
accounting principles.
"Continuing Director" means, as of the date of determination,
any Person who (i) was a member of the Board of Directors of the
Borrower on September 26, 1997 or (ii) was nominated for election or
elected to the Board of Directors of the Borrower after September 26,
1997 with the affirmative vote of a majority of the Continuing
Directors who were members of such Board of Directors at the time of
such nomination or election.
"Contractual Obligation": as to any Person, any provision of
any security issued by such Person or of any agreement, instrument or
other undertaking to which such Person is a party or by which it or any
of its property is bound.
"CSI": Chase Securities Inc., a Delaware corporation.
"CSI High Yield Index Rate": means the average yield to worst
of the CSI High Yield Index as published in the Chase High Yield
Research Weekly Update Report as published by Chase.
"Currency Agreement": in respect of a Person any foreign
exchange contract, currency swap agreement or other similar agreement
as to which such Person is a party or a beneficiary.
"Default": any event or condition that is, or after notice or
passage of time or both would be, an Event of Default.
"Designated Senior Indebtedness": (i) the Bank Indebtedness
and (ii) any other Senior Indebtedness which, at the date of
determination, has an aggregate principal amount outstanding of, or
under which, at the date of determination, the holders thereof are
committed to lend up to, at least $50,000,000 and is specifically
designated by the Borrower in the instrument evidencing or governing
such Senior Indebtedness as "Designated Senior Indebtedness" for
purposes of this Agreement.
<PAGE> 15
10
"Disqualified Stock": with respect to any Person, any Capital
Stock that by its terms (or by the terms of any security into which it
is convertible or for which it is exchangeable or exercisable) or upon
the happening of any event (i) matures or is mandatorily redeemable
pursuant to a sinking fund obligation or otherwise, (ii) is convertible
or exchangeable for Indebtedness or Disqualified Stock (excluding
Capital Stock that is convertible or exchangeable solely at the option
of the Borrower or a Restricted Subsidiary provided that any such
conversion or exchange will be deemed an Incurrence of Indebtedness) or
(iii) is redeemable at the option of the holder thereof, in whole or in
part, in each case, on or prior to the first anniversary of the Final
Maturity Date provided, that only the portion of Capital Stock which so
matures or is mandatorily redeemable, is so convertible or exchangeable
or is so redeemable at the option of the holder thereof prior to such
Final Maturity Date shall be deemed to be Disqualified Stock.
"Dollars" and "$": dollars in lawful currency of the United
States of America.
"Domestic Subsidiary": any Restricted Subsidiary of the
Borrower organized under the laws of any jurisdiction within the United
States.
"Domestic Subsidiary Guarantee": the Domestic Subsidiary
Guarantee, substantially in the form of Exhibit A, to be executed and
delivered by each Domestic Subsidiary (other than any Domestic
Subsidiary which is a Subsidiary of an Excluded Foreign Subsidiary),
including but not limited to, U.S. Finance Subsidiary I, U.S. Finance
Subsidiary II and U.S. Finance Subsidiary III, as the same may from
time to time be amended, supplemented or otherwise modified.
"EBITDA": for any period means the Consolidated Net Income for
such period, plus the following to the extent deducted in calculating
such Consolidated Net Income: (i) income tax expense, (ii) Consolidated
Interest Expense, (iii) depreciation expense, (iv) amortization
expense, (v) exchange or translation losses on foreign currencies, and
(vi) all other non-cash items reducing Consolidated Net Income
(excluding any non-cash item to the extent it represents an accrual of
or reserve for cash disbursements for any subsequent period prior to
the Final Maturity Date of the Securities) and less, to the extent
added in calculating Consolidated Net Income, (x) exchange or
translation gains on foreign currencies and (y) non-cash items
increasing Consolidated Net Income (excluding such non-cash items to
the extent they represent an accrual for cash receipts reasonably
expected to be received prior to the Final Maturity Date), in each case
for such period. Notwithstanding the foregoing, the income tax expense,
depreciation expense and amortization expense of a Subsidiary of the
Borrower shall be included in EBITDA only to the extent (and in the
same proportion) that the net income of such Subsidiary was included in
calculating Consolidated Net Income.
"Effective Date": as defined in Section 4.1.
"Environmental Laws": any and all foreign, Federal, state,
local or municipal laws, rules, orders, regulations, statutes,
ordinances, codes, decrees, requirements of any Governmental Authority
or other Requirements of Law (including common law) regulating,
relating to or imposing liability or standards of conduct concerning
protection of human health or the environment, as now or may at any
time hereafter be in effect.
<PAGE> 16
11
"Eurocurrency Reserves Requirements": for any day as applied
to a Eurodollar Loan, the aggregate (without duplication) of the rates
(expressed as a decimal fraction) of reserve requirements in effect on
such day (including, without limitation, basic, supplemental, marginal
and emergency reserves) under any regulations of the Board of Governors
or other Governmental Authority having jurisdiction with respect
thereto dealing with reserve requirements prescribed for eurocurrency
funding (currently referred to as "Eurocurrency Liabilities" in
Regulation D of the Board of Governors) maintained by a member bank of
such system.
"Eurodollar Base Rate": with respect to each day during each
Interest Period pertaining to a Eurodollar Loan, the rate per annum
equal to the rate at which Chase is offered Dollar deposits at or about
11:00 A.M., London time, two Business Days prior to the beginning of
such Interest Period in the London interbank market for delivery on the
first day of such Interest Period for the number of days comprised
therein.
"Eurodollar Borrowing": a Borrowing comprised of Eurodollar
Loans.
"Eurodollar Loan": a Loan bearing interest at a rate
determined by reference to the Adjusted LIBO Rate in accordance with
the provisions of Section 2.
"Excluded Foreign Subsidiary": any Foreign Subsidiary (and any
Domestic Subsidiary which is a Subsidiary of an Excluded Foreign
Subsidiary) if the execution by such Foreign Subsidiary (or Domestic
Subsidiary, as the case may be) of a Note Guarantee would, in the good
faith judgment of the Borrower, result in adverse tax consequences to
the Borrower or would be unlawful for such Foreign Subsidiary (or
Domestic Subsidiary, as the case may be).
"ERISA": the Employee Retirement Income Security Act of 1974,
as amended from time to time.
"ESOP Guaranty": the Guaranty, dated as of June 30, 1995, as
amended, made by the Borrower in favor of Bank of America National
Trust and Savings Association, as agent under the ESOP Loan Agreement.
"ESOP Loan Agreement": the Loan Agreement, dated as of June
30, 1995, as amended, among the Federal-Mogul Corporation Salaried
Employees' Stock Ownership Trust, as borrower, various financial
institutions, as lenders, and Bank of America National Trust and
Savings Association, as agent.
"Event of Default": any of the events specified in Section 7,
provided that all requirements for the giving of notice, the lapse of
time, or both, and any other conditions, have been satisfied.
"Exchange Act": the Securities Exchange Act of 1934, as
amended.
"Exchange Note": each senior subordinated note issued under
the Senior Subordinated Indenture delivered pursuant to Section 2.3 and
5.14; collectively, the "Exchange Notes".
<PAGE> 17
12
"Exchange Request": as defined in Section 5.14.
"Existing Credit Agreement": as defined in the Recitals
hereto.
"FDIC": the Federal Deposit Insurance Corporation and any
Governmental Authority which succeeds to the powers and functions
thereof.
"Final Maturity Date": the tenth anniversary of the Closing
Date.
"Foreign Subsidiary": any Restricted Subsidiary of the
Borrower other than a Domestic Subsidiary.
"GAAP": generally accepted accounting principles in the United
States of America (or, in the case of financial statements for any
Foreign Subsidiary Borrower (as defined in the Senior Credit Agreement)
and its Subsidiaries for any period prior to the date it became a
Foreign Subsidiary Borrower, in the country of organization of such
Foreign Subsidiary Borrower) in effect on the Closing Date, including
those set forth in the opinions and pronouncements of the Accounting
Principles Board of the American Institute of Certified Public
Accountants and statements and pronouncements of the Financial
Accounting Standards Board or in such other statements by such entity
as are approved by a significant segment of the accounting profession.
"Governmental Authority": any nation or government, any state,
province or other political subdivision thereof and any entity
exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government.
"Guarantee": (without duplication) any obligation, contingent
or otherwise, of any Person directly or indirectly guaranteeing any
Indebtedness of any other Person, and any obligation, direct or
indirect, contingent or otherwise, of such Person (i) to purchase or
pay (or advance or supply funds for the purchase or payment of) such
Indebtedness or other obligation of such other Person (whether arising
by virtue of partnership arrangements, or by agreement to keep-well, to
purchase assets, goods, securities or services, to take-or-pay, or to
maintain financial statement conditions or otherwise) or (ii) entered
into for purposes of assuring in any other manner the obligee of such
Indebtedness or other obligation of the payment thereof or to protect
such obligee against loss in respect thereof (in whole or in part);
provided, however, that the term "Guarantee" shall not include
endorsements for collection or deposit in the ordinary course of
business. The term "Guarantee" used as a verb has a corresponding
meaning.
"Guarantor Subordinated Obligation": any Indebtedness of a
Note Guarantor (whether outstanding on the date of this Agreement or
thereafter Incurred) which is subordinate or junior in right of payment
to its obligations under the Note Guarantee pursuant to a written
agreement.
"Hedging Obligations": of any Person means the obligations of
such Person pursuant to any Interest Rate Agreement or Currency
Agreement.
<PAGE> 18
13
"Holder" or "Noteholder": the Person in whose name a Loan (and
any corresponding Note(s)) is registered.
"Incur": issue, assume, Guarantee, incur or otherwise become
liable for; provided, however, that any Indebtedness or Capital Stock
of a Person existing at the time such Person becomes a Subsidiary
(whether by merger, consolidation, acquisition or otherwise) shall be
deemed to be Incurred by such Subsidiary at the time it becomes a
Subsidiary.
"Indebtedness": with respect to any Person on any date of
determination (without duplication):
(i) the principal of and premium, if any, in respect
of indebtedness of such Person for borrowed money,
(ii) the principal of and premium, if any, in respect
of obligations of such Person evidenced by bonds, debentures,
notes or other similar instruments,
(iii) all obligations of such Person in respect of
letters of credit or other similar instruments (including
reimbursement obligations with respect thereto), but excluding
commercial letters of credit or letters of credit issued in
connection with liabilities incurred in the ordinary course of
business (including those issued to self-insure under
applicable workers' compensation statutes), to the extent not
drawn upon or reimbursed within three Business Days after
drawing,
(iv) all obligations of such Person to pay the
deferred and unpaid purchase price of property or services
(except Trade Payables), which purchase price is due more than
six months after the date of placing such property in final
service or taking final delivery and title thereto or the
completion of such services,
(v) all Capitalized Lease Obligations and
Attributable Debt of such Person,
(vi) the amount of all obligations of such Person
with respect to the redemption, repayment or other repurchase
of Disqualified Stock or, with respect to any Subsidiary of
the Borrower, any Preferred Stock (but excluding, in each
case, any accrued dividends),
(vii) all Indebtedness of other Persons secured by a
Lien on any asset of such Person, whether or not such
Indebtedness is assumed by such Person; provided, however,
that the amount of Indebtedness of such Person shall be the
lesser of (A) the fair market value of such asset at such date
of determination and (B) the amount of such Indebtedness of
such other Persons,
(viii) all Indebtedness of other Persons to the
extent Guaranteed by such Person, and
(ix) to the extent not otherwise included in this
definition, net Hedging Obligations of such Person (such
obligations to be equal at any time of determination to the
termination value of such agreement or arrangement giving rise
to such Hedging Obligation that would be payable by such
Person at such time).
<PAGE> 19
14
The amount of Indebtedness of any Person at any date shall be
the outstanding balance at such date of all unconditional obligations
as described above and the maximum liability at such date, upon the
occurrence of the contingency giving rise to the obligation, of any
contingent obligations described above at such date. With respect to
any Indebtedness denominated in a foreign currency, for purposes of
determining compliance with any Dollar-denominated restriction on the
Incurrence of such Indebtedness under Section 6.1, the amount of such
Indebtedness shall be calculated based on the currency exchange rate in
effect on the date that such Indebtedness was Incurred, in the case of
term debt, or first committed in the case of revolving debt, provided
that any such Indebtedness outstanding on the Closing Date shall be
calculated based on the currency exchange rate in effect on the Closing
Date.
"Initial Loan": as defined in Section 2.1(a).
"Initial Loan Commitment Period": the period commencing on the
Satisfaction Date (which date shall be a day no earlier than the
Initial Revolving Credit Funding Date (as defined in the Senior Credit
Agreement)) and ending on the earlier of (a) the day immediately
following the date on which the Tender Offer lapses or is withdrawn by
U.K. Acquisition II and (b) May 1, 1998.
"Initial Maturity Date": the one-year anniversary of the
Closing Date.
"Initial Note": as defined in Section 2.4(e)
"Insolvency": with respect to any Multiemployer Plan, the
condition that such Plan is insolvent within the meaning of Section
4245 of ERISA.
"Insolvent": pertaining to a condition of Insolvency.
"Intellectual Property": as defined in Section 3.9.
"Interest Payment Date": with respect to any Loan, the last
day of the Interest Period applicable to the Loan, and in addition, the
date of any prepayment of such Loan.
"Interest Period": (i) prior to the Initial Maturity Date, (a)
as to any Eurodollar Borrowing, the periods commencing on the date of
such Eurodollar Borrowing and ending on the earlier of (A) the
numerically corresponding day (or, if there is no numerically
corresponding day, on the last day) in the calendar month that is three
months thereafter and (B) the Initial Maturity Date, and (b) as to any
ABR Borrowing, the period commencing on the date of such ABR Borrowing
and ending on the earlier of (A) the last day of each consecutive
fiscal quarter of the Borrower following the Closing Date and (B) the
Initial Maturity Date, and (ii) following the Initial Maturity Date,
the period commencing on the Initial Maturity Date and ending on the
last day of each consecutive fiscal quarter of the Borrower following
the Initial Maturity Date, and the period ending on the Final Maturity
Date; provided, however, that if any Interest Period would end on a day
other than a Business Day, such Interest Period shall be extended to
the next succeeding Business Day unless, in the case of a Eurodollar
Borrowing only, such next succeeding Business Day would fall in the
next calendar month, in which case such Interest Period shall end on
the
<PAGE> 20
15
next preceding Business Day. Interest shall accrue from and including
the first day of an Interest Period to but excluding the last day of
such Interest Period.
"Interest Rate Agreement": with respect to any Person any
interest rate protection agreement, interest rate future agreement,
interest rate option agreement, interest rate swap agreement, interest
rate cap agreement, interest rate collar agreement, interest rate hedge
agreement or other similar agreement or arrangement as to which such
Person is party or a beneficiary.
"Investment": in any Person means any direct or indirect
advance, loan (other than advances to customers in the ordinary course
of business that are recorded as accounts payable on the balance sheet
of such Person) or other extension of credit (including by way of
Guarantee or similar arrangement, but excluding any debt or extension
of credit represented by a bank deposit) or capital contribution to (by
means of any transfer of cash or other property to others or any
payment for property or services for the account or use of others), or
any purchase or acquisition of Capital Stock, Indebtedness or other
similar instruments issued by, such Person. For purposes of the
definition of "Unrestricted Subsidiary" and Section 6.2, (i)
"Investment" shall include the portion (proportionate to the Borrower's
equity interest in such Subsidiary) of the fair market value of the net
assets of any Subsidiary of the Borrower at the time that such
Subsidiary is designated an Unrestricted Subsidiary; provided, however,
that upon a redesignation of such Subsidiary as a Restricted
Subsidiary, the Borrower shall be deemed to continue to have a
permanent "Investment" in an Unrestricted Subsidiary in an amount (if
positive) equal to (x) the Borrower's "Investment" in such Subsidiary
at the time of such redesignation less (y) the portion (proportionate
to the Borrower's equity interest in such Subsidiary) of the fair
market value of the net assets of such Subsidiary at the time of such
redesignation; and (ii) any property transferred to or from an
Unrestricted Subsidiary shall be valued at its fair market value at the
time of such transfer, in each case as determined in good faith by the
Board of Directors.
"Lenders": as defined in the preamble to this Agreement.
"Lien": any mortgage, pledge, hypothecation, assignment,
deposit arrangement, encumbrance, lien (statutory or other), charge or
other security interest or any preference, priority or other security
agreement or preferential arrangement of any kind or nature whatsoever
(including, without limitation, any conditional sale or other title
retention agreement and any Capitalized Lease Obligations having
substantially the same economic effect as any of the foregoing).
"Loans": as defined in Section 2.1.
"Loan Documents": this Agreement, the Loan Notes and the Note
Guarantees.
"Loan Notes": the collective reference to the Term Notes and
the Initial Notes.
"Loan Participants": as defined in Section 10.6(b).
"Loan Parties": the collective reference to the Borrower, and
each of its Subsidiaries which from time to time is a party to any Loan
Document.
<PAGE> 21
16
"Material Adverse Effect": a material adverse effect on (a)
the business, operations, property, condition (financial or otherwise)
or prospects of the Borrower and its Subsidiaries taken as a whole, (b)
the ability of the Borrower to perform its obligations under this
Agreement or any of the Notes or any of the other Loan Documents to
which it is a party or (c) the validity or enforceability of this
Agreement or any of the Notes or any of the other Loan Documents or the
rights or remedies of the Administrative Agent or the Lenders hereunder
or thereunder.
"Material Environmental Amount": an amount payable by the
Borrower (net of the proceeds of any applicable insurance and amount
reasonably expected to be paid by Persons that are not Affiliates of
the Borrower and that are jointly liable with the Borrower in respect
of such amount) and/or its Subsidiaries in excess of $20,000,000 in any
year or $100,000,000 in the aggregate for remedial costs, compliance
costs, compensatory damages, punitive damages, fines, penalties or any
combination thereof.
"Materials of Environmental Concern": any gasoline or
petroleum (including crude oil or any fraction thereof) or petroleum
products or any hazardous or toxic substances, materials or wastes,
defined or regulated as such in or under any Environmental Law,
including, without limitation, asbestos, polychlorinated biphenyls and
urea-formaldehyde insulation.
"Moody's": Moody's Investors Service, Inc., and its
successors.
"Multiemployer Plan": a Plan which is a multiemployer plan as
defined in Section 4001(a)(3) of ERISA or any successor statute.
"Net Available Cash": from an Asset Disposition means cash
payments received (including any cash payments received by way of
deferred payment of principal pursuant to a note or installment
receivable or otherwise, but only as and when received, but excluding
any other consideration received in the form of assumption by the
acquiring person of Indebtedness or other obligations relating to the
properties or assets that are the subject of such Asset Disposition or
received in any other noncash form) therefrom, in each case net of (i)
all legal, accounting, investment banking, title and recording tax
expenses, commissions and other fees and expenses incurred, and all
Federal, state, provincial, foreign and local taxes required to be paid
or accrued as a liability under GAAP (A) as a consequence of such Asset
Disposition or (B) as a result of any repatriation to the United States
of any proceeds of such Asset Disposition, (ii) all payments made on
any Indebtedness that is secured by any assets subject to such Asset
Disposition, in accordance with the terms of any Lien upon such assets,
or that must by its terms, or in order to obtain a necessary consent to
such Asset Disposition, or by applicable law be repaid out of the
proceeds from such Asset Disposition, (iii) all distributions and other
payments required to be made to minority interest holders in
Subsidiaries or joint ventures as a result of such Asset Disposition,
(iv) the deduction of appropriate amounts to be provided by the seller
as a reserve, in accordance with GAAP, against any liabilities
associated with the assets disposed of in such Asset Disposition and
retained by the Borrower or any Restricted Subsidiary after such Asset
Disposition, (v) any portion of the purchase price from an Asset
Disposition placed in escrow (whether as a reserve for adjustment of
the purchase price, for satisfaction of indemnities in respect of such
Asset Disposition or otherwise in
<PAGE> 22
17
connection with such Asset Disposition); provided, however that upon
the termination of such escrow, Net Available Cash shall be increased
by any portion of funds therein released to the Borrower or any
Restricted Subsidiary, and (vi) all payments required to be applied
pursuant to any Senior Indebtedness.
"Net Cash Proceeds": with respect to any issuance or sale of
any securities of the Borrower or any Subsidiary by the Borrower or any
Subsidiary, the cash proceeds of such issuance or sale net of
attorneys' fees, accountants' fees, underwriters' or placement agents'
fees, discounts or commissions and brokerage, consultant and other fees
and expenses actually incurred in connection with such issuance or sale
and net of taxes paid or payable as a result of such issuance or sale.
"Nonconsenting Lender": as defined in Section 2.12.
"Non-Excluded Taxes": as defined in Section 2.10(a).
"Non-Funding Lender": as defined in Section 2.12.
"Non-Recourse Debt": Indebtedness (i) as to which neither the
Borrower nor any Restricted Subsidiary (a) provides any guarantee or
credit support of any kind (including any undertaking, guarantee,
indemnity, agreement or instrument that would constitute Indebtedness)
or (b) is directly or indirectly liable (as a guarantor or otherwise)
and (ii) no default with respect to which (including any rights that
the holders thereof may have to take enforcement action against an
Unrestricted Subsidiary) would permit (upon notice, lapse of time or
both) any holder of any other Indebtedness of the Borrower or any
Restricted Subsidiary to declare a default under such other
Indebtedness or cause the payment thereof to be accelerated or payable
prior to its stated maturity.
"Note Guarantee": the collective reference to Domestic
Subsidiary Guarantees and the U.K. Acquisition I Guarantee and any
other guarantee by a Subsidiary of the Indebtedness and obligations of
the Borrower hereunder substantially in the forms of Exhibits A1-4, and
as each of the same may be amended, supplemented, waived or otherwise
modified from time to time.
"Note Guarantor": any Domestic Subsidiary or Foreign
Subsidiary which has issued a Note Guarantee.
"Notes": the Loan Notes and the Exchange Notes, as originally
executed or as subsequently amended from time to time pursuant to the
applicable provisions hereof.
"Offer Documents": the Press Release and the Tender Offer
documentation subsequently to be posted by U.K. Acquisition II setting
out the detailed terms of the Tender Offer.
"Optionholders": the holders of Options.
"Options": options to purchase up to 25,000,000 Target
Shares.
"Original Initial Note": as defined in Section 2.4(e).
<PAGE> 23
18
"Original Term Note": as defined in Section 2.4(f).
"Panel": the Panel of Take-overs and Mergers in the City of
London.
"Payment Blockage Period": as defined in Section 8.3.
"Payment Sharing Notice": a written notice from the Borrower
or any Lender informing the Administrative Agent that an Event of
Default has occurred and is continuing and directing the Administrative
Agent to allocate payments thereafter received from or on behalf of the
Borrower in accordance with the provisions of Section 2.8.
"PBGC": the Pension Benefit Guaranty Corporation established
pursuant to Subtitle A of Title IV of ERISA or any successor
corporation.
"Permitted Indebtedness": (i) Indebtedness of the Borrower
owing to and held by any Restricted Subsidiary or Indebtedness of a
Restricted Subsidiary owing to and held by the Borrower or any
Restricted Subsidiary; provided, however, that any subsequent issuance
or transfer of any Capital Stock or any other event which results in
any such Restricted Subsidiary ceasing to be a Restricted Subsidiary or
any subsequent transfer of any such Indebtedness (except to the
Borrower in accordance with the foregoing) shall be deemed, in each
case, to constitute the Incurrence of such Indebtedness by the issuer
thereof; (ii) Indebtedness represented by (x) the Take-Out Financing,
(y) any Indebtedness (other than the Indebtedness described in clause
(i) of Section 6.1(b) and other than Indebtedness Incurred pursuant to
clause (i) above or clauses (iv), (v) or (vi) below) outstanding on the
Closing Date and (z) any Refinancing Indebtedness Incurred in respect
of any Indebtedness described in this clause (ii) or Incurred pursuant
to Section 6.1(a); (iii) (A) Indebtedness of a Restricted Subsidiary
Incurred and outstanding on the date on which such Restricted
Subsidiary was acquired by the Borrower (other than Indebtedness
Incurred as consideration in, or to provide all or any portion of the
funds or credit support utilized to consummate, the transaction or
series of related transactions pursuant to which such Restricted
Subsidiary became a Subsidiary or was otherwise acquired by the
Borrower), provided, however, that at the time such Restricted
Subsidiary is acquired by the Borrower, the Borrower would have been
able to Incur $1.00 of additional Indebtedness pursuant to Section
6.1(a) after giving effect to the Incurrence of such Indebtedness
pursuant to this clause (iii) and (B) Refinancing Indebtedness Incurred
by a Restricted Subsidiary in respect of Indebtedness Incurred by such
Restricted Subsidiary pursuant to this clause (iii); (iv) Indebtedness
(A) in respect of performance bonds, bankers' acceptances and surety or
appeal bonds provided by the Borrower or any of its Restricted
Subsidiaries to their customers in the ordinary course of their
business, (B) in respect of performance bonds or similar obligations of
the Borrower or any of its Restricted Subsidiaries for or in connection
with pledges, deposits or payments made or given in the ordinary course
of business in connection with or to secure statutory, regulatory or
similar obligations, including obligations under health, safety or
environmental obligations, (C) arising from Guarantees to suppliers,
lessors, licensees, contractors, franchises or customers of obligations
(other than Indebtedness) incurred in the ordinary course of business
and (D) under Currency Agreements and Interest Rate Agreements;
provided, however, that in the case of Currency Agreements and Interest
Rate Agreements, such Currency Agreements and Interest Rate Agreements
are entered into for bona fide hedging purposes of the Borrower or its
<PAGE> 24
19
Restricted Subsidiaries (as determined in good faith by the Board of
Directors or senior management of the Borrower) and correspond in terms
of notional amount, currencies and interest rates, as applicable, to
Indebtedness of the Borrower or its Restricted Subsidiaries Incurred
without violation of this Agreement or to business transactions of the
Borrower or its Restricted Subsidiaries on customary terms entered into
in the ordinary course of business; (v) Indebtedness arising from
agreements providing for indemnification, adjustment of purchase price
or similar obligations, or from Guarantees or letters of credit, surety
bonds or performance bonds securing any obligations of the Borrower or
any of its Restricted Subsidiaries pursuant to such agreements, in each
case Incurred in connection with the disposition of any business assets
or Restricted Subsidiary of the Borrower (other than Guarantees of
Indebtedness or other obligations Incurred by any Person acquiring all
or any portion of such business assets or Restricted Subsidiary of the
Borrower for the purpose of financing such acquisition) in a principal
amount not to exceed the gross proceeds actually received by the
Borrower or any of its Restricted Subsidiaries in connection with such
disposition, provided, however, that the principal amount of any
Indebtedness Incurred pursuant to this clause (v), when taken together
with all Indebtedness Incurred pursuant to this clause (v) and then
outstanding, shall not exceed $35,000,000; (vi) Indebtedness consisting
of (A) Guarantees by the Borrower or a Restricted Subsidiary of
Indebtedness Incurred by a Wholly-Owned Subsidiary without violation of
this Agreement and (B) Guarantees by a Restricted Subsidiary of Senior
Indebtedness Incurred by the Borrower without violation of this
Agreement; (vii) Indebtedness arising from the honoring by a bank or
other financial institution of a check, draft or similar instrument
drawn against insufficient funds in the ordinary course of business,
provided that such Indebtedness is extinguished within two business
days of its incurrence; and (viii) Indebtedness resulting from the
endorsement of negotiable instruments in the ordinary course of
business; (ix) Indebtedness of any Foreign Subsidiary for working
capital purposes in an aggregate principal amount not to exceed
$30,000,000 at one time outstanding; and (x) Indebtedness of any
Domestic Subsidiary for working capital purposes in an aggregate
principal amount not to exceed $30,000,000; provided that such
Indebtedness is repaid within three Business Days of incurrence.
"Permitted Investment": an Investment by the Borrower or any
Restricted Subsidiary in (i) a Wholly-Owned Subsidiary, the Borrower or
a Person that will, upon the making of such Investment, become a
Wholly-Owned Subsidiary; provided, however, that the primary business
of such Wholly-Owned Subsidiary is a Related Business; (ii) another
Person if as a result of such Investment such other Person is merged or
consolidated with or into, or transfers or conveys all or substantially
all its assets to, the Borrower or a Wholly-Owned Subsidiary; provided,
however, that such Person's primary business is a Related Business;
(iii) Temporary Cash Investments or Cash Equivalents; (iv) receivables
owing to the Borrower or any Restricted Subsidiary, if created or
acquired in the ordinary course of business and payable or
dischargeable in accordance with customary trade terms; provided,
however, that such trade terms may include such concessionary trade
terms as the Borrower or any such Restricted Subsidiary deems
reasonable under the circumstances; (v) securities received as
consideration in sales of assets made in compliance with Section 6.4;
(vi) payroll, travel and similar advances to cover matters that are
expected at the time of such advances ultimately to be treated as
expenses for accounting purposes and that are made in the ordinary
course of business; (vii) loans or advances (or guarantees in respect
thereof) to the officers or employees of the Borrower or any Restricted
Subsidiary in accordance with the ordinary course practices of the
Borrower and its Restricted Subsidiaries; (viii) stock,
<PAGE> 25
20
obligations or securities received in settlement of debts created in
the ordinary course of business and owing to the Borrower or any
Restricted Subsidiary or in satisfaction of judgments; (ix) Investments
in connection with pledges, deposits, payments or performance bonds
made or given in the ordinary course of business in connection with or
to secure statutory, regulatory or similar obligations, including
obligations under health, safety or environmental obligations; (x)
extensions of trade credit in the ordinary course of business; (xi)
guarantees of Indebtedness (including the Note Guarantees and the
Guarantees entered into in connection with the Senior Credit Facility)
permitted under Section 6.1; (xii) the Acquisition; (xiii) loans and
advances among the Borrower and its Restricted Subsidiaries made in
accordance with Section 6.1; (xiv) (A) Investments in a Related
Business acquired in consideration for the issuance of common equity of
the Borrower and (B) an Investment in a Related Business with the
proceeds of the issuance of common equity to the extent such amounts
have not been previously applied to make an Investment; provided that
no Default or Event of Default shall have occurred and be continuing
and such Permitted Investment shall not be an Investment which is, or
after notice or lapse of time or both, would be an "event of default"
under the terms of any Indebtedness of the Borrower or its Restricted
Subsidiaries; and (xv) Investments in a Related Business previously
disclosed to the Lenders in an aggregate amount, taken together with
all other Investments made pursuant to this clause (xv) that are at
that time outstanding, not to exceed $150,000,000.
