<PAGE> 1
==============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1999
COMMISSION FILE NUMBER: 1-1927
THE GOODYEAR TIRE & RUBBER COMPANY
(Exact name of Registrant as specified in its charter)
OHIO 34-0253240
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
1144 EAST MARKET STREET, AKRON, OHIO 44316-0001
(Address of Principal Executive Offices) (Zip Code)
(330) 796-2121
(Registrant's Telephone Number, Including Area Code)
-----------------------------------
Indicate by check mark whether the Registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
---- ----
-----------------------------------
Indicate the number of shares outstanding of each of the Registrant's classes of
common stock, as of the latest practicable date.
Number of Shares of Common Stock,
Without Par Value, Outstanding at October 31, 1999: 156,330,620
================================================================================
<PAGE> 2
THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME AND RETAINED EARNINGS
Unaudited
<TABLE>
<CAPTION>
(In millions, except per share) THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1999 1998 1999 1998
------- ------- ------- -------
<S> <C> <C> <C> <C>
NET SALES $ 3,288.8 $ 3,191.7 $ 9,328.7 $ 9,423.2
Cost of Goods Sold 2,764.6 2,469.8 7,531.2 7,193.7
Selling, Administrative and General Expense 515.4 471.5 1,435.4 1,382.4
Rationalizations 6.1 -- 163.9 (29.7)
Interest Expense 46.2 41.4 123.5 105.7
Other (Income) and Expense (159.2) (44.3) (148.2) (72.5)
Foreign Currency Exchange (1.3) (0.3) (34.8) (14.8)
Minority Interest in Net Income of Subsidiaries 12.1 9.7 23.1 25.6
--------- --------- --------- ---------
Income from Continuing Operations before Income Taxes 104.9 243.9 234.6 832.8
United States and Foreign Taxes on Income (4.2) 58.9 34.3 237.3
--------- --------- --------- ---------
INCOME FROM CONTINUING OPERATIONS 109.1 185.0 200.3 595.5
Discontinued Operations -- -- -- (34.7)
--------- --------- --------- ---------
NET INCOME $ 109.1 $ 185.0 200.3 560.8
========= =========
Retained Earnings at Beginning of Period 3,477.8 2,983.4
CASH DIVIDENDS (140.6) (141.2)
--------- ---------
Retained Earnings at End of Period $ 3,537.5 $ 3,403.0
========= =========
PER SHARE OF COMMON STOCK - BASIC:
INCOME FROM CONTINUING OPERATIONS $ 0.70 $ 1.19 $ 1.28 $ 3.80
Discontinued Operations -- -- -- (0.22)
--------- --------- --------- ---------
NET INCOME $ 0.70 $ 1.19 $ 1.28 $ 3.58
========= ========= ========= =========
Average Shares Outstanding 156.3 156.4 156.1 156.8
PER SHARE OF COMMON STOCK - DILUTED:
INCOME FROM CONTINUING OPERATIONS $ 0.69 $ 1.17 $ 1.26 $ 3.75
Discontinued Operations -- -- -- (0.22)
--------- --------- --------- ---------
NET INCOME $ 0.69 $ 1.17 $ 1.26 $ 3.53
========= ========= ========= =========
Average Shares Outstanding 159.5 157.8 159.0 158.7
CASH DIVIDENDS PER SHARE $ 0.30 $ 0.30 $ 0.90 $ 0.90
========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of this financial statement.
-1-
<PAGE> 3
THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
Unaudited
<TABLE>
<CAPTION>
(In millions)
SEPTEMBER 30, DECEMBER 31,
1999 1998
ASSETS: ------------- ------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 233.4 $ 239.0
Accounts and notes receivable,
less allowance - $90.6 ($54.9 in 1998) 2,639.4 1,770.7
Inventories:
Raw materials 378.0 369.9
Work in process 100.0 87.5
Finished product 1,807.0 1,707.1
--------- ---------
2,285.0 2,164.5
Sumitomo 1.2% Convertible Note Receivable Due 8/00 136.1 --
Prepaid expenses and other current assets 334.4 354.9
--------- ---------
TOTAL CURRENT ASSETS 5,628.3 4,529.1
Long Term Accounts and Notes Receivable 172.8 173.5
Investments in Affiliates, at equity 127.4 111.4
Other Assets 75.0 99.5
Goodwill 636.5 259.0
Deferred Charges 983.4 1,058.3
Properties and Plants,
less accumulated depreciation - $5,499.2 ($5,394.6 in 1998) 5,512.0 4,358.5
--------- ---------
TOTAL ASSETS $13,135.4 $10,589.3
========= =========
LIABILITIES:
CURRENT LIABILITIES:
Accounts payable - trade $ 1,310.5 $ 1,131.7
Compensation and benefits 812.0 751.0
Other current liabilities 375.9 351.9
United States and foreign taxes 141.4 252.6
Notes payable 1,613.8 763.3
Sumitomo 1.2% Convertible Note Payable Due 8/00 123.5 --
Long term debt due within one year 157.1 26.0
--------- ---------
TOTAL CURRENT LIABILITIES 4,534.2 3,276.5
Compensation and Benefits 2,189.4 1,945.9
Long Term Debt and Capital Leases 1,673.3 1,186.5
Other Long Term Liabilities 173.0 175.6
Minority Equity in Subsidiaries 886.7 259.0
--------- ---------
TOTAL LIABILITIES 9,456.6 6,843.5
SHAREHOLDERS' EQUITY:
Preferred Stock, no par value:
Authorized 50,000,000 shares, unissued -- --
Common Stock, no par value:
Authorized 300,000,000 shares
Outstanding shares - 156.3 (155.9 in 1998)
after deducting 39.4 treasury shares (39.7 in 1998) 156.3 155.9
Capital Surplus 1,029.0 1,015.9
Retained Earnings 3,537.5 3,477.8
Accumulated Other Comprehensive Income (1,044.0) (903.8)
--------- ---------
TOTAL SHAREHOLDERS' EQUITY 3,678.8 3,745.8
--------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $13,135.4 $10,589.3
========= =========
</TABLE>
The accompanying notes are an integral part of this financial statement.
-2-
<PAGE> 4
THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
Unaudited
<TABLE>
<CAPTION>
(In millions) Accumulated Other
Comprehensive Income
-------------------------------------
Common Capital Retained Foreign Minimum Unrealized Total
Stock Surplus Earnings Currency Pension Investment Shareholders'
Translation Liability Gains Equity
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1998 $155.9 $1,015.9 $3,477.8 $(877.6) $ (26.2) $ - $ 3,745.8
Comprehensive income for 1999:
Net income 200.3
Foreign currency translation (169.4)
Sale of subsidiaries 15.3
Minimum pension liability 6.1
Unrealized investment gain 7.8
(net of tax of $4.8)
TOTAL COMPREHENSIVE INCOME 60.1
Cash dividends (140.6) (140.6)
Common stock issued 0.4 13.1 13.5
---------------------------------------------------------------------------------------
BALANCE AT SEPTEMBER 30, 1999 $156.3 $1,029.0 $3,537.5 $(1,031.7) $ (20.1) $ 7.8 $ 3,678.8
=======================================================================================
</TABLE>
The accompanying notes are an integral part of this financial statement.
THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Unaudited
<TABLE>
<CAPTION>
(In millions) THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
NET INCOME $ 109.1 $ 185.0 $ 200.3 $ 560.8
Other comprehensive income:
Foreign currency translation adjustment 8.0 8.0 (169.4) (97.0)
Less reclassification adjustment for
recognition of FCTA in net income 15.3 -- 15.3 --
due to the sale of subsidiaries
Minimum pension liability adjustment 1.3 0.9 6.1 (0.5)
Unrealized investment gain (loss) (49.0) -- 12.6 --
Tax on unrealized investment income 18.6 -- (4.8) --
---------------------- ----------------------
COMPREHENSIVE INCOME $ 103.3 $ 193.9 $ 60.1 $ 463.3
====================== ======================
</TABLE>
The accompanying notes are an integral part of this financial statement.
-3-
<PAGE> 5
THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
Unaudited
<TABLE>
<CAPTION>
(In millions) NINE MONTHS ENDED
SEPTEMBER 30,
1999 1998
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
NET INCOME $ 200.3 $ 560.8
Adjustments to reconcile net income to cash flows
from operating activities:
Depreciation 393.6 351.8
Discontinued operations -- 49.5
Rationalizations and other actions 125.7 (19.6)
Asset sales (154.8) (69.9)
Changes in operating assets and liabilities, net of
asset acquisitions and dispositions:
Accounts and notes receivable (355.0) (326.2)
Inventories 294.7 (376.4)
Accounts payable-trade (197.8) (197.3)
Other assets and liabilities (83.6) (283.1)
-------- --------
Total adjustments 22.8 (871.2)
-------- --------
TOTAL CASH FLOWS FROM OPERATING ACTIVITIES 223.1 (310.4)
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (560.0) (490.6)
Asset sales 49.5 488.8
Asset acquisitions (845.6) (197.1)
Other transactions (61.5) (87.5)
-------- --------
TOTAL CASH FLOWS FROM INVESTING ACTIVITIES (1,417.6) (286.4)
CASH FLOWS FROM FINANCING ACTIVITIES:
Short term debt incurred 1,434.4 543.6
Short term debt paid (86.8) (59.8)
Long term debt incurred 23.2 325.6
Long term debt paid (38.1) (116.9)
Common stock issued 13.5 36.9
Common stock acquired -- (85.2)
Dividends paid (140.6) (141.2)
-------- --------
TOTAL CASH FLOWS FROM FINANCING ACTIVITIES 1,205.6 503.0
Effect of Exchange Rate Changes on Cash and Cash Equivalents (16.7) (6.5)
-------- --------
Net Change in Cash and Cash Equivalents (5.6) (100.3)
Cash and Cash Equivalents at Beginning of the Period 239.0 258.6
-------- --------
Cash and Cash Equivalents at End of the Period $ 233.4 $ 158.3
======== ========
</TABLE>
The accompanying notes are an integral part of this financial statement.
-4-
<PAGE> 6
THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
All per share amounts in these Notes to Financial Statements are diluted
unless otherwise indicated.
RATIONALIZATIONS
- ----------------
Rationalization charges (credits) were recorded as follows:
<TABLE>
<CAPTION>
(In millions) THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
1ST QUARTER
- -----------
Termination of tire
production at Gadsden $ -- $ -- $ 85.5 $ --
Plant downsizing
and consolidation -- -- 81.9 --
-------- ------ -------- --------
$ -- $ -- $ 167.4 $ --
2ND QUARTER
- -----------
1997 program-plant down-
sizing/consolidation $ -- $ -- $ (6.5) $ (7.7)
1997 program-Formula 1 -- -- -- (22.0)
1996 program -- -- (3.1) --
-------- ------ -------- --------
$ -- $ -- $ (9.6) $ (29.7)
3RD QUARTER
- -----------
Termination of
tire production $ 34.8 $ -- $ 34.8 $ --
CART/IRL 6.9 -- 6.9 --
North American Tire staffing 4.8 -- 4.8 --
1st qtr 1999-Gadsden (33.4) -- (33.4) --
1st qtr 1999-plant down-
sizing/consolidation (6.8) -- (6.8) --
1997 program-plant down-
sizing/consolidation (.2) -- (.2) --
-------- ------ -------- --------
$ 6.1 $ -- $ 6.1 $ --
RATIONALIZATIONS $ 6.1 $ -- $ 163.9 $ (29.7)
======== ====== ======== ========
AFTER TAX $ 15.7 $ -- $ 112.0 $ (19.6)
======== ====== ======== ========
PER SHARE $ .10 $ -- $ .80 $ (.12)
======== ====== ======== ========
</TABLE>
THIRD QUARTER 1999 PROGRAM - Continued competitive conditions in the markets
served by the Company resulted in the approval of rationalization plans in the
third quarter of 1999. The plans consisted of the decision to terminate tire
production at a facility in Latin America, the reduction of staffing levels in
North American Tire and the termination of participation in the Championship
Auto Racing Teams (CART) and Indy Racing League (IRL) racing series upon
completion of the 1999 series in November 1999. Of the $46.5 million of charges
recorded ($42.4 million after tax or $.27 per share), $19.2 million related to
non-cash writeoffs and $27.3 million related to future cash outflows, primarily
for associate severance costs and payments under noncancellable contracts. The
remaining balance of these provisions totaled $26.2 million at September 30,
1999.
The third quarter charges included $20.4 million for the release of
approximately 340 associates around the world, including approximately 160
production and supervisory associates at the Latin American facility, 120
managerial, administrative and support associates in North American Tire
operations and 60 production and support associates in CART/IRL activities. At
September 30, 1999, six North American Tire managerial associates had been
released at a cost of $1.2 million. The Company plans to release approximately
334 more associates and had reserved $19.2 million for that cost at September
30, 1999.
-5-
<PAGE> 7
THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
RATIONALIZATIONS (CONTINUED)
- ----------------------------
Rationalization costs, other than associate-related costs, were recorded in
the 1999 third quarter and were incurred through September 30, 1999, as follows:
<TABLE>
<CAPTION>
(In millions)
Recorded Incurred
-------- --------
<S> <C> <C>
Termination of tire production $19.6 $17.5
Withdrawal of support for CART and IRL 6.5 1.6
----- -----
$26.1 $19.1
</TABLE>
Costs associated with termination of tire production were primarily for
equipment taken out of service. Costs associated with the withdrawal of support
for CART and IRL were for the early termination of contracts with various racing
teams and for the writeoff of equipment taken out of service. The remaining
balance of these provisions totaled $7.0 million at September 30, 1999.
The Company expects that the major portion of these actions will be
completed during 2000.
----------------
The Company continued to implement its prior rationalization programs. The
following discussion reflects the activity and progress of those programs in the
third quarter of 1999.
FIRST QUARTER 1999 PROGRAM - A number of rationalization actions were approved
in the first quarter of 1999 to reduce costs and increase productivity and
efficiency. These actions consisted primarily of the termination of tire
production at the Gadsden, Alabama facility and the downsizing and consolidation
of tire manufacturing facilities at Freeport, Illinois and 12 other locations in
Europe, South Africa and Latin America. A charge of $167.4 million ($116.0
million after tax or $.74 per share) was recorded, of which $28.4 million
related to non-cash writeoffs and $139.0 million related to future cash
outflows, primarily for associate severance costs. The remaining balance of
these provisions totaled $25.4 million at September 30, 1999.
In the third quarter of 1999, charges recorded in the 1999 first quarter
totaling $40.2 million ($26.5 million after tax or $.17 per share) were
reversed. The reversals included $33.4 million related to the decision to resume
production of certain passenger tire lines in a portion of the Gadsden facility
due to higher-than-expected demand in North America and the high cost and time
delays associated with installing additional capacity at other plants. The other
$6.8 million related to the decision to abandon the planned relocation of
certain agricultural tire production to Turkey due to the rationalization
opportunities presented by the joint venture with Sumitomo and production
difficulties in Turkey following the recent earthquake.
Under the first quarter 1999 program, the Company recorded a charge of
$130.6 million for the release of approximately 4,000 associates around the
world. Most of the associates to be released under the plan are or were
production and support associates at manufacturing locations, primarily in the
United States and Latin America. Through September 30, 1999, approximately 2,300
associates, including over 1,400 production and support associates in Latin
America, over 375 production associates at Gadsden, Alabama and over 390
production associates in Freeport, Illinois were released at a cost of $94.4
million. In connection with the plan for terminating tire production at the
Gadsden facility, more than 400 associates have been transferred from Gadsden to
other manufacturing facilities, the cost of which was not included in the first
quarter program. In the third quarter of 1999, $20.3 million was charged to the
reserve for the release of approximately 500 associates, primarily production
associates in Latin America. Associate costs totaling $34.4 million, including
$18.4 million of pension curtailment costs, were reversed in the third quarter
as a result of the previously discussed changes related to Gadsden and Turkey.
The Company plans to release approximately 1,000 more associates and had
reserved $20.2 million for that cost at September 30, 1999. During October 1999,
production at the Logan, Ohio facility was terminated and more than 550
associates were released at a cost of $2.6 million.
-6-
<PAGE> 8
THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
RATIONALIZATIONS (CONTINUED)
- ----------------------------
Rationalization costs, other than associate-related costs, were recorded in
the first quarter program, and were incurred through September 30, 1999, as
follows:
<TABLE>
<CAPTION>
(In millions) Recorded Incurred
-------- --------
<S> <C> <C>
Plant downsizing and consolidation $26.7 $ 20.7
Asset sales and other exit costs 10.1 5.1
----- -----
$36.8 $25.8
===== =====
</TABLE>
Costs associated with downsizing and consolidation activities were
primarily for the writeoff of equipment taken out of service and obligations
under noncancellable contracts, primarily utility contracts, both at the Gadsden
facility. Asset sales and other exit costs included a loss on the anticipated
sale of a rubber plantation in Asia and additional costs associated with the
Company's 1998 exit from the Formula 1 racing series. Through September 30,
$25.8 million was charged to the reserve, of which $.5 million was incurred in
the 1999 third quarter. Reserves totaling $5.8 million were reversed in the
third quarter due to the changes related to Gadsden. The remaining balance of
these provisions totaled $5.2 million at September 30, 1999.
The Company expects the major portion of the first quarter 1999 program to
be completed during 1999, with the remaining actions to be completed in 2000.
1997 PROGRAM - During the third quarter, approximately 200 associates, primarily
hourly associates in North American operations, were released at a cost of $5.3
million. In addition, reserves related to European operations totaling $.2
million were reversed. The Company plans to release approximately 800 more
associates under the 1997 program and had reserved $33.1 million for that cost
at September 30, 1999.
Optimization, downsizing, consolidation and withdrawal costs of the 1997
program, other than associate-related costs, were recorded, and were incurred
through September 30, 1999, as follows:
<TABLE>
<CAPTION>
(In millions)
Recorded Incurred
-------- --------
<S> <C> <C> <C>
Withdrawal of support for the Formula 1 racing series $ 63.4 $43.2
Plant downsizing and closure activities 23.0 13.7
Kelly-Springfield consolidation 12.9 1.8
Consolidation of North American distribution facilities 12.3 11.4
Commercial tire outlet consolidation 4.7 4.7
Production realignments 2.8 2.8
------ -----
$119.1 $77.6
====== =====
</TABLE>
During the third quarter of 1999, $1.9 million was charged to the reserve.
In the second quarter of 1999, reserves totaling $.5 million related to plant
downsizing and closure activities were reversed. During 1998, the Company
reversed $22 million due to the favorable settlement of Formula 1 obligations
and $7.7 million due to a change in the plant downsizing and closure activities
($19.6 million after tax or $.12 per share when taken together). At September
30, 1999, the remaining balance of these provisions totaled $11.3 million.
The Company expects that the major portion of the 1997 program will be
completed during 1999 with the remaining actions to be completed in 2000.
-7-
<PAGE> 9
THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
RATIONALIZATIONS (CONTINUED)
- ----------------------------
1996 PROGRAM - The Company has completed the planned release of associates under
the 1996 program. Rationalization costs, other than for associate-related costs,
were recorded, and were incurred through September 30, 1999, as follows:
<TABLE>
<CAPTION>
(In millions)
Recorded Incurred
-------- --------
<S> <C> <C>
Discontinuance of PVC production $10.6 $10.6
Canadian retail store closures 9.0 6.2
International production rationalization 8.5 8.5
North American Tire production rationalization 7.1 8.1
----- -----
$35.2 $33.4
===== =====
</TABLE>
During the third quarter of 1999, $1.1 million was charged to the reserve.
In the second quarter of 1999 reserves totaling $1.0 million were adjusted. The
remaining balance of these provisions at September 30, 1999 totaled $2.8
million, which is for payments due under noncancellable leases through 2007
related to Canadian retail store closures. Except for the remaining Canadian
lease payments, the Company has completed the 1996 program.
BUSINESS SEGMENTS
- -----------------
Effective July 1, 1999 the Company reorganized its Europe Tire strategic
business unit (SBU) into the European Union Tire SBU and the Eastern Europe,
Africa and Middle East Tire SBU. In the segment information on the following
page, prior periods have been restated to reflect this change.
Portions of the items reported as Rationalizations and Other (Income) and
Expense on the Consolidated Statement of Income were not charged (credited) to
segment EBIT but were attributable to the Company's seven segments as follows:
<TABLE>
<CAPTION>
(In millions) THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1999 1998 1999 1998
------ ----- ------ -------
<S> <C> <C> <C> <C>
RATIONALIZATIONS
- ----------------
North American Tire $ (21.7) $ -- $ 64.6 $ (7.7)
European Union Tire (7.1) -- (.5) --
Eastern Europe, Africa
and Middle East Tire .1 -- 2.2 --
Latin American Tire 34.8 -- 77.3 --
Asia Tire -- -- 1.5 --
------- ------- ------- -------
TOTAL TIRES 6.1 -- 145.1 (7.7)
Engineered Products -- -- 8.8 --
Chemical Products -- -- 3.1 --
------- ------- ------- -------
TOTAL SEGMENTS $ 6.1 $ -- $ 157.0 $ (7.7)
======= ======= ======= =======
OTHER (INCOME) AND EXPENSE
- --------------------------
North American Tire $ -- $ (39.0) $ -- $ (39.0)
European Union Tire (149.7) -- (149.7) --
Eastern Europe, Africa
and Middle East Tire -- -- -- --
Latin American Tire -- (3.6) -- 12.0
Asia Tire -- (9.6) -- (9.6)
------- ------- ------- -------
TOTAL TIRES (149.7) (52.2) (149.7) (36.6)
Engineered Products -- (.6) -- 1.2
Chemical Products (17.0) (.4) (17.0) (61.5)
------- ------- ------- -------
TOTAL SEGMENTS $(166.7) $ (53.2) $(166.7) $ (96.9)
======= ======= ======= =======
</TABLE>
-8-
<PAGE> 10
THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
SEGMENT INFORMATION
Unaudited
<TABLE>
<CAPTION>
(In millions) THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
SALES:
North American Tire $1,622.5 $1,603.8 $4,709.4 $4,678.0
European Union Tire 661.5 523.7 1,635.8 1,494.7
Eastern Europe, Africa and 212.3 222.6 582.8 626.4
Middle East Tire
Latin American Tire 234.7 302.6 694.5 965.1
Asia Tire 150.0 123.8 439.8 358.2
-------- -------- -------- --------
TOTAL TIRES 2,881.0 2,776.5 8,062.3 8,122.4
Engineered Products 297.9 311.9 935.3 970.5
Chemical Products 231.5 236.6 683.1 741.3
-------- -------- -------- --------
TOTAL SEGMENT SALES 3,410.4 3,325.0 9,680.7 9,834.2
Inter-SBU Sales (122.4) (129.2) (355.7) (404.5)
Other 0.8 (4.1) 3.7 (6.5)
-------- -------- -------- --------
NET SALES $3,288.8 $3,191.7 $9,328.7 $9,423.2
======== ======== ======== ========
INCOME:
North American Tire $ (108.6) $ 94.9 $ 7.4 $ 294.3
European Union Tire 42.7 39.8 123.3 147.8
Eastern Europe, Africa and 13.1 31.6 34.3 78.5
Middle East Tire
Latin American Tire 12.5 40.1 58.6 154.0
Asia Tire 5.5 1.6 16.9 9.4
-------- -------- -------- --------
TOTAL TIRES (34.8) 208.0 240.5 684.0
Engineered Products 8.9 22.3 60.2 89.9
Chemical Products 36.5 34.5 95.4 109.4
-------- -------- -------- --------
TOTAL SEGMENT INCOME (EBIT) 10.6 264.8 396.1 883.3
Rationalizations and other actions 160.6 53.2 2.8 126.6
Interest expense (46.2) (41.4) (123.5) (105.7)
Foreign currency exchange 1.3 0.3 34.8 14.8
Minority interest in net income (12.1) (9.7) (23.1) (25.6)
of subsidiaries
Inter-SBU Income (15.2) (16.4) (41.4) (49.2)
Other 5.9 (6.9) (11.1) (11.4)
-------- -------- -------- --------
INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES $ 104.9 $ 243.9 $ 234.6 $ 832.8
======== ======== ======== ========
</TABLE>
-9-
<PAGE> 11
THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
STRATEGIC ALLIANCE
- ------------------
On June 14, 1999, the Company entered into a definitive general agreement
and various other agreements with Sumitomo Rubber Industries Ltd. ("Sumitomo")
relating to the formation and operation of the strategic global alliance (the
"Alliance Agreements"). The Alliance Agreements provide, among other things, for
tire manufacturing and sales joint ventures. On September 1, 1999, the global
alliance was completed and the joint ventures commenced operations. In addition
to the businesses contributed, the Company paid $915.5 million to Sumitomo and
its affiliates, which was financed by the issuance of additional debt.
In accordance with the terms of the Alliance Agreements, on September 1,
1999 the Company acquired 75%, and Sumitomo owned 25%, of Goodyear Dunlop Tires
Europe B.V., a Netherlands holding company. On September 1, 1999, this company
acquired substantially all of Sumitomo's tire businesses in Europe, including
eight tire manufacturing plants located in England, France and Germany and sales
and distribution operations in 18 European countries, and most of the Company's
tire businesses in Europe. The Company's tire businesses in Poland (other than a
sales company), Slovenia and Turkey (as well as Morocco and South Africa), the
Company's aircraft tire businesses, and the Company's textile, steel tire cord
and tire mold manufacturing plants and technical center and related facilities
located in Luxembourg are excluded from the joint venture. On September 1, 1999,
the Company also acquired 75%, and Sumitomo acquired 25%, of Goodyear Dunlop
Tires North America Ltd., a holding company that purchased Sumitomo's tire
manufacturing operations in North America and certain of its related tire sales
and distribution operations. In addition, the Company acquired 100% of the
balance of Sumitomo's Dunlop tire distribution and sales operation in the United
States and Canada. The Company also acquired a 25% (and Sumitomo acquired a 75%)
equity interest in each of two tire companies in Japan, one for the distribution
and sale of Goodyear-brand passenger and truck tires in the replacement market
in Japan and the other for the distribution and sale of Goodyear-brand and
Dunlop-brand tires to original equipment manufacturers in Japan. The Company
transferred certain assets of its subsidiary located in Japan in exchange for
such equity interests and approximately $27 million in cash. The Company also
acquired a 51% (and Sumitomo acquired a 49%) equity interest in a company that
will coordinate and disseminate commercialized tire technology among the
Company, Sumitomo, the joint ventures and their respective affiliates, and an
80% (and Sumitomo acquired a 20%) equity interest in a global purchasing
company.
The Company accounted for the strategic alliance using the purchase method.
The cost of the acquired businesses totaled approximately $1.22 billion,
including the cash payment of $915.5 million and the fair value of 25% of the
Goodyear businesses contributed to the European joint venture, or $307 million.
The Company will amortize the $390 million of goodwill recorded on the
transaction on a straight-line basis over 40 years. The Company recognized a
gain of $149.7 million ($143.7 million after tax or $.90 per share) on the
change of control of 25% of the businesses it contributed to the European joint
venture.
The Company has been undergoing an extensive analysis and assessment of the
various activities of the combined businesses and is formulating, but has not
completed, plans to integrate the businesses in order to optimize market growth
opportunities as well as maximize cost efficiencies. The actions contemplated
under the plans will include the downsizing or consolidation of various
manufacturing, distribution, sales, support and administrative operations. The
execution of the plan is contingent upon the completion of the analysis of the
optimal integration of manufacturing, distribution and sales operations and
facilities, information systems, research and development activities and the
appropriate staffing levels for various other functions. Due to the magnitude of
the assessment required, the establishment and implementation of these plans
will extend over several periods commencing in the fourth quarter of 1999. The
Company anticipates that some of these actions will result in charges to future
operations while others will result in an adjustment to the acquisition cost.
-10-
<PAGE> 12
THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
STRATEGIC ALLIANCE (CONTINUED)
- ------------------------------
The actions contemplated by the Company related to the businesses acquired
are expected to result in costs totaling $80 million to $120 million. These
costs include associate severance costs and noncancellable lease obligations.
The costs will be recorded as an adjustment to the acquisition cost and will
result in increased values assigned to non-current assets.
The Consolidated Balance Sheet includes all of the assets and liabilities
of the European and North American businesses acquired by the Company. The
Consolidated Statement of Income also includes the results of operations of the
former Sumitomo operations from September 1, 1999, which are referred to in the
table below as "Dunlop".
The following table presents supplemental pro forma estimated results of
operations as if the joint ventures had commenced operations on January 1, 1998.
Historical results of the acquired businesses have been adjusted to exclude
non-recurring items and to reflect changes in the carrying amounts and
depreciable lives of certain fixed assets. The pro forma information also
reflects amortization of goodwill recorded by the Company and interest expense
at 6% associated with the debt incurred to finance the Company's cash payment of
$915.5 million to Sumitomo and its affiliates.
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
(In millions, except per share) SEPT. 30, SEPT. 30,
1999 1998 1999 1998
<S> <C> <C> <C> <C>
NET SALES
- ---------
Goodyear $ 3,064.4 $ 3,191.7 $ 9,104.3 $ 9,423.2
Dunlop 608.2 636.0 1,802.2 1,815.1
---------- ---------- ---------- ----------
$ 3,672.6 $ 3,827.7 $ 10,906.5 $ 11,238.3
========== ========== ========== ==========
NET INCOME
- ----------
Goodyear $ 80.3 $ 176.5 $ 154.5 $ 535.3
Dunlop 16.5 11.8 48.5 42.1
---------- ---------- ---------- ----------
$ 96.8 $ 188.3 $ 203.0 $ 577.4
========== ========== ========== ==========
NET INCOME PER SHARE - BASIC
- ----------------------------
Goodyear $ .51 $ 1.12 $ .99 $ 3.41
Dunlop .11 .08 .31 .27
---------- ---------- ---------- ----------
$ .62 $ 1.20 $ 1.30 $ 3.68
========== ========== ========== ==========
NET INCOME PER SHARE - DILUTED
- ------------------------------
Goodyear $ .50 $ 1.11 $ .97 $ 3.37
Dunlop .11 .08 .31 .27
---------- ---------- ---------- ----------
$ .61 $ 1.19 $ 1.28 $ 3.64
========== ========== ========== ==========
</TABLE>
NONCASH INVESTING AND FINANCING ACTIVITIES
- ------------------------------------------
The Consolidated Statement of Cash Flows is presented net of the following
transactions:
In connection with the Company's strategic alliance with Sumitomo Rubber
Industries, Ltd., on February 25, 1999 the Company issued to Sumitomo at par its
1.2% Convertible Note Due August 16, 2000, in the principal amount of
Yen13,073,070,934 (equivalent to $123.5 million at September 30, 1999). The
Company's Note is convertible, if not earlier redeemed, during the period
beginning July 16, 2000 through August 15, 2000 into 2,281,115 shares of the
Common Stock, without par value, of the Company at a conversion price of
Yen5,731 per share, subject to certain adjustments. In addition, on February 25,
1999, the Company purchased at par from Sumitomo a 1.2% Convertible Note Due
August 16, 2000, in the principal amount of Yen13,073,070,934 (also equivalent
to $123.5 million at September 30, 1999). The Sumitomo Note is convertible, if
not earlier redeemed, during the period beginning July 16, 2000 through August
15, 2000 into 24,254,306 shares of the Common Stock, Yen50 par value per share,
of Sumitomo at a conversion price of Yen539 per share, subject to certain
adjustments. The Company and Sumitomo have agreed not to redeem their respective
Notes, and to convert the Notes, if the joint ventures are operating on July 1,
2000.
-11-
<PAGE> 13
THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NONCASH INVESTING AND FINANCING ACTIVITIES (CONTINUED)
- ------------------------------------------------------
On September 1, 1999, the Company completed its global alliance with
Sumitomo. The Company's acquisition cost included the approximately $307 million
fair value of 25% of its businesses contributed to the European joint venture.
The Company also assumed debt totaling $165 million in Dunlop's European and
North American businesses.
In the third quarter of 1999, a tire manufacturing subsidiary recorded
fixed assets totaling $43.4 million acquired under a capital lease. In the third
quarter of 1998, the Company acquired a majority ownership interest in an Indian
tire manufacturer and assumed $103 million of debt.
INVESTMENTS
- -----------
Reflecting the completion of the strategic alliance with Sumitomo and the
planned conversion into equity of the previously mentioned Convertible Notes,
the Company has classified its investment in the Sumitomo 1.2% Convertible Note
("the Note") as available-for-sale, as provided in Statement of Financial
Accounting Standards No. 115, "Accounting for Certain Investments in Debt and
Equity Securities". The fair value of the Note as an equity instrument was
$136.1 million at September 30, 1999. Changes in the fair value of the Note are
reported in the Consolidated Balance Sheet as Accumulated Other Comprehensive
Income. At September 30, 1999 the gross unrealized holding gain on the Note
totaled $28.1 million ($17.5 million after tax). The Company's 1.2% Convertible
Note has been designated as a hedge of the exchange exposure of the Sumitomo
Note, and the effect of exchange rate changes on the Company's Note are reported
on the Consolidated Balance Sheet as Accumulated Other Comprehensive Income. The
fair value of the Company's Note as a debt instrument was $119.0 million at
September 30, 1999.
NON-CONSOLIDATED OPERATIONS - SOUTH PACIFIC TYRE
- ------------------------------------------------
In addition to its consolidated operations in the Asia region, the Company
owns a 50% interest in South Pacific Tyres Ltd (SPT), a partnership with Pacific
Dunlop Ltd of Australia. SPT is the largest tire manufacturer, marketer and
exporter in Australia and New Zealand. The Company is required to use the equity
method to account for its interest in the results of operations and financial
position of SPT.
The following table presents sales and EBIT of the Company's Asia Tire
segment and 100% of the operations of SPT:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1999 1998 1999 1998
------- ------- ------- -------
<S> <C> <C> <C> <C>
NET SALES:
Asia Tire $ 150.0 $ 123.8 $ 439.8 $ 358.2
SPT 158.7 147.0 489.8 470.6
------- ------- ------- -------
$ 308.7 $ 270.8 $ 929.6 $ 828.8
======= ======= ======= =======
EBIT:
Asia Tire $ 5.5 $ 1.6 $ 16.9 $ 9.4
SPT 7.8 12.1 27.0 35.1
------- ------- ------- -------
$ 13.3 $ 13.7 $ 43.9 $ 44.5
======= ======= ======= =======
</TABLE>
-12-
<PAGE> 14
THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
OTHER (INCOME) AND EXPENSE
- --------------------------
Other (Income) and Expense in 1999 included a third quarter gain of $149.7
million ($143.7 million after tax or $.90 per share) on the change in control of
25% of the European businesses contributed to Goodyear Dunlop Tires Europe B.V.
by the Company. In addition, proceeds of $17.0 million ($11.1 million after tax
or $.07 per share) were realized in the 1999 third quarter from the Company's
sale of customer lists and formulations in connection with its exit from
the production of certain rubber chemicals. The third quarter of 1998 included
gains on dispositions of real estate totaling $53.2 million ($32.0 million after
tax or $.20 per share). The second quarter of 1998 included a charge of $17.4
million ($11.4 million after tax or $.07 per share) for the settlement of
several related lawsuits involving employment matters in Latin American Tires
and Engineered Products in Latin America. The first quarter of 1998 included a
gain of $61.1 million ($37.9 million after tax or $.24 per share) on the sale of
the Company's Calhoun, Georgia latex processing facility.
DISCONTINUED OPERATIONS
- -----------------------
On March 21, 1998 the Company reached an agreement to sell, and on July 30,
1998 the Company completed the sale of, substantially all of the assets and
liabilities of its oil transportation business to Plains All American Inc., a
subsidiary of Plains Resources Inc. Proceeds from the sale were $422.3 million,
which included distributions to the Company of $25.1 million prior to closing.
The principal asset of the oil transportation business was the All American
Pipeline System, consisting of a 1,225 mile heated crude oil pipeline system
extending from Las Flores and Gaviota, California, to McCamey, Texas, a crude
oil gathering system located in California's San Joaquin Valley and related
terminal and storage facilities.
The transaction was accounted for as a sale of discontinued operations.
Operating results and the loss on sale of discontinued operations follow:
<TABLE>
<CAPTION>
(In millions, except per share) NINE MONTHS ENDED
SEPTEMBER 30, 1998
------------------
<S> <C>
NET SALES $ 22.4
======
Income before Income Taxes $ 12.9
United States Taxes on Income 4.7
------
Income from Discontinued Operations 8.2
Loss on Sale of Discontinued Operations, including
estimated income from operations during the
disposal period (3/21/98-7/30/98)of $10.0
(net of tax of $24.1) (42.9)
------
DISCONTINUED OPERATIONS $(34.7)
======
INCOME (LOSS) PER SHARE - BASIC:
Income from Discontinued Operations $ .05
Loss on Sale of Discontinued Operations (.27)
------
DISCONTINUED OPERATIONS $ (.22)
======
INCOME (LOSS) PER SHARE - DILUTED:
Income from Discontinued Operations $ .05
Loss on Sale of Discontinued Operations (.27)
------
DISCONTINUED OPERATIONS $ (.22)
======
</TABLE>
-13-
<PAGE> 15
THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
PER SHARE OF COMMON STOCK
- -------------------------
Basic earnings per share have been computed based on the average number of
common shares outstanding. The following table presents the number of
incremental weighted average shares used in computing diluted per share amounts:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Stock options 917,564 1,142,429 951,509 1,654,882
Performance units -- 252,273 130,973 252,240
1.2% Convertible Note 2,281,115 -- 1,774,201 --
--------- --------- --------- ---------
3,198,679 1,394,702 2,856,683 1,907,122
========= ========= ========= =========
</TABLE>
RECLASSIFICATION
- ----------------
Certain items previously reported in specific financial statement captions
have been reclassified to conform to the 1999 presentation.
ADJUSTMENTS
- -----------
All adjustments, consisting of normal recurring adjustments, necessary for
a fair statement of the results of these unaudited interim periods have been
included.
-14-
<PAGE> 16
THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
---------------------
CONSOLIDATED
- ------------
(All per share amounts are diluted)
Sales in the third quarter of 1999 were $3.29 billion, increasing 3.0% from
$3.19 billion in the 1998 quarter. Net income of $109.1 million, or $.69 per
share, decreased 41.0% from $185.0 million or $1.17 per share in the 1998
period.
In the nine months, sales of $9.33 billion decreased 1.0% from $9.42
billion in 1998. Net income was $200.3 million or $1.26 per share, compared to
$560.8 million or $3.53 per share in 1998.
Worldwide tire unit sales in the third quarter were almost 4 million
units, or 8.1%, higher than in 1998. The increase reflects the Company's
strategic alliance with Sumitomo Rubber Industries Ltd. (Sumitomo), which
commenced operations on September 1, 1999, as well as strong performances in
Europe and Asia. North American volume increased more than 1 million units,
however performance was limited by severe capacity constraints in several
product lines. Total North American (United States and Canada) volume increased
4.2% in the quarter while international unit sales increased 13.2%. Worldwide
replacement unit sales increased 5.7% from the 1998 quarter, while worldwide
original equipment (OE) unit sales rose 15.3%. Both the OE and replacement
markets benefited from increased volume in North America, Europe and Asia.
Significant decreases in OE and replacement units were experienced in Latin
American markets. In the nine months, unit sales increased 5.3 million units, or
3.8%, from the 1998 period, with North American units 3.2% higher and
international units up 4.5%. Worldwide replacement unit sales rose 4.0% in the
first nine months of 1999, while original equipment volume increased 3.3%.
Revenues increased in the quarter due primarily to higher tire unit sales.
The Dunlop businesses acquired from Sumitomo contributed more than $200 million
to third quarter sales. Revenues decreased in the nine months despite higher
unit sales, due primarily to the adverse effect of currency translations on
international results. The Company estimates that versus 1998, currency
movements adversely affected revenues in 1999 by approximately $70 million in
the third quarter and $275 million in the nine months. In addition, revenues in
both 1999 periods were adversely affected by continued worldwide competitive
pricing pressures, weak economic conditions in Latin America and lower unit
sales of engineered products.
-15-
<PAGE> 17
The following table presents cost of goods sold (CGS) and selling, general
and administrative expense (SAG) as a percent of sales:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
CGS 84.1% 77.4% 80.7% 76.3%
SAG 15.7 14.8 15.4 14.7
</TABLE>
Cost of goods sold increased in dollars and as a percent to sales in 1999
third quarter due primarily to increased production costs associated with higher
unit volumes, increased distribution costs, higher research and development
costs and a change in mix to lower margin tires. In addition, the Company
incurred operating charges for inventory write-offs and adjustments. These
charges relate primarily to inventory write-offs resulting from the realignment
of North American tire brand positioning and replacement market distribution
strategies and the termination of participation in CART and IRL racing. In
the 1999 nine months, CGS was also adversely impacted by higher unit costs
associated with lower production levels in first six months of 1999 resulting
from the Company's programs to realign capacity and reduce inventories.
SAG increased in both 1999 periods in dollars and as a percent to sales due
to higher SAG levels at the Dunlop businesses acquired on September 1, 1999, and
due to lower revenues in the first half of 1999.
The Dunlop businesses acquired from Sumitomo contributed more than $18
million in EBIT (net sales less cost of goods sold and selling, administrative
and general expense) in the third quarter of 1999. EBIT was adversely affected
by the effect of currency movements versus 1998. The Company estimates the
impact of currency fluctuations on EBIT to be approximately $12 million in the
third quarter and $50 million in the nine months.
The Company is unable to predict the impact of currency fluctuations and
economic conditions on its sales and EBIT in future periods. Reported sales and
EBIT in future periods are likely to be unfavorably impacted if the dollar
strengthens versus various foreign currencies. Similarly, the continuing
economic downturn in Latin America is expected to adversely affect the Company's
sales and operating income in future periods.
Rationalization plans approved in the third quarter of 1999 resulted in
third quarter charges totaling $46.5 million ($42.4 million after tax or $.27
per share). In addition, credits of $40.4 million ($26.7 million after tax or
$.17 per share) were recorded in the 1999 third quarter due to the reversal of
certain rationalization charges recorded in the first quarter of 1999. The 1999
first quarter charges totaled $167.4 million ($116.0 million
-16-
<PAGE> 18
after tax or $.74 per share). The second quarter of 1999 included credits of
$9.6 million ($6.0 million after tax or $.04 per share), and the second quarter
of 1998 included credits of $29.7 million ($19.6 million after tax or $.12 per
share). For additional information concerning the Company's rationalization
programs, see "Rationalizations" below.
Interest expense rose in 1999 due primarily to higher debt levels incurred
to fund acquisitions and increased working capital requirements. Higher interest
rates were also experienced. Interest expense in future periods is expected to
be significantly higher than in the third quarter of 1999, due to increased debt
levels resulting from the strategic alliance with Sumitomo and higher interest
rates.
Other (Income) and Expense in the third quarter of 1999 included a gain of
$149.7 million ($143.7 million after tax or $.90 per share) on the change in
control of 25% of the European businesses contributed to Goodyear Dunlop Tires
Europe B.V. by the Company. In addition, proceeds of $17.0 million ($11.1
million after tax or $.07 per share) were realized in the 1999 third quarter
from the Company's sale of customer lists and formulations in connection with
its exit from the production of certain rubber chemicals. The third quarter of
1998 included gains on dispositions of real estate totaling $53.2 million ($32.0
million after tax or $.20 per share). The second quarter of 1998 included a
charge of $17.4 million ($11.4 million after tax or $.07 per share) for the
settlement of several related lawsuits involving employment matters in Latin
American Tires and Engineered Products in Latin America. The first quarter of
1998 included a gain of $61.1 million ($37.9 million after tax or $.24 per
share) on the sale of the Company's Calhoun, Georgia latex processing facility.
Foreign currency exchange gains increased pretax income in the nine months
due primarily to the impact of currency movements on U.S. dollar denominated
monetary items in Brazil.
The effective rate of U.S. and foreign taxes on income benefited from the
nontaxable character of the gain resulting from the change in control of 25% of
Goodyear's businesses contributed to the European joint venture with Sumitomo.
RATIONALIZATIONS
- ----------------
THIRD QUARTER 1999 PROGRAM - Continued competitive conditions in the markets
served by the Company resulted in the approval of a number of rationalization
plans in the third quarter of 1999. The actions consisted of the decision to
terminate tire production at a facility in Latin America, the reduction of
staffing levels in North American Tire and the termination of participation in
the Championship Auto Racing Teams (CART) and Indy Racing League (IRL) racing
series at the end of the season in November 1999. Of the $46.5 million of
charges recorded
-17-
<PAGE> 19
($42.4 million after tax or $.27 per share), $19.2 million related to non-cash
writeoffs and $27.3 million related to future cash outflows, primarily for
associate severance costs and payments under noncancellable contracts. The
remaining balance of these provisions totaled $26.2 million at September 30,
1999.
The third quarter charges included $20.4 million for the release of
approximately 340 associates around the world, including approximately 160
production and supervisory associates at the Latin American facility, 120
managerial, administrative and support associates in North American Tire
operations and 60 production and support associates in CART/IRL activities. At
September 30, 1999, six North American Tire managerial associates had been
released at a cost of $1.2 million. The Company plans to release approximately
334 more associates and had reserved $19.2 million for that cost at September
30, 1999.
Rationalization costs, other than associate-related costs, of $26.1 million
were recorded in the 1999 third quarter, of which $19.1 million were incurred
during the third quarter of 1999. Costs associated with termination of tire
production totaled $19.6 million and are primarily for equipment taken out of
service. Costs associated with the withdrawal of support for CART and IRL
totaled $6.5 million and are for the early termination of contracts with various
racing teams. The remaining balance of these provisions totaled $7.0 million at
September 30, 1999.
The Company expects that the major portion of these actions will be
completed during 2000. Annual pretax savings of approximately $35 million are
expected when the planned actions have been fully implemented.
PRIOR RATIONALIZATION PROGRAMS
- ------------------------------
During 1999, the Company continued to implement its prior rationalization
programs. The following discussion reflects the activity and progress of those
programs in the third quarter of 1999.
FIRST QUARTER 1999 PROGRAM - A number of rationalization actions were approved
in the first quarter of 1999 to reduce costs and increase productivity and
efficiency. These actions consisted primarily of the termination of tire
production at the Gadsden, Alabama facility and the downsizing and consolidation
of tire manufacturing facilities at Freeport, Illinois and 12 other locations in
Europe, South Africa and Latin America. A charge of $167.4 million ($116.0
million after tax or $.74 per share) was recorded, of which $28.4 million
related to non-cash writeoffs and $139.0 million related to future cash
outflows, primarily for associate severance costs. The remaining balance of
these provisions totaled $25.4 million at September 30, 1999.
-18-
<PAGE> 20
In the third quarter of 1999, charges recorded in the 1999 first quarter
totaling $40.2 million ($26.5 million after tax or $.17 per share) were reversed
and credited to the Rationalizations line on the Consolidated Statement of
Income. The reversals included $33.4 million related to the decision to resume
production of certain passenger tire lines in a portion of the Gadsden facility
due to higher-than-expected demand in North America and the high cost and time
delays associated with installing additional capacity at other plants. The other
$6.8 million related to the decision to abandon the planned relocation of
certain agricultural tire production to Turkey due to the rationalization
opportunities presented by the joint venture with Sumitomo and production
difficulties in Turkey following the recent earthquake.
Under the first quarter 1999 program, the Company recorded a charge of
$130.6 million for the release of approximately 4,000 associates around the
world. Most of the associates to be released under the plan are or were
production and support associates at manufacturing locations, primarily in the
United States and Latin America. Through September 30, 1999, approximately 2,300
associates, including over 1,400 production and support associates in Latin
America, over 375 production associates at the Gadsden, Alabama tire plant and
over 390 production associates at the Freeport, Illinois tire plant were
released at a cost of $94.4 million. In connection with the plan for terminating
tire production at the Gadsden facility, more than 400 Gadsden plant associates
have been transferred to other manufacturing facilities, the cost of which was
not included in the first quarter program. In the third quarter of 1999, $20.3
million was charged to the reserve for the release of approximately 500
associates, primarily production associates in Latin America. Associate costs
totaling $34.4 million, including $18.4 million of pension curtailment costs,
were reversed in the third quarter as a result of the previously discussed
changes related to the plants in Gadsden and Turkey. The Company plans to
release approximately 1,000 more associates and had reserved $20.2 million for
that cost at September 30, 1999. During October 1999, production at the Logan,
Ohio facility was terminated and more than 550 associates were released at a
cost of $2.6 million.
Rationalization costs, other than associate-related costs, of $36.8 million
were recorded, of which $.5 million were incurred during the third quarter of
1999. The costs were primarily associated with the writeoff of equipment taken
out of service and obligations under noncancellable contracts, primarily utility
contracts, both at the Gadsden facility, the loss on the anticipated sale of a
rubber plantation in Asia and additional costs associated with the Company's
1998 exit from the Formula 1 racing series. Through September 30, $25.8 million
was charged to the reserve. Reserves totaling $5.8 million were reversed in the
third quarter, as utility termination reserves will not be required due to the
resumption of production at the Gadsden facility. The remaining balance of these
provisions totaled $5.2
-19-
<PAGE> 21
million at September 30, 1999.
The Company expects that the major portion of the remaining actions will be
completed during 1999 with the balance to be completed in 2000. Annual pretax
savings of approximately $140 million are expected when the planned actions have
been fully implemented.
1997 PROGRAM - During the third quarter, approximately 200 associates, primarily
hourly associates in North American operations, were released at a cost of $5.3
million. In addition, reserves related to European operations totaling $.2
million were reversed. The Company plans to release approximately 800 more
associates under the 1997 program and had reserved $33.1 million for that cost
at September 30, 1999.
Rationalization costs, other than associate-related costs, totaling $1.9
million were incurred during the third quarter of 1999. The remaining balance of
these provisions totaled $11.3 million at September 30, 1999.
The Company expects that the major portion of the 1997 program will be
completed during 1999 with the balance to be completed in 2000. Annual pretax
savings of approximately $200 million are expected when the planned actions have
been fully implemented.
1996 PROGRAM - The Company has completed the planned release of associates under
the 1996 program. During the third quarter of 1999, $1.1 million was charged to
the reserve for other than associate related costs. In the second quarter of
1999, reserves totaling $1.0 million were adjusted. The remaining balance of
these provisions at September 30, 1999 totaled $2.8 million, which is for
payments due under noncancellable leases through 2007 related to Canadian retail
store closures. With the exception of the Canadian lease payments, the Company
has completed the 1996 program.
For further information, refer to the note to the financial statements
captioned "Rationalizations".
DISCONTINUED OPERATIONS
- -----------------------
On March 21, 1998 the Company reached an agreement to sell, and on July 30,
1998 the Company completed the sale of, substantially all of the assets and
liabilities of its oil transportation business. The loss on the sale, net of
income from operations during 1998, totaled $34.7 million after tax or $.22 per
share. For further information, refer to the note to the financial statements
captioned "Discontinued Operations".
-20-
<PAGE> 22
STRATEGIC ALLIANCE
- ------------------
On June 14, 1999, the Company entered into a definitive general agreement
and various other agreements with Sumitomo Rubber Industries Ltd. ("Sumitomo")
relating to the formation and operation of the strategic global alliance (the
"Alliance Agreements"). The Alliance Agreements provide, among other things, for
tire manufacturing and sales joint ventures. On September 1, 1999, the global
alliance was completed and the joint ventures commenced operations. In addition
to the businesses contributed, the Company paid $915.5 million to Sumitomo and
its affiliates, which was financed by the issuance of additional debt. Certain
adjustments may be made to the cash payment based on the amounts of cash, debt,
accounts receivable, inventory and trade payables contributed by Sumitomo and
the Company to the joint venture.
In accordance with the terms of the Alliance Agreements, the Company
acquired 75%, and Sumitomo owned 25%, of Goodyear Dunlop Tires Europe B.V., a
Netherlands holding company. On September 1, 1999, this company acquired
substantially all of Sumitomo's tire businesses in Europe, including eight tire
manufacturing plants located in England, France and Germany and sales and
distribution operations in 18 European countries, and most of the Company's tire
businesses in Europe. The Company's tire businesses in Poland (other than a
sales company), Slovenia and Turkey (as well as Morocco and South Africa), the
Company's aircraft tire businesses, and the Company's textile, steel tire cord
and tire mold manufacturing plants and technical center and related facilities
located in Luxembourg are excluded from the joint venture.
On September 1, 1999, the Company also acquired 75%, and Sumitomo acquired
25%, of Goodyear Dunlop Tires North America Ltd., a holding company that
purchased Sumitomo's tire manufacturing operations in North America and certain
of its related tire sales and distribution operations. In addition, the Company
acquired 100% of the balance of Sumitomo's Dunlop tire distribution and sales
operation in the United States and Canada. The Company also acquired a 25% (and
Sumitomo acquired a 75%) equity interest in each of two tire companies in Japan,
one for the distribution and sale of Goodyear-brand passenger and truck tires in
the replacement market in Japan and the other for the distribution and sale of
Goodyear-brand and Dunlop-brand tires to original equipment manufacturers in
Japan. The Company transferred certain assets of its subsidiary located in Japan
in exchange for such equity interests and approximately $27 million in cash.
The Company also acquired a 51% (and Sumitomo acquired a 49%) equity
interest in a company that will coordinate and disseminate commercialized tire
technology among the Company, Sumitomo, the joint ventures and their respective
affiliates, and an 80% (and Sumitomo acquired a 20%) equity interest in a global
-21-
<PAGE> 23
purchasing company.
The Company accounted for the strategic alliance using the purchase method.
The cost of the acquired businesses totaled approximately $1.22 billion,
including the cash payment of $915.5 million and the fair value of 25% of the
Goodyear businesses contributed to the European joint venture, or $307 million.
The Company will amortize the approximately $390 million of goodwill recorded on
the transaction on a straight-line basis over 40 years.
The Company recognized the previously mentioned gain of $149.7 million
($143.7 million after tax or $.90 per share) on the change of control of 25% of
its businesses contributed to the European tire company. The Consolidated
Statement of Income also includes the results of operations of the former
Sumitomo operations from September 1, 1999. The Consolidated Balance Sheet at
September 30, 1999 includes all of the assets and liabilities of the European
and North American businesses acquired by the Company.
The Company has been undergoing an extensive analysis and assessment of the
various activities of the combined businesses and is formulating, but has not
completed, plans to integrate the businesses in order to optimize market growth
opportunities as well as maximize cost efficiencies. The actions contemplated
under the plans will include the downsizing or consolidation of various
manufacturing, distribution, sales, support and administrative operations. The
execution of the plan is contingent upon the completion of the analysis of the
optimal integration of manufacturing, distribution and sales operations and
facilities, information systems, research and development activities and the
appropriate staffing levels for various other functions. Due to the magnitude of
the assessment required, the establishment and implementation of these plans
will extend over several periods commencing in the fourth quarter of 1999. The
Company anticipates that some of these actions will result in charges to future
operations while others will result in an adjustment to the acquisition cost.
The actions contemplated by the Company related to the businesses acquired
are expected to result in costs totaling $80 million to $120 million. These
costs include associate severance costs and noncancellable lease obligations.
The costs will be recorded as an adjustment to the acquisition cost and will
result in increased values assigned to non-current assets. Because of these
actions and other initiatives, the Company anticipates that it will be able to
realize synergies that will, by the end of the third year of combined
operations, yield annual cost savings aggregating $300 to $360 million. The
synergies are expected to be derived from the rationalization of manufacturing,
the integration of distribution facilities and staffing and the benefits of
combined purchasing activities.
-22-
<PAGE> 24
In addition to the above mentioned actions, the Company anticipates that it
will take certain other actions in respect of its European Union Tire and North
American Tire operations made possible by the strategic alliance with Sumitomo
that will result in fourth quarter rationalization charges of up to $45 million.
For further information, refer to the note to the financial statements,
Strategic Alliance.
YEAR 2000
- ---------
The Company has inventoried and assessed all date sensitive technical
infrastructure and information and transaction processing computer systems ("I/T
Systems"). The Company has also inventoried and assessed its manufacturing and
other operating systems that may be date sensitive ("Process Systems"),
including those that use embedded technology such as micro-controllers and
micro-processors. The Company has also determined the actions required to make
its I/T Systems and Process Systems Year 2000 compliant.
The Company monitors its Year 2000 compliance efforts with respect to I/T
Systems and Process Systems in three phases: (1) the identification and
inventory of date sensitive transactions, processes and systems (the "Inventory
Phase"), (2) the determination of repairs and replacements required, if any,
through testing, analysis and design (the "Analysis Phase"), and (3) the repair
or acquisition, installation and testing of Year 2000 compliant systems (the
"Remediation Phase"). The following table indicates the Company's progress in
its Year 2000 compliance program. This information includes the manufacturing
and distribution operations acquired by the Company on September 1, 1999 from
Sumitomo ("the Dunlop Facilities").
Estimated Percentage of Year 2000 Compliance Activity Completed:
----------------------------------------------------------------
<TABLE>
<CAPTION>
Inventory Phase Analysis Phase Remediation Phase
--------------- -------------- -----------------
Percentage Completed at Percentage Completed at Percentage Completed at
9/30/99 12/31/98 9/30/99 12/31/98 9/30/99 6/30/99 12/31/98
------- -------- ------- -------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
I/T Systems 100% 100% 100% 100% 97% 92% 74%
Process Systems 100% 100% 100% 95% 96% 92% 66%
</TABLE>
The I/T Systems and Process Systems that were not compliant as of September
30, 1999 are scheduled to be remediated and determined to be Year 2000 compliant
prior to December 31, 1999.
The cost of modifying the Company's existing I/T Systems in order to
achieve Year 2000 compliance is estimated to be $81 million to $89 million.
Approximately $79 million has been expended to modify existing I/T Systems
through September 30, 1999, including approximately $5 million expended during
the third quarter of 1999. The remaining $2 million to $10 million
-23-
<PAGE> 25
will be spent during the balance of 1999. All of the costs of repairing such
existing I/T Systems have been or will be expensed in the period incurred. The
cost of new hardware has been and will be capitalized.
In addition, for several years the Company has been designing, acquiring,
and installing various business transactions processing I/T Systems, which in
each case provide significant new functionality and, in some instances, replace
non-compliant I/T Systems with Year 2000 compliant I/T Systems. Due to the
integrated nature of these I/T Systems enhancement projects, it is not
practicable to segregate the costs associated with the elements of these new I/T
Systems that may have been accelerated to facilitate Year 2000 compliance. The
Company estimates that prior to January 1, 2000 it will have spent approximately
$230 million to $245 million for consulting, software and hardware costs
incurred in connection with the I/T Systems enhancement projects in process
since 1996. Approximately $219 million has been expended on these projects
through September 30, 1999, including approximately $24 million during the third
quarter of 1999. The Company anticipates that costs incurred in respect of these
projects will be approximately $11 million to $26 million during the balance of
1999. Through September 30, 1999, approximately $41 million of these costs have
been expensed and $178 million of these costs have been capitalized.
Substantially all of the remaining consulting, software and hardware costs for
these I/T Systems enhancement projects will be capitalized.
The Company is modifying or replacing and testing its Process Systems at an
anticipated cost of between $34 million and $42 million, substantially all of
which is for the acquisition of replacement systems. The cost of Process Systems
has been and will be capitalized. Through September 30, 1999, the cost of
Process Systems installed by the Company has totaled $33 million, of which $6
million was incurred during the third quarter of 1999.
Accordingly, the Company's Year 2000 compliance costs (including the cost
of all I/T Systems enhancement projects) are expected to total approximately
$340 million to $370 million. Through September 30, 1999, Year 2000 compliance
costs have totaled $330 million, of which $35 million was incurred during the
third quarter of 1999. All Year 2000 costs have been and will be funded from
operations.
For 1999, costs for repairing existing I/T Systems for Year 2000 compliance
is expected to be approximately 10% of the Company's budget for information
technology. The total cost of repairing existing I/T Systems and of the I/T
Systems enhancement projects is expected to represent 30% of the Company's
information technology budget during 1999.
-24-
<PAGE> 26
The Company surveyed its significant suppliers to determine the extent to
which the Company may be vulnerable to their failure to correct their own Year
2000 issues. Based on responses to its survey and other communications, the
Company has assessed the Year 2000 readiness of all of its significant
suppliers. Supplier assessments in respect of the Dunlop Facilities acquired
from Sumitomo on September 1, 1999 in connection with the formation of the
strategic alliance were 96% complete as of September 30, 1999 and have been
completed. If, contrary to the Company's expectations based on its supplier
assessment results, significant trading partners fail to adequately address Year
2000 issues, such failures could have a material adverse effect on the Company's
operations, although it is not possible at this time to quantify the amount of
revenues and profits that might be lost or costs that could be incurred by the
Company.
The Company is preparing contingency plans for its critical operational
areas, which plans include identification of critical processes, risk assessment
and response techniques in the event of a system failure. Planned responses to
system failures include emergency response teams designed to produce prompt
corrective action, identification of alternate sources of supply, manual
processing of transactions, manual control of production processes and the stock
piling of raw materials and finished goods in those instances where a risk of a
supply failure is suspected. The Company will also have a communications and
monitoring center operational from December 31, 1999 to January 3, 2000 (and
beyond, if necessary). The Company's contingency plans were 95% complete at
September 30, 1999 and were completed for all significant locations prior to
October 31, 1999, except that the contingency plans for the operational Dunlop
Facilities were 98% complete as of September 30, 1999 and were completed prior
to October 31, 1999. In certain cases, especially global infrastructure
failures, there may be no practical alternative course of action available to
the Company that will permit resumption of an interrupted business activity.
While the Company believes its efforts to address the Year 2000 issue will
be successful in avoiding any material adverse effect on the Company's
operations or financial condition, it recognizes that failing to resolve Year
2000 issues on a timely basis would, in a "most reasonably likely worst case
scenario", significantly limit its ability to manufacture and distribute certain
of its products for an undeterminable period of time, which is most likely to
arise in the event of the failure of one or more significant suppliers or
essential components of the global infrastructure, such as power sources. The
Company is not able to estimate its lost revenues, lost profits and costs
incurred in the event of the occurrence of the "most reasonably likely worst
case scenario". If the Company's systems are not Year 2000 compliant in a timely
manner, the Company may also incur liability for breach of contract or other
harm. It is not possible at this time to estimate either the risk of incurring
-25-
<PAGE> 27
any such liability or the nature or amount of any such liability.
The foregoing discussion regarding Year 2000 is based on management's
current evaluation using available information. Factors that might cause
material changes include, but are not limited to, the readiness of third parties
and the Company's ability to respond to unforeseen Year 2000 complications.
NEW ACCOUNTING STANDARDS
- ------------------------
The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging
Activities" (SFAS 133). SFAS 133 requires all derivatives to be recognized as
either assets or liabilities on the balance sheet and be measured at fair value.
Changes in such fair value are required to be recognized in earnings to the
extent that the derivatives are not effective as hedges. The provisions of SFAS
133 are effective for fiscal years beginning after June 15, 2000, and are
effective for interim periods in the initial year of adoption. At the present
time the Company has not yet determined the financial statement impact of the
adoption of SFAS 133.
SEGMENT INFORMATION
- -------------------
Effective July 1, 1999 the Company reorganized its Europe Tire segment into
two segments, the European Union Tire business and the Eastern Europe, Africa
and Middle East Tire business. This was done to reflect the way the business
would be managed given the anticipated addition of the Dunlop Facilities and
related businesses, which was completed on September 1, 1999. Segment
information for prior periods has been restated to reflect this change.
Segment EBIT was $10.6 million in the third quarter of 1999, decreasing
96.0% from $264.8 million in the 1998 quarter. Segment operating margin in the
third quarter of 1999 was .3%, compared to 8.0% in the 1998 period.
In the nine months, segment EBIT was $396.1 million, decreasing 55.2% from
$883.3 million in the 1998 period. Segment operating margin in the nine months
was 4.1%, compared to 9.0% in the 1998 period.
Segment EBIT does not include the previously discussed rationalizations and
certain items reported in other income and expense. For further information,
refer to the note to the financial statements captioned "Business Segments".
-26-
<PAGE> 28
NORTH AMERICAN TIRE
- -------------------
North American Tire segment sales in the third quarter of 1999 were $1.62
billion, increasing 1.2% from $1.60 billion in the 1998 quarter. In the nine
months, sales of $4.71 billion increased .7% from $4.68 billion in 1998.
Unit sales in the 1999 third quarter increased 4.2% from the 1998 period,
with replacement unit sales .6% higher and original equipment volume up 13.1%.
Unit sales in the nine months increased 3.2% from the 1998 period, with
replacement unit sales 1.3% higher and original equipment volume up 7.1%.
Revenues increased in the quarter and nine months due primarily to higher
tire unit sales resulting from the acquisition of the Dunlop Facilities and
related businesses in the United States and Canada. Revenues in both periods
were adversely impacted by competitive pricing pressures, a less favorable mix
and the impact of currency translation on Canadian results. The Company also
experienced unanticipated product shortages of certain tire lines and sizes,
which is expected to continue into the fourth quarter of 1999. Revenues in
future periods are likely to be adversely affected by competitive pricing
pressures.
The North America Tire segment incurred an EBIT loss of $108.6 million in
the third quarter of 1999, compared to income of $94.9 million in the 1998
quarter. Operating margin was (6.7)%, compared to 5.9% in the 1998 quarter.
In the nine months, EBIT in North America was $7.4 million, decreasing
97.5% from the $294.3 million recorded in the 1998 period. Operating margin was
.2%, compared to 6.3% in 1998.
EBIT was lower in the third quarter due primarily to increased production
costs associated with higher unit volumes and shifts in mix to lower margin
tires, increased distribution costs and higher research and development costs.
Third quarter EBIT also included charges for inventory write-offs and
adjustments resulting primarily from the realignment of brand positioning and
replacement market distribution strategies occasioned by the addition of the
Dunlop brand on September 1, 1999 and from the Company's exit from CART and
IRL racing and higher SAG. EBIT in the nine months was also affected by a
change in mix to lower priced tires, increased costs to realign capacity and
reduce inventories, competitive pricing conditions and second quarter
nonrecurring costs related to operational changes at the Company's Danville tire
plant. EBIT was favorably affected in both 1999 periods by the September 1, 1999
acquisition of the Dunlop facilities and related businesses in the United States
and Canada from Sumitomo.
-27-
<PAGE> 29
EBIT in 1999 did not include first quarter rationalization charges totaling
$95.5 million and credits resulting from the reversal of certain rationalization
reserves totaling $9.2 million in the second quarter and $21.7 million in the
third quarter. EBIT in 1998 did not include $7.7 million of credits in the
second quarter resulting from rationalization reversals and third quarter gains
on asset sales totaling $39.0 million.
The Company anticipates continued fluctuations in the value of the U.S.
dollar relative to the Canadian dollar. Revenues and EBIT in the North American
Tire segment may be affected in future periods by the effects of currency
translation on Canadian results.
EUROPEAN UNION TIRE
- -------------------
European Union Tire segment sales in the third quarter of 1999 were $661.5
million, increasing 26.3% from $523.7 million in the 1998 period. In the nine
months, sales of $1.64 billion increased 9.4% from $1.49 billion in 1998.
Unit sales in the 1999 quarter increased 29.8% from the 1998 period, with
replacement unit sales 27.4% higher and original equipment volume up 36.9%. Unit
sales in the nine months increased 12.9% from the 1998 period, with replacement
unit sales 16.5% higher and original equipment volume up 4.3%.
Revenues increased in the quarter due primarily to higher tire unit sales
resulting from the acquisition of certain of Sumitomo's Dunlop tire
manufacturing and distribution operations in Europe. Revenues were adversely
impacted by the effects of currency translation and competitive pricing
pressures. Revenues in future periods may be adversely affected by competitive
pricing pressures.
European Union Tire segment EBIT was $42.7 million in the third quarter of
1999, increasing 7.3% from $39.8 million in the 1998 quarter. Operating margin
was 6.5%, compared to 7.6% in the 1998 quarter.
In the nine months, EBIT in the European Union was $123.3 million,
decreasing 16.6% from $147.8 million in 1998. Operating margin was 7.5%,
compared to 9.9% in 1998.
EBIT increased in the quarter due primarily to higher tire unit sales
resulting from the acquisition of the Dunlop businesses. EBIT decreased in the
nine months due primarily to increased costs resulting from ongoing programs to
align production with inventory, the effects of currency translations and higher
SAG.
EBIT in 1999 did not include first quarter rationalization charges totaling
$6.7 million and credits totaling $7.1 million in the third quarter resulting
from the reversal of certain rationalization reserves. A third quarter gain
totaling $149.7 million resulting from the change in control of 25% of the
-28-
<PAGE> 30
Company's businesses contributed to the European joint venture was not included
in EBIT.
The Company anticipates continued fluctuations in the value of the U.S.
dollar relative to the Euro and other Western European currencies. Revenues and
EBIT in the European Union segment may be affected in future periods by the
effects of currency translations.
EASTERN EUROPE, AFRICA AND MIDDLE EAST TIRE
- -------------------------------------------
Eastern Europe, Africa and Middle East Tire segment ("Eastern Europe")
sales in the third quarter of 1999 were $212.3 million, decreasing 4.6% from
$222.6 million in the 1998 period. In the nine months, sales of $582.8 million
decreased 7.0% from the $626.4 million recorded in the 1998 period.
Unit sales in the 1999 quarter increased 6.7% from the 1998 period, with
replacement unit sales 3.3% higher and original equipment volume up 26.0%. Unit
sales in the nine months increased 7.4% from the 1998 period, with replacement
unit sales 9.2% higher and original equipment volume up .6%.
Revenues decreased in the quarter and nine months despite higher tire unit
sales, due primarily to the effects of currency translation, competitive pricing
conditions and adverse economic conditions in South Africa and Turkey. Revenues
were favorably impacted in the nine months by the acquisition of a majority
interest in tire manufacturing operations in Slovenia. Revenues in future
periods may be adversely affected by competitive pricing pressures and economic
conditions in the markets served by the Eastern Europe segment.
EBIT in the Eastern Europe Tire segment was $13.1 million in the third
quarter of 1999, decreasing 58.5% from $31.6 million in the 1998 quarter.
Operating margin was 6.2%, compared to 14.2% in the 1998 quarter.
In the nine months, EBIT in Eastern Europe was $34.3 million, decreasing
56.3% from $78.5 million in 1998. Operating margin was 5.9%, compared to 12.5%
in 1998.
EBIT was lower in the quarter and nine months due primarily to lower
revenues, increased costs resulting from lower production levels associated with
programs to realign capacity and reduce inventories, the impact of the recent
earthquake on the Turkish economy and adverse economic conditions in Eastern
Europe and South Africa.
EBIT in 1999 did not include first quarter rationalization charges totaling
$2.1 million.
The Company anticipates continued fluctuations in the value of the U.S.
dollar relative to the various Eastern European
-29-
<PAGE> 31
currencies. Revenues and EBIT in the Eastern Europe Tire segment are likely to
be adversely affected in future periods by the effects of currency translations
if the dollar, as expected, strengthens against the currencies in the region.
LATIN AMERICAN TIRE
- -------------------
Latin American Tire segment sales in the third quarter of 1999 were $234.7
million, decreasing 22.4% from $302.6 million in the 1998 period. In the nine
months, sales of $694.5 million decreased 28.0% from $965.1 million in 1998.
Unit sales in the 1999 quarter decreased 10.0% from the 1998 period, with
replacement unit sales 2.7% lower and original equipment volume down 30.6%. Unit
sales in the nine months decreased 16.2% from the 1998 period, with replacement
unit sales 8.2% lower and original equipment volume down 37.8%.
Revenues in the quarter and nine months decreased due primarily to lower
tire unit sales resulting from significantly reduced levels of vehicle
production, a significant economic downturn in most of the region, competitive
pricing pressures and the effects of currency translations.
EBIT in the Latin American Tire segment was $12.5 million in the third
quarter of 1999, decreasing 68.8% from $40.1 million in the 1998 quarter.
Operating margin was 5.3%, compared to 13.3% in 1998.
In the nine months, EBIT in Latin America was $58.6 million, decreasing
61.9% from $154.0 million in 1998. Operating margin was 8.4%, compared to 16.0%
in 1998.
EBIT was lower in the quarter and nine months due to lower revenues and
increased costs resulting from significantly lower demand from original
equipment manufacturers and in the replacement market due to adverse economic
conditions and from increased unit costs due to lower levels of capacity
utilization necessary to align production with demand and reduce inventory.
EBIT in 1999 did not include first quarter rationalization charges totaling
$42.5 million and third quarter rationalization charges totaling $34.8 million.
EBIT in 1998 did not include a second quarter charge for a lawsuit settlement
totaling $15.6 million and third quarter gains on asset sales totaling $3.6
million.
The Company anticipates continued fluctuations in the value of the U.S.
dollar relative to Latin American currencies. Revenues and EBIT in the Latin
American Tire segment in future periods may be adversely affected by the effects
of currency translations. In addition, the expected continuing unfavorable
economic conditions and competitive pricing pressures in the region are expected
to adversely affect future revenues and EBIT.
-30-
<PAGE> 32
ASIA TIRE
- ---------
Asia Tire segment sales in the third quarter of 1999 were $150.0 million,
increasing 21.2% from $123.8 million in the 1998 period. In the nine months,
sales of $439.8 million increased 22.8% from $358.2 million in 1998.
Unit sales in the 1999 quarter increased 12.7% from the 1998 period, with
replacement unit sales 3.7% higher and original equipment volume up 75.6%. Unit
sales in the nine months increased 14.6% from the 1998 period, with replacement
unit sales 5.4% higher and original equipment volume up 82.6%.
Revenues in the quarter and nine months increased due primarily to higher
tire unit sales, the favorable impact of currency translations and improving
economic conditions in the region.
EBIT in the Asia Tire segment was $5.5 million in the third quarter of
1999, increasing from $1.6 million in the 1998 quarter. Operating margin was
3.7%, compared to 1.3% in 1998.
In the nine months, EBIT in Asia was $16.9 million, increasing 79.8% from
$9.4 million in 1998. Operating margin was 3.8%, compared to 2.6% in 1998.
EBIT increased in the quarter and nine months due primarily to higher
revenues, but was adversely impacted by a charge of $5.2 million to write off
obsolete equipment in India.
EBIT in 1999 did not include first quarter rationalization charges totaling
$1.5 million. EBIT in 1998 did not include third quarter gains on asset sales
totaling $9.6 million.
The Company anticipates continued fluctuations in the value of the U.S.
dollar relative to Asian currencies. Revenues and EBIT in the Asia Tire segment
in future periods may be affected by the effects of currency translations. In
addition, changing economic conditions in the region may adversely affect future
revenues and EBIT. Revenues and EBIT in future periods may be adversely affected
by competitive pricing pressures.
Sales and EBIT of the Asia Tire segment reflect the results of the
Company's majority-owned tire businesses in the region. In addition, the Company
owns a 50% interest in South Pacific Tyres Ltd. (SPT), the largest tire
manufacturer, marketer and exporter in Australia and New Zealand. Results of
operations of SPT are not reported in segment results and are reflected in the
Company's Consolidated Statement of Income using the equity method.
-31-
<PAGE> 33
The following table presents the sales and EBIT of the Company's Asia Tire
segment together with 100% of the sales and operating income of SPT:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
(In millions) SEPTEMBER 30, SEPTEMBER 30,
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
NET SALES:
Asia Tire $150.0 $123.8 $439.8 $358.2
SPT 158.7 147.0 489.8 470.6
------ ------ ------ ------
$308.7 $270.8 $929.6 $828.8
====== ====== ====== ======
EBIT:
Asia Tire $ 5.5 $ 1.6 $ 16.9 $ 9.4
SPT 7.8 12.1 27.0 35.1
------ ------ ------ ------
$ 13.3 $ 13.7 $ 43.9 $ 44.5
====== ====== ====== ======
</TABLE>
ENGINEERED PRODUCTS
- -------------------
Engineered Products segment sales in the third quarter of 1999 were $297.9
million, decreasing 4.5% from $311.9 million in the 1998 period. In the nine
months, sales of $935.3 million decreased 3.6% from $970.5 million in 1998.
EBIT in the Engineered Products segment was $8.9 million in the third
quarter of 1999, decreasing 60.1% from $22.3 million in the 1998 quarter.
Operating margin was 3.0%, compared to 7.1% in 1998.
In the nine months, EBIT in Engineered Products was $60.2 million,
decreasing 33.0% from $89.9 million in 1998. Operating margin was 6.4%, compared
to 9.3% in 1998.
Revenues and EBIT decreased in the quarter and nine months due primarily to
lower unit sales resulting from reduced demand from the mining industry,
unfavorable currency translation and adverse economic conditions in Latin
America and South Africa. EBIT was adversely affected in both periods by
increased costs resulting from programs to align production with demand and
reduce inventories.
Revenues and EBIT in the Engineered Products segment in future periods may
be adversely affected by continued unfavorable economic conditions in Latin
America and South Africa.
EBIT in 1999 did not include first quarter rationalization charges totaling
$9.1 million. EBIT in 1998 did not include a second quarter charge for a lawsuit
settlement totaling $1.8 million and a third quarter gain on an asset sale
totaling $.6 million.
-32-
<PAGE> 34
CHEMICAL PRODUCTS
- -----------------
Chemical Products segment sales in the third quarter of 1999 were $231.5
million, decreasing 2.2% from $236.6 million in the 1998 period. In the nine
months, sales of $683.1 million decreased 7.9% from $741.3 million in 1998.
EBIT in the Chemical Products segment was $36.5 million in the third
quarter of 1999, increasing 5.8% from $34.5 million in the 1998 quarter.
Operating margin was 15.8%, compared to 14.6% in 1998.
In the nine months, EBIT in Chemical Products was $95.4 million, decreasing
12.8% from $109.4 million in 1998. Operating margin was 14.0%, compared to 14.8%
in 1998.
Revenues decreased in the quarter and nine months due primarily to
competitive pricing pressures. EBIT rose in the quarter due to the benefits of
cost control measures.
EBIT in 1999 did not include a first quarter rationalization charge of $3.1
million and third quarter proceeds of $17 million from the sale of customer
lists and formulations in connection with the Company's exit from the production
of certain rubber chemicals. EBIT in 1998 did not include gains on asset sales
totaling $61.1 million in the first quarter and $.4 million in the third
quarter.
LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
Net cash provided by operating activities was $223.1 million during the
first nine months of 1999, as reported on the Consolidated Statement of Cash
Flows. Excluding the impact of the strategic alliance with Sumitomo, as
discussed below, inventories decreased, although working capital requirements
increased for accounts receivable and accounts payable. The strategic alliance
with Sumitomo resulted in substantial increases on the Consolidated Balance
Sheet in accounts receivable, inventories, goodwill, other deferred charges,
property, plant and equipment, accounts payable, compensation and benefits, debt
and minority equity in subsidiaries. Cash flows from operating activities in the
Consolidated Statement of Cash Flows are presented net of the effects of the
strategic alliance, which is reflected in investing activities, as discussed
below.
-33-
<PAGE> 35
Net cash used in investing activities was $1.42 billion during the first
nine months of 1999. Cash used for investing activities in 1999 included a cash
payment of $915.5 million for the acquisition of the majority interests in
Sumitomo's Dunlop tire businesses in Europe and North America as part of the
strategic alliance with Sumitomo. Other investing activities in 1999 included
the net proceeds from the sale of assets to the Japanese joint ventures formed
under the strategic alliance, which are 25% owned by the Company, and the
proceeds from the sale of customer lists and formulations in connection with
the company's exit from the production of certain rubber chemicals. Capital
expenditures in the first nine months of 1999 were $560.0 million, primarily
for plant modernizations and expansions and new tire molds.
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
(In millions) 1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Capital Expenditures $206.6 $199.9 $560.0 $490.6
Depreciation 140.2 121.4 393.6 351.8
</TABLE>
Investing activities in 1998 included the divestitures of the Calhoun,
Georgia latex processing facility, the oil transportation segment, distribution
facilities in North America and other miscellaneous real estate. In addition,
other investing activities in 1998 included the acquisition a majority interest
in tire manufacturers in Slovenia, India and Japan and a tire and engineered
products manufacturing and distribution business in South Africa.
Net cash provided by financing activities was $1.21 billion during the
first nine months of 1999, which was used primarily to support the previously
mentioned investing activities.
<TABLE>
<CAPTION>
(Dollars in millions) 9/30/99 12/31/98 9/30/98
-------- -------- --------
<S> <C> <C> <C>
Consolidated Debt $3,444.2 $1,975.8 $2,169.1
Debt to Debt and Equity 48.4% 34.5% 37.2%
</TABLE>
In connection with the Company's strategic alliance with Sumitomo, on
February 25, 1999 the Company issued to Sumitomo at par a 1.2% Convertible Note
Due August 16, 2000 in the principal amount of Yen13,073,070,934 (equivalent to
$123.5 million at September 30, 1999). The Company's Note is convertible, if not
earlier redeemed, during the period beginning July 16, 2000 through August 15,
2000 into 2,281,115 shares of the Common Stock, without par value, of the
Company at a conversion price of Yen 5,731 per share, subject to certain
adjustments. Consolidated Debt and Debt to Debt and Equity as stated above do
not reflect the issuance of the Company's 1.2% Convertible Note.
In addition, on February 25, 1999 the Company purchased at par from
Sumitomo a 1.2% Convertible Note Due August 16, 2000 in the principal amount of
Yen 13,073,070,934 (also equivalent to $123.5 million at September 30, 1999. The
Sumitomo Note is convertible, if not earlier redeemed, during the period
beginning July 16, 2000
-34-
<PAGE> 36
through August 15, 2000 into 24,254,306 shares of the Common Stock, Yen50 par
value per share, of Sumitomo at a conversion price of Yen539 per share, subject
to certain adjustments. Upon conversion of the Sumitomo Note into Sumitomo
Common Stock, the Company would own 10% of Sumitomo's outstanding shares. The
Company accounts for the Sumitomo note as an available-for-sale equity
instrument. The fair value of the note at September 30, 1999 was $136.1 million.
For further information, refer to the note to the financial statements,
Investments.
The Company and Sumitomo have each agreed that it would not redeem its
convertible note if the joint ventures contemplated by the global alliance were
operating on July 1, 2000.
Substantial short term and long term credit sources are available to the
Company globally under normal commercial practices. At September 30, 1999, the
Company had an aggregate of $1.3 billion of commercial paper outstanding. In
addition, at September 30, 1999, the Company had short term uncommitted bank
credit arrangements totaling $2.1 billion, of which $1.1 billion were unused.
The Company also had available long term credit arrangements at September 30,
1999 totaling $3.3 billion, of which $2.0 billion were unused.
In August of 1999, the Company entered into a Credit Agreement [364-Day
Facility], dated as of August 20, 1999, whereunder the Company may borrow from
25 domestic and international banks up to an aggregate amount of $1.3 billion at
any time and from time to time until August 18, 2000, when the commitment of
each lender terminates unless extended for 364 days on a bank by bank basis. If
a bank does not extend its commitment if requested to do so, the Company may
obtain a two-year loan from such bank in an amount up to the amount of such
bank's commitment. The Company currently pays a commitment fee of 8 basis points
on the entire amount of the commitment. The Company will pay a usage fee on the
aggregate amount borrowed ranging from 32 to 57 basis points. The Company is
also a party to a Revolving Credit Facility Agreement, as amended by a Second
Amendment and Restatement Agreement dated as of July 13, 1998, whereunder the
Company may borrow from 23 domestic and international banks up to $700 million
at any time and from time to time through July 13, 2003, when the commitment
terminates and any outstanding loans mature. The Company currently pays a
commitment fee of 12.5 basis points on the entire amount of the commitment and
would pay a usage fee of 25 basis points on amounts borrowed. Under both
facilities, the Company may obtain loans bearing interest at reserve adjusted
LIBOR or a defined certificate of deposit rate, plus the applicable usage fee.
There were no loans outstanding under these facilities at September 30, 1999.
Funds generated by operations, together with funds available under existing
credit arrangements, are expected to exceed the Company's currently anticipated
funding requirements for operations.
-35-
<PAGE> 37
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
----------------------------------------------------------
INTEREST RATE RISK
- ------------------
The Company actively manages its fixed and floating rate debt mix, within
defined limitations, using refinancings and unleveraged interest rate swaps. The
Company will enter into fixed and floating interest rate swaps to alter its
exposure to the impact of changing interest rates on consolidated results of
operations and future cash outflows for interest. Fixed rate swaps are used to
reduce the Company's risk of increased interest costs during periods of rising
interest rates. Floating rate swaps are used to convert the fixed rates of long
term borrowings into short term variable rates. Interest rate swap contracts are
thus used by the Company to separate interest rate risk management from the debt
funding decision. At September 30, 1999, the interest rate on 31% of the
Company's debt was fixed by either the nature of the obligation or through the
interest rate contracts, compared to 55% at December 31, 1998 and 50% at
September 30, 1998.
The following table presents interest rate contract information:
<TABLE>
<CAPTION>
(Dollars in millions)
SEPTEMBER 30,
-------------
Interest Rate Contracts 1999 1998
- ----------------------- ---- ----
<S> <C> <C>
Notional principal amount $ 100.0 $ 100.0
Pay fixed rate 6.17% 6.17%
Receive variable LIBOR 5.26% 5.73%
Average years to maturity 1.4 2.4
Fair value - liability $ .4 $ 2.8
Carrying amount - liability .3 .1
Pro forma fair value - liability 1.1 4.1
</TABLE>
The pro forma fair value assumes a 10% decrease in variable market interest
rates at September 30, 1999 and 1998, respectively, and reflects the estimated
fair value of contracts outstanding at that date under that assumption.
Weighted average interest rate contract information follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------ ------------------------
(Dollars in millions) 1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Notional principal $ 100.0 $ 100.0 $ 100.0 $ 100.0
Pay fixed rate 6.17% 6.17% 6.17% 6.47%
Receive variable LIBOR 5.18 5.74 5.12 5.76
</TABLE>
-36-
<PAGE> 38
The following table presents fixed rate debt information:
<TABLE>
<CAPTION>
(In millions)
SEPTEMBER 30,
-------------
Fixed Rate Debt 1999 1998
- --------------- ---- ----
<S> <C> <C>
Fair value - liability $ 981.4 $888.2
Carrying amount - liability 996.1 831.6
Pro forma fair value - liability 1,029.8 947.0
</TABLE>
The pro forma fair value assumes a 100 basis point decrease in market
interest rates at September 30, 1999 and 1998, respectively, and reflects the
estimated fair value of fixed rate debt outstanding at that date under that
assumption.
The sensitivity to changes in interest rates of the Company's interest rate
contracts and fixed rate debt was determined with a valuation model based upon
net modified duration analysis. The model assumes a parallel shift in the yield
curve, and the precision of the model decreases as the assumed change in
interest rates increases.
FOREIGN CURRENCY EXCHANGE RISK
- ------------------------------
In order to reduce the impact of changes in foreign exchange rates on
consolidated results of operations and future foreign currency denominated cash
flows, the Company was a party to various foreign currency forward exchange
contracts at September 30, 1999 and 1998. These contracts reduce exposure to
currency movements affecting existing foreign currency denominated assets,
liabilities and firm commitments resulting primarily from trade receivables and
payables, equipment acquisitions, intercompany loans and the Company's Swiss
franc debt. The contract maturities match the maturities of the currency
positions. Changes in the fair value of forward exchange contracts are
substantially offset by changes in the fair value of the hedged positions.
The following table presents foreign exchange contract information:
<TABLE>
<CAPTION>
SEPTEMBER 30,
-------------
(In millions) 1999 1998
------- -------
<S> <C> <C>
Fair value - favorable $ 63.4 $ 72.6
Carrying amount - asset 70.2 79.4
Pro forma change in fair value 13.0 3.2
</TABLE>
The pro forma change in fair value assumes a 10% change in foreign exchange
rates at September 30, 1999 and 1998, respectively, and reflects the estimated
change in the fair value of contracts outstanding at that date under that
assumption. The sensitivity to changes in exchange rates of the Company's
foreign currency positions was determined using current market pricing models.
-37-
<PAGE> 39
FORWARD-LOOKING INFORMATION - SAFE HARBOR STATEMENT
---------------------------------------------------
Certain information set forth in this Quarterly Report on Form 10-Q (other
than historical data and information) may constitute forward-looking statements
regarding events and trends that may affect the Company's future operating
results and financial position. The words "estimate," "expect," "intend" and
"project," as well as other words or expressions of similar meaning, are
intended to identify forward-looking statements. Readers are cautioned not to
place undue reliance on forward-looking statements, which speak only as of the
date of this quarterly report. Such statements are based on current
expectations, are inherently uncertain, are subject to risks and should be
viewed with caution. Actual results and experience may differ materially from
the forward-looking statements as a result of many factors, including: changes
in economic conditions in the various markets served by the Company's
operations; increased competitive activity; fluctuations in the prices paid for
raw materials and energy; changes in the monetary policies of various countries
where the Company has significant operations; and other unanticipated events and
conditions. It is not possible to foresee or identify all such factors. The
Company makes no commitment to update any forward-looking statement, or to
disclose any facts, events or circumstances after the date hereof that may
affect the accuracy of any forward-looking statement.
-38-
<PAGE> 40
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
- ------- ------------------
Reference is made to the Annual Report of The Goodyear Tire & Rubber
Company (the "Company") on Form 10-K for the year ended December 31, 1998 (the
"1998 10-K"), wherein at Item 3, pages 19, 20 and 21, the Company reported
certain legal proceedings. The Company reports the following developments in
respect of the legal proceedings described at paragraph (D) of Item 3 of the
1998 10-K:
On March 15, 1995, a civil action, Orion Tire Corporation, et al. vs.
Goodyear, et al. (Cause No. SA CV 95-221), was filed in the United States
District Court for the Central District of California, against the Company,
Goodyear International Corporation, a wholly-owned subsidiary of the Company
("GIC"), and five individuals, including Samir G. Gibara, Chairman of the Board,
Chief Executive Officer and President of the Company, by Orion Tire Corporation,
a California corporation ("Orion"), China Tire Holdings Limited, a Bermuda
corporation ("China Tire"), and China Strategic Holdings Limited, a Hong Kong
corporation ("China Strategic"). The plaintiffs alleged, among other things,
that, in connection with the Company's acquisition of a 75% interest in a tire
manufacturing facility (the "Dalian Facility") in Dalian, People's Republic of
China, in 1994, the Company and GIC engaged in tortious interference with
certain alleged contractual relationships of plaintiffs involving the Dalian
Facility, committed tortious interference with certain prospective economic
advantages of the plaintiffs, violated the California Cartwright Act by engaging
in an unlawful combination and conspiracy in restraint of trade and committed
trade libel and defamation by making oral defamatory and written libelous
statements concerning the plaintiffs to various parties. In addition, all
defendants were alleged to have engaged in a civil conspiracy to induce the
entities which owned the Dalian Facility to breach their contracts with the
plaintiffs and to have engaged in civil racketeering. The plaintiffs claimed
more than $1.0 billion in actual damages and $3.0 billion in exemplary damages
from the Company and GIC and such further relief as the court may deem
appropriate. As previously reported by the Company, the court dismissed all
individual defendants from the proceeding for lack of jurisdiction, dismissed
all claims made by China Strategic and most of the claims made by Orion and
China Tire. On August 12, 1999, the court entered an order dismissing the entire
remaining cause of action. On September 9, 1999, the plaintiffs appealed the
order of the court to the United States Court of Appeals for the Ninth Circuit.
ITEM 5. OTHER INFORMATION.
- ------- ------------------
A. GLOBAL ALLIANCE. As previously reported at Item 1 of the 1998 10-K
under the caption "1999 Developments" and the subheading "Global Alliance", at
pages 2 and 3 of the 1998 10-K, on February 3, 1999 the Company entered into a
Memorandum of Understanding with Sumitomo Rubber Industries, Ltd. ("Sumitomo")
regarding the formation of a strategic global alliance for the manufacture,
distribution and sale of tires.
-39-
<PAGE> 41
As previously reported at Item 5 of the Company's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1999, at page 28, on June 14, 1999 the
Company entered into a definitive general agreement and various other agreements
with Sumitomo relating to the formation and operation of the strategic global
alliance (the "Alliance Agreements"). The Alliance Agreements provide, among
other things, for the establishment and operation of tire manufacturing and
sales joint ventures in Europe and North America, tire sales joint ventures in
Japan and global technology and purchasing joint ventures. On September 1, 1999,
the global alliance was formed and the joint ventures commenced operations.
In accordance with the terms of the Alliance Agreements, on September
1, 1999 the Company acquired 75%, and Sumitomo owned 25%, of the capital stock
of Goodyear Dunlop Tires Europe B.V., a Netherlands holding company. On
September 1, 1999, this holding company purchased substantially all of
Sumitomo's tire businesses in Europe, including eight tire manufacturing plants
located in England, France and Germany and sales and distribution operations in
18 European countries, and the major portion of the Company's tire businesses in
Europe. Excluded from the European joint venture are the Company's (i) European
aircraft tire business, (ii) tire businesses in Poland (other than a sales
company), Slovenia and Turkey, and (iii) textile, steel tire cord and tire mold
manufacturing plants and technical center and related facilities located in
Luxembourg.
On September 1, 1999, the Company also acquired 75%, and Sumitomo
acquired 25%, of the capital stock of Goodyear Dunlop Tires North America, Ltd.,
a holding company that, on September 1, 1999, purchased Sumitomo's tire
manufacturing operations in North America and certain of its related tire sales
and distribution operations. The Company also acquired 100% of the balance of
Sumitomo's tire distribution and sales operations in the United States and
Canada.
The Company acquired 25% of the capital stock of each of two newly
formed tire companies in Japan, one for the distribution and sale of
Goodyear-brand passenger and truck tires in the replacement market in Japan and
the other for the distribution and sale of Goodyear-brand and Dunlop-brand tires
to original equipment manufacturers in Japan. The Company transferred certain
assets of its subsidiary located in Japan in exchange for such equity interests
and a net cash payment of approximately $27 million. Sumitomo owns the remaining
75% of the capital stock of each of these companies. The Company also owns 51%,
and Sumitomo owns 49%, of the capital stock of a newly formed company that
coordinates and disseminates commercialized tire technology among the Company,
Sumitomo, the joint ventures and their respective affiliates and the Company
owns 80%, and Sumitomo owns 20%, of the capital stock of a global purchasing
company.
The Company made payments totaling approximately $915.5 million to
Sumitomo on September 1, 1999, in connection with the formation of the European
and North American joint ventures, which payments were financed by the Company's
issuance of additional debt. The transactions involved in the formation of the
European and North American Joint Ventures have been accounted for using the
purchase method. The cost of acquiring the businesses totaled approximately
$1.22 billion, consisting of the approximately $915.5 million of cash payments
and approximately $307 million representing the fair value of the 25% net
interest of the Company's businesses contributed to Goodyear Dunlop Tires Europe
B.V. Goodwill of approximately $390 million was recorded on the transactions and
will be amortized on a straight-line basis over 40
-40-
<PAGE> 42
years. The Company recognized a gain of $149.7 million ($143.7 million after
tax, or $.90 per share) on the businesses it contributed to Goodyear Dunlop
Tires Europe B.V.
Certain adjustments may be made to the cash payments based on the
amounts of cash, debt, accounts receivable, inventory and trade payables
contributed by Sumitomo and Goodyear to the European joint venture. In addition,
the Company is contemplating certain actions, commencing in the fourth quarter
of 1999, related to the business acquired, including associate severance costs
and non-cancelable lease termination costs, which actions are expected to result
in costs totaling $80 million to $120 million. These costs will be recorded as
an adjustment to the cost of acquiring the European and North American business
of Sumitomo and will result in increased values being assigned to non-current
assets.
B. ADDITION OF NEW BUSINESS SEGMENTS. Effective July 1, 1999, the
Company realigned its European operations and, in that connection, divided its
previously existing Europe Tire Segment into two separate operating segments,
the European Union Tire Segment ("EU Tire") and the Eastern Europe, Africa and
Middle East Tire Segment ("EEAME Tire").
EUROPEAN UNION TIRE
EU Tire develops, manufactures, distributes and sells a broad line of
tires for automobiles, motorcycles, trucks, farm implements and construction
equipment throughout the European Union member states, Norway and Switzerland,
exports tires for sale in other regions of the world and provides related
products and services. Tires are manufactured by the EU Tire segment in 14
plants located in England, Germany, Italy, France and Luxembourg. EU Tire
includes the Dunlop operations acquired from Sumitomo on September 1, 1999,
which are a part of the holdings of Goodyear Dunlop Tires Europe B.V., a 75%
owned subsidiary of the Company that is 25% owned by Sumitomo.
The table below sets forth the percentage of the Company's consolidated
net sales and operating income attributable to EU Tire, and the percentage of EU
Tire sales attributable to the sale of new tires, for the three and nine month
periods ended September 30, 1999 and for each year in the three year period
ended December 31, 1998:
<TABLE>
<CAPTION>
Year Ended December 31,
Three Months Nine Months -----------------------------
Ended 9/30/99 Ended 9/30/99 1998 1997 1996
------------- ------------- ----- ----- -----
<S> <C> <C> <C> <C> <C>
European Union Tire Segment sales 20.1% 17.5% 16.3% 15.5% 17.6%
European Union Tire Segment operating income 402.8%* 31.1% 17.7% 13.9% 18.8%
Tire sales 98.0% 95.0% 93.0% 92.0% 91.0%
</TABLE>
* The Company's total segment operating income for the quarter ended
September 30, 1999 was $10.6 million, including the $108.6 million operating
loss incurred by the Company's North American Tire segment.
-41-
<PAGE> 43
EU Tire manufactures and sells Goodyear-brand, Dunlop-brand (since
September 1, 1999), Fulda-brand and Kelly-brand tires, and sells Debica-brand
and Sava-brand tires manufactured by the EEAME Tire Segment. EU Tire also sells
new, and manufactures and sells retreaded, aircraft tires, provides various
retreading and related services for truck and heavy equipment tires, sells tires
and offers automotive repairs and related services through certain retail
outlets in which it owns a controlling interest, and provides other related
products and services. Approximately 7.0% of the tires produced by EU Tire
during 1998 were delivered to the Company's other Tire segments, primarily the
EEAME Tire and North American Tire segments, and approximately 6.3% of the tires
sold by EU Tire were imported from other Tire segments, primarily EEAME Tire.
EU Tire is a significant supplier of tires to most manufacturers of
automobiles, trucks and farm and construction equipment located in the European
Union member states. Goodyear-brand tires, as well as Dunlop-brand, Kelly-brand
and Fulda-brand tires (which are brands owned or controlled by the Company), are
sold in the replacement market through various channels of distribution. The
principal methods of distribution is through independent tire dealers who sell
several brands of tires and regional distributors. In some countries, primarily
Germany and the United Kingdom, the Company's tires are sold through
approximately 181 retail outlets operated by multi-brand tire retailing chains
controlled by the Company.
No customer or group of affiliated customers accounted for as much as
2.7% of the sales of EU Tire during 1998. Sales to the ten largest customers of
EU Tire represented less than 17% of its sales during 1998.
EASTERN EUROPE, AFRICA AND MIDDLE EAST TIRE
EEAME Tire develops, manufactures, distributes and sells a broad line
of passenger, truck and farm tires in Eastern Europe, the Middle East and
Africa. EEAME Tire manufactures tires at plants located in Morocco, Poland,
Slovenia, South Africa and Turkey, maintains sales operations in most countries
in Eastern Europe, including Russia, and exports tires for sale in other
countries in Eastern Europe, the Middle East and Africa and in other regions of
the world and provides related products and services in certain markets. EEAME
Tire sells tires primarily in the replacement market, except in Poland and South
Africa where it supplies automobile and truck manufacturers.
The table below sets forth the percentage of the Company's consolidated
net sales and operating income attributable to EEAME Tire, and the percentage of
EEAME Tire sales attributable to the sale of new tires, for the three and nine
month periods ended September 30, 1999 and for each year in the three year
period ended December 31, 1998:
-42-
<PAGE> 44
<TABLE>
<CAPTION>
Year Ended December 31,
Three Months Nine Months --------------------------------
Ended 9/30/99 Ended 9/30/99 1998 1997 1996
------------- ------------- ----- ----- -----
<S> <C> <C> <C> <C> <C>
EEAME Tire Segment sales 6.5% 6.2% 6.7% 6.9% 4.5%
EEAME Tire Segment operating income 123.6%* 8.7% 9.1% 8.5% 6.8%
Tire sales 96.0% 95.0% 95.0% 97.4% 94.0%
</TABLE>
* The Company's total segment operating income for the quarter ended
September 30, 1999 was $10.6 million, including the $108.6 million operating
loss incurred by the Company's North American Tire segment.
EEAME Tire manufactures and sells Goodyear-brand, Kelly-brand,
Debica-brand and Sava-branch tires and sells Fulda-brand and, since September 1,
1999, Dunlop-brand tires manufactured by EU Tire. EEAME Tire also sells new and
retreaded aircraft tires, provides various retreading and related services for
truck and heavy equipment tires, sells tires through certain retail outlets
owned by the Company, and provides other products and services. During 1998,
EEAME Tire exported and sold approximately 8% of its production to unaffiliated
customers located outside of Eastern Europe, Morocco, Turkey and South Africa.
Less that 1% of the tires produced by EEAME Tire during 1998 were delivered to
the Company's other Tire segments, primarily EU Tire, and approximately 2.7% of
the tires it sold were imported from the Company's other Tire segments.
EEAME Tire is a significant supplier of tires to manufacturers of
automobiles, trucks and farm and construction equipment in Poland and South
Africa. Goodyear-brand tires, as well as Debica-brand, Kelly-brand, Sava-brand
and, since September 1, 1999, Dunlop-brand tires, are sold in the replacement
markets in Eastern Europe, primarily through distributors or, in some instances,
independent dealers. In the Middle East and most of Africa, the Company sells
Goodyear-brand and Kelly-brand tires in the replacement markets, primarily
through regional distributors and, in some instances, independent dealers. In
South Africa, tires are also sold through a chain of approximately 220 retail
tire stores owned by the Company.
No customer or group of affiliated customers accounted for as much as
4.1% of the sales by EEAME Tire during 1998. Sales to the ten largest customers
of EEAME Tire represented less than 15.2% of its sales during 1998.
C. SUPPLEMENTAL SEGMENT DATA. Reference is made to the financial
statements set forth at Part I of this Quarterly Report on Form 10-Q and to the
Note thereto captioned "Business Segments", set forth at pages 8 and 9 of this
Quarterly Report. Reference is also made to Exhibits 99.1, 99.2, 99.3 and 99.4
to this Quarterly Report, wherein unaudited segment information for the Company
and its subsidiaries are set forth in respect of various annual and interim
periods,in each case presented to reflect the division of the Company's Europe
Tire segment into the European Union Tire segment and the Eastern Europe,
Africa and Middle East Tire segment.
-43-
<PAGE> 45
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
- ------- ---------------------------------
(a) EXHIBITS. See the Index of Exhibits at page E-1, which is by
specific reference incorporated into and made a part of this Quarterly Report on
Form 10-Q.
(b) REPORTS ON FORM 8-K. No Current Report on Form 8-K was filed by The
Goodyear Tire & Rubber Company during the quarter ended September 30, 1999.
S I G N A T U R E S
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE GOODYEAR TIRE & RUBBER COMPANY
(Registrant)
Date: November 12, 1999 By /s/ Robert W Tieken
-------------------------------------
Robert W Tieken
Executive Vice President and
Chief Financial Officer
(Signing on behalf of Registrant as a duly
authorized officer of Registrant and signing
as the Principal Financial Officer of
Registrant.)
-44-
<PAGE> 46
THE GOODYEAR TIRE & RUBBER COMPANY
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 1999
INDEX OF EXHIBITS (1)
EXHIBIT EXHIBIT
------- -------
TABLE ITEM NO. * DESCRIPTION OF EXHIBIT NUMBER PAGE
- ---------------- --------------------------------------- ------ ----
3 ARTICLES OF INCORPORTATION AND BY-LAWS
---------------------------------------------
(a) Certificate of Amended Articles of
Incorporation of The Goodyear Tire & Rubber
Company (the "Registrant"), dated December
20, 1954, and Certificate of Amendment to
Amended Articles of Incorporation of
Registrant, dated April 6, 1993, and
Certificate of Amendment to Amended Articles
of Incorporation of Registrant dated June 4,
1996, three documents comprising Registrant's
Articles of Incorporation as amended
(incorporated by reference, filed with the
Securities and Exchange Commission as Exhibit
3.1 to Registrant's Quarterly Report on Form
10-Q for the quarter ended June 30, 1996,
File No. 1-1927).
(b) Code of Regulations of The Goodyear Tire
& Rubber Company, adopted November 22, 1955,
as amended April 5, 1965, April 7, 1980,
April 6, 1981 and April 13, 1987
(incorporated by reference, filed as Exhibit
4.1(B) to Registrant's Registration Statement
on Form S-3, File No. 333-1995).
4 INSTRUMENTS DEFINING
THE RIGHTS OF SECURITY HOLDERS,
INCLUDING INDENTURES
---------------------------------------------
(a) Conformed copy of Rights Agreement, dated
as of June 4, 1996, between Registrant and
First Chicago Trust Company of New York,
rights Agent (incorporated by reference,
filed with the Securities and Exchange
Commission as Exhibit 1 to Registrant's
Registration Statement on Form 8-A dated June
11, 1996 and as Exhibit 4(a) to Registrant's
Current Report on Form 8-K dated June 4,
1996, File No. 1-1927).
- ----------
*Pursuant to Item 601 of Regulation S-K.
E-1
<PAGE> 47
EXHIBIT EXHIBIT
------- -------
TABLE ITEM NO. * DESCRIPTION OF EXHIBIT NUMBER PAGE
- ---------------- --------------------------------------- ------ ----
4 (b) Specimen nondenominational Certificate
for shares of the Common Stock, Without Par
Value, of Registrant; First Chicago Trust
Company of New York as transfer agent and
registrar (incorporated by reference, filed
with the Securities and Exchange Commission
as Exhibit 4.3 to Registrant's Quarterly
Report on Form 10-Q for the quarter ended
September 30, 1996, File No. 1-1927).
(c) Conformed copy of Revolving Credit
Facility Agreement, dated as of July 15,
1994, among Registrant, the Lenders named
therein and Chemical Bank, as Agent
(incorporated by reference, filed with the
Securities and Exchange Commission as Exhibit
A to Registrant's Quarterly Report on Form
10-Q for the quarter ended September 30,
1994, File No. 1-1927).
(d) Conformed copy of Replacement and
Restatement Agreement, dated as of July 15,
1996, among Registrant, the Lenders named
therein and The Chase Manhattan Bank
(formerly Chemical Bank), as Agent
(incorporated by reference, filed with the
Securities and Exchange Commission as Exhibit
4.5 to Registrant's Quarterly Report on Form
10-Q for the quarter ended June 30, 1996,
File No. 1-1927).
(e) Conformed copy of First Amendment to
Replacement and Restatement Agreement, dated
as of March 31, 1997, among Registrant, the
Lenders named therein and The Chase Manhattan
Bank (formerly Chemical Bank), as Agent
(incorporated by reference, filed as Exhibit
4.5 to Registrant's Quarterly Report on Form
10-Q for the quarter ended June 30, 1997,
File No. 1-1927).
(f) Form of Indenture, dated as of March 15,
1996, between Registrant and Chemical Bank
(now The Chase Manhattan Bank), as Trustee,
as supplemented on December 3, 1996, March
11, 1998 and March 17, 1998 (incorporated by
reference, filed as Exhibit 4.1 to
Registrant's Quarterly Report on Form 10-Q
for the quarter ended March 31, 1998, File
No. 1-1927).
- ----------
*Pursuant to Item 601 of Regulation S-K.
E-2
<PAGE> 48
EXHIBIT EXHIBIT
------- -------
TABLE ITEM NO. * DESCRIPTION OF EXHIBIT NUMBER PAGE
- ---------------- --------------------------------------- ------ ----
4 (g) Conformed copy of Second Replacement and
Restatement Agreement, dated as of July 13,
1998, among Registrant, the Lenders named
therein and The Chase Manhattan Bank, as
Agent (incorporated by reference, filed with
the Securities and Exchange Commission as
Exhibit 4 to Registrant's Quarterly Report on
Form 10-Q for the quarter ended September 30,
1998, File No. 1-1927).
(h) Form of Indenture, dated as of March 1,
1999, between Registrant and The Chase
Manhattan Bank, as Trustee (incorporated by
reference, filed as Exhibit 4.2, with
Amendment No. 1, to Registrant's Registration
Statement on Form S-3, File No. 333-67145).
(i) Conformed copy of Credit Agreement 4.1 X-4.1-1
[364-Day Facility], dated as of August 20,
1999, among Registrant, the Lenders named
therein and The Chase Manhattan Bank, as
Agent.
No other instrument defining the rights of
holders of long-term debt which relates to
securities having an aggregate principal
amount in excess of 10% of the consolidated
assets of Registrant and its subsidiaries was
entered into during the quarter ended
September 30, 1999. In accordance with
paragraph (iii) to Part 4 of Item 601 of
Regulation S-K, agreements and instruments
defining the rights of holders of certain
items of long term debt entered into during
the quarter ended September 30, 1999 which
relate to securities having an aggregate
principal amount less than 10% of the
consolidated assets of Registrant and its
Subsidiaries are not filed herewith. The
Registrant hereby agrees to furnish a copy of
any such agreements or instruments to the
Securities and Exchange Commission upon
request.
10 MATERIAL CONTRACTS
-----------------------------------------------
(a) Umbrella Agreement, dated as of June 14,
1999, between Registrant and Sumitomo Rubber
Industries, Ltd. (incorporated by reference,
filed as Exhibit 10.1 to Registrant's
Quarterly Report on Form 10-Q for the quarter
ended June 30, 1999, File No. 1-1927).
- ----------
*Pursuant to Item 601 of Regulation S-K.
E-3
<PAGE> 49
EXHIBIT EXHIBIT
------- -------
TABLE ITEM NO. * DESCRIPTION OF EXHIBIT NUMBER PAGE
- ---------------- --------------------------------------- ------ ----
(b) Joint Venture Agreement For Europe, 10.1 X-10.1-1
dated as of June 14, 1999 (and Amendment No.
1 dated as of September 1, 1999), among
Registrant, Goodyear S.A., a French
corporation, Goodyear S.A., a Luxembourg
corporation, Goodyear Canada, Inc., Sumitomo
Rubber Industries, Ltd., and Sumitomo Rubber
Europe B.V.
(c) Shareholders Agreement For the Europe 10.2 X-10.2-1
JVC, dated as of June 14, 1999, among
Registrant, Goodyear S.A., a French
corporation, Goodyear S.A., a Luxembourg
corporation, Goodyear Canada, Inc., and
Sumitomo Rubber Industries, Ltd.
12 STATEMENT RE COMPUTATION
OF RATIOS
-----------------------------------------
Statement setting forth the computation 12 X-12-1
of Ratio of Earnings to Fixed Charges.
27 FINANCIAL DATA SCHEDULE
-------------------------------------------
Financial Data Schedule for quarter ended 27 X-27-1
September 30, 1999.
99 ADDITIONAL EXHIBITS
-------------------------------------------
(a) Supplemental Segment Information for 99.1 X-99.1-1
Registrant and Subsidiaries (unaudited)
for the (i) three month periods ended March
31, 1999 and June 30, 1999 and (ii) the six
month period ended June 30, 1999.
(b) Supplemental Segment Information for 99.2 X-99.2-1
Registrant and Subsidiaries (unaudited) for
the (i) three month period ended March 31,
1998, (ii) three month period ended June
30, 1998, (iii) three month period ended
September 30, 1998, and (iv) three month
period ended December 31, 1998.
- ----------
*Pursuant to Item 601 of Regulation S-K.
E-4
<PAGE> 50
EXHIBIT EXHIBIT
------- -------
TABLE ITEM NO. * DESCRIPTION OF EXHIBIT NUMBER PAGE
- ---------------- --------------------------------------- ------ ----
(c) Supplemental Segment Information for 99.3 X-99.3-1
Registrant and Subsidiaries (unaudited) for
the (i) three month period ended March 31,
1998, (ii) six month period ended June 30,
1998, (iii) nine month period ended September
30, 1998, and (iv) twelve month period ended
December 31, 1998.
(d) Supplemental Segment Information for 99.4 X-99.4-1
Registrant and Subsidiaries (unaudited) for
the years ended December 31, 1998, 1997 and
1996, respectively.
- ----------
*Pursuant to Item 601 of Regulation S-K.
E-5
<PAGE> 1
EXHIBIT 4.1
CONFORMED COPY
- --------------------------------------------------------------------------------
CREDIT AGREEMENT [364-Day Facility]
Dated as of August 20, 1999
among
THE GOODYEAR TIRE & RUBBER COMPANY,
THE LENDERS NAMED HEREIN,
and
THE CHASE MANHATTAN BANK
as Advisor, Lead Arranger and Book Manager
- --------------------------------------------------------------------------------
X-4.1-1
<PAGE> 2
TABLE OF CONTENTS
Article Section Page
- ------- ------- ----
I. DEFINITIONS
1.01 Defined Terms .................................. 1
1.02 Terms Generally ................................ 16
II. THE CREDITS
2.01 Commitments ................................... 17
2.02 Loans ......................................... 17
2.03 Competitive Bid Procedure ..................... 19
2.04 Standard Borrowing Procedure .................. 22
2.05 Refinancings .................................. 23
2.06 Fees .......................................... 24
2.07 Repayment of Loans; Evidence of
Debt; Conversion and Continuation
of Standard Borrowings ........................ 25
2.08 Interest on Loans ............................. 28
2.09 Default Interest .............................. 29
2.10 Unavailability of LIBO Rate
and CD Rate Quotations ........................ 29
2.11 Termination, Reduction, Extension
and Addition of Commitments ................... 30
2.12 Prepayment .................................... 31
2.13 Reserve Requirements;
Change in Circumstances ....................... 33
2.14 Change in Legality ............................ 35
2.15 Pro Rata Treatment ............................ 36
2.16 Payments ...................................... 37
2.17 Taxes ......................................... 37
2.18 Termination or Assignment
of Commitments ................................ 40
III. REPRESENTATIONS AND WARRANTIES............................ 40
IV. CONDITIONS OF LENDING
4.01 All Borrowings ................................ 42
4.02 First Borrowing ............................... 43
V. AFFIRMATIVE COVENANTS..................................... 43
VI. NEGATIVE COVENANTS........................................ 45
VII. EVENTS OF DEFAULT ........................................ 47
X-4.1-2
<PAGE> 3
VIII. THE AGENT ................................................ 51
IX. MISCELLANEOUS
9.01 Notices ....................................... 54
9.02 Survival of Agreement ......................... 54
9.03 Binding Effect; Successors
and Assigns ................................... 55
9.04 Applicable Law ................................ 55
9.05 Waivers; Amendment ............................ 55
9.06 Interest Rate Limitation ...................... 56
9.07 Entire Agreement .............................. 57
9.08 Information; Access and
Confidentiality ............................... 57
9.09 Severability .................................. 58
9.10 Counterparts ........................... ...... 58
9.11 Headings ...................................... 58
9.12 Jurisdiction; Consent to Service
of Process ................................... 58
9.13 Stamp Taxes ................................... 59
9.14 Change of Control Option ...................... 60
Exhibit A-1 Form of Competitive Bid Request
Exhibit A-2 Form of Notice of Competitive Bid Request
Exhibit A-3 Form of Competitive Bid
Exhibit A-4 Form of Competitive Bid Accept/Reject Letter
Exhibit A-5 Form of Standby Borrowing Request
Exhibit B Form of Opinion of Counsel
Exhibit C Form of Schedule of Compliance
Exhibit D Form of Agreement Providing for Additional Lender
Exhibit E Form of Promissory Note to Facilitate Assignments to
Federal Reserve Banks
Schedule 2.01 Commitments; Addresses for Notices and
Reserve Percentages.
X-4.1-3
<PAGE> 4
CREDIT AGREEMENT [364-Day Facility] dated as of August 20,
1999, among THE GOODYEAR TIRE & RUBBER COMPANY, an Ohio corporation
(the "Borrower"), the lenders listed in Schedule 2.01 (the "Lenders")
and THE CHASE MANHATTAN BANK, a New York banking corporation, as agent
for the Lenders (in such capacity, the "Agent").
The Borrower has requested the Lenders to extend credit to the Borrower
in order to enable it to borrow on a standby revolving credit basis on and after
the date hereof and at any time and from time to time prior to the Commitment
Termination Date (as herein defined), and thereafter to have outstanding prior
to the Maturity Date, a principal amount not in excess of $1,300,000,000 at any
time outstanding. The Borrower has also requested the Lenders to provide a
procedure pursuant to which the Borrower may invite the Lenders to bid on an
uncommitted basis on borrowings by the Borrower. The Lenders are willing to
extend such credit to the Borrower on the terms and subject to the conditions
herein set forth.
Accordingly, the Borrower, the Lenders and the Agent agree as follows:
ARTICLE I. DEFINITIONS
SECTION 1.01. DEFINED TERMS. As used in this Agreement, the following
terms shall have the meanings specified below:
"ABR BORROWING" shall mean a Borrowing comprised of ABR Loans.
"ABR LOAN" shall mean any Standard Loan bearing interest at a rate
determined by reference to the Alternate Base Rate in accordance with the
provisions of Article II.
"ADJUSTED CD RATE" shall mean, with respect to any CD Loan, the rate
per annum (rounded upward, if necessary, to the nearest 1/1000th of 1%)
equivalent to the sum of (i) the quotient of (x) the CD Rate with respect to the
Interest Period in respect of such CD Loan, divided by (y) one minus the CD
Reserve Requirement of the applicable Lender, if any, PLUS (ii) the Assessment
Rate of the applicable Lender, if any. The Adjusted CD Rate shall be
1
X-4.1-4
<PAGE> 5
determined as of the first day of, and shall remain constant throughout, the
applicable Interest Period.
"ADJUSTED LIBO RATE" shall mean, with respect to any Eurodollar Loan,
the rate per annum (expressed as a percentage rounded upward, if necessary, to
the nearest 1/1000th of 1%) equivalent to the sum of (i) the quotient of (x) the
LIBO Rate for the Interest Period in respect of such Eurodollar Loan, divided by
(y) one minus the Eurodollar Reserve Requirement, if any. The Adjusted LIBO Rate
shall be the rate appropriately determined to be in effect on the first day of,
and shall remain constant throughout, such Interest Period. The Eurodollar
Reserve Requirement shall be determined as at the first day of, and shall remain
constant throughout, such Interest Period.
"ADMINISTRATIVE FEES" shall have the meaning assigned to such term in
Section 2.06(b).
"ALTERNATE BASE RATE" shall mean, 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%. For purposes hereof, "PRIME RATE"
shall mean the rate of interest per annum publicly announced from time to time
by the Agent as its prime rate in effect at its principal office in New York
City; each change in the Prime Rate shall be effective on the date such change
is publicly announced as effective. "FEDERAL FUNDS EFFECTIVE RATE" shall mean,
for any day, the weighted average of the rates 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 Agent from three Federal funds brokers of
recognized standing selected by it. If for any reason the 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 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
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 on the effective date of such
change in the Prime Rate or the Federal Funds Effective Rate, respectively.
2
X-4.1-5
<PAGE> 6
"ANNUAL PERIOD" shall mean a period of four complete, consecutive
fiscal quarters of the Borrower, taken together and constituting one accounting
period.
"ASSESSMENT RATE" shall mean, at any date as of which any determination
thereof is being or to be made and with respect to any CD Loan and the
applicable Interest Period in respect of which any determination thereof is
being or to be made, the aggregate of the net annual assessment rates or similar
fees or charges (expressed on a per annum percentage basis, rounded upward, if
necessary, to the nearest 1/1000th of 1%), if any, paid by the Lender making
such Loan on its Dollar time deposits in the United States of America insured by
the Federal Deposit Insurance Corporation (or any successor agency) or any other
Governmental Body which has general jurisdiction over such Lender and such
rates, fees or charges, if any, are measured with respect to Dollar time
deposits (including certificates of deposit and equivalent instruments) with
such Lender in the United States of America; such rates, fees or charges, if
any, shall be determined by annualizing the then most recent assessment rates or
similar fees or charges levied on such Lender by said Corporation or other
Governmental Body with respect to such Dollar time deposits evidenced by
certificates of deposit or equivalent instruments in amounts and for periods
substantially equal to the applicable Interest Period.
"AUTHORIZED OFFICER" shall mean (i) any of the Chairman of the Board,
any Vice Chairman of the Board, the President, any Executive Vice President, any
Vice President and the Treasurer of the Borrower, and (ii) in respect of all
matters relating to this Agreement other than the execution and delivery of this
Agreement, the Comptroller, the Secretary, any Assistant Treasurer, any
Assistant Comptroller or any Assistant Secretary of the Borrower and any other
person designated in writing by any officer specified in clause (i) above as
duly authorized to act on behalf of the Borrower hereunder.
"BOARD" shall mean the Board of Governors of the Federal Reserve System
of the United States.
"BORROWING" shall mean a group of Loans of a single Type made by the
Lenders (or, in the case of a Competitive Borrowing, by the Lender or Lenders
whose Competitive Bids have been accepted pursuant to
3
X-4.1-6
<PAGE> 7
Section 2.03) on a single date and as to which a single Interest Period is in
effect.
"BUSINESS DAY" shall mean any day (other than a day which is a
Saturday, Sunday or legal holiday in the State of New York) on which banks are
open for business in New York City; PROVIDED, HOWEVER, that, when used in
connection with a Eurodollar Loan, the term "Business Day" shall also exclude
any day on which banks are not open for dealings in Dollar deposits in the
London interbank market.
"CD BORROWING" shall mean a Borrowing comprised of CD Loans.
"CD LOAN" shall mean any Standard Loan bearing interest at a rate
determined by reference to the Adjusted CD Rate in accordance with the
provisions of Article II.
"CD RATE" shall mean with respect to any CD Borrowing for any Interest
Period, the rate of interest (expressed as an annual rate) equal to the
arithmetic average (expressed as a percentage rounded upward, if necessary, to
the nearest 1/1000th of 1%) of the rates specified as (x) the "Average" rate and
(y) the "Secondary CDs" rate, each such rate to be in respect of certificates of
deposits or similar instruments having a maturity which is equal or
substantially equal to such Interest Period, which rates appear on the display
designated as page "CDNY" on the Reuter System (or on such other display on the
Reuter System as shall then display rates for the purchase at face value of
certificates of deposit or equivalent instruments) at 10:00 a.m., New York City
time, on the first day of such Interest Period; PROVIDED, THAT, if no rates can
be obtained from page "CDNY" of the Reuter System (or such other display), CD
Rate shall be equal to the rate set forth under the caption "Certificates of
Deposit" in the daily statistical release published by the Federal Reserve Bank
of New York entitled "Composite 3:30 p.m. Quotations for U.S. Government
Securities", or any successor publication (the "Composite Quotations"), for the
first day of such Interest Period in respect of certificates of deposit having a
maturity substantially equal to such Interest Period; PROVIDED, FURTHER, that if
no rates are available from the Reuter System or the Composite Quotations, or
the Agent or the Borrower shall in good faith reasonably determine (and promptly
give notice to the other party of such determination) that the CD Rate in
respect of such Interest Period determined as aforesaid is materially higher (as
4
X-4.1-7
<PAGE> 8
reasonably determined by the Borrower) or lower (as reasonably determined by the
Agent) than the prevailing rate of interest the Agent is required to pay to
acquire funds evidenced by non-negotiable certificates of deposit in amounts of
$1,000,000 or more for a period substantially equal to such Interest Period,
then, in any such event, CD Rate shall mean, with respect to such Interest
Period and to the applicable CD Borrowing, the arithmetic average (expressed as
a percentage rounded upward, if necessary, to the nearest 1/1000th of 1%) of the
offered rates (each expressed as a per annum rate) offered by leading New York
City dealers in negotiable certificates of deposit at 10:30 a.m., New York City
time, on the first day of such Interest Period for the purchase at face value
from the Agent of negotiable certificates of deposit or equivalent instruments
in amounts of $1,000,000 or more for the period of, or for a period comparable
or substantially equal to, such Interest Period.