"Permitted Issuance": (a) the issuance by the Borrower of
shares of Capital Stock as dividends on issued and outstanding Capital
Stock of the same class of the Borrower or pursuant to any dividend
reinvestment plan, (b) the issuance by the Borrower of options or other
equity securities of the Borrower to outside directors, members of
management or employees of the Borrower or any Subsidiary of the
Borrower, (c) the issuance of securities as interest or dividends on
pay-in-kind debt or preferred equity securities permitted hereunder and
under the other Loan Documents, (d) the issuance to the Borrower or any
Subsidiary (or any director, with respect to directors' qualifying
shares) by any of their respective Subsidiaries of any Capital Stock,
(e) the issuance by the Borrower of shares of its Capital Stock (other
than Disqualified Stock) in connection with a Permitted Investment and
(f) cash payments made in lieu of issuing fractional shares of
Borrower's Capital Stock in an aggregate amount not to exceed $100,000.
"Person": an individual, partnership, corporation, business
trust, joint stock company, trust, unincorporated association, joint
venture, Governmental Authority or other entity of whatever nature.
"PIK Interest Amount": the aggregate amount equal to the
amount of interest borne by an Initial Note or a Term Note in excess of
14% per annum.
"Plan": at a particular time, any employee benefit plan which
is covered by ERISA and in respect of which the Borrower or a Commonly
Controlled Entity is (or, if such plan were terminated at such time,
would under Section 4069 of ERISA be deemed to be) an "employer" as
defined in Section 3(5) of ERISA.
"Preferred Stock", as applied to the Capital Stock of any
corporation, Capital Stock of any class or classes (however designated)
which is preferred as to the payment of dividends, or as to the
distribution of assets upon any voluntary or involuntary liquidation
<PAGE> 26
21
or dissolution of such corporation, over shares of Capital Stock of any
other class of such corporation.
"Press Release": the press announcement released by or on
behalf of U.K. Acquisition II on October 16, 1997 publicly announcing a
firm intention to make the Tender Offer.
"Pro Forma Balance Sheet": as defined in Section 3.1(b).
"Prohibited Transaction": any "prohibited transaction" as
defined in Section 406 of ERISA or Section 4975 of the Code.
"Properties": as defined in Section 3.16(a).
"Qualified Capital Stock": any Capital Stock that is not
Disqualified Stock.
"Refinancing Indebtedness": Indebtedness that is Incurred to
refund, refinance, replace, renew, repay or extend (including pursuant
to any defeasance or discharge mechanism) (collectively, "refinances,"
and "refinanced" shall have a correlative meaning) any Indebtedness
existing on the date of this Agreement or Incurred in compliance with
this Agreement (including Indebtedness of the Borrower that refinances
Indebtedness of any Restricted Subsidiary (to the extent permitted in
this Agreement) and Indebtedness of any Restricted Subsidiary that
refinances Indebtedness of another Restricted Subsidiary) including
Indebtedness that refinances Refinancing Indebtedness; provided,
however, that (i) the Refinancing Indebtedness has a Stated Maturity no
earlier than that of the Indebtedness being refinanced, (ii) the
Refinancing Indebtedness has an Average Life at the time such
Refinancing Indebtedness is Incurred that is equal to or greater than
that of the Indebtedness being refinanced and (iii) such Refinancing
Indebtedness is Incurred in an aggregate principal amount (or if issued
with original issue discount, an aggregate issue price) that is equal
to or less than the sum of (x) the aggregate principal amount (or if
issued with original issue discount, the aggregate accreted value) then
outstanding of the Indebtedness being refinanced, plus (y) fees,
underwriting discounts, premiums and other costs and expenses incurred
in connection with such Refinancing Indebtedness; provided further,
however, that Refinancing Indebtedness shall not include (x)
Indebtedness of a Restricted Subsidiary that refinances Indebtedness of
the Borrower or Indebtedness of a Note Guarantor that refinances
Indebtedness of a Restricted Subsidiary that is not a Note Guarantor or
(y) Indebtedness of the Borrower or a Restricted Subsidiary that
refinances Indebtedness of an Unrestricted Subsidiary.
"Register": as defined in Section 10.6(d).
"Regulation G": Regulation G of the Board of Governors as in
effect from time to time.
"Regulation U": Regulation U of the Board of Governors as in
effect from time to time.
"Regulation X": Regulation X of the Board of Governors as in
effect from time to time.
<PAGE> 27
22
"Related Business": any business which is the same as or
related, ancillary or complementary to any of the businesses of the
Borrower and its Restricted Subsidiaries on the date hereof, as
reasonably determined by the Board.
"Reorganization": with respect to any Multiemployer Plan, the
condition that such plan is in reorganization within the meaning of
Section 4241 of ERISA.
"Reportable Event": any of the events set forth in Section
4043(b) of ERISA or any regulation thereunder.
"Representative": the trustee, agent or representative (if
any) for an issue of Senior Indebtedness.
"Required Lenders": at any time, Lenders holding 51% or more
in principal amount of outstanding Loans (or, prior to the Closing
Date, 51% or more of the Commitments).
"Requirement of Law": as to any Person, the certificate of
incorporation and by-laws or other organizational or governing
documents of such Person, and any law, treaty, rule or regulation or
determination of an arbitrator or a court or other Governmental
Authority, in each case applicable to or binding upon such Person or
any of its property or to which such Person or any of its property is
subject.
"Responsible Officer": as to any Person, the chief executive
officer, the president, the chief financial officer, the treasurer, any
assistant treasurer or the controller.
"Restricted Payments": as defined in Section 6.2(a).
"Restricted Subsidiary": any Subsidiary of the Borrower other
than an Unrestricted Subsidiary.
"Sale/Leaseback Transaction": an arrangement relating to
property now owned or hereafter acquired by the Borrower or a
Restricted Subsidiary whereby the Borrower or such Restricted
Subsidiary transfers such property to a Person and the Borrower or such
Restricted Subsidiary leases it from such Person, other than leases
between the Borrower and a Wholly-Owned Subsidiary or between
Wholly-Owned Subsidiaries.
"Satisfaction Date": as defined in Section 4.2.
"SEC": the Securities and Exchange Commission or any
Governmental Authority which succeeds to the powers and functions
thereof.
"Secured Indebtedness": any Indebtedness of the Borrower
secured by a Lien.
"Securities": any stock, shares, partnership interests, voting
trust certificates, certificates of interest or participation in any
profit sharing agreement or arrangement, bonds, debentures, options,
warrants, notes, or other evidences of indebtedness, secured or
unsecured, convertible, subordinated or otherwise, or in general any
instruments commonly known as "securities" or any certificates of
interest, shares or participations in temporary or
<PAGE> 28
23
interim certificates for the purchase or acquisition of, or any right
to subscribe to, purchase or acquire, any of the foregoing.
"Securities Act": the Securities Act of 1933, as amended from
time to time.
"Senior Credit Agreement": means (i) the Second Amended and
Restated Credit Agreement dated as of December 18, 1997 among the
Borrower, the Foreign Subsidiaries parties thereto, The Chase Manhattan
Bank, as Administrative Agent and the lenders parties thereto from time
to time, as the same may be amended, supplemented or otherwise modified
from time to time and (ii) any renewal, extension, refunding,
restructuring, replacement, or refinancing thereof (whether with the
original administrative agent and lenders or another administrative
agent or agents or other lenders and whether provided under the
original Second Amended and Restated Credit Agreement or any other
agreement or indenture.)
"Senior Credit Documents": the "Loan Documents" as such term
is defined in the Senior Credit Agreement.
"Senior Credit Facility": the collective reference to the
Senior Credit Agreement and the notes issued pursuant thereto and the
guarantee agreements, the security agreements, the indemnity,
subrogation and contribution agreements, the pledge agreements and each
of the other security agreements and other instruments and documents
executed and delivered pursuant to any of the foregoing.
"Senior Credit Facility Loans": loans in an aggregate
principal amount not to exceed $2,750,000,000 borrowed by the Borrower
pursuant to the Senior Credit Facility.
"Senior Indebtedness": the principal of, premium (if any), and
interest (including interest accruing on or after the filing of any
petition in bankruptcy or for reorganization of the Borrower regardless
of whether post-filing interest is allowed in such proceeding) on, and
fees and other amounts owing in respect of, the Bank Indebtedness and
all other Indebtedness and Hedging Obligations of the Borrower, whether
outstanding on the Closing Date or thereafter issued, unless, in the
instrument creating or evidencing the same or pursuant to which the
same is outstanding, it is provided that the obligations in respect of
such Indebtedness are not superior in right of payment to the Loans;
provided, however, that Senior Indebtedness will not include (1) any
obligation of the Borrower to any Subsidiary, (2) any liability for
Federal, state, foreign, local or other taxes owed or owing by the
Borrower, (3) any accounts payable or other liability to trade
creditors arising in the ordinary course of business (including
Guarantees thereof or instruments evidencing such liabilities), (4) any
Indebtedness, Guarantee or obligation of the Borrower that is expressly
subordinate or junior in right of payment to any other Indebtedness,
Guarantee or obligation of the Borrower, including any Senior
Subordinated Indebtedness and any Subordinated Obligations, or (5) any
Capital Stock. "Senior Indebtedness" of a Note Guarantor has a
correlative meaning (including interest accruing on or after the filing
of a petition in bankruptcy or for reorganization of the Borrower or
Note Guarantor, regardless of whether post-filing interest is allowed
in such proceeding).
"Senior Subordinated Credit Agreement": as defined in the
recitals hereto.
<PAGE> 29
24
"Senior Subordinated Indebtedness": the Loans, the Exchange
Notes, and any other Indebtedness of the Borrower that specifically
provides that such Indebtedness is to rank pari passu with the Loans
and is not expressly subordinated in right of payment by its terms to
any Indebtedness or other obligation of the Borrower that is not Senior
Indebtedness.
"Senior Subordinated Indenture": the Senior Subordinated
Indenture, substantially in the form of Exhibit B hereto (with such
changes therein as the Borrower may request and Administrative Agent
may approve, such approval not to be unreasonably withheld), if and
when executed and delivered by the Borrower and a trustee thereunder,
as amended, waived, supplemented or otherwise modified from time to
time.
"Single Employer Plan": any Plan which is covered by Title IV
of ERISA, but which is not a Multiemployer Plan.
"Solvent" and "Solvency": when used with respect to any
Person, means that, as of any date of determination, (a) the amount of
the "present fair saleable value" of the assets of such Person will, as
of such date, exceed the amount of all "liabilities of such Person,
contingent or otherwise", as of such date, as such quoted terms are
determined in accordance with applicable federal and state laws
governing determinations of the insolvency of debtors, (b) the present
fair saleable value of the assets of such Person will, as of such date,
be greater than the amount that will be required to pay the liability
of such Person on its debts as such debts become absolute and matured,
(c) such Person will not have, as of such date, an unreasonably small
amount of capital with which to conduct its business, and (d) such
Person will be able to pay its debts as they mature. For purposes of
this definition, (i) "debt" means liability on a "claim", and (ii)
"claim" means any (x) right to payment, whether or not such a right is
reduced to judgment, liquidated, unliquidated, fixed, contingent,
matured, unmatured, disputed, undisputed, legal, equitable, secured or
unsecured or (y) right to an equitable remedy for breach of performance
if such breach gives rise to a right to payment, whether or not such
right to an equitable remedy is reduced to judgment, fixed, contingent,
matured or unmatured, disputed, undisputed, secured or unsecured.
"S&P": Standard & Poor's Ratings Service, a division of The
McGraw-Hill Companies, Inc., and its successors.
"Stated Maturity": with respect to any Security, the date
specified in such Security as the fixed date on which the payment of
principal of such security is due and payable, including pursuant to
any mandatory redemption provision (but excluding any provision
providing for the repurchase of such security at the option of the
holder thereof upon the happening of any contingency beyond the control
of the issuer unless such contingency has occurred).
"Subordinated Obligation": any Indebtedness of the Borrower
(whether outstanding on the date of this Agreement or thereafter
Incurred) which is subordinate or junior in right of payment to the
Loans pursuant to a written agreement.
"Subsequent Initial Note": as defined in Section 2.4(e).
"Subsequent Term Note": as defined in Section 2.4(f).
<PAGE> 30
25
"Subsidiary": as to any Person, any corporation, association,
partnership or other business entity of which more than 50% of the
total voting power of shares of Capital Stock or other interests
(including partnership interests) entitled (without regard to the
occurrence of any contingency) to vote in the election of directors,
managers or trustees thereof is at the time owned or controlled,
directly or indirectly, by (i) such Person or (ii) one or more
Subsidiaries of such Person.
"Successor Company": as defined in Section 6.8.
"Take-Out Banks": as defined in Section 4.2.
"Takeover Code": the City Code on Takeovers and Mergers in
effect in England.
"Take-Out Financing": any offering of unsecured notes,
debentures or Capital Stock of the Borrower or any Restricted
Subsidiary, whether or not such securities are designated by the
Borrower or any of its Restricted Subsidiaries as Take-Out Financing.
"Target": as defined in the recitals hereto.
"Target Shareholders": the holders of the Target Shares.
"Target Shares": as defined in the recitals hereto.
"Temporary Cash Investments": has the meaning given to "Cash
Equivalents" in the Senior Credit Agreement.
"Tender Offer": as defined in the recitals hereto.
"Term Note": as defined in Section 2.4(f).
"Term Loan": as defined in Section 2.1(b).
"Trade Payables": with respect to any Person, any accounts
payable or any indebtedness or monetary obligation to trade creditors
created, assumed or Guaranteed by such Person arising in the ordinary
course of business in connection with the acquisition of goods or
services.
"Transaction Documents": the collective reference to the
Acquisition Documents, the Senior Credit Documents, the Loan Documents,
the Senior Subordinated Indenture and the Exchange Notes.
"Transactions": the collective reference to the Tender Offer,
the Compulsory Acquisition, the issuances of Indebtedness under this
Agreement, the Senior Subordinated Indenture, the Take-Out Financing
and the Senior Credit Facility.
"Transferee": as defined in Section 10.6(f).
"Trustee": as defined in Section 2.5(d).
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26
"Type", when used in respect of any Loan or Borrowing, shall
refer to the Rate by reference to which interest on such Loan or
Borrowing is determined. For purposes hereof, the term "Rate" shall
include the Adjusted LIBO Rate and the Alternate Base Rate.
"U.K. Acquisition I": a Wholly Owned Subsidiary of the
Borrower to be organized under the laws of England prior to the Closing
Date.
"U.K. Acquisition I Guarantee": the U.K. Acquisition I
Guarantee in form and substance reasonably satisfactory to the
Administrative Agent, as the same may be amended, supplemented or
otherwise modified from time to time, to be executed and delivered by
U.K. Acquisition I pursuant to Section 5.15, guaranteeing all of the
obligations of the Borrower hereunder.
"U.K. Acquisition II": as defined in the recitals hereto.
"Unrestricted Subsidiary": (i) any Subsidiary (other than a
Note Guarantor) of the Borrower that at the time of determination shall
be designated an Unrestricted Subsidiary in the manner provided below
and (ii) any Subsidiary of an Unrestricted Subsidiary. At any time
after the Initial Maturity Date, the Borrower may designate any of its
Subsidiaries (including any newly acquired or newly formed Subsidiary
of the Borrower) to be an Unrestricted Subsidiary unless such
Subsidiary or any of its Subsidiaries owns any Capital Stock or
Indebtedness of, or owns or holds any Lien on any property of, the
Borrower or any other Subsidiary of the Borrower that is not an
Unrestricted Subsidiary or a Subsidiary of the Subsidiary to be so
designated; provided, however, that either (A) the Subsidiary to be so
designated has total consolidated assets of $10,000 or less or (B) if
such Subsidiary has consolidated assets greater than $10,000, then such
designation would be permitted under Section 6.2. The Borrower may
designate any Unrestricted Subsidiary to be a Restricted Subsidiary;
provided, however, that immediately after giving effect to such
designation (x) the Borrower could incur at least $1.00 of additional
Indebtedness under Section 6.1(a) and (y) no Default shall have
occurred and be continuing. Any such designation shall be evidenced to
the Administrative Agent by promptly filing with the Administrative
Agent an Officers' Certificate certifying that such designation
complied with the foregoing provisions.
"U.S. Finance Subsidiary I": a special purpose corporation to
be organized as a direct or indirect Subsidiary of the Borrower under
the laws of a state of the United States prior to the Closing Date.
"U.S. Finance Subsidiary II": a special purpose corporation to
be organized as a direct or indirect Subsidiary of the Borrower under
the laws of a state of the United States prior to the Closing Date.
"U.S. Finance Subsidiary III": a special purpose corporation
to be organized as a direct or indirect Subsidiary of the Borrower
under the laws of a state of the United States prior to the Closing
Date.
<PAGE> 32
27
"Voting Stock": all classes of Capital Stock of an entity then
outstanding and normally entitled to vote in the election of directors
or all interests in such entity with the ability to control the
management or actions of such entity.
"Wholly-Owned Subsidiary": a Restricted Subsidiary of the
Borrower all the Capital Stock of which (other than directors'
qualifying shares) is owned by the Borrower or another Wholly-Owned
Subsidiary, provided that if on the Closing Date the Borrower shall,
directly or indirectly, own greater than 90% of the Capital Stock of
Target then Target shall constitute a Wholly-Owned Subsidiary, however,
Target shall cease to be a Wholly-Owned Subsidiary if the Borrower has
failed to acquire 100% of the Capital Stock of Target by May 1, 1998.
1.2 Other Definitional Provisions. (a) Unless otherwise
specified therein, all terms defined in this Agreement shall have the defined
meanings when used in any Notes, any other Loan Document or any certificate or
other document made or delivered pursuant hereto.
(b) As used herein and in any Notes and any other Loan
Document, and any certificate or other document made or delivered pursuant
hereto or thereto, accounting terms relating to the Borrower and its
Subsidiaries not defined in Section 1.1 and accounting terms partly defined in
Section 1.1, to the extent not defined, shall have the respective meanings given
to them under GAAP.
(c) The words "hereof", "herein" and "hereunder" and words of
similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement, and Section,
subsection, Schedule, Annex and Exhibit references are to this Agreement unless
otherwise specified.
(d) The meanings given to terms defined herein shall be
equally applicable to both the singular and plural forms of such terms.
SECTION 2. AMOUNT AND TERMS OF LOANS
2.1 Loans. (a) Subject to the terms and conditions hereof,
each Lender severally agrees to make a loan (individually, an "Initial Loan" and
collectively, the "Initial Loans") to the Borrower on the Closing Date, in an
aggregate principal amount equal to such Lender's Commitment. Any Commitments
not drawn on the Closing Date shall terminate.
(b) Subject to the terms and conditions hereof, each Lender
severally agrees, if the Initial Loans have not been repaid or exchanged for
Exchange Notes on the Initial Maturity Date, to convert the then outstanding
principal amount of its Initial Loans into a loan (individually, a "Term Loan"
and collectively, the "Term Loans"; the Initial Loans and the Term Loans,
collectively, the "Loans") to the Borrower, on the Initial Maturity Date, in an
aggregate principal amount equal to then outstanding principal amount of the
Initial Loans held by such Lender. Upon the making by such Lender of such Term
Loan, each Lender shall cancel on its records a principal amount of the Initial
Loans and the Initial Loans held by such Lender corresponding to the principal
amount of Term Loans made by such Lender, which corresponding principal amount
of the Initial Loans shall be satisfied by the conversion thereof into Term
Loans in accordance with Section 2.2(b).
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28
(c) Subject to Section 2.6(c), prior to the Initial Maturity
Date, the Borrowing shall be comprised entirely of Eurodollar Loans. Each Lender
may at its option make any Eurodollar Loan by causing any domestic or foreign
branch or Affiliate of such Lender to make such Loan; provided that any exercise
of such option shall not affect the obligation of the Borrower to repay such
Loan in accordance with the terms of this Agreement; provided further that, the
Borrower shall not incur any additional expense or fees as a result of any
exercise of such option. Borrowings of more than one Type may be outstanding at
the same time in the event that the Administrative Agent gives notice as
provided in Section 2.6(c). For purposes of the foregoing, Borrowings having
different Interest Periods shall be considered separate Borrowings.
(d) Unless the Administrative Agent shall have received notice
from a Lender prior to the Closing Date that such Lender will not make available
to the Administrative Agent such Lender's portion of the Borrowing, the
Administrative Agent may assume that such Lender has made such portion available
to the Administrative Agent on the date of such Borrowing in accordance with
Section 2.1(c) and the Administrative Agent may, in reliance upon such
assumption, make available to the Borrower on such date a corresponding amount.
If the Administrative Agent shall have so made funds available then, to the
extent that such Lender shall not have made such portion available to the
Administrative Agent, such Lender and the Borrower severally agree to repay to
the Administrative Agent forthwith on demand such corresponding amount together
with interest thereon, for each day from the date such amount is made available
to the Borrower until the date such amount is repaid to the Administrative Agent
at (i) in the case of the Borrower, the interest rate applicable at the time to
the Loans comprising such Borrowing and (ii) in the case of such Lender, a rate
determined by the Administrative Agent to represent its cost of overnight or
short-term funds (which determination shall be conclusive absent manifest
error). If such Lender shall repay to the Administrative Agent such
corresponding amount, (a) such amount shall constitute such Lender's Loan as
part of such Borrowing for purposes of this Agreement and (b) the Administrative
Agent will promptly remit to the Borrower any such corresponding amount repaid
to the Administrative Agent by the Borrower. Nothing contained in this Section
2.1(d) shall relieve any Lender that has failed to make available its ratable
portion of any borrowing hereunder from its obligation to do so in accordance
with the terms hereof.
(e) The failure of any Lender to make the Initial Loan to be
made by it shall not relieve any other Lender of its obligation, if any,
hereunder to make its Initial Loan on the Closing Date, but no Lender shall be
responsible for the failure of any other Lender to make the Initial Loan to be
made by such other Lender on the Closing Date.
2.2 Procedure for Borrowing and Conversion. (a) Subject to the
provisions of Section 2.6(c), in order to request a Borrowing under the
Commitments on the Closing Date, the Borrower shall deliver by hand or by
telecopy to the Administrative Agent a notice (or telephonic notice promptly
confirmed in writing) (the "Borrowing Request") which notice must be received by
the Administrative Agent not later than 12:00 noon, New York City time, three
(3) days before the Closing Date. The Borrowing Request shall be duly completed,
irrevocable, signed by or on behalf of the Borrower and shall specify the
following information: (i) the date of such Borrowing (which shall be the
Closing Date and a Business Day); (ii) the number and location of the account to
which funds are to be disbursed (which shall be an account that complies with
the requirements of this Section 2.2(a)); and (iii) the amount of the Borrowing.
Upon receipt of such notice the Administrative Agent shall promptly notify each
Lender. Not later than 11:00 a.m., New York City time, on the Closing Date, each
Lender shall make available to the Administrative Agent at the office of the
Administrative Agent specified in Section 10.2 (or at such other location as the
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29
Administrative Agent may direct) an amount in immediately available funds equal
to the amount of the Initial Loan to be made by such Lender. Initial Loan
proceeds received by the Administrative Agent hereunder shall promptly be made
available to the Borrower by the Administrative Agent's crediting the account of
the Borrower, at the office of the Administrative Agent specified in Section
10.2, with the aggregate amount actually received by the Administrative Agent
from the Lenders and in like funds as received by the Administrative Agent.
(b) If the Borrower has not repaid the Initial Loan in full on
or prior to the Initial Maturity Date, then, subject to the right of any Lender
to convert its Initial Loans into Exchange Notes on the Initial Loan Maturity
Date pursuant to Section 2.3(c), each Lender shall convert the then outstanding
principal amount of the Initial Notes into Term Loans under this Section 2.2.
2.3 Maturity and Exchange Notes. (a) All the Initial Loans
will mature on the Initial Maturity Date.
(b) All the Term Loans will mature on the Final Maturity Date.
(c) Each Lender will have the option on or after the Initial
Maturity Date at any time or from time to time to receive Exchange Notes in
exchange for the Term Notes or, on the Initial Maturity Date, the Initial Loans,
of such Lender then outstanding in accordance with Section 5.10 of this
Agreement. The principal amount of the Exchange Notes will equal 100.0% of the
aggregate principal amount (including any accrued and unpaid interest not
required to be paid in cash) of the Loans for which they are exchanged. If a
Default (but not an Event of Default) shall have occurred and be continuing on
the date of such exchange, any notices given or cure periods commenced while the
Loan was outstanding shall be deemed given or commenced (as of the actual dates
thereof) for all purposes with respect to the Exchange Note (with the same
effect as if the Exchange Note had been outstanding as of the actual dates
thereof).
2.4 Repayment of Loans; Evidence of Debt. (a) The Borrower
hereby unconditionally promises to pay to the Administrative Agent for the
account of each Lender the then unpaid principal amount of each Loan in
accordance with the terms hereof and of the Loan Notes. The Borrower hereby
further agrees to pay to the Administrative Agent for the account of each Lender
interest on the unpaid principal amount of the Loans from time to time
outstanding from the date hereof until payment in full thereof at the rates per
annum, and on the dates, set forth in Section 2.6.
(b) Each Lender shall maintain in accordance with its usual
practice an account or accounts evidencing indebtedness of the Borrower to such
Lender resulting from the Loans (including the PIK Interest Amounts) made by
such Lender from time to time, including the amounts of principal and interest
payable and paid to such Lender from time to time under this Agreement.
(c) The Administrative Agent shall maintain the Register
pursuant to Section 10.6(d), with separate subaccounts therein for each Lender,
in which shall be recorded (i) the amount of each Loan (including the PIK
Interest Amounts) made hereunder, (ii) the amount of any principal or accrued
and unpaid interest due and payable or to become due and payable from the
Borrower to each Lender hereunder and (iii) both the amount of any sum received
by the Administrative Agent hereunder from the Borrower and each Lender's share
thereof, if any.
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(d) The entries made in the Register and the accounts of each
Lender maintained pursuant to Section 2.4(b) shall, to the extent permitted by
applicable law, be prima facie evidence of the existence and amounts of the
obligations of the Borrower therein recorded; provided, however, that the
failure of any Lender to maintain any account pursuant to Section 2.4(b) or the
Administrative Agent to make recordings in the Register pursuant to Section
2.4(c), or any error therein, shall not in any manner affect the obligation of
the Borrower to repay (with applicable interest) the Loans made to the Borrower
by such Lender in accordance with the terms of this Agreement.
(e) To the extent requested by any Lender, the Borrower shall
execute and deliver to such Lender an Initial Note dated the Closing Date
substantially in the form of Exhibit C-1 hereto to evidence the portion of the
Initial Loan made by such Lender and with appropriate insertions ("Original
Initial Notes"). On each Interest Payment Date prior to the Initial Maturity
Date on which the Borrower elects to pay a PIK Interest Amount pursuant to
Section 2.6, to the extent requested by any Lender, the Borrower shall execute
and deliver to such Lender on such Interest Payment Date a note dated such
Interest Payment Date substantially in the form of Exhibit C-1 hereto in a
principal amount equal to such Lender's pro rata portion of such PIK Interest
Amount and with other appropriate insertions (each a "Subsequent Initial Note"
and, together with the Original Initial Notes, the "Initial Notes"). A
Subsequent Initial Note shall bear interest from the date of its issuance at the
same rate borne by all Initial Notes at the date of issuance and from time to
time thereafter.
(f) Unless converted to an Exchange Note and, to the extent
requested by any Lender, the Borrower shall execute and deliver to such Lender a
Term Note dated the Initial Maturity Date substantially in the form of Exhibit
C-2 hereto to evidence the Term Loan made on such date, in the principal amount
of the Initial Notes held by such Lender on such date and with other appropriate
insertions (collectively, the "Original Term Notes"), in exchange for the return
to the Borrower of the Initial Notes held by such Lender. On or after the
Initial Maturity Date, on each Interest Payment Date on which the Borrower
elects to pay a PIK Interest Amount pursuant to Section 2.6(c), to the extent
requested by any Lender, the Borrower shall execute and deliver to such Lender
on such Interest Payment Date a Term Note dated such Interest Payment Date
substantially in the form of Exhibit C-2 hereto in a principal amount equal to
such Lender's pro rata portion of such PIK Interest Amount and with other
appropriate insertions (each a "Subsequent Term Note" and, together with the
Original Term Notes, the "Term Notes"). A Subsequent Term Note shall bear
interest from the date of its issuance at the same rate borne by all Term Notes
at the date of issuance and from time to time thereafter.
2.5 Optional and Mandatory Prepayments. (a) The Borrower may
at any time and from time to time prepay the Loans and Exchange Notes, in whole
or in part, subject to reimbursement of the Lenders' redeployment costs,
provided, however, that on or after the Initial Maturity Date, any prepayment
shall be applied pro rata among the Loans and Exchange Notes as provided in
Section 2.5(d) below. Upon receipt of such notice the Administrative Agent shall
promptly notify each Lender thereof. If such notice is given, the amount
specified in such notice shall be due and payable, and the Borrower shall make
such prepayment, on the date specified therein. Partial prepayments of the Loans
and Exchange Notes shall be in an aggregate principal amount equal to the lesser
of (A) $1,000,000, or a whole multiple of $500,000 in excess thereof and (B) the
aggregate unpaid principal amount of the Loans and Exchange Notes, as the case
may be. Prepayments of the Loans and Exchange Notes pursuant to this Section
2.5(a) shall be applied to the outstanding principal amounts of the Loans and
Exchange Notes ratably according to the
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31
outstanding principal amounts of such Loans and Exchange Notes as provided in
Section 2.5(d) below.
(b) (i) If, subsequent to the Closing Date, the Borrower or
any of its Subsidiaries shall issue Take-Out Financing (other than Permitted
Issuances), an amount equal to 100% of the Net Cash Proceeds thereof shall be
promptly applied toward the prepayment of the Loans and the Exchange Notes as
provided in Section 2.5(d) below; provided, however, that such Net Cash Proceeds
need not be applied to the prepayment of the Loans and the Exchange Notes to the
extent that such Net Cash Proceeds are required to be and are applied pursuant
to the Senior Credit Agreement in satisfaction of obligations thereunder.
(ii) If, subsequent to the Closing Date, the Borrower or
any of its Subsidiaries shall be required to apply any Net Available Cash
pursuant to Section 6.4(a)(iii)(C), such Net Available Cash shall be promptly
applied toward the prepayment of the Loans and the Exchange Notes as provided in
Section 2.5(d) below.
(iii) The Borrower shall give the Administrative Agent
(which shall promptly notify each Lender) at least three (3) Business Days'
prior notice or, telephone notice promptly confirmed in writing of each
prepayment in whole or in part pursuant to this Agreement setting forth the date
and amount thereof.
(c) Accrued and unpaid interest on the amount of any principal
of the Loans prepaid under this Section 2.5 shall be paid to and on the date of
such prepayment.
(d) As promptly as practicable after the Administrative Agent,
pursuant to Section 2.5(b)(iii), receives notice of a prepayment pursuant to
Sections 2.5(b)(i) or (b)(ii), the Administrative Agent, in cooperation with any
trustee under the Senior Subordinated Indenture (the "Trustee"), shall give
notice to each holder of an Exchange Note of the pro rata amount that would be
payable to such holder in respect of such holder's Exchange Note and the
expected date of such prepayment. Any holder of noncallable Exchange Notes that
wishes to accept such prepayment (each, an "Accepting Holder") shall promptly
notify the Trustee and the Administrative Agent in writing. Offers to prepay the
Loans and Exchange Notes shall be made ratably among the Loans and Exchange
Notes. After the Administrative Agent receives the prepayment amount, such
prepayment amount shall be distributed by the Administrative Agent, in
cooperation with the Trustee, subject to Section 2.8(b), in the following order,
with appropriate adjustments being made to account for the receipt by the
Trustee of any prepayment in respect of the Exchange Notes: First, to the
payment of all amounts described in clauses "First" and "Second" of Section
2.8(b)(i); Second, to the payment of interest then due and payable on the Loans,
Exchange Notes of Accepting Holders and callable Exchange Notes, ratably among
the Lenders, the Accepting Holders and Holders of callable Exchange Notes in
accordance with the aggregate amount of interest owed to each such Lender,
Accepting Holder and Holder; and Third, to the payment of the principal amount
of the Loans, the Exchange Notes of Accepting Holders and the callable Exchange
Notes that is then due and payable, ratably among the Lenders, the Accepting
Holders and Holders of callable Exchange Notes in accordance with the aggregate
principal amount owed to each such Lender, Accepting Holder and Holder. Amounts
offered to and rejected by any Exchange Note holder shall be ratably applied to
prepay the Loans, the Exchange Notes held by Accepting Holders and callable
Exchange Notes. Any offers to prepay non-callable Exchange Notes shall be made
in accordance with the provisions relating thereto in the Senior Subordinated
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Indenture, and with applicable law, and the distribution of the relevant
prepayment amount hereunder shall be made promptly after the expiration of such
offer.
2.6 Interest Rates and Payment Dates. (a) Subject to the
provisions of Section 2.6(c), Initial Loans comprising any Eurodollar Borrowing
shall bear interest for the period from and including the Closing Date to, but
excluding, the Initial Maturity Date on the unpaid principal thereof at a rate
per annum equal to the Adjusted LIBO Rate for the Interest Period in effect for
such Borrowing plus the Applicable Margin; provided that, in the event of
conditions described in clause (c) below, affected Initial Loans shall accrue
interest from and including the date of such event to, but excluding, the
Initial Maturity Date on the unpaid principal thereof at a rate per annum equal
to the Alternate Base Rate from time to time in effect.
(b) Term Loans shall bear interest for the period from and
including the Initial Maturity Date to, but excluding, the Final Maturity Date
or date of exchange for an Exchange Note on the unpaid principal thereof at a
rate per annum equal to the Adjusted Rate plus the Adjusted Margin.
(c) In the event, and on each occasion, that on the day two
(2) Business Days prior to the commencement of any Interest Period for a
Eurodollar Borrowing the Administrative Agent shall have reasonably determined
that (i) Dollar deposits in the principal amounts of the Loans comprising such
Borrowing are not generally available in the London interbank market, (ii) the
rates at which such Dollar deposits are being offered will not adequately and
fairly reflect the cost to any Lender of making or maintaining its Eurodollar
Loan during such Interest Period, or (iii) that reasonable means do not exist
for ascertaining the Adjusted LIBO Rate, the Administrative Agent shall, as soon
as practicable thereafter, give written or telecopy notice of such determination
to the Borrower and the Lenders. In the event of any such determination, until
the Administrative Agent shall have advised the Borrower and the Lenders that
the circumstances giving rise to such notice no longer exist, the Borrowing
shall, on the last day of the current Interest Period therefor shall be
converted to an ABR Borrowing. Each determination by the Administrative Agent
hereunder shall be conclusive absent manifest error.
(d) Notwithstanding the foregoing clauses (a), (b), and (c),
the interest rate borne by the Loans and Exchange Notes shall not exceed 16% per
annum. To the extent the interest on any Loan exceeds a rate of 14% per annum,
the Borrower may elect to pay such excess interest (or portion thereof) by (i)
paying the appropriate PIK Interest Amount through the increase in the principal
amount of the applicable Loans and (ii) if requested by any Lenders, the
issuance of Subsequent Initial Notes or Subsequent Term Notes, as the case may
be, in an aggregate principal amount equal to all or a portion of such excess
interest to be paid.
(e) If all or a portion of (i) the principal amount of any of
the Loans, (ii) any interest payable thereon, or (iii) any commitment fee or
other amount payable hereunder shall not be paid when due (whether at the stated
maturity, by acceleration or otherwise, but taking into account any applicable
grace period under Section 7(a)), such overdue amount shall, without limiting
the rights of the Lenders under Section 7, bear interest at a rate per annum
which is (x) in the case of overdue principal, the rate that would otherwise be
applicable thereto pursuant to the foregoing provisions of this subsection plus
2% or (y) in the case of overdue interest, commitment fees or other amounts due
and payable hereunder, the applicable rate hereunder for any Loan (but without
giving effect to the foregoing clause (x)) plus 2%.
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(f) Interest shall be payable in arrears on each Interest
Payment Date and upon the maturity date of the Loan in respect of which any such
interest is accruing, provided that interest accruing pursuant to Section 2.6(e)
shall be payable from time to time on demand.
2.7 Computation of Interest and Fees. (a) Interest in respect
of ABR Loans comprising each ABR Borrowing, (A) at any time that the Alternate
Base Rate is determined by reference to the Prime Rate shall be calculated on
the basis of a 365 day year (or 366 day year as the case may be) for the actual
days elapsed and (B) at any time that the Alternate Base Rate is determined by
reference to the Federal Funds Effective Rate, shall be calculated on the basis
of a 360-day year for the actual days elapsed.
(b) Eurodollar Loans comprising a Eurodollar Borrowing shall
bear interest (computed on the basis of the actual number of days elapsed over a
year of 360 days) at a rate per annum equal to the Adjusted LIBO Rate for the
Interest Period in effect for such Borrowing plus the Applicable Margin.
(c) Any change in the interest rate on a Loan resulting from a
change in the Alternate Base Rate or the Adjusted LIBO Rate, as the case may be,
shall become effective as of the opening of business on the day on which such
change is announced; provided, however, that no change (other than a change
resulting from a change in Statutory Reserve) in the Adjusted LIBO Rate during
an Interest Period shall affect the interest rate borne by the outstanding
Borrowing during such Interest Period. The Administrative Agent shall, as soon
as practicable, notify the Borrower and the Lenders of the effective date and
the amount of each such change in interest rate.
(d) Each determination of an interest rate by the
Administrative Agent pursuant to any provision of this Agreement shall be
conclusive and binding on the Borrower and the Lenders in the absence of
manifest error.
2.8 Pro Rata Treatment and Payments. (a) Except to the extent
otherwise provided herein, each borrowing of Loans by the Borrower from the
Lenders and any reduction of the Commitments of the Lenders hereunder shall be
made pro rata according to the relevant Commitment Percentages of the Lenders
with respect to the Loans borrowed or the Commitments to be reduced.
(b) Whenever any payment received by the Administrative Agent
under this Agreement or any Note or any Loan Document is insufficient to pay in
full all amounts then due and payable to the Administrative Agent and the
Lenders under this Agreement:
(i) if the Administrative Agent has not received a Payment
Sharing Notice (or, if the Administrative Agent has received a Payment
Sharing Notice but the Event of Default specified in such Payment
Sharing Notice has been cured or waived in accordance with the
provisions of this Agreement), subject to Section 8, such payment shall
be distributed by the Administrative Agent, in cooperation with the
Trustee, and applied by the Administrative Agent and the Lenders in the
following order, with appropriate adjustment being made to account for
any payment received by the Trustee in respect of the Exchange Notes:
First, to the payment of reasonable fees and expenses due and payable
to the Administrative Agent under and in connection with this Agreement
or any Note Guarantee or due and payable to the Trustee under the
Senior Subordinated Indenture; Second, to the payment of all reasonable
expenses due and payable under Section 10.5 and any equivalent section
of the
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Senior Subordinated Indenture, ratably among the Lenders and the
Exchange Note Holders in accordance with the aggregate amount of such
payments owed to each such Lender or Holder; Third, to the payment of
accrued and unpaid interest then due and payable on the Loans and the
Exchange Notes ratably among the Lenders and the Exchange Note Holders
in accordance with the aggregate amount of interest owed to each Lender
and Exchange Note Holder; and Fourth, to the payment of the principal
amount of the Loans and the Exchange Notes that is then due and
payable, ratably among the Lenders and the Exchange Note Holders in
accordance with the aggregate principal amount owed to each such Lender
and Exchange Note Holder (and in the case of any Exchange Notes that
are not prepayable, subject to the provisions of Section 2.5(d)); or
(ii) if the Administrative Agent has received a Payment
Sharing Notice that remains in effect, subject to Section 8, all
payments received by the Administrative Agent under this Agreement or
any Note shall be distributed by the Administrative Agent and applied
by the Administrative Agent, in cooperation with the Trustee, and the
Lenders in the following order, with appropriate adjustment being made
to account for any payment received by the Trustee in respect of the
Exchange Notes: First, to the payment of all amounts described in
clauses "First" and "Second" of the foregoing clause (i), in the order
set forth therein; Second, to the payment of the interest accrued and
unpaid on all Loans and Exchange Notes, regardless of whether any such
amount is then due and payable, ratably among the Lenders and the
Exchange Note Holders in accordance with the aggregate accrued interest
plus the aggregate principal amount owed to such Lender and the
Exchange Note Holders; and Third, to the payment of the principal
amount of all Loans and Exchange Notes, regardless of whether any such
amount is then due and payable, ratably among the Lenders and the
Exchange Note Holders in accordance with the aggregate principal amount
owed to each Lender and Exchange Note Holder (and in the case of any
Exchange Notes that are not prepayable, subject to the provisions of
Section 2.5(d)).
(c) All payments (including prepayments) to be made by the
Borrower on account of principal, interest and fees shall be made without setoff
or counterclaim and shall be made to the Administrative Agent, for the account
of the Lenders at the Administrative Agent's office located at 270 Park Avenue,
New York, New York 10017, in lawful money of the United States of America and in
immediately available funds. The Administrative Agent shall promptly distribute
such payments in accordance with the provisions of Section 2.8(b) promptly upon
receipt in like funds as received. If any payment hereunder would become due and
payable on a day other than a Business Day, such payment shall become due and
payable on the next succeeding Business Day and, with respect to payments of
principal, interest thereon shall be payable at the then applicable rate during
such extension.
2.9 Requirements of Law. (a) If the adoption of or any change
in any Requirement of Law or in the interpretation or application thereof or
compliance by any Lender with any request or directive (whether or not having
the force of law) from any central bank or other Governmental Authority made
subsequent to the date hereof:
(i) shall subject any Lender to any tax of any kind
whatsoever with respect to this Agreement or any other Loan Document or
change the basis of taxation of payments to such Lender in respect
thereof (except for taxes covered by Section 2.10 below and the
establishment of a tax based on the net income of such Lender or
changes in the rate of tax on the net income of such Lender);
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35
(ii) shall impose, modify or hold applicable any reserve,
special deposit, compulsory loan or similar requirement against assets
held by, deposits or other liabilities in or for the account of,
advances, loans or other extensions of credit (including, without
limitation, letters of credit) by, or any other acquisition of funds
by, any office of such Lender which is not otherwise included in the
determination of the Eurodollar Base Rate hereunder, including, without
limitation, the imposition of any reserves with respect to Eurodollar
liabilities under Regulation D of the Board of Governors; or
(iii) shall impose on such Lender any other condition;
and the result of any of the foregoing is to increase the cost to such Lender,
by an amount which such Lender deems to be material, of making, continuing, or
maintaining Eurodollar Loans or to reduce any amount receivable hereunder in
respect thereof, then, in either case, the Borrower shall promptly pay such
Lender, upon its demand, any additional amounts necessary to compensate such
Lender for such increased cost or reduced amount receivable, provided that
before making any such demand, each Lender agrees to use reasonable efforts
(consistent with its internal policy and legal and regulatory restrictions and
so long as such efforts would not be disadvantageous to it, in its reasonable
discretion, in any legal, economic or regulatory manner) to designate a
different Eurodollar lending office if the making of such designation would
allow the Lender or its Eurodollar lending office to continue to perform its
obligations to make Eurodollar Loans or to continue to fund or maintain
Eurodollar Loans and avoid the need for, or materially reduce the amount of,
such increased cost. If any Lender becomes entitled to claim any additional
amounts pursuant to this subsection, it shall promptly notify (in any event no
later than ninety (90) days after such Lender becomes entitled to make such
claim) the Borrower, through the Administrative Agent, of the event by reason of
which it has become so entitled. A certificate as to any additional amounts
payable pursuant to this subsection submitted by such Lender, through the
Administrative Agent, to the Borrower shall be conclusive in the absence of
manifest error. If the Borrower so notifies the Administrative Agent within five
Business Days after any Lender notifies the Borrower of any increased cost
pursuant to the foregoing provisions of this Section 2.9, the Borrower may
convert all Eurodollar Loans of such Lender then outstanding into Alternate Base
Rate Loans and, additionally, reimburse such Lender for any cost in accordance
with Section 2.11. No Lender shall be entitled to compensation under this
subsection 2.9 for any costs incurred or reductions suffered with respect to any
date that it has such costs unless it shall have notified the Company that it
will demand compensation for such costs or reductions not more than 120 days
after the later of (i) such date and (ii) the date on which it shall have become
aware of such costs or reductions; provided that the foregoing shall in no way
operate in derogation of the undertaking contained in the penultimate sentence
of this paragraph (a). Notwithstanding any other provision of subsection 2.9, no
Lender shall demand compensation for any increased cost or reduction referred to
above if it shall not at the time be the general policy or practice of such
Lender to demand such compensation in similar circumstances under comparable
provisions of other credit agreements. In the event that any Lender determines
that any event or circumstances that will lead to a claim under this subsection
2.9 has occurred or will occur, such Lender will use its reasonable best efforts
to so notify the Borrower; provided, that any failure to provide such notice
shall in no way impair the rights of any Lender to demand and receive
compensation under this subsection 2.9, but without prejudice to any claims of
the Borrower for compensation for actual damages sustained as a result of any
failure to observe this undertaking. This covenant shall survive the termination
of this Agreement and the payment of the Loans and all other amounts payable
hereunder.
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(b) If any Lender shall have determined that the adoption of
or any change in any Requirement of Law regarding capital adequacy or in the
interpretation or application thereof or compliance by such Lender or any
corporation controlling such Lender with any request or directive regarding
capital adequacy (whether or not having the force of law) from any Governmental
Authority made subsequent to the date hereof does or shall have the effect of
reducing the rate of return on such Lender's or such corporation's capital as a
consequence of its obligations hereunder to a level below that which such Lender
or such corporation could have achieved but for such change or compliance
(taking into consideration such Lender's or such corporation's policies with
respect to capital adequacy) by an amount deemed by such Lender to be material,
then from time to time, after submission by such Lender to the Borrower (with a
copy to the Administrative Agent) of a prompt written request therefor, the
Borrower shall pay to such Lender such additional amount or amounts as will
compensate such Lender for such reduction. This covenant shall survive the
termination of this Agreement and the payment of the Loans and all other amounts
payable hereunder.
2.10 Taxes. (a) Except as provided below in this Section, all
payments made by the Borrower under this Agreement and any Notes shall be made
free and clear of, and without deduction or withholding for or on account of,
any present or future income, stamp or other taxes, levies, imposts, duties,
charges, fees, deductions or withholdings, now or hereafter imposed, levied,
collected, withheld or assessed by any Governmental Authority, excluding net
income taxes and franchise taxes imposed in lieu of net income taxes. If any
such non-excluded taxes, levies, imposts, duties, charges, fees, deductions or
withholdings ("Non-Excluded Taxes") are required to be withheld from any amounts
payable to the Administrative Agent or any Lender hereunder or under any Notes,
the amounts so payable to the Administrative Agent or such Lender shall be
increased to the extent necessary to yield to the Administrative Agent or such
Lender (after payment of all Non-Excluded Taxes) interest or any such other
amounts payable hereunder at the rates or in the amounts specified in this
Agreement and any Notes, provided, however, that the Borrower shall be entitled
to deduct and withhold any Non-Excluded Taxes and shall not be required to
increase any such amounts payable to any Lender if such Lender fails or is
unable to comply with the requirements of paragraph (b) of this Section or if
such Lender fails to comply with the requirements of paragraph (c) of this
Section 2.10. Whenever any Non-Excluded Taxes are payable by the Borrower, as
promptly as possible thereafter the Borrower shall send to the Administrative
Agent for its own account or for the account of such Lender, as the case may be,
a certified copy of an original official receipt received by the Borrower
showing payment thereof. If the Borrower fails to pay any Non-Excluded Taxes
when due to the appropriate taxing authority or fails to remit to the
Administrative Agent the required receipts or other required documentary
evidence, the Borrower shall indemnify the Administrative Agent and the Lenders
for any incremental taxes, interest or penalties that may become payable by the
Administrative Agent or any Lender as a result of any such failure. The
agreements in this subsection shall survive the termination of this Agreement
and the payment of the Loans and all other amounts payable hereunder.
(b) Each Lender that is not incorporated under the laws of the
United States of America or a state thereof shall:
(i) (x) at least five Business Days before the date
of any payment by the Borrower under this Agreement or any
Notes to such Lender, deliver to the Borrower and the
Administrative Agent (A) two duly completed copies of United
States Internal Revenue Service Form 1001 or 4224, or
successor applicable form,
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as the case may be, certifying that it is entitled to receive
payments under this Agreement and any Notes without any
deduction or withholding of any United States federal income
taxes and (B) a duly completed Internal Revenue Service Form
W-8 or W-9, or successor applicable form, as the case may be,
certifying that it is entitled to an exemption from United
States backup withholding tax;
(y) deliver to the Borrower and the Administrative
Agent two further copies of any such form or certification at
least five Business Days before the date that any such form or
certification expires or becomes obsolete and after the
occurrence of any event requiring a change in the most recent
form previously delivered by it to the Borrower; and
(z) obtain such extensions of time for filing and
complete such forms or certifications as may reasonably be
requested by the Borrower or the Administrative Agent; or
(ii) in the case of any such Lender that is not a
"bank" within the meaning of Section 881(c)(3)(A) of the Code
and that does not comply with sub-paragraph (i) of this
paragraph (b), (x) represent to the Borrower (for the benefit
of the Borrower and the Administrative Agent) that it is not a
bank within the meaning of Section 881(c)(3)(A) of the Code,
(y) deliver to the Borrower on or before the date of any
payment by the Borrower, with a copy to the Administrative
Agent, (A) a certificate stating that such Lender (1) is not a
"bank" under Section 881(c)(3)(A) of the Code, is not subject
to regulatory or other legal requirements as a bank in any
jurisdiction, and has not been treated as a bank for purposes
of any tax, securities law or other filing or submission made
to any Governmental Authority, any application made to a
rating agency or qualification for any exemption from tax,
securities law or other legal requirements, (2) is not a
10-percent shareholder within the meaning of Section
881(c)(3)(B) of the Code and (3) is not a controlled foreign
corporation receiving interest from a related person within
the meaning of Section 881(c)(3)(C) of the Code (any such
certificate a "U.S. Tax Compliance Certificate") and (B) two
duly completed copies of Internal Revenue Service Form W-8, or
successor applicable form, certifying to such Lender's legal
entitlement at the date of such certificate to an exemption
from U.S. withholding tax under the provisions of Section
881(c) of the Code with respect to payments to be made under
this Agreement and any Notes (and to deliver to the Borrower
and the Administrative Agent two further copies of Form W-8 on
or before the date it expires or becomes obsolete and after
the occurrence of any event requiring a change in the most
recently provided form and, if necessary, obtain any
extensions of time reasonably requested by the Borrower or the
Administrative Agent for filing and completing such forms),
and (z) agree, to the extent legally entitled to do so, upon
reasonable request by the Borrower, to provide to the Borrower
(for the benefit of the Borrower and the Administrative Agent)
such other forms as may be reasonably required in order to
establish the legal entitlement of such Lender to an exemption
from withholding with respect to payments under this Agreement
and any Notes; or
unless in any such case any change in treaty, law or regulation has occurred
after the date such Person becomes a Lender hereunder which renders all such
forms and certificates inapplicable or which would prevent such Lender from duly
completing and delivering any such form or certificate
<PAGE> 43
38
with respect to it and such Lender so advises the Borrower and the
Administrative Agent. Each Person that shall become a Lender or a Participant
pursuant to Section 10.6 shall, upon the effectiveness of the related transfer,
be required to provide all of the forms, certifications and statements required
pursuant to this Section; provided that in the case of a Participant the
obligations of such Participant pursuant to this paragraph (b) shall be
determined as if such Participant were a Lender except that such Participant
shall furnish all such required forms, certifications and statements to the
Lender from which the related participation shall have been purchased.
(c) Each Lender shall, upon request by the Borrower, deliver
to the Borrower or the applicable Governmental Authority, as the case may be,
any form or certificate required in order that any payment by the Borrower under
this Agreement or any Notes may be made free and clear of, and without deduction
or withholding for or on account of any Non-Excluded Taxes (or to allow any such
deduction or withholding to be at a reduced rate) imposed on such payment under
the laws of any jurisdiction, provided that such Lender is legally entitled to
complete, execute and deliver such form or certificate and such completion,
execution or submission would not materially prejudice the legal position of
such Lender;
2.11 Indemnity. The Borrower agrees to indemnify each Lender
and to hold each Lender harmless from any loss or expense which such Lender may
sustain or incur as a consequence of (a) default by the Borrower in payment when
due of the principal amount of or interest on any Eurodollar Loan, (b) default
by the Borrower in making a borrowing of, conversion into or continuation of
Eurodollar Loans after the Borrower has given a notice requesting the same in
accordance with the provisions of this Agreement, (c) default by the Borrower in
making any prepayment after the Borrower has given a notice thereof in
accordance with the provisions of this Agreement or (d) the making of a
prepayment of Eurodollar Loans on a day which is not the last day of an Interest
Period with respect thereto, including, without limitation, in each case, any
such loss or expense (but excluding loss of margin) arising from the
reemployment of funds obtained by it or from fees payable to terminate the
deposits from which such funds were obtained. Calculation of all amounts payable
to a Lender under this Section 2.11 shall be made as though such Lender had
actually funded its relevant Eurodollar Loan through the purchase of a deposit
bearing interest at the Eurodollar Rate in an amount equal to the amount of such
Eurodollar Loan and having a maturity comparable to the relevant Interest
Period; provided, however, that each Lender may fund each of its Eurodollar
Loans in any manner it sees fit, and the foregoing assumption shall be utilized
only for the calculation of amounts payable under this Section 2.11. This
covenant shall survive the termination of this Agreement and the payment of the
Loans and all other amounts payable hereunder.
2.12 Replacement Lenders. If at any time (a) the Borrower
becomes obligated to pay additional amounts described in Sections 2.9 or 2.10 as
a result of any condition described in such Sections, (b) any Lender becomes
insolvent and its assets become subject to a receiver, liquidator, trustee,
custodian or other Person having similar powers, (c) any Lender becomes a
"Nonconsenting Lender" (as defined below in this Section 2.12) or (d) any Lender
becomes a "Non-Funding Lender", then the Borrower may, on ten (10) Business
Days' prior written notice to the Administrative Agent and such Lender, replace
such Lender by causing such Lender to (and such Lender shall) assign pursuant to
Section 10.6(c) all of its rights and obligations under this Agreement to a
Lender or other entity selected by the Borrower and acceptable to the
Administrative Agent for a purchase price equal to the outstanding principal
amount of such Lender's Loans and all accrued and unpaid interest and fees and
other amounts payable hereunder;
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39
provided that (i) the Borrower shall have no right to replace the Administrative
Agent, (ii) neither the Administrative Agent nor any Lender shall have any
obligation to the Borrower to find a replacement Lender or other such entity,
(iii) in the event of a replacement of a Nonconsenting Lender or a Lender to
which the Borrower becomes obligated to pay additional amounts pursuant to
clause (a) of this Section 2.12, in order for the Borrower to be entitled to
replace such a Lender, such replacement must take place no later than 180 days
after (A) the date the Nonconsenting Lender shall have notified the Borrower and
the Administrative Agent of its failure to agree to any requested consent,
waiver or amendment or (B) the Lender shall have demanded payment of additional
amounts under one of the subsections described in clause (a) of this Section
2.12, as the case may be, and (iv) in no event shall the Lender hereby replaced
be required to pay or surrender to such replacement Lender or other entity any
of the fees received by such Lender hereby replaced pursuant to this Agreement.
In the case of a replacement of a Lender to which the Borrower becomes obligated
to pay additional amounts pursuant to clause (a) of this Section 2.12, the
Borrower shall pay such additional amounts to such Lender prior to such Lender
being replaced and the payment of such additional amounts shall be a condition
to the replacement of such Lender. In the event that (x) the Borrower or the
Administrative Agent has requested the Lenders to consent to a departure or
waiver of any provisions of the Loan Documents or to agree to any amendment
thereto, (y) the consent, waiver or amendment in question requires the agreement
of all Lenders in accordance with the terms of Section 10.1 and (z) Required
Lenders have agreed to such consent, waiver or amendment, then any Lender who
does not agree to such consent, waiver or amendment shall be deemed a
"Nonconsenting Lender." The Borrower's right to replace a Non-Funding Lender
pursuant to this Section 2.12 is, and shall be, in addition to, and not in lieu
of, all other rights and remedies available to the Borrower against such
Non-Funding Lender under this Agreement, at law, in equity, or by statute.