"CD RESERVE REQUIREMENT" shall mean, at any date as of which any
determination thereof is being or to be made and with respect to any CD Loan and
the applicable Interest Period in respect of which any determination thereof is
being or to be made, the amount (expressed as a decimal, rounded upward, if
necessary, to six decimal places) equal to the sum of (i) the aggregate of all
reserve requirements (including, without duplication, all basic, supplemental,
marginal and other reserves) in effect on such date (as established under
Regulation D of the Board, or any other regulation of the Board which prescribes
reserve requirements applicable to non-personal time deposits then in effect and
applicable to the Lender making such Loan), on Dollar non-personal time deposits
in the United States of the type used as a reference in determining the CD Rate
and having a maturity equal or comparable to the applicable Interest Period, as
and to the extent that such Lender is subject to such requirements, and (ii) the
aggregate of all reserve or similar requirements of any other Governmental Body
having jurisdiction over such Lender in respect of such Dollar non-personal time
deposits in the United States having a maturity equal or comparable to the
applicable Interest Period.
"CLOSING DATE" shall mean August 20, 1999.
"CODE" shall mean the Internal Revenue Code of 1986, as the same may be
amended from time to time.
5
X-4.1-8
<PAGE> 9
"COMMITMENT" shall mean, with respect to each Lender, the commitment of
such Lender hereunder as set forth in Schedule 2.01 hereto, as such Lender's
Commitment may be permanently terminated or reduced from time to time pursuant
to Section 2.11. Schedule 2.01 will be deemed to have been appropriately amended
to reflect any addition of a Commitment pursuant to Section 2.11(d), assignment
pursuant to Section 9.03 or termination of any Commitment.
"COMMITMENT TERMINATION DATE" shall mean August 18, 2000, or any date
to which the Commitment Termination Date shall have been extended pursuant to
Section 2.11(e).
"COMPETITIVE BID" shall mean an offer by a Lender to make a Competitive
Loan pursuant to Section 2.03.
"COMPETITIVE BID ACCEPT/REJECT LETTER" shall mean a notification made
by the Borrower pursuant to Section 2.03(d) in the form of Exhibit A-4.
"COMPETITIVE BID RATE" shall mean, as to any Competitive Bid made by a
Lender pursuant to Section 2.03(b), (i) in the case of a Eurodollar Loan, the
Margin, and (ii) in the case of a Fixed Rate Loan, the fixed rate of interest
offered by the Lender making such Competitive Bid.
"COMPETITIVE BID REQUEST" shall mean a request made pursuant to Section
2.03 in the form of Exhibit A-1.
"COMPETITIVE BORROWING" shall mean a borrowing consisting of a
Competitive Loan or concurrent Competitive Loans from the Lender or Lenders
whose Competitive Bids for such Borrowing have been accepted by the Borrower
under the bidding procedure described in Section 2.03.
"COMPETITIVE LOAN" shall mean a Loan from a Lender to the Borrower
pursuant to the bidding procedure described in Section 2.03. Each Competitive
Loan shall be a Eurodollar Competitive Loan or a Fixed Rate Loan.
"CONSOLIDATED" shall refer to the consolidation of the accounts of the
Borrower and the Subsidiaries in accordance with generally accepted accounting
principles, including principles of consolidation.
"CONSOLIDATED DEBT" shall mean, as at the date as of which any
determination thereof is being or to be made,
6
X-4.1-9
<PAGE> 10
Debt of the Borrower and the Subsidiaries, without duplication, determined on a
Consolidated basis in accordance with generally accepted accounting principles.
"CONSOLIDATED FINANCIAL STATEMENTS OF THE BORROWER" shall mean the
Consolidated balance sheet of the Borrower and Subsidiaries as at December 31,
1998 and 1997 and the Consolidated statements of income, shareholders' equity
and cash flows for each of the three years in the period ended December 31,
1998, and the Notes to Financial Statements in respect thereof, together with
the Report of Price Waterhouse, independent accountants, in respect thereof, all
as set forth at pages 43 through 68, inclusive, of the Annual Report on Form
10-K for the Borrower for the year ended December 31, 1998, a copy of which has
heretofore been delivered to each of the Lenders.
"CONSOLIDATED INTEREST EXPENSE" shall mean, with respect to any Annual
Period in respect of which a determination thereof is being or to be made,
without duplication and excluding intercorporate transactions among the Borrower
and the Subsidiaries, the sum of (i) Consolidated interest accrued in respect of
all Consolidated Debt of the Borrower and the Subsidiaries during such Annual
Period, whether or not paid and whether expensed or capitalized, calculated and
determined after giving effect, as and to the extent permitted by generally
accepted accounting principles, to any amounts paid or received by the Borrower
or the Subsidiaries under interest rate exchange and similar agreements and
arrangements which are intended to hedge or limit interest rates and expenses,
PLUS (ii) amortization of debt expense and discount or premium relating to any
such Debt (including and giving effect to any similar amounts paid or received
by the Borrower and the Subsidiaries under any such interest rate exchange or
similar agreement or arrangement) during such period, whether or not paid and
whether expensed or capitalized, PLUS (iii) the portion of rental expense
payable during such period pursuant to all capital lease obligations (which are
recorded as Debt) representing imputed interest recorded in accordance with
generally accepted accounting principles.
"CONSOLIDATED NET WORTH" shall mean, as at the end of any fiscal
quarter in respect of which a determination thereof is being or to be made, the
Consolidated stated capital, surplus and retained earnings of the Borrower and
the Subsidiaries, before (i) foreign currency translation adjustment and (ii)
the effect (on such retained earnings)
7
X-4.1-10
<PAGE> 11
of the recognition of the one time charge for the "transition obligation" of the
Borrower and the Subsidiaries upon the Borrower's adoption of, and under and in
accordance with the applicable provisions of, Statement of Financial Accounting
Standards No. 106, "Employers' Accounting for Postretirement Benefits other than
Pensions" in 1992.
"CONSOLIDATED OPERATING INCOME" shall mean, with respect to any Annual
Period in respect of which a determination thereof is being or to be made, the
Consolidated net sales of the Borrower and the Subsidiaries for such Annual
Period, PLUS other income, MINUS cost of goods sold and selling, administrative
and general expense properly attributable to continuing operations of the
Borrower and the Subsidiaries for such Annual Period.
"DEBT" shall mean and shall include, as at the date as of which any
determination thereof is being or is to be made and in respect of any Person,
without duplication and excluding in the case of the Borrower and the
Subsidiaries intercorporate debt and other intercorporate obligations solely
among the Borrower and the Subsidiaries, all (i) indebtedness of such Person for
borrowed money, (ii) obligations of such Person evidenced by bonds, debentures,
notes or other similar instruments, (iii) obligations of such Person to pay the
deferred purchase price of property or services under conditional sales or other
similar agreements which provide for the deferral of the payment of the purchase
price for a period in excess of one year following the date of such Person's
receipt and acceptance of the complete delivery of such property and/or
services, (iv) obligations of such Person as lessee under leases which
obligations are, in accordance with generally accepted accounting principles,
recorded as capital lease obligations, and (v) obligations of such Person under
direct or indirect guaranties in respect of, and obligations (contingent or
otherwise) of such Person to purchase or otherwise acquire, indebtedness or
obligations of others of the kinds referred to in clauses (i) through (iv)
above. Whenever any determination of the amount of Debt (or of Consolidated Debt
or Funded Debt) is required or permitted to be, or is otherwise being or to be,
made for any purpose under this Agreement, the amount of any such Debt
denominated in any currency other than Dollars shall be calculated at the Dollar
Equivalent of such Debt as at the date as of which such determination of the
amount of Debt is being or to be made, except that, if all or any portion of the
principal amount of any such Debt which is payable in a currency other than
Dollars is hedged into Dollars, the
8
X-4.1-11
<PAGE> 12
principal amount of such hedged Debt, or the hedged portion thereof, shall be
deemed to be equal to the amount of Dollars specified in, or determined pursuant
to, the applicable hedging contract.
"DOLLAR EQUIVALENT" shall mean, in respect of any amount of any
currency, and as at the date and time as of which any determination thereof is
being or to be made, that number of Dollars into which such amount of currency
may be converted on such date, which shall be equal to the product of (a) the
principal amount of such currency (expressed in standard units of such currency)
multiplied by (b) the prevailing spot rate for exchanging such currency into
Dollars as quoted on page "Spot" of the Reuter System as at such date and time
as of which the determination of Dollar Equivalent is being or to be made, or,
if no rate is quoted in respect of such currency on the Reuter System display
designated page "Spot" as at such date and time, the prevailing spot rate for
exchanging such currency into Dollars in the New York City foreign currency
exchange market (or, if a more substantial and liquid market for the exchange of
such currency, the London currency exchange market or the currency exchange
market in the principal financial center of such currency) as at such date and
time.
"DOLLARS" or "$" shall mean lawful money of the United States of
America.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as the same may be amended from time to time, and the regulations promulgated
and the rulings issued thereunder.
"ERISA LIABILITIES" shall mean, as at the date as of which any
determination in respect thereof is being or to be made, the minimum liability
with respect to Plans which would be required to be reflected at such time as a
liability on the Consolidated balance sheet of the Borrower and the Subsidiaries
under paragraphs 36 and 70 of Statement of Financial Accounting Standards No. 87
as such statement may from time to time be amended, modified or supplemented, or
under any successor statement issued in replacement thereof.
"EURODOLLAR BORROWING" shall mean a Borrowing comprised of Eurodollar
Loans.
9
X-4.1-12
<PAGE> 13
"EURODOLLAR COMPETITIVE LOAN" shall mean any Competitive Loan bearing
interest at a rate determined by reference to the LIBO Rate in accordance with
the provisions of Article II.
"EURODOLLAR LOAN" shall mean any Eurodollar Competitive Loan or
Eurodollar Standard Loan.
"EURODOLLAR RESERVE REQUIREMENT" shall mean, at any date as of which
any determination thereof is being or to be made and with respect to any
Eurodollar Loan and the applicable Interest Period in respect of which any
determination thereof is being or to be made, the amount (expressed as a
decimal, rounded upward, if necessary, to six decimal places) of the applicable
statutory reserve or similar requirements (including, without duplication, all
basic, supplemental, marginal, emergency, special and other reserves), if any,
on Eurodollar deposits applicable to and imposed upon the applicable Lender from
time to time under regulations issued from time to time by the Board (or any
successor) for determining the minimum reserve requirement (including, without
limitation, any such reserve requirements under Regulation D of the Board and
any emergency, supplemental or other marginal reserve requirements), or by any
other Governmental Body having jurisdiction over such Lender, applicable to such
Lender with respect to liabilities or assets consisting of or including
Eurocurrency liabilities (as defined in Regulation D of the Board, as in effect
from time to time) having a term substantially equal to such Interest Period.
"EURODOLLAR STANDARD LOAN" shall mean any Standard Loan bearing
interest at a rate determined by reference to the LIBO Rate in accordance with
the provisions of Article II.
"EVENT OF DEFAULT" shall have the meaning assigned to such term in
Article VII.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended, and any successor Federal statute.
"FACILITY FEE" shall have the meaning assigned to such term in Section
2.06(a).
"FEES" shall mean the Facility Fee, the Utilization Fee and the
Administrative Fees.
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<PAGE> 14
"FIXED RATE BORROWING" shall mean a Borrowing comprised of Fixed Rate
Loans.
"FIXED RATE LOAN" shall mean any Competitive Loan bearing interest at a
fixed percentage rate per annum (expressed in the form of a decimal to no more
than four decimal places) specified by the Lender making such Loan in its
Competitive Bid.
"FUNDED DEBT" shall mean and include, as at any date as of which any
determination thereof is being or to be made, any Debt of the Borrower which by
its terms (i) matures more than one year after the date on which it was issued,
incurred, assumed or guaranteed by the Borrower, or (ii) matures one year or
less after the date it was issued, incurred, guaranteed or assumed which at such
date may be renewed at the sole election or option of the Borrower so as to
mature more than one year after such date.
"GOVERNMENTAL BODY" shall mean the United States of America, any State
thereof, any other country or any political subdivision of such other country,
or any department, agency, commission, board, bureau or instrumentality of the
United States of America, any State thereof, any other country or political
subdivision of such other country or any subdivision of any of them, and, to the
extent the term is used in respect of the Agent or any Lender, any
quasi-governmental body, agency or authority (including any central bank)
exercising regulatory authority over the Agent or any Lender pursuant to
applicable law in respect of the transactions contemplated by this Agreement.
"INTEREST PAYMENT DATE" shall mean, with respect to any Loan, the last
day of the Interest Period applicable thereto and, in the case of a Eurodollar
Loan with an Interest Period of more than three months' duration or a Fixed Rate
Loan or a CD Loan with an Interest Period of more than 90 days' duration, each
day that would have been an Interest Payment Date for such Loan had successive
Interest Periods of three months' duration or 90 days' duration, as the case may
be, been applicable to such Loan and, in addition, the date of any refinancing
or conversion of such Loan with or to a Loan of a different Type.
"INTEREST PERIOD" shall mean (a) as to any Eurodollar Borrowing, the
period commencing on the date of such Borrowing or on the last day of the
immediately preceding Interest Period applicable to such Borrowing, as the case
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<PAGE> 15
may be, and ending on the numerically corresponding day (or, if there is no
numerically corresponding day, on the last day) in the calendar month that is 1,
2, 3, 6 or 12 months thereafter (or, in the case of a Eurodollar Competitive
Borrowing, on any day that is 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11 or 12 months
thereafter), as the Borrower may elect, (b) as to any CD Borrowing, a period of
30, 60, 90, 180 or 360 days' duration, as the Borrower may elect, commencing on
the date of such Borrowing, (c) as to any ABR Borrowing, the period commencing
on the date of such Borrowing and ending on the date 90 days thereafter or, if
earlier, on the Maturity Date or the date of prepayment of such Borrowing and
(d) as to any Fixed Rate Borrowing, the period commencing on the date of such
Borrowing and ending on the date specified in the Competitive Bids in which the
offers to make the Fixed Rate Loans comprising such Borrowing were extended,
which shall not be earlier than seven days after the date of such Borrowing or
later than the 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 Eurodollar
Loans only, such next succeeding Business Day would fall in the next calendar
month, in which case such Interest Period shall end on the 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.
"LIBO RATE" means, with respect to any Interest Period relating to a
Eurodollar Loan, the rate of interest (expressed as an annual rate) equal to the
arithmetic average (expressed as a percentage rounded upward, if necessary, to
the nearest 1/1000th of 1%) of the offered rates for deposits in Dollars for a
period substantially equal to such Interest Period of the banks whose rates
appear on the Bloomberg's British Banker Association rate page, or on any
successor or substitute page for such service as shall then display the London
interbank offered rates for deposits in Dollars quoted by selected banks (page
"LIBO" or such other display being herein referred to as the "Reuter Screen"),
for delivery on the first day of such Interest Period, such rate to be
established from quotes on the Reuter Screen at (or as near to as practicable)
11:00 a.m. (London time) two Business Days prior to the first day of such
Interest Period (which shall be a Business Day); PROVIDED, THAT, if no rates can
be obtained from the Reuter Screen, the LIBO Rate shall be equal to the
arithmetic average (expressed as a percentage rounded upward, if
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<PAGE> 16
necessary, to the nearest 1/1000th of 1%) of the rates (expressed as annual
rates) at which deposits in Dollars in amounts of $5,000,000 or more for a
period substantially equal to such Interest Period are offered by the LIBOR
Reference Banks to prime banks in the London interbank market for delivery on
the first day of such Interest Period, such rates to be established from quotes
obtained at (or as near as practicable to) 12:00 noon (London time) two Business
Days prior to the first day of such Interest Period (which shall be a Business
Day); PROVIDED FURTHER, THAT, if with respect to any such Interest Period fewer
than two LIBOR Reference Banks are offering quotations, then LIBOR shall be
equal to the arithmetic average (rounded upward, if necessary, to the nearest
1/1000th of 1%) of the rates (expressed as annual rates) at which the Reference
Banks are offered deposits in Dollars in New York in amounts of $5,000,000 or
more for delivery on the first day of such Interest Period for a period
substantially equal to the Interest Period by leading banks in the New York
interbank market as of 11:00 a.m. (New York time) on the first day of such
Interest Period (which shall be a business day). As used herein, the term "LIBOR
REFERENCE BANKS" shall mean [Banque Nationale De Paris, Canadian Imperial Bank
of Commerce, Commerzbank Aktiengesellschaft and The Sumitomo Bank, Limited], and
the term "REFERENCE BANKS" shall mean [Bank of America NT&SA, The Chase
Manhattan Bank, Citibank, N.A. and Morgan Guaranty Trust Company of New York].
"LIEN" shall mean, with respect to any asset, (a) any mortgage, deed of
trust, lien, pledge, encumbrance, charge or security interest in or on such
asset or (b) the interest of a vendor or a lessor under any conditional sale
agreement, capital lease or title retention agreement relating to such asset.
"LOAN" shall mean a Competitive Loan or a Standard Loan, whether made
as a Eurodollar Loan, a CD Loan, an ABR Loan or a Fixed Rate Loan, as permitted
hereby.
"MAJORITY LENDERS" shall mean, at any time, Lenders having Commitments
representing at least a majority of the Total Commitment.
"MANUFACTURING FACILITY" shall mean any plant, other facility or
equipment owned by the Borrower which is used primarily to manufacture
automotive or other products and is located within the United States of America,
but
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<PAGE> 17
shall not include (i) retread plants, facilities or equipment, (ii) plants,
facilities or equipment which, in the opinion of the Board of Directors of the
Borrower, are not of material importance to the total business conducted by the
Borrower and the Subsidiaries, or (iii) plants, facilities or equipment which,
in the opinion of the Board of Directors of the Borrower, are used primarily for
transportation, marketing or warehousing.
"MARGIN" shall mean, as to any Eurodollar Competitive Loan, the margin
(expressed as a percentage rate per annum in the form of a decimal to no more
than four decimal places) to be added to or subtracted from the LIBO Rate in
order to determine the interest rate applicable to such Loan, as specified in
the Competitive Bid relating to such Loan.
"MATURITY DATE" shall mean the second anniversary of the Commitment
Termination Date.
"PERSON" shall mean any natural person, corporation, business trust,
joint venture, association, company, partnership or Governmental Body.
"PLAN" shall mean an employee benefit plan, other than a Multiemployer
Plan (as defined in Section 4001(a)(3) of ERISA), which (i) is (or, in the event
that any such plan has been terminated within five years of a transaction
described in Section 4069 of ERISA, was) maintained for employees of the
Borrower (or any trade or business which would be considered as under common
control with the Borrower within the meaning of Section 4001(b) of ERISA) and
subject to Title IV of ERISA, and (ii) has assets having an aggregate market
value in excess of $100,000,000.
"REQUIRED LENDERS" shall mean, at any time, Lenders having Commitments
representing at least two-thirds of the Total Commitment or, for purposes of
acceleration pursuant to clause (ii) of Article VII, Lenders holding Loans
representing at least two-thirds of the aggregate principal amount of the Loans
outstanding.
"REUTER SYSTEM" means the Reuter Money Service Monitor System.
"SCHEDULE OF COMPLIANCE" shall mean a Schedule of Compliance,
substantially in the form of Exhibit C, prepared by the Borrower and delivered
to the Lenders pursuant to subsection (c) of Article V.
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<PAGE> 18
"STANDARD BORROWING" shall mean a borrowing consisting of simultaneous
Standard Loans from each of the Lenders.
"STANDARD BORROWING REQUEST" shall mean a request made pursuant to
Section 2.04 in the form of Exhibit A-5.
"STANDARD LOANS" shall mean the revolving loans made by the Lenders to
the Borrower pursuant to Section 2.04. Each Standard Loan shall be a Eurodollar
Standard Loan, a CD Loan or an ABR Loan.
"SUBSIDIARY" shall mean any corporation, partnership, limited liability
company, joint venture, trust or estate of which (or in which) more than 50% of
(i) the outstanding capital stock having ordinary voting power
to elect a majority of the board of directors of such corporation
(irrespective of whether or not at the time capital stock of any other
class or classes of such corporation shall or might have voting power
upon the occurrence of any contingency),
(ii) the interest in the capital or profits of such
partnership, limited liability company or joint venture, or
(iii) the beneficial interest of such trust or estate,
is at the time directly or indirectly owned by the Borrower, by the Borrower and
one or more other Subsidiaries, or by one or more other Subsidiaries.
"SUPPLEMENTAL AMOUNT" shall mean, as at the end of any fiscal quarter
of the Borrower in respect of which a determination thereof is being or to be
made, the Dollar amount (if a positive number), if any, which is equal to the
product of (x) the remainder obtained by subtracting $2.25 billion from the
Consolidated Net Worth of the Borrower as at the end of such fiscal quarter,
multiplied by (y) .50.
"TOTAL COMMITMENT" shall mean at any time the aggregate amount of the
Lenders' Commitments, as in effect at such time.
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<PAGE> 19
"TYPE", when used in respect of any Loan or Borrowing, shall refer to
the Rate by reference to which interest on such Loan or on the Loans comprising
such Borrowing is determined. For purposes hereof, "RATE" shall include the LIBO
Rate, the CD Rate, the Alternate Base Rate and the Fixed Rate.
"UTILIZATION FEE" shall have the meaning assigned to such term in
Section 2.06(b).
SECTION 1.02. TERMS GENERALLY. The definitions in Section 1.01 shall
apply equally to both the singular and plural forms of the terms defined.
Whenever the context may require, any pronoun shall include the corresponding
masculine, feminine and neuter forms. The words "include", "includes" and
"including" shall be deemed to be followed by the phrase "without limitation".
All references herein to Articles, Sections, Exhibits and Schedules shall be
deemed references to Articles and Sections of, and Exhibits and Schedules to,
this Agreement unless the context shall otherwise require. Except as otherwise
expressly provided herein, all terms of an accounting or financial nature shall
be construed in accordance with generally accepted accounting principles in the
United States, as in effect on the date of this Agreement.
ARTICLE II. THE CREDITS
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<PAGE> 20
SECTION 2.01. COMMITMENTS. Subject to the terms and conditions and
relying upon the representations and warranties herein set forth, each Lender
agrees, severally and not jointly, to make Standard Loans to the Borrower, at
any time and from time to time on and after the date hereof and until (and
including) the Commitment Termination Date or the date of any earlier
termination of the Commitment of such Lender, in an aggregate principal amount
at any time outstanding not to exceed such Lender's Commitment minus the amount
by which the Competitive Loans outstanding at such time shall be deemed to have
used such Commitment pursuant to Section 2.15, subject, however, to the
conditions that (a) at no time shall (i) the sum of (x) the outstanding
aggregate principal amount of all Standard Loans made by all Lenders plus (y)
the outstanding aggregate principal amount of all Competitive Loans made by all
Lenders exceed (ii) the Total Commitment and (b) except as otherwise provided in
Section 2.07(a), at all times the outstanding aggregate principal amount of all
Standard Loans made by each Lender shall equal the product of (i) the percentage
which its Commitment represents of the Total Commitment times (ii) the
outstanding aggregate principal amount of all Standard Loans made pursuant to
Section 2.04. Each Lender's Commitment is set forth opposite its respective name
in Schedule 2.01. Such Commitments may be terminated, reduced or extended from
time to time pursuant to Section 2.11.
Within the foregoing limits, the Borrower may borrow, pay or prepay and
reborrow hereunder, on and after the Closing Date and prior to the Commitment
Termination Date, subject to the terms, conditions and limitations set forth
herein.
SECTION 2.02. LOANS. (a) Each Standard Loan shall, except as otherwise
provided in Section 2.07(a), be made as part of a Borrowing consisting of Loans
made by the Lenders ratably in accordance with their Commitments; PROVIDED,
HOWEVER, that the failure of any Lender to make any Standard Loan shall not in
itself relieve any other Lender of its obligation to lend hereunder (it being
understood, however, that no Lender shall be responsible for the failure of any
other Lender to make any Loan required to be made by such other Lender). Each
Competitive Loan shall be made in accordance with the procedures set forth in
Section 2.03. The Standard Loans or Competitive Loans comprising any Borrowing
shall be in an aggregate principal amount which is an integral multiple of
$1,000,000 and not less than $25,000,000 in the case of Standard Loans and
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<PAGE> 21
$5,000,000 in the case of Competitive Loans (or an aggregate principal amount
equal to the remaining balance of the available Total Commitment).
(b) Each Competitive Borrowing shall be comprised entirely of
Eurodollar Competitive Loans or Fixed Rate Loans, and each Standard Borrowing
shall be comprised entirely of Eurodollar Standard Loans, CD Loans or ABR Loans,
as the Borrower may request pursuant to Section 2.03 or 2.04, as applicable.
Borrowings of more than one Type or of the same Type and having different
Interest Periods may be outstanding at the same time. For purposes of the
foregoing, Loans of different Types and Loans having different Interest Periods,
regardless of whether they commence on the same date, shall be considered
separate Loans and separate Borrowings.
(c) Subject to Section 2.05, each Lender shall make each Loan to be
made by it hereunder on the proposed date thereof by wire transfer of
immediately available funds to the Agent in New York, New York, not later than
11:30 a.m., New York City time, and the Agent shall transfer the entire amount
received to the Borrower in Dollars in immediately available funds at the bank
and to the account designated by the Borrower as promptly as practicable and in
any event by such a time that such funds will be available for retransfer,
investment or other use by the Borrower on the borrowing date or, if a Borrowing
shall not occur on such date because any condition precedent herein specified
shall not have been met, return the amounts so received to the respective
Lenders. Competitive Loans shall be made by the Lender or Lenders whose
Competitive Bids therefor are accepted pursuant to Section 2.03 in the amounts
so accepted and Standard Loans shall be made by the Lenders pro rata in
accordance with Section 2.15. Unless the Agent shall have received notice from a
Lender prior to the date of any Borrowing that such Lender will not make
available to the Agent such Lender's portion of such Borrowing, the Agent may
assume that such Lender has made such portion available to the Agent on the date
of such Borrowing in accordance with this paragraph (c) and the Agent may, in
reliance upon such assumption, make available to the Borrower on such date a
corresponding amount. If and to the extent that such Lender shall not have made
such portion available to the Agent, such Lender and the Borrower severally
agree to repay to the 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
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<PAGE> 22
amount is repaid to the Agent at the Federal Funds Effective Rate; PROVIDED that
if such Lender does not pay such principal amount to the Agent within five
Business Days and the Borrower repays such principal amount on the sixth
Business Day, such Lender shall be responsible for interest during such six
Business Day period, provided that the Agent, if it shall first have made demand
on such Lender and shall not have received payment, may recover such interest
from the Borrower. If such Lender shall pay to the Agent such corresponding
amount within five Business Days, such amount shall constitute such Lender's
Loan as part of such Borrowing for purposes of this Agreement.
(d) Notwithstanding any other provision of this Agreement, the Borrower
shall not be entitled to request any Borrowing if the Interest Period requested
with respect thereto would end after the Maturity Date.
SECTION 2.03. COMPETITIVE BID PROCEDURE. (a) In order to request
Competitive Bids, the Borrower shall hand deliver or telecopy to the Agent a
duly completed Competitive Bid Request in the form of Exhibit A-1 hereto, to be
received by the Agent (i) in the case of a Eurodollar Competitive Borrowing, not
later than 10:00 a.m., New York City time, four Business Days before a proposed
Competitive Borrowing and (ii) in the case of a Fixed Rate Borrowing, not later
than 10:00 a.m., New York City time, one Business Day before a proposed
Competitive Borrowing. No CD Loan or ABR Loan shall be requested in, or made
pursuant to, a Competitive Bid Request. A Competitive Bid Request that does not
conform substantially to the format of Exhibit A-1 may be rejected in the
Agent's sole discretion, and the Agent shall promptly notify the Borrower of
such rejection by telecopier. Such request shall in each case refer to this
Agreement and specify (x) whether the Borrowing then being requested is to be a
Eurodollar Borrowing or a Fixed Rate Borrowing, (y) the date of such Borrowing
(which shall be a Business Day) and the aggregate principal amount thereof which
shall be in a minimum principal amount of $25,000,000 and in an integral
multiple of $1,000,000, and (z) the Interest Period with respect thereto (which
may not end after the Maturity Date). Promptly after its receipt of a
Competitive Bid Request that is not rejected as aforesaid, the Agent shall
invite by telecopier (in the form set forth in Exhibit A-2 hereto) the Lenders
to bid, on the terms and conditions of this Agreement, to make Competitive Loans
pursuant to the Competitive Bid Request.
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<PAGE> 23
(b) Each Lender may, in its sole discretion, make one or more
Competitive Bids to the Borrower responsive to a Competitive Bid Request. Each
Competitive Bid by a Lender must be received by the Agent via telecopier, in the
form of Exhibit A-3 hereto, (i) in the case of a Eurodollar Competitive
Borrowing, not later than 9:30 a.m., New York City time, three Business Days
before a proposed Competitive Borrowing and (ii) in the case of a Fixed Rate
Borrowing, not later than 9:30 a.m., New York City time, on the day of a
proposed Competitive Borrowing. Multiple bids will be accepted by the Agent.
Competitive Bids that do not conform substantially to the format of Exhibit A-3
may be rejected by the Agent after conferring with, and upon the instruction of,
the Borrower, and the Agent shall notify the Lender making such nonconforming
bid of such rejection as soon as practicable. Each Competitive Bid shall refer
to this Agreement and specify (x) the principal amount (which shall be in a
minimum principal amount of $5,000,000 and in an integral multiple of $1,000,000
and which may equal the entire principal amount of the Competitive Borrowing
requested by the Borrower) of the Competitive Loan or Loans that the Lender is
willing to make to the Borrower, (y) the Competitive Bid Rate or Rates at which
the Lender is prepared to make the Competitive Loan or Loans and (z) the
Interest Period and the last day thereof. If any Lender shall elect not to make
a Competitive Bid, such Lender shall so notify the Agent via telecopier (I) in
the case of Eurodollar Competitive Loans, not later than 9:30 a.m., New York
City time, three Business Days before a proposed Competitive Borrowing, and (II)
in the case of Fixed Rate Loans, not later than 9:30 a.m., New York City time,
on the day of a proposed Competitive Borrowing; PROVIDED, HOWEVER, that failure
by any Lender to give such notice shall not cause such Lender to be obligated to
make any Competitive Loan as part of such Competitive Borrowing. A Competitive
Bid submitted by a Lender pursuant to this paragraph (b) shall be irrevocable.
(c) The Agent shall promptly notify the Borrower by telecopier of all
the Competitive Bids made, the Competitive Bid Rate and the principal amount of
each Competitive Loan in respect of which a Competitive Bid was made and the
identity of the Lender that made each bid. The Agent shall send a copy of all
Competitive Bids to the Borrower for its records as soon as practicable after
completion of the bidding process set forth in this Section 2.03.
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<PAGE> 24
(d) The Borrower may in its sole and absolute discretion, subject only
to the provisions of this paragraph (d), accept or reject any Competitive Bid
referred to in paragraph (c) above (and the Competitive Bids accepted need not
be in any minimum aggregate amount except as provided below in this paragraph).
The Borrower shall notify the Agent by telephone, confirmed by telecopier in the
form of a Competitive Bid Accept/Reject Letter in the format of Exhibit A-4,
whether and to what extent it has decided to accept or reject any of or all the
bids referred to in paragraph (c) above, (x) in the case of a Eurodollar
Competitive Borrowing, not later than 10:30 a.m., New York City time, three
Business Days before a proposed Competitive Borrowing, and (y) in the case of a
Fixed Rate Borrowing, not later than 10:30 a.m., New York City time, on the day
of a proposed Competitive Borrowing; PROVIDED, HOWEVER, that (i) the failure by
the Borrower to give such notice shall be deemed to be a rejection of all the
bids referred to in paragraph (c) above, (ii) the Borrower shall not accept a
bid made at a particular Competitive Bid Rate if the Borrower has decided to
reject a bid made at a lower Competitive Bid Rate, (iii) if the Borrower shall
accept a bid or bids made at a particular Competitive Bid Rate but the amount of
such bid or bids shall cause the total amount of bids to be accepted by the
Borrower to exceed the amount that the Borrower desires to borrow, then the
Borrower shall accept a portion of such bid or bids in an amount equal to the
amount that the Borrower desires to borrow less the amount of all other
Competitive Bids accepted with respect to such Competitive Bid Request, which
acceptance, in the case of multiple bids at such Competitive Bid Rate, shall be
made pro rata in accordance with the amount of each such bid at such Competitive
Bid Rate, and (iv) except pursuant to clause (iii) above, no bid shall be
accepted for a Competitive Loan unless such Competitive Loan is in a minimum
principal amount of $5,000,000 and an integral multiple of $1,000,000; PROVIDED
FURTHER, HOWEVER, that if a Competitive Loan must be in an amount less than
$5,000,000 because of the provisions of clause (iii) above, such Competitive
Loan may be for a minimum of $1,000,000 or any integral multiple thereof, and in
calculating the pro rata allocation of acceptances of portions of multiple bids
at a particular Competitive Bid Rate pursuant to clause (iv) the amounts shall
be rounded to integral multiples of $1,000,000 in a manner which shall be in the
discretion of the Borrower. The Borrower may accept Competitive Bids in an
aggregate principal amount in excess of the principal amount specified in the
relevant Competitive Bid Request. A notice given by
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<PAGE> 25
the Borrower in the form of a Competitive Bid Accept/Reject Letter pursuant to
this paragraph (d) shall be irrevocable.
(e) The Agent shall promptly notify each bidding Lender whether or not
its Competitive Bid has been accepted (and if so, in what amount and at what
Competitive Bid Rate or Rates) by telecopy sent by the Agent, and each
successful bidder will thereupon become bound, subject to the other applicable
conditions hereof, to make the Competitive Loans in respect of which its bid has
been accepted.
(f) A Competitive Bid Request shall not be made within five Business
Days after the date of any previous Competitive Bid Request.
(g) If the Agent shall elect to submit a Competitive Bid in its
capacity as a Lender, it shall submit such bid directly to the Borrower one
quarter of an hour earlier than the latest time at which the other Lenders are
required to submit their bids to the Agent pursuant to paragraph (b) above.
(h) All notices required by this Section 2.03 shall be given in
accordance with Section 9.01.
SECTION 2.04. STANDARD BORROWING PROCEDURE. In order to request a
Standard Borrowing, the Borrower shall hand deliver or telecopy to the Agent in
the form of Exhibit A-5 (a) in the case of a Eurodollar Standard Borrowing, not
later than 3:00 p.m., New York City time, three Business Days before a proposed
Borrowing, (b) in the case of a CD Borrowing, not later than 10:30 a.m., New
York City time, two Business Days before a proposed Borrowing and (c) in the
case of an ABR Borrowing, not later than 10:30 a.m., New York City time, on the
day of a proposed Borrowing. No Fixed Rate Loan shall be requested or made
pursuant to a Standard Borrowing Request. Such notice shall be irrevocable and
shall in each case specify (i) whether the Borrowing then being requested is to
be a Eurodollar Standard Borrowing, a CD Borrowing or an ABR Borrowing; (ii) the
date of such Standard Borrowing (which shall be a Business Day) and the amount
thereof; and (iii) if such Borrowing is to be a Eurodollar Standard Borrowing or
CD Borrowing, the Interest Period with respect thereto. If no election as to the
Type of Standard Borrowing is specified in any such notice, then the requested
Standard Borrowing shall be an ABR Borrowing. If no Interest Period with respect
to any Eurodollar Standard Borrowing or CD Borrowing is specified in any such
notice, then the
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<PAGE> 26
Borrower shall be deemed to have selected an Interest Period of one month's
duration, in the case of a Eurodollar Standard Borrowing, or 30 days' duration,
in the case of a CD Borrowing. If the Borrower shall not have given notice in
accordance with this Section 2.04 of its election to refinance a Standard
Borrowing prior to the end of the Interest Period in effect for such Borrowing,
then the Borrower shall (unless such Borrowing is repaid at the end of such
Interest Period) be deemed to have given notice of an election to refinance such
Borrowing with an ABR Borrowing and the Agent will advise the Borrower that such
notice has not been received (but shall not be liable to the Borrower for any
unintentional omission to do so). The Agent shall promptly advise the Lenders of
any notice given or deemed to have been given pursuant to this Section 2.04 and
of each Lender's portion of the requested Borrowing.
SECTION 2.05. REFINANCINGS. The Borrower may refinance all or any part
of any Borrowing with a Borrowing of the same or a different Type made pursuant
to Section 2.03 or Section 2.04, subject to the conditions and limitations set
forth herein and elsewhere in this Agreement, including refinancings of
Competitive Borrowings with Standard Borrowings and Standard Borrowings with
Competitive Borrowings. Any Borrowing or part thereof so refinanced shall be
deemed to be repaid in accordance with Section 2.07 with the proceeds of a new
Borrowing hereunder and the proceeds of the new Borrowing, to the extent they do
not exceed the principal amount of the Borrowing being refinanced, shall not be
paid by the Lenders to the Agent or by the Agent to the Borrower pursuant to
Section 2.02(c); PROVIDED, HOWEVER, that (i) if the principal amount extended by
a Lender in a refinancing is greater than the principal amount extended by such
Lender in the Borrowing being refinanced, then such Lender shall pay such
difference to the Agent for distribution to the Lenders described in (ii) below,
(ii) if the principal amount extended by a Lender in the Borrowing being
refinanced is greater than the principal amount being extended by such Lender in
the refinancing, the Agent shall return the difference to such Lender out of
amounts received pursuant to (i) above, and (iii) to the extent any Lender fails
to pay the Agent amounts due from it pursuant to (i) above, any Loan or portion
thereof being refinanced with such amounts shall not be deemed repaid in
accordance with Section 2.07 and shall be payable by the Borrower.
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<PAGE> 27
SECTION 2.06. FEES. (a) The Borrower agrees to pay to each Lender,
through the Agent, on each March 31, June 30, September 30 and December 31, and
on the Maturity Date or on any earlier date on which the Commitment of such
Lender shall have terminated and its outstanding Loans repaid, a facility fee (a
"FACILITY FEE") equal to 0.08% per annum on the amount of the Commitment of such
Lender, whether used or unused, or, following the Commitment Termination Date,
the amount of the outstanding Loans of such Lender, during the preceding quarter
(or shorter period commencing with the date hereof or ending with the Maturity
Date or the date of such termination and repayment). All Facility Fees shall be
computed on the basis of the actual number of days elapsed in a year of 365 or
366 days, as the case may be. The Facility Fee due to each Lender shall commence
to accrue on the date hereof and shall cease to accrue on the Maturity Date or
any earlier date on which the Commitment of such Lender shall have terminated
(but shall in any event accrue until all Loans made by such Lender have been
repaid).
(b) The Borrower agrees to pay to each Lender, through the Agent, on
each March 31, June 30, September 30 and December 31 and on each date on which
the Commitment of such Lender shall be terminated or reduced as provided herein,
a utilization fee of .125% per annum (a "Utilization Fee") (i) on such Lender's
a pro rata portion (based on the ratio of such Lender's Commitment to the Total
Commitment) of the aggregate principal amount of all of the outstanding Loans
for each day during the preceding quarter (or other period commencing on the
date hereof or ending with the Maturity Date or any date on which the Commitment
of such Lender shall be terminated and its outstanding Loans repaid in full) on
which the sum of the outstanding Loans, including Competitive Loans, exceeds 33%
of the Total Commitment and (ii) after the termination of such Lender's
Commitment (other than as a result of the termination of the Commitments due to
the occurrence of an Event of Default under clause (a) or (b) of Article VII),
on the principal amount of such Lender's outstanding Loans. The Utilization Fee
shall be computed on the basis of the actual number of days elapsed in a year of
360 days. The Utilization Fee due to each Lender shall be payable in arrears and
shall commence to accrue on the date hereof and cease to accrue on the earlier
of the Maturity Date and the date on which the Commitment of such Lender is
terminated and its outstanding Loans repaid in full as provided herein.
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<PAGE> 28
(c) The Borrower agrees to pay the Agent, for its own account, agent
and administrative fees (the "Administrative Fees") at the times and in the
amounts agreed upon in the letter agreement dated August [3], 1999, between the
Borrower and the Agent.
(d) All Fees shall be paid on the dates due, in immediately available
funds, to the Agent for distribution, if and as appropriate, among the Lenders.
Once paid, none of the Fees shall be refundable under any circumstances.
SECTION 2.07. REPAYMENT OF LOANS; EVIDENCE OF DEBT; CONVERSION AND
CONTINUATION OF STANDARD BORROWINGS. (a) The outstanding principal balance of
each Competitive Loan and Standard Loan shall be payable on the last day of the
Interest Period applicable to such Loan prior to the Commitment Termination Date
and on the Commitment Termination Date applicable to the Lender making such
Loan; PROVIDED, HOWEVER, that if the Borrower shall, at least three Business
Days prior to such Commitment Termination Date, notify the Agent and such Lender
of its election to (i) extend the maturity of one or more Standard Loans made by
such Lender, or of any portion or portions of the principal amounts thereof,
then outstanding, (ii) obtain from such Lender one or more new Standard Loans in
such amount(s) as Borrower shall elect up to the Commitment of such Lender on
such notice date (which Loan or Loans shall be made by such Lender on the
Commitment Termination Date and, if for less than the entire Commitment of such
Lender, shall be in a minimum amount of at least $1,000,000 and shall be, to the
extent permitted, in integral multiples of $1,000,000), or (iii) obtain any
combination of extensions of outstanding Standard Loans and new Standard Loans
having an aggregate principal amount up to the Commitment of such Lender, all
such Standard Loans shall in each case (notwithstanding the Interest Period(s)
in respect thereof then selected) instead mature on the Maturity Date.
Notwithstanding any other provision of this Agreement, in the event of any
extensions of Standard Loans or any new Standard Loans, or both, by the Borrower
from any Lender pursuant to the preceding sentence of this paragraph (a) at a
time when the Commitment Termination Date has been extended as to other Lenders,
then from and after the Commitment Termination Date in respect of such Lender
(i) Section 2.15 shall no longer apply to the Loans of such Lender, and shall
apply to the Loans of the other Lenders as to which the Commitment Termination
Date has been extended as if such Lender were not a party to this Agreement;
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<PAGE> 29
(ii) insofar as the rights and obligations of such Lender are concerned, this
Agreement shall operate as if it were an agreement solely between the Borrower
and such Lender, with the result, INTER ALIA, that (A) such Lender shall have,
as to its Loans, all the rights and obligations of the "Lenders" and the
"Agent", (B) such Lender shall have an independent right to accelerate its Loans
as provided in Article VII, (C) the consent of such Lender shall be required in
order for any amendment to or waiver of this Agreement to be applicable to such
Lender (and such Lender shall not be deemed to have a Commitment or Loans
outstanding for the purpose of determining or participating in any action taken
by the Majority Lenders or Required Lenders or any of the rights or obligations
of the other Lenders), (D) all notices provided for hereunder shall be given
directly by the Borrower to such Lender or by such Lender to the Borrower, as
the case may be, and (E) all payments to which such Lender is entitled shall be
made directly by the Borrower to such Lender; and (iii) the Agent shall have no
further responsibilities with respect to such Lender or the administration of
this Agreement as it relates to such Lender (but, at the request of the Borrower
or such Lender from time to time, will determine the rates of interest
applicable to the Loans of such Lender).
(b) Each Lender shall maintain in accordance with its usual practice an
account or accounts evidencing the indebtedness to such Lender resulting from
each Loan made by such Lender from time to time, including the amounts of
principal and interest payable and paid such Lender from time to time under this
Agreement.
(c) The Agent shall maintain accounts in which it will record (i) the
amount of each Loan made hereunder, the Type of each Loan made and the Interest
Period applicable thereto, (ii) the amount of any principal or interest due and
payable or to become due and payable from the Borrower to each Lender hereunder
and (iii) the amount of any sum received by the Agent hereunder from the
Borrower and each Lender's share thereof.
(d) The entries made in the accounts maintained pursuant to paragraphs
(b) and (c) of this Section 2.07 shall, to the extent permitted by applicable
law, be rebuttable evidence of the existence and amounts of the obligations
therein recorded; PROVIDED, HOWEVER, that the failure of any Lender or the Agent
to maintain such accounts or any error therein shall not in any manner affect
the
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<PAGE> 30
obligations of the Borrower to repay the Loans in accordance with their terms.
(e) Following the Commitment Termination Date applicable to each
Lender, if the Borrower shall have elected to extend the maturity of the Loan of
such Lender pursuant to Section 2.07(a), the Borrower shall have the right at
any time upon prior irrevocable notice to the Agent and such Lender (i) not
later than 12:00 (noon), New York City time, one Business Day prior to
conversion, to convert any Eurodollar Standard Loan or CD Loan by such Lender
then outstanding into an ABR Loan by such Lender, (ii) not later than 10:30
a.m., New York City time, two Business Days prior to conversion or continuation,
to convert any Eurodollar Standard Loan or ABR Loan by such Lender into a CD
Loan by such Lender or to continue any CD Loan by such Lender as a CD Loan by
such Lender for an additional Interest Period, and (iii) not later than 3:00
p.m., New York City time, three Business Days prior to conversion or
continuation, to convert any ABR Loan or CD Loan by such Lender into a
Eurodollar Standard Loan or to continue any Eurodollar Standard Loan as a
Eurodollar Standard Loan for an additional Interest Period, subject in each case
to the following:
(i) if less than all the outstanding principal amount of any
Standard Loan shall be converted or continued, the aggregate principal
amount of such Standard Loan converted or continued shall be an
integral multiple of $1,000,000 and not less than $1,000,000;
(ii) if any Eurodollar Standard Loan or CD Loan is converted
at a time other than the end of the Interest Period applicable thereto,
the Borrower shall pay, upon demand, any amount due to the applicable
Lender pursuant to Section 2.12(d); and
(iii) no Interest Period may be selected for any Eurodollar
Standard Loan or CD Loan that would end later than the Maturity Date.
Each notice pursuant to this paragraph (e) shall be irrevocable and
shall refer to this Agreement and specify (i) the identity and amount of the
Standard Loan that the Borrower requests be converted or continued, (ii) whether
such Standard Loan is to be converted to or continued as a Eurodollar Standard
Loan, a CD Loan or an ABR Loan, (iii) if
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<PAGE> 31
such notice requests a conversion, the date of such conversion (which shall be a
Business Day) and (iv) if such Standard Loan is to be converted to or continued
as a Eurodollar Standard Loan or CD Loan, the Interest Period with respect
thereto. If no Interest Period is specified in any such notice with respect to
any conversion to or continuation as a Eurodollar Standard Loan or CD Loan, the
Borrower shall be deemed to have selected an Interest Period of one month's
duration, in the case of a Eurodollar Standard Loan, or 30 days' duration, in
the case of a CD Loan. If the Borrower shall not have given notice in accordance
with this paragraph to continue any Standard Loan into a subsequent Interest
Period (and shall not otherwise have given notice in accordance with this
paragraph to convert such Standard Loan), such Standard Loan shall, at the end
of the Interest Period applicable thereto (unless repaid pursuant to the terms
hereof), automatically be continued into a new Interest Period as an ABR Loan.
SECTION 2.08. INTEREST ON LOANS. (a) Subject to the provisions of
Section 2.09, the Loans comprising each 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 (i) in the case of each Eurodollar Standard
Loan, the LIBO Rate for the Interest Period in effect for such Borrowing plus
0.32%, and (ii) in the case of each Eurodollar Competitive Loan, the LIBO Rate
for the Interest Period in effect for such Borrowing plus (or minus) the Margin
offered by the Lender making such Loan and accepted by the Borrower pursuant to
Section 2.03.
(b) Subject to the provisions of Section 2.09, the Loans comprising
each CD 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
CD Rate for the Interest Period in effect for such Borrowing plus 0.445%.
(c) Subject to the provisions of Section 2.09, the Loans comprising
each ABR Borrowing shall bear interest (computed on the basis of the actual
number of days elapsed over a year of 365 or 366 days, as the case may be, when
determined by reference to the Prime Rate and over a year of 360 days at all
other times) at a rate per annum equal to the Alternate Base Rate minus 0.08%.
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<PAGE> 32
(d) Subject to the provisions of Section 2.09, each Fixed Rate Loan
shall bear interest at a rate per annum (computed on the basis of the actual
number of days elapsed over a year of 360 days) equal to the fixed rate of
interest offered by the Lender making such Loan and accepted by the Borrower
pursuant to Section 2.03.
(e) Subject to the provisions of Section 2.09, interest on each Loan
shall be payable on each Interest Payment Date applicable to such Loan. The LIBO
Rate, the CD Rate or the Alternate Base Rate for each Interest Period or day
within an Interest Period shall be determined by the Agent in accordance with
the terms and conditions of this Agreement, and such determination shall be
conclusive absent manifest error.
SECTION 2.09. DEFAULT INTEREST. If the Borrower shall default in the
payment of the principal of or interest on any Loan or any other amount becoming
due hereunder, whether by scheduled maturity, notice of prepayment, acceleration
or otherwise, the Borrower shall on demand from time to time from the Agent pay
interest, to the extent permitted by law, on such defaulted amount up to (but
not including) the date of actual payment (after as well as before judgment) at
a rate per annum (computed on the basis of the actual number of days elapsed
over a year of 360 days) equal to the Alternate Base Rate plus 1%.
SECTION 2.10. UNAVAILABILITY OF LIBO RATE AND CD RATE QUOTATIONS. (a)
In the event that on the day two Business Days prior to the commencement of any
Interest Period for a Eurodollar Borrowing the Agent shall have determined that
it is not possible to ascertain a LIBO Rate for such Interest Period, either
from the Reuter Screen on the Reuter System or from rates offered by at least
two of the LIBO Reference Banks or the Reference Banks as contemplated in the
definition of LIBO Rate at Section 1.01, the Agent shall, as soon as practicable
thereafter, give written or telecopy notice of such event to the Borrower and
the Lenders, in which event any request by the Borrower for a Eurodollar
Borrowing for such Interest Period shall be of no force or effect and no
Borrowing shall be made pursuant to such request.
(b) In the event, and on each occasion, that on the day on which the
Interest Period for any CD Borrowing commences the Agent shall have determined
that it is not possible to ascertain a CD Rate for such Interest Period,
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<PAGE> 33
either from Page "CDNY" or other display on the Reuter System or from "Composite
Quotations" or, if applicable, the rates offered by leading New York City
dealers in negotiable certificates of deposits as contemplated in the definition
of CD Rate at Section 1.01, the Agent shall, as soon as practicable thereafter,
give written or telecopy notice of such determination to the Borrower and the
Lenders, in which event any request by the Borrower for a CD Loan for such
Interest Period shall be of no force or effect and no Borrowing shall be made
pursuant to such request.
SECTION 2.11. TERMINATION, REDUCTION, EXTENSION AND ADDITION OF
COMMITMENTS. (a) The Commitments shall be automatically terminated on the
Commitment Termination Date.
(b) Upon at least three Business Days' prior irrevocable written or
telecopy notice to the Agent, the Borrower may at any time in whole permanently
terminate, or from time to time in part permanently reduce, the Total
Commitment; PROVIDED, HOWEVER, that each partial reduction of the Total
Commitment shall be in an integral multiple of $1,000,000 and in a minimum
amount of $5,000,000.
(c) Each reduction in the Total Commitment hereunder shall be made
ratably among the Lenders in accordance with their respective Commitments. The
Borrower shall pay to the Agent for the account of the Lenders, on the date of
each termination or reduction, the Facility Fees on the amount of the
Commitments so terminated or reduced accrued to the date of such termination or
reduction.
(d) The Borrower may from time to time request that one or more
additional financial institutions be added as Lenders under this Agreement with
Commitments agreed upon by the Borrower and such financial institutions. In the
event of any such request, such financial institutions shall become parties to
and Lenders under this Agreement upon the execution of one or more agreements to
that effect in the form (appropriately completed) of Exhibit D (and without any
action being required on the part of any other Lender), and upon the
effectiveness of any such agreement, Schedule 2.01 shall be automatically
amended to reflect the Commitment of each new Lender.
(e) Not later than the date 45 days prior to the first, or, if the
Commitment Termination Date has previously been extended, the second, third or
fourth anniversary of the date hereof, as the case may be, the Borrower may
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<PAGE> 34
deliver to the Agent (which shall promptly transmit a copy to each Lender) a
notice requesting that the Commitments then remaining in effect be extended to
the date 364 days after the Commitment Termination Date at the time in effect.
Within 20 days after its receipt of any such notice, each Lender shall notify
the Agent of its willingness or unwillingness so to extend its Commitment. Any
Lender which shall fail so to notify the Agent within such period shall be
deemed to have declined to extend its Commitment. The Commitment of any Lender
that shall so decline (or be deemed to have declined) to extend its Commitment
pursuant to this paragraph (e) shall terminate on the Commitment Termination
Date at the time in effect and the Loans, if any, of such Lender shall, subject
to 2.07(a), be repaid on such date together with all interest accrued thereon
and the accrued Facility Fee and Utilization Fee. Any payment made pursuant to
this Section 2.11(e) shall be without premium, penalty or other cost of any kind
and shall not be subject to the requirements of Sections 2.15 and 2.12(d). The
Commitments of the Lenders notifying the Borrower that they are willing to
extend shall be extended, effective as of the date which shall theretofore have
been the Commitment Termination Date, to the date 364 days after such date.
SECTION 2.12. PREPAYMENT. (a) The Borrower shall have the right at any
time and from time to time to prepay without premium or penalty any Borrowing
(including a Competitive Borrowing), in whole or in part, upon giving written or
telecopy notice (or telephone notice promptly confirmed by written or telecopy
notice) to the Agent: (i) before 5:00 p.m., New York City time, three Business
Days prior to prepayment, in the case of Eurodollar Loans, (ii) before 5:00
p.m., New York City time, two Business Days prior to prepayment, in the case of
CD Loans or Fixed Rate Loans, and (iii) before 10:00 a.m., New York City time,
one Business Day prior to prepayment, in the case of ABR Loans; PROVIDED,
HOWEVER, that each partial prepayment of a Borrowing shall be in an amount which
is an integral multiple of $1,000,000 and, prior to the Commitment Termination
Date, not less than $5,000,000.
(b) On the date of any termination or reduction of the Commitments
pursuant to Section 2.11(b), the Borrower shall pay or prepay so much of the
outstanding Borrowings, selected at the Borrower's sole option, as shall be
necessary in order that the aggregate principal amount of the Competitive Loans
and Standard Loans outstanding will
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<PAGE> 35
not exceed the Total Commitment after giving effect to such termination or
reduction.
(c) Each notice of prepayment shall specify the prepayment date and the
principal amount of each Borrowing (or portion thereof) to be prepaid, shall be
irrevocable and shall commit the Borrower to prepay such Borrowing (or portion
thereof) by the amount stated therein on the date stated therein. All
prepayments under this Section 2.12 shall be accompanied by accrued interest on
the principal amount being prepaid to the date of payment.
(d) In the event any prepayment is made in respect of any Loan (or in
the event any Lender is required to transfer a Loan or the Borrower repays any
Loan on the Commitment Termination Date and such date shall be prior to the end
of the Interest Period applicable to such Loan), other than (i) any ABR Loan and
(ii) any Loan the prepayment, payment or transfer of which is made by Borrower
pursuant to its right to prepay, repay or require the transfer of such Loan
under Sections 2.11(e), 2.13, 2.14, 2.17 or 9.05 or upon the Lender's exercise
of its option pursuant to Section 9.14, the Borrower shall pay to such Lender,
promptly upon the written request of such Lender (which request shall be
accompanied by a certificate as described below), such amount as shall be
necessary to reimburse such Lender for the loss, if any, reasonably incurred by
such Lender as a result of such repayment, prepayment or transfer arising from
inability due to general market conditions to recover the cost of deposits or
other funds acquired by such Lender to fund such Loan, in the liquidation of
such deposits or other funds so acquired (or from the reemployment thereof if
such reemployment would result in less of a funding loss to such Lender);
PROVIDED, that any such funding loss shall not in any event exceed the cost
incurred by such Lender to obtain such deposit or other funds, minus the fair
market value thereof realizable by such Lender in the liquidation thereof. Such
Lender shall use reasonable efforts to avoid or minimize any such loss. Such
Lender's claim, if any, shall be accompanied by a certificate setting forth in
reasonable detail (including the calculations made in determining) the reason
for and the amount of such loss, which certificate shall be conclusive in the
absence of manifest error. Prepayments of ABR Borrowings shall be without
penalty, premium or other cost of any kind.
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<PAGE> 36
SECTION 2.13. RESERVE REQUIREMENTS; CHANGE IN CIRCUMSTANCES. (a) In the
event that at any time or from time to time during the term of this Agreement
any Eurodollar Reserve Requirement shall be applicable to deposits acquired in
respect of any Eurodollar Loan the Lender making such Eurodollar Loan shall
promptly notify the Borrower in writing of any imposition of or change in or
prospective imposition of or change in any Eurodollar Reserve Requirement,
whether in respect of an outstanding Eurodollar Loan or any possible future
Eurodollar Loan, and, for as long as such Eurodollar Reserve Requirement shall
be effective, the Borrower shall, upon written request from such Lender (with a
copy of such request to the Agent), pay to such Lender at the end of each
Interest Period for such Eurodollar Loan, an additional amount equal to the
difference between the interest accrued based upon the LIBO Rate and the
interest that would have accrued had the Adjusted LIBO Rate been applicable to
the Eurodollar Loan of such Lender. Each Lender represents that currently it is
not subject to (and does not incur) any Eurodollar Reserve Requirement.
(b) In the event that at any time or from time to time during the term
of this Agreement any CD Reserve Requirement or Assessment Rate shall be
applicable to deposits acquired in respect of any CD Loan the Lender making such
CD Loan shall promptly notify the Borrower in writing of any imposition of or
change in or prospective imposition of or change in any CD Reserve Requirement
or Assessment Rate, whether in respect of an outstanding CD Loan or any possible
future CD Loan, and, for as long as such CD Reserve Requirement or Assessment
Rate shall be effective, the Borrower shall, upon written request from such
Lender (with a copy of such request to the Agent), pay to such Lender at the end
of the Interest Period for such CD Loan, an additional amount equal to the
difference between the interest accrued based upon the CD Rate and the interest
that would have accrued had the Adjusted CD Rate been applicable to the CD Loan
of such Lender. Each Lender represents that its current CD Reserve Requirement
and Assessment Rate are as set forth on Schedule 2.01.
(c) Notwithstanding any other provision herein, if after the date of
this Agreement, either (i) the introduction of, or any change in or in the
interpretation of, any law or regulation or (ii) compliance by any Lender with
any directive, guideline or request of any Governmental Body (whether or not
having the force of law) affects or
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<PAGE> 37
would affect the amount of capital required or expected to be maintained by such
Lender, so as to increase the minimum amount of capital required to be
maintained by such Lender based upon the existence of this Agreement, the
Commitment of such Lender and/or any Loans made hereunder and such requirement
applies equally to other agreements with, and to commitments and loans similar
to the transactions contemplated by this Agreement to, all other corporate
borrowers situated in the United States of America, then the Borrower shall pay
to such Lender amounts sufficient to compensate such Lender, in light of such
circumstances, to the extent that such Lender reasonably and equitably
determines such increase in required capital over the capital of such Lender in
place on the date hereof to be allocable to this Agreement, to the Commitment of
such Lender (or the unused portion thereof), or to any Loans made by such Lender
hereunder, it being understood that in no event shall the cost allocable, and/or
amount charged, to the Borrower under this paragraph (c) exceed the cost
allocable, and/or amount charged, with respect to any similar agreement between
such Lender and any other corporate borrower located in the United States, in
each instance determined ratably with respect to the relative transactional
amounts. Each Lender represents that, to its best knowledge on the date hereof
it would not be required to increase its capital or to otherwise incur any
increased capital costs in respect of this Agreement under existing laws, rules,
regulations, directives or guidelines (whether or not currently in effect) of
any Governmental Body.
(d) A certificate of a Lender setting forth such amount or amounts as
shall be necessary to compensate such Lender as specified in paragraph (c) above
shall be delivered to the Borrower (with a copy to the Agent) and shall be
conclusive absent manifest error. The Borrower shall pay each Lender the amount
shown as due on any such certificate delivered by it within 10 days after the
receipt of the same. No Lender shall be entitled to any compensation for any
additional costs under this Section 2.13 requested by such Lender unless such
Lender shall have notified the Borrower that it will request compensation for
such additional costs not more than 30 days after the date such additional costs
were first incurred.
(e) The Borrower may at any time following its receipt from any Lender
of a notice of the occurrence or prospective occurrence of any imposition of or
increase in the Eurodollar Reserve Requirement, the CD Reserve
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<PAGE> 38
Requirement, the Assessment Rate or capital requirements or costs of such Lender
terminate the Commitment of such Lender and repay any outstanding Loans of such
Lender (together with all accrued interest and Facility Fee and Utilization Fee)
on the effective date of such termination, which repayments, if any, shall be
without premium, penalty or other cost of any kind and shall not be subject to
the requirements of Sections 2.15 and 2.12(d).
SECTION 2.14. CHANGE IN LEGALITY. (a) Notwithstanding any other
provision herein, if any change in any law or regulation or in the
interpretation thereof by any Governmental Body charged with the administration
or interpretation thereof shall make it unlawful for any Lender to make or
maintain any Eurodollar Loan or to give effect to its obligations as
contemplated hereby with respect to any Eurodollar Loan, then, by written or
telecopy notice to the Borrower and to the Agent, such Lender may:
(i) declare that Eurodollar Loans will not thereafter be made
by such Lender hereunder, whereupon such Lender shall not submit a
Competitive Bid in response to a request for Eurodollar Competitive
Loans and any request by the Borrower for a Eurodollar Standard
Borrowing shall, as to such Lender only, be without effect and void
unless such declaration shall be subsequently withdrawn; and
(ii) require (if required by law to do so) that all
outstanding Eurodollar Loans made by it be converted to CD Loans, in
which event all such Eurodollar Loans shall be automatically converted
to CD Loans with an Interest Period agreed upon by the Borrower and
such Lender as of the effective date of such notice as provided in
paragraph (b) below.
In the event any Lender shall exercise its rights under (i) or (ii) above, all
payments and prepayments of principal which would otherwise have been applied to
repay the Eurodollar Loans that would have been made by such Lender or the
converted Eurodollar Loans of such Lender shall instead be applied to repay the
Loans of such Lender resulting from the conversion of such Eurodollar Loans. The
Borrower may in any event prepay any Loan resulting from the conversion of any
Eurodollar Loan under this Section within five Business Days after such
conversion.
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(b) For purposes of this Section 2.14, a notice to the Borrower by any
Lender shall be effective as to each Eurodollar Loan, if lawful, on the last day
of the Interest Period currently applicable to such Eurodollar Loan; in all
other cases such notice shall be effective on the date of receipt by the
Borrower.
(c) In the event that any Lender shall (i) give Borrower any notice
contemplated by, or exercise its rights under, this Section 2.14 or (ii) unless
Borrower shall fail to meet the conditions set forth at Section 4.01, Lender for
any reason fails to fund any Loan, the Borrower may at any time terminate the
Commitment of the Lender and repay any outstanding Loans of such Lender
(together with all accrued interest and Facility Fee and Utilization Fee) on the
effective date of such termination, which repayment, if any, shall be without
premium, penalty or other cost of any kind and shall not be subject to the
requirements of Sections 2.15 and 2.12(d).
SECTION 2.15. PRO RATA TREATMENT. Except as required or permitted under
Section 2.07(a) and (e), 2.11(d) and (e), 2.12, 2.13, 2.14, 2.17, 2.18, 9.05 or
9.14, each Standard Borrowing, each payment or prepayment of principal of any
Standard Borrowing, each payment of interest on the Standard Loans, each payment
of the Facility Fees, each payment of the Utilization Fee, each reduction of the
Commitments and each refinancing of any Borrowing with a Standard Borrowing of
any Type, shall be allocated pro rata among the Lenders in accordance with their
respective Commitments (or, if such Commitments shall have expired or been
terminated, in accordance with the respective principal amounts of their
outstanding Standard Loans). Each payment of principal of any Competitive
Borrowing shall be allocated pro rata among the Lenders participating in such
Borrowing in accordance with the respective principal amounts of their
outstanding Competitive Loans comprising such Borrowing. Each payment of
interest on any Competitive Borrowing shall be allocated pro rata among the
Lenders participating in such Borrowing in accordance with the respective
amounts of accrued and unpaid interest on their outstanding Competitive Loans
comprising such Borrowing. For purposes of determining the available Commitments
of the Lenders at any time, each outstanding Competitive Borrowing shall be
deemed to have utilized the Commitments of the Lenders (including those Lenders
which shall not have made Loans as part of such Competitive Borrowing) pro rata
in accordance with such respective Commitments. Each Lender agrees that in
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<PAGE> 40
computing such Lender's portion of any Borrowing to be made hereunder, the Agent
may, in its discretion, round each Lender's percentage of such Borrowing to the
next higher or lower whole dollar amount.
SECTION 2.16. PAYMENTS. (a) The Borrower shall make each payment
(including principal of or interest on any Borrowing or any Fees or other
amounts) hereunder not later than 3:00 p.m., New York City time, on the date
when due in Dollars to the Agent (except as otherwise provided herein) at its
offices at 270 Park Avenue, New York, New York, in immediately available funds.
Except as provided in Section 2.07(a), any payment required to be made to the
Lenders shall be deemed made when made to the Agent and shall, insofar as the
obligations of the Borrower are concerned, be deemed to have been received by
the Lenders at the time of receipt by the Agent (which shall promptly forward
such payment to the Lenders). In the event the Lenders shall receive payments in
an amount less than the amounts at the time due hereunder, the amounts received
shall be applied first against the principal of Loans, second against accrued
interest, third against accrued Fees, fourth against amounts due under Section
2.13 or 2.17, and fifth against any other amounts due hereunder.
(b) Whenever any payment (including principal of or interest on any
Borrowing or any Fees or other amounts) hereunder shall become due, or otherwise
would occur, on a day that is not a Business Day, such payment may be made on
the next succeeding Business Day, and such extension of time shall in the case
of a payment of principal be included in the computation of interest.
SECTION 2.17. TAXES. (a) Each Lender represents and warrants unto, and
covenants and agrees with, the Borrower that (i) such Lender is presently exempt
from United States Federal withholding tax (including backup withholding, as
such term is defined in the Code), and from any other withholding tax,
assessment or charge imposed by any Governmental Body, on any amount payable to
it under this Agreement, and has heretofore delivered to the Borrower such
evidence as may be required by law to claim or substantiate any such exemption
(stating the provisions of law and/or treaty under which such exemption is
claimed); (ii) such Lender will notify the Borrower promptly upon its becoming
aware of the occurrence or of any prospective occurrence of any event which
would result in any such withholding tax exemption not being available to such
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<PAGE> 41
Lender; and (iii) such Lender will indemnify and hold the Borrower harmless from
and against any loss, cost or liability the Borrower may incur as a result of
its reliance on the foregoing representations, or the failure of such Lender to
give prompt notice of any event resulting in any said withholding tax exemption
not being available to such Lender.
(b) All payments by the Borrower to the Lenders under this Agreement
shall be made without setoff or counterclaim and in such amounts as may be
necessary in order that all such payments after deduction or withholding for or
on account of any present or future taxes, levies, imposts, duties or other
charges of whatsoever nature imposed by any Governmental Body or taxing
authority thereof (herein collectively referred to as "TAXES"), other than any
Taxes on or measured by the net income of any Lender pursuant to (i) the income
and/or franchise tax laws of the jurisdictions where such Lender is incorporated
or organized and where the principal office or branch of such Lender is located,
and (ii) the income and/or franchise tax laws of the jurisdictions where the
lending office(s) of such Lender are then located, and other than any
withholding tax or deduction for, or other imposition of, Taxes as to which such
Lender is entitled to a credit against income or franchise taxes payable by it
in the country and/or other jurisdictions of its incorporation or organization
or in the countries and/or other jurisdictions where the principal office or the
lending office(s) of such Lender are then located (herein collectively referred
to as "EXCLUDED TAXES"), shall not be less than the amounts otherwise specified
to be paid by the Borrower to the Lenders under this Agreement. Each Lender
shall use its best efforts to avoid the imposition of any deduction or
withholding of Taxes (other than in respect of Excluded Taxes) by designating
(with the consent of the Borrower which consent shall not be unreasonably
withheld) a different lending office, if such designation will avoid the
imposition of such deduction or withholding, or other imposition, of Taxes
(other than in respect of Excluded Taxes) and will not, in the judgment of such
Lender, reasonably exercised, be otherwise disadvantageous to such Lender or, in
the judgment of the Borrower, reasonably exercised, be disadvantageous to the
Borrower. A certificate as to any additional amounts payable to a Lender under
this paragraph (b) submitted to the Borrower by such Lender shall show in
reasonable detail the amount payable and the calculations used to determine
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<PAGE> 42
such amount and shall, absent manifest error, be conclusive and binding,
PROVIDED, that the determination of such additional amounts set forth in such
certificate is made reasonably and in good faith. With respect to each deduction
or withholding for or on account of any Taxes, the Borrower shall promptly (and
in any event not later than 45 days thereafter) furnish to any Lender such
certificates, receipts and other documents as may be necessary to establish any
tax credit to which such Lender may be entitled or as may be required by law to
be in such Lender's possession. Any Lender claiming any additional amounts
payable pursuant to this Section shall use reasonable efforts (consistent with
legal and regulatory restrictions) to file any certificate or document requested
by the Borrower or to change the jurisdiction of its applicable lending office
if the making of such a filing or change would avoid the need for or reduce the
amount of any such additional amounts which may thereafter accrue or avoid the
circumstances giving rise to such exercise and would not, in the sole
determination of such Lender, be otherwise disadvantageous to such Lender. Each
Lender agrees that should any such additional amount paid by the Borrower to or
for such Lender in respect of any Taxes be recovered, in whole or in part, by
such Lender (by credit, offset, deduction or otherwise), against or in computing
any income, franchise or other Taxes in its country and/or other jurisdiction of
its incorporation or organization or in any of the jurisdictions where the
principal office or branch of such Lender and the lending office(s) of such
Lender is then located, such Lender shall reimburse the Borrower the amount of
such recovery. A transferee of any interest in this Agreement shall not be
entitled to the benefits of this Section 2.17 with respect to any Taxes which
would not have been incurred if there had been no transfer.
(c) At any time subsequent to the Borrower's receipt of any notice
given by a Lender pursuant to paragraph (a) above, or to the imposition of any
Taxes (other than Excluded Taxes) in respect of which the Borrower shall have
the obligation to "gross up" amounts due under this Agreement pursuant to
paragraph (b) above, the Borrower shall have the right to prepay, in whole or in
part, without penalty or premium, the entire principal amount of any and all
Loans in respect of which such obligation in respect of Taxes (other than
Excluded Taxes) would be incurred upon two Business Days' notice to such Lender
and any such payment shall be without premium, penalty or other cost of any kind
and shall not be subject to the requirements of
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<PAGE> 43
Sections 2.15 and 2.12(d). Any such prepayment shall be accompanied by the
payment of all accrued interest on the principal amount prepaid.
(d) In no event shall the Borrower have any obligation to "gross up"
amounts due under this Agreement in respect of Excluded Taxes.
(e) The representations, warranties and agreements contained in this
Section 2.17 shall survive the termination of this Agreement and the payment in
full of the Loans.
SECTION 2.18. TERMINATION OR ASSIGNMENT OF COMMITMENTS. The Borrower
shall have the right (in addition to its rights pursuant to Sections 2.11(b),
2.11(e), 2.13, 2.14, 2.17 and 9.05), at its own expense, at any time upon notice
to any Lender and the Agent, (i) to terminate the Commitment of such Lender
(with or without, at Borrower's sole election, replacing such terminated
Commitment) or (ii) to require such Lender to transfer and assign without
recourse all its interests, rights and obligations under this Agreement to
another financial institution reasonably acceptable to the Agent which shall
assume such obligations; PROVIDED that (x) no such assignment shall conflict
with any law, rule or regulation or order of any Governmental Body applicable to
such affected Lender and (y) the Borrower or the assignee, as the case may be,
shall pay to the affected Lender in immediately available funds on the effective
date of such termination or assignment the principal of and interest accrued to
the date of payment on the Loans made by it hereunder then outstanding and
accrued and unpaid Facility Fee and Utilization Fee and any amounts which
Borrower had theretofore been notified were accruing in respect of such Loans
under Section 2.13, which payments shall not be subject to the provisions of
Section 2.15.
ARTICLE III. REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants to each of the Lenders that:
(a) The Borrower is a corporation duly organized, validly
existing and in good standing under the laws of the State of Ohio.
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<PAGE> 44
(b) The execution, delivery and performance of this Agreement
by the Borrower are within the Borrower's corporate powers, have been
duly authorized by all necessary corporate action, will not violate any
provision of any existing law or regulation or order or decree of any
court or Governmental Body or of the Amended Articles of Incorporation
or Code of Regulations of the Borrower, as each is amended to date, or
of the unwaived terms of any mortgage, indenture, agreement or other
instrument to which the Borrower is a party or which is binding upon it
or its assets, and will not result in the creation or imposition of any
security interest, lien, charge or encumbrance on any of its assets
pursuant to the provisions of any of the foregoing.
(c) No authorization or approval or other action by, and no
notice to or filing with, any Governmental Body or court is required to
be made or effected by the Borrower for the due execution and delivery
of this Agreement by the Borrower and for the performance by the
Borrower of the obligations on its part to be performed under this
Agreement.
(d) This Agreement constitutes the legal, valid and binding
obligation of the Borrower enforceable against the Borrower in
accordance with its terms, subject to applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting
creditors' rights generally and subject, as to enforceability, to
general principles of equity (regardless of whether enforcement is
sought in a proceeding in equity or at law).
(e) The Consolidated Financial Statements of the Borrower and
its Subsidiaries present fairly, in all material respects, the
financial position of the Borrower and its Consolidated Subsidiaries at
December 31, 1998 and 1997 and the Consolidated results of their
operations and their Consolidated cash flows for each of the three
years in the period ended December 31, 1998, in conformity with
generally accepted accounting principles.
(f) 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.
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<PAGE> 45
(g) Neither the Borrower nor any Subsidiary is a "holding
company", or a "subsidiary company" of a "holding company", within the
meaning of the Public Utility Holding Company Act of 1935, as amended.
(h) The Borrower is not engaged principally, or as one of its
important activities, in the business of extending credit for the
purpose of purchasing or carrying margin stock, within the meaning of
Regulation U of the Board.
(i) To the Borrower's knowledge, the disclosures relating to
Year 2000 matters contained in (i) the Borrower's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1999 and (ii) the Borrower's
Annual Report on Form 10-K for the year ended December 31, 1998,
accurately present, in all material respects, the status of the
Borrower's efforts to address Year 2000 compliance issues as of June
30, 1999 and December 31, 1998 respectively.
ARTICLE IV. CONDITIONS OF LENDING
The obligation of each Lender to make Loans hereunder is
subject to the satisfaction of the following conditions:
SECTION 4.01. ALL BORROWINGS. On the date of each Borrowing,
including each Borrowing in which Loans are refinanced with new Loans as
contemplated by Section 2.05:
(a) The Agent shall have received a notice of such Borrowing
as required by Section 2.03 or Section 2.04, as applicable.
(b) The representations and warranties set forth in Article
III hereof shall be true and correct in all material respects on and as
of the date of such Borrowing with the same effect as though made on
and as of such date.
(c) No event shall have occurred and be continuing on and as
of the date of such Borrowing, or would result from such Borrowing or
from (after giving effect to) the application of the proceeds of such
Borrowing, which constitutes an Event of Default.
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<PAGE> 46
Each Borrowing shall be deemed to constitute a representation and warranty by
the Borrower on the date of such Borrowing as to the matters specified in
paragraphs (b) and (c) of this Section 4.01.
SECTION 4.02. FIRST BORROWING. On the Closing Date, the Agent
shall have received the following (in the case of (a), (b), (c) and (d), each
dated the Closing Date):
(a) an opinion of the General Counsel, the Associate General
Counsel or an Assistant General Counsel of the Borrower addressed to
the Lenders and the Agent in substantially the form of Exhibit B
hereto;
(b) a certified copy of the resolutions of the Board of
Directors of the Borrower authorizing the execution and delivery of
this Agreement;
(c) a certificate of the Secretary or an Assistant Secretary
of the Borrower certifying the names and true signatures of the
Authorized Officers;
(d) a certificate signed by an Authorized Officer, confirming
compliance with conditions set forth in paragraphs (b) and (c) of
Section 4.01; and
(e) all Fees and other amounts due and payable on or prior to
the Closing Date.
ARTICLE V. AFFIRMATIVE COVENANTS
The Borrower covenants and agrees with each Lender and the
Agent that, so long as the Commitment of such Lender shall remain in effect or
the principal of or interest on any Loan by such Lender shall be unpaid, unless
the Majority Lenders shall otherwise consent in writing, the Borrower will:
(a) INTEREST COVERAGE RATIO. Maintain, as at the end of each
fiscal quarter of the Borrower, a ratio of Consolidated Operating
Income for the Annual Period then ended to Consolidated Interest
Expense for the Annual Period then ended of not less than 1.55 to 1.
(b) NET WORTH. Maintain, as at the end of each fiscal quarter
of the Borrower, Consolidated Net Worth at an amount not less than
$1,250,000,000.
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<PAGE> 47
(c) REPORTING REQUIREMENTS. Furnish to the Agent, together
with sufficient number of copies for each of the Lenders:
(i) as soon as available and in any event not later than 60
days after the end of each of the first three quarters of each fiscal
year of the Borrower, a conformed copy of the Borrower's Quarterly
Report on Form 10-Q for such quarter as filed with the Securities and
Exchange Commission, together with (1) a Schedule of Compliance, signed
by an Authorized Officer setting forth computations used by the
Borrower in determining compliance with the covenants contained in
paragraphs (a) and (b) of this Article V and in paragraphs (a) and (b)
of Article VI and (2) a certificate of an Authorized Officer stating
that no Event of Default has occurred and is continuing or, if an Event
of Default has occurred and is continuing, a statement as to the nature
thereof and the action which the Borrower has taken and proposes to
take with respect thereto; and
(ii) as soon as available and in any event not later than 120
days after the end of each fiscal year of the Borrower, a conformed
copy of the Borrower's Annual Report on Form 10-K for such year as
filed with the Securities and Exchange Commission, together with (1) a
Schedule of Compliance, signed by an Authorized Officer setting forth
computations used by the Borrower in determining compliance with the
covenants contained in paragraphs (a) and (b) of Article V, and in
paragraphs (a) and (b) of Article VI, and (2) a certificate of an
Authorized Officer stating that no Event of Default has occurred and is
continuing or, if an Event of Default has occurred and is continuing, a
statement as to the nature thereof and the action which the Borrower
has taken and proposes to take with respect thereto; and
(iii) as soon as practicable and in any event within ten
Business Days after any Authorized Officer of the Borrower obtains
actual knowledge of the occurrence of any Event of Default, a statement
of an Authorized Officer setting forth details of such Event of Default
and the action which the Borrower has taken and proposes to take with
respect thereto; and
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<PAGE> 48
(iv) promptly after the filing thereof, copies of all reports
(in addition to Forms 10-K and 10-Q) filed by the Borrower with the
Securities and Exchange Commission (other than annual reports on Form
11-K) pursuant to the Exchange Act; and
(v) such other publicly available information relating to the
financial condition or business operations of the Borrower as the Agent
or any Lender may from time to time reasonably request.
(d) PRESERVATION OF CORPORATE EXISTENCE. Preserve and maintain
its corporate existence; PROVIDED, that the Borrower may merge or transfer its
assets in a transaction permitted by paragraph (c) of Article VI.
ARTICLE VI. NEGATIVE COVENANTS
The Borrower covenants and agrees with each Lender and the
Agent that, so long as the Commitment of such Lender shall remain in effect or
the principal of or interest on any Loan by such Lender shall be unpaid, unless
the Majority Lenders shall otherwise consent in writing, the Borrower will not:
(a) LIMITATION ON LIENS. Issue, assume or guarantee Debt if
such Debt is secured by a Lien upon any Manufacturing Facility without providing
(concurrently with the issuance, assumption or guarantee of any such Debt) that
the Loans shall be secured equally and ratably with such Debt; PROVIDED,
HOWEVER, that the foregoing restriction shall not apply to:
(i) any Lien on property if such Lien is in existence at the
time of the acquisition of such property by the Borrower;
(ii) any Lien on property to secure the payment of all or any
part of the purchase price of such property or to secure any Debt
incurred (prior to, at the time of, or within 360 days after, the
acquisition by the Borrower of such property) for the purpose of, or in
connection with, financing all or any part of the purchase price
thereof;
(iii) any Lien on property of a corporation if such Lien was
in existence prior to the time such
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<PAGE> 49
corporation is merged into or consolidated with the Borrower or prior
to the time of a sale, lease or other disposition of the properties of
an entity as an entirety or substantially as an entirety to the
Borrower;
(iv) any Lien on property in favor of the United States of
America, any State thereof, or any department, agency or
instrumentality or political subdivision of the United States of
America or any State thereof, in favor of any other country or any
political subdivision thereof, or in favor of any other Governmental
Body, to secure partial, progress, advance or other payments, or
performance of any other obligations, pursuant to any contract or
statute or to secure any indebtedness incurred for the purpose of
financing all or any part of the purchase price or the cost of
construction of the property subject to such Lien; or
(v) any extension, renewal or replacement (or successive
extensions, renewals or replacements), in whole or in part, of any Lien
referred to in the foregoing clauses (i) to (iv), inclusive; PROVIDED,
HOWEVER, that the principal amount of Debt secured thereby shall not
exceed the principal amount of Debt so secured at the time of such
extension, renewal or replacement, and that such extension, renewal, or
replacement Lien shall be limited to all or a part of the property
which secured the Lien so extended, renewed or replaced (plus
improvements on such property).
Notwithstanding the foregoing, the Borrower may issue, assume
or guarantee Debt secured by a Lien on a Manufacturing Facility which would
otherwise be subject to the foregoing restrictions in an aggregate amount which,
together with the aggregate principal amount of all other such Debt of the
Borrower outstanding at the time of such issuance, assumption or guarantee (but
excluding Debt permitted by the foregoing clauses (i) to (v), inclusive), does
not at such time exceed fifteen percent (15%) of the Consolidated Net Worth of
the Borrower as at the end of the then most recently completed fiscal year of
the Borrower.
(b) LIMITATION ON DEBT. Issue, incur, assume or guarantee, or
permit any Subsidiary to issue, incur, assume or guarantee, any Debt if,
immediately after giving effect
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<PAGE> 50
to the issuance, incurrence, assumption or guarantee of such Debt and after
giving effect to the receipt and application of any and all proceeds thereof,
the aggregate principal amount of the Consolidated Debt of the Borrower and the
Subsidiaries would, at the end of any fiscal quarter of the Borrower, exceed the
sum of (x) $5,000,000,000 plus (y) the Supplemental Amount, if any, at such
date. For the purpose of this paragraph (b), if any such Debt is payable in a
currency other than Dollars and all or any portion of the principal amount of
such Debt is hedged into Dollars, then the principal amount thereof, or such
portion thereof, shall be the amount of Dollars specified in, or determined
pursuant to, the applicable hedging contract.
(c) MERGERS, ETC. Merge or consolidate with or into, or
convey, transfer, lease or otherwise dispose of (whether in one transaction or
in a series of transactions) all or substantially all of its assets (whether now
owned or hereafter acquired) to, or acquire all or substantially all of the
assets of, any Person; except that (i) any Subsidiary may merge into or transfer
assets to or obtain assets from the Borrower, and (ii) the Borrower may merge
with or acquire all or substantially all of the assets of any Person, PROVIDED
in any such case that, immediately after giving effect to such proposed
transaction, no Event of Default would exist and, in the case of any such merger
to which the Borrower is a party, the Borrower is the surviving corporation.
(d) ERISA LIABILITIES. Create or suffer to exist, as at the
end of any fiscal quarter of Borrower, any ERISA Liabilities of the Borrower in
an aggregate amount in excess of $750,000,000.
ARTICLE VII. EVENTS OF DEFAULT
So long as any Commitment shall be in effect or any amount of
the principal of or accrued interest on any Borrowing shall be unpaid, in case
of the occurrence and continuance of any of the following events ("Events of
Default"):
(a) The Borrower shall fail to pay the principal of any Loan
when due, or shall fail to pay interest on any Loan when due, and any
such failure shall remain unremedied for more than five Business Days
after the earlier of (i) the day on which an Authorized Officer
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<PAGE> 51
first obtains actual knowledge of such failure or (ii) written notice
of such failure shall have been given to the Borrower by the Agent or
any Lender; or
(b) The Borrower shall fail to pay any Fees when due and such
failure shall remain unremedied for more than ten Business Days after
the earlier of (i) the day on which an Authorized Officer first obtains
actual knowledge of such failure or (ii) written notice of such failure
shall have been given to the Borrower by the Agent or any Lender; or
(c) Any representation or warranty made by the Borrower in
this Agreement or by the Borrower (or any of its Authorized Officers)
in any certificate delivered pursuant to this Agreement, or deemed to
have been made pursuant to and in accordance with Section 4.01 of this
Agreement, shall prove to have been incorrect in any material respect
when made; PROVIDED, that if any such representation or warranty is
capable of being rendered true and correct in all material respects,
such event shall not constitute an Event of Default unless such
incorrect representation or warranty is not rendered true and correct
in all material respects within thirty days after the earlier of (i)
the day on which an Authorized Officer first obtains actual knowledge
of such default or (ii) the day written notice thereof shall have been
given to the Borrower by the Agent or any Lender; or
(d) The Borrower shall fail to perform or observe any covenant
or agreement set forth in paragraph (a) or (b) of Article V or in
paragraph (a) or (b) of Article VI and such failure shall remain
unremedied for more than thirty days after the earlier of (i) the day
on which an Authorized Officer first obtains actual knowledge of such
failure or (ii) written notice thereof shall have been given to the
Borrower by the Agent or any Lender; or
(e) The Borrower shall fail to perform or observe any other
material provision of this Agreement on its part to be performed or
observed and such failure shall remain unremedied for more than thirty
Business Days after the earlier of (i) the day on which an Authorized
Officer first obtains actual knowledge of such failure or (ii) written
notice thereof shall have been given to the Borrower by the Agent or
any Lender; or
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<PAGE> 52
(f) The Borrower shall fail to pay any principal of Funded
Debt of the Borrower which is then outstanding in a principal amount in
excess of $25,000,000 at the scheduled maturity thereof, such failure
shall continue after the applicable grace period, if any, specified in
the agreement or instrument relating to such Funded Debt, and such
Funded Debt is not paid within ten Business Days after the earlier of
(i) the day on which an Authorized Officer first obtains actual
knowledge of such failure or (ii) written notice of such failure shall
have been given to the Borrower by the holder or holders of such Funded
Debt; or Funded Debt of the Borrower which is then outstanding in a
principal amount in excess of $25,000,000 shall become due and payable
prior to the scheduled maturity thereof as a result of the lawful
acceleration thereof due to the occurrence of an event of default
thereunder (other than an event of default resulting from a pledge or
transfer of any margin stock, as defined in Regulation U of the Board)
and such Funded Debt is not paid, or such acceleration thereof is not
rescinded or annulled, within ten Business Days following such lawful
acceleration thereof; or
(g) The Borrower shall sell or otherwise dispose of all or
substantially all of its assets; or
(h) The Borrower shall generally not pay its debts as such
debts become due, or shall admit in writing its inability to pay its
debts generally, or shall make a general assignment for the benefit of
creditors; or any proceeding shall be instituted by or against the
Borrower seeking to adjudicate it a bankrupt or insolvent, or seeking
liquidation, winding up, reorganization, arrangement, adjustment,
protection, relief or composition of it or its debts under any law
relating to bankruptcy, insolvency or reorganization or relief of
debtors, or seeking the entry of an order for relief or the appointment
of a receiver, trustee, or other similar official for it or for any
substantial part of its property, and, if instituted against the
Borrower, is consented to by it or remains undismissed or unstayed for
a period of 90 consecutive days; or the Borrower shall take any
corporate action to authorize any of the actions set forth above in
this clause (h);
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<PAGE> 53
then, and in every such event (other than the entry of an order for relief with
respect to the Borrower as a bankrupt under the Federal Bankruptcy Code), and at
any time thereafter during the continuance of such event, the Agent, at the
request of the Required Lenders, shall, by notice to the Borrower, take either
or both of the following actions, at the same or different times: (i) terminate
forthwith the Commitments and (ii) declare the Loans then outstanding to be
forthwith due and payable in whole or in part, whereupon the principal of the
Loans so declared to be due and payable, together with accrued interest thereon
and any unpaid accrued Fees and all other liabilities of the Borrower accrued
hereunder, shall become forthwith due and payable, without presentment, demand,
protest or any other notice of any kind, all of which are hereby expressly
waived by the Borrower, anything contained herein to the contrary
notwithstanding; PROVIDED, that in the event of the entry of an order for relief
with respect to Borrower as a bankrupt under the Federal Bankruptcy Code, the
Commitments shall automatically terminate and the principal of the Loans then
outstanding, together with accrued interest thereon and any unpaid accrued Fees
and all other liabilities of the Borrower accrued hereunder, shall automatically
become due and payable, without presentment, demand, protest or any other notice
of any kind, all of which are hereby expressly waived by the Borrower, anything
contained herein to the contrary notwithstanding.
50
X-4.1-53
<PAGE> 54
ARTICLE VIII. THE AGENT
In order to expedite the transactions contemplated by this
Agreement, The Chase Manhattan Bank is hereby appointed to act as Agent on
behalf of the Lenders. Subject to Section 2.07(a), each of the Lenders hereby
irrevocably authorizes the Agent to take such actions on behalf of such Lender
and to exercise such powers as are specifically delegated to the Agent by the
terms and provisions hereof, together with such actions and powers as are
reasonably incidental thereto. The Agent is hereby expressly authorized by the
Lenders, without hereby limiting any implied authority, (a) to receive on behalf
of the Lenders all payments of principal of and interest on the Loans and all
other amounts due to the Lenders hereunder, and promptly to distribute to each
Lender its proper share of each payment so received; (b) to give notice on
behalf of each of the Lenders to the Borrower of any Event of Default specified
in this Agreement of which the Agent has actual knowledge acquired in connection
with its agency hereunder; and (c) to distribute to each Lender copies of all
notices, financial statements and other materials delivered by the Borrower
pursuant to this Agreement as received by the Agent.
Neither the Agent nor any of its directors, officers,
employees or agents shall be liable to any Lender as such for any action taken
or omitted by any of them except for its or his own gross negligence or wilful
misconduct, or be responsible for any statement, warranty or representation
herein or the contents of any document delivered in connection herewith, or be
required to ascertain or to make any inquiry concerning the performance or
observance by the Borrower of any of the terms, conditions (except delivery to
the Agent of the items required by Section 4.02 to be delivered to it),
covenants or agreements contained in this Agreement. The Agent shall not be
responsible to the Lenders for the due execution, genuineness, validity,
enforceability or effectiveness of this Agreement or other instruments or
agreements. The Agent shall in all cases be fully protected in acting, or
refraining from acting, in accordance with written instructions signed by the
Required Lenders and, except as otherwise specifically provided herein, such
instructions and any action or inaction pursuant thereto shall be binding on all
the Lenders. The Agent shall, in the absence of knowledge to the contrary, be
entitled to rely on any instrument or document believed by it in good faith to
be
51
X-4.1-54
<PAGE> 55
genuine and correct and to have been signed or sent by the proper Person or
Persons. Neither the Agent nor any of its directors, officers, employees or
agents shall have any responsibility to the Borrower on account of the failure
of or delay in performance or breach by any Lender of any of its obligations
hereunder or to any Lender on account of the failure of or delay in performance
or breach by any other Lender or the Borrower of any of their respective
obligations hereunder or in connection herewith. The Agent may execute any and
all duties hereunder by or through agents or employees and shall be entitled to
rely upon the advice of legal counsel selected by it with respect to all matters
arising hereunder and shall not be liable for any action taken or suffered in
good faith by it in accordance with the advice of such counsel.
The Lenders hereby acknowledge that the Agent shall be under
no duty to take any discretionary action permitted to be taken by it pursuant to
the provisions of this Agreement unless it shall be requested in writing to do
so by the Required Lenders.
Subject to the appointment and acceptance of a successor Agent
as provided below, the Agent may resign at any time by notifying the Lenders and
the Borrower. Upon any such resignation, the Required Lenders shall have the
right to appoint a successor. If no successor shall have been so appointed by
the Required Lenders and shall have accepted such appointment within 30 days
after the retiring Agent gives notice of its resignation, then the retiring
Agent may, on behalf of the Lenders, appoint a successor Agent which shall be a
bank with an office in New York, New York, having a combined capital and surplus
of at least $500,000,000. Upon the acceptance of any appointment as Agent
hereunder by a successor bank, such successor shall succeed to and become vested
with all the rights, powers, privileges and duties of the retiring Agent and the
retiring Agent shall be discharged from its duties and obligations hereunder.
After the Agent's resignation hereunder, the provisions of this Article and
Section 9.05 shall continue in effect for its benefit in respect of any actions
taken or omitted to be taken by it while it was acting as Agent.
With respect to the Loans made by it hereunder, the Agent in
its individual capacity and not as Agent shall have the same rights and powers
as any other Lender and may exercise the same as though it were not the Agent,
and the Agent may accept deposits from, lend money to and generally
52
X-4.1-55
<PAGE> 56
engage in any kind of business with the Borrower as if it were not the Agent.
Each Lender agrees (i) to reimburse the Agent, on demand, in
the amount of its pro rata share (based on its Commitment hereunder) of any
expenses incurred for the benefit of the Lenders by the Agent, including
reasonable counsel fees and compensation of agents and employees paid for
services rendered on behalf of the Lenders, which shall not have been reimbursed
by the Borrower and (ii) to indemnify and hold harmless the Agent and any of its
directors, officers, employees or agents, on demand, in the amount of such pro
rata share, from and against any and all liabilities, taxes, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind or nature whatsoever which may be imposed on, incurred
by or asserted against it in its capacity as the Agent or any of them in any way
relating to or arising out of this Agreement or any action taken or omitted by
it or any of them under this Agreement, to the extent the same shall not have
been reimbursed by the Borrower; PROVIDED that no Lender shall be liable to the
Agent or any other indemnitee for any portion of such liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements resulting from the gross negligence or wilful misconduct of the
Agent or any of its directors, officers, employees or agents.
Each Lender acknowledges that it has, independently and
without reliance upon the Agent or any other Lender and based on such documents
and information as it has deemed appropriate, made its own credit analysis and
decision to enter into this Agreement. Each Lender also acknowledges that it
will, independently and without reliance upon the Agent or any other Lender and
based on such documents and information as it shall from time to time deem
appropriate, continue to make its own decisions in taking or not taking action
under or based upon this Agreement, any related agreement or any document
furnished hereunder or thereunder.
Notwithstanding any other provision herein, each Lender
acknowledges that the Agent is not acting as an agent of the Borrower and that
the Borrower will not be responsible for any acts or failures to act on the part
of the Agent.
53
X-4.1-56
<PAGE> 57
ARTICLE IX. MISCELLANEOUS
SECTION 9.01. NOTICES. Except or otherwise expressly provided
herein, notices and other communications provided for herein shall be in writing
and shall be delivered by hand or overnight courier service, priority mail,
mailed by certified or registered mail or sent by telecopy, as follows:
(a) if to the Borrower, to it at 1144 East Market Street,
Akron, Ohio 44316-0001, Attention of the Treasurer (Telecopy No.
216-796-1021 or 216-796-8836);
(b) if to the Agent, to The Chase Manhattan Bank, Loan and
Agency Services Group, One Chase Manhattan Plaza, 8th Floor, New York,
New York 10081, Attention of Janet Belden (Telecopy No. 212-552-5658),
with a copy to The Chase Manhattan Bank, 270 Park Avenue, New York, New
York 10017, Attention of Julie Long (Telecopy No. 212-972-9854); and
(c) if to a Lender, to it at its address (or telecopy number)
set forth in Schedule 2.01.
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 if delivered by hand or overnight courier service or sent by
telecopy (as evidenced by machine transmission report), or on the date five
Business Days after dispatch by certified or registered mail, in each case
delivered, sent or mailed (properly addressed) to such party as provided in this
Section 9.01 or in accordance with the latest unrevoked direction from such
party given in accordance with this Section 9.01.
SECTION 9.02. SURVIVAL OF AGREEMENT. All covenants,
agreements, representations and warranties made by the Borrower herein and in
the certificates or other instruments prepared or delivered in connection with
or pursuant to this Agreement shall be considered to have been relied upon by
the Lenders and shall survive the making by the Lenders of the Loans, regardless
of any investigation made by the Lenders or on their behalf, and shall continue
in full force and effect as long as the principal of or any accrued interest on
any Loan or any Fee or any other amount payable under this Agreement is
outstanding and unpaid and so long as the Commitments have not been terminated.
54
X-4.1-57
<PAGE> 58
SECTION 9.03. BINDING EFFECT; SUCCESSORS AND ASSIGNS. (a) This
Agreement shall become effective when it shall have been executed by the
Borrower and the Agent and when the Agent shall have received copies hereof
which, when taken together, bear the signatures of each Lender, and thereafter
shall be binding upon and inure to the benefit of the Borrower, the Agent and
each Lender and their respective successors and assigns, except that (i) the
Borrower shall not have the right to assign its rights hereunder or any interest
herein or to delegate any of its duties hereunder without the prior written
consent of all the Lenders and (ii) no Lender shall have the right to assign or
participate its rights hereunder or any interest herein or to delegate any of
its duties hereunder without the prior written consent of the Borrower and
giving a written notice (also signed by the Borrower) to the Agent.
(b) Whenever in this Agreement any of the parties hereto is
referred to, such reference shall be deemed to include any successors and
permitted assigns of such party; and all covenants, promises and agreements by
or on behalf of the Borrower, the Agent or the Lenders that are contained in
this Agreement shall bind and inure to the benefit of their respective
successors and permitted assigns.
(c) Notwithstanding the limitations set forth in this Section
9.03, any Lender may at any time assign all or any portion of its rights under
this Agreement to a Federal Reserve Bank without the prior written consent of
the Borrower or the Agent; PROVIDED that no such assignment shall release a
Lender from any of its obligations hereunder or substitute any such Bank for
such Lender as a party hereto. In order to facilitate such an assignment to a
Federal Reserve Bank, the Borrower shall, at the request of the assigning
Lender, duly execute and deliver to the assigning Lender a promissory note or
notes in the form of Exhibit E hereto evidencing the Loans made to the Borrower
by the assigning Lender hereunder.
SECTION 9.04. APPLICABLE LAW. THIS AGREEMENT SHALL BE
CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.
SECTION 9.05. WAIVERS; AMENDMENT. (a) No failure or delay of
the Agent or any Lender in exercising any power or right hereunder shall operate
as a waiver thereof, nor shall any single or partial exercise of any such right
or power, or any abandonment or discontinuance of
55
X-4.1-58
<PAGE> 59
steps to enforce such a right or power or preclude any other or further exercise
thereof or the exercise of any other right or power. The rights and remedies of
the Agent and the Lenders hereunder are cumulative and are not exclusive of any
rights or remedies provided by law. No waiver of any provision of this Agreement
or consent to any departure by the Borrower therefrom shall in any event be
effective unless the same shall be permitted by paragraph (b) below, and then
such waiver or consent shall be effective only in the specific instance and for
the purpose for which given.
(b) Neither this Agreement nor any provision hereof may be
waived, amended or modified except pursuant to an agreement or agreements in
writing entered into by the Borrower and the Majority Lenders; provided,
HOWEVER, that no such agreement shall (i) amend, modify or otherwise affect the
rights or duties of the Agent hereunder without the prior written consent of the
Agent, (ii) decrease the principal amount of, or extend the maturity of or any
scheduled principal payment date or date for the payment of any interest on any
Loan or any Fees, or waive or excuse any such payment or any part thereof, or
decrease the rate of interest on any Loan or any Fees, without the prior written
consent of each Lender affected thereby, (iii) change or extend the Commitment
or decrease the Facility Fees or the Utilization Fee of any Lender without the
prior written consent of such Lender, or (iv) amend or modify the provisions of
Section 2.15, the provisions of this Section or the definition of "Majority
Lenders" or "Required Lenders", without the prior written consent of each
Lender; PROVIDED that the provisions referred to in the preceding clauses (ii),
(iii) and (iv) may be amended by the Majority Lenders; but any Lender which
declines to approve any such amendment shall have the right at any time, on 10
Business Days' notice to the Borrower, to terminate its Commitment and require
the Borrower to pay the principal of and interest on its outstanding Loans, and
the amount of the principal and interest so paid shall be determined without
giving effect to such amendment. All prepayments made pursuant to this Section
9.05(b) shall be without premium, penalty or other cost of any kind and shall
not be subject to the requirements of Sections 2.15 and 2.12(d).
SECTION 9.06. INTEREST RATE LIMITATION. Notwithstanding
anything herein to the contrary, if at any time the applicable interest rate,
together with all fees and charges which are treated as interest under
applicable law (collectively the "Charges"), as provided for herein, or
56
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<PAGE> 60
otherwise contracted for, charged, received, taken or reserved by any Lender,
shall exceed the maximum lawful rate (the "Maximum Rate") which may be
contracted for, charged, taken, received or reserved by such Lender in
accordance with applicable law, the rate of interest payable hereunder to such
Lender, together with all Charges payable to such Lender, shall be limited to
the Maximum Rate.
SECTION 9.07. ENTIRE AGREEMENT. This Agreement and the letter
agreement referred to in Section 2.06(b) constitute the entire contract between
the parties relative to the subject matter hereof. Any previous agreement among
the parties with respect to the subject matter hereof is superseded by this
Agreement. Nothing in this Agreement, expressed or implied, is intended to
confer upon any party other than the parties hereto any rights, remedies,
obligations or liabilities under or by reason of this Agreement.
SECTION 9.08. INFORMATION; ACCESS AND CONFIDENTIALITY. So long
as any Commitments shall be in effect or any Loans shall remain unpaid: (i) the
Lenders, acting through their officers and other duly designated employees,
shall have the right to discuss the affairs, finances and accounts of the
Borrower and the Subsidiaries with senior financial officers and employees of
the Borrower at such reasonable times and intervals as the Lenders shall
reasonably request; and (ii) the Borrower will make available to the Lenders
such other information relating to the financial condition or business
operations of the Borrower and the Subsidiaries as the Lenders shall from time
to time reasonably request. Notwithstanding anything herein to the contrary, in
no event shall the Borrower be required to furnish to the Lenders any
information pursuant to this Section 9.08 if the Borrower shall reasonably
determine that the furnishing of such requested information would be in
violation of any applicable law, regulation or order of any Governmental Body or
if such information relates to the Borrower's strategic planning, research,
development, testing, manufacturing or marketing activities and the furnishing
thereof would, in the sole judgment of the Borrower reasonably exercised,
adversely affect the competitive position of the Borrower. Each Lender agrees
that all such information provided to such Lender (or any officer or employee of
such Lender) is confidential and proprietary to the Borrower and that such
Lender will not disclose (other than to the directors, officers and employees of
such Lender who require such information in
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<PAGE> 61
connection with such Lender's administration of this Agreement and who have been
directed to treat such information as confidential and proprietary to the
Borrower) any such information (excluding information which becomes (i)
generally available to the public other than as a result of the disclosure
thereof by such Lender or its representatives or (ii) available to such Lender
on a non-confidential basis from a source other than the Borrower or the
Subsidiaries or any of their respective directors, officers, employees, agents
or representatives, provided such source is not bound by a confidentiality
agreement with the Borrower), except to the extent such Lender is, in the
opinion of legal counsel to such Lender, required by law to disclose such
information and then only after such Lender shall have given the Borrower at
least five (5) days' prior written notice of such required disclosure or, if
such prior notice period is not available to such Lender under applicable law,
such shorter notice period, if any, as shall in fact be available to such Lender
under applicable law.
SECTION 9.09. SEVERABILITY. In the event any one or more of
the provisions contained in this Agreement should be held invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein and therein shall not in any way be
affected or impaired thereby. The parties shall endeavor in good-faith
negotiations to replace the invalid, illegal or unenforceable provisions with
valid provisions the legal and economic effect of which comes as close as
possible to that of the invalid, illegal or unenforceable provisions.
SECTION 9.10. COUNTERPARTS. This Agreement may be executed in
two or more counterparts, each of which shall constitute an original but all of
which when taken together shall constitute but one contract, and shall become
effective as provided in Section 9.03.
SECTION 9.11. HEADINGS. Article and Section headings and the
Table of Contents used herein are for convenience of reference only, are not
part of this Agreement and are not to affect the construction of, or to be taken
into consideration in interpreting, this Agreement.
SECTION 9.12. JURISDICTION; CONSENT TO SERVICE OF PROCESS. (a)
Each party to this Agreement irrevocably and unconditionally submits, for itself
and its property, to the nonexclusive jurisdiction of any New York State court
or Federal court of the United States of America sitting in
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<PAGE> 62
New York City, and any appellate court from any thereof, in any action or
proceeding arising out of or relating to this Agreement, or for recognition or
enforcement of any judgment related hereto, and each of the parties hereto
hereby irrevocably and unconditionally agrees that all claims in respect of any
such action or proceeding may be heard and determined in such New York State or,
to the extent permitted by law, in such Federal court. Nothing in this Agreement
shall affect any right that any party may otherwise have to bring any action or
proceeding relating to this Agreement in the courts of any jurisdiction.
(b) Each party to this Agreement irrevocably and
unconditionally waives, to the fullest extent it may legally and effectively do
so, any objection which it may now or hereafter have to the laying of venue of
any suit, action or proceeding arising out of or relating to this Agreement in
any New York State or Federal court. Each of the parties hereto hereby
irrevocably waives, to the fullest extent permitted by law, the defense of an
inconvenient forum to the maintenance of such action or proceeding in any such
court.
(c) Each party to this Agreement irrevocably consents to
service of process in the manner provided for notices in Section 9.01. Nothing
in this Agreement will affect the right of any party to this Agreement to serve
process in any other manner permitted by law.
SECTION 9.13. STAMP TAXES. The Borrower agrees to pay, and to
save the Agent and each Lender harmless from all liability for, any stamp,
transfer, documentary or similar taxes, assessments or charges (herein "Stamp
Taxes"), and any penalties or interest with respect thereto, which may be
assessed, levied, collected or imposed, or otherwise become payable, in
connection with the execution and delivery of this Agreement. The Agent and each
Lender represents and warrants unto the Borrower that, at the date of this
Agreement, there are not Stamp Taxes in effect which are applicable to this
Agreement or any Loans which may be made hereunder and the Agent and each Lender
agrees that it will promptly notify the Borrower upon becoming aware of the
imposition or prospective imposition of any Stamp Taxes in respect of this
Agreement or any Loan made pursuant to this Agreement. The obligations of the
Borrower, the Agent and each Lender under this Section 9.13 shall survive the
payment of the Loans.
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<PAGE> 63
SECTION 9.14. CHANGE OF CONTROL OPTION. (a) In the event there
shall occur any Change of Control (as defined below) each Lender shall have the
right, at its option exercisable at any time within six months following the
Change Date (as defined below), to require the Borrower to purchase the Loans of
such Lender on the Purchase Date (as defined below) at a purchase price which
shall be equal to the sum of (i) the principal amount of such Loans then
outstanding, PLUS (ii) any and all accrued and unpaid interest on such Loans to
the Purchase Date (the "Purchase Price").
(b) The Borrower shall give the Lenders, through the Agent,
written notice of the occurrence of a Change of Control within five Business
Days following the Change Date. No failure of the Borrower to give notice of a
Change of Control shall limit the right of any Lender to require the purchase of
its Loans pursuant to this Section 9.14.
(c) Any Lender may exercise its right to require the purchase
of its Loans under this Section 9.14 by delivering to the Borrower at any time
within six months after the Change Date written notice thereof, specifying the
Purchase Date. The Commitment of any Lender exercising its right to require the
purchase of its Loans under this Section 9.14 shall automatically terminate
immediately upon the Borrower's receipt of such Lender's written notice of such
exercise of its option in accordance with this Section 9.14.
(d) In the event of the exercise by any Lender of its option
under this Section 9.14 in the manner provided herein, the Borrower shall pay or
cause to be paid to such Lender on the Purchase Date the Purchase Price
(determined in accordance with paragraph (a) above) in immediately available
funds. No exercise of the option granted in this Section 9.14 shall be subject
to the requirements of Sections 2.15 and 2.12(d).
(e) As used in this Section 9.14, the term:
(1) "CHANGE DATE" means the date on which any Change of
Control shall be deemed to have occurred; PROVIDED, that, if the
Borrower shall fail to give timely notice of the occurrence of a Change
of Control to the Lenders as provided in paragraph (b) above, for the
purpose of determining the duration of the Lenders' rights to require
prepayment under this Section 9.14,
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<PAGE> 64
"CHANGE DATE" shall mean the earlier of (i) the date on which notice of
a Change of Control is duly given by the Borrower to the Agent or (ii)
with respect to any Lender, the date on which such Lender obtains
actual knowledge of the Change of Control.
(2) "CHANGE OF CONTROL" means when, and shall be deemed to
have occurred at such time as, a "person" or "group" (within the
meaning of Sections 13(d) and 14(d)(2) of the Exchange Act) becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act) of
more than 50% of the then outstanding Voting Stock of the Borrower;
PROVIDED, that fifty percent shall become 70% with respect to any
"employee benefit plan" (as defined in Section 3(3) of ERISA)
maintained by the Borrower or any Subsidiary or any trust or funding
vehicle maintained for or pursuant to such "employee benefit plan".
(3) "PURCHASE DATE" means, with respect to any Lender, the
date on which the Borrower shall purchase the Loans of such Lender
pursuant to the exercise by such Lender of its option under this
Section 9.14, pursuant to a notice given to the Borrower in accordance
with paragraph (c) of this Section 9.14, which date shall be a Business
Day not less than 90 nor more than 120 days after the date such Lender
gives the Borrower written notice of such exercise.
(4) "VOTING STOCK" shall mean capital stock of the Borrower of
any class or classes (however designated) the holders of which are
ordinarily, in the absence of contingencies, entitled to vote for the
election of the Board of Directors of the Borrower, it being understood
that, at the date hereof, the Common Stock, without par value, of the
Borrower is the only outstanding class of capital stock of the Borrower
which constitutes "Voting Stock".
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<PAGE> 65
IN WITNESS WHEREOF, the Borrower, the Agent and the Lenders
have caused this Agreement to be duly executed by their respective authorized
officers as of the day and year first above written.
THE GOODYEAR TIRE & RUBBER COMPANY,
by /s/ Stephanie W. Bergeron
---------------------------------
Name: Stephanie W. Bergeron
Title: Vice President and
Treasurer
THE CHASE MANHATTAN BANK, individually
and as Agent,
by /s/ Julie S. Long
---------------------------------
Name: Julie S. Long
Title: Vice President
BANQUE NATIONALE de PARIS,
Chicago Branch,
by /s/ Jo Ellen Bender
---------------------------------
Name: Jo Ellen Bender
Title: Senior Vice
President
CIBC INC.,
by /s/ Barrie Anderson
---------------------------------
Name: Barrie Anderson
Title: Executive Director
CIBC World Markets
Corp. As Agent
THE SUMITOMO BANK LIMITED, New
York Branch
by /s/Edward D. Henderson, Jr.
---------------------------------
Name: Edward D.Henderson,Jr.
Title: Senior Vice President
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<PAGE> 66
COMMERZBANK AG, New York and Grand
Cayman Branches,
by /s/ John Marlatt
---------------------------------
Name: John Marlatt
Title: Vice President
by /s/ Graham Warning
---------------------------------
Name: Graham Warning
Title: Assistant Treasurer
BANK OF AMERICA, N.A.,
by /s/ Lynn W. Stetson
---------------------------------
Name: Lynn W. Stetson
Title: Managing Director
ABN AMRO BANK N.V.,
by /s/ John M. Ellenwood
---------------------------------
Name: John M. Ellenwood
Title: Group Vice President
by /s/ Erin Marie Lavelle
---------------------------------
Name: Erin Marie Lavelle
Title: Vice President
BANK OF TOKYO-MITSUBISHI
by /s/ Heather T. Zimmerman
---------------------------------
Name: Heather T. Zimmerman
Title: Vice President
BARCLAYS BANK PLC,
by /s/ L. Peter Yetman
---------------------------------
Name: L. Peter Yetman
Title: Director
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<PAGE> 67
CITICORP USA, Inc.,
by /s/ Candi M. Halbert
---------------------------------
Name: Candi M. Halbert
Title: Vice President
CREDIT LYONNAIS, Chicago Branch,
by /s/ Mary Ann Klemm
---------------------------------
Name: Mary Ann Klemm
Title: Vice President
CREDIT SUISSE FIRST BOSTON,
by /s/ Bill O'Daly
---------------------------------
Name: Bill O'Daly
Title: Vice President
by /s/ Kristin Lepri
---------------------------------
Name: Kristin Lepri
Title: Associate
THE DAI-ICHI KANGYO BANK, LTD.,
Chicago Branch,
by /s/ Nobuyasu Fukatsu
---------------------------------
Name: Nobuyasu Fukatsu
Title: General Manager
DEUTSCHE BANK AG, New York
and/or Cayman Islands Branch,
by /s/ Hans-Josep Thiele
---------------------------------
Name: Hans-Josep Thiele
Title: Director
by /s/ Joel Makowsky
---------------------------------
Name: Joel Makowsky
Title: Vice President
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<PAGE> 68
THE FIRST NATIONAL BANK OF CHICAGO,
by /s/ Patrick F. Dunphy
---------------------------------
Name: Patrick F. Dunphy
Title: Vice President
THE INDUSTRIAL BANK OF JAPAN, LIMITED,
by /s/ Walter R. Wolff
---------------------------------
Name: Walter R. Wolff
Title: Joint General
Manager
NATIONAL CITY BANK,
by /s/ Janice E. Focke
---------------------------------
Name: Janice E. Focke
Title: Vice President and
Senior Lending
Officer
THE NORTHERN TRUST COMPANY,
by /s/ Tracy J. Toulouse
---------------------------------
Name: Tracy J. Toulouse
Title: Vice President
ROYAL BANK OF CANADA,
by /s/ Gordon C. MacArthur
----------------------------------
Name: Gordon C. MacArthur
Title: Senior Manager
SOCIETE GENERALE, Chicago Branch,
by /s/ Steven R. Fercho
----------------------------------
Name: Steven R. Fercho
Title: Director
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<PAGE> 69
THE BANK OF NOVA SCOTIA,
by /s/ F.C.H. Ashby
----------------------------------
Name: F.C.H. Ashby
Title: Senior Manager Loan
Operations
BBL INTERNATIONAL (U.K.) LIMITED,
by /s/ C.F. Wright
-----------------------------------
Name: C.F. Wright
Title: Autorised Signatory
by /s/ M-C Swinnen
-----------------------------------
Name: M-C Swinnen
Title: Authorised Signatory
BANCA NAZIONALE DEL LAVORO, S.P.A. -
NEW YORK BRANCH
by /s/ Giulio Giovine
----------------------------------
Name: Giulio Giovine
Title: Vice President
by /s/ Leonardo Valentini
----------------------------------
Name: Leonardo Valentini
Title: First Vice President
KEYBANK, NATIONAL ASSOCIATION,
by /s/ Daniel W. Lally
----------------------------------
Name: Daniel W. Lally
Title: Assistant Vice
President
66
X-4.1-69
<PAGE> 70
<TABLE>
<CAPTION>
SCHEDULE 2.01
======================================================================================================
Lender Commitment CD Reserve Requirement
- ------------------------------------------- ---------------------------------- -----------------------
<S> <C> <C>
THE CHASE MANHATTAN BANK $145,000,000.00 0.0%
270 Park Avenue
10th Floor
New York, NY 10017-2070
Attention: David W. Fox
Telephone: (212) 270-4449
Telecopy: (212) 270-1340
- ------------------------------------------- ---------------------------------- -----------------------
BANQUE NATIONALE de PARIS, $75,000,000.00 0.0%
Chicago Branch
Rookery Bldg, 5th Floor
209 South LaSalle Street
Chicago, IL 60604
Attention: Fred Moryl
Telephone: (312) 977-2211
Telecopy: (312) 977-1380
- ------------------------------------------- ---------------------------------- -----------------------
CIBC INC. $75,000,000.00 0.0%
425 Lexington Avenue
New York, NY 10017
Attention: W. Barrie Anderson
Telephone: (212) 856-3580
Telecopy: (212) 856-3991
- ------------------------------------------- ---------------------------------- -----------------------
THE SUMITOMO BANK LIMITED $30,000,000.00 0.0%
New York Branch
277 Park Avenue
New York, NY 10172
Attention: Bruce Gregory
Telephone: (212) 224-4143
Telecopy: (212) 224-4384
- ------------------------------------------- ---------------------------------- -----------------------
COMMERZBANK AG $75,000,000.00 0.0%
New York and Grand Cayman
Branches
20 S. Clark Street
Suite 2700
Chicago, IL 60603
Attention: Tim Shortly
Telephone: (312) 795-1620
Telecopy: (312) 236-2827
</TABLE>
X-4.1-70
<PAGE> 71
<TABLE>
<CAPTION>
======================================================================================================
Lender Commitment CD Reserve Requirement
- ------------------------------------------- ---------------------------------- -----------------------
<S> <C> <C>
BANK OF AMERICA, N.A., $75,000,000.00 0.0%
231 South LaSalle Street
Chicago, IL 60697
Attention: Robert Balmos
Telephone: (312) 828-4405
Telecopy: (312) 987-0303
- ------------------------------------------- ---------------------------------- -----------------------
ABN AMRO BANK N.V. $30,000,000.00 0.0%
135 South LaSalle Street
Chicago, IL 60674-9135
Attention: John Ellenwood
Telephone: (312) 904-2735
Telecopy: (312) 904-2537
- ------------------------------------------- ---------------------------------- -----------------------
THE BANK OF TOKYO-MITSUBISHI TRUST COMPANY $45,000,000.00 0.0%
1251 Avenue of the Americas
12th Floor
New York, NY 10111
Attention: Fredrich Wilms
Telephone: (212) 782-4341
Telecopy: (212) 782-6445
- ------------------------------------------- ---------------------------------- -----------------------
BARCLAYS BANK PLC $30,000,000.00 0.0%
New York
222 Broadway, 8th Floor
New York, NY 10038
Attention: Timothy Weidman
Telephone: (212) 412-2984
Telecopy: (212) 412-7585
- ------------------------------------------- ---------------------------------- -----------------------
CITIBANK, N.A. $75,000,000.00 0.23%
399 Park Avenue
8th Floor, Zone 12
New York, NY 10043
Attention: Brian Ike
Telephone: (212) 559-7205
Telecopy: (212) 826-2375
- ------------------------------------------- ---------------------------------- -----------------------
</TABLE>
X-4.1-71
<PAGE> 72
<TABLE>
<CAPTION>
======================================================================================================
Lender Commitment CD Reserve Requirement
- ------------------------------------------- ---------------------------------- -----------------------
<S> <C> <C>
CREDIT LYONNAIS $45,000,000.00 0.0%
Chicago Branch
227 West Monroe Street
Suite 3800
Chicago, IL 60606
Attention: Nigel Carter
Telephone: (312) 220-7310
Telecopy: (312) 641-0527
- ------------------------------------------- ---------------------------------- -----------------------
CREDIT SUISSE FIRST BOSTON $75,000,000.00 0.0%
11 Madison Avenue
New York, NY 10010-3692
Attention: William O'Daly
Telephone: (212) 325-1986
Telecopy: (212) 325-8309
- ------------------------------------------- ---------------------------------- -----------------------
THE DAI-ICHI KANGYO BANK, $30,000,000.00 0.0%
LTD.
10 South Wacker Drive
26th Floor
Chicago, IL 60606
Attention: Norman Fedder
Telephone: (312) 715-6363
Telecopy: (312) 876-2011
- ------------------------------------------- ---------------------------------- -----------------------
DEUTSCHE BANK AG $45,000,000.00 0.0%
31 W. 52nd Street
24th Floor
New York, NY 10019
Attention: Rolf-Peter Mikolayczyk
Telephone: (212) 469-8237
Telecopy: (212) 474-8212
- ------------------------------------------- ---------------------------------- -----------------------
THE FIRST NATIONAL BANK $75,000,000.00 0.0%
OF CHICAGO
611 Woodward Avenue
2nd Floor
South Detroit, MI 48226
Attention: Paul Demelo
Telephone: (313) 225-2520
Telecopy: (313) 225-1212
- ------------------------------------------- ---------------------------------- -----------------------
THE INDUSTRIAL BANK OF JAPAN, LIMITED $45,000,000.00 0.0%
AT&T Corporate Center
227 West Monroe Street
Suite 2600
Chicago, IL 60606
Attention: Stan Beltramea
Telephone: (312) 855-8492
Telecopy: (312) 855-8200
</TABLE>
X-4.1-72
<PAGE> 73
<TABLE>
<CAPTION>
======================================================================================================
Lender Commitment CD Reserve Requirement
- ------------------------------------------- ---------------------------------- -----------------------
<S> <C> <C>
NATIONAL CITY BANK $30,000,000.00 0.0%
National City Center
1900 East Ninth Street
Locator #2077
Cleveland, OH 44114-3484
Attention: Janice Focke
Telephone: (216) 575-2836
Telecopy: (216) 222-0003
- ------------------------------------------- ---------------------------------- -----------------------
THE NORTHERN TRUST COMPANY $30,000,000.00 0.0%
50 South LaSalle Street
Chicago, IL 60675
Attention: Tracy Toulouse
Telephone: (312) 557-1356
Telecopy: (312) 630-6062
- ------------------------------------------- ---------------------------------- -----------------------
ROYAL BANK OF CANADA $75,000,000.00 0.0%
One Liberty Plaza - 4th Floor
New York, NY 10006-1404
Attention:Aurora Lanteigne
Telephone: (212) 428-6338
Telecopy: (212) 428-2372
with a copy to:
Attention:G.C. MacAurthur
Telephone: (212) 428-6502
Telecopy: (212) 428-2319
- ------------------------------------------- ---------------------------------- -----------------------
SOCIETE GENERALE $45,000,000.00 0.0%
181 W. Madison Street
Suite 3400
Chicago, IL 60602
Attention: Steven Fercho
Telephone: (312) 578-5008
Telecopy: (312) 578-5099
- ------------------------------------------- ---------------------------------- -----------------------
BBL INTERNATIONAL (U.K.) $30,000,000.00 0.0%
LIMITED
6 Broadgate
London ECM 2AJ
Attention: Chris Wright
Telephone: 011-44-171-392-5533
Telecopy: 011-44-171-562-0208
- ------------------------------------------- ---------------------------------- -----------------------
BANCA NAZIONALE DEL LAVORO $45,000,000.00 0.0%
25 West 51st Street
New York, NY 10019
Attention: Giulio Giovine
Telephone: (212) 314-0239
Telecopy: (212) 765-2978
</TABLE>
X-4.1-73
<PAGE> 74
<TABLE>
<CAPTION>
======================================================================================================
Lender Commitment CD Reserve Requirement
- ------------------------------------------- ---------------------------------- -----------------------
<S> <C> <C>
KEYBANK, NATIONAL ASSOCIATION $30,000,000.00 0.0%
127 Public Square
6th Floor
Cleveland, OH 44114-1306
Attention: Dan Lally
Telephone: (216) 689-8065
Telecopy: (216) 689-4981
- ------------------------------------------- ---------------------------------- -----------------------
THE BANK OF NOVA SCOTIA $45,000,000.00 0.0%
181 West Madison Street
Suite 3700
Chicago, IL 60602
Attention: Eric Bergren
Telephone: (312) 201-4187
Telecopy: (312) 201-4108
=========================================== ================================== =======================
TOTAL $1,300,000,000.00
=========================================== ================================== =======================
</TABLE>
X-4.1-74
<PAGE> 75
EXHIBIT A-1
FORM OF COMPETITIVE BID REQUEST
The Chase Manhattan Bank, as Agent for
the Lenders referred to below,
270 Park Avenue
New York, N.Y. 10017
[Date]
Attention:
Dear Sirs:
The undersigned, The Goodyear Tire & Rubber Company (the
"Borrower"), refers to the Credit Agreement [364-Day Facility] dated as of
[ ], 1999 (as it may hereafter be amended, modified, extended or
restated from time to time, the "Credit Agreement"), among the Borrower, the
Lenders parties thereto and The Chase Manhattan Bank, as Agent. Capitalized
terms used herein and not otherwise defined herein shall have the meanings
assigned to such terms in the Credit Agreement. The Borrower hereby gives you
notice pursuant to Section 2.03(a) of the Credit Agreement that it requests a
Competitive Borrowing under the Credit Agreement, and in that connection sets
forth below the terms on which such Competitive Borrowing is requested to be
made:
(A) Date of Competitive Borrowing
(which is a Business Day) ____________________
(B) Principal Amount of
Competitive Borrowing 1/ ____________________
(C) Interest rate basis 2/ ____________________
(D) Interest Period and the last
day thereof 3/ ____________________
- --------
1/ Not less than $25,000,000 (and in integral multiples of $1,000,000) or
greater than the Total Commitment then available.