SECTION 3. REPRESENTATIONS AND WARRANTIES
To induce the Administrative Agent and the Lenders to enter
into this Agreement and to make the Loans, the Borrower hereby represents and
warrants to the Administrative Agent and each Lender that:
3.1 Financial Condition. (a) The consolidated balance sheets
of the Borrower and its consolidated Subsidiaries as at December 31, 1995 and
December 31, 1996, respectively, and the related consolidated statements of
earnings, cash flows and shareholders' equity for the fiscal years ended on such
dates, reported on by Ernst & Young LLP, copies of which have heretofore been
furnished to each Lender, are complete and correct in all material respects and
present fairly the consolidated financial condition of the Borrower and its
consolidated Subsidiaries as at such dates, and the consolidated results of
their operations and their consolidated cash flows for the fiscal years then
ended. The unaudited consolidated balance sheet of the Borrower and its
consolidated Subsidiaries as at June 30, 1997 and the related unaudited
consolidated statements of earnings and of cash flows for the six-month period
ended on such date, certified by a Responsible Officer, copies of which have
heretofore been furnished to each Lender, are complete and correct and present
fairly the consolidated financial condition of the Borrower and its consolidated
Subsidiaries as at such date, and the consolidated results of their operations
and their consolidated cash flows for the six-month period then ended (subject
to normal year-end audit adjustments). All such financial statements, including
the related schedules and notes thereto, have been prepared in accordance with
GAAP applied consistently throughout the periods involved (except as approved by
such accountants or Responsible Officer, as the case may be, and as disclosed
therein). Neither the
<PAGE> 45
40
Borrower nor any of its consolidated Subsidiaries (taken as a whole) had, at the
date of the most recent balance sheet referred to above, any material Guarantee,
contingent liability or liability for taxes, or any long-term lease or unusual
forward or long-term commitment, including, without limitation, any interest
rate or foreign currency swap or exchange transaction, which is not reflected in
the foregoing statements or in the notes thereto. During the period from
December 31, 1996 to and including the date hereof there has been no sale,
transfer or other disposition by the Borrower or any of its consolidated
Subsidiaries of any material part of its business or property and no purchase or
other acquisition of any business or property (including any capital stock of
any other Person) material in relation to the consolidated financial condition
of the Borrower and its consolidated Subsidiaries at December 31, 1996, other
than any such sale, transfer or other disposition or purchase or acquisition
that would have been permitted by this Agreement if this Agreement had been in
effect at all times during such period.
(b) The unaudited pro forma consolidated balance sheet of the
Borrower and its consolidated Subsidiaries as at June 30, 1997 (including the
notes thereto) (the "Pro Forma Balance Sheet"), copies of which have heretofore
been furnished to each Lender, has been prepared giving effect (as if such
events had occurred on such date) to (i) the consummation of the Acquisition,
(ii) the Loans to be made hereunder and under the Senior Credit Facility and the
use of proceeds thereof and (iii) the payment of fees and expenses in connection
with the foregoing. The Pro Forma Balance Sheet has been prepared based on the
best information available to the Borrower as of the date of delivery thereof,
and presents fairly on a pro forma basis the estimated financial position of the
Borrower and its consolidated Subsidiaries as at June 30, 1997, assuming that
the events specified in the preceding sentence had actually occurred at such
date.
(c) The consolidated balance sheets of the Target and its
consolidated Subsidiaries as at December 31, 1995 and December 31, 1996,
respectively, and the related consolidated statements of earnings, cash flows
and shareholders' equity for the fiscal years ended on such dates, reported on
by KPMG Audit plc, copies of which have heretofore been furnished to each
Lender, are, to the best of the Borrower's knowledge, complete and correct in
all material respects and, to the best of the Borrower's knowledge, present
fairly the consolidated financial condition of the Target and its consolidated
Subsidiaries as at such dates, and the consolidated results of their operations
and their consolidated cash flows for the fiscal years then ended. The unaudited
consolidated balance sheet of the Target and its consolidated Subsidiaries as at
June 30, 1997 and the related unaudited consolidated statements of earnings and
of cash flows for the six-month period ended on such date, copies of which have
heretofore been furnished to each Lender, are, to the best of the Borrower's
knowledge, complete and correct and, to the best of the Borrower's knowledge,
present fairly the consolidated financial condition of the Target and its
consolidated Subsidiaries as at such date, and the consolidated results of their
operations and their consolidated cash flows for the six-month period then ended
(subject to normal year-end audit adjustments).
3.2 No Change. Since December 31, 1996, (a) there has been no
development or event which has had or could reasonably be expected to have a
Material Adverse Effect, except as disclosed in the Borrower's Annual Report on
Form 10-K/A for fiscal year 1996 and (b) to the best of the Borrower's
knowledge, there has been no development or event which has had or could
reasonably be expected to have a material adverse effect on the business,
operations, property, condition (material or otherwise) or prospects of the
Target and its Subsidiaries taken as a whole.
3.3 Corporate Existence; Compliance with Law. Each of the
Borrower and its Subsidiaries (a) is duly organized, validly existing and in
good standing under the laws of the
<PAGE> 46
41
jurisdiction of its organization except to the extent that, with respect to
those Subsidiaries that are not borrowers under the Senior Credit Agreement, the
lack of such organization, existence or good standing could not, in the
aggregate, reasonably be expected to have a Material Adverse Effect, (b) has the
corporate or other power and authority, and the legal right, to own and operate
its property, to lease the property it operates as lessee and to conduct the
business in which it is currently engaged except to the extent that, with
respect to those Subsidiaries that are not borrowers under the Senior Credit
Agreement, the lack of such power, authority or legal right could not, in the
aggregate, reasonably be expected to have a Material Adverse Effect, (c) is duly
qualified as a foreign corporation or other entity and in good standing under
the laws of each jurisdiction where its ownership, lease or operation of
property or the conduct of its business requires such qualification except to
the extent that the failure to qualify or be in good standing could not, in the
aggregate, reasonably be expected to have a Material Adverse Effect and (d) is
in compliance with all Requirements of Law except to the extent that the failure
to comply therewith could not, in the aggregate, reasonably be expected to have
a Material Adverse Effect.
3.4 Corporate Power; Authorization; Enforceable Obligations.
Each Loan Party has the corporate or other power and authority, and the legal
right, to execute, deliver and perform the Loan Documents to which it is a party
and, in the case of the Borrower, to borrow hereunder and has taken all
necessary corporate or other action to authorize the borrowings on the terms and
conditions of this Agreement and the Notes to which it is a party and to
authorize the execution, delivery and performance of the Loan Documents to which
it is a party. Each of the Borrower and U.K. Acquisition II has the corporate
power and authority, and the legal right, to consummate the Transactions. No
consent or authorization of, filing with, notice to or other act by or in
respect of, any Governmental Authority or any other Person is required with
respect to the Borrower or any of its Subsidiaries in connection with the
borrowings hereunder or the consummation of the Transactions or, with the
execution, delivery, performance, validity or enforceability of the Loan
Documents to which it is a party, except for consents, filings, authorizations
or approvals which have been obtained and are in full force and effect, and
except for (i) any such approvals which will be set forth in the Offer Documents
as conditions to the Tender Offer and (ii) other approvals the failure to obtain
which could not reasonably be expected to have a Material Adverse Effect. This
Agreement has been, and each other Loan Document has been or when executed
pursuant hereto will be, duly executed and delivered on behalf of each of the
applicable Loan Parties. This Agreement and each other Loan Document to which a
Loan Party is a party constitutes a legal, valid and binding obligation of such
Person enforceable against such Person in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally and by general equitable principles (whether
enforcement is sought by proceedings in equity or at law) and by an implied
covenant of good faith and fair dealing.
3.5 No Legal Bar. The execution, delivery and performance of
the Loan Documents, the borrowings hereunder, the use of the proceeds thereof
and the consummation of the Transactions will not violate any Requirement of Law
or Contractual Obligation of the Borrower or of any of its Subsidiaries, other
than any such violation which could not reasonably be expected to have a
Material Adverse Effect, and will not result in, or require, the creation or
imposition of any Lien on any of its or their respective properties or revenues
pursuant to any such Requirement of Law or Contractual Obligation, except Liens
created pursuant to the Loan Documents and any Lien which could not reasonably
be expected to have a Material Adverse Effect.
<PAGE> 47
42
3.6 No Material Litigation. No litigation, investigation or
proceeding of or before any arbitrator or Governmental Authority is pending or,
to the knowledge of the Borrower, threatened by or against the Borrower or any
of its Subsidiaries or against any of its or their respective properties or
revenues (a) with respect to any of the Loan Documents, the Transactions or any
of the transactions contemplated hereby, or (b) which could reasonably be
expected to have a Material Adverse Effect.
3.7 No Default. Neither the Borrower nor any of its
Subsidiaries is in default under or with respect to any of its Contractual
Obligations in any respect which could reasonably be expected to have a Material
Adverse Effect. No Default or Event of Default has occurred and is continuing.
3.8 Ownership of Property; Liens. Each of the Borrower and its
Subsidiaries has good record and marketable title in fee simple to, or a valid
leasehold interest in, all its material real property, and good title to, or a
valid leasehold interest in, all its other material property, and none of such
property is subject to any Lien except as permitted by the Senior Credit
Agreement.
3.9 Intellectual Property. Each of the Borrower and its
Subsidiaries owns, or is licensed to use, all trademarks, tradenames,
copyrights, technology, know-how and processes necessary for the conduct of its
business as currently conducted except for those the failure to own or license
which could not reasonably be expected to have a Material Adverse Effect (the
"Intellectual Property"). No claim has been asserted and is pending by any
Person challenging or questioning the use of any such Intellectual Property or
the validity or effectiveness of any such Intellectual Property, nor does the
Borrower know of any valid basis for any such claim which, in the aggregate,
could reasonably be expected to have a Material Adverse Effect. The use of such
Intellectual Property by the Borrower and its Subsidiaries does not infringe on
the rights of any Person, except for such claims and infringements that, in the
aggregate, could not reasonably be expected to have a Material Adverse Effect.
3.10 No Burdensome Restrictions. No Requirement of Law or
Contractual Obligation of the Borrower or any of its Subsidiaries could
reasonably be expected to have a Material Adverse Effect.
3.11 Taxes. Each of the Borrower and its Subsidiaries has
filed or caused to be filed all U.S. tax returns and all other material tax
returns which, to the knowledge of the Borrower, are required to be filed and
has paid all taxes shown to be due and payable on said returns or on any
assessments made against it or any of its property and all other taxes, fees or
other charges imposed on it or any of its property by any Governmental Authority
(other than any (i) with respect to which the failure to pay, in the aggregate,
would not reasonably be expected to have a Material Adverse Effect or (ii) the
amount or validity of which is currently being contested in good faith by
appropriate proceedings and with respect to which reserves in conformity with
GAAP have been provided on the books of the Borrower or its Subsidiaries, as the
case may be); no tax Lien has been filed, and, to the knowledge of the Borrower,
no claim is being asserted, with respect to any such tax, fee or other charge.
3.12 Federal Regulations. No part of the proceeds of any Loan
Notes will be used for "purchasing" or "carrying" any "margin stock" within the
respective meanings of each of the quoted terms under Regulation G and
Regulation U of the Board of Governors of the United States Federal Reserve
System as now and from time to time hereafter in effect or for any purpose which
<PAGE> 48
43
violates the provisions of the Regulations of such Board of Governors (including
but not limited to the provisions of Regulation G, Regulation U and Regulation
X) or any similar rule of any other Governmental Authority. If the Borrower is
requested by any Lender or the Administrative Agent, the Borrower will furnish
to the Administrative Agent and each Lender a statement to the foregoing effect
in conformity with the requirements of Form FR U-1 or FR G-3 referred to in said
Regulation U and Regulation G, respectively.
3.13 ERISA. Neither a Reportable Event nor an Accumulated
Funding Deficiency has occurred during the five-year period prior to the date on
which this representation is made or deemed made with respect to any Plan, and
each Plan has complied in all material respects with the applicable provisions
of ERISA and the Code. No termination of a Single Employer Plan has occurred,
and no Lien in favor of PBGC or a Plan has arisen, during such five-year period.
The present value of all accrued benefits under each Single Employer Plan (based
on those assumptions used to fund such Plans) did not, as of the last annual
valuation date prior to the date on which this representation is made or deemed
made, exceed the value of the assets of such Plan allocable to such accrued
benefits by an amount which could reasonably be expected to have a Material
Adverse Effect, either individually or in the aggregate with all other Single
Employer Plans under which such accrued benefits exceed such assets. Neither the
Borrower nor any Commonly Controlled Entity has had a complete or partial
withdrawal from any Multiemployer Plan during the five-year period prior to the
date on which this representation is made or deemed made which could, in the
aggregate with other such withdrawals during such period, reasonably be expected
to have a Material Adverse Effect, and neither the Borrower nor any Commonly
Controlled Entity would become subject to any liability under ERISA if the
Borrower or any such Commonly Controlled Entity were to withdraw completely from
all Multiemployer Plans as of the valuation date most closely preceding the date
on which this representation is made or deemed made. No such Multiemployer Plan
is in Reorganization or is Insolvent.
3.14 Investment Company Act; Other Regulations. The Borrower
is not an "investment company", or a company "controlled" by an "investment
company", within the meaning of the Investment Company Act of 1940, as amended.
The Borrower is not subject to any law or regulation which limits its ability to
incur the Indebtedness to be incurred by it under the Loan Documents.
3.15 Subsidiaries. As of the date hereof, the Borrower has no
Subsidiaries except those Subsidiaries identified on Schedule 2 to this
Agreement.
3.16 Environmental Matters. (a) The facilities and properties
owned, leased or operated by the Borrower and/or any of its Subsidiaries (the
"Properties") do not contain, and have not previously contained, any Materials
of Environmental Concern in amounts or concentrations which (i) constitute or
constituted a violation of, or (ii) could reasonably be expected to give rise to
liability under, any Environmental Law except in either case insofar as such
violation or liability, or any aggregation thereof, is not reasonably likely to
result in the payment of a Material Environmental Amount.
<PAGE> 49
44
(b) The Properties and all operations at the Properties are in
compliance, and have in the last five years been in compliance, in all material
respects with all applicable Environmental Laws, and there is no contamination
at, under or about the Properties or violation of any Environmental Law with
respect to the Properties or the business operated by the Borrower or any of its
Subsidiaries (the "Business") which could materially interfere with the
continued operation of the Properties or materially impair the aggregate fair
saleable value of the Properties.
(c) Neither the Borrower nor any of its Subsidiaries has
received any notice of violation, alleged violation, non-compliance, liability
or potential liability regarding environmental matters or compliance with
Environmental Laws with regard to any of the Properties or the Business, nor
does the Borrower or any of its Subsidiaries have knowledge or reason to believe
that any such notice will be received or is being threatened except insofar as
such notice or threatened notice, or any aggregation thereof, does not involve a
matter or matters that is or are reasonably likely to result in the payment of a
Material Environmental Amount.
(d) Materials of Environmental Concern have not been
transported or disposed of from the Properties in violation of, or in a manner
or to a location which could reasonably be expected to give rise to liability
under, any Environmental Law, nor have any Materials of Environmental Concern
been generated, treated, stored or disposed of at, on or under any of the
Properties in violation of, or in a manner that could reasonably be expected to
give rise to liability on the part of the Borrower or any Subsidiary under, any
applicable Environmental Law except insofar as any such violation or liability
referred to in this paragraph, or any aggregation thereof, is not reasonably
likely to result in the payment of a Material Environmental Amount.
(e) No judicial proceeding or governmental or administrative
action is pending or, to the knowledge of the Borrower, threatened, under any
Environmental Law to which the Borrower or any Subsidiary is or will be named as
a party with respect to the Properties or the Business, nor are there any
consent decrees or other decrees, consent orders, administrative orders or other
orders, or other administrative or judicial requirements outstanding under any
Environmental Law with respect to the Properties or the Business except insofar
as such proceeding, action, decree, order or other requirement, or any
aggregation thereof, is not reasonably likely to result in the payment of a
Material Environmental Amount.
(f) There has been no release or threat of release of
Materials of Environmental Concern at or from the Properties, or arising from or
related to the operations of the Borrower or any Subsidiary in connection with
the Properties or otherwise in connection with the Business, in violation of or
in amounts or in a manner that could reasonably give rise to liability under
Environmental Laws except insofar as any such violation or liability referred to
in this paragraph, or any aggregation thereof, is not reasonably likely to
result in the payment of a Material Environmental Amount.
3.17 Accuracy and Completeness of Information. All information
heretofore furnished by each Loan Party to the Lenders for purposes of or in
connection with this Agreement does not, and all such information hereafter
furnished by such Loan Party to any Lender for purposes of this Agreement will
not, contain any untrue statement of a material fact or omit to state a material
fact necessary in order to make the statements made or to be made, in the light
of the circumstances under which they were or will be made, not misleading.
Prior to the date hereof, the Borrower has disclosed to the Lenders in writing
any and all facts which materially and adversely affect (to the extent the
Borrower can as of the date hereof reasonably foresee), the business,
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45
operations or financial condition of the Borrower and its Subsidiaries, taken as
a whole, or the ability of any Loan Party to perform its obligations under the
Loan Documents. It is understood that no representation or warranty is made
concerning the forecasts, estimates, pro forma information, projections and
statements as to anticipated future performance or conditions, and the
assumptions on which they were based, contained in any such information,
reports, financial statements, exhibits or schedules, except that as of the date
such forecasts, estimates, pro forma information, projections and statements
were generated, (a) such forecasts, estimates, pro forma information,
projections and statements were based on the good faith assumptions of the
management of the Borrower and (b) such assumptions were believed by such
management to be reasonable. It is further understood that the foregoing
statements in this subsection 3.17, to the extent they refer to information in
respect of the Target, are made to the best of the Borrower's knowledge.
3.18 Other Unsecured Indebtedness. The obligations of each of
the Loan Parties under this Agreement and the Notes and the other Loan Documents
rank at least pari passu in right of payment with all other subordinated
Indebtedness of such Loan Parties.
3.19 Foreign Subsidiaries. Each Foreign Subsidiary will have
full right and authority to enter into the Loan Documents to which it is a party
and each Loan Document to which it is a party will constitute a valid and
legally binding obligation of such Foreign Subsidiary enforceable in accordance
with their respective terms except as such terms may be limited by the
application of bankruptcy, moratorium, insolvency and similar laws affecting the
rights of creditors generally and by general equitable principles affecting the
availability of specific performance and other remedies.
3.20 Solvency. Each Loan Party is, and after giving effect to
the Transactions and the incurrence of all Indebtedness and obligations being
incurred in connection herewith and therewith will be and will continue to be,
Solvent.
3.21 Purpose of Loans. The proceeds of the Loans shall be used
to (i) finance a portion of the Acquisition and (ii) pay certain transactions
costs, fees and expenses related to the Acquisition and the financing thereof.
3.22 Delivery of the Transaction Documents. The Administrative
Agent has received for itself and for each Lender a complete photocopy of each
of the Transaction Documents (including all exhibits, schedules and disclosure
letters referred to therein or delivered pursuant thereto, if any) and all
amendments thereto, waivers relating thereto and other side letters or
agreements affecting the terms thereof in any material respect.
3.23 Representations and Warranties Contained in the
Transaction Documents. Each of the other Transaction Documents have been duly
executed and delivered by the Loan Parties party thereto and, to the best
knowledge of the Borrower have been duly executed and are in full effect. The
representations and warranties of the Borrower and to the best of knowledge of
Borrower, the representations and warranties with respect to the Target, are
accurate and correct with respect to each of the Transaction Documents.
SECTION 4. CONDITIONS PRECEDENT
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4.1 Conditions to Effective Date. This Agreement shall become
effective on the date of the satisfaction of the conditions precedent set forth
in this subsection 4.1 (the date on which such conditions are satisfied, the
"Effective Date"):
(a) Credit Agreement. The Administrative Agent shall have
received this Agreement, executed and delivered by a duly authorized
officer (or a duly authorized representative) of the Borrower, with a
counterpart or copy for each Lender.
(b) Corporate Proceedings. The Administrative Agent shall have
received, with a counterpart or copy for each Lender, a copy of the
resolutions, in form and substance satisfactory to the Administrative
Agent, of the Board of Directors of the Borrower and each other Loan
Party, authorizing (i) the execution, delivery and performance by it of
this Agreement and the Loan Documents to which it is a party and (ii)
the borrowings by it contemplated hereunder, certified by the Secretary
or an Assistant Secretary of the Loan Party or such other Loan Party,
as the case may be, as of the Effective Date, which certificate shall
be in form and substance satisfactory to the Administrative Agent and
shall state that the resolutions thereby certified have not been
amended, modified, revoked or rescinded.
(c) Incumbency Certificate. The Administrative Agent shall
have received, with a counterpart or copy for each Lender, a
certificate of the Borrower, dated the Effective Date, as to the
incumbency and signature of the officers or representatives of each
Loan Party executing any Loan Document on the Effective Date,
satisfactory in form and substance to the Administrative Agent,
executed by any of the Chief Executive Officer, the President, the
Chief Financial Officer, the Treasurer or the Controller of the
Borrower and the Secretary or any Assistant Secretary (or a duly
authorized representative, if such representative is also a duly
authorized officer of the Borrower or otherwise authorized by the
Borrower) of the Borrower.
(d) Corporate Documents. The Administrative Agent shall have
received, with a counterpart or copy for each Lender, true and complete
copies of the certificate of incorporation and by-laws of the Borrower
and each other Loan Party that is a party hereto on the Effective Date,
certified as of the Effective Date as complete and correct copies
thereof by the Secretary or an Assistant Secretary or a duly authorized
representative of the Borrower or such other Loan Party, as the case
may be.
(e) Approvals. All governmental and third party approvals
necessary in connection with the transactions contemplated hereby shall
have been obtained and be in full force and effect (other than (i) any
such approvals which will be set forth in the Offer Documents as
conditions to the Tender Offer and (ii) other approvals the failure to
obtain which could not reasonably be expected to have a Material
Adverse Effect). The Administrative Agent shall have received a
certificate of a Responsible Officer of the Borrower to the foregoing
effect, to which shall be attached copies of any such approvals
theretofore obtained.
(f) Fees. The Administrative Agent shall have received all
fees to be received by the Administrative Agent or Chase on or prior to
the Effective Date in connection with this Agreement.
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47
(g) Legal Opinions. The Administrative Agent shall have
received the executed legal opinion of (i) Diane L. Kaye, Esq., General
Counsel of the Borrower and (ii) Cleary Gottlieb Steen & Hamilton,
counsel to the Borrower, each given upon the express instructions of
the Borrower, substantially in the forms of Exhibits F-1 and F-2,
respectively.
After the document delivery conditions set forth above in this subsection have
been satisfied, the Administrative Agent will, at the request of the Borrower,
provide to the Borrower written confirmation that such conditions have been
satisfied.
4.2 Conditions to Closing Date. The obligation of each Lender
to make its Initial Loan is subject to the satisfaction of the following
conditions precedent on the date of such Initial Loans, which date shall in any
event be on or after the Effective Date and on or prior to the last day of the
Initial Loan Commitment Period (the date on which such conditions are satisfied,
the "Satisfaction Date"):
(a) Senior Credit Agreement. (i) the Borrower shall have
received net cash proceeds from the issuance of term loans under the
Senior Credit Facility and (ii) the Administrative Agent shall have
received, with a copy for each Lender, true and correct copies,
certified as to authenticity by the Borrower of the Senior Credit
Documents.
(b) Existing Credit Agreement. All loans, accrued interest,
fees and any other amounts owing to the respective lenders and agents
under the Existing Credit Agreement shall have been paid in full, and
the commitments to make loans thereunder shall have been cancelled.
(c) Note Guarantee. The Administrative Agent shall have
received each Note Guarantee executed and delivered by a duly
authorized officer of each Note Guarantor.
(d) Offer Documents; Terms of Tender Offer. The terms of the
Tender Offer as set forth in the Press Release shall have been approved
by the Administrative Agent prior to the public announcement thereof by
U.K. Acquisition II. The Administrative Agent shall have received
copies of the Offer Documents, and of all other documents and materials
filed or released publicly by the Borrower or U.K. Acquisition II in
connection with the Tender Offer, certified as true and correct copies
thereof as of the Closing Date by a Responsible Officer of the
Borrower, and the conditions set forth in such documents shall conform
to the conditions set forth in the Press Release as approved by the
Administrative Agent prior to the release thereof.
(e) The Tender Offer. The Tender Offer shall have been
declared fully unconditional on behalf of U.K. Acquisition II, without
any amendment, supplement, modification or waiver of the terms thereof
contained in the Press Release not consented to by the Required
Lenders, other than (i) any amendments, supplements, modifications or
waivers which in the aggregate are not material and (ii) any waiver of
the conditions contained in the Press Release, relating to matters
other than aggregate purchase price and minimum acceptance conditions,
that is required by the Panel.
(f) Illegality. (i) The borrowings hereunder and the use of
proceeds thereof shall not violate any Requirement of Law of the United
States or the United Kingdom applicable
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48
to the Borrower and (ii) the making of the Initial Loans shall not
violate any Requirement of Law of the United States or the United
Kingdom applicable to the Lenders.
(g) Representation and Warranties. The representations and
warranties contained in subsections 3.3, 3.4, 3.5, 3.12, and 3.14 shall
be true and correct in all material respects as if made on and as of
such date.
(h) No Injunction, etc. There shall not be in effect any
injunction or restraining order of any Governmental Authority having
jurisdiction to issue such injunction or restraining order prohibiting
the making of the Initial Loans made on such date, the use of the
proceeds thereof or the consummation of the Tender Offer or the
Acquisition.
(i) No Default. No Default or Event of Default shall have
occurred or be continuing under (i) paragraph (a) of Article XII of the
Senior Credit Agreement or (ii) paragraph (f) of Section 7 of this
Agreement (only to the extent such paragraph (f) relates to the
Borrower or U.K. Acquisition II).
(j) Certificate. The Administrative Agent shall have received
a certificate of a Responsible Officer to the effect set forth in
paragraphs (f)(i), (g), (h) and (i) above substantially in the form of
Exhibit D.
(k) Legal Opinions. The Administrative Agent shall have
received the executed legal opinion of (i) Diane L. Kaye, Esq., General
Counsel of the Borrower, substantially in the form of Exhibit F-3 and
(ii) Cleary Gottlieb Steen & Hamilton, counsel to the Borrower,
substantially in the form of Exhibit F-4.
(l) Related Agreements. The Administrative Agent shall have
received, with a copy for each Lender, true and correct copies,
certified as to authenticity by the Borrower of (i) a Loan Note
conforming to the requirements hereof and executed by a duly authorized
officer of the Borrower, pursuant to subsection 2.04(e) and (ii) each
Note Guarantee, if any, to be entered into on the Closing Date,
executed and delivered by a duly authorized officer of the relevant
Note Guarantor.
SECTION 5. AFFIRMATIVE COVENANTS
From and after the Closing Date, the Borrower hereby covenants
and agrees that so long as any of the Commitments remain in effect, any Loan or
Loan Note remains outstanding and unpaid or any other amount is owing to any
Lender or the Administrative Agent hereunder, the Borrower will comply with the
covenants set forth below in this Section 5:
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49
5.1 Financial Statements. The Borrower will furnish to each
Lender:
(a) as soon as available, but in any event within 120 days
after the end of each fiscal year of the Borrower, a copy of the consolidated
balance sheet of the Borrower and its Subsidiaries as at the end of such year
and the related consolidated statements of income and cash flows for such year,
setting forth in each case in comparative form the figures for the previous
year, certified without qualification or exception by independent public
accountants of nationally recognized standing selected by the Borrower, it being
understood and agreed that the delivery of the Borrower's Annual Report on Form
10-K for such fiscal year signed by a Responsible Officer will satisfy the
requirement set forth in this clause; and
(b) as soon as available, but in any event within 60 days
after the end of each of the first three quarterly periods of each fiscal year
of the Borrower, a copy of the unaudited consolidated condensed balance sheet of
the Borrower and its Subsidiaries as at the end of each such quarter and the
related unaudited consolidated condensed statements of income and cash flows of
the Borrower and its Subsidiaries for the portion of the fiscal year through
such date, setting forth in each case in comparative form such figures for the
previous year, certified by a Responsible Officer, it being understood and
agreed that the delivery of the Borrower's Quarterly Report on Form 10-Q for the
relevant fiscal quarter signed by a Responsible Officer will satisfy the
requirement set forth in this clause;
all such financial statements to be complete and correct in all material
respects and prepared in reasonable detail and in accordance with GAAP applied
consistently throughout the periods reflected therein (except for such changes
in accounting principles as may be approved by such Responsible Officer and
concurred in by the Borrower's independent public accountants and disclosed
therein).
5.2 Certificates; Other Information. The Borrower will
furnish to each Lender:
(a) concurrently with each delivery of the financial
statements referred to in subsections 5.1(a) and (b), a certificate of a
Responsible Officer in the form of Exhibit D (i) stating that such officer has
no knowledge of any Default or Event of Default except as specified in such
certificate and (ii) showing in reasonable detail the calculations supporting
such statement in respect of subsections 6.1 and 6.2;
(b) on or prior to February 28 of each year, a copy of the
projections by the Borrower of the operating budget and cash flow budget of the
Borrower and its Subsidiaries for the succeeding fiscal year, such projections
to be accompanied by a certificate of a Responsible Officer to the effect that
such projections have been prepared on a reasonable basis and in good faith, it
being understood that no representation or warranty shall be deemed to be made
concerning the projections and budgets and the assumptions on which they were
based, except that as of the date on which such projections and budgets were
generated, (a) they were based on the good faith assumptions of the management
of the Borrower and (b) such assumptions were believed by such management to be
reasonable;
(c) promptly after the same are sent, copies of all financial
statements and reports which the Borrower sends to its common or preferred
stockholders as a class, and promptly after the same are filed, copies of all
regular, periodic and special reports which the Borrower may file
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50
with the Securities and Exchange Commission or any successor or analogous
Governmental Authority;
(d) if requested by the Administrative Agent or by any Lender
through the Administrative Agent, promptly after the same is furnished to PBGC,
copies of all information furnished by the Borrower, any Subsidiary or any
Commonly Controlled Entity to PBGC, except, in each case, information furnished
as to ordinary operational aspects of the business of the Borrower or any
Subsidiary and not relating to any deviation by the Borrower or any Subsidiary
from rules and regulations of PBGC; and
(e) promptly, such additional financial and other information
as any Lender may from time to time reasonably request.