2/ Eurodollar Borrowing or Fixed Rate Borrowing.
3/ Which shall be subject to the definition of "Interest Period" and end
not later than the Maturity Date.
X-4.1-75
<PAGE> 76
Upon acceptance of any or all of the Loans offered by the
Lenders in response to this request, the Borrower shall be deemed to have
represented and warranted that the conditions to lending specified in Section
4.01(b) and (c) of the Credit Agreement have been satisfied.
Very truly yours,
THE GOODYEAR TIRE & RUBBER COMPANY,
by
---------------------------
Title: [Authorized Officer]
X-4.1-76
<PAGE> 77
EXHIBIT A-2
FORM OF NOTICE OF COMPETITIVE BID REQUEST
[Name of Lender]
[Address]
[Date]
Attention:
Dear Sirs:
Reference is made to the Credit Agreement [364-Day Facility]
dated as of [ ], 1999 (as it may hereafter be amended, modified,
extended or restated from time to time, the "Credit Agreement"), among The
Goodyear Tire & Rubber Company (the "Borrower"), the Lenders parties thereto and
The Chase Manhattan Bank, as Agent. Capitalized terms used herein and not
otherwise defined herein shall have the meanings assigned to such terms in the
Credit Agreement. The Borrower made a Competitive Bid Request on , 19 ,
pursuant to Section 2.03(a) of the Credit Agreement, and in that connection you
are invited to submit a Competitive Bid by [Date]/[Time] . 4/ Your Competitive
Bid must comply with Section 2.03(b) of the Credit Agreement and the terms set
forth below on which the Competitive Bid Request was made:
(A) Date of Competitive Borrowing ____________________
(B) Principal amount of
Competitive Borrowing ____________________
- -----------
4/ The Competitive Bid must be received by the Agent (i) in the case of
Eurodollar Loans, not later than 9:30 a.m., New York City time, three Business
Days before a proposed Competitive Borrowing, and (ii) in the case of Fixed Rate
Loans, not later than 9:30 a.m., New York City time, on the Business Day of a
proposed Competitive Borrowing.
X-4.1-77
<PAGE> 78
(C) Interest rate basis
--------------------
(D) Interest Period and the last
day thereof
--------------------
Very truly yours,
THE CHASE MANHATTAN BANK, as
Agent,
By
-------------------------
Title:
X-4.1-78
<PAGE> 79
EXHIBIT A-3
FORM OF COMPETITIVE BID
The Chase Manhattan Bank, as Agent for
the Lenders referred to below,
270 Park Avenue
New York, N.Y. 10017
[Date]
Attention:
Dear Sirs:
The undersigned, [Name of Bank], refers to the Credit
Agreement [364-Day Facility] dated as of [ ], 1999 (as it may
hereafter be amended, modified, extended or restated from time to time, the
"Credit Agreement"), among The Goodyear Tire & Rubber Company (the "Borrower"),
the Lenders parties thereto and The Chase Manhattan Bank, as Agent. Capitalized
terms used herein and not otherwise defined herein shall have the meanings
assigned to such terms in the Credit Agreement. The undersigned hereby makes a
Competitive Bid pursuant to Section 2.03(b) of the Credit Agreement, in response
to the Competitive Bid Request made by the Borrower on , 19 ,
and in that connection sets forth below the terms on which such Competitive
Bid is made:
(A) Principal Amount 5/ ____________________
(B) Competitive Bid Rate 6/ ____________________
- --------------
5/ Not less than $5,000,000 or greater than the requested Competitive
Borrowing and in integral multiples of $1,000,000. Multiple bids will be
accepted by the Agent.
6/ i.e., LIBO Rate + or - %, in the case of Eurodollar Loans or %, in
the case of Fixed Rate Loans.
X-4.1-79
<PAGE> 80
(C) Interest Period and last
day thereof ____________________
The undersigned hereby confirms that it is prepared, subject
to the conditions set forth in the Credit Agreement, to extend credit to the
Borrower upon acceptance by the Borrower of this bid in accordance with Section
2.03(d) of the Credit Agreement.
Very truly yours,
[NAME OF LENDER],
By
----------------------
Title:
X-4.1-80
<PAGE> 81
EXHIBIT A-4
FORM OF COMPETITIVE BID ACCEPT/REJECT LETTER
[Date]
The Chase Manhattan Bank, as Agent for
the Lenders referred to below
270 Park Avenue
New York, N.Y. 10017
Attention: [ ]
Dear Sirs:
The undersigned, The Goodyear Tire & Rubber Company (the
"Borrower"), refers to the Credit Agreement [364-Day Facility] dated as of
[ ], 1999 (as it may hereafter be amended, modified, extended or
restated from time to time, the "Credit Agreement"), among the Borrower, the
Lenders parties thereto and The Chase Manhattan Bank, as Agent.
In accordance with Section 2.03(c) of the Credit Agreement, we
have received a summary of bids in connection with our Competitive Bid Request
dated ___________ and in accordance with Section 2.03(d) of the Credit
Agreement, we hereby accept the following bids for maturity on [date]:
Principal Amount Fixed Rate/Margin Lender
$
$ [%]/[+/-. %]
We hereby reject all other bids.
X-4.1-81
<PAGE> 82
The $ should be deposited in [ ]
account number [ ] on [date].
Very truly yours,
THE GOODYEAR TIRE & RUBBER
COMPANY,
by
-----------------------
Name:
Title:
X-4.1-82
<PAGE> 83
EXHIBIT A-5
FORM OF STANDARD BORROWING REQUEST
The Chase Manhattan Bank, as Agent for the
Lenders referred to below,
270 Park Avenue
New York, N.Y. 10017
[Date]
Attention:
Dear Sirs:
The undersigned, The Goodyear Tire & Rubber Company (the
"Borrower"), refers to the Credit Agreement [364-Day Facility] dated as of
[ ], 1999 (as it may hereafter be amended, modified, extended or
restated from time to time, the "Credit Agreement"), among the Borrower, the
Lenders parties thereto and The Chase Manhattan Bank, as Agent. Capitalized
terms used herein and not otherwise defined herein shall have the meanings
assigned to such terms in the Credit Agreement. The Borrower hereby gives you
notice pursuant to Section 2.04 of the Credit Agreement that it requests a
Standard Borrowing under the Credit Agreement, and in that connection sets forth
below the terms on which such Standard Borrowing is requested to be made:
(A) Date of Standard Borrowing
(which is a Business Day) ____________________
(B) Principal Amount of
Standard Borrowing 7/ ____________________
(C) Interest rate basis 8/ ____________________
__________
7/ Not less than $25,000,000 (and in integral multiples of $1,000,000)
or greater than the Total Commitment then available.
8/ Eurodollar Loan, CD Loan or ABR Loan.
X-4.1-83
<PAGE> 84
(D) Interest Period 9/ ____________________
(E) Account to which funds
should be transferred ____________________
Upon acceptance of any or all of the Loans made by the Lenders
in response to this request, the Borrower shall be deemed to have represented
and warranted that the conditions to lending specified in Section 4.01(b) and
(c) of the Credit Agreement have been satisfied.
Very truly yours,
THE GOODYEAR TIRE & RUBBER COMPANY,
By
----------------------------
Title: [Authorized Officer]
- ------------
9/ Which shall be subject to the definition of "Interest Period" and
end not later than the Maturity Date.
X-4.1-84
<PAGE> 85
EXHIBIT B
FORM OF OPINION OF COUNSEL TO GOODYEAR
--------------------------------------
[INSERT CLOSING DATE]
The Lenders and the Agent
named in the Credit
Agreement referred to below
c/o The Chase Manhattan Bank, as Agent,
270 Park Avenue
New York, NY 10017
RE: CREDIT AGREEMENT [364-DAY FACILITY] DATED AS OF
[ ], 1999, AMONG THE GOODYEAR TIRE & RUBBER COMPANY,
THE LENDERS NAMED THEREIN AND THE CHASE MANHATTAN BANK, AS AGENT
Gentlemen:
This opinion is furnished to you pursuant to Section 4.02(a) of the
Credit Agreement [364-Day Facility] dated as of [ ], 1999
(the "Agreement"), among The Goodyear Tire & Rubber Company ("Goodyear"), the
financial institutions party thereto as lenders (the "Lenders") and The Chase
Manhattan Bank, as agent for the Lenders.
I am [the General Counsel and a Vice President] [Associate (Assistant)
General Counsel] of Goodyear, an Ohio corporation, and, as such, am familiar
with the provisions of its Amended Articles of Incorporation and its Code of
Regulations, as each is amended to date, and such other documents as relate to
its corporate power to enter into and perform the Agreement and to incur
indebtedness thereunder.
I am also familiar with the terms and provisions of the Agreement and
with the corporate proceedings taken by Goodyear in connection with its
authorization, execution and delivery.
My opinion is limited to matters involving United States Federal law
and the law of the State of Ohio. I have made no examination of the law of any
other jurisdiction (other than United States Federal law and the law of the
State of Ohio) as a basis for the opinion hereinafter expressed and I do not
express, nor should there be implied, any opinion thereon.
X-4.1-85
<PAGE> 86
Based upon the foregoing, I am of the opinion that:
1. Goodyear is a corporation duly organized, validly existing
and in good standing under the laws of the State of Ohio.
2. The execution, delivery and performance of the Agreement by
Goodyear are within Goodyear's corporate powers, have been duly
authorized by all necessary corporate action, will not violate any
provision of any existing law or regulation or order or decree of any
court or Governmental Body or of the Amended Articles of Incorporation
or Code of Regulations of Goodyear, as each is amended to date, or of
the unwaived terms of any mortgage, indenture, agreement or other
instrument to which Goodyear is a party or which is binding upon it or
its assets, and will not result in the creation or imposition of any
security interest, lien, charge or encumbrance on any of its assets
pursuant to the provisions of any of the foregoing.
3. No authorization or approval or other action by, and no
notice to or filing with, any Governmental Body or court is required to
be made or effected by Goodyear for the due execution and delivery of
the Agreement by Goodyear and for the performance by Goodyear of the
obligations on its part to be performed under the Agreement.
4. If, contrary to the intent of the parties, the Agreement
were held to be governed by Ohio law, the Agreement would constitute
the legal, valid and binding obligation of Goodyear enforceable against
Goodyear in accordance with its terms, subject to applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors' rights generally and subject, as to
enforceability, to general principles of equity (regardless of whether
enforcement is sought in a proceeding in equity or at law).
Very truly yours,
[General Counsel or
Associate or Assistant
General Counsel]
X-4.1-86
<PAGE> 87
EXHIBIT C
THE GOODYEAR TIRE & RUBBER COMPANY
SCHEDULE OF COMPLIANCE
DATED AS OF ___________________, ______
This Schedule of Compliance is delivered pursuant to and in accordance
with clause (1) of part [(i)] [(ii)] of Subsection (d) of Article V of the
Credit Agreement [364-Day Facility] dated as of [ ], 1999 (the "Credit
Agreement"), among The Goodyear Tire & Rubber Company ("Goodyear"), the lenders
parties thereto and The Chase Manhattan Bank, as agent for the lenders. The
terms defined in the Credit Agreement are used herein as therein defined. All
dollar amounts set forth herein are expressed in millions of dollars. This
Schedule of Compliance is in respect of the fiscal [quarter] [year] of Goodyear
ended ________________ (the "Current Fiscal [Quarter] [Year]").
I. INTEREST COVERAGE RATIO - Article V(a)
-------------------------------------
INTEREST COVERAGE RATIO FOR THE ANNUAL PERIOD ENDED
ON [INSERT DATE].
(A) ANNUAL PERIOD CONSOLIDATED
OPERATING INCOME: $___________________
ANNUAL PERIOD INTEREST CHARGES: $___________________
(B) Annual Period Interest $___________________
(C) Annual Period Amortized
Debt discount and expense $___________________
(D) Annual Period Capitalized
Lease imputed interest $___________________
(E) CALCULATION OF ANNUAL PERIOD
INTEREST CHARGES:
(B)+(C)+(D) $___________________
CALCULATION OF INTEREST
COVERAGE RATIO FOR THE
ANNUAL PERIOD:
(A)/(E) ___________________
MINIMUM INTEREST COVERAGE
RATIO REQUIRED BY
ARTICLE V(a) 1.55 TO 1
II. CONSOLIDATED NET WORTH - ARTICLE V(a)
-------------------------------------
X-4.1-87
<PAGE> 88
(A) Consolidated stated capital,
surplus and retained earnings
(before foreign currency
translation adjustment) $
--------------------
(B) SFAS 106 Transition obligation
adjustment $ 1,065.7
--------------------
Calculation of Consolidated
Net Worth as at end of
Current Fiscal
[Quarter] [Year]:
(A)+(B) $___________________
Minimum Consolidated Net
Worth required by
Section 6.1(C) $ 1,250.0
--------------------
III. LIMITATION ON LIENS - ARTICLE VI(a)
-----------------------------------
LIENS ON MANUFACTURING FACILITIES ISSUED, ASSUMED OR
GUARANTEED DURING THE CURRENT FISCAL YEAR.
(A) Liens on property at
acquisition $____________________
(B) Permitted purchase money
Liens $____________________
(C) Liens on property of
acquired or merged entity $____________________
(D) Permitted governmental
Liens $___________________
(E) Permitted renewal Liens $___________________
(F) Permitted Liens under
basket provision of
Article VI(a) $___________________
(G) Liens not permitted by
Article VI(a) $___________________
IV. LIMITATION ON DEBT - ARTICLE VI(b)
----------------------------------
CONSOLIDATED DEBT AT END OF CURRENT FISCAL [QUARTER] [YEAR].
(A) Indebtedness for borrowed
money constituting Debt,
obligations evidenced by
bonds, debentures or similar
instruments constituting
Debt and obligations for
deferred purchase price of
property or services
X-4.1-88
<PAGE> 89
constituting Debt $
-------------------
(B) Capital Lease Obligations
constituting Debt $
-------------------
(C) Guarantees constituting
Debt $
-------------------
CALCULATION OF CONSOLIDATED
DEBT AT END OF CURRENT FISCAL
YEAR (A)+(B)+(C) $
-------------------
AMOUNT OF CONSOLIDATED DEBT
PERMITTED BY ARTICLE VI(B) $
($5,000,000,000) PLUS THE -------------------
SUPPLEMENTAL AMOUNT
OF $__________________ $
-------------------
V. LEVERAGE RATIO
--------------
CONSOLIDATED DEBT AT END OF CURRENT FISCAL QUARTER.
(A) (1) Notes payable to banks
and overdrafts $
-------------------
(2) Long term debt due
within one year $
-------------------
(3) Long term debt and capital
leases $
-------------------
(B) Net proceeds from the sale of
outstanding domestic accounts
receivable $
-------------------
(C) Consolidated Net Worth
(including SFAS 106 transition
charge) ((A)+(B) of Part II) $
-------------------
CALCULATION OF LEVERAGE
RATIO AT END OF CURRENT
FISCAL QUARTER
[(A)+(B)] / [(A)+(B)+(C)] %
-----------------
The undersigned hereby certifies that the above information has been
prepared in accordance with the requirements of the Credit Agreement and that
such information is true and correct in all material respects.
THE GOODYEAR TIRE & RUBBER COMPANY
By:_____________________________
[Name and Title of Authorized
Officer]
X-4.1-89
<PAGE> 90
EXHIBIT D
[FORM OF AGREEMENT]
AGREEMENT dated as of [ ], [ ],
between The Goodyear Tire & Rubber Company, an Ohio corporation and [ ]
(the "New Lender").
Reference is made to the Credit Agreement [364-Day Facility]
dated as of [ ], 1999 (the "Credit Agreement"), among The Goodyear
Tire & Rubber Company, an Ohio corporation (the "Borrower"), the Lenders listed
in Schedule 2.01 thereof (the "Lenders") and The Chase Manhattan Bank, a New
York banking corporation, as agent for the Lenders (in such capacity, the
"Agent"). Terms defined in the Credit Agreement are used herein with the same
meanings.
1. Pursuant to Section 2.11(d) of the Credit Agreement the New
Lender and the Borrower hereby agree that the New Lender shall become a
Lender under the Credit Agreement with a Commitment of $[ ]
by the New Lender, effective as of the later of [ ],
[ ], and the fifth Business day after this Agreement shall
have been delivered to the Agent (the "Effective Date"). From and after
the Effective Date the New Lender shall be a party to and be bound by
the provisions of the Credit Agreement and have the rights and
obligations of a Lender thereunder.
2. Upon the effectiveness of this Agreement, Schedule 2.01 to
the Credit Agreement shall be automatically amended to reflect the
Commitment of the New Lender.
3. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York.
X-4.1-90
<PAGE> 91
IN WITNESS WHEREOF, the Borrower and have caused this Agreement
to be duly executed by their respective authorized officers as of the day and
year first above written.
THE GOODYEAR TIRE & RUBBER
COMPANY,
By ___________________________
Name:
Title:
[ ],
By ___________________________
Name:
Title:
X-4.1-91
<PAGE> 92
EXHIBIT E
[Date]
[FORM OF]
PROMISSORY NOTE
FOR VALUE RECEIVED, the undersigned, THE GOODYEAR TIRE & RUBBER
COMPANY, an Ohio corporation (the "Borrower"), hereby promises to pay to the
order of (the "Lender") at the office of The Chase Manhattan Bank (the "Agent"),
at 270 Park Avenue, New York, New York, 10017, when and as due under the terms
of the Credit Agreement referred to below, the aggregate unpaid principal amount
of all Loans made by the Lender to the Borrower under the Credit Agreement, in
lawful money of the United States of America in same day funds, and to pay
interest from the date hereof on such principal amount from time to time
outstanding in like funds, at said office, at a rate or rates per annum and
payable on the dates provided in the Credit Agreement.
This note is one of the notes referred to in Section 9.03(c) of
the Revolving Credit Facility Agreement dated as of [ ], 1999,
among the Borrower, the lenders parties thereto (including the "Lender") and The
Chase Manhattan Bank, as Agent (as the same may be modified, amended, extended
or restated from time to time, the "Credit Agreement"). The Lender is hereby
authorized to record information as to the amounts and types of the Loans made
by it and payments of principal and interest received with respect thereto on
the schedule attached hereto. Capitalized terms used in this note have the
respective meanings assigned to them in the Credit Agreement. THIS NOTE SHALL BE
CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK
AND ANY APPLICABLE LAWS OF THE UNITED STATED OF AMERICA.
THE GOODYEAR TIRE & RUBBER
COMPANY,
By
_________________________
Name:
Title:
X-4.1-92
<PAGE> 1
EXHIBIT 10.1
Conformed Copy
As of August 20, 1999
JOINT VENTURE AGREEMENT FOR EUROPE
DATED AS OF JUNE 14, 1999
BY AND AMONG
THE GOODYEAR TIRE & RUBBER COMPANY,
GOODYEAR S.A., A FRENCH CORPORATION,
GOODYEAR S.A., A LUXEMBOURG CORPORATION,
GOODYEAR CANADA INC.,
SUMITOMO RUBBER INDUSTRIES, LTD.,
AND
SUMITOMO RUBBER EUROPE B.V.
X-10.1-1
<PAGE> 2
TABLE OF CONTENTS
PAGE NO.
--------
ARTICLE I
DEFINITIONS
-----------
Article 1.1 Definitions........................................... 1
Article 1.2 Definitions Can be Substantive........................ 8
Article 1.3 Definitions Not in Article I.......................... 8
Article 1.4 Non-Working Day Performance........................... 8
Article 1.5 Calculation of Day Periods............................ 8
Article 1.6 Tire and Non-Tire Assets.............................. 8
ARTICLE II
AGREEMENTS OF THE PARTIES HERETO
--------------------------------
WITH RESPECT TO THE ORGANIZATION OF
-----------------------------------
THE JOINT VENTURE COMPANY
-------------------------
Article 2.1 Reorganizations....................................... 9
Article 2.2 Organization of the Joint Venture Company............. 9
Article 2.3 Acquisition of SRE Stock.............................. 9
Article 2.4 Exchange for Solely Europe JVC Voting Stock........... 9
Article 2.5 Completion of Closing................................. 9
Article 2.6 Post-Closing Adjustments.............................. 10
ARTICLE III
INCLUDED ASSETS AND INCLUDED LIABILITIES
----------------------------------------
Article 3.1 Goodyear Business Assets and SRI Business Assets...... 11
Article 3.2 Liabilities of the Goodyear JV Companies and SRI JV 16
Companies............................................
X-10.1-2
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ARTICLE IV
EXCLUDED ASSETS AND EXCLUDED LIABILITIES
----------------------------------------
Article 4.1 Goodyear Excluded Assets............................. 17
Article 4.2 SRI Excluded Assets.................................. 18
Article 4.3 Goodyear Excluded Liabilities........................ 18
Article 4.4 SRI Excluded Liabilities............................. 18
ARTICLE V
REPRESENTATIONS AND WARRANTIES
------------------------------
Article 5.1 Corporate Organization, etc.......................... 18
Article 5.2 Authority; Execution and Enforceability.............. 19
Article 5.3 Ownership of Stock; Corporate Structure.............. 19
Article 5.4 No Violation or Breach............................... 20
Article 5.5 Brokers and Finders.................................. 21
Article 5.6 Financial Statements; Liabilities.................... 22
Article 5.7 Quiet Enjoyment...................................... 23
Article 5.8 Consents; Filings.................................... 23
Article 5.9 Actions and Proceedings.............................. 24
Article 5.10 Taxes and Tax Returns................................ 24
Article 5.11 Title to Property; Condition; Sufficiency............ 25
Article 5.12 Intellectual Property................................ 28
Article 5.13 Software............................................. 34
Article 5.14 Compliance with Legal Requirements................... 35
Article 5.15 Outstanding Commitments.............................. 36
Article 5.16 Employment Matters................................... 37
Article 5.17 Environment, Health and Safety....................... 39
Article 5.18 Insurance............................................ 41
Article 5.19 Accounts Receivables................................. 41
ii
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Article 5.20 Guarantees............................................ 41
Article 5.21 Subsidies............................................. 42
Article 5.22 Year 2000............................................. 42
Article 5.23 Undisclosed Liabilities, etc.......................... 42
Article 5.24 Absence of Certain Changes or Events.................. 43
Article 5.25 Survival Period....................................... 45
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
------------------------------
Article 6.1 Corporate Organization, etc........................... 45
Article 6.2 Authority; Execution and Enforceability............... 46
Article 6.3 Ownership of Stock; Corporate Structure............... 46
Article 6.4 No Violation or Breach................................ 47
Article 6.5 Brokers and Finders................................... 48
Article 6.6 Financial Statements; Liabilities..................... 48
Article 6.7 Quiet Enjoyment....................................... 50
Article 6.8 Consents; Filings..................................... 50
Article 6.9 Actions and Proceedings............................... 50
Article 6.10 Taxes and Tax Returns................................. 51
Article 6.11 Title to Property; Condition; Sufficiency............. 52
Article 6.12 Intellectual Property................................. 54
Article 6.13 Software.............................................. 61
Article 6.14 Compliance with Legal Requirements.................... 62
Article 6.15 Outstanding Commitments............................... 63
Article 6.16 Employment Matters.................................... 64
Article 6.17 Environment, Health and Safety........................ 67
Article 6.18 Insurance............................................. 68
Article 6.19 Accounts Receivables.................................. 69
Article 6.20 Guarantees............................................ 69
Article 6.21 Subsidies............................................. 69
Article 6.22 Year 2000............................................. 69
iii
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Article 6.23 Undisclosed Liabilities, etc.......................... 70
Article 6.24 Absence of Certain Changes or Events.................. 70
Article 6.25 Survival Period....................................... 72
ARTICLE VII
MAINTENANCE OF BUSINESS AND ASSETS
----------------------------------
Article 7.1 Maintenance of Business and Assets.................... 73
ARTICLE VIII
CONDITIONS TO PARTIES' OBLIGATIONS
----------------------------------
Article 8.1 ........................................................ 73
ARTICLE IX
NAMES AND TRADEMARKS
--------------------
Article 9.1 ........................................................ 73
Article 9.2 ........................................................ 73
Article 9.3 ........................................................ 73
Article 9.4 ........................................................ 74
Article 9.5 ........................................................ 74
ARTICLE X
R&D REORGANIZATION
------------------
Article 10.1 ........................................................ 76
iv
X-10.1-5
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ARTICLE XI
TECHNOLOGY MATTERS
------------------
Article 11.1 ........................................................ 77
ARTICLE XII
EMPLOYEE MATTERS
----------------
Article 12.1 ........................................................ 77
Article 12.2 ........................................................ 77
Article 12.3 ........................................................ 78
Article 12.4 ........................................................ 78
ARTICLE XIII
INDEMNIFICATION
---------------
Article 13.1 ........................................................ 78
ARTICLE XIV
SHARED SERVICES
---------------
Article 14.1 ........................................................ 79
Article 14.2 ........................................................ 79
Article 14.3 ........................................................ 79
ARTICLE XV
NON TIRE REAL PROPERTY LEASES
-----------------------------
Article 15.1 ........................................................ 79
Article 15.2 ........................................................ 80
v
X-10.1-6
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Article 15.3 ........................................................ 80
ARTICLE XVI
[Intentionally left blank]
ARTICLE XVII
WARRANTY SERVICES
-----------------
Article 17.1 Warranty Services..................................... 80
ARTICLE XVIII
INSURANCE AND PRODUCT LIABILITY
-------------------------------
Article 18.1 Insurance............................................. 81
Article 18.2 SRI Product Liability/Completed Operations........... 81
Article 18.3 Goodyear Product Liability/Completed Operations...... 82
ARTICLE XIX
TERM OF JV AGREEMENT; EFFECTIVE DATE
------------------------------------
Article 19.1 Term of Agreement.................................... 83
Article 19.2 Effective Date....................................... 83
ARTICLE XX
MISCELLANEOUS PROVISIONS
------------------------
Article 20.1 Amendments......................................... 84
Article 20.2 Waivers............................................ 84
vi
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Article 20.3 Assignability...................................... 84
Article 20.4 Severability....................................... 84
Article 20.5 Notices............................................ 84
Article 20.6 Governing Law, Disputes and Language............... 86
Article 20.7 Termination Prior to Closing....................... 87
Article 20.8 Third Parties...................................... 87
Article 20.9 Titles to Articles and Subparts.................... 87
Article 20.10 Counterparts....................................... 87
Article 20.11 Singular and Plural; Gender........................ 87
Article 20.12 Incorporation...................................... 87
vii
X-10.1-8
<PAGE> 9
SCHEDULES AND EXHIBITS TO
JOINT VENTURE AGREEMENT FOR EUROPE
SCHEDULES
---------
SCHEDULE SUBJECT ARTICLE
- -------- ------- -------
1.1(a) Goodyear JV Companies 1.1
1.1(b) SRI JV Companies 1.1
2.1(a) Goodyear Reorganization 2.1
2.1(b) SRI Reorganization 2.1
2.3 Closing Transactions - Share Purchase 2.3
2.4 Closing Transactions - Share Exchange 2.4
2.5 Example of Allocation of Voting Rights 2.5
2.6 Example of Share Reallocation 2.6
Mechanism
4.1 Goodyear Excluded Assets 4.1
4.2 SRI Excluded Assets 4.2
4.3 Goodyear Excluded Liabilities 4.3
4.4 SRI Excluded Liabilities 4.4
5.1 Companies Whose Shares Must 5.1
Be Owned by the Europe JVC and
its Affiliates
5.2 Authority; Execution and Enforceability 5.2
5.3(a) SRI JV Companies' Stock and 5.3(a)
Corporate Structure
5.3(b) No Commitment to Acquire 5.3(b)
Other Company
5.3(d) SRI JV Companies Which are Not Solvent 5.3(d)
5.4 No Violation or Breach 5.4
5.6(a) Financial Statements 5.6(a)
5.6(c) SRE Financial Statements 5.6(c)
5.6(d) SRI Major European Companies' Liabilities 5.6(d)
5.6(e) Ordinary Course of Business 5.6(e)
5.6(f) No Material Intercompany Transactions 5.6(f)
or Arrangements
5.7 Quiet Enjoyment 5.7
5.8 Consents and Filings 5.8
5.9(a) Actions and Proceedings 5.9(a)
viii
X-10.1-9
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SCHEDULES AND EXHIBITS TO
JOINT VENTURE AGREEMENT FOR EUROPE
SCHEDULE SUBJECT ARTICLE
- -------- -------- -------
5.9(c) No Action Pending or Threatened 5.9(c)
5.10(b) Threatened Audits or Investigations 5.10(b)
Relating to Taxes
5.10(c) Tax Withholding Payments 5.10(c)
5.10(e) Preferential Tax Treatment 5.10(e)
5.10(f) Permanent Establishment 5.10(f)
5.10(g) Tax Liability 5.10(g)
5.11(a) Real Property Owned by SRI 3.1,5.11(a),
JV Companies 5.11(b)
5.11(b) Real Property Leased by 3.1,5.11(b)
SRI JV Companies
5.11(c) SRI Business Assets 5.11(c)
5.11(d) Leases of Tangible 5.11(d)
Personal Property Leased by
or from SRI JV Companies
5.12(a) All Patents and Patent 5.12
Applications Owned by the SRI
JV Companies or Licensed from Third
Parties
5.12(b)(ii) Infringement Proceedings 5.12
5.12(c)(i) All Patent License Agreements to 5.12
Third Parties
5.12(c)(ii) All Patents and Know-How 5.12
Licensed from Competitors
5.12(d) All Trademarks, Service Marks 5.12
and Trade Names
5.12(e) No Infringement of Trademark Rights; 5.12
No Trademark Assignments
5.12(f) Rights to Manufacture and Sell 5.12
5.12(g) Restrictions on Copyrights 5.12
5.12(h) No Infringement of Copyrights 5.12
5.13(c) Licenses for Software Granted 5.13(c)
to Third Parties
5.13(d) Assignments of Copyrights 5.13(d)
5.14 Compliance With Legal 5.14(b),(c)
Requirements
ix
X-10.1-10
<PAGE> 11
SCHEDULES AND EXHIBITS TO
JOINT VENTURE AGREEMENT FOR EUROPE
SCHEDULE SUBJECT ARTICLE
- -------- ------- -------
5.15(a) Outstanding Commitments 5.15(a),(b),
(c),(d)
5.16(a) Collective Rules 5.15(a), 5.16
5.16(b) Employment, Consulting, 5.15(d), 5.16
Severance, Termination or Compensation
Contracts
5.16(d) Compliance with Labor and Social Security 5.16(d)
Laws, Collective Rules and SRI JV
Employment Agreements
5.16(f) Changes to Benefit Plans 5.16(f)
5.16(g) SRI JV Companies Labor Actions 5.16(g)
5.17(a) Environmental, Health, and 5.17(a)
Safety Compliance
5.17(b) Liabilities for Environmental, 5.17(b)
Health & Safety
5.18 Insurance 5.18
5.19 SRI JV Companies' Accounts Receivables 5.19
5.20 Guarantees 5.20
5.21 Subsidies 5.21
5.23 Undisclosed Liabilities 5.23
5.24 Absence of Certain Changes 5.24
or Events
6.1 Companies Whose Shares Must Be Owned 6.1
by Europe JVC and its Affiliates
6.2 Authorized Execution and 6.2
Enforceability
6.3(a) Goodyear JV Companies' Stock and 6.3(a)
Corporate Structure
6.3(b) No Commitment to Acquire Other Company 6.3(b)
6.3(d) Goodyear JV Companies Which are Not Solvent 6.3(d)
6.4 No Violation or Breach 6.4
x
X-10.1-11
<PAGE> 12
SCHEDULES AND EXHIBITS TO
JOINT VENTURE AGREEMENT FOR EUROPE
SCHEDULE SUBJECT ARTICLE
- -------- ------- -------
6.6(a) Financial Statement 6.6(a)
6.6(d) Ordinary Course of Business 6.6(d)
6.6(e) No Material Intercompany 6.6(e)
Transactions or Arrangements
6.7 Quiet Enjoyment 6.7
6.8 Consents and Filings 6.8
6.9(a) Actions and Proceedings 6.9(a)
6.9(c) No Action Pending or Threatened 6.9(c)
6.10(b) Threatened Audits or Investigations 6.10
Relating to Taxes
6.10(g) Tax Liability 6.10(g)
6.11(a) Real Property Owned by 3.1, 6.11(a),
Goodyear JV Companies 6.11(b)
6.11(b) Real Property Leased by 3.1, 6.11(b)
Goodyear JV Companies
6.11(c) Goodyear Business Assets 6.11(c)
6.11(d) Leases of Tangible Personal 6.11(d)
Property Leased by or from
Goodyear JV Companies
6.12(a) All Patents and Patent Applications 6.12
Owned by Goodyear JV Companies
or Licensed from Third Parties
6.12(b)(ii) Infringement Proceedings 6.12
6.12(c)(i) All Patent License Agreements to Third 6.12
Parties
6.12(c)(ii) All Patents and Know-How Licensed 6.12
from Competitors
6.12(d) All Trademarks, Service 6.12(d)
Marks and Trade Names
xi
X-10.1-12
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SCHEDULES AND EXHIBITS TO
JOINT VENTURE AGREEMENT FOR EUROPE
SCHEDULE SUBJECT ARTICLE
- -------- ------- -------
6.12(d)(ii) Restrictions on Use of Goodyear 6.12
Trademarks
6.12(d)(iii) Goodyear Trademarks Licensed 6.12
to Other Parties
6.12(d)(iv) Goodyear Trademarks Licensed 6.12
from Third Parties
6.12(d)(v) Encumbrances Affecting Goodyear 6.12
Trademarks
6.12(d)(vi) Agreements Terminated by Change 6.12
of Control
6.12(d)(vii) OE Export Agreements 6.12
6.12(d)(viii) Company Names 6.12
6.12(e) No Infringement of Trademark 6.12
Rights; No Trademark Assignments
6.12(f) Rights to Manufacture and Sell 6.12
6.12(g) Restrictions on Copyrights 6.12
6.12(h) No Infringement of Copyrights 6.12
6.13(c) Licenses for Software Granted
to Third Parties 6.13(c)
6.13(d) Assignment of Copyrights 6.13(d)
6.14 Compliance With Legal 6.14(b), (c)
Requirements
6.15 Outstanding Commitments 6.15(a), (b),
(c), (d)
6.16(a) Collective Rules 6.15(a), 6.16
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SCHEDULES AND EXHIBITS TO
JOINT VENTURE AGREEMENT FOR EUROPE
SCHEDULE SUBJECT ARTICLE
- -------- ------- -------
6.16(b) Employment, Consulting, Severance, 6.15(d), 6.16
Termination or Compensation
Contracts
6.16(f) Changes to Benefit Plans 6.16(f)
6.16(g) Goodyear JV Companies Labor Actions 6.16
6.17(a) Environmental, Health and Safety Compliance 6.17(a)
6.17(b) Liabilities for Environmental, Health and 6.17(b)
Safety
6.18 Insurance 6.18
6.20 Guarantees 6.20
6.21 Subsidies 6.21
6.23 Undisclosed Liabilities 6.23
6.24 Absence of Certain Changes 6.24
or Events
xiii
X-10.1-14
<PAGE> 15
JOINT VENTURE AGREEMENT FOR EUROPE
This Joint Venture Agreement for Europe dated as of June 14, 1999 (this
"JV Agreement") by and among The Goodyear Tire & Rubber Company, a company
organized and existing under the laws of the State of Ohio of The United States
of America ("Goodyear"), Goodyear S. A., a company organized and existing under
the laws of the Republic of France ("Goodyear Fra"), Goodyear S. A., a company
organized and existing under the laws of the Grand Duchy of Luxembourg
("Goodyear Lux"), Goodyear Canada Inc., a company organized and existing under
the laws of the Province of Ontario of Canada ("Goodyear Canada"), Sumitomo
Rubber Europe B. V., a company organized and existing under the laws of The
Netherlands ("SRE") and Sumitomo Rubber Industries, Ltd., a company organized
and existing under the laws of Japan ("SRI").
WITNESSETH:
WHEREAS, Goodyear and SRI have entered into an agreement of even date
herewith (the "Umbrella Agreement") which envisages that this JV Agreement would
be entered into by the above recited parties; and
WHEREAS, the Umbrella Agreement sets forth the framework for the
formation of a strategic alliance for the research and development, manufacture,
distribution and sale of tires.
NOW, THEREFORE, IT IS AGREED AS FOLLOWS:
ARTICLE I
DEFINITIONS
-----------
1.1 DEFINITIONS. In this JV Agreement the terms used herein which are also
defined in the Umbrella Agreement shall have the meaning set forth in Article
1.01 of the Umbrella Agreement unless otherwise defined in this JV Agreement.
In addition, the following terms shall, unless the context otherwise requires,
have the following respective meanings:
"Affiliate" shall mean, with respect to any specified Person,
any Person that, directly or indirectly, controls, is controlled by or is under
direct or indirect common control with, such specified Person; provided that
the term "Affiliate" as used herein and in the other Alliance Agreements, shall
not include any direct or indirect shareholder of Goodyear or SRI or other
Persons controlled
1
X-10.1-15
<PAGE> 16
by those shareholders, unless such shareholders or other Persons are expressly
included. For this purpose, the term control (including its use in the terms
"controlled by" and "under direct or indirect common control with") shall mean
the ownership, directly or indirectly, of more than fifty percent (50%) of the
voting securities of such Person. The term "Affiliates" when used in
conjunction with Goodyear and its Affiliates shall also include South Pacific
Tyres, in which Goodyear has a fifty percent (50%) interest, provided, however,
that the arrangements contemplated in the Alliance Agreements shall not result
in an amendment of the financial and other terms of any existing license
agreements between SRI (or its Affiliates) and Pacific Dunlop Limited (or its
Subsidiaries) relating to South Pacific Tyres or its Subsidiaries with respect
to any product types or tread designs already in production in South Pacific
Tyres or its Subsidiaries. The Parties agree that Nakata Engineering Co., Ltd.
is not included within the definition of "Affiliates" in the Alliance
Agreements, notwithstanding SRI's control thereof.
"Alliance" means the strategic alliance for the research and
development, manufacture, distribution and sale of tires between Goodyear, SRI
and their Affiliates.
"Allowed Debt" means the sum of the Goodyear Allowed Debt and
the SRI Allowed Debt.
"Cash" means cash and cash equivalents as reported under US
GAAP. "Cash" excludes those amounts of cash contributed by a Party prior to
Closing in order to prefund an obligation of such Party under the Alliance
Agreements which would otherwise be owed by such Party to the Europe JVC or
Affiliates controlled by it after Closing including without limitation the cash
contributions referred to in Article 3.03(b)(iv), 3.04(b) and (d) of the
Umbrella Agreement. "Cash equivalents" means short term securities held for the
primary purpose of general liquidity which normally mature within three months
from the date of acquisition, however, it does not include trade bills of
exchange on hand.
"Code" means the United States Internal Revenue Code of 1986,
as amended.
"Closing" means the closing of the Transactions pursuant to
the terms of the Alliance Agreements, subject to the satisfaction or waiver of
all the conditions thereto set forth therein.
"Closing Date" shall have the meaning specified in Article
5.01 of the Umbrella Agreement.
"Debt" means interest bearing liabilities owed to third
parties, including SRI and Goodyear (and their respective Affiliates (other
than any JVC)); other non-interest bearing liabilities (in the nature of
indebtedness) owed to
2
X-10.1-16
<PAGE> 17
Affiliates (other than any JVC); capital lease liabilities and other
liabilities which are otherwise in the nature of financing; preference shares,
debenture stock and other capital instruments bearing interest; interest
bearing off-balance sheet liabilities and net liability of off balance sheet
derivative contracts, but excluding trade liabilities to Affiliates and third
parties, operational lease liabilities, pension liabilities and other employee
related liabilities. Each item included in this definition of the term "Debt"
is determined in accordance with US GAAP.
"Eastern Europe" shall have the meaning specified in Article
9.5 of the Shareholders Agreement for the Europe JVC.
"Encumbrance" means any lien, mortgage, charge, security
interest, pledge, voting agreement, option or encumbrance of any similar kind.
"Environmental Claim" means any notice (written or oral) by
any Person alleging actual or potential liability (including, without
limitation, potential liability for investigatory costs, cleanup costs (past,
present or future), governmental response costs (past, present or future),
natural resources damages (past, present or future), property damages, personal
injuries, fines or penalties) arising out of, based on or resulting from
circumstances forming the basis of any violation, or alleged violation of any
Environmental Law.
"Environmental Laws" means statutes, codes, directives,
ordinances, rules, regulations, permits, consents, approvals, licenses,
judgments, orders, writs, decrees, injunctions, or other authorizations or
mandates of any Authority existing at the date hereof or that become effective
prior to the Closing Date relating to human health, the environment or to
emissions, controls, discharges or releases of pollutants, contaminants,
Hazardous Materials or wastes into the environment, including without limitation
ambient air, surface water, ground water, sewers or land, or otherwise relating
to the generation, manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of pollutants, contaminants, Hazardous
Materials or wastes or the clean-up of or remediation thereof.
"Equity Capital" shall have the meaning specified in Article
1.1 of the Shareholders Agreement for the Europe JVC.
"ERISA" means the United States Retirement Income Security Act
of 1974, as amended.
"Europe JVC" means the company to be organized in accordance
with Article 2.2 of this JV Agreement.
3
X-10.1-17
<PAGE> 18
"European Territory" shall have the meaning specified in
Article 9.5 of the Shareholders Agreement for the Europe JVC.
"Excluded Liabilities" means both the Goodyear Excluded
Liabilities and the SRI Excluded Liabilities.
"Extended Products" shall have the meaning specified in
Article 9.3.
"Extended Services" shall have the meaning specified in
Article 9.3.
"Goodyear" shall have the meaning specified in the
introductory paragraph hereof.
"Goodyear Allowed Debt" has the meaning specified on Schedule
4.3.
"Goodyear Business Assets" means all of the assets,
properties or rights (real, personal or mixed, tangible or intangible) which
are and will be as of the Closing Date owned or held by, or leased or licensed
to the Goodyear JV Companies and which were used in the Goodyear Businesses on
December 31, 1998 including without limitation, those assets, properties and
rights described in Article 3.1 hereof, (i) excluding those assets that are
cancelled, expired, retired or sold and including those acquired, in each case,
in the Ordinary Course of Business in the period beginning on December 31, 1998
and ending on the Closing Date, inclusive, and (ii) excluding the Goodyear
Excluded Assets.
"Goodyear Businesses" means the tire manufacturing,
distribution and sales businesses and operations and related activities of the
Goodyear JV Companies and a 50% interest in Dackia Partners AB in the European
Territory, as of December 31, 1998 taking account of changes in the Ordinary
Course of Business in the period beginning on December 31, 1998 and ending on
the Closing Date, inclusive, including retail chains, if any, and retreading
operations, but excluding the Goodyear Excluded Assets.
"Goodyear Canada" shall have the meaning specified in the
introductory paragraph hereof.
"Goodyear Fra" shall have the meaning specified in the
introductory paragraph hereof.
"Goodyear JV Companies" means those companies listed in
Schedule 1.1(a). Any one of the Goodyear JV Companies is a "Goodyear JV
Company".
"Goodyear JV Employees" means the employees employed by any
of the Goodyear JV Companies in the Goodyear Businesses immediately prior to
the Closing Date and after the Goodyear Reorganization and such other employees
of
4
X-10.1-18
<PAGE> 19
Goodyear, Goodyear Lux and Goodyear Fra and Affiliates controlled by them whom
the Parties agree on or before the Closing Date should be offered employment by
the Europe JVC and/or Affiliates controlled by it.
"Goodyear JV Liabilities" has the meaning specified in
Article 3.2(b).
"Goodyear Lux" shall have the meaning specified in the
introductory paragraph hereof.
"Hazardous Materials" means any toxic, ignitable, reactive,
corrosive, radioactive, caustic or regulated hazardous substance, hazardous
waste or hazardous material whether solid, liquid or gaseous, including without
limitation petroleum and its derivatives and by-products; other hydrocarbons;
metals; asbestos; PCBs; and any substance having any constituent elements
displaying any of the foregoing characteristics which is regulated under
Environmental Laws, health or safety laws, regulations, orders, codes,
directives, rules and ordinances.
"Joint Venture Company" means in this JV Agreement the
company to be organized in accordance with Article 2.2 of this JV Agreement.
"JV Agreement" shall have the meaning specified in the
introductory paragraph hereof.
"Licensed Products" shall have the meaning specified in
Article 9.3.
"Material Adverse Effect" shall have the meaning specified in
Article 1.01 of the Umbrella Agreement.
"Material Goodyear JV Companies" means Deutsche Goodyear
GmbH, Gummiwerke Fulda GmbH, Goodyear Great Britain Limited, Goodyear France
S.A., the Goodyear Business portion of Goodyear Lux, Goodyear Italiana SpA,
S.A.Goodyear, N.V., Goodyear (Nederland) B.V., Goodyear Svenska AB, The
Goodyear Tire & Rubber Co A/S, Goodyear Gesellschaft M.B.H., Goodyear (Suisse)
S.A., Goodyear Espanola S.A., Goodyear Portuguesa, Limitada, Goodyear Hellas
SAIC and Deutsche Goodyear Holding GmbH, each of such companies considered
alone without its Affiliates controlled by it.
"Material SRI JV Companies" means Dunlop GmbH, Pneumant
Reifen GmbH, Holert Konz GmbH, Dunlop Banden B.V., Dunlop Tyres Limited, Dunlop
France S.A., SIPAR, COFIDI, CLARO PNEUS, Pneu Holding, K-DIS Distribution,
VULCO Nord, VULCO Sud, VULCO Armorique, DUNLOP TYRES NV/SA, DUNLOP PNEUMATICI
S.p.A., DUNLOP NEUMATICOS S.A., each of such companies considered alone without
its Affiliates controlled by it.
5
X-10.1-19
<PAGE> 20
"MOU" means the Memorandum of Understanding signed by SRI and
Goodyear on February 3, 1999.
"Ordinary Course of Business" shall have the meaning
described in Article 4.03 of the Umbrella Agreement.
"Part 6 countries" means Israel, Turkey and Morocco.
"Parties" means Goodyear, Goodyear Fra, Goodyear Lux,
Goodyear Canada, SRI and SRE and "Party" means one of the Parties, which Party
may be a specific one of the Parties as indicated by the context in which the
word Party is used.
"Permitted Encumbrances" means (i) liens for Taxes not yet
due, (ii) warehousemen's, mechanics', carriers', landlords', employees',
repairmen's or similar liens imposed by law, created in the Ordinary Course of
Business and for amounts not yet due and payable, and (iii) minor imperfections
of title or minor encumbrances, if any, which in the aggregate do not
materially detract from the value of the property subject thereto or impair in
any material respect the continued use by a SRI JV Company or a Goodyear JV
Company of the property subject thereto for the use being made thereof.
"Person" means any individual, corporation, limited liability
company, partnership, joint venture, association, joint stock company, trust,
entity, incorporated organization or government.
"Reorganizations" means both the Goodyear Reorganization and
the SRI Reorganization (each as described in Article II) including, for the
avoidance of doubt, all corporate actions reasonably required in respect
thereof.
"Solvent" means, with respect to any Person on a particular
date, that on such date (a) the fair value of the assets of such Person is
greater than the total amount of liabilities of such Person, (b) the present
fair saleable value of the assets of such Person is not less than the amount
that will be required to pay the probable liability of such Person on its debts
as they become absolute and matured, (c) such Person does not intend to incur
debts or liabilities beyond such Person's ability to pay such debts and
liabilities as they mature and (d) such Person is not engaged in business or a
transaction for which such Person's property would constitute an unreasonably
small capital.
"SRE" shall have the meaning specified in the introductory
paragraph hereof.
"SRI" shall have the meaning specified in the introductory
paragraph hereof.
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<PAGE> 21
"SRI Allowed Debt" has the meaning specified on Schedule 4.4.
"SRI Business Assets" means all of the assets, properties or
rights (real, personal or mixed, tangible or intangible) which are and will be
as of the Closing Date owned or held by or leased or licensed to the SRI JV
Companies and which were used in the SRI Businesses on December 31, 1998
including without limitation, those assets, properties and rights described in
Article 3.1 hereof, (i) excluding those assets that are cancelled, expired,
retired or sold and including those acquired, in each case, in the Ordinary
Course of Business in the period beginning on December 31, 1998 and ending on
the Closing Date, inclusive, and (ii) excluding the SRI Excluded Assets.
"SRI Businesses" means the tire manufacturing, distribution
and sales and air springs businesses and operations and related activities of
the SRI JV Companies in the European Territory, as of December 31, 1998, taking
account of changes in the Ordinary Course of Business in the period beginning on
December 31, 1998 and ending on the Closing Date, inclusive, including mold
facilities, interests in and rights to certain test tracks and test facilities
in Germany and the United Kingdom, the air springs division of Dunlop France
S.A., and retail chains, but excluding the SRI Excluded Assets.
"SRI JV Companies" means SRE and those companies listed in
Schedule 1.1(b). Any one of the SRI JV Companies is an "SRI JV Company".
"SRI JV Employees" means the employees employed by any of the
SRI JV Companies in the SRI Businesses immediately prior to the Closing Date and
after the SRI Reorganization and such other employees of SRI, SRE and Affiliates
controlled by them whom the Parties agree on or before the Closing Date should
be offered employment by the Europe JVC and/or Affiliates controlled by it.
"SRI JV Liabilities" shall have the meaning specified in
Article 3.2(a) hereof.
"Tax" and "Taxes" shall mean (i) all taxes, assessments,
levies, imposts, duties, fees, withholdings, or other similar mandatory charges
or collections, including, without limitation, income taxes, receipts taxes,
value added taxes, franchise taxes, net worth taxes, transfer taxes, stamp
taxes, transaction taxes, stock transfer taxes, excise taxes, custom duties,
trade taxes, capital taxes, capital contribution taxes, ad valorem taxes, sales,
use, real and personal property taxes, intangible assets taxes, waste tire
taxes, withholding taxes, minimum taxes and payroll and employee charges or
contributions, fees or other taxes which a Person is required to collect and pay
over to any Authority,
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and (ii) any interest, penalties, fines or additions to tax imposed on a Tax
described in clause (i) hereof, imposed by any Authority.
"Tire Goods" shall have the meaning specified in Article 9.3.
"Umbrella Agreement" shall have the meaning specified in the
first recital hereof.
"Western Europe" shall have the meaning specified in Article
9.5 of the Shareholders Agreement for the Europe JVC.
1.2 DEFINITIONS CAN BE SUBSTANTIVE. If any provision in a definition is a
substantive provision conferring rights or imposing obligations on any Party,
notwithstanding that it is only in the definition Article, effect shall be
given to it as if it were a substantive provision of this JV Agreement.
1.3 DEFINITIONS NOT IN ARTICLE I. Where any term is defined within the context
of any particular article, section or clause in this JV Agreement, the term so
defined, unless it is clear from the context in question that the term so
defined has limited application to the relevant article, section or clause,
shall bear the meaning ascribed to it for all purposes in terms of this JV
Agreement, notwithstanding that that term has not been defined in this Article.
1.4 NON-WORKING DAY PERFORMANCE. Where any payment falls due or any other
obligation is to be performed on a day which is not a working day in the
jurisdiction where such payment is to be made or such obligation is to be
performed, then such payment shall be made or such obligation performed on the
next succeeding working day.
1.5 CALCULATION OF DAY PERIODS. Except as otherwise specifically provided in
this JV Agreement, where in this JV Agreement any number of days is prescribed
in relation to the doing of a particular thing or in respect of a period of
time, those days will be calculated exclusive of the first day and inclusive of
the last day.
1.6 TIRE AND NON-TIRE ASSETS. The Parties agree that the parenthetical phrase
"(insofar as such assets are comprised in the SRI Businesses)" or "(insofar as
such assets are comprised in the Goodyear Businesses)", as the case may be,
shall not exclude any assets from the term "assets" except as a result of the
Reorganization obligations under Article 2.1 intended to separate out non-tire
assets from tire assets or except as a result of the application of the
definition of SRI Business Assets or Goodyear Business Assets, as the case may
be.
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<PAGE> 23
ARTICLE II
AGREEMENTS OF THE PARTIES HERETO
--------------------------------
WITH RESPECT TO THE ORGANIZATION OF
-----------------------------------
THE JOINT VENTURE COMPANY
-------------------------
2.1 REORGANIZATIONS. Goodyear agrees to, and to cause its Affiliates to, carry
out the transactions described in Schedule 2.1(a) together with any other
transactions reasonably incidental thereto and to contribute or transfer, or
cause its Affiliates to contribute or transfer, the Goodyear Business Assets to
the Goodyear JV Companies (the "Goodyear Reorganization"). SRI agrees to, and to
cause its Affiliates to, carry out the transactions described in Schedule 2.1(b)
together with any other transactions reasonably incidental thereto and to
contribute or transfer, or cause its Affiliates to contribute or transfer, the
SRI Business Assets to the SRI JV Companies (the "SRI Reorganization"). The
Parties agree, and agree to cause their respective Affiliates, in good faith to
perform the various transactions contemplated by such reorganizations in a
sequence and by such dates as will accommodate their completion on or prior to
the Closing. The Parties agree to discuss or meet from time to time to review
the progress towards completing the Reorganizations.
2.2 ORGANIZATION OF THE JOINT VENTURE COMPANY. On or prior to the Closing, SRI
and SRE hereby agree (i) to take all necessary action to cause the articles of
association of SRE to be amended, restated or changed as contemplated in the
Shareholders Agreement for the Europe JVC, or as the Parties may otherwise
agree, and (ii) simultaneously therewith or as soon thereafter as practicable,
to change the name of SRE to Goodyear Dunlop Tires Europe B.V. (hereafter
sometimes called the "Europe JVC").
2.3 ACQUISITION OF SRE STOCK. Simultaneously with the transactions described in
Article 2.4, Goodyear Fra and Goodyear Canada shall make such respective cash
transfers to SRI, in consideration for the transfer of shares of voting stock of
SRE, free and clear of all Encumbrances and, in each case, in the respective
ownership interests and voting rights as set forth in Schedule 2.3.
2.4 EXCHANGE FOR SOLELY EUROPE JVC VOTING STOCK. The Parties hereto agree that
at the Closing, in return for the simultaneous transfer of shares of certain of
the Goodyear JV Companies by Goodyear, Goodyear Fra and Goodyear Lux, free and
clear of all Encumbrances, SRE shall exchange shares of solely voting stock of
SRE to be issued by SRE to Goodyear, Goodyear Fra and Goodyear Lux, free and
clear of all Encumbrances and, in each case, in the respective ownership
interests and voting rights as set forth in Schedule 2.4.
2.5 COMPLETION OF CLOSING. Immediately following completion of the
Reorganizations and the Closing, the issued Equity Capital of the Europe JVC
9
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<PAGE> 24
will be owned, on the one hand, seventy-five percent (75%) by Goodyear, Goodyear
Fra, Goodyear Lux and Goodyear Canada, consisting of shares having seventy
percent (70%) of the voting rights of the Europe JVC as well as class specific
share premium on these shares, and, on the other hand, owned twenty-five percent
(25%) by SRI, consisting of shares owned by SRI having thirty percent (30%) of
the voting rights of the Europe JVC. Schedule 2.5 sets out an illustrative
example of how this allocation of rights may be achieved.
2.6 POST-CLOSING ADJUSTMENTS. (a) The Parties agree that where a Party shall be
obliged to make a capital contribution to SRE as provided in Article 3.02(d)(i)
and (iii) of the Umbrella Agreement, such contribution shall be made to the
Europe JVC's general reserves and simultaneously SRI on the one hand and a Party
from among Goodyear, Goodyear Fra, Goodyear Lux or Goodyear Canada on the other
hand, shall subscribe to the lowest possible number of newly issued shares in
proportion to SRI's shareholding on the one hand and the aggregate shareholding
of Goodyear, Goodyear Fra, Goodyear Lux, and Goodyear Canada on the other hand,
respectively, in SRE as of that time, in order to preserve their relative voting
rights and shall pay in such amount of additional class specific share premium
as needed in order to preserve their relative economic interest in the Europe
JVC. Schedule 2.6 sets out an illustrative example of the calculations for such
an adjustment.
(b) If the sum of the adjustments to the Europe JVC Balancing Payment
as provided in Articles 3.02(d)(ii) and (iii) and 3.03 of the Umbrella Agreement
results in:
(i) AN INCREASE IN THE EUROPE JVC BALANCING PAYMENT, the
amount of the additional Europe JVC Balancing
Payment shall be paid to SRI by Goodyear Canada or
Goodyear Fra. In the event that Goodyear Canada or
Goodyear Fra fail to pay on or before the due date
specified in the Umbrella Agreement, Goodyear will
transfer funds to SRI immediately upon notice from
SRI, or
(ii) A DECREASE IN THE EUROPE JVC BALANCING PAYMENT, the
amount of the decrease in the Europe JVC Balancing
Payment shall be reimbursed by SRI to Goodyear
Canada.
(c) SHARE REALLOCATION. In order for Goodyear and its Affiliates that
are shareholders of SRE to allocate their seventy-five percent (75%) ownership
and seventy percent (70%) voting interest between each other in proportion to
the fair market value of the consideration they contributed or paid, the
following is agreed:
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<PAGE> 25
After the closing balance sheets are prepared as provided in Article 3.01 of the
Umbrella Agreement and after adjustments made pursuant to Articles 3.02(d)(ii)
and 3.03 of the Umbrella Agreement, Goodyear, Goodyear Canada, Goodyear Fra and
Goodyear Lux shall reallocate shares among themselves in order to make their
respective voting rights and their respective shares in the Equity Capital
proportionate to the fair market value of their respective contributions and
payments. The Parties shall cause SRE to record such reallocation in its share
ledger. An illustration of such reallocation is set forth in Schedule 2.6.
ARTICLE III
INCLUDED ASSETS AND INCLUDED LIABILITIES
----------------------------------------
3.1 (a) GOODYEAR BUSINESS ASSETS AND SRI BUSINESS ASSETS. Subject to the
application of the provisions of Articles 3.1(b) and (c) and Articles 4.1 and
4.2, as the case may be, the Goodyear Business Assets and the SRI Business
Assets shall include, without limitation, all of the following types of assets
(insofar as such assets are comprised in the Goodyear Businesses or the SRI
Businesses):
(i) REAL PROPERTY AND REAL PROPERTY LEASES. All real
property, owned or leased, including, but not
limited to, factories, warehouses, office buildings,
test tracks and test facilities together with all
buildings, fixtures and improvements thereon and all
appurtenant rights, easements and privileges
belonging or relating thereto and all right, title
and interest to all leases for such property. Said
property shall include, but not be limited to, those
properties set forth on Schedules 5.11(a), 5.11(b),
6.11(a) and 6.11(b);
(ii) TANGIBLE PERSONAL PROPERTY AND TANGIBLE PERSONAL
PROPERTY LEASES. (A) All machinery, equipment
(including, without limitation, office equipment,
laboratory equipment, manufacturing totes,
furnishings, furniture, vehicles, forklifts,
trailers, tools, parts, operating supplies,
consumables and other tangible personal property
(together with all spare and maintenance parts)),
whether owned or leased, together with all right,
title and interest to all leases for such property;
(B) All merchandising equipment, including, without
limitation, dispensing equipment, controlling
equipment, displays, racks, mounting equipment,
repair equipment and other similar devices installed
or located at any customer or third party location
and which are owned on the one hand by any Goodyear
JV Companies or on the other hand, by any SRI JV
Companies, as the case may be; and
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<PAGE> 26
(C) All inventory of goods, merchandise,
merchandising equipment, raw materials,
work-in-process, stock-in-trade and supplies,
including, without limitation, inventory in transit
or in storage and rights in inventory on consignment;
(iii) CONTRACT RIGHTS. All rights and incidents of interest
in and to all contracts, licenses, franchises, sales
and purchase orders, commitments, undertakings,
quotations, executory commitments, agency and
commission contracts, guarantees and indemnifications
and other arrangements and all warranties, claims and
causes of action against third parties and under
insurance policies, whether oral or written;
(iv) ACCOUNTS RECEIVABLE. All notes and accounts
receivable, deposits, advances, manufacturer and
supplier rebates, and all other receivables;
(v) RESTRICTIONS ON COMPETITION AND OBLIGATIONS REGARDING
CONFIDENTIALITY. All rights with respect to all
restrictions on competition in so far as capable of
continuing to be held following a change of control
and obligations regarding confidentiality imposed on
third parties and present and former employees;
(vi) GOVERNMENTAL LICENSES, PERMITS AND APPROVALS. All
governmental licenses, permits, concessions,
authorizations, consents, approvals and product
registrations;
(vii) INTELLECTUAL PROPERTY AND RIGHTS. All technology,
trademarks, trade secrets, inventions, patents,
patent applications, know-how, copyrights, software
and other intellectual property and rights used on
the one hand in the Goodyear JV Companies or, on the
other hand in the SRI JV Companies, including those
rights granted by Article 3.1(d), as the case may
be, except such properties and rights as are owned
or licensed by Goodyear, SRI or their Affiliates
(other than the Goodyear JV Companies or the SRI JV
Companies) or by unaffiliated third parties, unless
otherwise agreed in writing;
(viii) CASH AND INVESTMENTS. Cash on hand or on deposit
together with interest accrued thereon and
investments and shares in other companies except as
otherwise agreed;
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<PAGE> 27
(ix) COMMUNICATION AND ADDRESS NUMBERS. All telephone,
telex, telecopy and electronic mail address numbers,
uniform resource locator file names (URLs), mailing
addresses, and bank account lock box numbers or
addresses, associated with the Goodyear Businesses
and the SRI Businesses wherever located to the
extent they are transferable;
(x) BOOKS AND RECORDS. All sales literature, promotional
signs and literature and other selling material,
records, files, invoices, credit and sales records,
tax records, personnel records, employee handbooks,
manufacturing and technical records or
specifications, customer lists, distributor lists,
permits or approvals, and accounting books and
records (whether stored in physical form, on
computer, on microfilm or otherwise) that pertain to
items (i) to and including (ix) above and the
Goodyear Business Assets and the SRI Business
Assets; and
(xi) GOODWILL. The value and goodwill of each of the
Goodyear Businesses and SRI Businesses as a going
concern above and beyond the separate and
identifiable assets and rights listed or described
above, if any.