5.3 Accrual of Liabilities; Payment of Obligations. The
Borrower will maintain, and cause each of its Subsidiaries to maintain, in
accordance with GAAP, appropriate reserves for the accrual of taxes and all
other obligations, liabilities and claims and pay, discharge or otherwise
satisfy, and cause each of its Subsidiaries to pay, discharge or otherwise
satisfy, at or before their maturity or before they become delinquent, as the
case may be, all obligations except (a) where the same are being contested in
good faith by appropriate proceedings diligently pursued or (b) where the
failure so to pay, discharge or otherwise satisfy obligations would not, in the
aggregate, reasonably be expected to have a Material Adverse Effect.
5.4 Maintenance of Corporate Existence; Maintenance of
Properties. The Borrower will (a) maintain its corporate existence, rights and
franchises necessary to continue its business and the corporate existence,
rights and franchises necessary to continue the business of each of its
Subsidiaries, provided that the foregoing shall not be a limitation (i) on the
right of the Borrower to discontinue any operations if in the opinion of the
Borrower such discontinuance is in the best interest of the Borrower and would
not materially affect the ability of the Borrower to pay its debts as they
become due, (ii) on asset sales permitted under subsection 6.4 and (iii) on the
right of any Subsidiary of the Borrower to merge with or be liquidated into the
Borrower or another Subsidiary of the Borrower if a Default does not then exist
and would not result therefrom; and (b) maintain, and cause each Subsidiary to
maintain, the properties which are used or useful in its respective operations
in good working order and condition.
5.5 Insurance. The Borrower will maintain, and cause each of
its Subsidiaries to maintain, insurance with financially sound and reputable
companies in such form and upon such terms and in such amounts and against such
risks (including liability for bodily injury and property damage) and subject to
such deductibles or retentions as in the reasonable opinion of the Borrower is
available on commercially reasonable terms and will provide sound and reasonable
protection for the Borrower's or such Subsidiary's assets and operations. At the
Administrative Agent's request, the Borrower will furnish to the Administrative
Agent (with copies for each Lender) certificates of insurance or other evidence
that such insurance is being maintained.
5.6 Notices. The Borrower will (a) promptly give notice in
writing to the Administrative Agent (which shall promptly notify each Lender) of
the occurrence of any Default or Event of Default under this Agreement, or of
the commencement of (i) any material litigation or proceedings affecting the
Borrower or any Subsidiary or (ii) any dispute between the Borrower or any
Subsidiary and any Governmental Authority or any other party if such litigation,
proceedings or dispute could reasonably be expected to result in a Material
Adverse Effect; and (b) as soon as
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51
possible and in any event within 45 days after the Borrower knows or has reason
to know that any Reportable Event (other than a Reportable Event not subject to
the provision for 30-day notice to PBGC pursuant to the regulations issued under
ERISA) has occurred with respect to any Single Employer Plan or that PBGC or any
Loan Party or any Commonly Controlled Entity has instituted or will institute
proceedings under Title IV of ERISA to terminate any Single Employer Plan,
deliver to the Administrative Agent (which shall promptly notify each Lender) a
certificate of a Responsible Officer of the Borrower setting forth details as to
such Reportable Event and the action that the Borrower proposes to take with
respect thereto, together with a copy of any notice of such Reportable Event
that may be required to be filed with PBGC, or any notice delivered by PBGC
evidencing its intent to institute such proceedings or any notice to PBGC that
such Plan is to be terminated, as the case may be. For all purposes of clause
(b) of this subsection 5.6, the Borrower shall be deemed to have all knowledge
or knowledge of all facts attributable to the administrator of a Single Employer
Plan.
5.7 Compliance with Contractual Obligations and Laws. The
Borrower will, and will cause each of its Subsidiaries to, comply with all
provisions of any Contractual Obligation, applicable law, rule, regulation,
order, writ, judgment, injunction, decree, award or ordinance to which it is
subject, except to the extent that the failure to comply therewith could not, in
the aggregate, reasonably be expected to have a Material Adverse Effect.
5.8 Access to Books and Inspection. The Borrower shall keep
proper books of record and account in which full, true and correct entries in
conformity with GAAP and all Requirements of Law shall be made of all dealings
and transactions in relation to its business and activities; and give the
Administrative Agent and any reasonable number of representatives of the Lenders
access, at the Borrower's principal office, upon reasonable notice during normal
business hours to, and permit any such representatives to examine, copy or make
excerpts from, any and all books, records and documents in the possession of the
Borrower relating to its affairs and the affairs of the Subsidiaries, and to
inspect any of the properties of the Borrower or the Subsidiaries.
Notwithstanding any provision in this subsection, the Borrower (i) shall be
given a reasonable opportunity upon reasonable notice to have an officer or
officers of the Borrower accompany any such representative during any such
visit, and (ii) shall not be responsible for any expenses incurred by any such
representative.
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52
5.9 Environmental Laws. The Borrower will, and will cause each
Subsidiary to, (a) comply with, and ensure compliance by all tenants and
subtenants, if any, with, all applicable Environmental Laws and obtain and
comply in all material respects with and maintain, and ensure that all tenants
and subtenants obtain and comply in all material respects with and maintain, any
and all licenses, approvals, notifications, registrations or permits required by
applicable Environmental Laws except to the extent that the failure to do so, or
any aggregation thereof, is not reasonably likely to result in the payment of a
Material Environmental Amount, (b) conduct and complete all investigations,
studies, sampling and testing, and all remedial, removal and other actions
required under Environmental Laws and promptly comply in all material respects
with all lawful orders and directives of all Governmental Authorities regarding
Environmental Laws except to the extent that the same are being contested in
good faith by appropriate proceedings and the pendency of such proceedings is
not reasonably likely to result in the payment of a Material Environmental
Amount and (c) defend, indemnify and hold harmless the Administrative Agent and
the Lenders, and their respective employees, agents, officers and directors,
from and against any and all claims, demands, penalties, fines, liabilities,
settlements, damages, costs and expenses of whatever kind or nature known or
unknown, contingent or otherwise, arising out of, or in any way relating to the
violation of, noncompliance with or liability under, any Environmental Law
applicable to the operations of the Borrower, any of its Subsidiaries or the
Properties, or any orders, requirements or demands of Governmental Authorities
related thereto, including, without limitation, investigation and laboratory
fees, response costs, court costs, litigation expenses and reasonable attorneys'
and consultants' fees, except to the extent that any of the foregoing arise out
of the gross negligence or willful misconduct of the party seeking
indemnification therefor. The agreements in clause (c) of this subsection shall
survive repayment of the Loans and Loan Notes and all other amounts payable
hereunder.
5.10 Additional Guarantees. With respect to any new Subsidiary
(other than an Excluded Foreign Subsidiary) created or acquired after the
Closing Date by the Borrower or any Domestic Subsidiary (which new Subsidiary,
for purposes of this Section 5.10, shall include any existing Subsidiary that
ceases to be an Excluded Foreign Subsidiary and, at the request of the
Administrative Agent, shall also include any Foreign Subsidiary (other than any
Excluded Foreign Subsidiary) of the Borrower or any Domestic Subsidiary which is
in existence on the Closing Date but does not execute a Note Guarantee on the
Closing Date), the Borrower or its Subsidiaries, as applicable, shall promptly
cause such new Subsidiary to become a party to the relevant Note Guarantee, and
if reasonably requested by the Administrative Agent, deliver to the
Administrative Agent legal opinions relating to the matters described above,
which opinions shall be in form and substance, and from counsel, reasonably
satisfactory to the Administrative Agent.
5.11 Interest Rate Protection. The Borrower shall, within six
months after the Closing Date, obtain interest rate protection in respect of the
amount, if any, of the floating rate indebtedness of the Borrower and it
Subsidiaries in excess of $1,000,000,000, for periods and pursuant to terms and
conditions reasonably acceptable to the Administrative Agent.
5.12 Consummation of Compulsory Acquisition. As promptly as
reasonably practicable after the Closing Date, the Borrower shall cause U.K.
Acquisition II to consummate the Compulsory Acquisition in respect of the Target
Shares, and related Options, not already owned by U.K. Acquisition II.
5.13 Take-Out Financing. (a) Use its best efforts to cause to
be declared effective a registration statement with respect to the Take-Out
Financing or to effect a private placement
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thereof pursuant to Rule 144A of the Securities Act as soon as reasonably
practicable after the Closing Date. The Borrower will give the Administrative
Agent prior notice of its intention to file the registration statement or to
effect a private placement of the Take-Out Financing. The Borrower will notify
the Administrative Agent promptly upon the receipt of any comments from the SEC
in connection with the registration statement, will furnish the Administrative
Agent with a copy of any written comments from the SEC, will respond in a
reasonably prompt manner and appropriately to any such comments and will furnish
a copy to the Administrative Agent of any such response to the SEC.
(b) In connection with the Borrower's covenants with respect
to this Section 5.13 the Borrower shall deliver to the Administrative Agent, by
the date that is 90 days after the acquisition of 90% of the ordinary shares of
the Target, a substantially complete initial draft of a Registration Statement
or a Rule 144A Offering Memorandum relating to the Take-Out Financing (including
audited financial statements or draft audited financial statements for the three
preceding years, pro forma financial information and such other financial
information as may be required by applicable law).
5.14 Exchange Notes. (a) The Borrower shall, as promptly as
practicable after being requested to do so by the Administrative Agent at any
time after the nine month anniversary of the Closing Date and in any event prior
to the Initial Maturity Date, select a trustee meeting the requirements of
Section 5.14(c) and enter into the Senior Subordinated Indenture. The Borrower
shall cause the Note Guarantors in respect of the Note Guarantees then in effect
to execute and deliver senior subordinated guarantees of the Exchange Notes on
terms similar to those contained in such Note Guarantees.
(b) On or prior to the Initial Maturity Date the Borrower
shall:
(i) execute and deliver, and cause a bank or trust company
acting as trustee thereunder to execute and deliver, the Senior
Subordinated Indenture if such Senior Subordinated Indenture has not
previously been executed and delivered; and
(ii) execute and deliver to each requesting Lender in
accordance with the Senior Subordinated Indenture an Exchange Note
bearing interest as set forth therein in exchange for the relevant
Initial Loan or Term Note dated the date of the issuance of such
Exchange Note, payable to the order of such holder or owner, as the
case may be, in the same principal amount as such Initial Loan or Term
Note (or portion thereof) being exchanged.
The exchange request ("Exchange Request") shall specify the
principal amount of the Term Notes to be exchanged pursuant to this Section
5.14, which shall be at least $1,000,000 and integral multiples of $100,000 in
excess thereof. Initial Loans and Term Notes delivered to Borrower under this
Section 5.14 in exchange for Exchange Notes shall be canceled by the Borrower
and the corresponding amount of the Initial Loan or Term Loan deemed repaid and
the Exchange Notes shall be governed by and construed in accordance with the
terms of the Senior Subordinated Indenture.
(c) The bank or trust company acting as trustee under the
Senior Subordinated Indenture shall at all times be a corporation organized and
doing business under the laws of the United States of America or any state
thereof, in good standing, which is authorized under such
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laws to exercise corporate trust powers and is subject to supervision or
examination by Federal or state authority and which has a combined capital and
surplus of not less than $500,000,000.
(d) If Exchange Notes are issued pursuant to the terms hereof,
then the holders of such Exchange Notes shall have the registration rights, as
set forth in an exhibit to the Senior Subordinated Indenture.
5.15 U.K. Acquisition I Corporate Documents. (a) As soon as
practicable after the Closing Date, the Borrower shall deliver to the
Administrative Agent, with a counterpart or copy for each Lender, the following
documents, certified as complete and correct copies thereof by the Secretary or
an Assistant Secretary or a duly authorized representative of U.K Acquisition I,
in each case in form and substance satisfactory to the Administrative Agent:
(i) the statutory declaration of each member of the
Board of Directors of U.K. Acquisition I;
(ii) the auditor's report in respect of U.K.
Acquisition I;
(iii) the resolutions of the Board of Directors of
U.K. Acquisition I authorizing the execution, delivery and
performance of the Loan Documents to which it is a party
(including a U.K. Acquisition I Guarantee in respect of all
obligations of the Borrower hereunder without limitation as to
amount), certified by the Secretary or an Assistant Secretary
of U.K. Acquisition I, which certificate shall state that the
resolutions thereby certified have not been amended, modified,
revoked or rescinded; and
(iv) such other documents as shall be required to
effect and evidence an exemption from the financial assistance
requirements of Section 151 of the Companies Act.
(b) Promptly upon the completion of steps set forth in
paragraph (a) above, the Borrower shall cause U.K. Acquisition I to (i) execute
and deliver to the Administrative Agent the U.K. Acquisition I Guarantee and
(ii) deliver to the Administrative Agent a legal opinion relating to the U.K.
Acquisition I Guarantee, which opinion shall be in form and substance, and from
counsel, reasonably satisfactory to the Administrative Agent.
5.16 Further Assurances. Upon reasonable request of the
Administrative Agent, execute and deliver such further instruments and do such
further acts as may be reasonably necessary or proper to carry out more
effectively the purpose of this Agreement.
SECTION 6. NEGATIVE COVENANTS
From and after the Closing Date, so long as any Loan or Loan
Note remains outstanding and unpaid, or any other amount is owing to any Lender
or the Administrative Agent hereunder or under any other Loan Document:
6.1 Limitation on Indebtedness. (a) The Borrower shall not,
and shall not permit any of its Restricted Subsidiaries to, Incur any
Indebtedness; provided, however, that on or after the
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Initial Maturity Date the Borrower may Incur Indebtedness if on the date of
Incurrence the Consolidated Coverage Ratio would be greater than 2.50 : 1.00, if
such Indebtedness is Incurred on or prior to the first anniversary of the
Initial Maturity Date, and 2.75 : 1.00, if such Indebtedness is Incurred
thereafter.
(b) Notwithstanding Section 6.1(a), the Borrower and its
Restricted Subsidiaries may Incur the following Indebtedness:
(i) Indebtedness Incurred pursuant to (A) the Senior
Credit Agreement (including, without limitation, any renewal,
extension, refunding, restructuring, replacement or
refinancing thereof) or (B) any other agreements or indentures
governing, guaranteeing or securing the Senior Credit
Facility; provided, however, that the aggregate principal
amount of the Indebtedness Incurred pursuant to this clause
(i) does not exceed $2,750,000,000 at any time outstanding,
less repayments of term loans and reductions in term loan
commitments to the extent made in accordance with the Senior
Credit Agreement (and to the extent, in the case of a
repayment of revolving credit Indebtedness, the commitment to
advance the loans repaid has been terminated);
(ii) Indebtedness represented by Capitalized Lease
Obligations, mortgage financings or purchase money
obligations, in each case Incurred for the purpose of
financing all or any part of the purchase price or cost of
construction or improvement of property used in a Related
Business, in each case Incurred no later than 365 days after
the date of such acquisition or the date of completion of such
construction or improvement and Refinancing Indebtedness in
respect of such Capitalized Lease Obligations, mortgage
financings or purchase money obligations; provided, however,
that the principal amount of any Indebtedness Incurred
pursuant to this Section 6.1(b)(ii) shall not exceed
$50,000,000 at any time outstanding;
(iii) Permitted Indebtedness;
(iv) Indebtedness (other than Indebtedness described
in clauses (i)-(iii)) in a principal amount which, when taken
together with the principal amount of all other Indebtedness
Incurred pursuant to this Section 6.1(b)(iv) and then
outstanding, will not exceed $150,000,000; and
(v) Indebtedness in respect of Guarantees by any
Subsidiary which is a party to a Note Guarantee, in respect of
the obligations of the Borrower under the ESOP Guaranty or the
obligations of Federal-Mogul Corporation Salaried Employees'
Ownership Trust under the ESOP Loan Agreement, provided that
each such Guaranty shall provide that when any Note Guarantor
party to such Guaranty is released from its obligations under
the Note Guaranty to which it is a party, such Note Guarantor
shall be released from its obligations under such Guaranty.
(c) Notwithstanding the foregoing, the Borrower shall not
Incur any Indebtedness under Section 6.1(b) if the proceeds thereof are used,
directly or indirectly, to refinance any Subordinated Obligations of the
Borrower unless such Indebtedness shall be subordinated to the Notes to at least
the same extent as such Subordinated Obligations. Restricted Subsidiaries of the
Borrower shall not incur any Indebtedness, the proceeds of which are used,
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directly or indirectly, to refinance Indebtedness of the Borrower. No Note
Guarantor shall Incur any Indebtedness under Section 6.1(b) if the proceeds
thereof are used, directly or indirectly, to refinance any Guarantor
Subordinated Obligation of such Note Guarantor unless such Indebtedness shall be
subordinated to the obligations of such Guarantor under the Note Guarantee to at
least the same extent as such Guarantor Subordinated Obligation.
(d) In addition, the Borrower shall not Incur any Secured
Indebtedness which is not Senior Indebtedness unless contemporaneously therewith
effective provision is made to secure the Notes equally and ratably with such
Secured Indebtedness for so long as such Secured Indebtedness is secured by a
Lien. No Note Guarantor shall Incur any Secured Indebtedness which is not Senior
Indebtedness unless contemporaneously therewith effective provision is made to
secure such Note Guarantor's obligations under the Note Guarantee equally and
ratably with such Secured Indebtedness for so long as such Secured Indebtedness
is secured by a Lien.
(e) The Borrower will not permit any Unrestricted Subsidiary
to incur any Indebtedness other than Non-Recourse Debt; provided, however, if
any such Indebtedness ceases to be Non-Recourse Debt, such event shall be deemed
to constitute an incurrence of Indebtedness by the Borrower or a Restricted
Subsidiary.
(f) The Borrower shall not Incur any Indebtedness if such
Indebtedness is subordinate or junior in ranking in any respect to any Senior
Indebtedness unless such Indebtedness is Senior Subordinated Indebtedness or is
contractually subordinated in right of payment to Senior Subordinated
Indebtedness. No Note Guarantor shall Incur any Indebtedness if such
Indebtedness is contractually subordinate or junior in ranking in any respect to
any Senior Indebtedness of such Note Guarantor unless such Indebtedness is
Senior Subordinated Indebtedness of such Note Guarantor or is contractually
subordinated in right of payment to Senior Subordinated Indebtedness of such
Note Guarantor.
(g) Notwithstanding the foregoing, no Restricted Subsidiary of
the Borrower shall issue any Preferred Stock to any Person other than the
Borrower or a Restricted Subsidiary.
6.2 Limitation on Restricted Payments. (a) On or prior to the
Initial Maturity Date, the Borrower shall not, and shall not permit any
Restricted Subsidiary, directly or indirectly, to (i) declare or pay any
dividend or make any distribution on or in respect of its Capital Stock
(including any payment in connection with any merger or consolidation involving
the Borrower) except dividends or distributions payable solely in its Capital
Stock (other than Disqualified Stock) or in options, warrants or rights to
purchase such Capital Stock and except dividends or distributions payable to the
Borrower or any Restricted Subsidiary (and if such Restricted Subsidiary is not
a Wholly-Owned Subsidiary, its other holders of Capital Stock on a pro rata
basis), (ii) purchase, redeem, retire or otherwise acquire for value any Capital
Stock of the Borrower or any Restricted Subsidiary held by Persons other than
the Borrower or another Subsidiary, in any case other than in exchange for its
Capital Stock (other than Disqualified Stock) or to the extent that after giving
effect to such purchase, redemption, retirement or other acquisition, such
Restricted Subsidiary would become a Wholly-Owned Subsidiary, (iii) purchase,
repurchase, redeem, prepay interest, defease or otherwise acquire or retire for
value, prior to scheduled maturity, scheduled repayment or scheduled sinking
fund payment any Subordinated Obligation (other than the purchase, repurchase or
other acquisition of Subordinated Obligation purchased in anticipation of
satisfying a sinking fund obligation, principal installment or final maturity,
in each case due within one year of the date of acquisition) or (iv) make any
Investment (other than a
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Permitted Investment) in any Person (any such dividend, distribution, purchase,
redemption, repurchase, defeasance, other acquisition, retirement or Investment
being herein referred to as a "Restricted Payment"); provided, however, that the
Borrower or any Restricted Subsidiary may make Restricted Payments so long as no
Default or Event of Default has occurred and is continuing or would be
continuing after giving effect to such Restricted Payment in respect of (A) the
repurchase of Capital Stock of the Borrower or any Subsidiary from an employee
of the Borrower or any Subsidiary or their assigns, estates or heirs upon the
death, retirement or termination of such employee, (B) payments to permit the
Borrower to purchase its Capital Stock in order to fulfill the Borrower's and/or
its Restricted Subsidiaries' obligations under any employee stock purchase plan,
(C) loans or advances to employees of the Borrower or any Subsidiary made in the
ordinary course of business and (D) dividends in respect of (1) the Borrower's
preferred stock at the stated rate, (2) the Borrower's common stock at a rate
not exceeding $.48 per share per year, as adjusted for stock splits and similar
events and (3) Take-Out Financing to the extent the proceeds thereof are
actually applied to the prepayment of Senior Credit Facility Loans or Loans
under this Agreement and the related commitments are terminated;
provided, further, that (i) the aggregate amount of Restricted Payments
permitted in clauses (A), (B) and (C) above (such Restricted Payments,
"Permitted Employee Payments"), shall not exceed $15,000,000 in the aggregate at
any time (giving effect to any repayments); provided, however, that Permitted
Employee Payments shall be included in the calculation of the amount of
Restricted Payments made pursuant to Section 6.2(b) and (ii) the Restricted
Payments permitted by clause (D) shall be included in the calculation of the
amount of Restricted Payments made pursuant to clause 6.2(b).
(b) After the Initial Maturity Date, the Borrower shall not,
and shall not permit any of its Restricted Subsidiaries, directly or indirectly,
to make any Restricted Payment if at the time the Borrower or such Restricted
Subsidiary makes such Restricted Payment: (1) a Default shall have occurred and
be continuing (or would result therefrom); or (2) the Borrower is not able to
incur an additional $1.00 of Indebtedness pursuant to Section 6.1(a); or (3) the
aggregate amount of such Restricted Payment and all other Restricted Payments
declared or made on or after the Initial Maturity Date would exceed 25% of the
Consolidated Net Income accrued during the period (treated as one accounting
period) from the Initial Maturity Date to the end of the most recent fiscal
quarter ending prior to the date of such Restricted Payment as to which
financial results are available (but in no event ending more than 135 days prior
to the date of such Restricted Payment) (or, in case such Consolidated Net
Income shall be a deficit, minus 100% of such deficit);
(c) The provisions of Section 6.2(b) shall not prohibit:
(i) any purchase or redemption of Capital Stock or
Subordinated Obligations of the Borrower made by exchange for, or out
of the proceeds of the substantially concurrent sale of, Capital Stock
of the Borrower (other than Disqualified Stock and other than Capital
Stock issued or sold to a Subsidiary or an employee stock ownership
plan or similar trust); provided, however, that such purchase or
redemption shall be excluded in the calculation of the amount of
Restricted Payments;
(ii) any purchase or redemption of Subordinated
Obligations of the Borrower made by exchange for, or out of the
proceeds of the substantially concurrent sale of, Subordinated
Obligations of the Borrower; provided, however, that such purchase or
redemption shall be excluded in the calculation of the amount of
Restricted Payments;
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(iii) any purchase or redemption of Subordinated
Obligations from Net Available Cash to the extent permitted under
Section 6.4; provided, however, that such purchase or redemption shall
be excluded in the calculation of the amount of Restricted Payments;
(iv) dividends paid within sixty (60) days after the
date of declaration if at such date of declaration such dividend would
have complied with this provision; provided, however, that such
dividend shall be included in the calculation of the amount of
Restricted Payments;
(v) payments to enable the Borrower to make cash
payments to holders of its Capital Stock in lieu of the issuance of
fractional shares of its Capital Stock; provided, however, that such
amount shall be included in the calculation of the amount of Restricted
Payments;
(vi) Restricted Payments of the type permitted by
Section 6.2(a); and
(vii) Restricted Payments to permit the Borrower to
purchase its Capital Stock in order to fulfill the Borrower's and/or
its Subsidiaries' obligations under any employee stock purchase plan in
an aggregate net amount not to exceed $15,000,000; provided, however,
that such amount shall be included in the calculation of the amount of
Restricted Payments.
6.3 Limitation on Restrictions on Distributions from
Restricted Subsidiaries. The Borrower shall not, and shall not permit any of its
Restricted Subsidiaries to, create or permit to exist or become effective any
consensual encumbrance or restriction on the ability of any such Restricted
Subsidiary to (i) pay dividends or make any other distributions on its Capital
Stock or pay any Indebtedness or other obligation owed to the Borrower, (ii)
make any loans or advances to the Borrower or (iii) transfer any of its property
or assets to the Borrower; except:
(a) any encumbrance or restriction pursuant to an agreement in
effect at or entered into on the Closing Date, including the Senior
Credit Documents;
(b) any encumbrance or restriction with respect to such a
Restricted Subsidiary pursuant to an agreement relating to any
Indebtedness issued by such Restricted Subsidiary on or prior to the
date on which such Restricted Subsidiary was acquired by the Borrower
and outstanding on such date (other than Indebtedness issued as
consideration in, or to provide all or any portion of the funds or
credit support utilized to consummate, the transaction or series of
related transactions pursuant to which such Restricted Subsidiary
became a Restricted Subsidiary of the Borrower or was acquired by the
Borrower);
(c) any encumbrance or restriction with respect to such a
Restricted Subsidiary pursuant to an agreement effecting a refinancing
of Indebtedness issued pursuant to an agreement referred to in clauses
(a) or (b) or this clause (c) or contained in any amendment to an
agreement referred to in clauses (a) or (b) or this clause (c);
provided, however, that the encumbrances and restrictions with respect
to such Restricted Subsidiary contained in any such refinancing
agreement or amendment, taken as a whole, are no less favorable to the
Lenders in any material respect, as determined in good faith by the
senior management
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of the Borrower or Board of Directors of the Borrower, than
encumbrances and restrictions with respect to such Restricted
Subsidiary contained in agreements in effect at, or entered into on,
the Closing Date;
(d) in the case of clause (iii) of this Section 6.3, any
encumbrance or restriction (A) that restricts in a customary manner the
subletting, assignment or transfer of any property or asset that is a
lease, license, conveyance or contract or similar property or asset,
(B) by virtue of any transfer of, agreement to transfer, option or
right with respect to, or Lien on, any property or assets of the
Borrower or any Restricted Subsidiary not otherwise prohibited by this
Agreement, (C) that is included in a licensing agreement to the extent
such restrictions limit the transfer of the property subject to such
licensing agreement or (D) arising or agreed to in the ordinary course
of business and that does not, individually or in the aggregate,
detract from the value of property or assets of the Borrower or any of
its Subsidiaries in any manner material to the Borrower or any such
Restricted Subsidiary;
(e) in the case of clause (iii) of this Section 6.3,
restrictions contained in security agreements, mortgages or similar
documents securing Indebtedness of a Restricted Subsidiary to the
extent such restrictions restrict the transfer of the property subject
to such security agreements;
(f) any restriction with respect to such a Restricted
Subsidiary imposed pursuant to an agreement entered into for the sale
or disposition of all or substantially all the Capital Stock or assets
of such Restricted Subsidiary pending the closing of such sale or
disposition; and
(g) encumbrances or restrictions arising or existing by reason
of applicable law.