Any assets of the type described in this article or otherwise which are
allocated, transferred or returned to either the Goodyear Business Assets or the
SRI Business Assets, as the case may be, under Articles 3.1(b) or (c) shall be
included within the definition of such assets for all purposes under this JV
Agreement or other Alliance Agreements referencing such term, except as
otherwise stated.
(b) TREATMENT OF ASSETS USED IN MORE THAN ONE BUSINESS. The Parties
recognize that certain assets used in or associated with the Goodyear
Businesses or the SRI Businesses, as the case may be, are also used in or
associated with other Goodyear businesses or activities or SRI businesses or
activities not included within the Goodyear Businesses or the SRI Businesses
("Dual Use Assets"). The Parties agree that Dual Use Assets will, pursuant to
the Reorganizations, be included with and belong to the businesses in which
such Dual Use Assets are predominantly used. For this purpose, the term
predominantly used will be determined by a reasonable review of the facts and
circumstances surrounding each asset's use.
In the event it is not clear in which business a Dual Use Asset is predominantly
used, the Parties agree that such Dual Use Asset will be included in the
respective Goodyear Businesses or SRI Businesses.
The Parties agree that the Dual Use Assets which are predominantly used by
Goodyear businesses or SRI businesses outside the Europe JVC and Affiliates
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<PAGE> 28
controlled by it will continue to be made available to the JVC which shared the
use of such Dual Use Assets prior to Closing, at cost or upon such commercial
terms in each case, as are agreed between Goodyear and SRI. Further, Dual Use
Assets included in the Goodyear Businesses or the SRI Businesses will continue
to be made available, at cost, or upon such other commercial terms, in each
case, as are agreed between Goodyear and SRI, to Goodyear, SRI or their
Affiliates which shared the use of such Dual Use Assets prior to the Closing to
the extent it does not interfere with the best interest of the Europe JVC and
Affiliates controlled by it.
The Parties acknowledge that certain Dual Use Assets not intended to be included
within the Goodyear Business Assets or the SRI Business Assets may be disposed
of by Goodyear or SRI or their respective Affiliates to third parties instead of
to Goodyear or SRI or their respective Affiliates (other than the Goodyear JV
Companies or the SRI JV Companies) as the case may be and that, in such event,
the above arrangements shall apply after such disposal, and that such disposal
shall proceed only if such third party shall also agree to accept and abide by
the above arrangements regarding use by the Europe JVC or its Affiliates
controlled by it with respect to such assets.
(c) REALLOCATION OF ASSETS.
(i) Otherwise than as provided in Article III of the
Umbrella Agreement, in the event that, subsequent to
the Closing, any of the Parties hereto identifies
any assets, rights or contractual arrangements,
(except Excluded Assets), or at any time receives
cash proceeds in respect of accounts receivable
transferred pursuant to this JV Agreement, in either
case which should, pursuant to the Alliance
Agreements, have been but were not transferred
(through inadvertence or otherwise) to the Europe
JVC or the appropriate Goodyear JV Company or SRI JV
Company, the Parties hereto shall cause such assets,
rights or contractual arrangements or such cash
proceeds to be transferred to such company as soon
as possible at no charge and for no more than
nominal consideration, on the same terms, and
subject to the same conditions, as would have
applied had such assets, rights or contractual
arrangements or such cash proceeds been so
transferred at Closing.
(ii) In the event that subsequent to the Closing, assets,
rights or contractual arrangements or such cash
proceeds are identified which have been transferred
to the Europe JVC or a Goodyear JV Company or a SRI
JV Company as part of the
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<PAGE> 29
consummation of the Transactions, but which should
not have been transferred to such company pursuant
to the Alliance Agreements, the Parties hereto shall
cause such company to return such assets, rights or
contractual arrangements or such cash proceeds as
soon as possible to such company as Goodyear or SRI,
as the case may be, shall designate.
(iii) The Parties agree that such reallocation will be
done in a manner or will use a mechanism so as to
leave the affected Party or Parties and each of its
Affiliates in the same tax position or with the same
net tax liability as if the relevant assets, rights,
contractual arrangements or cash proceeds had,
pursuant to the Alliance Agreements, been properly
allocated at Closing. In the event that such
reallocation would result in a tax liability or tax
position that is not the same as if the relevant
assets, rights, contractual arrangements or cash
proceeds had, pursuant to the Alliance Agreements,
been properly allocated at Closing, then the Parties
agree to make an adjustment pursuant to Article 2.6.
(d) CERTAIN RETAINED TECHNOLOGY RIGHTS. (i) Notwithstanding any
exception to the property or rights granted under Article 3.1(a)(vii), and
excepting any rights covered under any technology license contemplated by this
JV Agreement or the Umbrella Agreement, and subject to any rights held by or
the terms of any bona fide agreement with any third party, with effect from
Closing, the Goodyear JV Companies and the SRI JV Companies will retain and/or
will be granted, by the Parties or their Affiliates (the Parties to cause such
Affiliates to make this grant) as the case may be, an unrestricted, unlimited,
paid up, non-exclusive license to use in the Goodyear Businesses or the SRI
Businesses as the case may be any technology, know-how, processes, trade secret
or software of Goodyear, SRI or their Affiliates (other than the Goodyear JV
Companies or SRI JV Companies), which has applications in both the Goodyear
Businesses or SRI Businesses, on the one hand and in any businesses of
Goodyear, SRI or their Affiliates (other than the Goodyear JV Companies or SRI
JV Companies) on the other hand as the same is used at Closing.
(ii) Subject to any rights held by or the terms of any bona fide agreement with
any third party, with effect from Closing, the Parties and the Europe JVC shall
cause the Goodyear JV Companies and the SRI JV Companies to grant the Parties or
their Affiliates, as the case may be, an unrestricted, unlimited, paid up,
non-exclusive license to use in the business of the Parties or their Affiliates
any technology, know-how, processes, trade secret or software of the Goodyear JV
Companies or SRI JV Companies which has applications in both the Goodyear
Businesses or SRI Businesses, on the one hand and in any business of Goodyear,
SRI or their Affiliates (other than the Goodyear JV Companies or SRI JV
Companies) on the other hand as the same is used at Closing.
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<PAGE> 30
3.2 LIABILITIES OF THE GOODYEAR JV COMPANIES AND SRI JV COMPANIES. (a) As at
the Closing, and without prejudice to any rights or obligations of
indemnification otherwise provided in the Alliance Agreements, and subject to
the provisions of Article 4.4, and except as otherwise provided in this JV
Agreement, the SRI JV Companies shall continue to be liable for any debt,
obligation, commitment, responsibility or liability arising from or in
connection with the SRI Business Assets or the SRI Businesses of any kind,
character or description, whether accrued, fixed, absolute, known or unknown,
determined or undetermined, contingent or otherwise, whether previously, now or
hereafter arising, such debts, obligations, commitments, responsibilities or
liabilities applicable to the SRI JV Companies herein called the "SRI JV
Liabilities." As at the Closing, SRE shall, directly or indirectly, have no
debts, obligations, commitments, responsibilities or liabilities other than as
follows:
(i) obligations under the Alliance Agreements; and
(ii) the SRI JV Liabilities.
(b) As at the Closing, and without prejudice to any rights or
obligations of indemnification otherwise provided in the Alliance Agreements,
and subject to the provisions of Article 4.3, and except as otherwise provided
in this JV Agreement, the Goodyear JV Companies shall continue to be liable for
any debt, obligation, commitment, responsibility or liability arising from or
in connection with the Goodyear Business Assets or the Goodyear Businesses of
any kind, character or description, whether accrued, fixed, absolute, known or
unknown, determined or undetermined, contingent or otherwise, whether
previously, now or hereafter arising, such debts, obligations, commitments,
responsibilities or liabilities applicable to Goodyear JV Companies herein
called the "Goodyear JV Liabilities".
(c) REALLOCATION OF LIABILITIES.
(i) Otherwise than as provided in Article III of the
Umbrella Agreement, in the event that, subsequent to
the Closing, any of the Parties hereto identifies
any debts, obligations, commitments,
responsibilities or liabilities, (except Excluded
Liabilities), which should, pursuant to the Alliance
Agreements, have been but were not (through
inadvertence or otherwise) assumed by the Europe JVC
or the appropriate Goodyear JV Company or SRI JV
Company, the Parties hereto shall cause such debts,
obligations, commitments, responsibilities or
liabilities to be assumed by such company as soon as
possible at no charge and for no more than a nominal
consideration, on the same terms, and subject to the
same conditions, as would have applied had such
debts,
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obligations, commitments, responsibilities or
liabilities been so assumed at Closing.
(ii) In the event that subsequent to the Closing, debts,
obligations, commitments, responsibilities or
liabilities are identified which have been assumed
by the Europe JVC or a Goodyear JV Company or a SRI
JV Company as part of the consummation of the
Transactions, but which should not have been assumed
by such company pursuant to the Alliance Agreements,
the Parties hereto shall cause such company as
Goodyear or SRI, as the case may be, shall designate
to assume such debts, obligations, commitments,
responsibilities or liabilities as soon as possible.
(iii) The Parties agree that such reallocation will be
done in a manner or will use a mechanism so as to
leave the affected Party or Parties and each of its
Affiliates in the same tax position or with the same
net tax liability as if the relevant debts,
obligations, commitments, responsibilities or
liabilities had, pursuant to the Alliance
Agreements, been properly allocated at Closing. In
the event that such reallocation would result in a
tax liability or tax position that is not the same
as if the relevant debts, obligations, commitments,
responsibilities or liabilities had, pursuant to the
Alliance Agreements, been properly allocated at
Closing, then the Parties agree to make an
adjustment pursuant to Article 2.6.
(iv) The Parties hereto shall, or shall cause the
relevant company assuming a liability under Article
3.2(c) (i) or (ii) above (the "Transferee"), to
indemnify, defend and hold harmless the company from
which such liability is assumed from and against any
failure by the Transferee to comply with its
obligations under the contractual arrangements
governing the liability so assumed.
ARTICLE IV
EXCLUDED ASSETS AND EXCLUDED LIABILITIES
----------------------------------------
4.1 GOODYEAR EXCLUDED ASSETS. Anything herein to the contrary notwithstanding,
the Parties agree that all the assets, rights or contractual arrangements or
cash proceeds listed or described in Schedule 4.1 (the "Goodyear Excluded
Assets"), except as otherwise separately agreed in writing, shall not be a part
of the Goodyear Business Assets.
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<PAGE> 32
4.2 SRI EXCLUDED ASSETS. Anything herein to the contrary notwithstanding, the
Parties agree that all the assets, rights or contractual arrangements or cash
proceeds listed or described in Schedule 4.2 (the "SRI Excluded Assets") (the
Goodyear Excluded Assets and the SRI Excluded Assets collectively called the
"Excluded Assets"), except as otherwise separately agreed in writing, shall not
be a part of the SRI Business Assets.
4.3 GOODYEAR EXCLUDED LIABILITIES. The items listed on Schedule 4.3 shall be
excluded from the Goodyear JV Liabilities.
4.4 SRI EXCLUDED LIABILITIES. The items listed on Schedule 4.4 shall be
excluded from the SRI JV Liabilities.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
------------------------------
The Parties hereby agree that SRI shall be deemed to know and possess all
the knowledge and information known to or possessed by SRE and each of the
other SRI JV Companies. SRI hereby represents and warrants to Goodyear,
Goodyear Fra, Goodyear Lux and Goodyear Canada (including any successor
corporations as the case may be) as of the date hereof except as otherwise
stated herein, as follows:
5.1 CORPORATE ORGANIZATION, ETC. (a) Schedule 5.1 hereto lists all the
companies, one hundred per cent (100%) of the shares of which, except as
otherwise indicated on such schedule, must be owned by the Europe JVC and its
Affiliates controlled by it in order that the Europe JVC and its Affiliates
controlled by it will be able to conduct the SRI Businesses as contemplated in
the Alliance Agreements.
(b) Each of the SRI JV Companies, is a corporation or limited liability
company duly organized and validly existing and, in good standing under the
laws of its jurisdiction of incorporation or organization and each has all
requisite corporate power and authority to own, lease, convey and operate its
respective part of the SRI Businesses as now conducted, and is qualified to do
business in each jurisdiction where the nature of its properties, assets or
business requires such qualification, other than where the failure to be so
qualified would not have a Material Adverse Effect on the business and assets
of such corporation or company. Complete and correct copies of the Constituent
Documents, duly updated, of each of the SRI JV Companies have previously been
delivered to Goodyear or will be made available upon request. The minute books
or similar records of each of the SRI JV Companies contain a materially
accurate record of all meetings and other corporate action of its stockholders,
board of directors or
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other governing bodies (and any committees thereof). Except as described and
contemplated by this JV Agreement, there has been no proposal made or
resolution adopted by the competent corporate body or bodies of any of the SRI
JV Companies for the dissolution, liquidation, merger or split-up of any of
them and, to their best knowledge, no circumstances exist which might result in
the dissolution, liquidation, merger or split-up of any such corporation or
company.
5.2 AUTHORITY; EXECUTION AND ENFORCEABILITY. Except as set forth on Schedule
5.2, SRE and each of the other SRI JV Companies has the requisite power and
authority to execute, deliver and carry out the terms and provisions of the
Alliance Agreements to be executed, delivered and (save in respect of corporate
actions concerning the Reorganizations) carried out by each of them, if any, to
which each of them is a party and to consummate the Transactions to which each
of them is a party, and has taken all necessary corporate action to authorize
the execution, delivery and performance of such Alliance Agreements, and no
other act or proceeding, corporate or otherwise, on the part of SRE or any of
the other SRI JV Companies is necessary to authorize the execution of the
Alliance Agreements or the consummation of any of the Transactions. SRI has the
power and authority to cause the SRI JV Companies to enter into and, prior to
Closing, to carry out the obligations under the Alliance Agreements to which
such companies are a party, and, to the extent applicable, to carry out the SRI
Reorganization, in each case so as to be bound to the obligations thereunder.
This JV Agreement has been duly executed by each of SRI and SRE and constitutes
and the other Alliance Agreements when duly executed by them and the SRI JV
Companies will constitute, a legal, valid and binding obligation of each of SRI,
SRE and the other SRI JV Companies as the case may be, enforceable against each
in accordance with its terms except to the extent that (i) such enforceability
may be limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereafter in effect affecting creditors' rights generally
and (ii) the remedy of specific performance and injunctive and other forms of
equitable relief may be subject to certain equitable defenses and to the
discretion of the court before which any proceedings therefor may be brought.
Except as described and contemplated by this JV Agreement, all corporate actions
required from the SRI JV Companies in connection with the consummation of the
Transactions have been duly performed.
5.3 OWNERSHIP OF STOCK; CORPORATE STRUCTURE.
(a) Schedule 5.3 (a) sets forth for each of the SRI JV Companies as of
the date hereof which will be supplemented by an accurate and complete list, as
required by Article 8.03 of the Umbrella Agreement, the authorized capital, the
issued capital, the number and, where applicable, the par value of the shares
comprising such capital, the names of the shareholders thereof and the number
of shares held by each such shareholder. All of the issued and outstanding
shares of capital stock of each of the SRI JV Companies have been duly
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authorized and are validly issued, have been credited as fully paid and are
clear of any Encumbrances, and, as of the date hereof are held of record and
owned beneficially by the Persons indicated on Schedule 5.3(a). There are no
preemptive rights with respect to the capital stock indicated on Schedule
5.3(a) of any of the SRI JV Companies. Except as set forth on Schedule 5.3(a),
at the Closing, the Europe JVC will own, directly or indirectly, 100% of the
capital stock of all the other SRI JV Companies. Except in the Ordinary Course
of Business or as part of the SRI Reorganization, no repayment or reduction of
the stated capital of the SRI JV Companies has been made.
(b) Except as set forth in Schedule 5.3(b) and except for their
respective ownership interests in the SRI JV Companies or pursuant to the
Transactions, neither SRI or any SRI JV Company own, nor have they committed to
acquire, directly or indirectly, any interest in any Person which manufactures,
distributes or sells tires in the European Territory.
(c) Except as provided in Article 2 hereof, there are not authorized or
outstanding, any subscriptions, options, conversion rights, warrants or other
agreements, securities or commitments of any nature whatsoever (whether oral or
written and whether firm or conditional) obligating (i) any of SRI, or the SRI
JV Companies to issue, deliver or sell, or cause to be issued, delivered or
sold, any shares of the capital stock or any securities convertible into or
exchangeable for shares of capital stock, of any of the SRI JV Companies (ii)
any Person to repurchase or redeem the capital stock of any SRI JV Company, or
(iii) any of such Persons to grant, extend or enter into any such agreement or
commitment.
(d) Except as indicated on Schedule 5.3(d), each of the SRI JV Companies
is Solvent.
5.4 NO VIOLATION OR BREACH. Except as set forth in Schedule 5.4, neither the
execution and delivery by SRI, SRE or the other SRI JV Companies of the Alliance
Agreements to which such companies are a party nor the consummation of the
Transactions, does or will:
(a) conflict with, result in the breach of any terms or conditions of,
constitute a default under or violate, accelerate or permit the acceleration of
any other similar right of any other party or result in the creation or
imposition of any Encumbrance except for Permitted Encumbrances on any of the
SRI Business Assets, under the Constituent Documents of any of the SRI JV
Companies, any applicable law, rule or regulation or any agreement, lease,
mortgage, note, bond, indenture, license or other document or undertaking, to
which any of the SRI JV Companies is a party or by which any of the SRI JV
Companies or any of their properties may be bound, nor will such execution,
delivery and consummation violate any order, writ, injunction or decree of any
Authority to which any of the SRI JV Companies or any of their properties is
subject, the effect of any of which, either individually or in the aggregate
(i) would impair the ability of any of the SRI
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<PAGE> 35
JV Companies to perform its or their material obligations under the Alliance
Agreements or have a Material Adverse Effect on any of the Material SRI JV
Companies or (ii) would materially diminish the benefits intended to be
afforded to any of the parties to the Alliance Agreements;
(b) 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 or 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,
commitments or other binding undertakings ("Contracts") or any permits,
authorizations, approvals, registrations or licenses granted by or obtained
from any Authority ("Permits") to which any of SRI or the SRI JV Companies is a
party or by which any of them (or any of the securities, properties or
businesses of any of them) are bound, the effect of any of which would have a
Material Adverse Effect on any of the Material SRI JV Companies;
(c) result in the creation of any Encumbrances except Permitted
Encumbrances upon the SRI Business Assets of any of the SRI JV Companies, the
effect of which would have a Material Adverse Effect on any of the Material SRI
JV Companies; or
(d) constitute a violation by SRI or any of the SRI JV Companies of (i)
any laws, treaties, ordinances, orders, rulings or regulations of any Authority
("Laws") or any judgments, orders, rulings, awards or administrative acts of
any court, arbitrator or other judicial authority or any Authority
("Judgments") but only those violations of Laws or Judgments the violation of
which may give rise to criminal penalties or punishments or (ii) any Laws or
Judgments the violation of which may not give rise to criminal penalties or
punishments, the effect of any of which in (ii) hereof would have a Material
Adverse Effect on any of the Material SRI JV Companies.
5.5 BROKERS AND FINDERS. All negotiations relating to the Alliance Agreements
and the Transactions have been carried on without the participation of any
Person acting on behalf of SRI or any of the SRI JV Companies, in such manner as
would give rise to any broker's fee (including without limitation investment
banker's fees) or finder's fees or commissions that will be for the account of,
or impose a liability on, Goodyear, Goodyear Fra, Goodyear Lux, Goodyear Canada,
any of the Goodyear JV Companies or any of the SRI JV Companies (including any
successor corporations thereof).
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5.6 FINANCIAL STATEMENTS; LIABILITIES.
(a) Schedule 5.6(a) contains complete and correct copies of the audited
statements of assets and liabilities to be contributed to the Europe JVC (as
described in the MOU, modified as stated in note 1 to the relevant Financial
Statements), including the reports of the independent accountants of the SRI JV
Companies with respect thereto, in the English language, stated in each case as
of December 31, 1998, of each of:
(i) Dunlop GmbH and its subsidiaries on a consolidated basis;
(ii) Dunlop Tyres Ltd. and its subsidiaries on a consolidated
basis; and
(iii) Dunlop France S.A. and its subsidiaries on a consolidated
basis
(each of such three companies and its respective subsidiaries being herein
called a "SRI European Operating Company") and each such statement together
referred to as is being herein called a "SRI European Operating Company Year End
Financial Statement"). The SRI European Operating Companies and SRE together
will be hereinafter referred to as the "SRI Major European Companies".
(b) Each of the SRI European Operating Company Year End Financial
Statements gives a true and accurate account in all material respects of, and
fairly presents, in conformity with accounting principles generally accepted in
the United States of America ("US GAAP"), the assets and liabilities of the
relevant SRI European Operating Company as of December 31, 1998 which are to be
contributed to the Europe JVC (as described in the MOU, modified as stated in
note 1 to the relevant Financial Statements).
Each of the SRI European Operating Company Year End Financial Statements
has been certified without qualification by the relevant independent
accountants.
(c) Schedule 5.6(c) contains a complete and correct copy of an audited
special purpose balance sheet of SRE as of December 31, 1998, including the
notes thereto (together, the "SRE balance sheet") and a report thereon by the
independent accountants. The SRE balance sheet has been prepared on the basis
set out in the notes thereto and contains the assets and liabilities of SRE as
of December 31, 1998 which are to be contributed to the Europe JVC. The SRE
balance sheet has been certified without qualification by the independent
accountants of SRE. The SRE balance sheet and each of the SRI European
Operating Company Year End Financial Statements together will be hereinafter
referred to as the "SRI Major European Companies Year End Financial
Statements."
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(d) Except as disclosed on Schedule 5.6(d), as of December 31, 1998 none
of the SRI Major European Companies had any liabilities or obligations of any
nature, whether known or unknown, accrued, absolute, contingent or otherwise,
and whether due or to become due (for the purposes of Article 5.6 or 6.6 only,
collectively, "Liabilities" and individually, a "Liability") which are to be
contributed to the Europe JVC and which (i) were required by US GAAP, as
applicable, as applied on a consistent basis, to be reflected in financial
statements and (ii) individually or in the aggregate would have had a Material
Adverse Effect on the financial condition of any of the relevant SRI Major
European Companies, and that, in either case, were not reflected or expressly
reserved against in the SRI Major European Companies Year End Financial
Statements or specifically disclosed or provided for in the notes thereto.
(e) Except as disclosed on Schedule 5.6(e) and except as otherwise
conducted as a result of the Transactions, since December 31, 1998 each SRI
Major European Company has conducted its businesses only in the Ordinary Course
of Business and the SRI Major European Company has not undergone or suffered
any change in its financial condition, income, properties (other than as
expressly required by this JV Agreement), Liabilities, operations or prospects
which has had, individually or in the aggregate, a Material Adverse Effect on
any SRI Major European Company.
(f) Except as disclosed on Schedule 5.6(f), there have been no material
intercompany transactions or arrangements relating to the SRI Businesses
between or among any of the SRI JV Companies and SRI and its Affiliates during
the periods covered by the SRI Major European Companies Year End Financial
Statements which have not been fully and accurately reflected on the SRI Major
European Companies Year End Financial Statements.
5.7 QUIET ENJOYMENT. Except as set forth on Schedule 5.7 or as a result of the
Transactions, each of the SRI JV Companies is entitled to carry on its
respective part of the SRI Businesses and enjoy the goodwill of those respective
businesses as going concerns free and clear of any and all Encumbrances, other
than Permitted Encumbrances.
5.8 CONSENTS; FILINGS. Except as set forth on Schedule 5.8 and except as
provided in Articles 8.04(a), (b) and (c) and Schedule 8.04(d) of the Umbrella
Agreement,, no consent, waiver, approval, authorization, exemption,
registration, license or declaration of or by, or filing with, any other Person
or Authority ("Consent"), is required to be made or obtained by any of SRI or
the SRI JV Companies in connection with (i) the execution, delivery or
enforceability of the Alliance Agreements to which such companies are a party or
(ii) the consummation of any of the Transactions except, in either case, where
the failure to make or obtain a Consent would not have a Material Adverse Effect
on any of the Material SRI JV Companies.
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5.9 ACTIONS AND PROCEEDINGS.
(a) Except as set forth on Schedule 5.9(a), there is no action or suit or
legal, administrative, arbitration or other alternative dispute resolution
proceeding or investigation (in each case, whether or not the defense thereof
or liability in respect thereof is covered by policies of insurance) (each, a
"Proceeding" and collectively, "Proceedings") pending nor, to the best
knowledge of SRI, is any Proceeding or claim threatened, to which any of the
SRI JV Companies is, or would be, a party, nor is any Judgment outstanding
against any of the SRI JV Companies, in each case, the effect of which would
have a Material Adverse Effect on any of the Material SRI JV Companies.
(b) No Proceeding is pending or, to the best knowledge of SRI,
threatened, before any arbitrator or Authority to restrain or prohibit, or to
obtain damages or other relief in connection with, entry into the Alliance
Agreements or the Closing of the Transactions.
(c) Except as set forth on Schedule 5.9(c), no attachments, executions,
assignments for the benefit of creditors, receiverships, conservatorships or
voluntary or, to the best knowledge of SRI, involuntary proceedings in
bankruptcy or actions pursuant to any other debtor relief laws or actions by
any Authority having jurisdiction over any of the SRI JV Companies are pending,
or to the best knowledge of SRI, threatened, against any of the SRI JV
Companies.
5.10 TAXES AND TAX RETURNS.
(a) Each of the SRI JV Companies has filed on a timely basis (or within
any applicable extension) all returns and reports of all Taxes required to be
filed by it and has timely given and delivered all Tax notices and accounts
required to be given by it in respect of Taxes for which such company is
liable. All information provided in such returns, reports, notices and accounts
was, when filed or given, complete and accurate. All Taxes previously assessed
or that will be assessed upon any of the SRI JV Companies for any period prior
to January 1, 1999 have been paid. Adequate provisions in accordance with US
GAAP, as applicable, have been made in the SRI Major European Companies Year
End Financial Statements for the payment of all Taxes for which each of the SRI
JV Companies will be liable for the periods covered thereby that were not yet
due and payable as of the dates thereof, regardless of whether the liability
for such Taxes is disputed.
(b) Except as set forth on Schedule 5.10(b), there are no pending, or to
the best knowledge of SRI, threatened audits or investigations relating to any
Taxes for which any of the SRI JV Companies is liable. No deficiencies for any
Taxes have been proposed, asserted or assessed against any of the SRI JV
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<PAGE> 39
Companies. There are no agreements in effect to extend the period of
limitations for the assessment or collection of any Taxes for which any of the
SRI JV Companies is liable and no written requests for any such agreements are
pending.
(c) Except as set forth in Schedule 5.10(c), each of the SRI JV Companies
has withheld from its employees and timely paid to the appropriate Authority
proper and accurate amounts for all periods through the date hereof in
compliance with all Tax withholding provisions of all applicable Laws.
(d) SRI and SRE have furnished or made available or will make available
upon request to Goodyear complete and accurate copies of all returns and
reports of all Taxes filed by any of the SRI JV Companies or on their behalf on
or prior to the date hereof for each of the preceding three (3) fiscal years.
(e) Except as set forth in Schedule 5.10(e), none of the SRI JV Companies
has elected, or has otherwise been granted, any preferential tax treatment or
made any sort of commitment vis-a-vis any Tax Authorities (whether in
connection with a reorganization or otherwise) which (i) are applicable in
whole or in part to any time period that includes a date on or after the date
of this JV Agreement and (ii) would have a Material Adverse Effect on any of
the SRI JV Companies.
(f) Except as set forth in Schedule 5.10(f), each of the SRI JV Companies
is resident only in the jurisdiction in which it is incorporated for tax
purposes and does not have a permanent establishment or other taxable presence
in any other jurisdiction.
(g) Except as set forth on Schedule 5.10(g), none of the SRI JV Companies
is liable for any Taxes for which SRI or any Affiliate of SRI, other than the
SRI JV Companies, is liable.
5.11 TITLE TO PROPERTY; CONDITION; SUFFICIENCY.
(a) Schedule 5.11(a) sets forth an accurate and complete list of each
parcel of real property which was owned by any of the SRI JV
Companies as part of the SRI Businesses on December 31, 1998 of the
following description:
(i) all factories, warehouses, distribution facilities, retail
stores, office buildings, test tracks, test facilities,
technical centers, dump sites and landfills and also any real
property over which environmental concerns can reasonably be
expected;
(ii) all other parcels of real property in excess of the fair
market value of US$250,000; and
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<PAGE> 40
(iii) any parcels of real property owned by any of the SRI JV
Companies, leased or subleased to Persons other than
Affiliates controlled by SRE for a term exceeding three (3)
years.
Such list will be supplemented by an accurate and complete list, as required by
Article 8.03 of the Umbrella Agreement, of each parcel of such real property as
of the Closing Date. Except as indicated on Schedule 5.11(a) as so supplemented,
as of the Closing Date, the SRI JV Companies will own all of the parcels of real
property so listed and supplemented, free and clear of all Encumbrances, except
Permitted Encumbrances.
(b) Schedule 5.11(b) sets forth an accurate and complete list of all the
real property leased by any of the SRI JV Companies as part of the SRI
Businesses on December 31, 1998 of the following description:
(i) all factories, warehouses, distribution facilities, retail
stores, office buildings, test tracks, test facilities,
technical centers, dump sites and landfills and also any real
property over which environmental concerns can reasonably be
expected;
(ii) all other parcels of real property leased to any of the SRI
JV Companies with an annual rent of US$100,000 or more per
annum; and
(iii) any parcels of real property leased by any of the SRI JV
Companies, or subleased to Persons other than Affiliates
controlled by SRE for a term exceeding three (3) years.
Such list will be supplemented by an accurate and complete list, as required by
Article 8.03 of the Umbrella Agreement, of (A) all such real property leased by
any of the SRI JV Companies (the Schedule 5.11(b) leases as supplemented being
called the "SRI JV Major Real Property Leases") and (B) all real property leases
with SRI and/or any Affiliate of SRI (the "SRI Non Tire Real Property Leases"),
(A) and (B) being as of the Closing Date. SRI and SRE have made and will make
all such Schedule 5.11(b) leases above available to Goodyear upon request as
soon as practicable for review. The SRI JV Major Real Property Leases and all
other leases to which any of the SRI JV Companies is a party (except the SRI Non
Tire Real Property Leases) are collectively hereinafter called the "SRI JV Real
Property Leases". With respect to the SRI JV Real Property Leases, each SRI JV
Company which is a party to such leases has a valid and subsisting right to use
the premises, in accordance with the terms of those leases, in each instance
free and clear of all Encumbrances other than Permitted Encumbrances. There is
no default under any SRI JV Real Property Leases and no event has occurred that
with the lapse of time or giving of notice would constitute a default
thereunder, which would for the SRI JV Real Property Leases, except for the SRI
JV Major Real Property Leases, have a Material Adverse Effect on any of the
Material SRI JV Companies. There does not exist with respect to the SRI JV Real
Property
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<PAGE> 41
Leases and, as of the Closing Date with respect to the SRI Non-Tire Real
Property Leases, any violation of any building, zoning, health, safety,
environmental or other license, ordinance, code, regulation or law, the effect
of which would have a Material Adverse Effect on any SRI JV Company.
The Parties agree that, notwithstanding the identification of real property on
Schedules 5.11(a) and 5.11(b) by reference to an assessment of a reasonable
expectation of environmental concern, a claim against SRI for breach by a SRI JV
Company of Environmental Laws may only be brought pursuant to Article 5.17.
(c) Except as set forth on Schedule 5.11(c), the SRI JV Companies, as the
case may be, have good title to the SRI Business Assets, free and clear of all
Encumbrances other than Permitted Encumbrances.
(d) Schedule 5.11(d) sets forth an accurate and complete list of all
leases of tangible personal property leased by or from any of the SRI JV
Companies relating to or used in the conduct of the SRI Businesses, which will
be supplemented by an accurate and complete list, as required by Article 8.03
of the Umbrella Agreement, of all such leases on the Closing Date, which in
each case require lease payments equal to or exceeding the equivalent of US$
50,000 per annum (the "SRI JV Major Personal Property Leases") and SRI and SRE
have made and will make all such Schedule 5.11(d) leases available to Goodyear
upon request as soon as practicable for review. The SRI JV Major Personal
Property Leases and all other tangible personal property leases pursuant to
which any of the SRI JV Companies leases tangible personal property are
collectively hereinafter called the "SRI JV Personal Property Leases". With
respect to each SRI JV Personal Property Lease, each SRI JV Company which is
party to any such lease has a valid and subsisting lease, in each instance free
and clear of all Encumbrances other than Permitted Encumbrances. There is no
default under any SRI JV Personal Property Lease and no event has occurred that
with the lapse of time or giving of notice would constitute a default
thereunder, which would for the SRI JV Personal Property Leases, except for the
SRI JV Major Personal Property Leases, have a Material Adverse Effect on any of
the SRI JV Companies.
(e) The SRI Business Assets and the assets, properties and rights to be
transferred and/or granted to the SRI JV Companies pursuant to the Alliance
Agreements at or prior to Closing, constitute all assets, properties and rights
necessary for the conduct of the SRI Businesses.
(f) The SRI Business Assets are in all material respects in normal
operating condition and suitable for their intended purposes, ordinary wear and
tear excepted, and adequate in all material respects for the conduct of their
respective part of the SRI Businesses and ancillary activities as currently
conducted. No material change in the nature or method of use will occur prior
to
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Closing (other than normal lease expirations) and no lease assets will be
disposed of in each case outside the Ordinary Course of Business.
5.12 INTELLECTUAL PROPERTY.
(a) Schedule 5.12(a) sets forth an accurate and complete list (as at the
date in 1999 indicated at the top of each article) in all material respects of
all patents and patent applications owned by the SRI JV Companies or (to the
extent that SRI is permitted to disclose the same) licensed by them from a
third party ("SRI Patents") indicating for each such SRI Patent whether it is
owned or licensed from a third party and whether such SRI Patent is licensed to
any third party. Except as set forth on Schedule 5.12(a), each of the SRI JV
Companies has all of the patents, patent licenses and know-how licenses
necessary for the conduct of the SRI Businesses as conducted by the SRI JV
Companies as of the Closing Date and the consummation of the transactions
contemplated hereby will not alter or impair any such rights, save as expressly
stated in or contemplated by the Alliance Agreements. Schedule 5.12(a) also
includes an update of all material and substantive changes to the information
contained in the above list which changes occurred after the date indicated on
the top of the list and before the date of this JV Agreement.
(b) To the best of SRI and SRI's Affiliates knowledge and belief (having
made all proper inquiries) save as specified in Schedule 5.12(b)(ii):
(i) the manufacture, use, or sale of the products of the SRI
Businesses, and the SRI JV Companies' respective use of
processes and equipment in the manufacture or sale of such
products, do not infringe the patent rights of any third
party; and
(ii) other than those claims identified in Schedule 5.12(b)(ii),
there is no claim of any third party or any proceeding
pending or threatened, or any investigations for which the
SRI JV Companies have procured a written legal opinion,
internally or externally, during any of the last six years,
which relate to infringement of a third party's patent rights
in the conduct of the SRI Businesses, nor are there any
written notices or challenges to the validity or
enforceability of such rights.
(c) Schedule 5.12(c) sets forth one or more lists which cumulatively
provide an accurate and complete record (as at the date in 1999 indicated at
the top of each article) in all material respects of the following (in so far
as SRI is permitted to disclose the same):
(i) All license agreements whereunder the SRI JV Companies have
licensed patents and know-how relating to the SRI
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Businesses exclusively to third parties indicating for each,
the identity of the licensee, the identity of the patents,
the identity of the licensed subject matter, as well as the
term of the license, the licensed territory, the type of
exclusivity and whether the exclusivity relates to
manufacture, use or sale; and
(ii) All patents, patent applications and know-how licensed
directly, or indirectly under a sub-license, from competitors
of SRI and SRI JV Companies, indicating the details of said
license, as described above and details of all the products,
processes and equipment used by SRI JV Companies which fall
within one or more claims of such patents.
Schedule 5.12(c) also includes an update of all material and substantive changes
to the information contained in the above lists which changes occurred after the
date indicated on those lists. Complete and accurate copies of all the license
agreements under (i) and (ii) above which SRI is permitted to disclose have been
provided to Goodyear.
(d) Schedule 5.12(d) sets forth one or more lists which cumulatively
provide an accurate and complete record (as at the date in 1999 indicated at
the top of each article) in all material respects of:
(i) all trademarks, service marks (and applications and
registrations for such trademarks and service marks), used or
held by or licensed to SRI and the SRI JV Companies, or to
which they are entitled, relating to "SRI Goods" (namely:
tires, inner tubes for tires, tire repair kits, pre-cured
treads for tires, air springs, and tire retail chains, none
of the aforesaid relating to aircraft or solid polyurethane
industrial tires) in the Greater European Territory,
including but not limited to the trademarks DUNLOP, D Device,
SP and PNEUMANT (but excluding SPAX, PERFORMA, SUMITOMO,
Sumitomo Device and trademarks owned and licensed by Sumitomo
Corporation or The Ohtsu Tire and Rubber Co. Ltd.) (together
called the "SRI European Trademarks"), indicating for each
the full name of the registered proprietor, the name of the
current proprietor (if different) or if SRI is unaware
whether a known change of proprietor has been recorded then
the names of the former proprietor and the new proprietor and
the date and nature of the transaction giving rise to the
change, the country/ies and general nature of the
goods/services for which such are registered/pending and the
general nature of the goods/services for which such are used;
and
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<PAGE> 44
(ii) (A) in respect of DUNLOP, D Device, PNEUMANT, SP (whether
or not registered) and all registrations and pending
applications to register said trademarks or a similar
trademark or a variation thereof or a combination
containing any of said trademarks in the Greater
European Territory (hereinafter the "D Marks"), all and
any material restrictions on use of the D Marks in
relation to the SRI Goods in the Greater European
Territory including but not limited to all agreements,
arrangements, conflicts or threatened conflicts between
SRI or any of the SRI JV Companies and a third party
which restrict use of one or more of the D Marks in
relation to the SRI Goods or affect the scope of or
validity of the D Marks including the names of parties
and details (or copy documentation to be provided
concurrently); and
(B) in respect of all other registrations and pending
applications to register any SRI European Trademark
(hereinafter "SRI Registrations-2"), all and any
material restrictions on use and registration of the
SRI Registrations-2 in relation to the SRI Goods in all
countries where said are registered or pending,
including but not limited to all agreements,
arrangements, conflicts or threatened conflicts between
SRI or any of the SRI JV Companies and a third party
which restrict use of one or more of the SRI
Registrations-2 in relation to the SRI Goods in all
countries where said are registered or pending, or
affect the scope of or validity of the SRI
Registrations-2 in said countries including the names
of parties and details (or copy documentation to be
provided concurrently), and all restrictions on
registration of the SRI Registrations-2 in the Greater
European Territory in relation to SRI Goods of which
SRI or any of the SRI JV Companies are aware, including
but not limited to all agreements, arrangements,
conflicts or threatened conflicts between SRI or any of
the SRI JV Companies and a third party which restrict
registration of one or more of the SRI Registrations-2
in relation to the SRI Goods including the names of
parties and details (or copy documentation to be
provided concurrently); and
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<PAGE> 45
(C) in respect of SRI European Trademarks which are
used but not registered (or the subject of a
pending application) in any country/ies for any
goods/services falling within SRI Goods in relation
to which they are used (hereinafter "SRI CL
Marks"), all and any material restrictions on use
of the SRI CL Marks in relation to the SRI Goods in
said countries including but not limited to all
agreements, arrangements, conflicts or threatened
conflicts between SRI or any of the SRI JV
Companies and a third party which restrict use of
one or more of the SRI CL Marks in relation to the
SRI Goods or affect the scope of or validity of the
SRI CL Marks including the names of parties and
details (or copy documentation to be provided
concurrently); and
(D) all other restrictions on use of the SRI European
Trademarks in relation to the SRI Goods in the
Greater European Territory of which SRI or any of
the SRI JV Companies are aware; and
(iii) all licenses under which SRI European Trademarks are
licensed to another party, with the name and address of
the licensee/s, and details of said licenses (or a copy
thereof to be provided concurrently); and
(iv) all licenses under which SRI European Trademarks are
licensed from a third party, with the name and address of
the licensor/s, the name and address of the owner (if
different), and details of said license/s (or a copy
thereof to be provided concurrently); and
(v) details of each and every Encumbrance (other than a
Permitted Encumbrance) created by SRI or any of the SRI JV
Companies on any of the SRI European Trademarks (or a copy
thereof to be provided concurrently); and
(vi) all agreements or arrangements relating to the SRI
European Trademarks which may be terminated in the event
of a change of control of the SRI JV Companies or which
require approval to grant sub-licenses in a separate list
in Schedule 5.12(d) (details shall be included); and
(vii) all OE export arrangements or agreements relating to
Licensed Products bearing SRI European Trademarks fitted
as original
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<PAGE> 46
equipment to vehicles exported from any country within the
Greater European Territory; and
(viii) all company names of SRI or the SRI JV Companies
incorporated in the Greater European Territory.
Schedule 5.12(d) includes an update of all material and substantive changes to
the information contained in the above lists which changes occurred after the
date indicated on those lists but before the date of this Agreement.
(e) To the best of SRI's knowledge and belief (having made all proper
inquiries), save as specified in Schedule 5.12(e) the use or other exploitation
by SRI and the SRI JV Companies of the following, does not infringe the rights
of any third party:
(i) the D Marks in relation to the SRI Goods in the Greater
European Territory;
(ii) the SRI Registrations-2 in relation to the SRI Goods in
countries where they are registered or pending; and
(iii) the SRI CL Marks in relation to the goods/services falling
within the SRI Goods for which they are used in the
countries in which they are used.
Other than those identified in Schedule 5.12(e), there is no claim of any third
party or any proceeding pending or to the best knowledge of SRI, threatened, or
any investigations by SRI or the SRI JV Companies, which relate to infringement
or other violation by SRI or any of the SRI JV Companies (or so far as they are
aware, any users authorized by them) of a third party's trademark rights in the
conduct of the Business in the Greater European Territory, nor are there any
written notices or challenges to the validity or enforceability of the rights of
SRI and/or the SRI JV Companies in the SRI European Trademarks. To the best of
the knowledge and belief of SRI and the SRI JV Companies, no person is
infringing the rights of any of SRI and the SRI JV Companies with respect to
such SRI European Trademarks, other than those identified in Schedule 5.12(e).
Other than as specified in Schedule 5.12(e), no Trademarks relating to the SRI
Goods in the Greater European Territory have been assigned or transferred, and
no rights which would restrict use of the SRI European Trademarks in relation to
the SRI Goods have been granted by SRI or the SRI JV Companies within the last
12 months.
(f) Except as set forth on Schedule 5.12(f), each of SRI and the SRI JV
Companies cumulatively have:
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<PAGE> 47
(i) the right to manufacture under:
(A) the D Marks in relation to the SRI Goods,
(B) the SRI Registrations-2 in relation to the SRI
Goods in countries where they are registered or
pending, and
(C) the SRI CL Marks in relation to the goods for which
they are used,
in the Greater European Territory; and
(ii) the right to sell and provide the goods and services
referred to in (f) (i) above under the respective
trademarks referred to in (f) (i) above in the Greater
European Territory; and
(iii) in relation to the SRI JV Companies, the right to use said
trademarks in connection with OE exports of said goods to
jurisdictions other than the country in which the said
goods are fitted to the vehicle;
and have all the trademark rights and licenses necessary for the conduct of the
SRI Businesses as conducted by the SRI JV Companies as of the Closing Date, and
the consummation of the transactions contemplated hereby will not alter or
impair any such rights, save as expressly stated in or contemplated by the
Alliance Agreements.
(g) Schedule 5.12(g) also sets forth:
(i) Any and all material restrictions on use by the SRI JV
Companies of all copyright rights and other rights in
drawings of tires and parts thereof and other products of
the SRI Businesses and all designs applicable to the
appearance or shape of tires and other products of the SRI
Businesses (including but not limited to tread designs)
owned by SRI, SRI's Affiliates or the SRI JV Companies or
licensed from a third party in the European Territory
(hereinafter "the Works") and the consummation of the
Transactions contemplated hereby will not alter or impair
any of the SRI JV Companies' rights in or their ability to
use the Works save as expressly stated in or contemplated
by the Alliance Agreements; and
(ii) All current conflicts or threatened conflicts (of which
SRI is aware) or validity challenges relating to the
Works.
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<PAGE> 48
(h) To the best knowledge and belief of SRI, the use or other
exploitation by the SRI JV Companies of the Works in relation to the SRI
Businesses does not infringe the rights of any third party. Other than those
identified in Schedule 5.12(h), there is no claim of any third party or any
Proceeding pending or to the best knowledge of SRI, threatened, or any
investigations by SRI or the SRI JV Companies, which relate to infringement or
other violation of a third party's rights in the Works in the conduct of the
SRI Businesses, nor are there any written notices or challenges to the validity
or enforceability of the rights of SRI, SRI's Affiliates or the SRI JV
Companies in the Works. To the best of the knowledge and belief of SRI, no
person is infringing the rights of any of SRI, SRI's Affiliates or the SRI JV
Companies with respect to such Works, other than those identified in Schedule
5.12(h).
(i) The Parties agree that the information provided pursuant to all
parts of this Article 5.12 and in Schedules 5.12(a) through (h) shall be
supplemented by an accurate and complete list, as required by Article 8.03 of
the Umbrella Agreement as at the Closing Date.
5.13 SOFTWARE.
(a) The SRI JV Companies have entered into, have valid rights under and
have maintained all material computer programs, computer data bases or other
computer software used or owned by any of the SRI JV Companies (insofar as they
are comprised in the SRI Businesses) ("Software").
(b) The SRI JV Companies have received no claim of any third party nor
is any Proceeding or any investigation pending or, to the best of the knowledge
of SRI, threatened, which relates to infringement or other violation of the
rights of third parties arising out of the use of the Software. There are no
written notices or challenges to the validity or enforceability of the rights
of any of the SRI JV Companies to use the Software. To the best of the
knowledge of SRI, no Person is infringing the rights of any of the SRI JV
Companies with respect to the Software.
(c) The SRI JV Companies have granted to the third parties listed on
Schedule 5.13(c) the licenses or authorizations identified thereon relating to
the use of the Software owned or licensed by the SRI JV Companies.
(d) Except as set forth on Schedule 5.13(d), each of the SRI JV
Companies' consultants, contractors and subcontractors who have participated in
the creation, design or development of the Software owned or used but not
licensed by any of the SRI JV Companies has entered into a written agreement
assigning the copyright (or any other right arising under any applicable Law)
in the Software (including the related documentation) to the relevant SRI JV
Company and each employee of a SRI JV Company who has participated in the
creation, design or development of the Software owned or used by any of the SRI
JV Companies, have under the law of the relevant jurisdictions automatically
34
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<PAGE> 49
assigned the copyright (or any other right arising under any applicable Law) in
the Software (including the related documentation) to the relevant SRI JV
Company.
5.14 COMPLIANCE WITH LEGAL REQUIREMENTS.
(a) The SRI JV Companies are currently conducting, and have at all times
for which the applicable statute of limitation has not expired, conducted their
respective part of the SRI Businesses and are currently maintaining and have at
all times for which the applicable statute of limitation has not expired
maintained their ownership and possession of their respective SRI Business
Assets, in compliance with all applicable Laws, Judgments and Permits, except
to the extent that the failure to so conduct their respective part of the SRI
Businesses and maintain their respective SRI Business Assets would not have a
Material Adverse Effect on any of the Material SRI JV Companies.
(b) Except as set forth on Schedule 5.14, the SRI JV Companies possess,
and upon consummation of the Transactions will continue to possess all Permits
necessary to conduct their respective part of the SRI Businesses, as they are
currently being conducted, and all such Permits are in full force and effect,
except to the extent the failure to so possess or maintain in full force and
effect would not have a Material Adverse Effect on any of the Material SRI JV
Companies or impair the SRI JV Companies ability to perform their material
obligations under the Alliance Agreements. Except as set forth in Schedule
5.14, all such Permits, to the extent such Permits need to be assigned or
transferred pursuant to the Transactions, are fully and freely assignable or
transferable (except to the extent that the failure to so assign or transfer is
due solely to the discretionary act or acts of an Authority and not based upon
the acts or omissions of SRI or any of the SRI JV Companies) to the applicable
SRI JV Company. No proceeding to modify, suspend, terminate or otherwise limit
any such Permit is pending or, to the best knowledge of SRI, threatened.
(c) Except as set forth in Schedule 5.14, none of the SRI JV Companies
has received any notice in any form (including any citations, notices of
violations, complaints, consent orders or inspection reports) which would
indicate that any such company was not at the time of such notice or is not
currently in compliance with all such applicable Laws, Judgments and Permits
except where the failure to not be in compliance would not have a Material
Adverse Effect on any of the Material SRI JV Companies.
(d) None of the SRI JV Companies has made any illegal payment to any
officer or employee of any governmental or regulatory authority, engaged in any
illegal reciprocal agreements with competitors, customers or suppliers or made
any illegal payment to any supplier or purchasing agent.
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<PAGE> 50
5.15 OUTSTANDING COMMITMENTS.
(a) Schedule 5.15(a) contains an accurate and complete list of all
Contracts (insofar as such Contracts are comprised in the SRI Businesses other
than Contracts covered in Article 5.16(b)) to which any of the SRI JV Companies
is a party or by which any of their assets or operations are bound or affected
and which (i) involve the obligation (including contingent obligations) by or
to any of the SRI JV Companies to pay amounts in excess of the equivalent of
US$1,000,000 in any fiscal year, (ii) are Contracts whose term exceeds one (1)
year or is unlimited (with the exception of labor agreements) and which may not
be terminated by the relevant SRI JV Company on less than six (6) months'
notice without the payment of a penalty in the equivalent amount of US$100,000
or more, (iii) are Contracts under whose terms one or more of the SRI JV
Companies is bound to materially refrain from carrying out or to materially
restrict certain normal business activities as such activities are conducted in
the Ordinary Course of Business, or to refrain from competing with any third
party, (iv) are Contracts with SRI or any Affiliate thereof (except any of the
SRI JV Companies) in the equivalent amount of US$100,000 or more or any
director or employee thereof (v) are Contracts for the purchase or resale of
tires, retread materials, accessory parts and air springs in excess of the
equivalent of US$2,000,000 per annum ("Dealer Contracts"), or (vi) were not
entered into in the Ordinary Course of Business.
(b) All Contracts listed on Schedule 5.15(a) are valid, binding and
enforceable by one or more of the SRI JV Companies in accordance with their
respective terms and none of the SRI JV Companies is in default or has waived
any material right under any of such Contracts, nor does there exist any event
or condition, which upon the giving of notice or the lapse of time or both,
would (i) constitute a default or event of default thereunder or (ii) entitle
any other party thereto to terminate such Contract, and which would in any
case, have a Material Adverse Effect on any of the Material SRI JV Companies.
To the best knowledge of SRI, the obligations of each counterparty to any
Contracts listed on Schedule 5.15(a) are (i) valid and binding on such
counterparty and enforceable by one or more of the SRI JV Companies in
accordance with their respective terms, (ii) none of the counterparties is in
default or has waived any material right under any of such Contracts, nor does
there exist any event or condition, which upon the giving of notice or the
lapse of time or both, would (A) constitute a default or event of default
thereunder or (B) entitle any other party thereto to terminate such Contract,
and which would in any case have a Material Adverse Effect on any of the
Material SRI JV Companies.
(c) Specifically, pursuant to Article 5.15 (a) (i), Schedule 5.15(a)
includes without limitation a list of all Contracts in excess of the equivalent
of US$1,000,000 in any fiscal year to which any of the SRI JV Companies is a
party or by which any of their assets or operations are bound with any original
36
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<PAGE> 51
equipment automotive manufacturer ("Original Equipment Contracts"). Except for
such Original Equipment Contracts, there are no other contracts with original
equipment automotive manufacturers which impose obligations on any of the
Material SRI JV Companies which would have a Material Adverse Effect on any of
the Material SRI JV Companies.
(d) None of the Contracts listed on Schedules 5.15(a) or 5.16(a) and (b)
to which any SRI JV Company is a party or a beneficiary violates any provision
of any applicable Law or Judgment. All Contracts between any of the SRI JV
Companies on the one hand, and its suppliers, customers, distributors, dealers,
agents or licensees, on the other hand, have been concluded under normal market
conditions, in accordance with normal commercial practice except where the
failure to have so concluded such Contracts would have a Material Adverse
Effect on any of the Material SRI JV Companies.
(e) SRI and SRE have made or will make upon request all Dealer Contracts
and Original Equipment Contracts available to Goodyear for review and have made
available or will make available upon request in writing all material
amendments to such Contracts in connection therewith (unless prohibited by
applicable anti-trust Laws or a confidentiality clause contained in any such
agreement). Any Contracts or material amendments not available for review by
Goodyear due to the foregoing prohibition regarding anti-trust Laws or
confidentiality clauses, impose no obligations on any of the Material SRI JV
Companies which would have a Material Adverse Effect on any of the Material SRI
JV Companies.
5.16 EMPLOYMENT MATTERS.
(a) Schedule 5.16(a) contains a list, for each of the SRI JV Companies,
and for each separate establishment thereof, of all the collective rules
applicable to SRI JV Employees (the "Collective Rules"), including without
limitation: (i) the applicable collective bargaining agreements (other than
those applicable on a nation-wide or industry-wide basis) and company
agreements; (ii) the remuneration system, including premiums, bonuses,
commissions and benefits in kind; (iii) profit-sharing, incentive and company
savings plans; (iv) any retirement or health insurance plan pursuant to which
employees are entitled to receive benefits in addition to those provided for by
law or the applicable collective bargaining agreements; (v) any other employee
benefit plans similar in type to those described in Sections 3(1) and 3(2) of
ERISA; and (vi) any regional, local or individual company or establishment
practices which provide for benefits which exceed those provided for by law or
the applicable collective bargaining agreements.
(b) Schedule 5.16(b) (save as expressly provided therein) sets forth a
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<PAGE> 52
complete and accurate list of the thirty (30) employment, consulting,
severance, termination or compensation Contracts of greatest amount between any
individual and each of the Major SRI JV Companies and their Affiliates
controlled by them and ten (10) such contracts of greatest amount for retail
operations between an individual and any of the SRI JV Companies, pursuant to
which any such individual has received benefits within the preceding two (2)
years which exceed those provided for by law or the applicable Collective
Rules, including, but not limited to, increased severance pay, extended notice
periods, advantages in kind or pensions (the "SRI JV Employment Agreements"),
copies of which are available upon request by Goodyear. In the case of certain
of the SRI JV Employment Agreements to which the provisions of the German Data
Protection Act extend, the information provided on Schedule 5.16 (b) shall only
identify the employment contract between the applicable company and individual
by a general title, job description or functional area of responsibility, in
order not to disclose information protected by such Act (the "SRI German
Employment Contracts"). None of the individual SRI German Employment Contracts
have been amended nor do any of them contain any contractual provisions or
entitlement to benefits other than as stated in the specific representative
contract that SRI has provided to Goodyear (by letter of May 24, 1999) as
representative of that individual's SRI German Employment Contract. SRI has
provided a model representative contract (by letter of May 24, 1999) to
Goodyear for each of the SRI German Employment Contracts. No amount will become
due to any director, consultant or employee of any of the SRI JV Companies
under the Collective Rules or any SRI JV Employment Agreement solely as a
result of the Transactions.
(c) As of the date hereof, none of the directors, consultants or
employees of any of the SRI JV Companies earning in excess of the equivalent of
US$100,000 per annum has formally notified any such company that he or she does
not intend to continue his or her relationship with it following the completion
of the Transactions on the terms of the applicable Collective Rules and the SRI
JV Employment Agreements as currently in effect and SRI and SRE have no reason
to believe that each of the SRI JV Companies will not be able to continue such
relationships with such persons after the Closing.
(d) Except as set forth on Schedule 5.16(d), each of the SRI JV
Companies are now and have in the past been in all material respects in
compliance with all provisions of applicable labor and social security Laws,
the Collective Rules and the SRI JV Employment Agreements and all payments due
thereunder from each of the SRI JV Companies have been made when due.
(e) The SRI JV Companies:
(i) do not have any obligation to contribute to, nor have they
incurred any liability with respect to any benefit plan
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<PAGE> 53
concerning the SRI JV Employees, other than the employee
benefit plans listed on Schedule 5.16(a) (the "SRI JV
Employee Benefit Plans"), nor will they have any liability
after the Closing under any employee benefit plan
concerning any employees, other than SRI JV Employees or
retirees from the SRI Businesses or the predecessors of
such businesses;
(ii) have not engaged in a transaction that could result in the
imposition upon any SRI JV Companies of a civil penalty
with respect to the regulation of the SRI JV Employee
Benefit Plans and no fact or event exists that could give
rise to any such liability which would have a Material
Adverse Effect on any of the Material SRI JV Companies;
(iii) have not entered into any agreement to indemnify any
Person (other than any Person entitled to benefits under
the SRI JV Employee Benefit Plans) with respect to any of
the SRI JV Employee Benefit Plans; and
(iv) have had the SRI JV Employee Benefit Plans, as amended to
date, determined by the appropriate regulatory authority
if required, to be plans which comply in all material
respects with the laws and regulations to which they are
subject, and no assets of the SRI JV Employee Benefit
Plans are subject to any Encumbrances.
(f) Except as set forth on Schedule 5.16(f), SRI and SRE have not
permitted the SRI JV Companies to adopt, change or commit to adopt any type of
employee benefit plan similar to the SRI JV Employee Benefit Plans covering the
SRI JV Employees, after December, 31 1998 and prior to the Closing, except in
the Ordinary Course of Business.
(g) Except as set forth in Schedule 5.16(g), since January 1, 1998 there
have not occurred any strikes, slow downs, work stoppages or other similar
labor actions by any group of employees of any of the SRI JV Companies. Nor are
any of SRI or any of the SRI JV Companies aware that any such labor action is
pending or threatened. No Proceeding arising out of any labor grievance under
any Law, the Collective Rules or any SRI JV Employment Agreement is pending or,
to the best knowledge of SRI, threatened against any SRI JV Company.
5.17 ENVIRONMENT, HEALTH AND SAFETY.
(a) Except as set forth on Schedule 5.17(a), and except where the
failure to be in compliance would not have a Material Adverse Effect on any
Material SRI
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<PAGE> 54
JV Company, each of the SRI JV Companies has obtained, and has been at all
times, for which the applicable statute of limitation has not expired, in
compliance with all terms and conditions of, all Permits which are required
under, and has complied with all other limitations, restrictions, conditions,
standards, prohibitions, requirements, obligations, schedules and timetables
which are contained in, all Laws, Permits and Judgments relating to public
health and safety, worker health and safety, and pollution or protection of the
environment, including without limitation Environmental Laws relating to
emissions, discharges, releases or threatened releases of pollutants,
contaminants or chemical, industrial, hazardous or toxic materials or wastes
into ambient air, surface water, ground water or lands or otherwise relating to
the testing, characterization, classification, manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
pollutants, contaminants or chemical, industrial, hazardous or toxic materials
or wastes. All such Permits are valid and in full force and effect and (to the
extent such Permits need to be assigned or transferred to an SRI JV Company
pursuant to the SRI Reorganization or pursuant to the Transactions in order to
ensure the continued conduct of the SRI Businesses as such are presently
conducted) are freely transferable or assignable (except to the extent that the
failure to assign or transfer is due solely to the discretionary act of any
Authority and not based upon the acts or omissions of SRI or any of the SRI JV
Companies), and where applicable, timely renewal applications have been
submitted for all such Permits. No Proceedings have been filed or commenced
against any of the SRI JV Companies or notices of violation or Environmental
Claim received by any of the SRI JV Companies alleging any failure to comply
with any such Laws, Judgments or Permits, where such Proceeding or violation
would have a Material Adverse Effect on any of the SRI JV Companies and, to the
best knowledge of SRI, no such Proceedings, notices of violation or
Environmental Claims are pending or threatened, nor does there exist any
existing event or condition on the basis of which (i) an Authority would
reasonably be expected to deny or revoke or limit any such Permits or (ii) if
such Permits have been obtained by any of the SRI JV Companies, such Permits
would not remain in full force and effect as of the Closing Date.
(b) Except as set forth in Schedule 5.17(b), none of the SRI JV
Companies has any material liability (and there is not any past or present
fact, status, condition, activity, occurrence, action or failure to act related
to the past or present operations, properties or facilities, whether owned,
used or leased, of any of the SRI JV Companies that to their best knowledge,
forms or reasonably could form the basis for the imposition of any liability)
(i) under any law relating to protection of human health or safety or
concerning employee or worker health and safety or relating generally to the
environment, (ii) for damage to any site, location, natural resources or body
of water (surface or subsurface) or for failure to report or clean up any
discharges of any substance, or (iii) for any illness of, personal injury to,
or death of, any of its employees or any third party.