6.4 Limitation on Sales of Assets and Subsidiary Stock. (a)
The Borrower shall not, and shall not permit any of its Restricted Subsidiaries
to, make any Asset Disposition unless:
(i) the Borrower or such Restricted Subsidiary
receives consideration at the time of such Asset Disposition
at least equal to the fair market value, as determined in good
faith by the Borrower's senior management or the Board of
Directors (including as to the value of all non-cash
consideration), of the shares and assets subject to such Asset
Disposition;
(ii) at least (A) prior to the Initial Maturity Date,
90% and (B) on or after the Initial Maturity Date, 80% of the
consideration thereof received by the Borrower or such
Restricted Subsidiary is in the form of cash or cash
equivalents; and
(iii) an amount equal to 100% of the Net Available
Cash from such Asset Disposition is applied by the Borrower
(or such Restricted Subsidiary, as the case may be):
(A) first, to the extent the Borrower or any
Restricted Subsidiary elects (or is required by the
terms of any Senior Indebtedness), to prepay, repay
or purchase (x) Senior Indebtedness or (y)
Indebtedness (other than Preferred Stock) of a
Wholly-Owned Subsidiary (in each case other than
Indebtedness owed to the Borrower) within (I) sixty
(60) days for the period
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60
prior to the Initial Maturity Date and (II) 365 days,
for Asset Dispositions occurring on or after the
Initial Maturity Date, from the later of the date of
such Asset Disposition or the receipt of such Net
Available Cash;
(B) second, for any Asset Disposition which
occurs on or after the Initial Maturity Date, within
365 days from the receipt of such Net Available Cash,
to the extent of the balance of such Net Available
Cash after application in accordance with clause (A),
at the Borrower's election either (x) to the
investment in or acquisition of Additional Assets or
(y) to prepay, repay or purchase (1) Senior
Indebtedness or (2) Indebtedness (other than
Preferred Stock) of a Wholly-Owned Subsidiary (in
each case other than Indebtedness owed to the
Borrower);
(C) third, (I) for any Asset Disposition
which occurs prior to the Initial Maturity Date,
within sixty (60) days after the application of Net
Available Cash in accordance with clause (A) or (II)
for any Asset Disposition which occurs on or after
the Initial Maturity Date, after the later of the
application of Net Available Cash in accordance with
clauses (A) and (B) and the date that is 365 days
from the receipt of such Net Available Cash, to the
extent of the balance of such Net Available Cash
after application in accordance with clauses (A) and
(B), to redeem the Loans and Exchange Notes at par
plus accrued and unpaid interest, if any, thereon in
accordance with Section 2.5(d); and
(D) fourth, for any Asset Disposition which
occurs on or after the Initial Maturity Date, to the
extent of the balance of such Net Available Cash
after application in accordance with clauses (A), (B)
and (C), to (w) the investment in or acquisition of
Additional Assets, (x) the making of Temporary Cash
Investments, (y) the prepayment, repayment or
purchase of Indebtedness of the Borrower or
Indebtedness of any Restricted Subsidiary (other than
Indebtedness owed to the Borrower) or (z) any other
purpose otherwise permitted under this Agreement.
provided, however, that, in connection with any prepayment, repayment or
purchase of Indebtedness pursuant to clause (A), (B), (C) or (D), the Borrower
or such Restricted Subsidiary shall retire such Indebtedness and shall cause the
related loan commitment (if any) to be permanently reduced in an amount equal to
the principal amount so prepaid, repaid or purchased.
Notwithstanding the foregoing provisions, the Borrower and its
Restricted Subsidiaries shall not be required to apply any Net Available Cash in
accordance herewith except to the extent that the aggregate Net Available Cash
from all Asset Dispositions which are not applied in accordance with this
covenant exceeds (1) $2,500,000 prior to the Initial Maturity Date and (2)
$5,000,000 thereafter.
For the purposes of this covenant, the following will be
deemed to be cash: (x) the assumption by the transferee of Senior Indebtedness
of the Borrower or Indebtedness of any Restricted Subsidiary of the Borrower and
the release of the Borrower or such Restricted Subsidiary from all liability on
such Senior Indebtedness or Indebtedness in connection with such Asset
Disposition (in which case the Borrower shall, without further action, be deemed
to have applied
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61
such assumed Indebtedness in accordance with clause (A) of the preceding
paragraph) and (y) securities received by the Borrower or any Restricted
Subsidiary of the Borrower from the transferee that are promptly converted by
the Borrower or such Restricted Subsidiary into cash.
6.5 Limitation on Affiliate Transactions. (a) The Borrower
will not, and will not permit any of its Subsidiaries to, directly or
indirectly, enter into or conduct any transaction (including the purchase, sale,
lease or exchange of any property or the rendering of any service) with any
Affiliate of the Borrower other than a Wholly-Owned Subsidiary (an "Affiliate
Transaction") unless: (i) the terms of such Affiliate Transaction are no less
favorable to the Borrower or such Subsidiary, as the case may be, than those
that could be obtained at the time of such transaction in arm's-length dealings
with a Person who is not such an Affiliate; and (ii) in the event such Affiliate
Transaction involves an aggregate amount in excess of $2,500,000, the terms of
such transaction have been approved by a majority of the members of the Board of
Directors of the Borrower and by a majority of the disinterested members of such
Board, if any (and such majority or majorities, as the case may be, determines
that such Affiliate Transaction satisfies the criteria in (i) above).
(b) The foregoing provisions of Section 6.5(a) shall not apply
to (i) any Restricted Payment permitted to be made pursuant to Section 6.2, (ii)
any issuance of securities, or other payments, awards or grants in cash,
securities or otherwise pursuant to, or the funding of, employment arrangements,
stock options and stock ownership plans approved by the Board of Directors of
the Borrower, (iii) loans or advances to employees in the ordinary course of
business of the Borrower or any of its Restricted Subsidiaries, (iv) any
transaction between Wholly-Owned Subsidiaries or between the Borrower and Wholly
Owned Subsidiaries, (v) indemnification agreements with, and the payment of fees
and indemnities to, directors, officers and employees of the Borrower and its
Restricted Subsidiaries, in each case in the ordinary course of business, (vi)
transactions pursuant to agreements as in existence on the Closing Date and
amendments to such agreements that would not materially increase the amount
payable under such agreements, (vii) any employment, non-competition or
confidentiality agreements entered into by the Borrower or any of its Restricted
Subsidiaries with its employees in the ordinary course of business, (viii)
payments made in connection with the Acquisition, (ix) the issuance of Capital
Stock of the Borrower (other than Disqualified Stock) and (x) any transactions
between (A) Borrower and any of its Restricted Subsidiaries or (B) between
Restricted Subsidiaries of Borrower, as otherwise permitted under this
Agreement.
6.6 Change of Control. (a) Upon a Change of Control on or
after the Initial Maturity Date, each Holder shall have the right to require
that the Borrower repurchase all or any part of such Holder's Loans at a
purchase price in cash equal to 100% of the principal amount thereof plus
accrued and unpaid interest, if any, to the date of purchase (subject to the
right of Holders of record on the relevant record date to receive interest on
the relevant interest payment date), such repurchase to be made in accordance
with Section 6.6(b).
(b) Within thirty (30) days following any Change of Control on
or after the Initial Maturity Date, unless the Borrower has mailed a redemption
notice with respect to all the outstanding Loans in connection with such Change
of Control, the Borrower shall mail a notice to each Holder with a copy to the
Trustee stating:
(i) that a Change of Control has occurred and that such Holder
has the right to require the Borrower to purchase such Holder's Loans
at a purchase price in cash equal to
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62
100% (or in the case of Exchange Notes at a fixed rate of interest,
101%) of the principal amount thereof plus accrued and unpaid interest,
if any, to the date of purchase (subject to the right of Holders of
record on a record date to receive interest on the relevant interest
payment date);
(ii) the repurchase date (which shall be no earlier than
thirty (30) days nor later than sixty (60) days from the date such
notice is mailed);
(iii) the procedures determined by the Borrower, consistent
with this Section, that a Holder must follow in order to have its Loans
purchased; and
(iv) the circumstances, facts and relevant financial
information related thereto.
(c) Holders electing to have a Loan or Loan Note purchased
will be required to surrender the Loan Note, with an appropriate form duly
completed, to the Borrower at the address specified in the notice at least three
(3) Business Days prior to the purchase date. Each Holder will be entitled to
withdraw its election if the Borrower receives, not later than the close of
business (5:00 p.m. New York City time) on one (1) Business Day prior to the
purchase date, a telegram, telex, facsimile transmission or letter from such
Holder setting forth the name of such Holder, the principal amount of the Loans
which were delivered for purchase by such Holder and a statement that such
Holder is withdrawing his election to have such Loans and Loan Notes purchased.
(d) On the purchase date, all Notes purchased by the Borrower
under this Section shall be delivered to the Trustee for cancellation, and the
Borrower shall pay the purchase price plus accrued and unpaid interest, if any,
to the Holders entitled thereto.
6.7 Limitation on Capital Stock of Subsidiaries. The Borrower
shall not permit any of its Restricted Subsidiaries to issue any Capital Stock
to any Person (other than to the Borrower or a Wholly-Owned Subsidiary of the
Borrower) or permit any Person (other than the Borrower or a Wholly-Owned
Subsidiary of the Borrower) to own any Capital Stock of a Restricted Subsidiary
of the Borrower, if in either case as a result thereof such Restricted
Subsidiary would no longer be a Restricted Subsidiary of the Borrower; provided,
however, that this Section 6.7 shall not prohibit (x) the Borrower or any of its
Restricted Subsidiaries from selling, leasing or otherwise disposing of all of
the Capital Stock of any Restricted Subsidiary or (y) the designation of a
Restricted Subsidiary as an Unrestricted Subsidiary in compliance with this
Agreement.
6.8 Merger, Consolidation, etc. The Borrower and Note
Guarantors shall not consolidate with or merge with or into, or convey, transfer
or lease all or substantially all its assets to, any Person, unless:
(i) the resulting, surviving or transferee Person (the
"Successor Company", or "Successor Guarantor", as the case may be)
shall be a corporation, partnership, trust, or limited liability
company organized and existing under the laws of the United States of
America, any State thereof or the District of Columbia (except that a
Successor Guarantor may remain a Foreign Subsidiary in the event of a
consolidation, merger or conveyance, transfer or lease of all or
substantially all of the assets of a Foreign Subsidiary that is a Note
Guarantor) and the Successor Company (if not the Borrower) or Successor
Guarantor shall expressly assume, by an assumption agreement
supplemental hereto, executed by the Successor Company or Successor
Guarantor and delivered to the Administrative Agent, in
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63
form and substance satisfactory to the Administrative Agent, all the
obligations of the Borrower under the Notes, the Loans and this
Agreement or such Note Guarantor under the Loan Documents;
(ii) immediately after giving effect to such transaction (and
treating any Indebtedness which becomes an obligation of the Successor
Company, the Successor Guarantor or any Restricted Subsidiary as a
result of such transaction as having been Incurred by the Successor
Company, the Successor Guarantor or such Restricted Subsidiary at the
time of such transaction), no Default or Event of Default shall have
occurred and be continuing;
(iii) immediately after giving effect to such transaction, the
Successor Company would be able to incur an additional $1.00 of
Indebtedness pursuant to Section 6.1(a); and
(iv) the Borrower shall have delivered to the Administrative
Agent a certificate of a Responsible Officer and an opinion of counsel
to Borrower, each stating that such consolidation, merger, transfer or
lease and such assumption agreement (if any) comply with this
Agreement.
The Successor Company shall succeed to, and be substituted
for, and may exercise every right and power of, the Borrower under this
Agreement, but in the case of a lease of all or substantially all its assets,
the Borrower shall not be released from the obligation to pay the principal of
and interest on the Loans and the Notes.
Notwithstanding clauses (ii) and (iii) of the first sentence
of this Section 6.8: (1) any Restricted Subsidiary of the Borrower may
consolidate with, merge into or transfer all or part of its properties and
assets to the Borrower; (2) any Restricted Subsidiary of the Borrower may
consolidate with, merge into or transfer all or part of its properties and
assets (the "Merging Restricted Subsidiary") to another Restricted Subsidiary of
the Borrower (the "Resulting Restricted Subsidiary"); provided that the
Borrower's and/or its Wholly-Owned Subsidiaries' economic and voting ownership
interests in the Resulting Restricted Subsidiary is equal to or greater than the
economic and voting ownership interests of the Borrower and its Wholly-Owned
Subsidiaries' in the Merging Restricted Subsidiary; and (3) the Borrower may
merge with an Affiliate incorporated solely for the purpose of reincorporating
the Borrower in another jurisdiction to realize tax or other benefits.
6.9 Limitation on Lines of Business. Borrower shall not, and
shall not permit any Restricted Subsidiary to, engage in any business other than
a Related Business.
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SECTION 7. EVENTS OF DEFAULT
If any of the following events shall occur and be continuing:
(a) the Borrower shall fail to pay any principal of any Loan
when due in accordance with the terms thereof or hereof, or shall fail
to redeem or purchase Loans when required pursuant to this Agreement or
any Note, in each case whether or not such payment, redemption or
purchase shall be prohibited by Section 8; or the Borrower shall fail
to pay any interest on any Loan, or any other amount payable hereunder,
within ten (10) (or following the Initial Maturity Date, thirty (30))
Business Days after any such interest or other amount becomes due in
accordance with the terms thereof or hereof, in each case, whether or
not such payment shall be prohibited by Section 8; or
(b) Prior to the Initial Maturity Date, any representation or
warranty made or deemed made by the Borrower or any other Loan Party
herein or in any other Loan Document or which is contained in any
certificate, document, or financial or other statement furnished by it
at any time under or in connection with this Agreement or any such
other Loan Document shall prove to have been incorrect in any material
respect on or as of the date made or deemed made; or
(c) the Borrower or any other Loan Party shall default in the
observance or performance of any agreement contained in Section 5.13 or
5.14 or Section 6; or
(d) the Borrower or any other Loan Party shall default in the
observance or performance of any other agreement contained in this
Agreement or any other Loan Document (other than as provided in
paragraphs (a) through (c) of this Section 7), and such default shall
continue unremedied for a period of 30 days after receipt by the
Borrower of notice of such default from the Administrative Agent or any
Lender; or
(e) The Borrower or any of its Subsidiaries shall (i) default
in any payment or payments of principal or interest in an aggregate
amount for the Borrower and its Subsidiaries of more than $10,000,000
(or its equivalent in another currency) at any one time on any
Indebtedness (other than the Loans) or in the payment of more than
$10,000,000 in the aggregate under any Guarantees, beyond the period of
grace (not to exceed 30 days), if any, provided in the instrument or
agreement under which such Indebtedness or Guarantee was created; or
(ii) default in the observance or performance of any other agreement or
condition relating to any Indebtedness (other than the Loans) the
principal amount of which exceeds $10,000,000 in the aggregate for the
Borrower and its Subsidiaries or any Guarantee guaranteeing
Indebtedness the principal amount of which exceeds $10,000,000 in the
aggregate for the Borrower and its Subsidiaries or contained in any
instrument or agreement evidencing, securing or relating to any such
Indebtedness or Guarantee, beyond any applicable period of grace (not
to exceed 30 days), or any other event shall occur or condition exist,
the effect of which default or other event or condition is to cause, or
to permit the holder or holders of such Indebtedness or beneficiary or
beneficiaries of such Guarantee (or a trustee or agent on behalf of
such holder or holders or beneficiary or beneficiaries) to cause, with
the giving of notice if required, such Indebtedness to become due prior
to its stated maturity or such Guarantee to become payable; or
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(f) (i) The Borrower or any of its Subsidiaries shall commence
any case, proceeding or other action (A) under any existing or future
law of any jurisdiction, domestic or foreign, relating to bankruptcy,
insolvency, reorganization or relief of debtors, seeking to have an
order for relief entered with respect to it, or seeking to adjudicate
it a bankrupt or insolvent, or seeking reorganization, arrangement,
adjustment, winding-up, liquidation, dissolution, composition or other
relief with respect to it or its debts, or (B) seeking appointment of a
receiver, trustee, custodian, conservator or other similar official for
it or for all or any substantial part of its assets, or the Borrower or
any of its Subsidiaries shall make a general assignment for the benefit
of its creditors; or (ii) there shall be commenced against the Borrower
or any of its Subsidiaries any case, proceeding or other action of a
nature referred to in clause (i) above which (A) results in the entry
of an order for relief or any such adjudication or appointment or (B)
remains undismissed, undischarged or unbonded for a period of 60 days;
or (iii) there shall be commenced against the Borrower or any of its
material Subsidiaries any case, proceeding or other action seeking
issuance of a warrant of attachment, execution, distraint or similar
process against all or any substantial part of its assets which results
in the entry of an order for any such relief which shall not have been
vacated, discharged, or stayed or bonded pending appeal within 60 days
from the entry thereof; or (iv) the Borrower or any of its Subsidiaries
shall take any action in furtherance of, or indicating its consent to,
approval of, or acquiescence in, any of the acts set forth in clause
(i), (ii), or (iii) above; or (v) the Borrower or any of its
Subsidiaries shall generally not, or shall be unable to, or shall admit
in writing its inability to, pay its debts as they become due; or
(g) Prior to the Initial Maturity Date (i) Any Person shall
engage in any Prohibited Transaction involving any Plan, (ii) any
Accumulated Funding Deficiency, whether or not waived, shall exist with
respect to any Plan or any Lien in favor of the PBGC or a Plan shall
arise on the assets of the Borrower or any Commonly Controlled Entity,
(iii) a Reportable Event shall occur with respect to, or proceedings
shall commence to have a trustee appointed, or a trustee shall be
appointed, to administer or to terminate, any Single Employer Plan,
which Reportable Event or commencement of proceedings or appointment of
a trustee is, in the reasonable opinion of the Required Lenders, likely
to result in the termination of such Plan for purposes of Title IV of
ERISA, (iv) any Single Employer Plan shall terminate for purposes of
Title IV of ERISA, (v) the Borrower or any Commonly Controlled Entity
shall, or in the reasonable opinion of the Required Lenders is likely
to, incur any liability in connection with a withdrawal from, or the
Insolvency or Reorganization of, a Multiemployer Plan or (vi) any other
event or condition shall occur or exist with respect to a Plan; and in
each case in clauses (i) through (vi) above, such event or condition,
together with all other such events or conditions, if any, could
reasonably be expected to have a Material Adverse Effect; or
(h) One or more judgments or decrees shall be entered against
the Borrower or any of its Subsidiaries involving in the aggregate a
liability (not paid or fully covered by insurance as to which the
insurance carrier has admitted liability) of $30,000,000 or more, and
all such judgments or decrees shall not have been vacated, discharged,
stayed or bonded pending appeal within 30 days from the entry thereof;
or
(i) The validity or enforceability of this Agreement, any Loan
Document or any of the other documents required to be delivered in
connection herewith shall be challenged by
<PAGE> 71
66
the Borrower or any of its Subsidiaries or shall fail to remain in full
force and effect for any reason other than in accordance with its
express terms; or
(j) A Change of Control shall occur prior to the Initial
Maturity Date;
then, and in any such event, (A) if such event is an Event of Default specified
in clause (i) or (ii) of paragraph (f) above with respect to the Borrower,
automatically the Commitments shall immediately terminate and the Loans
hereunder (with accrued interest thereon) and all other amounts owing under this
Agreement and the Loan Notes shall immediately become due and payable, and (B)
if such event is any other Event of Default, either or both of the following
actions may be taken: (i) with the consent of the Required Lenders, the
Administrative Agent may, or upon the request of the Required Lenders, the
Administrative Agent shall, by notice to the Borrower declare the Commitments to
be terminated forthwith, whereupon the Commitments shall immediately terminate;
and (ii) with the consent of the Required Lenders, the Administrative Agent may,
or upon the request of the Required Lenders, the Administrative Agent shall, by
notice to the Borrower, declare the Loans hereunder (with accrued interest
thereon) and all other amounts owing under this Agreement and the Loan Notes to
be due and payable forthwith, whereupon the same shall immediately become due
and payable, provided, that, notwithstanding the foregoing, during the Initial
Loan Commitment Period (x) if the applicable conditions precedent to any Initial
Loan set forth in Section 4 are satisfied, no such declaration under clause
(B)(i) or (B)(ii) above shall relieve the Lenders of their obligations to make
such Initial Loan, (y) no acceleration of the Loans under clause (B)(i) or
(B)(ii) above shall apply to any outstanding Initial Loans until the end of the
Initial Loan Commitment Period and, in any event, no acceleration of the Loans
under clause (B)(i) or (B)(ii) above shall apply to any amount of outstanding
Loans (whether such Loans were made before or after such acceleration) to the
extent that the proceeds thereof have not been disbursed to pay Target
Shareholders or Optionholders for the purchase of Target Shares or Options
pursuant to the Tender Offer (such undisbursed proceeds, "Acquisition Funds")
and (z) neither the Administrative Agent nor any Lender will take any
enforcement action against any Acquisition Funds or otherwise seek to prevent
the disbursement of any Acquisition Funds to pay Target Shareholders or
Optionholders for the purchase of Target Shares or Options pursuant to the
Tender Offer.
Except as expressly provided above in this Section, presentment,
demand, protest and all other notices of any kind are hereby expressly waived.
SECTION 8. SUBORDINATION
8.1 Agreement To Subordinate. The Borrower agrees, and each
Lender agrees, that the Loans and Indebtedness evidenced by the Notes is
subordinated in right of payment, to the extent and in the manner provided in
this Section 8, to the prior payment in full in cash or Cash Equivalents of all
Senior Indebtedness and that the subordination is for the benefit of and
enforceable by the holders of Senior Indebtedness. The Loans shall in all
respects rank pari passu with all other Senior Subordinated Indebtedness of the
Borrower and only indebtedness of the Borrower that is Senior Indebtedness shall
rank senior to the Loans in accordance with the provisions set forth herein.
8.2 Liquidation; Dissolution; Bankruptcy. Upon any payment or
distribution of the assets of the Borrower to creditors upon a total or partial
liquidation or a total or partial dissolution
<PAGE> 72
67
of the Borrower or in a bankruptcy, reorganization, insolvency, receivership or
similar proceeding relating to the Borrower or its property:
(1) holders of Senior Indebtedness shall be entitled to
receive payment in full in cash or Cash Equivalents of the Senior
Indebtedness before Lenders shall be entitled to receive any payment of
principal of, or premium, if any, or interest on the Loans; and
(2) until the Senior Indebtedness is paid in full in cash or
Cash Equivalents, any payment or distribution to which Lenders would be
entitled but for this Section 8 shall be made to holders of Senior
Indebtedness as their interests may appear.
8.3 Default on Senior Indebtedness. The Borrower may not pay
the principal of, premium, if any, or interest on, the Loans or make any deposit
pursuant to any defeasance provision or otherwise purchase or retire any Loans
(collectively, "pay the Loans") if (i) any Senior Indebtedness is not paid when
due or (ii) any other default on Senior Indebtedness occurs and the maturity of
such Senior Indebtedness is accelerated in accordance with its terms unless, in
either case, (x) the default has been cured or waived in writing and any such
acceleration has been rescinded in writing or (y) such Senior Indebtedness has
been paid in full in cash or Cash Equivalents; provided, however, that the
Borrower may pay the Loans without regard to the foregoing if the Borrower and
the Administrative Agent receive written notice approving such payment from the
Representative of the Designated Senior Indebtedness with respect to which
either of the events set forth in (i) or (ii) above has occurred and is
continuing. During the continuance of any default (other than a default
described in clause (i) or (ii) of the preceding sentence) with respect to any
Designated Senior Indebtedness pursuant to which the maturity thereof may be
accelerated immediately without further notice (except such notice as may be
required to effect such acceleration) or the expiration of any applicable grace
periods, the Borrower may not pay the Loans for a period (a "Payment Blockage
Period") commencing upon the receipt by the Borrower and the Administrative
Agent of written notice (a "Blockage Notice") of such default from the
Representative of such Designated Senior Indebtedness specifying an election to
effect a Payment Blockage Period and ending 179 days thereafter (or earlier if
such Payment Blockage Period is terminated (i) by written notice to the
Administrative Agent and the Borrower from the Person or Persons who gave such
Blockage Notice, (ii) by repayment in full of such Designated Senior
Indebtedness or (iii) because the default giving rise to such Blockage Notice is
no longer continuing). Notwithstanding the provisions described in the
immediately preceding sentence (but subject to the provisions contained in the
first sentence of this Section), unless the holders of such Designated Senior
Indebtedness or the Representative of such holders shall have accelerated the
maturity of such Designated Senior Indebtedness, the Borrower may resume
payments on the Loans after such Payment Blockage Period. Not more than one
Blockage Notice may be given in any consecutive 360-day period, irrespective of
the number of defaults with respect to Designated Senior Indebtedness during
such period; provided, however, that if any Blockage Notice within such 360-day
period is given by or on behalf of any holders of Designated Senior Indebtedness
(other than the Bank Indebtedness), the Representative of the Bank Indebtedness
may give another Blockage Notice within such period; provided further, however,
that in no event may the total number of days during which any Payment Blockage
Period or Periods is in effect exceed 179 days in the aggregate during any 360
consecutive day period.
8.4 Acceleration of Payment of Loans. If payment of the Loans
is accelerated because of an Event of Default, the Borrower and the
Administrative Agent shall promptly notify the holders of the Designated Senior
Indebtedness of the acceleration. If any Designated Senior
<PAGE> 73
68
Indebtedness is outstanding, the Borrower may not pay the Loans until five (5)
Business Days after the Representative of the Designated Senior Indebtedness
receives notice of such acceleration and, thereafter, may pay the Loans only if
this Section 8 otherwise permits the payment at that time.
8.5 When Distribution Must Be Paid Over. If a distribution is
made to the Lenders that because of this Section 8 should not have been made to
them, the Lenders who receive the distribution shall hold it in trust for
holders of Senior Indebtedness and pay it over to them as their interests may
appear.
8.6 Subrogation. After all Senior Indebtedness is paid in full
and until the Loans are paid in full, the Lenders shall be subrogated to the
rights of holders of Senior Indebtedness to receive distributions applicable to
Senior Indebtedness. A distribution made under this Section 8 to holders of
Senior Indebtedness that otherwise would have been made to the Lenders is not,
as between the Borrower and the Lenders, a payment by the Borrower on Senior
Indebtedness.
8.7 Relative Rights. This Section 8 defines the relative
rights of the Lenders and holders of Senior Indebtedness. Nothing in this
Agreement shall:
(1) impair, as between the Borrower and the Lenders, the
obligation of the Borrower, which is absolute and unconditional, to pay
principal of, premium, if any, and interest on the Loans in accordance
with their terms; or
(2) prevent the Administrative Agent or any Lender from
exercising its available remedies upon a Default, subject to the rights
of holders of Senior Indebtedness to receive distributions otherwise
payable to Lenders.
8.8 Subordination May Not Be Impaired By the Borrower. No
right of any holder of Senior Indebtedness to enforce the subordination of the
Loans and the Indebtedness evidenced by the Notes shall be impaired by any act
or failure to act by the Borrower or by its failure to comply with this
Agreement.
8.9 Rights of Administrative Agent. Notwithstanding Section
8.3, the Administrative Agent may continue to make payments on the Loans and
shall not be charged with knowledge of the existence of facts that would
prohibit the making of any such payments unless, not less than two (2) Business
Days prior to the date of such payment, a Responsible Officer of the
Administrative Agent receives notice to it that payments may not be made under
this Section 8. The Borrower, a Representative or a holder of Senior
Indebtedness may give the notice; provided, however, that, if an issue of Senior
Indebtedness has a Representative, only the Representative may give the notice.
The Administrative Agent in its individual or any other
capacity may hold Senior Indebtedness with the same rights it would have if it
were not the Administrative Agent. The Administrative Agent shall be entitled to
all the rights set forth in this Section 8 with respect to any Senior
Indebtedness that may at any time be held by it, to the same extent as any other
holder of Senior Indebtedness; and nothing in Section 9 shall deprive the
Administrative Agent of any of its rights as such holder. Nothing in this
Section 8 shall apply to claims of, or payments to, the Administrative Agent
under or pursuant to Section 9.7.
<PAGE> 74
69
8.10 Distribution or Notice to Representative. Whenever a
distribution is to be made or a notice given to holders of Senior Indebtedness,
the distribution may be made and the notice given to their Representative (if
any).
8.11 Section 8 Not To Prevent Events of Default or Limit Right
To Accelerate. The failure to make a payment pursuant to the Loans by reason of
any provision in this Section 8 shall not be construed as preventing the
occurrence of a Default. Nothing in this Section 8 shall have any effect on the
right of the Lenders or the Administrative Agent to accelerate the maturity of
the Loans subject to Section 8.4.
8.12 Administrative Agent Entitled to Rely. Upon any payment
or distribution pursuant to this Section 8, the Administrative Agent and the
Lenders shall be entitled to rely (i) upon any order or decree of a court of
competent jurisdiction in which any proceedings of the nature referred to in
Section 8.2 are pending, (ii) upon a certificate of the liquidating trustee or
agent or other Person making such payment or distribution to the Administrative
Agent or to the Lenders or (iii) upon the Representatives for the holders of
Senior Indebtedness for the purpose of ascertaining the Persons entitled to
participate in such payment or distribution, the holders of the Senior
Indebtedness and other Indebtedness of the Borrower, the amount thereof or
payable thereon, the amount or amounts paid or distributed thereon and all other
facts pertinent thereto or to this Section 8. In the event that the
Administrative Agent determines, in good faith, that evidence is required with
respect to the right of any Person as a holder of Senior Indebtedness to
participate in any payment or distribution pursuant to this Section 8, the
Administrative Agent may request such Person to furnish evidence to the
reasonable satisfaction of the Administrative Agent as to the amount of Senior
Indebtedness held by such Person, the extent to which such Person is entitled to
participate in such payment or distribution and other facts pertinent to the
rights of such Person under this Section 8, and, if such evidence is not
furnished, the Administrative Agent may defer any payment to such Person pending
judicial determination as to the right of such Person to receive such payment.
The provisions of Section 9 shall be applicable to all actions or omissions of
actions by the Administrative Agent pursuant to this Section 8.
8.13 Administrative Agent to Effectuate Subordination. Each
Lender hereby authorizes and directs the Administrative Agent on such Lender's
behalf to take such action as may be necessary or appropriate to acknowledge or
effectuate the subordination between the Lenders and the holders of Senior
Indebtedness as provided in this Section 8 and appoints the Administrative Agent
as attorney-in-fact for any and all such purposes.