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5.18 INSURANCE. Except as disclosed on Schedule 5.18, each of the SRI JV
Companies are insured by insurance carriers not related to or affiliated with
SRI or SRE. Schedule 5.18 sets forth a complete list and brief description
(specifying the insurer, the coverage and the policy number or covering note
number with respect to binders) of all policies, binders or Contracts to which
any of the SRI JV Companies is a party or by which any of the SRI Business
Assets are covered for purposes of property, fire, liability, product liability,
workmen's compensation, vehicular, crime, builders' risk, title and other
insurance or Contracts in the nature of insurance. The policies, binders and
Contracts listed on Schedule 5.18 are in full force and effect in accordance
with their respective terms and, to the best knowledge of SRI and the SRI JV
Companies, will remain in full force and effect after the Closing, except as
otherwise agreed in writing between SRI and Goodyear and, additionally, none of
the SRI JV Companies has received written notice that any insurer thereunder
intends to cancel or terminate such policies, binders or Contracts. None of SRI
or any of the SRI JV Companies has received any notice that it is in default
with respect to any provision of any such policies, binders or Contracts. None
of SRI or any of the SRI JV Companies has provided inaccurate, incomplete or
misleading information in connection with any such policies, binders or
Contracts or failed to give any notice or present any claim thereunder in due
and timely fashion or as required by any such policies, binders or Contracts so
as to jeopardize full recovery thereunder. There are no claims in excess of
US$1,000,000 outstanding under any such policy, binder or Contract.
5.19 ACCOUNTS RECEIVABLES. Except as disclosed on Schedule 5.19, all accounts
receivables of the SRI JV Companies and other rights of payment, including,
without limitation, unbilled amounts and credits extended to third parties,
shown on the SRI Major European Companies Year End Financial Statements or
acquired by the SRI JV Companies subsequent to the date of the balance sheets
included therein but before the Closing Date, except to the extent thereafter
collected, have arisen from bona fide transactions in the Ordinary Course of
Business, are free of any Encumbrances, except for those receivables sold as
reflected on the SRI Major European Companies Year End Financial Statements
which receivables will be free and clear of Encumbrances at the Closing Date,
and the reserves or write-offs for bad debts in the SRI Major European Companies
Year End Financial Statements have been computed in a manner consistent with
past practice.
5.20 GUARANTEES. There are no guaranty agreements, commitments to issue
guarantees, comfort letters, letters of awareness, other credit support
arrangements, joint and several obligations, swap agreements or any other
derivative transactions entered into by any of the SRI JV Companies which are
not listed in Schedule 5.20, copies of which are available to Goodyear upon
request.
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5.21 SUBSIDIES. Schedule 5.21 sets forth a complete list of all governmental,
quasi-governmental and other public and private grants and subsidies that
provide any reimbursement, refund, abatement, Tax reduction or other benefit in
excess of US$1,000,000 ("Subsidies") to any of the SRI JV Companies, together
with any additional Subsidies for which any of the SRI JV Companies is in the
process of applying, and fully and correctly sets out the status of each Subsidy
and application therefor, including the obligations imposed on each SRI JV
Company that remain outstanding. The SRI JV Companies have complied in all
material respects with the terms and conditions imposed upon them in connection
with each such Subsidy, including but not limited to the utilization of funds,
the amount of investments to be made by them and the maintaining of a minimum
level of employment. Except as set forth in Schedule 5.21, none of the SRI JV
Companies are in material breach of any of the terms and conditions of any
Subsidy and no facts or circumstances exist that to the best knowledge of SRI
could cause the SRI JV Companies to be required to reimburse all or part of any
Subsidy before the due date of reimbursement, if any, or to lose all or part of
the benefit of the Subsidy.
5.22 YEAR 2000. Each of SRI and the SRI JV Companies have taken and will take
up to Closing all commercially reasonable actions in a timely manner to prevent
a Year 2000 problem in computer systems, software, or equipment owned, leased
or licensed by such company from (a) interfering with its performance under the
Alliance Agreements, (b) interfering with or frustrating the purpose and
successful operation and administration of the Europe JVC or the SRI JV
Companies, as set forth in this JV Agreement, the Umbrella Agreement or any of
the other Alliance Agreements or (c) having a Material Adverse Effect on any of
the SRI JV Companies. Each of the SRI JV Companies has requested from those of
its suppliers or other business partners whose performance may materially
affect the performance of any of the SRI JV Companies hereunder that each
supplier or business partner undertake all commercially reasonable actions in a
timely manner to prevent a Year 2000 problem from interfering with such
performance, in each case where the failure to perform would have a Material
Adverse Effect on any of the Material SRI JV Companies.
For purposes of the Alliance Agreements, Year 2000 problem means any failure,
error, or delay resulting from the inability of any software, hardware, embedded
chip, or other device to accurately and without interruption perform and
process, display, store, manipulate, and handle dates before, on, and after
January 1, 2000.
5.23 UNDISCLOSED LIABILITIES, ETC. On the date hereof, except as disclosed in
the SRI Major European Companies Year End Financial Statements or as set forth
on Schedule 5.23, the SRI JV Companies have no liabilities or obligations of any
nature, whether accrued, absolute, contingent or otherwise, and whether due or
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to become due other than liabilities (i) that have been incurred in the Ordinary
Course of Business, (ii) that have not had a Material Adverse Effect on the SRI
JV Companies taken as a whole, or (iii) that would not have a Material Adverse
Effect on the SRI JV Companies taken as a whole.
5.24 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth on Schedule
5.24, which will be supplemented by an accurate and complete list as required
by Article 8.03 of the Umbrella Agreement, since December 31, 1998 (except for
Article 5.24(q), none of the SRI JV Companies has and/or there has not been
(with respect to either the SRI Business Assets or the SRI Businesses):
(a) declared for payment after the Closing Date, any cash dividend,
payment or other distribution in respect of their shares of capital stock or,
except as required by the SRI Reorganization or otherwise pursuant to the
Alliance Agreements, declared any dividend of property in kind;
(b) other than in the Ordinary Course of Business, or except as
contemplated by the SRI Reorganization, incurred any obligation or liability,
contingent or otherwise, exceeding US$1,000,000, except such obligations
affecting any of the SRI JV Companies beyond the Closing Date under Contracts;
(c) except (i) in the Ordinary Course of Business, (ii) as contemplated
by the Alliance Agreements, (iii) the payment of any obligations or
installments when due or (iv) the discharge or satisfaction of any Encumbrance,
paid any obligation or liability (fixed or contingent);
(d) sold, assigned, transferred, conveyed, leased or otherwise disposed
of or agreed to sell, assign, transfer, convey, lease or otherwise dispose of
any of its SRI Business Assets having a fair market value equivalent of
US$100,000 and above, except for fair consideration (plus or minus 10%
therefrom) in the Ordinary Course of Business or except as contemplated by the
SRI Reorganization;
(e) compromised any debt, Proceeding or claim, or waived or released any
right, except as made in the Ordinary Course of Business or which would not
have a Material Adverse Effect on any of the Material SRI JV Companies;
(f) suffered any extraordinary loss or extraordinary losses which would
have a Material Adverse Effect on any of the Material SRI JV Companies;
(g) except in the Ordinary Course of Business or as contemplated by the
Alliance Agreements, transferred or granted any rights under any material
concessions, leases, licenses, agreements, Patents, inventions, Trademarks,
brandmarks, brand names, copyrights, or with respect to any know-how;
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(h) suffered any accidental losses or damages with respect to the SRI
Business Assets having an aggregate replacement cost of more than US$5,000,000,
whether or not such losses or damages shall have been covered by insurance;
(i) made any material charitable contribution not in accordance with
past practice or entered into any commitment therefor;
(j) lost as customers any original equipment manufacturers, Dealer
Contracts or Contracts with suppliers or for supplies, based on facts or events
not arising out of a change in control of the SRI JV Companies, which losses,
individually or in the aggregate, have had, or which any of the SRI JV
Companies expect to have, a Material Adverse Effect on any of the Material SRI
JV Companies;
(k) other than as contemplated by the Alliance Agreements or at the
specific request of Goodyear, introduced any material change with respect to
the method or practices of accounting of the SRI JV Companies;
(l) instituted any increases or commitments for increases in excess of
3% per annum in the general average salary or compensation level of all the SRI
JV Employees of each of the SRI JV Companies;
(m) except for bids or tenders made in the Ordinary Course of Business,
made any bids or tenders on or for Contracts in excess of US$5,000,000;
(n) except as provided in (l) above, amended or otherwise modified the
terms of any SRI JV Employment Agreements to increase the amount or accelerate
the payment or vesting of any benefit thereunder or under any existing or new
benefit plan of the type described in Article 5.16(a) with respect to any
individual party to such agreements;
(o) adopted any amendments to its Constituent Documents that could
reasonably be expected to have a Material Adverse Effect on the ability of SRI
or any of the SRI JV Companies to perform their obligations under the Alliance
Agreements;
(p) any transaction, commitment, dispute or other event or condition
(financial or otherwise) of any character (whether or not) in the Ordinary
Course of Business) that could reasonably be expected to have a Material
Adverse Effect on the ability of SRI or any of the Material SRI JV Companies to
perform their obligations under the Alliance Agreements; and
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(q) since December 31, 1998 through and including the date hereof,
except as contemplated by the Alliance Agreements or otherwise agreed in
writing, carried on the SRI Businesses (including without limitation, entering
into any material transaction, contract or commitment) other than in the
ordinary course of business and substantially in the same manner as heretofore
conducted consistent with past practice.
5.25 SURVIVAL PERIOD. The representations and warranties of SRI or SRE
contained in the Alliance Agreements or in any document delivered pursuant to
the Alliance Agreements shall not be discharged upon the date(s) of the giving
of such representations and warranties (the date of this JV Agreement and the
Closing Date), but shall survive for so long as an indemnification claim for
the applicable representation and warranty can be made pursuant to Article XV,
Indemnification, of the Umbrella Agreement.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
------------------------------
The Parties hereby agree that Goodyear shall be deemed to know and
possess all the knowledge and information known to or possessed by each of the
Goodyear JV Companies. Each of Goodyear, Goodyear Fra, Goodyear Lux and Goodyear
Canada hereby jointly and severally represents and warrants to SRI (including
any successor corporation) as of the date hereof except as otherwise stated
herein, as follows:
6.1 CORPORATE ORGANIZATION, ETC. (a) Schedule 6.1 hereto lists all the
companies, one hundred per cent (100%) of the shares of which, except as
otherwise indicated on such schedule, must be owned by the Europe JVC and its
Affiliates controlled by it in order that the Europe JVC and its Affiliates
controlled by it will be able to conduct the Goodyear Businesses as contemplated
in the Alliance Agreements.
(b) Each of the Goodyear JV Companies, is a corporation or limited liability
company duly organized and validly existing and, in good standing under the laws
of its jurisdiction of incorporation or organization and each has all requisite
corporate power and authority to own, lease, convey and operate its respective
part of the Goodyear Businesses as now conducted, and is qualified to do
business in each jurisdiction where the nature of its properties, assets or
business requires such qualification, other than where the failure to be so
qualified would not have a Material Adverse Effect on the business and assets of
such corporation or company. Complete and correct copies of the Constituent
Documents, duly updated, of each of the Goodyear JV Companies have previously
been delivered to SRI or will be made available upon request. The
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minute books or similar records of each of the Goodyear JV Companies contain a
materially accurate record of all meetings and other corporate action of its
stockholders, board of directors or other governing bodies (and any committees
thereof). Except as described and contemplated by this JV Agreement, there has
been no proposal made or resolution adopted by the competent corporate body or
bodies of any of the Goodyear JV Companies for the dissolution, liquidation,
merger or split-up of any of them and, to their best knowledge, no
circumstances exist which might result in the dissolution, liquidation, merger
or split-up of any such corporation or company.
6.2 AUTHORITY; EXECUTION AND ENFORCEABILITY. Except as set forth on Schedule
6.2, each of the Goodyear JV Companies has the requisite power and authority to
execute, deliver and carry out the terms and provisions of the Alliance
Agreements to be executed, delivered and (save in respect of corporate actions
concerning the Reorganizations) carried out by each of them, if any, to which
each of them is a party and to consummate the Transactions to which each of them
is a party, and has taken all necessary corporate action to authorize the
execution, delivery and performance of such Alliance Agreements, and no other
act or proceeding, corporate or otherwise, on the part of any of the Goodyear JV
Companies is necessary to authorize the execution of the Alliance Agreements or
the consummation of any of the Transactions. Goodyear has the power and
authority to cause the Goodyear JV Companies to enter into and, prior to
Closing, to carry out the obligations under the Alliance Agreements to which
such companies are a party, and, to the extent applicable, to carry out the
Goodyear Reorganization, in each case so as to be bound to the obligations
thereunder. This JV Agreement has been duly executed by of each of Goodyear,
Goodyear Fra, Goodyear Lux and Goodyear Canada and constitutes and the other
Alliance Agreements when duly executed by them and the Goodyear JV Companies
will constitute, a legal, valid and binding obligation of each of Goodyear,
Goodyear Fra, Goodyear Lux, Goodyear Canada and the Goodyear JV Companies as the
case may be, enforceable against each in accordance with its terms except to the
extent that (i) such enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
affecting creditors' rights generally and (ii) the remedy of specific
performance and injunctive and other forms of equitable relief may be subject to
certain equitable defenses and to the discretion of the court before which any
proceedings therefor may be brought. Except as described and contemplated by
this JV Agreement, all corporate actions required from the Goodyear JV Companies
in connection with the consummation of the Transactions have been duly
performed.
6.3 OWNERSHIP OF STOCK; CORPORATE STRUCTURE. (a) Schedule 6.3 (a) sets forth
for each of the Goodyear JV Companies as of the date hereof which will be
supplemented by an accurate and complete list, as required by Article 9.03 of
the Umbrella Agreement, the authorized capital, the issued capital, the number
and,
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where applicable, the par value of the shares comprising such capital, the
names of the shareholders thereof and the number of shares held by each such
shareholder. All of the issued and outstanding shares of capital stock of each
of the Goodyear JV Companies have been duly authorized and are validly issued,
have been credited as fully paid and are clear of any Encumbrances, and, as of
the date hereof are held of record and owned beneficially by the Persons
indicated on Schedule 6.3(a). There are no preemptive rights with respect to
the capital stock indicated on Schedule 6.3(a) of any of the Goodyear JV
Companies. Except as set forth on Schedule 6.3(a), at the Closing, the Europe
JVC will own, directly or indirectly, 100% of the capital stock of all the
Goodyear JV Companies. Except in the Ordinary Course of Business or as part of
the Goodyear Reorganization, no repayment or reduction of the stated capital of
the Goodyear JV Companies has been made.
(b) Except as set forth in Schedule 6.3(b) and except for their
respective ownership interests in the Goodyear JV Companies and pursuant to the
Transactions, neither Goodyear, Goodyear Fra, Goodyear Lux or Goodyear Canada
own, nor have they committed to acquire, directly or indirectly, any interest
in any Person which manufactures, distributes or sells tires in the European
Territory.
(c) Except as provided in Article 2 hereof, there are not authorized or
outstanding, any subscriptions, options, conversion rights, warrants or other
agreements, securities or commitments of any nature whatsoever (whether oral or
written and whether firm or conditional) obligating (i) any of Goodyear,
Goodyear Fra, Goodyear Lux, Goodyear Canada or the Goodyear JV Companies to
issue, deliver or sell, or cause to be issued, delivered or sold, any shares of
the capital stock or any securities convertible into or exchangeable for shares
of capital stock, of any of the Goodyear JV Companies (ii) any Person to
repurchase or redeem the capital stock of any Goodyear JV Company, or (iii) any
of such Persons to grant, extend or enter into any such agreement or
commitment.
(d) Except as indicated on Schedule 6.3(d), each of the Goodyear JV
Companies is Solvent.
6.4 NO VIOLATION OR BREACH. Except as set forth on Schedule 6.4, neither the
execution and delivery by Goodyear, Goodyear Fra, Goodyear Lux, Goodyear Canada
or the Goodyear JV Companies of the Alliance Agreements to which such companies
are a party nor the consummation of the Transactions, does or will:
(a) conflict with, result in the breach of any terms or conditions of,
constitute a default under or violate, accelerate or permit the acceleration of
any other similar right of any other party or result in the creation or
imposition of any Encumbrance except for Permitted Encumbrances on any of the
Goodyear Assets, under the Constituent Documents of any of the Goodyear JV
Companies, any applicable law, rule or regulation or any agreement, lease,
mortgage, note,
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bond, indenture, license or other document or undertaking, to which any of the
Goodyear JV Companies is a party or by which any of the Goodyear JV Companies
or any of their properties may be bound, nor will such execution, delivery and
consummation violate any order, writ, injunction or decree of any Authority to
which any of the Goodyear JV Companies or any of their properties is subject,
the effect of any of which, either individually or in the aggregate (i) would
impair the ability of any of the Goodyear JV Companies to perform its or their
material obligations under the Alliance Agreements or have a Material Adverse
Effect on any of the Material Goodyear JV Companies or (ii) would materially
diminish the benefits intended to be afforded to any of the parties to the
Alliance Agreements;
(b) 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 or 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 or any Permits
to which any of Goodyear, Goodyear Fra, Goodyear Lux, Goodyear Canada or the
Goodyear JV Companies is a party or by which any of them (or any of the
securities, properties or businesses of any of them) are bound, the effect of
any of which would have a Material Adverse Effect on any of the Material
Goodyear JV Companies;
(c) result in the creation of any Encumbrances except Permitted
Encumbrances upon the Goodyear Business Assets of any of the Goodyear JV
Companies, the effect of which would have a Material Adverse Effect on any of
the Material Goodyear JV Companies; or
(d) constitute a violation by Goodyear, Goodyear Fra, Goodyear Lux,
Goodyear Canada or any of the Goodyear JV Companies of (i) any Laws or any
Judgments but only those violations of Laws or Judgments the violation of which
may give rise to criminal penalties or punishments or (ii) any Laws or
Judgments the violation of which may not give rise to criminal penalties or
punishments, the effect of any of which in (ii) hereof would have a Material
Adverse Effect on any of the Material Goodyear JV Companies.
6.5 BROKERS AND FINDERS. All negotiations relating to the Alliance Agreements
and the Transactions have been carried on without the participation of any
Person acting on behalf of Goodyear, Goodyear Fra, Goodyear Lux, Goodyear Canada
or any of the Goodyear JV Companies, in such manner as would give rise to any
broker's fee (including without limitation investment banker's fees) or finder's
fees or commissions that will be for the account of, or impose a liability on,
SRI or any of the SRI JV Companies (including any successor corporations
thereof).
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6.6 FINANCIAL STATEMENTS; LIABILITIES.
(a) Schedule 6.6(a) contains a complete and correct copy of the audited
consolidated statement of assets and liabilities to be contributed to the
Europe JVC (as described in the MOU), modified as stated in note 1 to the
relevant Financial Statements), including the report of the independent
accountants of the Goodyear JV Companies with respect thereto, in the English
language. Such statement is made as of December 31, 1998 ("Goodyear Europe Year
End Financial Statement").
(b) The Goodyear Europe Year End Financial Statement gives a true and
accurate account in all material respects of, and fairly presents, in
conformity with accounting principles generally accepted in the United States
of America ("US GAAP"), the assets and liabilities of the relevant Goodyear JV
Companies as of December 31, 1998 which are to be contributed to the Europe JVC
(as described in the MOU, modified as stated in note 1 to the relevant
Financial Statement). The Goodyear Europe Year End Financial Statement has been
certified without qualification by the relevant independent accountants.
(c) As of December 31, 1998 the Goodyear JV Companies on a consolidated
basis did not have any liabilities or obligations of any nature, whether known
or unknown, accrued, absolute, contingent or otherwise, and whether due or to
become due (for the purposes of Article 5.6 or 6.6 only, collectively,
"Liabilities" and individually, a "Liability") which are to be contributed to
the Europe JVC and which (i) were required by US GAAP, as applicable, as
applied on a consistent basis, to be reflected in financial statements and (ii)
individually or in the aggregate would have had a Material Adverse Effect on
the financial condition of the Goodyear JV Companies on a consolidated basis,
and that, in either case, were not reflected or expressly reserved against in
the Goodyear Europe Year End Financial Statement or specifically disclosed or
provided for in the notes thereto.
(d) Except as disclosed on Schedule 6.6(d) and except as otherwise
conducted as a result of the Transactions, since December 31, 1998 the Goodyear
JV Companies on a consolidated basis have conducted their businesses only in
the Ordinary Course of Business and the Goodyear JV Companies on a consolidated
basis have not undergone or suffered any change in their financial condition,
income, properties (other than as expressly required by this JV Agreement),
Liabilities, operations or prospects which has had, individually or in the
aggregate, a Material Adverse Effect on the Goodyear JV Companies on a
consolidated basis.
(e) Except as disclosed on Schedule 6.6(e), there have been no material
intercompany transactions or arrangements relating to the Goodyear Businesses
between or among any of the Goodyear JV Companies, Goodyear, Goodyear Fra,
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Goodyear Lux and Goodyear Canada and their Affiliates during the periods
covered by the Goodyear Europe Year End Financial Statement which have not been
fully and accurately reflected on the Goodyear Europe Year End Financial
Statement.
6.7 QUIET ENJOYMENT. Except as set forth on Schedule 6.7 or as a result of the
Transactions, each of the Goodyear JV Companies is entitled to carry on its
respective part of the Goodyear Businesses and enjoy the goodwill of those
respective businesses as going concerns free and clear of any and all
Encumbrances, other than Permitted Encumbrances.
6.8 CONSENTS; FILINGS. Except as set forth on Schedule 6.8 and except as
provided in Articles 8.04(a), (b) and (c) and Schedule 8.04(d) of the Umbrella
Agreement, no consent, waiver, approval, authorization, exemption, registration,
license or declaration of or by, or filing with, any other Person or Authority
("Consent"), is required to be made or obtained by any of Goodyear, Goodyear
Fra, Goodyear Lux, Goodyear Canada or the Goodyear JV Companies in connection
with (i) the execution, delivery or enforceability of the Alliance Agreements to
which such companies are a party or (ii) the consummation of any of the
Transactions except, in each case, where the failure to make or obtain a Consent
would not have a Material Adverse Effect on any of the Material Goodyear JV
Companies.
6.9 ACTIONS AND PROCEEDINGS.
(a) Except as set forth on Schedule 6.9(a), there is no action or suit or
legal, administrative, arbitration or other alternative dispute resolution
proceeding or investigation (in each case, whether or not the defense thereof
or liability in respect thereof is covered by policies of insurance) (each, a
"Proceeding" and collectively, "Proceedings") pending nor, to the best
knowledge of Goodyear, Goodyear Fra, Goodyear Lux or Goodyear Canada, is any
Proceeding or claim threatened, to which any of the Goodyear JV Companies is,
or would be, a party, nor is any Judgment outstanding against any of the
Goodyear JV Companies, in each case, the effect of which would have a Material
Adverse Effect on any of the Material Goodyear JV Companies.
(b) No Proceeding is pending or, to the best knowledge of Goodyear,
Goodyear Fra, Goodyear Lux or Goodyear Canada, threatened, before any
arbitrator or Authority to restrain or prohibit, or to obtain damages or other
relief in connection with, entry into the Alliance Agreements or the Closing of
the Transactions.
(c) Except as set forth in Schedule 6.9(c), no attachments, executions,
assignments for the benefit of creditors, receiverships, conservatorships or
voluntary or, to the best knowledge of Goodyear, Goodyear Fra, Goodyear Lux or
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Goodyear Canada, involuntary proceedings in bankruptcy or actions pursuant to
any other debtor relief laws or actions by any Authority having jurisdiction
over any of the Goodyear JV Companies are pending, or to the best knowledge of
Goodyear, Goodyear Fra, Goodyear Lux or Goodyear Canada, threatened, against
any of the Goodyear JV Companies.
6.10 TAXES AND TAX RETURNS.
(a) Each of the Goodyear JV Companies has filed on a timely basis (or
within any applicable extension) all returns and reports of all Taxes required
to be filed by it and has timely given and delivered all Tax notices and
accounts required to be given by it in respect of Taxes for which such company
is liable. All information provided in such returns, reports, notices and
accounts was, when filed or given, complete and accurate. All Taxes previously
assessed or that will be assessed upon any of the Goodyear JV Companies for any
period prior to January 1, 1999 have been paid. Adequate provisions in
accordance with US GAAP, as applicable, have been made in the Goodyear Europe
Year End Financial Statement for the payment of all Taxes for which each of the
Goodyear JV Companies will be liable for the periods covered thereby that were
not yet due and payable as of the dates thereof, regardless of whether the
liability for such Taxes is disputed.
(b) Except as set forth on Schedule 6.10(b), there are no pending, or to
the best knowledge of Goodyear, Goodyear Fra, Goodyear Lux or Goodyear Canada,
threatened audits or investigations relating to any Taxes for which any of the
Goodyear JV Companies is liable. No deficiencies for any Taxes have been
proposed, asserted or assessed against any of the Goodyear JV Companies. There
are no agreements in effect to extend the period of limitations for the
assessment or collection of any Taxes for which any of the Goodyear JV
Companies is liable and no written requests for any such agreements are
pending.
(c) Each of the Goodyear JV Companies has withheld from its employees and
timely paid to the appropriate Authority proper and accurate amounts for all
periods through the date hereof in compliance with all Tax withholding
provisions of all applicable Laws.
(d) Goodyear, Goodyear Fra, Goodyear Lux and Goodyear Canada have
furnished or made available or will make available upon request to SRI complete
and accurate copies of all returns and reports of all Taxes filed by any of the
Goodyear JV Companies or on their behalf on or prior to the date hereof for
each of the preceding three (3) fiscal years.
(e) None of the Goodyear JV Companies has elected, or has otherwise been
granted, any preferential tax treatment or made any sort of commitment
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vis-a-vis any Tax Authorities (whether in connection with a reorganization or
otherwise) which (i) are applicable in whole or in part to any time period that
includes a date on or after the date of this JV Agreement and (ii) would have a
Material Adverse Effect on any of the Goodyear JV Companies.
(f) Each of the Goodyear JV Companies is resident only in the
jurisdiction in which it is incorporated for tax purposes and does not have a
permanent establishment or other taxable presence in any other jurisdiction.
(g) Except as set forth on Schedule 6.10(g), none of the Goodyear JV
Companies is liable for any Taxes for which Goodyear or any Affiliate of
Goodyear, other than the Goodyear JV Companies, is liable.
6.11 TITLE TO PROPERTY; CONDITION; SUFFICIENCY.
(a) Schedule 6.11(a) sets forth an accurate and complete list of each
parcel of real property which was owned by any of the Goodyear JV
Companies as part of the Goodyear Businesses on December 31, 1998
of the following description:
(i) all factories, warehouses, distribution facilities, retail
stores, office buildings, test tracks, test facilities,
technical centers, dump sites and landfills and also any real
property over which environmental concerns can reasonably be
expected;
(ii) all other parcels of real property in excess of the fair
market value of US$250,000; and
(iii) any parcels of real property owned by any of the Goodyear JV
Companies, leased or subleased to Persons other than
Affiliates of Goodyear, Goodyear Fra, Goodyear Lux or
Goodyear Canada for a term exceeding three (3) years.
Such list which will be supplemented by an accurate and complete list, as
required by Article 9.03 of the Umbrella Agreement, of each parcel of such real
property as of the Closing Date. Except as indicated on Schedule 6.11(a) as so
supplemented, as of the Closing Date, the Goodyear JV Companies will own all of
the parcels of real property so listed and supplemented, free and clear of all
Encumbrances, except Permitted Encumbrances.
(b) Schedule 6.11(b) sets forth an accurate and complete list of all the
real property leased by any of the Goodyear JV Companies as part of the
Goodyear Businesses on December 31, 1998 of the following description:
(i) all factories, warehouses, distribution facilities, retail
stores, office buildings, test tracks, test facilities,
technical centers,
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dump sites and landfills and also any real property over
which environmental concerns can reasonably be expected;
(ii) all other parcels of real property leased to any of the
Goodyear JV Companies with an annual rent of US$100,000 or
more per annum; and
(iii) any parcels of real property leased by any of the Goodyear JV
Companies, or subleased to Persons other than Affiliates of
Goodyear, Goodyear Fra, Goodyear Lux or Goodyear Canada for a
term exceeding three (3) years.
Such list which will be supplemented by an accurate and complete list, as
required by Article 9.03 of the Umbrella Agreement, of (A) all such real
property leased by any of the Goodyear JV Companies (the Schedule 6.11(b) leases
as supplemented being called the "Goodyear JV Major Real Property Leases") and
(B) all real property leases with Goodyear, Goodyear Fra, Goodyear Lux or
Goodyear Canada and/or any of their Affiliates (the "Goodyear Non Tire Real
Property Leases"), (A) and (B) being as of the Closing Date. Goodyear has made
and will make all such Schedule 6.11(b) leases above available to SRI upon
request as soon as practicable for review. The Goodyear JV Major Real Property
Leases and all other leases to which any of the Goodyear JV Companies is a party
(except the Goodyear Non Tire Real Property Leases) are collectively hereinafter
called the "Goodyear JV Real Property Leases". With respect to the Goodyear JV
Real Property Leases, each Goodyear JV Company which is a party to such leases
has a valid and subsisting right to use the premises, in accordance with the
terms of those leases, in each instance free and clear of all Encumbrances other
than Permitted Encumbrances. There is no default under any Goodyear JV Real
Property Leases and no event has occurred that with the lapse of time or giving
of notice would constitute a default thereunder, which would for the Goodyear JV
Real Property Leases, except for the Goodyear JV Major Real Property Leases,
have a Material Adverse Effect on any of the Material Goodyear JV Companies.
There does not exist with respect to the Goodyear JV Real Property Leases and,
as of the Closing Date with respect to the Goodyear Non-Tire Real Property
Leases, any violation of any building, zoning, health, safety, environmental or
other license, ordinance, code, regulation or law, the effect of which would
have a Material Adverse Effect on any Goodyear JV Company.
The Parties agree that, notwithstanding the identification of real property on
Schedules 6.11(a) and 6.11(b) by reference to an assessment of a reasonable
expectation of environmental concern, a claim against Goodyear, Goodyear Fra,
Goodyear Lux or Goodyear Canada for breach by a Goodyear JV Company of
Environmental Laws may only be brought pursuant to Article 6.17.
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(c) Except as set forth on Schedule 6.11(c), the Goodyear JV Companies,
as the case may be, have good title to the Goodyear Business Assets, free and
clear of all Encumbrances other than Permitted Encumbrances.
(d) Schedule 6.11(d) sets forth an accurate and complete list of all
leases of tangible personal property leased by or from any of the Goodyear JV
Companies relating to or used in the conduct of the Goodyear Businesses, which
will be supplemented by an accurate and complete list, as required by Article
9.03 of the Umbrella Agreement, of all such leases on the Closing Date, which
in each case require lease payments equal to or exceeding the equivalent of US$
50,000 per annum (the "Goodyear JV Major Personal Property Leases") and
Goodyear, Goodyear Fra, Goodyear Lux and Goodyear Canada have made and will
make all such Schedule 6.11(d) leases available to SRI upon request as soon as
practicable for review. The Goodyear JV Major Personal Property Leases and all
other tangible personal property leases pursuant to which any of the Goodyear
JV Companies leases tangible personal property are collectively hereinafter
called the "Goodyear JV Personal Property Leases". With respect to each
Goodyear JV Personal Property Lease, each Goodyear JV Company which is party to
any such lease has a valid and subsisting lease, in each instance free and
clear of all Encumbrances other than Permitted Encumbrances. There is no
default under any Goodyear JV Personal Property Lease and no event has occurred
that with the lapse of time or giving of notice would constitute a default
thereunder, which would for the Goodyear JV Personal Property Leases, except
for the Goodyear JV Major Personal Property Leases, have a Material Adverse
Effect on any of the Goodyear JV Companies.
(e) The Goodyear Business Assets and the assets, properties and rights
to be transferred and/or granted to the Goodyear JV Companies pursuant to the
Alliance Agreements at or prior to Closing, constitute all assets, properties
and rights necessary for the conduct of the Goodyear Businesses.
(f) The Goodyear Business Assets are in all material respects in normal
operating condition and suitable for their intended purposes, ordinary wear and
tear excepted, and adequate in all material respects for the conduct of their
respective part of the Goodyear Businesses and ancillary activities as
currently conducted. No material change in the nature or method of use will
occur prior to Closing (other than normal lease expirations) and no lease
assets will be disposed of outside the Ordinary Course of Business.
6.12 INTELLECTUAL PROPERTY.
(a) Schedule 6.12(a) sets forth an accurate and complete list (as at the
date in 1999 indicated at the top of each article) in all material respects of
all patents and patent applications owned by the Goodyear JV Companies or (to
the extent that Goodyear is permitted to disclose the same) licensed by them
from a third
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party ("Goodyear Patents") indicating for each such Goodyear Patent whether it
is owned or licensed from a third party and whether such Goodyear Patent is
licensed to any third party. Except as set forth on Schedule 6.12(a), each of
the Goodyear JV Companies has all of the patents, patent licenses and know-how
licenses necessary for the conduct of the Goodyear Businesses as conducted by
the Goodyear JV Companies as of the Closing Date and the consummation of the
transactions contemplated hereby will not alter or impair any such rights, save
as expressly stated in or contemplated by the Alliance Agreements. Schedule
6.12(a) also includes an update of all material and substantive changes to the
information contained in the above list which changes occurred after the date
indicated on the top of the list and before the date of this JV Agreement.
(b) To the best of Goodyear and Goodyear's Affiliates knowledge and
belief (having made all proper inquiries) save as specified in Schedule
6.12(b)(ii):
(i) the manufacture, use, or sale of the products of the
Goodyear Businesses, and the Goodyear JV Companies'
respective use of processes and equipment in the
manufacture or sale of such products, do not infringe the
patent rights of any third party; and
(ii) other than those claims identified in Schedule
6.12(b)(ii), there is no claim of any third party or any
proceeding pending or threatened, or any investigations
for which the Goodyear JV Companies have procured a
written legal opinion, internally or externally, during
any of the last six years, which relate to infringement of
a third party's patent rights in the conduct of the
Goodyear Businesses, nor are there any written notices or
challenges to the validity or enforceability of such
rights.
(c) Schedule 6.12(c) sets forth one or more lists which cumulatively
provide an accurate and complete record (as at the date in 1999 indicated at
the top of each article) in all material respects of the following (in so far
as Goodyear is permitted to disclose the same):
(i) All license agreements whereunder the Goodyear JV
Companies have licensed patents and know-how relating to
the Goodyear Businesses exclusively to third parties
indicating for each, the identity of the licensee, the
identity of the patents, the identity of the licensed
subject matter, as well as the term of the license, the
licensed territory, the type of exclusivity and whether
the exclusivity relates to manufacture, use or sale; and
(ii) All patents, patent applications and know-how licensed
directly, or indirectly under a sub-license, from
competitors of
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Goodyear and Goodyear JV Companies, indicating the details
of said license, as described above and details of all the
products, processes and equipment used by Goodyear JV
Companies which fall within one or more claims of such
patents.
Schedule 6.12(c) also includes an update of all material and substantive changes
to the information contained in the above lists which changes occurred after the
date indicated on those lists. Complete and accurate copies of all the license
agreements under (i) and (ii) above which Goodyear is permitted to disclose have
been provided to SRI.
(d) Schedule 6.12(d) sets forth one or more lists which cumulatively
provide an accurate and complete record (as at the date in 1999 indicated at
the top of each article) in all material respects of:
(i) all trademarks, service marks (and applications and
registrations for such trademarks and service marks), used
or held by or licensed to Goodyear and the Goodyear JV
Companies, or to which they are entitled, relating to
"Goodyear Goods" (namely: tires, inner tubes for tires,
tire repair kits, pre-cured treads for tires, air springs
and tire retail chains, none of the aforesaid relating to
aircraft or solid polyurethane industrial tires) in the
Greater European Territory, including but not limited to
the trademarks GOODYEAR, GOODYEAR (and Winged Foot
Device), KELLY and FULDA (but excluding the SAVA and
DEBICA trademarks (as defined in the Alliance Agreements)
and excluding trademarks owned by any other Eastern
European manufacturing operation which Goodyear may
subsequently acquire which is not part of the Europe JVC)
(together called the "Goodyear European Trademarks"),
indicating for each the full name of the registered
proprietor, the name of the current proprietor (if
different) or if Goodyear is unaware whether a known
change of proprietor has been recorded then the names of
the former proprietor and the new proprietor and the date
and nature of the transaction giving rise to the change,
the country/ies and general nature of the goods/services
for which such are registered/pending and the general
nature of the goods/services for which such are used; and
(ii) (A) in respect of GOODYEAR, GOODYEAR (and Winged Foot
Device), KELLY and FULDA (whether or not
registered) and all registrations and pending
applications to register said trademarks or a
similar
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trademark or a variation thereof or a combination
containing any of said trademarks in the Greater
European Territory (hereinafter the "G Marks"), all
and any material restrictions on use of the G Marks
in relation to the Goodyear Goods in the Greater
European Territory including but not limited to all
agreements, arrangements, conflicts or threatened
conflicts between Goodyear or any of the Goodyear
JV Companies and a third party which restrict use
of one or more of the G Marks in relation to the
Goodyear Goods or affect the scope of or validity
of the G Marks including the names of parties and
details (or copy documentation to be provided
concurrently); and
(B) in respect of all other registrations and pending
applications to register any Goodyear European
Trademark (hereinafter "Goodyear Registrations-2"),
all and any material restrictions on use and
registration of the Goodyear Registrations-2 in
relation to the Goodyear Goods in all countries
where said are registered or pending, including but
not limited to all agreements, arrangements,
conflicts or threatened conflicts between Goodyear
or any of the Goodyear JV Companies and a third
party which restrict use of one or more of the
Goodyear Registrations-2 in relation to the
Goodyear Goods in all countries where said are
registered or pending, or affect the scope of or
validity of the Goodyear Registrations-2 in said
countries including the names of parties and
details (or copy documentation to be provided
concurrently), and all restrictions on registration
of the Goodyear Registrations-2 in the Greater
European Territory in relation to Goodyear Goods of
which Goodyear or any of the Goodyear JV Companies
are aware, including but not limited to all
agreements, arrangements, conflicts or threatened
conflicts between Goodyear or any of the Goodyear
JV Companies and a third party which restrict
registration of one or more of the Goodyear
Registrations-2 in relation to the Goodyear Goods
including the names of parties and details (or copy
documentation to be provided concurrently); and
(C) in respect of Goodyear European Trademarks which
are used but not registered (or the subject of a
pending application) in any country/s for any
goods/services
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falling within Goodyear Goods in relation to which
they are used (hereinafter "Goodyear CL Marks"),
all and any material restrictions on use of the
Goodyear CL Marks in relation to the Goodyear Goods
in said countries including but not limited to all
agreements, arrangements, conflicts or threatened
conflicts between Goodyear or any of the Goodyear
JV Companies and a third party which restrict use
of one or more of the Goodyear CL Marks in relation
to the Goodyear Goods or affect the scope of or
validity of the Goodyear CL Marks including the
names of parties and details (or copy documentation
to be provided concurrently); and
(D) all other restrictions on use of the Goodyear
European Trademarks in relation to the Goodyear
Goods in the Greater European Territory of which
Goodyear or any of the Goodyear JV Companies are
aware; and
(iii) all licenses under which Goodyear European Trademarks are
licensed to another party, with the name and address of
the licensee/s, and details of said licenses (or a copy
thereof to be provided concurrently); and
(iv) all licenses under which Goodyear European Trademarks are
licensed from a third party, with the name and address of
the licensor/s, the name and address of the owner (if
different), and details of said license/s (or a copy
thereof to be provided concurrently); and
(v) details of each and every Encumbrance (other than a
Permitted Encumbrance) created by Goodyear or any of the
Goodyear JV Companies on any of the Goodyear European
Trademarks (or a copy thereof to be provided
concurrently); and
(vi) all agreements or arrangements relating to the Goodyear
European Trademarks which may be terminated in the event
of a change of control of the Goodyear JV Companies or
which require approval to grant sub-licenses in a separate
list in Schedule 6.12(d)(vi) (details shall be included);
and
(vii) all OE export arrangements or agreements relating to
Licensed Products bearing Goodyear European Trademarks
fitted as original equipment to vehicles exported from any
country
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within the Greater European Territory in a separate list
in Schedule 6.12(d)(vii); and
(viii) all company names of Goodyear or the Goodyear JV Companies
incorporated in the Greater European Territory in a
separate list in Schedule 6.12(d)(viii).
Schedule 6.12(d) includes an update of all material and substantive changes to
the information contained in the above lists which changes occurred after the
date indicated on those lists but before the date of this Agreement.
(e) To the best of Goodyear's knowledge and belief (having made all
proper inquiries), save as specified in Schedule 6.12(e) the use or other
exploitation by Goodyear and the Goodyear JV Companies of the following, does
not infringe the rights of any third party:
(i) the G Marks in relation to the Goodyear Goods in the
Greater European Territory;
(ii) the Goodyear Registrations-2 in relation to the
Goodyear Goods in countries where they are registered
or pending; and
(iii) the Goodyear CL Marks in relation to the goods/services
falling within the Goodyear Goods for which they are
used in the countries in which they are used.
Other than those identified in Schedule 6.12(e), there is no claim of any third
party or any proceeding pending or to the best knowledge of Goodyear,
threatened, or any investigations by Goodyear or the Goodyear JV Companies,
which relate to infringement or other violation by Goodyear or any of the
Goodyear JV Companies (or so far as they are aware, any users authorized by
them) of a third party's trademark rights in the conduct of the Business in the
Greater European Territory, nor are there any written notices or challenges to
the validity or enforceability of the rights of Goodyear and/or the Goodyear JV
Companies in the Goodyear European Trademarks. To the best of the knowledge and
belief of Goodyear and the Goodyear JV Companies, no person is infringing the
rights of any of Goodyear and the Goodyear JV Companies with respect to such
Goodyear European Trademarks, other than those identified in Schedule 6.12(e).
Other than as specified in Schedule 6.12(e), no Trademarks relating to the
Goodyear Goods in the Greater European Territory have been assigned or
transferred, and no rights which would restrict use of the Goodyear European
Trademarks in relation to the Goodyear Goods have been granted by Goodyear or
the Goodyear JV Companies within the last 12 months.
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(f) Except as set forth on Schedule 6.12(f), each of Goodyear and the
Goodyear JV Companies cumulatively have:
(i) the right to manufacture under:
(A) the G Marks in relation to the Goodyear Goods,
(B) the Goodyear Registrations-2 in relation to the
Goodyear Goods in countries where they are
registered or pending, and
(C) the Goodyear CL Marks in relation to the goods
for which they are used,
in the Greater European Territory; and
(ii) the right to sell and provide the goods and services
referred to in (f) (i) above under the respective
trademarks referred to in (f) (i) above in the Greater
European Territory; and
(iii) in relation to the Goodyear JV Companies, the right to
use said trademarks in connection with OE exports of
said goods to jurisdictions other than the country in
which the said goods are fitted to the vehicle;
and have all the trademark rights and licenses necessary for the conduct of the
Goodyear Businesses as conducted by the Goodyear JV Companies as of the Closing
Date, and the consummation of the transactions contemplated hereby will not
alter or impair any such rights, save as expressly stated in or contemplated by
the Alliance Agreements.
(g) Schedule 6.12(g) also sets forth:
(i) Any and all material restrictions on use by the
Goodyear JV Companies of all copyright rights and other
rights in drawings of tires and parts thereof and other
products of the Goodyear Businesses and all designs
applicable to the appearance or shape of tires and
other products of the Goodyear Businesses (including
but not limited to tread designs) owned by Goodyear,
Goodyear's Affiliates or the Goodyear JV Companies or
licensed from a third party in the European Territory
(hereinafter "the Works") and the consummation of the
Transactions contemplated hereby will not alter or
impair any of the Goodyear JV Companies' rights in or
their ability to use
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the Works save as expressly stated in or contemplated
by the Alliance Agreements; and
(ii) All current conflicts or threatened conflicts (of which
Goodyear is aware) or validity challenges relating to
the Works.
(h) To the best knowledge and belief of Goodyear, the use or other
exploitation by the Goodyear JV Companies of the Works in relation to the
Goodyear Businesses does not infringe the rights of any third party. Other than
those identified in Schedule 6.12(h), there is no claim of any third party or
any Proceeding pending or to the best knowledge of Goodyear, threatened, or any
investigations by Goodyear or the Goodyear JV Companies, which relate to
infringement or other violation of a third party's rights in the Works in the
conduct of the Goodyear Businesses, nor are there any written notices or
challenges to the validity or enforceability of the rights of Goodyear,
Goodyear's Affiliates or the Goodyear JV Companies in the Works. To the best of
the knowledge and belief of Goodyear, no person is infringing the rights of any
of Goodyear, Goodyear's Affiliates or the Goodyear JV Companies with respect to
such Works, other than those identified in Schedule 6.12(h).
(i) The Parties agree that the information provided pursuant to all
parts of this Article 6.12 and in Schedules 6.12(a) through (h) shall be
supplemented by an accurate and complete list, as required by Article 9.03 of
the Umbrella Agreement as at the Closing Date.
6.13 SOFTWARE.
(a) The Goodyear JV Companies have entered into, have valid rights
under and have maintained all material computer programs, computer data bases
or other computer software used or owned by any of the Goodyear JV Companies
(insofar as they are comprised in the Goodyear Businesses) ("Software").
(b) The Goodyear JV Companies have received no claim of any third party
nor is any Proceeding or any investigation pending or, to the best of the
knowledge of Goodyear, Goodyear Fra, Goodyear Lux or Goodyear Canada,
threatened, which relates to infringement or other violation of the rights of
third parties arising out of the use of the Software. There are no written
notices or challenges to the validity or enforceability of the rights of any of
the Goodyear JV Companies to use the Software. To the best of the knowledge of
Goodyear, Goodyear Fra, Goodyear Lux or Goodyear Canada, no Person is
infringing the rights of any of the Goodyear JV Companies with respect to the
Software.
(c) The Goodyear JV Companies have granted to the third parties listed
on Schedule 6.13(c) the licenses or authorizations identified thereon relating
to the use of the Software owned or licensed by the Goodyear JV Companies.
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(d) Except as set forth on Schedule 6.13(d), each of the Goodyear JV
Companies' consultants, contractors and subcontractors who have participated in
the creation, design or development of the Software owned or used but not
licensed by any of the Goodyear JV Companies has entered into a written
agreement assigning the copyright (or any other right arising under any
applicable Law) in the Software (including the related documentation) to the
relevant Goodyear JV Company and each employee of a Goodyear JV Company who has
participated in the creation, design or development of the Software owned or
used by any of the Goodyear JV Companies, have under the law of the relevant
jurisdictions automatically assigned the copyright (or any other right arising
under any applicable Law) in the Software (including the related documentation)
to the relevant Goodyear JV Company.
6.14 COMPLIANCE WITH LEGAL REQUIREMENTS
(a) The Goodyear JV Companies are currently conducting, and have at all
times for which the applicable statute of limitation has not expired, conducted
their respective part of the Goodyear Businesses and are currently maintaining
and have at all times which the applicable statute of limitation has not
expired maintained their ownership and possession of their respective Goodyear
Business Assets, in compliance with all applicable Laws, Judgments and Permits,
except to the extent that the failure to so conduct their respective part of
the Goodyear Businesses and maintain their respective Goodyear Business Assets
would not have a Material Adverse Effect on any of the Material Goodyear JV
Companies.
(b) Except as set forth on Schedule 6.14, the Goodyear JV Companies
possess, and upon consummation of the Transactions will continue to possess all
Permits necessary to conduct their respective part of the Goodyear Businesses,
as they are currently being conducted, and all such Permits are in full force
and effect, except to the extent the failure to so possess or maintain in full
force and effect would not have a Material Adverse Effect on any of the
Material Goodyear JV Companies or impair the Goodyear JV Companies ability to
perform their material obligations under the Alliance Agreements. Except as set
forth in Schedule 6.14, all such Permits, to the extent such Permits need to be
assigned or transferred, pursuant to the Transactions, are fully and freely
assignable or transferable (except to the extent that the failure to so assign
or transfer is due solely to the discretionary act or acts of an Authority and
not based upon the acts or omissions of Goodyear, Goodyear Fra, Goodyear Lux,
Goodyear Canada or any of the Goodyear JV Companies) to the applicable Goodyear
JV Company. No proceeding to modify, suspend, terminate or otherwise limit any
such Permit is pending or, to the best knowledge of Goodyear, Goodyear Fra,
Goodyear Lux and/or Goodyear Canada, threatened.
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(c) Except as set forth in Schedule 6.14, none of the Goodyear JV
Companies has received any notice in any form (including any citations, notices
of violations, complaints, consent orders or inspection reports) which would
indicate that any such company was not at the time of such notice or is not
currently in compliance with all such applicable Laws, Judgments and Permits
except where the failure to not be in compliance would not have a Material
Adverse Effect on any of the Material Goodyear JV Companies.
(d) None of the Goodyear JV Companies has made any illegal payment to
any officer or employee of any governmental or regulatory authority, engaged in
any illegal reciprocal agreements with competitors, customers or suppliers or
made any illegal payment to any supplier or purchasing agent.
6.15 OUTSTANDING COMMITMENTS.
(a) Schedule 6.15 contains an accurate and complete list of all
Contracts (insofar as such Contracts are comprised in the Goodyear Businesses
other than Contracts covered in Article 6.16(b)) to which any of the Goodyear
JV Companies is a party or by which any of their assets or operations are bound
or affected and which (i) involve the obligation (including contingent
obligations) by or to any of the Goodyear JV Companies to pay amounts in excess
of the equivalent of US$1,000,000 in any fiscal year, (ii) are Contracts whose
term exceeds one (1) year or is unlimited (with the exception of labor
agreements) and which may not be terminated by the relevant Goodyear JV Company
on less than six (6) months' notice without the payment of a penalty in the
equivalent amount of US$100,000 or more, (iii) are Contracts under whose terms
one or more of the Goodyear JV Companies is bound to materially refrain from
carrying out or to materially restrict certain normal business activities as
such activities are conducted in the Ordinary Course of Business, or to refrain
from competing with any third party, (iv) are Contracts with Goodyear or any
Affiliate thereof (except any of the Goodyear JV Companies) in the equivalent
amount of US$100,000 or more or any director or employee thereof (v) are
Contracts for the purchase or resale of tires, retread materials, accessory
parts and air springs in excess of the equivalent of US$2,000,000 per annum
("Dealer Contracts"), or (vi) were not entered into in the Ordinary Course of
Business.
(b) All Contracts listed on Schedule 6.15 are valid, binding and
enforceable by one or more of the Goodyear JV Companies in accordance with
their respective terms and none of the Goodyear JV Companies is in default or
has waived any material right under any of such Contracts, nor does there exist
any event or condition, which upon the giving of notice or the lapse of time or
both, would (i) constitute a default or event of default thereunder or (ii)
entitle any other party thereto to terminate such Contract, and which would in
any case, have a Material Adverse Effect on any of the Material Goodyear JV
Companies. To the best knowledge of Goodyear, Goodyear Fra, Goodyear Lux
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and Goodyear Canada, the obligations of each counterparty to any Contracts
listed on Schedule 6.15 are (i) valid and binding on such counterparty and
enforceable by one or more of the Goodyear JV Companies in accordance with
their respective terms, (ii) none of the counterparties is in default or has
waived any material right under any of such Contracts, nor does there exist any
event or condition, which upon the giving of notice or the lapse of time or
both, would (A) constitute a default or event of default thereunder or (B)
entitle any other party thereto to terminate such Contract, and which would in
any case have a Material Adverse Effect on any of the Material Goodyear JV
Companies.
(c) Specifically, pursuant to Article 6.15(a)(i), Schedule 6.15
includes without limitation a list of all Contracts in excess of the equivalent
of US$1,000,000 in any fiscal year to which any of the Goodyear JV Companies is
a party or by which any of their assets or operations are bound with any
original equipment automotive manufacturer ("Original Equipment Contracts").
Except for such Original Equipment Contracts, there are no other contracts with
original equipment automotive manufacturers which impose obligations on any of
the Material Goodyear JV Companies which would have a Material Adverse Effect
on any of the Material Goodyear Companies.
(d) None of the Contracts listed on Schedules 6.15 or 6.16(a) and (b)
to which any Goodyear JV Company is a party or a beneficiary violates any
provision of any applicable Law or Judgment. All Contracts between any of the
Goodyear JV Companies on the one hand, and its suppliers, customers,
distributors, dealers, agents or licensees, on the other hand, have been
concluded under normal market conditions, in accordance with normal commercial
practice except where the failure to have so concluded such Contracts would
have a Material Adverse Effect on any of the Material Goodyear JV Companies.
(e) Goodyear, Goodyear Fra, Goodyear Lux and Goodyear Canada have made
or will make upon request all Dealer Contracts and Original Equipment Contracts
available to SRI for review and have made available or will make available upon
request, in writing all material amendments to such Contracts in connection
therewith (unless prohibited by applicable anti-trust Laws or a confidentiality
clause contained in any such agreement). Any Contracts or material amendments
not available for review by SRI due to the foregoing prohibition regarding
anti-trust Laws or confidentiality clauses, impose no obligations on any of the
Material Goodyear JV Companies which would have a Material Adverse Effect on
any of the Material Goodyear JV Companies.
6.16 EMPLOYMENT MATTERS.
(a) Schedule 6.16(a) contains a list, for each of the Goodyear JV
Companies, and for each separate establishment thereof, of all the collective
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rules applicable to Goodyear JV Employees (the "Collective Rules"), including
without limitation: (i) the applicable collective bargaining agreements (other
than those applicable on a nation-wide or industry-wide basis) and company
agreements; (ii) the remuneration system, including premiums, bonuses,
commissions and benefits in kind; (iii) profit-sharing, incentive and company
savings plans; (iv) any retirement or health insurance plan pursuant to which
employees are entitled to receive benefits in addition to those provided for by
law or the applicable collective bargaining agreements; (v) any other employee
benefit plans similar in type to those described in Sections 3(1) and 3(2) of
ERISA; and (vi) any regional, local or individual company or establishment
practices which provide for benefits which exceed those provided for by law or
the applicable collective bargaining agreements.
(b) Schedule 6.16(b) (save as expressly provided therein) sets forth a
complete and accurate list of the thirty (30) employment, consulting,
severance, termination or compensation Contracts of greatest amount between any
individual and any of the Goodyear JV Companies and ten (10) such contracts of
greatest amount for retail operations between an individual and any of the
Goodyear JV Companies, pursuant to which any such individual has received
benefits within the preceding two (2) years which exceed those provided for by
law or the applicable Collective Rules, including, but not limited to,
increased severance pay, extended notice periods, advantages in kind or
pensions (the "Goodyear JV Employment Agreements"), copies of which are
available upon request by SRI. In case of certain of the Goodyear JV Employment
Agreements to which the provisions of the German Data Protection Act extend,
the information provided on Schedule 6.16(b) shall only identify the employment
contract between the applicable company and individual by a general title, job
description or functional area of responsibility, in order not to disclose
information protected by such Act (the "Goodyear German Employment Contracts").
None of the individual Goodyear German Employment Contracts have been amended
nor do any of them contain any contractual provisions or entitlement to
benefits other than as stated in the specific representative contract that
Goodyear has provided to SRI (by letter of June 10, 1999) as representative of
that individual's Goodyear German Employment Contract. Goodyear has provided a
model representative contract (by letter of June 10, 1999) to SRI for each of
the Goodyear German Employment Contracts. No amount will become due to any
director, consultant or employee of any of the Goodyear JV Companies under the
Collective Rules or any Goodyear JV Employment Agreement solely as a result of
the Transactions.
(c) As of the date hereof, none of the directors, consultants or
employees of any of the Goodyear JV Companies earning in excess of the
equivalent of US$100,000 per annum has formally notified any such company that
he or she does not intend to continue his or her relationship with it following
the completion of the Transactions on the terms of the applicable Collective
Rules and the Goodyear JV Employment Agreements as currently in effect and
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Goodyear, Goodyear Fra, Goodyear Lux and Goodyear Canada have no reason to
believe that each of the Goodyear JV Companies will not be able to continue
such relationships with such persons after the Closing.
(d) Each of the Goodyear JV Companies are now and have in the past been
in all material respects in compliance with all provisions of applicable labor
and social security Laws, the Collective Rules and the Goodyear JV Employment
Agreements and all payments due thereunder from each of the Goodyear JV
Companies have been made when due.
(e) The Goodyear JV Companies:
(i) do not have any obligation to contribute to, nor have
they incurred any liability with respect to any benefit
plan concerning the Goodyear JV Employees other than
the employee benefit plans listed on Schedule 6.16(a)
(the "Goodyear JV Employee Benefit Plans"), nor will
they have any liability after the Closing under any
employee benefit plan concerning any employees, other
than Goodyear JV Employees or retirees from the
Goodyear Businesses or the predecessors of such
businesses;
(ii) have not engaged in a transaction that could result in
the imposition upon any Goodyear JV Companies of a
civil penalty with respect to the regulation of the
Goodyear JV Employee Benefit Plans and no fact or event
exists that could give rise to any such liability which
would have a Material Adverse Effect on any of the
Material Goodyear JV Companies;
(iii) have not entered into any agreement to indemnify any
Person (other than any Person entitled to benefits
under the Goodyear JV Employee Benefit Plans) with
respect to any of the Goodyear JV Employee Benefit
Plans; and
(iv) have had the Goodyear JV Employee Benefit Plans, as
amended to date, determined by the appropriate
regulatory authority if required, to be plans which
comply in all material respects with the laws and
regulations to which they are subject, and no assets of
the Goodyear JV Employee Benefit Plans are subject to
any Encumbrances.
(f) Except as set forth on Schedule 6.16(f), Goodyear, Goodyear Fra,
Goodyear Lux and Goodyear Canada have not permitted the Goodyear JV Companies
to adopt, change or commit to adopt any Goodyear JV Employee
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Benefit Plans covering the Goodyear JV Employees, after December, 31 1998 and
prior to the Closing, except in the Ordinary Course of Business.
(g) Except as set forth on Schedule 6.16(g), since January 1, 1998
there have not occurred any strikes, slow downs, work stoppages or other
similar labor actions by any group of employees of any of the Goodyear JV
Companies. Nor are any of Goodyear, Goodyear Fra, Goodyear Lux, Goodyear Canada
or any of the Goodyear JV Companies aware that any such labor action is pending
or threatened. No Proceeding arising out of any labor grievance under any Law,
the Collective Rules or any Goodyear JV Employment Agreement is pending or, to
the best knowledge of Goodyear, Goodyear Fra, Goodyear Lux or Goodyear Canada,
threatened against any Goodyear JV Company.
6.17 ENVIRONMENT, HEALTH AND SAFETY.
(a) Except as set forth on Schedule 6.17(a), and except where the
failure to be in compliance would not have a Material Adverse Effect on any
Material Goodyear JV Company, each of the Goodyear JV Companies has obtained,
and has been at all times, for which the applicable statute of limitation has
not expired, in compliance with all terms and conditions of, all Permits which
are required under, and has complied with all other limitations, restrictions,
conditions, standards, prohibitions, requirements, obligations, schedules and
timetables which are contained in, all Laws, Permits and Judgments relating to
public health and safety, worker health and safety, and pollution or protection
of the environment, including without limitation Environmental Laws relating to
emissions, discharges, releases or threatened releases of pollutants,
contaminants or chemical, industrial, hazardous or toxic materials or wastes
into ambient air, surface water, ground water or lands or otherwise relating to
the testing, characterization, classification, manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
pollutants, contaminants or chemical, industrial, hazardous or toxic materials
or wastes. All such Permits are valid and in full force and effect and (to the
extent such Permits need to be assigned or transferred to a Goodyear JV Company
pursuant to the Goodyear Reorganization or pursuant to the Transactions in
order to ensure the continued conduct of the Goodyear Businesses as such
businesses are presently conducted) are freely transferable or assignable
(except to the extent that the failure to assign or transfer is due solely to
the discretionary act of any Authority and not based upon the acts or omissions
of Goodyear, Goodyear Fra, Goodyear Lux, Goodyear Canada or any of the Goodyear
JV Companies), and where applicable, timely renewal applications have been
submitted for all such Permits. No Proceedings have been filed or commenced
against any of the Goodyear JV Companies or notices of violation or
Environmental Claim received by any of the Goodyear JV Companies alleging any
failure to comply with any such Laws, Judgments or Permits, where such
Proceeding or violation would have a Material Adverse Effect on any of the
Goodyear JV Companies and, to the best knowledge
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of Goodyear, Goodyear Fra, Goodyear Lux and/or Goodyear Canada, no such
Proceedings, notices of violation or Environmental Claims are pending or
threatened, nor does there exist any existing event or condition on the basis
of which (i) an Authority would reasonably be expected to deny or revoke or
limit any such Permits or (ii) if such Permits have been obtained by any of the
Goodyear JV Companies, such Permits would not remain in full force and effect
as of the Closing Date.
(b) Except as set forth in Schedule 6.17(b), none of the Goodyear JV
Companies has any material liability (and there is not any past or present
fact, status, condition, activity, occurrence, action or failure to act related
to the past or present operations, properties or facilities, whether owned,
used or leased, of any of the Goodyear JV Companies that to their best
knowledge, forms or reasonably could form the basis for the imposition of any
liability) (i) under any law relating to protection of human health or safety
or concerning employee or worker health and safety or relating generally to the
environment, (ii) for damage to any site, location, natural resources or body
of water (surface or subsurface) or for failure to report or clean up any
discharges of any substance, or (iii) for any illness of, personal injury to,
or death of, any of its employees or any third party.
6.18 INSURANCE. Except as disclosed on Schedule 6.18, each of the Goodyear JV
Companies are insured by insurance carriers not related to or affiliated with
Goodyear, Goodyear Fra, Goodyear Lux or Goodyear Canada. Schedule 6.18 sets
forth a complete list and brief description (specifying the insurer, the
coverage and the policy number or covering note number with respect to binders)
of all policies, binders or Contracts to which any of the Goodyear JV Companies
is a party or by which any of the Goodyear Business Assets are covered for
purposes of property, fire, liability, product liability, workmen's
compensation, vehicular, crime, builders' risk, title and other insurance or
Contracts in the nature of insurance. The policies, binders and Contracts listed
on Schedule 6.18 are in full force and effect in accordance with their
respective terms and, to the best knowledge of Goodyear, Goodyear Fra, Goodyear
Lux, Goodyear Canada and the Goodyear JV Companies, will remain in full force
and effect after the Closing, except as otherwise agreed in writing between SRI
and Goodyear and, additionally, none of the Goodyear JV Companies has received
written notice that any insurer thereunder intends to cancel or terminate such
policies, binders or Contracts. None of Goodyear, Goodyear Fra, Goodyear Lux,
Goodyear Canada or any of the Goodyear JV Companies has received any notice that
it is in default with respect to any provision of any such policies, binders or
Contracts. None of Goodyear, Goodyear Fra, Goodyear Lux, Goodyear Canada or any
of the Goodyear JV Companies has provided inaccurate, incomplete or misleading
information in connection with any such policies, binders or Contracts or failed
to give any notice or present any claim thereunder in due and timely fashion or
as required by any such policies, binders or Contracts so as to jeopardize full
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recovery thereunder. There are no claims in excess of US$1,000,000 outstanding
under any such policy, binder or Contract.