8.14 Administrative Agent Not Fiduciary for Lenders of Senior
Indebtedness. The Administrative Agent shall not be deemed to owe any fiduciary
duty to the holders of Senior Indebtedness and shall not be liable to any such
holders if it shall mistakenly pay over or distribute to the Lenders or the
Borrower or any other Person, money or assets to which any holders of Senior
Indebtedness shall be entitled by virtue of this Section 8 or otherwise.
8.15 Reliance by Lenders of Senior Indebtedness on
Subordination Provisions. Each Lender acknowledges and agrees, that the
foregoing subordination provisions are, and are intended to be, an inducement
and a consideration to each holder of any Senior Indebtedness, whether such
Senior Indebtedness was created or acquired before or after the issuance of the
Loans, to acquire and continue to hold, or to continue to hold, such Senior
Indebtedness and such holder of Senior Indebtedness shall be deemed conclusively
to have relied on such subordination provisions in acquiring and continuing to
hold, or in continuing to hold, such Senior Indebtedness.
<PAGE> 75
70
8.16 Certain Amendments Prohibited. This Agreement may not be
amended to make any changes that may adversely affect the rights hereto of any
holder of Senior Indebtedness then outstanding unless the holders of such Senior
Indebtedness (or any group or representative thereof authorized to give a
consent on behalf of such holders) consent to such change.
SECTION 9. THE ADMINISTRATIVE AGENT
9.1 Appointment. Each Lender hereby irrevocably designates and
appoints the Administrative Agent as the administrative agent of such Lender
under the Loan Documents, and each such Lender irrevocably authorizes the
Administrative Agent, in such capacity, to take such action on its behalf under
the provisions of the Loan Documents and to exercise such powers and perform
such duties as are expressly delegated to the Administrative Agent by the terms
of the Loan Documents, together with such other powers as are reasonably
incidental thereto. Notwithstanding any provision to the contrary elsewhere in
this Agreement, the Administrative Agent shall not have any duties or
responsibilities, except those expressly set forth herein, or any fiduciary
relationship with any Lender, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into this
Agreement or any other Loan Document or otherwise exist against the
Administrative Agent.
9.2 Delegation of Duties. The Administrative Agent may execute
any of its duties under the Loan Documents by or through agents or
attorneys-in-fact and shall be entitled to advice of counsel concerning all
matters pertaining to such duties. The Administrative Agent shall not be
responsible for the negligence or misconduct of any agents or attorneys-in-fact
selected by it with reasonable care.
9.3 Exculpatory Provisions. Neither the Administrative Agent
nor any of its officers, directors, employees, agents, attorneys-in-fact or
Affiliates shall be (i) liable for any action lawfully taken or omitted to be
taken by it or such Person under or in connection with this Agreement or any
other Loan Document (except for its or such Person's own gross negligence or
willful misconduct) or (ii) responsible in any manner to any of the Lenders for
any recitals, statements, representations or warranties made by the Borrower or
any officer thereof contained in this Agreement or any other Loan Document or in
any certificate, report, statement or other document referred to or provided for
in, or received by the Administrative Agent under or in connection with, this
Agreement or any other Loan Document or for the value, validity, effectiveness,
genuineness, enforceability or sufficiency of this Agreement or any other Loan
Document or for any failure of the Borrower to perform its obligations hereunder
or thereunder. The Administrative Agent shall not be under any obligation to any
Lender to ascertain or to inquire as to the observance or performance of any of
the agreements contained in, or conditions of, this Agreement or any other Loan
Document, or to inspect the properties, books or records of the Borrower.
9.4 Reliance by Administrative Agent. The Administrative Agent
shall be entitled to rely, and shall be fully protected in relying, upon any
Note, writing, resolution, notice, consent, certificate, affidavit, letter,
telecopy, telex or teletype message, statement, order or other document or
conversation believed by it to be genuine and correct and to have been signed,
sent or made by the proper Person or Persons and upon advice and statements of
legal counsel (including, without limitation, counsel to the Borrower),
independent accountants and other experts selected by the
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71
Administrative Agent. The Administrative Agent may deem and treat the payee of
any Loans as the owner thereof for all purposes unless a written notice of
assignment, negotiation or transfer thereof shall have been filed with the
Administrative Agent. The Administrative Agent shall be fully justified in
failing or refusing to take any action under this Agreement or any other Loan
Document unless it shall first receive such advice or concurrence of the
Required Lenders as it deems appropriate or it shall first be indemnified to its
satisfaction by the Lenders against any and all liability and expense which may
be incurred by it by reason of taking or continuing to take any such action. The
Administrative Agent shall in all cases be fully protected in acting, or in
refraining from acting, under this Agreement and the other Loan Documents in
accordance with a request of the Required Lenders, and such request and any
action taken or failure to act pursuant thereto shall be binding upon all the
Lenders and all future holders of the Loans.
9.5 Notice of Default. The Administrative Agent shall not be
deemed to have knowledge or notice of the occurrence of any Default or Event of
Default hereunder unless the Administrative Agent has received notice from a
Lender or the Borrower or Holdings referring to this Agreement, describing such
Default or Event of Default and stating that such notice is a "notice of
default". In the event that the Administrative Agent receives such a notice, the
Administrative Agent shall give notice thereof to the Lenders. The
Administrative Agent shall take such action with respect to such Default or
Event of Default as shall be reasonably directed by the Required Lenders;
provided that unless and until the Administrative Agent shall have received such
directions, the Administrative Agent may (but shall not be obligated to) take
such action, or refrain from taking such action, with respect to such Default or
Event of Default as it shall deem advisable in the best interests of the
Lenders.
9.6 Non-Reliance on Administrative Agent and Other Lenders.
Each Lender expressly acknowledges that neither the Administrative Agent nor any
of its officers, directors, employees, agents, attorneys-in-fact or Affiliates
has made any representations or warranties to it and that no act by the
Administrative Agent hereinafter taken, including any review of the affairs of
the Borrower, shall be deemed to constitute any representation or warranty by
the Administrative Agent to any Lender. Each Lender represents to the
Administrative Agent that it has, independently and without reliance upon the
Administrative Agent or any other Lender, and based on such documents and
information as it has deemed appropriate, made its own appraisal of and
investigation into the business, operations, property, financial and other
condition and creditworthiness of the Borrower and made its own decision to make
its Loans hereunder and enter into this Agreement. Each Lender also represents
that it will, independently and without reliance upon the Administrative Agent
or any other Lender, and based on such documents and information as it shall
deem appropriate at the time, continue to make its own credit analysis,
appraisals and decisions in taking or not taking action under this Agreement and
the other Loan Documents, and to make such investigation as it deems necessary
to inform itself as to the business, operations, property, financial and other
condition and creditworthiness of the Borrower. Except for notices, reports and
other documents expressly required to be furnished to the Lenders by the
Administrative Agent hereunder, the Administrative Agent shall not have any duty
or responsibility to provide any Lender with any credit or other information
concerning the business, operations, property, condition (financial or
otherwise), prospects or creditworthiness of the Borrower which may come into
the possession of the Administrative Agent or any of its officers, directors,
employees, agents, attorneys-in-fact or Affiliates.
9.7 Indemnification. The Lenders agree to indemnify the
Administrative Agent in its capacity as such (to the extent not reimbursed by
the Borrower and without limiting the
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obligation of the Borrower to do so), ratably according to their respective
Commitment Percentages in effect on the date on which indemnification is sought
(or, if indemnification is sought after the date upon which the Commitments
shall have terminated and the Loans shall have been paid in full, ratably in
accordance with their Commitment Percentages immediately prior to such date),
from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind whatsoever which may at any time (including, without limitation, at any
time following the payment of the Loans) be imposed on, incurred by or asserted
against the Administrative Agent in any way relating to or arising out of, the
Commitments, this Agreement, any of the other Loan Documents or any documents
contemplated by or referred to herein or therein or the transactions
contemplated hereby or thereby or any action taken or omitted by the
Administrative Agent under or in connection with any of the foregoing; provided
that no Lender shall be liable for the payment of any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements resulting from the Administrative Agent's gross
negligence or willful misconduct. The agreements in this subsection shall
survive the payment of the Loans and all other amounts payable hereunder.
9.8 Administrative Agent in Its Individual Capacity. The
Administrative Agent and its Affiliates may make loans to, accept deposits from
and generally engage in any kind of business with the Borrower as though the
Administrative Agent were not the Administrative Agent hereunder. With respect
to the Loans made by it, the Administrative Agent shall have the same rights and
powers under the Loan Documents as any Lender and may exercise the same as
though it were not the Administrative Agent, and the terms "Lender" and
"Lenders" shall include the Administrative Agent in its individual capacity.
9.9 Successor Administrative Agent. The Administrative Agent
may resign as Administrative Agent upon thirty (30) days notice to the Lenders
and the Borrower. If the Administrative Agent shall resign as Administrative
Agent under this Agreement and any Note Guarantee, then the Required Lenders
shall appoint from among the Lenders a successor agent for the Lenders, which
successor agent shall be subject to the approval of the Borrower (which approval
shall not be unreasonably withheld), whereupon such successor agent shall
succeed to the rights, powers and duties of the Administrative Agent, and the
term "Administrative Agent" shall mean such successor agent effective upon such
appointment and approval, and the former Administrative Agent's rights, powers
and duties as Administrative Agent shall be terminated, without any other or
further act or deed on the part of such former Administrative Agent or any of
the parties to this Agreement or any holders of the Loans. After any retiring
Administrative Agent's resignation as Administrative Agent, the provisions of
this Section 9 shall inure to its benefit as to any actions taken or omitted to
be taken by it while it was Administrative Agent under this Agreement and any
Note Guarantee.
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SECTION 10. MISCELLANEOUS
10.1 Amendments and Waivers. Neither this Agreement nor any
Loan Note, nor any Note Guarantee, nor any terms hereof or thereof, may be
amended, supplemented, waived or modified except in accordance with the
provisions of this subsection. The Required Lenders may, or, with the written
consent of the Required Lenders, the Administrative Agent may, from time to
time, (a) enter into with the Borrower and each Loan Party which is a party to
the relevant Loan Documents written amendments, supplements, waivers or
modifications hereto and to the other Loan Documents for the purpose of adding
any provisions to this Agreement or the other Loan Documents or changing in any
manner the rights or obligations of the Lenders or of the Borrower hereunder or
thereunder or (b) waive, on such terms and conditions as the Required Lenders or
the Administrative Agent, as the case may be, may specify in such instrument,
any of the requirements of this Agreement or the other Loan Documents or any
Default or Event of Default and its consequences; provided, however, that no
such waiver and no such amendment, supplement, or modification shall (i) (A)
reduce the amount or extend the scheduled date of maturity of any Loan or of any
scheduled installment or mandatory prepayment thereof, (B) reduce the stated
rate of any interest thereon or fee payable hereunder or extend the scheduled
date of any payment thereof or increase the aggregate amount or extend the
expiration date of any Lender's Commitment, (C) restrict on the right of each
Lender to exchange Term Loans, or Initial Loans on the Initial Maturity Date,
for Exchange Notes or amend the rate of such exchange, or (D) change the pro
rata provisions contained in Section 2.8, in each case without the written
consent of each Lender directly affected thereby, (ii) (A) amend, modify, or
waive any provision of this subsection, (B) reduce the percentage specified in
the definition of Required Lenders, (C) consent to the assignment or transfer by
the Borrower of any of its rights and obligations under the Loan Documents
except as expressly permitted hereby, (D) amend, modify or waive any provision
in the Exchange Notes that requires (or would, if any Exchange Notes were
outstanding, require) the approval of all holders of Exchange Notes, or (E)
release all or substantially all of the guarantors under the Note Guarantees, in
each case without the consent of all of the Lenders, or (iii) amend, modify or
waive any provision of Section 9 without the written consent of the then
Administrative Agent. Any such waiver and any such amendment, supplement or
modification shall apply equally to each of the Lenders and shall be binding
upon the Borrower and the other Loan Parties, the Lenders, the Administrative
Agent, and all future holders of the Loans. In the case of any waiver, the
Borrower and the other Loan Parties, the Lenders and the Administrative Agent
shall be restored to their former positions and rights hereunder and under the
other Loan Documents, and any Default or Event of Default waived shall be deemed
to be cured and not continuing; no such waiver shall extend to any subsequent or
other Default or Event of Default or impair any right consequent thereon. No
amendment of Section 8 may be made in violation of Section 8.16.
10.2 Notices. All notices, requests and demands to or upon the
respective parties hereto to be effective shall be in writing (including by
facsimile transmission), and, unless otherwise expressly provided herein, shall
be deemed to have been duly given or made when delivered by hand, or three (3)
days after being deposited in the mail, postage prepaid (or, if later, the first
Business Day after being so deposited), or, in the case of telecopy notice, when
received (or if received on a day that is not a Business Day or if received
after 5:00 p.m. local time at the place of reception on a Business Day, on the
next succeeding Business Day), addressed as follows in the case of the Borrower
and the Administrative Agent, and as set forth on its signature pages hereto in
the case of the other parties hereto, or to such other address as may be
hereafter notified by the respective parties hereto and any future holders of
the Notes:
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<TABLE>
<S> <C>
the Borrower: Federal-Mogul Corporation
World Headquarters
26555 Northwestern Highway
Southfield, Michigan 48034
Attention: Sandra W. Galac
Telephone: 248-354-2653
Telecopy: 248-354-8103
The Administrative
Agent: The Chase Manhattan Bank
One Chase Manhattan Plaza
8th Floor
New York, New York 10081
Attention: James Tabois
Telephone: 212-552-7952
Telecopy: 212-552-5650
</TABLE>
provided that any notice, request or demand to or upon the Administrative Agent
or the Lenders pursuant to Section 2.2 or 2.5 shall not be effective until
received.
10.3 No Waiver; Cumulative Remedies. No failure to exercise
and no delay in exercising, on the part of the Administrative Agent or any
Lender, any right, remedy, power or privilege hereunder or under the Loan Notes
and Note Guarantees shall operate as a waiver thereof; nor shall any single or
partial exercise of any right, remedy, power or privilege hereunder preclude any
other or further exercise thereof or the exercise of any other right, remedy,
power or privilege. The rights, remedies, powers and privileges herein provided
are cumulative and not exclusive of any rights, remedies, powers and privileges
provided by law.
10.4 Survival of Representations and Warranties. All
representations and warranties made hereunder, in the Loan Notes and Note
Guarantees and in any document, certificate or statement delivered pursuant
hereto or in connection herewith shall survive the execution and delivery of
this Agreement and the making of the Loans hereunder.
10.5 Payment of Expenses and Taxes. The Borrower agrees (a) to
pay or reimburse the Administrative Agent for all reasonable out-of-pocket costs
and expenses incurred in connection with the development, preparation and
execution of, and any amendment, supplement or modification to, the Loan
Documents and any other documents prepared in connection herewith or therewith,
and the consummation and administration of the transactions contemplated hereby
and thereby, including, without limitation, the reasonable fees and
disbursements of counsel to the Administrative Agent (and any special or local
counsel retained by such counsel to assist it), (b) to pay or reimburse each
Lender and the Administrative Agent for all its reasonable out-of-pocket costs
and expenses incurred in connection with the enforcement or preservation of any
rights under the Loan Documents and any such other documents, including, without
limitation, the reasonable fees and disbursements of counsel to the
Administrative Agent and, at any time after and during the continuance of an
Event of Default, of one counsel to all the Lenders, and (c) to pay, indemnify,
and hold each Lender and the Administrative Agent (and their respective
directors, officers, employees and agents) harmless from, any and all recording
and filing fees and any and all liabilities with respect to, or resulting from
any delay in paying, stamp, excise and other similar
<PAGE> 80
75
taxes, if any, which may be payable or determined to be payable in connection
with the execution and delivery of, or consummation or administration of any of
the transactions contemplated by, or any amendment, supplement or modification
of, or any waiver or consent under or in respect of, the Loan Documents and any
such other documents, and (d) to pay, indemnify, and hold each Lender and the
Administrative Agent (and their respective directors, officers, employees,
agents, affiliates and successors) harmless from and against any and all other
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind or nature whatsoever with respect
to the execution, delivery, enforcement, performance and administration of the
Transaction Documents or the use of the proceeds of the Loans in connection with
the Transactions and any such other documents, including, without limitation,
any of the foregoing relating to the use of proceeds of the Loans and Term Notes
(all the foregoing in this clause (d), collectively, the "indemnified
liabilities"), provided that the Borrower shall have no obligation hereunder to
the Administrative Agent, or any Lender (or their respective directors,
officers, employees and agents) with respect to indemnified liabilities arising
from the gross negligence or wilful misconduct of the party seeking
indemnification or expenses incurred by the Administrative Agent or any Lender
in connection with the assignment of Loans to an assignee (except pursuant to
Section 10.6(e) for any assignment pursuant to Section 2.12). The agreements in
this subsection shall survive repayment of the Loans and all other amounts
payable hereunder.
10.6 Successors and Assigns; Participations and Assignments.
(a) This Agreement shall be binding upon and inure to the benefit of the
Borrower the Lenders, the Administrative Agent and their respective successors
and assigns, except that the Borrower may not assign or transfer any of its
rights or obligations under this Agreement without the prior written consent of
each Lender and any assignment or transfer by any Lender of its rights or
obligations under the Loan Documents must be made in compliance with this
Section 10.6 (and any purported assignment in violation of this subsection shall
be null and void).
(b) Any Lender may, in accordance with applicable law, at any
time sell to one or more financial institutions or other entities ("Loan
Participants") participating interests in any Loan owing to such Lender, any
Commitment of such Lender or any other interest of such Lender under the Loan
Documents. In the event of any such sale by a Lender of a participating interest
to a Loan Participant, (i) such Lender's obligations under this Agreement to the
other parties to this Agreement shall remain unchanged, (ii) such Lender shall
remain solely responsible for the performance thereof, (iii) such Lender shall
remain the holder of any such Loan (and any Note evidencing such Loan) for all
purposes under the Loan Documents, (iv) the Borrower and the Administrative
Agent shall continue to deal solely and directly with such Lender in connection
with such Lender's rights and obligations under the Loan Documents, and (v) no
Loan Participant under any participation shall have any right to approve any
amendment or waiver of any provision of any Loan Document, or any consent to any
departure by any Loan Party therefrom, except with respect to the matters
described in clauses (i) and (ii) of the proviso to the second sentence of
Section 10.1. The Borrower agrees that each Loan Participant shall be entitled
to the benefits of Sections 2.9 and 2.10 with respect to its participation in
the Commitments and the Loans outstanding from time to time as if it was a
Lender; provided that, in the case of Section 2.10 such Loan Participant shall
have complied with the requirements of said Section and provided, further, that
no Loan Participant shall be entitled to receive any greater amount pursuant to
any such Section than the transferor Lender would have been entitled to receive
in respect of the amount of the participation transferred by such transferor
Lender to such Loan Participant had no such transfer occurred.
<PAGE> 81
76
(c) Any Lender may, in accordance with applicable law, at any
time and from time to time assign to (i) any Lender or any Affiliate thereof and
(ii) with the prior written consent of the Administrative Agent (such consent
not to be unreasonably withheld, and, prior to the occurrence and continuance of
an Event of Default after consultation with the Borrower) to an additional bank,
financial institution or other entity that is regularly engaged in making or
purchasing loans (an "Assignee"), all or any part of its rights and obligations
under the Loan Documents pursuant to an Assignment and Acceptance, substantially
in the form of Exhibit E, executed by such Assignee, such assigning Lender (and,
in the case of an Assignee that is not then a Lender or an Affiliate thereof, by
the Administrative Agent, and, prior to the occurrence and continuance of an
Event of Default, by the Borrower) and delivered to the Administrative Agent for
its acceptance and recording in the Register, provided that if such assignment
is of less than all of the rights and obligations of the assigning Lender, the
sum of the aggregate principal amount of the Loans and the unused Commitments
remaining with the assigning Lender are not, in each case, less than $5,000,000
(or such lesser amount as may be agreed to by the Borrower and the
Administrative Agent). Upon such execution, delivery, acceptance and recording,
from and after the effective date determined pursuant to such Assignment and
Acceptance, (x) the Assignee thereunder shall be a party hereto and, to the
extent provided in such Assignment and Acceptance, have the rights and
obligations of a Lender hereunder with a Commitment as set forth therein, and
(y) the assigning Lender thereunder shall be released from its obligations under
this Agreement to the extent that such obligations shall have been assumed by
the Assignee pursuant to such Assignment and Acceptance (and, in the case of an
Assignment and Acceptance covering all or the remaining portion of an assigning
Lender's rights and obligations under this Agreement, such assigning Lender
shall cease to be a party hereto).
(d) The Administrative Agent, which for purposes of this
Section 10.6(d) only shall be deemed an agent of the Borrower, shall maintain at
the address of the Administrative Agent referred to in Section 10.2 a copy of
each Assignment and Acceptance delivered to it and a register (the "Register")
for the recordation of the names and addresses of the Lenders and the
Commitments of, and principal amounts of the Loans owing to, each Lender from
time to time. The entries in the Register shall be conclusive, in the absence of
manifest error, and the Borrower, the Administrative Agent and the Lenders,
shall treat each Person whose name is recorded in the Register as the owner of a
Loan or other obligation hereunder as the owner thereof for all purposes of the
Loan Documents, notwithstanding any notice to the contrary. Any assignment of
any Loan or other obligation hereunder (whether or not evidenced by a Note)
shall be effective only upon appropriate entries with respect thereto being made
in the Register. The Register shall be available for inspection by the Borrower
or any Lender at any reasonable time and from time to time upon reasonable prior
notice.
(e) Upon its receipt of an Assignment and Acceptance executed
by an assigning Lender and an Assignee (and, in the case of an Assignee that is
not then a Lender or an Affiliate thereof, executed by the Borrower and the
Administrative Agent), together with payment to the Administrative Agent of a
registration and processing fee of $4,000, the Administrative Agent shall (i)
promptly accept such Assignment and Acceptance and (ii) on the effective date
determined pursuant thereto record the information contained therein in the
Register and give notice of such acceptance and recordation to the Lenders and
the Borrower. On or prior to such effective date, the assigning Lender shall
surrender any outstanding Loan Notes held by it all or a portion of which are
being assigned, and the Borrower, at its own expense, shall, upon a request to
the Administrative Agent by the assigning Lender or the Assignee, as applicable,
execute and deliver to the Administrative Agent (in exchange for outstanding
Loan Notes of the assigning Lender, if any) a
<PAGE> 82
77
new Loan Note to the order of such Assignee in an amount equal to the amount of
such Assignee's Loans after giving effect to such Assignment and Acceptance and,
if the assigning Lender has retained a Loan hereunder, a new Loan Note, to the
order of the assigning Lender in an amount equal to the amount of such Lender's
Loans after giving effect to such Assignment and Acceptance. Any such new Loan
Notes shall be dated the Closing Date and shall otherwise be in the form of the
Loan Note replaced thereby. Any Loan Notes surrendered by the assigning Lender
shall be returned by the Administrative Agent to the Borrower marked
"cancelled."
(f) the Borrower authorizes each Lender to disclose to any
Loan Participant or Assignee (each, a "Transferee") and any prospective
Transferee any and all financial information in such Lender's possession
concerning the Borrower and its Affiliates which has been delivered to such
Lender by or on behalf of the Borrower pursuant to this Agreement or which has
been delivered to such Lender by or on behalf of the Borrower in connection with
such Lender's credit evaluation of the Borrower and its Affiliates prior to
becoming a party to this Agreement.
(g) For avoidance of doubt, the parties to this Agreement
acknowledge that the provisions of this subsection concerning assignments of
Loans and Notes relate only to absolute assignments and that such provisions do
not prohibit assignments creating security interests, including, without
limitation, any pledge or assignment by a Lender of any Loan or Note to any
Federal Reserve Bank in accordance with applicable law, provided that no such
assignment, whether to a Federal Reserve Bank or other entity, shall release a
Lender from any of its obligations hereunder or substitute any such Federal
Reserve Bank or other entity for such Lender as a party hereto or permit an
absolute assignment to occur other than in accordance with such provisions of
this subsection.
(h) If, pursuant to this subsection, any interest in this
Agreement or any Loan is transferred to any Transferee (which is not a Lender)
which is organized under the laws of any jurisdiction other than the United
States or any state thereof, the transferor Lender shall cause such Transferee,
concurrently with the effectiveness of such transfer, to agree (for the benefit
of the transferor Lender, the Administrative Agent and the Borrower) to provide
the transferor Lender (and, in the case of any Transferee registered in the
Register, the Administrative Agent and the Borrower) the tax forms and other
documents required to be delivered pursuant to subsection 2.10(b) and to comply
from time to time with all applicable U.S. laws and regulations with regard to
such withholding tax exemption.
10.7 Adjustments; Set-off. (a) If any Lender (a "Benefitted
Lender") shall at any time receive any payment of all or part of its Loans or
interest thereon, or receive any collateral in respect thereof (whether
voluntarily or involuntarily, by set-off, pursuant to events or proceedings of
the nature referred to in Section 7(f), or otherwise), in a greater proportion
than any such payment to or collateral received by any other Lender, if any, in
respect of such other Lender's Loans or interest thereon, such Benefitted Lender
shall purchase for cash from the other Lenders a participating interest in such
portion of each such other Lender's Loan, or shall provide such other Lenders
with the benefits of any such collateral, or the proceeds thereof, as shall be
necessary to cause such Benefitted Lender to share the excess payment or
benefits of such collateral or proceeds ratably with each of the Lenders;
provided, however, that if all or any portion of such excess payment or benefits
is thereafter recovered from such Benefitted Lender, such purchase shall be
rescinded, and the purchase price and benefits returned, to the extent of such
recovery, but without interest.
<PAGE> 83
78
(b) In addition to any rights and remedies of the Lenders
provided by law, each Lender shall have the right, without prior notice to the
Borrower, any such notice being expressly waived by the Borrower to the extent
permitted by applicable law, upon any amount becoming due and payable by the
Borrower hereunder to set-off and appropriate and apply against such amount any
and all deposits (general or special, time or demand, provisional or final), in
any currency, and any other credits, indebtedness or claims, in any currency, in
each case whether direct or indirect, absolute or contingent, matured or
unmatured, at any time held or owing by such Lender or any branch or agency
thereof to or for the credit or the account of the Borrower. Each Lender agrees
promptly to notify the Borrower and the Administrative Agent after any such
set-off and application made by such Lender, provided that the failure to give
such notice shall not affect the validity of such set-off and application.
10.8 Counterparts. This Agreement may be executed by one or
more of the parties to this Agreement on any number of separate counterparts
(including by facsimile transmission), and all of said counterparts taken
together shall be deemed to constitute one and the same instrument. A set of the
copies of this Agreement signed by all the parties shall be lodged with the
Borrower and the Administrative Agent.
10.9 Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without, to
the extent permitted by law, invalidating the remaining provisions hereof, and
any such prohibition or unenforceability in any jurisdiction shall not, to the
extent permitted by law, invalidate or render unenforceable such provision in
any other jurisdiction.
10.10 Integration. This Agreement and the other Loan Documents
represent the agreement of the Borrower, the Administrative Agent and the
Lenders with respect to the subject matter hereof, and there are no promises,
undertakings, representations or warranties by the Administrative Agent or any
Lender relative to the subject matter hereof not expressly set forth or referred
to herein or in the other Loan Documents.
10.11 GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK WITHOUT REGARD
TO THE CONFLICTS OF LAW PRINCIPLES THEREOF.
10.12 Submission To Jurisdiction; Waivers. The Borrower
hereby irrevocably and unconditionally:
(a) submits for itself and its property in any legal action or
proceeding relating to this Agreement and the other Loan Documents to
which it is a party, or for recognition and enforcement of any
judgement in respect thereof, to the non-exclusive general jurisdiction
of the Courts of the State of New York, the courts of the United States
of America for the Southern District of New York, and appellate courts
from any thereof;
(b) consents that any such action or proceeding may be brought
in such courts and waives any objection that it may now or hereafter
have to the venue of any such action or proceeding in any such court or
that such action or proceeding was brought in an inconvenient court or
forum and agrees not to plead or claim the same;
<PAGE> 84
79
(c) agrees that service of process in any such action or
proceeding may be effected by mailing a copy thereof by registered or
certified mail (or any substantially similar form of mail), postage
prepaid, to the Borrower, at the address specified in Section 10.2 or
at such other address of which the Administrative Agent shall have been
notified pursuant thereto;
(d) agrees that nothing herein shall affect the right to
effect service of process in any other manner permitted by law or shall
limit the right to sue in any other jurisdiction; and
(e) waives, to the maximum extent not prohibited by law, any
right it may have to claim or recover in any legal action or proceeding
referred to in this subsection any special, exemplary, punitive or
consequential damages.
10.13 Acknowledgements. The Borrower hereby acknowledges that:
(a) it has been advised by counsel in the negotiation,
execution and delivery of the Loan Documents;
(b) neither the Administrative Agent nor any Lender has any
fiduciary relationship with or duty to the Borrower arising out of or
in connection with the Loan Documents, and the relationship between
Administrative Agent and Lenders, on one hand, and the Borrower, on the
other hand, in connection herewith or therewith is solely that of
creditor and debtor; and
(c) no joint venture is created hereby or by the other Loan
Documents or otherwise exists by virtue of the transactions
contemplated hereby among the Lenders or among the Borrower and the
Lenders.
10.14 Confidentiality. Each Lender shall hold all non-public
information obtained pursuant to the requirements of this Agreement which has
been identified as confidential by the Borrower in accordance with such Lender's
customary procedures for handling confidential information of this nature, it
being understood and agreed by the Borrower that in any event a Lender may make
disclosures reasonably required by any bona fide assignee, transferee or
participant in connection with the contemplated assignment or transfer by such
Lender of any Loans or any participation therein or as required or requested by
any governmental agency or representative thereof or pursuant to legal process
or by the National Association of Insurance Commissioners or in connection with
the exercise of any remedy under the Loan Documents; provided that, unless
specifically prohibited by applicable law or court order, each Lender shall
notify the Borrower of any request by any governmental agency or representative
thereof (other than any such request in connection with any examination of such
Lender by such governmental agency) for disclosure of any such non-public
information prior to disclosure of such information; and provided, further that
in no event shall any Lender be obligated or required to return any materials
furnished by the Borrower or any of its Subsidiaries.
10.15 WAIVERS OF JURY TRIAL. THE BORROWER, THE ADMINISTRATIVE
AGENT AND THE LENDERS HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY
IN ANY LEGAL ACTION OR
<PAGE> 85
80
PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND FOR ANY
COUNTERCLAIM THEREIN.
10.16 No Guarantee of Domestic Obligations by Foreign
Subsidiary of Borrower. Notwithstanding anything to the contrary provided
herein, no Foreign Subsidiary of Borrower shall be required to Guarantee the
Indebtedness hereunder and no assets of any Foreign Subsidiary shall be used to
secure any Indebtedness hereunder.
<PAGE> 86
SCHEDULE 1.1 TO
CREDIT AGREEMENT
COMMITMENTS
<TABLE>
<CAPTION>
LENDERS COMMITMENT
<S> <C>
The Chase Manhattan Bank $130,000,000.00**
Senior High Income Portfolio, Inc. 5,000,000.00
Debt Strategies Fund, Inc. 5,000,000.00
PIMCO High Yield Fund 20,000,000.00
Protective Asset Management 15,000,000.00**
Oak Hill Securities Fund, L.P. 10,000,000.00
Trust Company of the West 20,000,000.00**
Imperial Credit Industries 10,000,000.00**
First Dominion Capital, L.L.C. 5,000,000.00
KZH Holding Corporation III 10,000,000.00
Ares Leveraged Investment Fund, L.P. 20,000,000.00
Franklin Principal Maturity Trust 5,000,000.00
Bank of America National Trust and Savings Association 25,000,000.00
Bayerische Vereinsbank AG, New York Branch 15,000,000.00
Credit Lyonnais (Chicago Branch) 25,000,000.00
Fleet National Bank 25,000,000.00
Royal Bank of Canada 25,000,000.00
The Fuji Bank, Limited 25,000,000.00
Union Bank of Switzerland, New York Branch 75,000,000.00
BHF Bank, Aktiengesellschaft 15,000,000.00
Compagnie Financiere de CIC et de l'Union Europeene 15,000,000.00
----------------
Total $500,000,000.00
===============
</TABLE>
- --------
** This amount reflects assignments anticipated to occur after the Closing Date.
<PAGE> 1
EXHIBIT 10.38
FIRST AMENDMENT, dated as of January 20, 1998 (this "Amendment"), to the
Second Amended and Restated Credit Agreement, dated as of December 18, 1997 the
("Credit Agreement"), among FEDERAL-MOGUL CORPORATION, a Michigan corporation
(the "Company"), each Foreign Subsidiary Borrower named therein (together with
the Company, the "Borrowers"), the several banks and other financial
institutions from time to time parties thereto (the "Lenders") and THE CHASE
MANHATTAN BANK, a New York banking corporation, as administrative agent for the
Lenders thereunder (in such capacity, the "Administrative Agent").
W I T N E S S E T H:
WHEREAS, pursuant to the Credit Agreement, the Lenders have agreed to
make certain loans and other extensions of credit to the Borrowers; and
WHEREAS, the Borrowers have requested, and, upon this Amendment
becoming effective, the Required Prepayment Lenders and the Required Lenders
have agreed, that certain provisions of the Credit Agreement be amended in the
manner provided for in this Amendment;
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. Defined Terms. Terms defined in the Credit Agreement and used
herein shall have the meanings given to them in the Credit Agreement.
2. Amendment to Recitals to the Credit Agreement. The first recital
to the Credit Agreement is hereby amended to read in its entirety as follows:
"WHEREAS, the Company is party to the Revolving
Credit, Competitive Advance and Multicurrency Facility Agreement,
dated as of June 16, 1997 (as hereinafter defined, the "Existing
Credit Agreement"), with the several banks and other financial
institutions party thereto and The Chase Manhattan Bank, as the
administrative agent;"
3. Amendments to Section 1.01 of the Credit Agreement. (a) The
definition of "Net Cash Proceeds" contained in Section 1.01 of the Credit
Agreement is hereby amended by adding the following sentence immediately at the
end of such definition:
"It is understood that the issuance by the Company of Capital Stock as
a part of the consideration for the Fel- Pro Acquisition will not be
deemed to generate Net Cash Proceeds."
(b) Section 1.01 of the Credit Agreement is hereby amended by adding
thereto the following new definitions in their appropriate alphabetical order:
"`Existing Credit Agreement': the Revolving Credit,
Competitive Advance and Multicurrency Facility Agreement, dated as of
June 16, 1997, as amended from time to time.
<PAGE> 2
2
`Fel-Pro Acquisition Agreement': the Equity Purchase
Agreement, dated as of January 9, 1998, by and among the Company, as
Buyer, and Fel-Pro Realty Corporation, McCormick Investments L.P. and
the other Sellers listed therein, as sellers.
`Fel-Pro Acquisition': the acquisition by the
Company pursuant to the Fel-Pro Acquisition Agreement of (i) the
Equity Interests (as defined in the Fel-Pro Acquisition Agreement),
consisting of all the partnership interests in Fel-Pro Master General
Partnership, an Illinois general partnership, and all of the issued
and outstanding capital stock of Felt Products Mfg. Co., a Delaware
corporation, Fel-Pro Management Co., a Delaware corporation, Meridian
Parts Corporation, a California corporation, and Fel-Pro Mexico S. de
R.L. de C. V., a Mexican limited liability partnership and (ii)
certain real property owned by Fel-Pro Realty Corporation, for
consideration consisting of (a) approximately $495,000,000 in cash
(which may include repayment of existing indebtedness of up to
$10,000,000) and (b) Capital Stock of the Company having an aggregate
market value of at least $225,000,000.
`Threshold Amount': $1,075,000,000; provided, that
if a reduction of the Term Loan Commitments is required to be made
pursuant to Section 6.04(d)(iv), the Threshold Amount shall be reduced
to $875,000,000 upon the making of such reduction."
4. Amendment to Section 3.01 of the Credit Agreement. The second
sentence of Section 3.01 of the Credit Agreement is hereby amended to read in
its entirety as follows:
"The Term Loans shall be made (i) on the Initial Term Loan Funding
Date, in an aggregate principal amount not to exceed the aggregate
purchase price of Target Shares purchased on such date and the amount
applied to repay existing indebtedness of the Target on such date and
to pay fees and expenses in respect of the transactions contemplated
hereby (less the amount applied for such purposes from the proceeds of
the Senior Subordinated Bridge Loans and of the 7% Trust Convertible
Preferred Securities issued by Federal-Mogul Financing Trust on
December 1, 1997 and December 10, 1997), (ii) on the later of (A) the
Initial Term Loan Funding Date and (B) the closing date of the Fel-Pro
Acquisition, in an aggregate principal amount of up to $500,000,000
and (iii) following the Initial Term Loan Funding Date, until the last
day of the Term Loan Commitment Period, on up to ten Borrowing Dates,
in a minimum aggregate principal amount of $75,000,000 on each such
Borrowing Date unless otherwise agreed by the Administrative Agent and
Borrower."
5. Amendment to Section 6.04(d) of the Credit Agreement. Section
6.04(d) of the Credit Agreement is hereby amended to read in its entirety as
follows:
"(d) Unless the Required Prepayment Lenders and the
Required Lenders shall otherwise agree, if any Capital Stock or
Indebtedness (other than Indebtedness permitted by paragraphs (a)
through (c), paragraphs (e) through (g) and paragraph (i) of Section
10.05 as in effect prior to the Covenant Transition Date) shall be
issued or incurred by the Company or any of its Subsidiaries at any
time after November 30, 1997, an amount equal to 100% of the Net Cash
Proceeds thereof shall be applied on the date of such issuance or
Incurrence toward the prepayment of the Term Loans as set forth in
Section 6.08(b); provided, that, notwithstanding the foregoing:
<PAGE> 3
3
(i) on the Business Day immediately preceding the
Initial Revolving Credit Funding Date (or on such earlier date
as the Company shall elect), the Company shall reduce the Term
Loan Commitments (in the same order as prepayments of the Term
Loans are to be applied pursuant to Section 6.08(b)) by an
amount equal to (A) $75,000,000 and (B) the Net Cash Proceeds
of any issuance after December 10, 1997 and prior to the
Initial Revolving Credit Funding Date of the Company's Capital
Stock yielding Gross Cash Proceeds in an amount which,
together with the Gross Cash Proceeds of all prior issuances
of the Company's Capital Stock during the Reduction Period
(including the 7% Trust Convertible Securities issued by
Federal-Mogul Financing Trust), aggregates less than the
Threshold Amount;
(ii) if subsequent to December 10, 1997 and prior to
the Initial Term Loan Funding Date the Company receives Gross
Cash Proceeds from the issuance of its Capital Stock in an
amount which, together with the amount of Gross Cash Proceeds
received in all prior Capital Stock issuance transactions
consummated during the Reduction Period, aggregates the
Threshold Amount or more, the Company may, on the Business Day
immediately preceding the Initial Revolving Credit Funding
Date (or on such earlier date as the Company shall elect),
reduce the Senior Subordinated Bridge Loan Commitments by an
aggregate amount up to the amount of the Net Cash Proceeds of
such subsequent issuance, and the Term Loan Commitments shall
be reduced, in the same order as prepayments of the Term Loans
are to be applied pursuant to Section 6.08(b), by an amount
equal to the excess of such Net Cash Proceeds over the amount
by which the Company has reduced the Senior Subordinated
Bridge Loan Commitments pursuant to this clause) (such
reduction of the Term Loan Commitments to occur simultaneously
with any reduction of the Senior Subordinated Bridge Loan
Commitments and in any event not later than the Business Day
immediately preceding the Initial Revolving Credit Funding
Date);
(iii) if on or after the Initial Term Loan Funding
Date the Company receives Gross Cash Proceeds from the
issuance of its Capital Stock in an amount which, together
with the amount of Gross Cash Proceeds received in the prior
Capital Stock issuance transactions consummated during the
Reduction Period, aggregates the Threshold Amount or more, the
Company may apply the Net Cash Proceeds of such issuance to
prepay the Senior Subordinated Debt, and the remainder of such
Net Cash Proceeds not so applied shall be applied on the date
of receipt thereof to prepay the Term Loans as set forth in
Section 6.08(b);
(iv) unless on or before May 1, 1998 the Company
shall have (A) consummated the Fel-Pro Acquisition and (B) as
a portion of the consideration for the Fel-Pro Acquisition,
issued at least $225,000,000 in aggregate market value of the
Company's Capital Stock, the Company shall, on such date,
reduce the Term Loan Commitments, in the same order as
prepayments are required to be applied pursuant to Section
6.08(b), by $500,000,000;
<PAGE> 4
4
(v) Net Cash Proceeds of Subordinated Debt (other
than Senior Subordinated Debt) issued prior to the date of
repayment in full of the Interim Term Loans and the Senior
Subordinated Debt shall be applied on the date of receipt
thereof toward the prepayment of the Interim Term Loans or, at
the Company's option (if no Default or Event of Default is in
existence), the Senior Subordinated Debt, and after the
repayment in full of the Interim Term Loans, the Company shall
not be required to apply proceeds of Subordinated Debt toward
prepayment of the Loans;
(vi) the Company shall not be required to make
mandatory prepayments with the proceeds of Capital Stock
issued to employees pursuant to stock option plans or similar
arrangements, or Capital Stock issued as consideration for
acquisitions made by the Company and its Subsidiaries;
(vii) after the Interim Term Loans have been repaid
in full, the Company shall not be required to make mandatory
prepayments with proceeds of issuances by the Company of
Capital Stock or Subordinated Debt, and the Company may use
such Net Cash Proceeds to prepay the Senior Subordinated Debt
or for other corporate purposes to the extent not prohibited
hereunder; and
(viii) after the Collateral Release Date, the Company
shall not be required to make mandatory prepayments with the
proceeds of Indebtedness."
6. Amendment to Section 6.13 of the Credit Agreement. The second
sentence of Section 6.13 of the Credit Agreement is hereby amended to read in
its entirety as follows:
"Up to $500,000,000 of the proceeds of the Term Loans may be used to
finance the Fel-Pro Acquisition and related fees and expenses (or, as
the case may be, to refinance loans made under the Existing Credit
Agreement whose proceeds were used to finance the Fel-Pro Acquisition
and related fees and expenses), and the remaining proceeds of the Term
Loans shall be used in accordance with Schedule 6.13 (a) to finance
the acquisition of the Target Shares, (b) to refinance existing
indebtedness of the Target and (c) to pay fees and expenses incurred
in connection with the Tender Offer and this Agreement."
7. Amendments to Section 8.05 of the Credit Agreement. (a) The
initial paragraph of Section 8.05 of the Credit Agreement is hereby amended to
read in its entirety as follows:
"SECTION (a) Conditions to each Revolving Credit and
Multicurrency Loan after Initial Revolving Credit Funding Date and
Term Loans used to Finance or Refinance Fel-Pro Acquisition. The
obligation of each Lender to make (i) any Revolving Credit Loan and
Multicurrency Loan requested to be made by it on any date (other than
the Revolving Credit Loans and Multicurrency Loans made on the Initial
Revolving Credit Funding Date in an amount sufficient to repay all
amounts outstanding under the Existing Credit Agreement), and (ii) the
Term Loans whose proceeds will be used to finance the Fel-Pro
Acquisition (or, as the case may be, to refinance loans made under the
Existing Credit Agreement whose proceeds were used to finance the
Fel-Pro Acquisition), is in each case subject to the satisfaction of
the following conditions precedent:"
<PAGE> 5
5
(b) The last paragraph of Section 8.05 of the Credit Agreement is
hereby amended to read in its entirety as follows:
"Each borrowing by a Borrower of Revolving Credit Loans or
Multicurrency Loans (other than any such Loans made on the Initial
Revolving Credit Funding Date, to the extent the proceeds thereof are
used solely to repay amounts outstanding under the Existing Credit
Agreement), or of Term Loans whose proceeds are used to fund the
Fel-Pro Acquisition, shall in each case constitute a representation
and warranty by the Company and such Borrower as of the date of such
Loan that the applicable conditions contained in this Section 8.05
have been satisfied."
8. Amendment to Section 9.11 of the Credit Agreement. Section 9.11
of the Credit Agreement is hereby amended to add thereto the following new
paragraph (d):
"(d) Without limiting the generality of the foregoing
provisions of this Section 9.11, and subject to the provisions of the
foregoing paragraph (c), the Company agrees that it shall comply with
the provisions of the foregoing paragraphs (a) and (b) in respect of
Subsidiaries and assets acquired in connection with the Fel-Pro
Acquisition, promptly following consummation of the Fel-Pro
Acquisition."
9. Amendment to Section 10.04 of the Credit Agreement. Paragraph (b)
of Section 10.04 of the Credit Agreement is hereby amended to read in its
entirety as follows:
"(i) Liens on property or assets of any entity existing at
the time such entity becomes a Subsidiary and not created in
contemplation thereof;".
10. Amendment to Section 10.05 of the Credit Agreement. Paragraph
(g) of Section 10.05 of the Credit Agreement is hereby amended to read in its
entirety as follows:
"(g) (i) Indebtedness outstanding on the date hereof and
listed on Schedule IV and any refinancings, refundings, renewals or
extensions thereof (without any increase in the principal amount
thereof), (ii) Indebtedness of the Target and its Subsidiaries
outstanding on the date of consummation of the Acquisition, but not
any refinancings, refundings, renewals or extensions thereof, (iii)
Indebtedness of the entities acquired in the Fel-Pro Acquisition
outstanding on the date of consummation of the Fel-Pro Acquisition and
listed on Schedule IV-A, but not any refinancings, refundings,
renewals or extensions thereof and (iv) other Indebtedness of the
entities acquired in the Fel-Pro Acquisition outstanding on the date
of consummation of the Fel-Pro Acquisition in an aggregate principal
amount not exceeding $10,000,000 (provided, that the cash portion of
the consideration for the Fel-Pro Acquisition shall be reduced by an
equal amount), but not any refinancings, refundings, renewals or
extensions thereof;
11. Amendments to Section 10.11 of the Credit Agreement. (a)
Paragraph (e) of Section 10.11 of the Credit Agreement is hereby amended to
read in its entirety as follows:
"(e) the Acquisition and the Fel-Pro Acquisition;".
<PAGE> 6
6
(b) Paragraph (j) of Section 10.11 of the Credit Agreement is hereby
amended to read in its entirety as follows:
"(j) Investments to the extent that the consideration paid by
the Company and its Subsidiaries is Capital Stock of the Company
(provided that if such Investment is the acquisition of, in a single
transaction or in a series of related transactions, all or
substantially all of the equity interests of any Person, such
acquisition is approved by the board of directors or analogous
governing body of such Person); and".
12. Amendments to Schedules to the Credit Agreement. Schedule IV to
the Credit Agreement is hereby amended to add thereto Schedule IV-A, in the
form of Annex I to this Amendment, and Schedule 10.08 to the Credit Agreement
is hereby amended to read in its entirety as set forth in Annex II to this
Amendment.
13. Conditions to Effectiveness. This Amendment shall become
effective on the date (the "Amendment Effective Date") on which (i) the
Borrowers shall have executed and delivered to the Administrative Agent this
Amendment and each of the Required Prepayment Lenders and the Required Lenders
shall have delivered to the Administrative Agent its written consent to the
execution and delivery hereof by the Administrative Agent and (ii) the Company
shall have delivered to the Administrative Agent a copy of the Fel-Pro
Acquisition Agreement.
14. Representation and Warranties. To induce the Administrative
Agent and the Lenders to enter into this Amendment, each Borrower hereby
represents and warrants to the Administrative Agent and each Lender as of the
Amendment Effective Date that:
(a) Corporate Power; Authorization; Enforceable Obligations.
Each Loan Party has the corporate or other power and authority, and
the legal right, to execute, deliver and perform this Amendment and
has taken all necessary corporate or other action to authorize the
execution, delivery and performance of this Amendment. No consent or
authorization of, filing with, notice to or other act by or in respect
of, any Governmental Authority or any other Person is required with
respect to the Company or any of its Subsidiaries in connection with
the execution, delivery, performance, validity or enforceability of
this Amendment, except for consents, filings, authorizations or
approvals which have been obtained and are in full force and effect,
and except for other approvals the failure to obtain which could not
reasonably be expected to have a Material Adverse Effect. This
Amendment has been duly executed and delivered on behalf of each of
the applicable Loan Parties. This Amendment constitutes a legal,
valid and binding obligation of such Person enforceable against such
Person in accordance with its terms, except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting the enforcement of creditors'
rights generally and by general equitable principles (whether
enforcement is sought by proceedings in equity or at law) and by an
implied covenant of good faith and fair dealing.
(b) No Legal Bar. The execution, delivery and performance of
this Amendment will not violate any Requirement of Law or Contractual
Obligation of the Company or of any of its Subsidiaries, other than
any such violation which could not reasonably be expected to have a
Material Adverse Effect, and will not result in, or require, the
creation
<PAGE> 7
7
or imposition of any Lien on any of its or their respective properties
or revenues pursuant to any such Requirement of Law or Contractual
Obligation, except Liens created pursuant to the Loan Documents and
any Lien which could not reasonably be expected to have a Material
Adverse Effect.
(c) Representations and Warranties in Credit Agreement. Each
of the representations and warranties set forth in Article VII of the
Credit Agreement is true and correct in all material respects as of
the Amendment Effective Date as if made on and as of the Amendment
Effective Date (after giving effect to the amendments effected
hereby), except if such representation or warranty relates to an
earlier date, in which case such representation and warranty is true
and correct in all material respects on such earlier date.
15. General. (a) Payment of Expenses. The Company agrees to pay or
reimburse the Administrative Agent for all of its reasonable out-of-pocket
costs and expenses incurred in connection with the development, preparation,
execution and delivery of, and any amendment, supplement or modification to,
this Amendment and any other documents prepared in connection herewith or
therewith, and the consummation and administration of the transactions
contemplated hereby, including, without limitation, the reasonable fees and
disbursements of counsel (and any special or local counsel retained by such
counsel to assist it) to the Administrative Agent.
(b) No Other Amendments; Confirmation. Except as expressly amended,
modified and supplemented hereby, the provisions of the Credit Agreement and
the Notes are and shall remain in full force and effect.
(C) GOVERNING LAW. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF
THE PARTIES UNDER THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
(d) Counterparts. This Amendment may be executed by one or more of
the parties to this Amendment on any number of separate counterparts (including
by facsimile transmission), and all of said counterparts taken together shall
be deemed to constitute one and the same instrument. A set of the copies of
this Amendment signed by all the parties shall be delivered to the Borrowers
and the Administrative Agent.
<PAGE> 8
8
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed and delivered by their proper and duly authorized officers and
delivered in New York, New York as of the day and year first above written.
FEDERAL-MOGUL CORPORATION
By:
---------------------------------
Name:
Title:
THE CHASE MANHATTAN BANK,
as Administrative Agent and as a
Lender
By:
--------------------------------
Name:
Title:
<PAGE> 9
9
Annex I
[To be completed]
<PAGE> 10
10
Annex II
[To be completed]
<PAGE> 1
EXHIBIT 21
FEDERAL-MOGUL CORPORATION SUBSIDIARIES
The Company has no parent. The direct and indirect subsidiaires of the Company
and their respective States or other jurisdictions of incorporation as of
December 31, 1997, are as follows:
Percentage of
Voting Stock
Jurisdiction Owned by FM
Name of Subsidiary of Incorporation & Other Subs
------------------ ---------------- --------------
Carter Automotive Company, Inc. Delaware, U.S.A. 100%
Mather Seal Company Michigan, U.S.A. 100%
*Federal-Mogul Bruss Sealing
Systems South Carolina, U.S.A. 49%
Federal-Mogul Funding Corp. Michigan, U.S.A. 100%
Federal-Mogul Global Properties, Inc. Michigan, U.S.A. 100%
Federal-Mogul Venture Corporation Nevada, U.S.A. 100%
Federal-Mogul World Wide, Inc. Michigan, U.S.A. 100%
DeCaroli & CIA, S.A.I.C. Argentina 100%
In-De-Co. H. Minoli, S.A.I.C. Argentina 96%
Neoprint, S.A. Argentina 96%
Plasticos Puntanos, S.A. Argentina 100%
Federal-Mogul Pty. Ltd. Australia 100%
Federal-Mogul World Trade Ltd. ("FSC") Barbados 100%
Coventry Assurance Ltd. Bermuda 100%
Federal-Mogul Boliviana, S.A. Bolivia 100%
Federal-Mogul Comercio
Internacional, S.A. Brazil 100%
Federal-Mogul Canada Investment
Co. ("NRO") Canada 100%
Federal-Mogul Canada Limited Canada 100%
Federal-Mogul de Costa Rica, S.A. Costa Rica 100%
Federal-Mogul Dominicana, S.A. Dominican Republic 100%
Federal-Mogul del Ecuador, S.A. Ecuador 100%
Federal-Mogul S.A. France 100%
Federal-Mogul Karosserieteile GmbH Germany 100%
F-M Motorentiele Holding GmbH Germany 100%
Glyco GmbH Germany 100%
Glyco-Metall-Werke Glyco B.V. & Co. KG Germany 100%
Federal-Mogul de Guatemala, S.A. Guatemala 100%
Federal-Mogul World Trade Hong Kong, Ltd. Hong Kong 100%
AFM India Ltd. India 50%
____________________
*remaining 51% owned by Dichtungstechnik G. Bruss GmbH & Co. KG of which FM
subsidiary owns 49%.
Page 1 of 2
<PAGE> 2
FEDERAL-MOGUL CORPORATION SUBSIDIARIES (CONT.)
Percentage of
Voting Stock
Jurisdiction Owned by FM
Name of Subsidiary of Incorporation & Other Subs
------------------ ---------------- -------------
Bertolotti Pietro e Figli, S.r.l. Italy 100%
Federal-Mogul S.p.A. Italy 100%
Federal-Mogul Japan K.K. Japan 100%
Federal-Mogul World Trade SDN, BHD Malaysia 100%
Federal-Mogul S.A. de C.V. ("PUEBLA") Mexico 61%
Femosa Mexico, S.A. Mexico 100%
Manufacturas Metalicas Linan
S.A. ("LINAN") Mexico 100%
Raimsa S.A. de C.V. ("RAIMSA") Mexico 100%
Servicios Administrativos
Industriales, S.A.
("SAISA") Mexico 100%
Servicios de Components Automotrices, S.A.
("SEDECA") Mexico 100%
Subensambles Internacionales S.A. de C.V. Mexico 100%
Glyco B.V. Netherlands 100%
Federal-Mogul New Zealand Limited New Zealand 100%
Federal-Mogul Panama, S.A. Panama 100%
Federal-Mogul Puerto Rico, Inc. Puerto Rico 100%
Federal-Mogul World Trade Pte. Ltd. Singapore 100%
Federal-Mogul Distribucion, S.A. Spain 51%
Federal-Mogul S.A. Switzerland 100%
Federal-Mogul Acquisition Corp. United Kingdom 100%
Federal-Mogul Global Growth Limited United Kingdom 100%
Federal-Mogul Holding U.K., Limited United Kingdom 100%
Federal-Mogul U.K., Limited United Kingdom 100%
Federal-Mogul U.K. Holding Limited United Kingdom 100%
Seal Technology Systems Limited United Kingdom 100%
Bromley Inversora, S.A. Uruguay 100%
Federal-Mogul de Uruguay Uruguay 100%
Federal-Mogul de Venezuela C.A. Venezuela 100%
La Font Repuestos C.A. Venezuela 100%
Page 2 of 2
<PAGE> 1
EXHIBIT 23.1
Consent of Independent Auditors
We consent to the incorporation by reference in Form S-8 Registration Statement
No. 333-38961, effective October 29, 1997, Form S-3 Registration Statement No.
33-55135, effective September 2, 1994, Form S-3 Registration Statement No.
33-54717, effective August 5, 1994, Form S-3 Registration Statement No.
33-54301, effective June 24, 1994, Form S-3 Registration Statement No.
33-51265, effective January 13, 1994, Form S-8 Registration Statement No.
33-51403, effective December 10, 1993, Form S-8 Registration Statement No.
33-32429, effective December 31, 1989, Form S-8 Registration Statement No.
33-32323, effective December 22, 1989, Form S-8 Registration Statement No.
33-30172, effective August 21, 1989, and Form S-8 Registration Statement No.
2-93179, effective October 1, 1984, of our report dated January 30, 1998,
except for Note 20, as to which the date is February 24, 1998, with respect to
the consolidated financial statements and schedule of Federal-Mogul Corporation
included in the Annual Report on Form 10-K for the year ended December 31,
1997.
March 2, 1998
<PAGE> 1
EXHIBIT 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned directors of
FEDERAL-MOGUL CORPORATION, a Michigan corporation, which is about to file with
the Securities and Exchange Commission, Washington D. C. under the provisions
of the Securities Exchange Act of 1934, as amended, the Corporation's Annual
Report on Form 10-K for the year ended December 31, 1997, hereby nominates,
constitutes and appoints Thomas W. Ryan and Diane L. Kaye, or either of them,
as his true and lawful attorney-in-fact, with full power to act and with full
power of substitution, for him and in his name, place and stead, to sign such
Report and any and all amendments thereto, and to file said Report and each
Amendment so signed, with all Exhibits thereto, with the Securities and
Exchange Commission.
IN WITNESS WHEREOF, each of the undersigned has executed this Power of
Attorney this 4th day of February, 1998.
/s/RICHARD A. SNELL
-----------------------------------
RICHARD A. SNELL
Chairman of the Board and
Chief Executive Officer; Director
/s/JOHN J. FANNON /s/ROBERT S. MILLER, JR.
- --------------------- -------------------------
JOHN J. FANNON ROBERT S. MILLER, JR.
Director Director
/s/RODERICK M. HILLS /s/JOHN C. POPE
- --------------------- -------------------------
RODERICK M. HILLS JOHN C. POPE
Director Director
/s/ANTONIO MADERO /s/H. MICHAEL SEKYRA
- --------------------- -------------------------
ANTONIO MADERO H. MICHAEL SEKYRA
Director Director
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