6.19 ACCOUNTS RECEIVABLES. All accounts receivables of the Goodyear JV
Companies and other rights of payment, including, without limitation, unbilled
amounts and credits extended to third parties, shown on the Goodyear Europe
Year End Financial Statement or acquired by the Goodyear JV Companies
subsequent to the date of the balance sheets included therein but before the
Closing Date, except to the extent thereafter collected, have arisen from bona
fide transactions in the Ordinary Course of Business, are free of any
Encumbrances, except for those receivables sold as reflected on the Goodyear
Europe Year End Financial Statement which receivables will be free and clear of
Encumbrances at the Closing Date, and the reserves or write-offs for bad debts
in the Goodyear Europe Year End Financial Statement have been computed in a
manner consistent with past practice.
6.20 GUARANTEES. There are no guaranty agreements, commitments to issue
guarantees, comfort letters, letters of awareness, other credit support
arrangements, joint and several obligations, swap agreements or any other
derivative transactions entered into by any of the Goodyear JV Companies which
are not listed in Schedule 6.20, copies of which are available to SRI upon
request.
6.21 SUBSIDIES. Schedule 6.21 sets forth a complete list of all governmental,
quasi-governmental and other public and private grants and subsidies that
provide any reimbursement, refund, abatement, Tax reduction or other benefit in
excess of US$1,000,000 ("Subsidies") to any of the Goodyear JV Companies,
together with any additional Subsidies for which any of the Goodyear JV
Companies is in the process of applying, and fully and correctly sets out the
status of each Subsidy and application therefor, including the obligations
imposed on each Goodyear JV Company that remain outstanding. The Goodyear JV
Companies have complied in all material respects with the terms and conditions
imposed upon them in connection with each such Subsidy, including but not
limited to the utilization of funds, the amount of investments to be made by
them and the maintaining of a minimum level of employment. Except as set forth
in Schedule 6.21, none of the Goodyear JV Companies are in material breach of
any of the terms and conditions of any Subsidy and no facts or circumstances
exist that to the best knowledge of Goodyear, Goodyear Fra, Goodyear Lux or
Goodyear Canada could cause the Goodyear JV Companies to be required to
reimburse all or part of any Subsidy before the due date of reimbursement, if
any, or to lose all or part of the benefit of the Subsidy.
6.22 YEAR 2000. Each of Goodyear, Goodyear Fra, Goodyear Lux, Goodyear Canada
and the Goodyear JV Companies have taken and will take up to Closing all
commercially reasonable actions in a timely manner to prevent a Year 2000
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problem in computer systems, software, or equipment owned, leased or licensed by
such company from (a) interfering with its performance under the Alliance
Agreements, (b) interfering with or frustrating the purpose and successful
operation and administration of the Europe JVC or the Goodyear JV Companies, as
set forth in this JV Agreement, the Umbrella Agreement or any of the other
Alliance Agreements or (c) having a Material Adverse Effect on any of the
Goodyear JV Companies. Each of the Goodyear JV Companies has requested from
those of its suppliers or other business partners whose performance may
materially affect the performance of any of the Goodyear JV Companies hereunder
that each supplier or business partner undertake all commercially reasonable
actions in a timely manner to prevent a Year 2000 problem from interfering with
such performance, in each case where the failure to perform would have a
Material Adverse Effect on any of the Material Goodyear JV Companies.
For purposes of the Alliance Agreements, Year 2000 problem means any failure,
error, or delay resulting from the inability of any software, hardware, embedded
chip, or other device to accurately and without interruption perform and
process, display, store, manipulate, and handle dates before, on, and after
January 1, 2000.
6.23 UNDISCLOSED LIABILITIES, ETC. On the date hereof, except as disclosed in
the Goodyear Europe Year End Financial Statement or as set forth on Schedule
6.23, the Goodyear JV Companies have no liabilities or obligations of any
nature, whether accrued, absolute, contingent or otherwise, and whether due or
to become due other than liabilities (i) that have been incurred in the Ordinary
Course of Business, (ii) that have not had a Material Adverse Effect on the
Goodyear JV Companies taken as a whole, or (iii) that would not have a Material
Adverse Effect on the Goodyear JV Companies taken as a whole.
6.24 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth on Schedule
6.24, which will be supplemented by an accurate and complete list as required
by Article 9.03 of the Umbrella Agreement, since December 31, 1998 (except for
Article 6.24(q)), none of the Goodyear JV Companies has and/or there has not
been (with respect to either the Goodyear Business Assets or the Goodyear
Businesses):
(a) declared for payment after the Closing Date, any cash dividend,
payment or other distribution in respect of their shares of capital stock or,
except as required by the Goodyear Reorganization or otherwise pursuant to the
Alliance Agreements, declared any dividend of property in kind;
(b) other than in the Ordinary Course of Business or except as
contemplated by the Goodyear Reorganization, incurred any obligation or
liability, contingent or otherwise, exceeding US$1,000,000, except such
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obligations affecting any of the Goodyear JV Companies beyond the Closing Date
under Contracts;
(c) except (i) in the Ordinary Course of Business, (ii) as contemplated
by the Alliance Agreements, (iii) the payment of any obligations or
installments when due or (iv) the discharge or satisfaction of any Encumbrance,
paid any obligation or liability (fixed or contingent);
(d) sold, assigned, transferred, conveyed, leased or otherwise disposed
of or agreed to sell, assign, transfer, convey, lease or otherwise dispose of
any of its Goodyear Business Assets having a fair market value equivalent of
US$100,000 and above, except for fair consideration (plus or minus 10%
therefrom) in the Ordinary Course of Business or except as contemplated by the
Goodyear Reorganization;
(e) compromised any debt, Proceeding or claim, or waived or released
any right, except as made in the Ordinary Course of Business or which would not
have a Material Adverse Effect on any of the Material Goodyear JV Companies;
(f) suffered any extraordinary loss or extraordinary losses which would
have a Material Adverse Effect on any of the Material Goodyear JV Companies;
(g) except in the Ordinary Course of Business or as contemplated by the
Alliance Agreements, transferred or granted any rights under any material
concessions, leases, licenses, agreements, Patents, inventions, Trademarks,
brandmarks, brand names, copyrights, or with respect to any know-how;
(h) suffered any accidental losses or damages with respect to the
Goodyear Business Assets having an aggregate replacement cost of more than
US$5,000,000, whether or not such losses or damages shall have been covered by
insurance;
(i) made any material charitable contribution not in accordance with
past practice or entered into any commitment therefor;
(j) lost as customers any original equipment manufacturers, Dealer
Contracts, or lost any Contracts with suppliers or for supplies, based on facts
or events not arising out of a change in control of the Goodyear JV Companies,
which losses, individually or in the aggregate, have had, or which any of the
Goodyear JV Companies expects to have, a Material Adverse Effect on the
Material Goodyear JV Companies;
(k) other than as contemplated by the Alliance Agreements or at the
specific request of SRI, introduced any material change with respect to the
method or practices of accounting of the Goodyear JV Companies;
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(l) instituted any increases or commitments for increases in excess of
3% per annum in the general average salary or compensation level of all the
Goodyear JV Employees of each of the Goodyear JV Companies;
(m) except for bids or tenders made in the Ordinary Course of Business,
made any bids or tenders on or for Contracts in excess of US$5,000,000;
(n) except as provided in (l) above, amended or otherwise modified the
terms of any Goodyear JV Employment Agreements to increase the amount or
accelerate the payment or vesting of any benefit thereunder or under any
existing or new benefit plan of the type described in Article 6.16(a) with
respect to any individual party to such agreements;
(o) adopted any amendments to its Constituent Documents that could
reasonably be expected to have a Material Adverse Effect on the ability of
Goodyear, Goodyear Fra, Goodyear Lux, Goodyear Canada or any of the Goodyear JV
Companies to perform their obligations under the Alliance Agreements;
(p) any transaction, commitment, dispute or other event or condition
(financial or otherwise) of any character (whether or not) in the Ordinary
Course of Business) that could reasonably be expected to have a Material
Adverse Effect on the ability of Goodyear, Goodyear Fra, Goodyear Lux, Goodyear
Canada or any of the Material Goodyear JV Companies to perform their
obligations under the Alliance Agreements; and
(q) since December 31, 1998 through and including the date hereof,
except as contemplated by the Alliance Agreements or otherwise agreed in
writing, carried on the Goodyear Businesses (including without limitation,
entering into any material transaction, contract or commitment) other than in
the ordinary course of business and substantially in the same manner as
heretofore conducted consistent with past practice.
6.25 SURVIVAL PERIOD. The representations and warranties of Goodyear, Goodyear
Fra, Goodyear Lux or Goodyear Canada contained in the Alliance Agreements or in
any document delivered pursuant to the Alliance Agreements shall not be
discharged upon the date(s) of the giving of such representations and warranties
(the date of this JV Agreement and the Closing Date), but shall survive for so
long as an indemnification claim for the applicable representation and warranty
can be made pursuant to Article XV, Indemnification, of the Umbrella Agreement.
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ARTICLE VII
MAINTENANCE OF BUSINESS AND ASSETS
----------------------------------
7.1 MAINTENANCE OF BUSINESS AND ASSETS.
The Parties to this JV Agreement agree to use reasonable efforts to
preserve and to cause their Affiliates controlled by them, as the case may be,
to preserve the Goodyear Businesses and the SRI Businesses, and to maintain the
rights and franchises of such businesses, as the case may be, intact until the
Closing Date and to keep available to the Europe JVC and Affiliates controlled
by it, the present services of the Goodyear JV Employees and the SRI JV
Employees respectively and to preserve the goodwill of their respective
customers, suppliers and others with whom business relationships exist, except
as may otherwise be agreed in writing between SRI and/or SRE on the one hand
and Goodyear, Goodyear Fra, Goodyear Lux and/or Goodyear Canada on the other
hand.
ARTICLE VIII
CONDITIONS TO PARTIES' OBLIGATIONS
----------------------------------
8.1 The obligations of Goodyear, Goodyear Fra, Goodyear Lux and Goodyear Canada
to consummate the Transactions shall be subject to the satisfaction of the
conditions, unless waived by Goodyear, stated in Articles V and VIII of the
Umbrella Agreement. The obligations of SRI and SRE to consummate the
Transactions shall be subject to the satisfaction of the conditions, unless
waived by SRI, stated in Articles V and IX of the Umbrella Agreement.
ARTICLE IX
NAMES AND TRADEMARKS
--------------------
9.1 Without prejudice to Article 3.6 of the Shareholders Agreement for
the Europe JVC, SRI will not object to the Europe JVC using the name "DUNLOP"
in its corporate name and trade name or in one or more domain names that do not
conflict with third party rights.
9.2 Goodyear hereby grants to the Europe JVC permission to use the name
"GOODYEAR" in its corporate name and trade name during the term of this JV
Agreement provided that Goodyear directly or indirectly maintains a greater
than fifty percent (50%) ownership of the issued voting shares of the Europe
JVC. Goodyear will not object to the Europe JVC registering one or more domain
names including "GOODYEAR" if combined with "DUNLOP".
9.3 (a) SRI agrees and shall cause its Affiliates (other than the SRI JV
Companies) jointly or severally to agree and each undertakes not to directly or
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indirectly use or assist any other Person to use any of the SRI European
Trademarks in any country in Western Europe or in Eastern Europe on or in
connection with:
(i) any "Licensed Products", (namely all types of tires,
retread tires, pre-cured treads for tires, inner tubes
for tires, flaps for tires, repair kits for tires, and
repair outfits for tires, but not including aircraft
tires or solid polyurethane industrial tires), save to
the extent that BTRI and its assigns and licensees are
licensed to use DUNLOP and D Device in connection with
industrial tires on a non-exclusive basis; or
(ii) any "Extended Products" (namely air springs, vehicle
tracks, vehicle treads, tire repair materials, vehicle
batteries, shock absorbers, accessories and parts and
fittings for vehicles (hereinafter "Tire Goods");
software relating to design, construction,
administration and sale of Licensed Products and Tire
Goods; machines and apparatus and parts thereof
relating to manufacture of Tire Goods); or
(iii) any "Extended Services" (namely retreading, retail,
repair, and fitting services relating to Licensed
Products and Extended Products; and vehicle repair
services).
(b) Products produced by the non-tire operations of SRI which
are excluded from the Alliance (said operations being identified in the
definition of SRI Businesses in this JV Agreement) are not included in the
above definitions of Extended Products and Extended Services for the purposes
of this Article 9.3.
9.4 Goodyear agrees and shall cause its Affiliates (other than the
Goodyear JV Companies) jointly or severally to agree and each undertakes not to
directly or indirectly use or assist any other Person to use any of the Goodyear
European Trademarks in any country in Western Europe or in Eastern Europe on or
in connection with:
(i) any Licensed Products; or
(ii) any Extended Products; or
(iii) any Extended Services.
9.5 SRI and Goodyear agree that:
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(a) Goodyear and SRI shall consult and co-operate with regard
to filing, maintaining and renewal of SRI European
Trademarks in the Greater European Territory;
(b) if either SRI or the Europe JVC (for itself and as
representative of the SRI JV Companies and Goodyear JV
Companies) is using or intends to use a "New D TM"
(namely: a trade mark similar to, incorporating, or being
a variation or foreign language equivalent of any of
DUNLOP, D Device, PNEUMANT and SP or an expansion of the
goods or services (within Licensed Products and Extended
Products and Extended Services) covered by an existing
application/registration) in any one or more countries of
French Africa, Russia/CIS, Middle East, Miscellaneous
countries or Part 6 countries, it may request the other
(whichever is the owner (the Europe JVC as owners
representative)) of DUNLOP, D Device, PNEUMANT or SP in
the country in question) to apply to register said
Trademark for the goods/services of interest and the other
company may cause said application to be filed unless the
trademark would conflict with the trademark rights of a
third party. If without due cause said other company does
not act and confirm or refuses to act to cause said
application to be filed within 21 days of said request
then the company who made the request may cause the
application to be filed in its own name or the other
company's name and the other company shall consent to said
application;
(c) in so far as SRI or any of SRI's Affiliates own Trademark
rights which may in any way interfere with the ability or
rights of the Europe JVC or any of its Subsidiaries to use
the SRI European Trademarks in relation to Extended
Products and Extended Services in the Greater European
Territory, SRI and SRI's Affiliates shall not unreasonably
object to use by the Europe JVC and its Subsidiaries of
those trademarks in relation to Extended Products and
Extended Services and shall consent to any application by
the Europe JVC or any of its Subsidiaries to register
those Trademarks for the Extended Products and Extended
Services in the Greater European Territory;
(d) in so far as Goodyear or any of Goodyear's Affiliates own
Trademark rights which may in any way interfere with the
ability or rights of the Europe JVC or any of its
Subsidiaries to use the Goodyear European Trademarks in
relation to Extended Products and Extended Services in the
Greater
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European Territory, Goodyear and Goodyear's Affiliates
shall not unreasonably object to use by the Europe JVC and
its Subsidiaries of those trademarks in relation to
Extended Products and Extended Services and consent to any
application by the Europe JVC to register those Trademarks
for the Extended Products and Extended Services in the
Greater European Territory; and
(e) in so far as DUNLOP, D Device, and SP are not registered
in any one or more countries of French Africa, Russia/CIS,
Middle East, Miscellaneous countries or Part 6 countries
or are not registered for any goods or services falling
within Licensed Products, Extended Products or Extended
Services, SRI or the Europe JVC may request the proprietor
of that trademark in that country (or in the case of the
SRI JV Companies and the Goodyear JV Companies, the Europe
JVC) to apply to register said trademark in said country
for requested goods/services and said company may cause
said application to be filed unless it would give rise to
a conflict with a third party. If without due cause said
company does not act and confirm or refuses to cause said
application to be filed within 21 days of said request
then the company making the request may cause the
application to be filed in its own name or the other
company's name and the other company shall consent to and
support said application.
ARTICLE X
R&D REORGANIZATION
------------------
10.1 After Closing, the Europe JVC will review the possibility for increasing
efficiency and cost savings in the tire research and development organizations
of the SRI JV Companies in France, Germany and the United Kingdom. If, following
appropriate consultation with relevant works councils, trade union and employee
representatives, the Europe JVC decides to proceed with any such efficiency
plan, then:
(a) the Europe JVC will consult SRI and Goodyear concerning
implementation of the plan; and
(b) all relevant costs of implementing the plan which are
reasonably and necessarily incurred and/or committed by
the Europe JVC (or its Affiliates controlled by it) within
the four months after Closing will be for the account of
SRI, provided
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however that SRI's obligation shall in no event exceed
US$7 million.
For the purpose of Article 10.1, "relevant costs" are (1) all direct employee
redundancy and relocation costs and (2) all incidental costs of reducing
variable research and development expense.
10.2 Upon request from the Europe JVC, SRI will make a capital contribution to
the general reserves of the Europe JVC in accordance with Article 5.8 of the
Shareholders Agreement for the Europe JVC to the Europe JVC of an amount equal
to the relevant costs referred to in Article 10.1(b).
ARTICLE XI
TECHNOLOGY MATTERS
------------------
11.1 The Parties agree that during the first twenty-four (24) months following
the Closing Date, the Parties will undertake to review and may reorganize and
realign the research and development and technology responsibilities of the
Parties in line with the Technology Joint Venture and Shareholders Agreement and
the technology license agreements listed in Article 5.03(d) of the Umbrella
Agreement and the overall objectives and operations of the Europe JVC. At the
end of such twenty-four (24) month period, the Parties will consider entering
into new agreements which reflect any revised responsibilities of each Party and
appropriate compensation. The Parties agree and understand that neither Party
will be financially disadvantaged as a result of such new agreements.
ARTICLE XII
EMPLOYEE MATTERS
----------------
12.1 SRI acknowledges that as of Closing, the SRI JV Companies will continue to
make employment available to the SRI JV Employees including participation in the
respective SRI JV Employee Benefit Plans in which they are entitled to
participate. The SRI JV Companies are liable for all expense charges,
contributions to, liabilities and benefits under the SRI JV Employee Benefit
Plans before the Closing Date and will be responsible for the expenses, charges,
contributions to, liabilities and benefits under these plans with effect upon
Closing. The SRI JV Companies have accounted for, consistent with past
practices, the expenses through all prior periods which end on or prior to the
Closing Date for the cost of providing the benefits for the SRI JV Employee
Benefit Plans.
12.2 Goodyear, Goodyear Fra, Goodyear Lux and Goodyear Canada acknowledge that
as of Closing, the Goodyear JV Companies will continue to
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make employment available to the Goodyear JV Employees, including participation
in the respective Goodyear JV Employee Benefit Plans in which they are entitled
to participate. The Goodyear JV Companies are liable for all expense charges,
contributions to, liabilities and benefits under the Goodyear JV Employee
Benefit Plans before the Closing Date and will be responsible for the expenses,
charges, contributions to, liabilities and benefits under these plans with
effect upon Closing. The Goodyear JV Companies have accounted for, consistent
with past practices, the expenses through all prior periods which end on or
prior to the Closing Date for the cost of providing the benefits for the
Goodyear JV Employee Benefit Plans.
12.3 As soon as practicable after the date of this JV Agreement, each of SRI
and Goodyear shall cause their applicable Affiliates to request from their
respective employees who are parties to the SRI German Employment Contracts and
the Goodyear German Employment Contracts, permission to provide copies of such
Contracts to the Parties. In lieu of the above, each of SRI or Goodyear may
make copies of the applicable agreements available to the other Parties after
approval of the Transactions by the European Commission, provided that in each
case such copies are provided at least one (1) month or more prior to the
Closing.
12.4 After the date of this JV Agreement and prior to the Closing, each of SRI
and Goodyear agree to advise the other of any directors, consultants or
employees of any of the SRI JV Companies and Goodyear JV Companies, as the case
may be, earning in excess of the equivalent of US$100,000 per annum that have
formally notified such SRI JV Company or Goodyear JV Company, as the case may
be, that he or she does not intend to continue his or her relationship with such
company following the consummation of the Transactions on the terms of the
applicable Collective Rules and the SRI JV Employment Contracts and Goodyear JV
Employment Contracts, as the case may be.
ARTICLE XIII
INDEMNIFICATION
---------------
The rights and obligations of the Parties under this JV Agreement are
governed by and subject to Article XV, Indemnification, of the Umbrella
Agreement and said Article is hereby incorporated into and made a part of this
JV Agreement by this reference. The term "Party" and/or "Parties" in said
Article XV of the Umbrella Agreement shall be deemed to include all the Parties
to this JV Agreement. SRI shall be solely liable for SRE's obligations to
indemnify under said Article XV of the Umbrella Agreement.
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ARTICLE XIV
SHARED SERVICES
---------------
14.1 The Parties acknowledge that after the Closing Date, in order to ensure
the continued operation of the Goodyear Businesses, the SRI Businesses and the
businesses to be extracted pursuant to the Goodyear Reorganization and the SRI
Reorganization, certain services will continue to be provided either by or to
the Goodyear JV Companies or the SRI JV Companies on the one hand and Goodyear
or SRI and their respective Affiliates (other than the Europe JVC and
Affiliates controlled by it) on the other hand (the "Shared Services").
14.2 The Parties agree that between the date hereof and the Closing Date, they
will, and will cause their respective Affiliates to, agree to the detailed
written commercial terms upon which the Shared Services will be provided between
them on the understanding that the provision of any such services will be made
at cost, or upon such other commercial terms, in each case, as are agreed
between Goodyear and SRI.
14.3 The Parties acknowledge that in the event that Shared Services, other than
services which in the reasonable opinion of the provider have confidentiality
aspects to providing such services (i.e. computer use, etc.), are transferred by
Goodyear or SRI or their respective Affiliates to third parties instead of to
Goodyear or SRI or their respective Affiliates (other than the Goodyear JV
Companies or the SRI JV Companies), as the case may be, the above arrangements
shall apply after such disposal, and such disposal shall proceed only if such
third party shall also agree to accept and abide by the above arrangements
regarding use by the Europe JVC or its Affiliates controlled by it with respect
to such services.
ARTICLE XV
NON TIRE REAL PROPERTY LEASES
-----------------------------
15.1 As of the Closing Date, SRI will, to the extent necessary, have caused the
SRI JV Companies to have entered into the SRI Non Tire Real Property Leases with
SRI and/or any Affiliate of SRI, other than the SRI JV Companies, for the use
and enjoyment of each of the real properties described in Article 5.11(b) at
cost, or upon such other commercial terms, in each case, as are agreed between
Goodyear and SRI. SRI will ensure that, with respect to the SRI Non Tire Real
Property Leases, as of the Closing Date, each SRI JV Company which is a party to
such leases will have a valid and subsisting right to use the premises at no
more than then current market terms, in each instance free and clear of all
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Encumbrances other than Permitted Encumbrances and that, as of the Closing Date,
there will be no default under any SRI Non Tire Real Property Lease nor any
event, that with the lapse of time or giving of notice, would constitute a
default thereunder and which would, in either case, have a Material Adverse
Effect on any of the Material SRI JV Companies.
15.2 As of the Closing Date, Goodyear will, to the extent necessary, have
caused the Goodyear JV Companies to have entered into the Goodyear Non Tire
Real Property Leases with Goodyear and/or any Affiliate of Goodyear, other than
the Goodyear JV Companies, for the use and enjoyment of each of the real
properties described in Article 6.11(b) at cost, or upon such other commercial
terms, in each case, as are agreed between Goodyear and SRI. Goodyear will
ensure that, with respect to the Goodyear Non Tire Real Property Leases, as of
the Closing Date, each Goodyear JV Company which is a party to such leases will
have a valid and subsisting right to use the premises at no more than then
current market terms, in each instance free and clear of all Encumbrances other
than Permitted Encumbrances and that, as of the Closing Date, there will be no
default under any Goodyear Non Tire Real Property Lease nor any event, that
with the lapse of time or giving of notice, would constitute a default
thereunder and which would, in either case, have a Material Adverse Effect on
any of the Material Goodyear JV Companies.
15.3 The Parties acknowledge that in the event any interest in the leases
described in Articles 15.1 or 15.2 above are disposed of by Goodyear or SRI or
their respective Affiliates to third parties instead of to Goodyear or SRI or
their respective Affiliates (other than the Goodyear JV Companies or the SRI JV
Companies), as the case may be, the above arrangements shall apply after such
disposal, and such disposal shall proceed only if such third party shall also
agree to accept and abide by the above arrangements regarding use by the Europe
JVC or its Affiliates controlled by it with respect to such leases.
ARTICLE XVI
This Article intentionally left blank.
ARTICLE XVII
WARRANTY SERVICES
-----------------
17.1 WARRANTY SERVICES. The Parties agree that the applicable Goodyear JV
Companies and the SRI JV Companies, respectively, from the Closing Date forward,
for the products contemplated to be part of the Goodyear Businesses
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and the SRI Businesses, shall perform repair and other work in connection with
product warranties and shall administratively handle all claims and pay all
costs arising in respect of warranty claims. Product recalls, including the
administration and costs therefor, shall be handled in accordance with the
applicable procedures of the Goodyear JV Companies and the SRI JV Companies, as
the case may be.
ARTICLE XVIII
INSURANCE AND PRODUCT LIABILITY
-------------------------------
18.1 INSURANCE. The Parties agree to and to cause their Affiliates, from the
date of this JV Agreement until the Closing Date, to maintain property and
liability insurance, if any, of the type and value maintained on the Goodyear
Business Assets and the SRI Business Assets, as applicable, immediately before
the signing of this JV Agreement.
18.2 SRI PRODUCT LIABILITY/COMPLETED OPERATIONS.
(a) SRI agrees to be responsible for the costs and expenses of liability for
products manufactured or services performed by the SRI JV Companies before the
Closing Date for the Transactions. Pursuant to but without limitation of the
foregoing, SRI will at SRI's expense secure a product liability/completed
operations insurance policy in the name of or for the benefit of the SRI JV
Companies to pay for losses from product liability/completed operations claims
(a "SRI Pre-Closing Product Liability Claim") arising on and after the Closing
Date for products manufactured or services performed by the SRI JV Companies
prior to the Closing Date and the Parties will cause the relevant SRI JV
Companies to claim and to use their best efforts to recover under such policy
for any insured losses. Such policy will provide coverage for a term of at least
two (2) years after the Closing Date. The insurer under such policy shall
administer such SRI Pre-Closing Product Liability Claims and shall be directed
by SRI to coordinate with the risk manager for the Europe JVC regarding such
risk manager's administration of SRI Pre-Closing Product Liability Claims with
SRI and SRI's Affiliates, as mutually agreed between Goodyear and SRI.
(b) In the event that a SRI Pre-Closing Product Liability Claim gives rise to
any claim by an SRI JV Company for recovery of insured losses which are not for
any reason met in full or in part by the relevant insurer (such loss being an
"SRI Uninsured Loss") for which SRI is responsible pursuant to this Article
18.2, the applicable SRI JV Company shall with reasonable promptness notify SRI
in writing, specifying the nature of and the specific basis for such claim
and the
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amount or the estimated amount thereof to the extent then feasible. SRI may,
and upon request of the SRI JV Company shall, retain counsel reasonably
satisfactory to the SRI JV Company to represent the SRI JV Company and any
other persons SRI may designate in connection with such claim. SRI shall pay
the fees and disbursements of such counsel with regard thereto. SRI shall not
be liable under this Article 18.2 for any settlement of any SRI Uninsured Loss
without the prior written consent of SRI, which consent shall not be
unreasonably withheld or delayed. SRI shall have the right to direct the
defense or settlement of any SRI Uninsured Loss, but shall not, without the SRI
JV Company's prior written consent, which consent shall not be unreasonably
withheld or delayed, settle or compromise any SRI Uninsured Loss or consent to
entry of any Judgment which does not include as an unconditional term thereof
the release by the claimant or the plaintiff of the SRI JV Company and its
Affiliates from all liability in respect of such claim. In the event SRI
exercises the right to undertake the defense of any SRI Pre-Closing Product
Liability Claim as provided above, the relevant SRI JV Company shall cooperate,
and shall use all reasonable efforts to cause its Affiliates to cooperate, with
SRI in such defense and make available to SRI, at SRI's expense, all witnesses,
pertinent records, materials and information in the SRI JV Company's possession
or under its control, and shall use all reasonable efforts to cause its
Affiliates to make available to SRI, at SRI's expense, all witnesses, pertinent
records, materials and information in the possession or under the control of
any of them relating thereto, in each case as is reasonably required by SRI.
18.3 GOODYEAR PRODUCT LIABILITY/COMPLETED OPERATIONS.
(a) Goodyear agrees to be responsible for the costs and expenses of liability
for products manufactured or services performed by the Goodyear JV Companies
before the Closing Date for the Transactions. Pursuant to but without limitation
of the foregoing, Goodyear will at Goodyear's expense secure a product
liability/completed operations insurance policy in the name of or for the
benefit of the Goodyear JV Companies to pay for losses from product
liability/completed operations claims (a "Goodyear Pre-Closing Product Liability
Claim") arising on and after the Closing Date for products manufactured or
services performed by the Goodyear JV Companies prior to the Closing Date and
the Parties will cause the relevant Goodyear JV Companies to claim and to use
their best efforts to recover under such policy for any insured losses. Such
policy will provide coverage for a term of at least two (2) years after the
Closing Date. The insurer under such policy shall administer such Goodyear
Pre-Closing Product Liability Claims and shall be directed by Goodyear to
coordinate with the risk manager for the Europe JVC regarding such risk
manager's administration of Goodyear Pre-Closing Product Liability Claims with
Goodyear and Goodyear's Affiliates, as mutually agreed between SRI and Goodyear.
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(b) In the event that a Goodyear Pre-Closing Product Liability Claim gives rise
to any claim by a Goodyear JV Company for recovery of insured losses which are
not for any reason met in full or in part by the relevant insurer (such loss
being a "Goodyear Uninsured Loss") for which Goodyear is responsible pursuant
to this Article 18.3, the applicable Goodyear JV Company shall with reasonable
promptness notify Goodyear in writing, specifying the nature of and the
specific basis for such claim and the amount or the estimated amount thereof to
the extent then feasible. Goodyear may, and upon request of the Goodyear JV
Company shall, retain counsel reasonably satisfactory to the Goodyear JV
Company to represent the Goodyear JV Company and any other persons Goodyear may
designate in connection with such claim. Goodyear shall pay the fees and
disbursements of such counsel with regard thereto. Goodyear shall not be liable
under this Article 18.3 for any settlement of any Goodyear Uninsured Loss
without the prior written consent of Goodyear, which consent shall not be
unreasonably withheld or delayed. Goodyear shall have the right to direct the
defense or settlement of any Goodyear Uninsured Loss, but shall not, without
the Goodyear JV Company's prior written consent, which consent shall not be
unreasonably withheld or delayed, settle or compromise any Goodyear Uninsured
Loss or consent to entry of any Judgment which does not include as an
unconditional term thereof the release by the claimant or the plaintiff of the
Goodyear JV Company and its Affiliates from all liability in respect of such
claim. In the event Goodyear exercises the right to undertake the defense of
any Goodyear Pre-Closing Product Liability Claim as provided above, the
relevant Goodyear JV Company shall cooperate, and shall use all reasonable
efforts to cause its Affiliates to cooperate, with Goodyear in such defense and
make available to Goodyear, at Goodyear's expense, all witnesses, pertinent
records, materials and information in the Goodyear JV Company's possession or
under its control, and shall use all reasonable efforts to cause its Affiliates
to make available to Goodyear, at Goodyear's expense, all witnesses, pertinent
records, materials and information in the possession or under the control of
any of them relating thereto, in each case as is reasonably required by
Goodyear.
ARTICLE XIX
TERM OF JV AGREEMENT; EFFECTIVE DATE
------------------------------------
19.1 TERM OF AGREEMENT. The covenants and agreements of the Parties hereto
contained in this JV Agreement shall survive the execution and delivery of this
JV Agreement and the Closing. This JV Agreement shall remain in effect until
terminated in accordance with the provisions of the Umbrella Agreement.
19.2 EFFECTIVE DATE. This JV Agreement shall become effective as of the date
first above written.
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ARTICLE XX
MISCELLANEOUS PROVISIONS
------------------------
20.1 AMENDMENTS. This JV Agreement may be amended, modified or superseded, and
any of the terms, covenants or conditions hereof may be waived, only by a
written instrument expressly referencing this JV Agreement as being amended,
modified, superseded or waived, executed by the Parties, or, in the case of a
waiver, by the Party or Parties waiving compliance.
20.2 WAIVERS. The failure at any time of any Party to require performance by
another Party of any responsibility or obligation provided for in this JV
Agreement shall in no way affect the full right to require such performance at
any time thereafter, nor shall the waiver by any Party of a breach of any
provision of this JV Agreement by another Party constitute a waiver of any
succeeding breach of the same or any other provision nor constitute a waiver of
the responsibility or obligation itself. No investigation conducted by or on
behalf of any Party hereto, whether prior or subsequent to the date hereof,
shall affect the representations and warranties contained in this JV Agreement,
or in the schedules or certificates delivered pursuant hereto, or the rights of
any Party hereto with respect to such representations and warranties or
otherwise under this JV Agreement.
20.3 ASSIGNABILITY. Neither this JV Agreement nor any right or obligation
hereunder may be assigned or delegated in whole or in part by any Party without
the prior written consent of the other Parties, and any such attempted
assignment or delegation without such consent shall be null, void AB INITIO and
without effect. Any permitted assignment of this JV Agreement shall be binding
upon and inure to the benefit of the Parties hereto and their respective
successors and permitted assigns and the assignor shall, unless the Parties
agree otherwise, remain liable for the obligations of any of its permitted
assigns.
20.4 SEVERABILITY. If any one or more of the provisions contained in this JV
Agreement or any document executed in connection therewith shall be invalid,
illegal or unenforceable in any respect under any applicable Law, the validity,
legality and enforceability of the remaining provisions contained herein shall
not in any way be affected or impaired; PROVIDED, HOWEVER, that in such case the
Parties agree to use their best efforts (but without the incurrence of
unreasonable cost or liability) to achieve the purpose of the invalid provision
by a new legally valid stipulation.
20.5 NOTICES. All notices, requests, demands and other communications
required or permitted under this JV Agreement shall be in writing and shall be
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deemed to have been duly given if delivered by hand, or sent by courier (and, in
either case duly receipted) or facsimile transmission (provided that, in the
case of facsimile transmission, a confirmation copy thereof shall be delivered
by hand or sent by courier (and, in either case duly receipted) within two (2)
days of transmission) as follows (until notice of a change thereof is given as
provided in this Article 20.5):
(a) if to Goodyear, to:
The Goodyear Tire & Rubber Company
1144 East Market Street
Akron, Ohio 44316-0001, U.S.A.
Attention: Corporate Secretary
Facsimile: (330) 796 7861
(b) if to Goodyear Fra, to:
Goodyear S.A.
101 Avenue De La Chataigneraie
Bp 310
92506 Rueil-Malmaison Cedex - France
Attention: Finance Director
Facsimile: 33 1 47 16 2317
(c) if to Goodyear Lux, to:
Goodyear S.A.
Avenue Gordon Smith
L-7750 Colmar-Berg
Grand Duchy of Luxembourg
Attention: Finance Director
Facsimile: 352 8199 2709
(d) if to Goodyear Canada, to:
Goodyear Canada Inc.
450 Kipling Avenue
Toronto, Ontario M8Z 5E1
Canada
Attention: President
Facsimile: 1-416-201-4249
(e) if to SRI, to:
Sumitomo Rubber Industries, Ltd.
6-9, 3-Chome
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Wakinohama-cho, Chuo-ku
Kobe 651-0072, Japan
Attention: General Manager, Legal Department
Facsimile: 81 78 265 3111
(f) if to SRE, to:
Sumitomo Rubber Europe B.V.
Rue de Luxembourg 14A
B-1000 Brussels
Belgium
Attention: Chairman
Facsimile: 32 2 500 3693
All notices given in accordance with this Article 20.5 are (subject to
the foregoing provisions) effective, if delivered by hand or mailed by courier,
at the time of delivery, and, if communicated by facsimile, at the time of
receipt of confirmation of a successful transmission.
20.6 GOVERNING LAW, DISPUTES AND LANGUAGE.
(a) THIS JV AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK, UNITED STATES OF AMERICA, WITHOUT GIVING
EFFECT TO ITS PRINCIPLES OR RULES OF CONFLICT OF LAWS TO THE EXTENT SUCH
PRINCIPLES OR RULES WOULD REQUIRE OR PERMIT THE APPLICATION OF THE LAWS OF
ANOTHER JURISDICTION.
(b) The parties hereto acknowledge that this JV Agreement and all other
agreements contemplated to be delivered in connection herewith, incorporate
certain negotiated terms and therefore, no presumption shall arise favoring any
party hereto by virtue of authorship of any provisions of this JV Agreement,
exhibits, schedules or any documents specifically referenced herein.
(c) This JV Agreement has been written in English and the English
version shall be the definitive text even if for convenience or otherwise it is
translated into another language.
(d) Except as may be otherwise specifically provided in this JV
Agreement, any dispute between the parties in regard to the interpretation of,
the effect of, the Parties' respective rights and obligations under, or a breach
of any matter arising out of this JV Agreement shall be decided by the
procedures in the Umbrella Agreement.
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20.7 TERMINATION PRIOR TO CLOSING. This JV Agreement may be terminated in
accordance with the provisions of Article 18.08 of the Umbrella Agreement.
20.8 THIRD PARTIES. Except as specifically set forth or referred to in the
Alliance Agreements, nothing expressed or implied herein is intended or shall be
construed to confer upon or give any Person or entity other than the Parties
hereto, their Affiliates and subsidiaries from time to time and their permitted
successors and assigns any rights or remedies under or by reason of this JV
Agreement.
20.9 TITLES TO ARTICLES AND SUBPARTS. The various titles of Articles or
subparts of this JV Agreement are used solely for the purpose of convenience
and shall not be used for interpreting or construing any word, clause, article
or subpart of this JV Agreement.
20.10 COUNTERPARTS. This JV Agreement may be executed simultaneously in
multiple counterparts, each of which shall be deemed an original, but all of
which taken together shall constitute one and the same instrument.
20.11 SINGULAR AND PLURAL; GENDER. Whenever the context requires, words used in
the singular shall be construed to mean or include the plural and vice versa,
and pronouns of any gender shall be deemed to include and designate the
masculine, feminine or neuter gender.
20.12 INCORPORATION. The Parties hereto hereby agree that Articles 4.01, ACCESS
TO DATA AND PROPERTIES, 4.02, CONSENTS; NONASSIGNABILITY OR APPROVALS, 4.03,
ORDINARY COURSE OF BUSINESS, 4.05, ANNOUNCEMENTS AND CONFIDENTIALITY, 4.06,
PRESERVATION OF AND ACCESS TO BOOKS AND RECORDS, 18.06 SET-OFF, 18.08,
TERMINATION PRIOR TO CLOSING, 18.09, ENTIRE AGREEMENT, 18.11, COSTS AND TAXES,
and 18.12, REMEDIES, of the Umbrella Agreement are hereby incorporated into and
made a part of this JV Agreement by this reference. The term "Party" and/or
"Parties" in the above referenced articles of the Umbrella Agreement shall be
deemed to include all the Parties to this JV Agreement.
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IN WITNESS WHEREOF, the Parties hereto have caused this JV Agreement to
be duly executed as of the day and year first above written.
THE GOODYEAR TIRE & RUBBER COMPANY
/S/ Samir Gibara
-----------------------------------------------
By: Samir Gibara
Title: Chairman of the Board, Chief Executive
Officer and President
GOODYEAR S.A. a French corporation
/S/ Samir Gibara
-----------------------------------------------
By : Samir Gibara
Title: Attorney-in-Fact
GOODYEAR S.A.
a Luxembourg corporation
/S/ Samir Gibara
-----------------------------------------------
By: Samir Gibara
Title: Attorney-in-Fact
GOODYEAR CANADA INC.
/S/ Samir Gibara
-----------------------------------------------
By: Samir Gibara
Title: Attorney-in-Fact
SUMITOMO RUBBER INDUSTRIES , LTD.
/S/ Naoto Saito
-----------------------------------------------
By: Naoto Saito
Title: Chairman
SUMITOMO RUBBER EUROPE B.V.
/S/ Naoto Saito
-----------------------------------------------
By: Naoto Saito
Title: Attorney-in-Fact
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EXHIBIT 10.1 (Continued)
AMENDMENT NO. 1 TO
JOINT VENTURE AGREEMENT FOR EUROPE
This Amendment No. 1 to the Joint Venture Agreement for Europe ("JVA") dated as
of September 1, 1999 ("Amendment No. 1") by and among The Goodyear Tire & Rubber
Company, a company organised and existing under the laws of the State of Ohio of
The United States of America ("Goodyear"), Goodyear S.A., a company organized
and existing under the laws of the Republic of France ("Goodyear Fra"), Goodyear
S.A., a company organized and existing under the laws of the Grand Duchy of
Luxembourg ("Goodyear Lux"), Goodyear Canada Inc., a company organized and
existing under the laws of the Province of Ontario of Canada ("Goodyear
Canada"), Sumitomo Rubber Europe B.V., a company organized and existing under
the laws of The Netherlands (to be renamed Goodyear Dunlop Tires Europe B.V.)
("SRE") and Sumitomo Rubber Industries, Ltd., a company organized and existing
under the laws of Japan ("SRI").
WITNESSETH:
WHEREAS,
(A) the above-stated parties desire to amend the JVA by amending Article
2.4 and Schedule 2.4 thereof (i) by having Goodyear transfer the shares
of Checkpoint Franchise B.V., where Checkpoint Franchise B.V. owns all
the shares of Goodyear Great Britain Limited, to SRE in exchange for
shares of SRE and by not having Goodyear Lux transfer any shares of
Goodyear Great Britain Limited to SRE, (ii) by not having Goodyear Lux
transfer any shares of S.A. Goodyear Coordination Center N.V. to SRE,
and (iii) by retaining as an asset of DUK the sports field site known
as "Sports Ground East, Fort Dunlop" ("sports field site") referred to
in Schedule 2.1(b) of the JVA for a period of time and to agree to
arrangements concerning its disposal by DUK following Closing; and
(B) the above-stated parties desire to agree to arrangements concerning
certain letters of comfort issued by SRI to Sumitomo Bank Limited in
favor of DU.
NOW, THEREFORE, IT IS AGREED AS FOLLOWS:
1. Goodyear Great Britain Limited and S.A. Goodyear Coordination Center
N.V.
1.1 The parties agree that Goodyear shall transfer the entire issued share
capital of Checkpoint Franchise B.V., a Netherlands company, which will
on the Closing Date be the 100% owner of all issued share capital of
Goodyear Great Britain Limited, except for certain shares held by
directors as nominees, to SRE in exchange for shares of solely voting
stock of SRE, all of the above-stated shares of Checkpoint Franchise
B.V., Goodyear Great Britain Limited and SRE to be free and clear of
all Encumbrances.
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1.2 The parties agree that Goodyear Lux shall not transfer any shares of
Goodyear Great Britain directly to SRE and shall not transfer any
shares of S.A. Goodyear Coordination Center N.V., which corporation has
been dissolved, to SRE.
1.3 The amount of Equity Capital of SRE to be issued by SRE to Goodyear and
Goodyear Lux in exchange for the shares of the companies to be
transferred by Goodyear and Goodyear Lux pursuant to Article 2.4 and
Schedule 2.4 of the JVA, as modified and amended by this Amendment No.
1, shall be adjusted in accordance with the formula set forth in such
Schedule 2.4, where the "Share Value" for Goodyear shall increase from
$291.4 mm to $594.4 mm to reflect the additional value of Checkpoint
Franchise B.V. and Goodyear Great Britain Limited as being exchanged by
Goodyear for SRE shares and where the "Share Value" for Goodyear Lux
shall decrease from $1,071.2 mm to $768.2 mm to reflect the subtracted
value of Goodyear Great Britain Limited not being in the shares of
companies being exchanged by Goodyear Lux for SRE shares.
1.4 Goodyear hereby:
1.4.1 acknowledges and agrees with SRE that to the extent that any
stamp duty or other Tax is incurred by SRE in connection with
the matters referred to in Article 1.1 above, Goodyear agrees
to indemnify, defend and hold harmless SRE from any such stamp
duty and any other Tax in accordance with Article 3.04(c) of
the Umbrella Agreement dated as of June 14, 1999 by and
between Goodyear and SRI; and
1.4.2 agrees to indemnify, defend and hold harmless SRI (and its
Affiliates) from all costs, losses and liabilities incurred by
SRI (or any of its Affiliates) to the extent that the same
would not have been incurred had the parties given effect to
Article 2.4 and Schedule 2.4 of the JVA in their original form
prior to the amendments thereto set out in this Amendment No.
1, including, without limitation, costs, losses and
liabilities arising out of the inability of SRI (or any of its
Affiliates) to have the benefit in Japan of foreign tax
credits as a result of giving effect to such amendments.
2. Sports Ground East, Fort Dunlop
2.1 The parties agree that the sports field site shall remain as one of the
assets of DUK after Closing until such time as the sports field site is
sold to Tarmac Richardson Development Limited ("Tarmac") by December
31, 1999 or thereafter to SRI (or its nominee) notwithstanding the
provisions of paragraph (xv) of Schedule 2.1(b) of the JVA on the
following basis:
2.1.1 following Closing the Parties will cooperate to agree to
arrangements for the disposal of the sports field site either
to Tarmac or to SRI (or its nominee) which, so far as is
practicable, will have the same economic effect for DUK (and
its Affiliates) and SRI (and its Affiliates) as if the
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sports field site had been disposed of by DUK to Tarmac or
another third party at market value immediately prior to
Closing and so that SRI (and its Affiliates) can receive the
benefit of the net proceeds of sale arising in DUK on such a
disposal, i.e. after deducting all costs associated with its
disposal; and
2.1.2 SRI shall indemnify, defend and hold harmless DUK (and its
Affiliates) from and against all costs, losses and liabilities
(other than costs already deducted in accordance with Article
2.1.1 above) incurred by DUK (or any of its Affiliates) to the
extent that the same would not have been incurred had the
sports field site been disposed of immediately prior to
Closing.
3. Letters of Comfort
3.1 SRI has issued a letter of comfort to Sumitomo Bank Limited in respect
of forward exchange contracts entered into by DU which are listed in
Schedule A hereto. The parties have agreed that it is impracticable to
terminate such letter of comfort on Closing and that it shall continue
in place for so long as the forward exchange contracts remain effective
provided that the parties will procure that DU will not enter into any
new forward exchange contracts with Sumitomo Bank Limited which are
covered by such letter of comfort. SRE shall indemnify, defend and hold
harmless SRI (and its Affiliates) from and against all costs, losses
and liabilities incurred by SRI (or any of its Affiliates) under such
letter of comfort.
4. SRI Reorganization
4.1 The Parties recognize that, for commercial reasons, it has not been
practicable to complete the non-exclusive grant back of the IMS patent
by SRI to DG envisaged by paragraph (vi) of Schedule 2.1(b) to the JVA
(the "Grant").
4.2 The Parties agree that they will each use their respective reasonable
endeavors to achieve completion of the Grant as soon as reasonably
practicable after the date hereof.
5. General
5.1 The Parties agree that the JVA shall be amended to give effect to the
provisions of this Amendment No. 1 but in all other respects the other
terms and conditions of the JVA shall continue without change.
5.2 The Parties agree that expressions used in this Amendment No. 1 will
have the same meanings as are ascribed thereto in the JVA.
-3-
X-10.1-105
<PAGE> 106
IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 1 to the
Joint Venture Agreement for Europe to be duly executed as of the day and year
first above written in this Amendment No. 1.
THE GOODYEAR TIRE & RUBBER COMPANY
/s/ C.E. Sprang
------------------------------
By: Clark E. Sprang
Title: Senior Vice President
Business Development and
Business Integration
GOODYEAR S.A.
a French corporation
/s/ C.E. Sprang
------------------------------
By: Clark E. Sprang
Title: Attorney-in-Fact
GOODYEAR S.A.
a Luxembourg corporation
/s/ C.E. Sprang
------------------------------
By: Clark E. Sprang
Title: Attorney-in-Fact
GOODYEAR CANADA, INC.
/s/ C.E. Sprang
------------------------------
By: Clark E. Sprang
Title: Attorney-in-Fact
SUMITOMO RUBBER INDUSTRIES, LTD.
/s/ T. Uchibayashi
------------------------------
By: Takashi Uchibayashi
Title: Representative Director and
Executive Vice President
SUMITOMO RUBBER EUROPE B.V.
/s/ T. Uchibayashi
------------------------------
By: Takashi Uchibayashi
Title: Attorney-in-Fact
-4-
X-10.1-106
<PAGE> 1
Conformed Copy
as of August 28, 1999
EXHIBIT 10.2
SHAREHOLDERS AGREEMENT FOR THE EUROPE JVC
DATED AS OF JUNE 14, 1999
BY AND AMONG
THE GOODYEAR TIRE & RUBBER COMPANY,
GOODYEAR S.A., A FRENCH CORPORATION,
GOODYEAR S.A., A LUXEMBOURG CORPORATION,
GOODYEAR CANADA INC.,
AND
SUMITOMO RUBBER INDUSTRIES, LTD.
X-10.2-1
<PAGE> 2
TABLE OF CONTENTS
PAGE NO.
ARTICLE I
DEFINITIONS
Article 1.1 Definitions........................................ 2
Article 1.2 Definitions Can be Substantive..................... 5
Article 1.3 Definitions Not in Article I....................... 5
Article 1.4 Non-Working Day Performance........................ 5
Article 1.5 Calculation of Day Periods......................... 5
ARTICLE II
COOPERATION AMONG THE SHAREHOLDERS
Article 2.1 ..................................................... 6
ARTICLE III
GOVERNANCE OF THE COMPANY-SHAREHOLDERS
Article 3.1 Shareholders Meetings.............................. 6
Article 3.2 Annual Meeting..................................... 6
Article 3.3 Special Meetings................................... 7
Article 3.4 Voting............................................. 7
Article 3.5 Quorum............................................. 7
Article 3.6 Adoption of Decisions.............................. 8
Article 3.7 Share Ledger....................................... 11
Article 3.8 Shareholder's Lists................................ 12
Article 3.9 Notice............................................. 12
Article 3.10 Attendance......................................... 12
Article 3.11 Conduct of Meeting................................. 12
Article 3.12 Shareholder Meetings Without Notice................ 12
Article 3.13 Shareholders Meetings by Telephone, Video or 13
Electronically.....................................
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X-10.2-2
<PAGE> 3
Article 3.14 Consent of Shareholders in Lieu of Meeting......... 13
Article 3.15 Minutes............................................ 13
Article 3.16 Enforcement of Decision............................ 13
ARTICLE IV
BOARD OF DIRECTORS
Article 4.1 Board Composition.................................. 14
Article 4.2 Change in Composition.............................. 15
Article 4.3 Meetings of the Board.............................. 16
Article 4.4 Special Meetings................................... 17
Article 4.5 Quorum and Decision Making......................... 17
Article 4.6 Written Statement In Lieu of Meeting............... 18
Article 4.7 Proxies............................................ 18
Article 4.8 Standing or Temporary Committees................... 18
Article 4.9 Compensation....................................... 19
Article 4.10 Resignations....................................... 20
Article 4.11 Indemnification and Liability of Directors and 20
Officers...........................................
Article 4.12 Representation of the Company...................... 20
Article 4.13 Agents............................................. 21
Article 4.14 The Chairman of the Board.......................... 21
Article 4.15 The President...................................... 21
Article 4.16 Vice-Chairman...................................... 22
Article 4.17 Secretary and Assistant Secretaries................ 22
Article 4.18 The Finance Director............................... 23
Article 4.19 Duties of Directors May be Delegated............... 24
Article 4.20 Removal............................................ 24
Article 4.21 Salaries and Compensation.......................... 24
Article 4.22 Delegation of Authority to Hire, Discharge and Designate 24
Duties.............................................
Article 4.23 Contracts.......................................... 24
Article 4.24 Supervisory Board.................................. 25
ii
X-10.2-3
<PAGE> 4
ARTICLE V
SHARES
Article 5.1 Shareholding....................................... 25
Article 5.2 Transfer of Shares, Creation of Usufruct and Pledge 25
on Shares..........................................
Article 5.3 Share Transfer and Pledge Restrictions............. 25
Article 5.4 Registered Shareholders............................ 27
Article 5.5 Regulations........................................ 27
Article 5.6 Fixing Record Date................................. 27
Article 5.7 Ownership of Shares of Affiliates Wholly-Owned by 27
the Company........................................
Article 5.8 Capital Contributions.............................. 28
ARTICLE VI
DIVIDENDS AND FINANCE
Article 6.1 Dividends.......................................... 28
Article 6.2 Debt/Equity Ratios................................. 29
Article 6.3 Future Funding Arrangements........................ 29
Article 6.4 Creation of Reserves............................... 33
Article 6.5 Moneys............................................. 33
Article 6.6 Fiscal Year........................................ 33
Article 6.7 Directors' Statement............................... 33
Article 6.8 Financial Information to be Provided by the Company 33
to the Parties.....................................
Article 6.9 Repurchase of Shares............................... 34
ARTICLE VII
BOOKS AND RECORDS; TAX INQUIRY
Article 7.1 Books, Accounts and Records........................ 34
Article 7.2 Tax Treatment of Technology License................ 35
iii
X-10.2-4
<PAGE> 5
ARTICLE VIII
TRANSFER PRICING POLICY AND SERVICE CHARGE
Article 8.1 Europe JVC Transfer Pricing Policy................. 35
Article 8.2 Service Charge..................................... 35
ARTICLE IX
EUROPE JVC OPERATING PROVISIONS
Article 9.1 Reporting Lines.................................... 36
Article 9.2 OEM Council........................................ 36
Article 9.3 Conduct of Business................................ 37
Article 9.4 Permitted Scope of Business of the Europe JVC...... 37
Article 9.5 Sales Territories.................................. 37
Article 9.6 Brand Policies..................................... 39
Article 9.7 Sales Structure; Pricing and Marketing Policies.... 39
Article 9.8 Manufacturing/Sourcing............................. 41
Article 9.9 Non-Compete........................................ 42
Article 9.10 Business Plan...................................... 43
Article 9.11 Offices and Branches............................... 44
Article 9.12 Insurances......................................... 44
Article 9.13 Certain Fees....................................... 44
ARTICLE X
INCONSISTENCY BETWEEN THIS SHAREHOLDERS AGREEMENT
AND THE ARTICLES OF INCORPORATION
Article 10.1 Inconsistency...................................... 44
iv
X-10.2-5
<PAGE> 6
ARTICLE XI
RELATIONSHIP OF THE PARTIES
Article 11.1 No Partnership or Agency........................... 45
ARTICLE XII
EFFECTIVE DATE; TERM; TERMINATION; DURATION
Article 12.1 Effective Date..................................... 45
Article 12.2 Term............................................... 45
Article 12.3 Termination by Either Party........................ 46
Article 12.4 Duration of the Company............................ 46
ARTICLE XIII
MISCELLANEOUS PROVISIONS
Article 13.1 Amendments....................................... 46
Article 13.2 Waivers.......................................... 46
Article 13.3 Assignability.................................... 46
Article 13.4 Severability..................................... 47
Article 13.5 Notices.......................................... 47
Article 13.6 Set-Off.......................................... 48
Article 13.7 Governing Law, Disputes and Language............. 48
Article 13.8 Termination Prior to Closing..................... 49
Article 13.9 Third Parties.................................... 49
Article 13.10 Titles to Articles and Subparts.................. 49
Article 13.11 Counterparts..................................... 49
Article 13.12 Singular and Plural; Gender..................... 49
Article 13.13 Incorporation.................................... 49
v
X-10.2-6
<PAGE> 7
SCHEDULES AND EXHIBITS TO
SHAREHOLDERS AGREEMENT FOR THE EUROPE JVC
SCHEDULES
ARTICLE
NUMBER SUBJECT REFERENCE
4.1 Responsibilities of Vice-Chairman 4.1
6.3(iv)(C) Additional Equity Participation 6.3(iv)(C)
8.1 Europe JVC Transfer Pricing Policy 8.1, 9.5, 9.8
9.1 Reporting Structure 9.1
9.5(a) European Territory 9.5(a)
9.5(b) Sub-Equatorial Africa 9.5(b)
9.5(c) French Africa 9.5(c)
9.5(c) Russia/CIS 9.5(c)
9.5(d) Middle East 9.5(d)
9.5(e) Miscellaneous Countries 9.5(e)
EXHIBITS
ARTICLE
NUMBER SUBJECT REFERENCE
1.1(a) Deed of Amendment of the Articles of 1.1
Association of the Company
5.3 Deed of Adherence 5.3
vi
X-10.2-7
<PAGE> 8
SHAREHOLDERS AGREEMENT FOR THE EUROPE JVC
This Shareholders Agreement for the Europe JVC dated as of June 14, 1999 (the
"Shareholders Agreement") by and among The Goodyear Tire & Rubber Company, a
company organized and existing under the laws of the State of Ohio of the United
States of America ("Goodyear"), Goodyear S. A., a company organized and existing
under the laws of the Republic of France ("Goodyear Fra"), Goodyear S. A., a
company organized and existing under the laws of the Grand Duchy of Luxembourg
("Goodyear Lux"), Goodyear Canada Inc., a company organized and existing under
the laws of the Province of Ontario of Canada ("Goodyear Canada") and Sumitomo
Rubber Industries, Ltd., a company organized and existing under the laws of
Japan ("SRI").
WITNESSETH:
WHEREAS, simultaneously with the execution of this Shareholders
Agreement, Goodyear and SRI have executed the Umbrella Agreement of even date
herewith (the "Umbrella Agreement") pursuant to which Goodyear and SRI have
formed the Alliance regarding the Business as defined in the Umbrella Agreement;
and
WHEREAS, simultaneously with the execution of this Shareholders
Agreement, Goodyear, Goodyear Fra, Goodyear Lux, Goodyear Canada, SRI and
Sumitomo Rubber Europe B.V. have executed the Joint Venture Agreement for Europe
of even date herewith (the "Europe JV Agreement") pursuant to which Goodyear,
Goodyear Fra, Goodyear Lux, Goodyear Canada, SRI and Sumitomo Rubber Europe B.V.
will organize a joint venture company in Europe to be named Goodyear Dunlop
Tires Europe B.V. (the "Europe JVC" or the "Company"), which will hold
substantially all of SRI's current tire-related manufacturing, distribution and
sales operations and air springs operations in Europe and substantially all of
Goodyear's current tire-related manufacturing, distribution and sales operations
in Europe, as such SRI operations and such Goodyear operations are more fully
defined in the Europe JV Agreement; and
WHEREAS, the Parties hereto desire to set forth in this Shareholders
Agreement the terms, conditions and provisions that will regulate their
relationship as shareholders and govern the management and operation of the
Europe JVC;
1
X-10.2-8
<PAGE> 9
NOW, THEREFORE, IT IS AGREED AS FOLLOWS:
ARTICLE I
DEFINITIONS
1.1 DEFINITIONS. The terms used herein which are also defined in the Umbrella
Agreement or the Europe JV Agreement shall have the meaning set forth in Article
1.01 of the Umbrella Agreement and Article 1.1 of the Europe JV Agreement, as
the case may be, unless otherwise defined in this Shareholders Agreement. In
addition, the following terms shall, unless the context otherwise requires, have
the following respective meanings:
"Affiliate" shall mean, with respect to any specified Person, any
Person that, directly or indirectly, controls, is controlled by or is under
direct or indirect common control with, such specified Person; provided that the
term "Affiliate" as used herein and in the other Alliance Agreements, shall not
include any direct or indirect shareholder of Goodyear or SRI or other Persons
controlled by those shareholders, unless such shareholders or other Persons are
expressly included. For this purpose, the term control (including its use in the
terms "controlled by" and "under direct or indirect common control with") shall
mean the ownership, directly or indirectly, of more than fifty percent (50%) of
the voting securities of such Person. The term "Affiliates" when used in
conjunction with Goodyear and its Affiliates shall also include South Pacific
Tyres, in which Goodyear has a fifty percent (50%) interest, provided, however,
that the arrangements contemplated in the Alliance Agreements shall not result
in an amendment of the financial and other terms of any existing license
agreements between SRI (or its Affiliates) and Pacific Dunlop Limited (or its
Subsidiaries) relating to South Pacific Tyres or its Subsidiaries with respect
to any product types or tread designs already in production in South Pacific
Tyres or its Subsidiaries. The Parties agree that Nakata Engineering Co., Ltd.
is not included within the definition of "Affiliates" in the Alliance
Agreements, notwithstanding SRI's control thereof.
"Alliance" means the strategic alliance for the manufacture,
distribution and sale of tires between Goodyear, SRI and their Affiliates.
"articles of incorporation" has the same meaning as articles of
association under the laws of The Netherlands. (The form of articles of
incorporation of the Company on and after the Closing Date are attached as
Exhibit 1.1(a). The Parties agree that between the date of this Shareholders
Agreement and the Closing Date, the Parties will amend
2
X-10.2-9
<PAGE> 10
the form of the articles of association attached as Exhibit 1.1(a) to reflect
certain key minority protection rights provided in this Shareholders Agreement,
using the precise meaning of such provisions. In the event that certain
provisions are not approved by the Ministry of Justice of The Netherlands, the
Parties agree to proceed with using the form of articles of association attached
as Exhibit 1.1(a), as supplemented by those provisions which the Ministry of
Justice of The Netherlands will approve for inclusion in such articles of
association.)
"Closing" means the closing of the Transactions pursuant to the terms
of the Alliance Agreements, subject to the satisfaction or waiver of all the
conditions thereto set forth therein.
"Closing Date" shall have the meaning specified in Article 5.01 of the
Umbrella Agreement.
"Company" shall mean Goodyear Dunlop Tires Europe B.V.
"debt" shall have the meaning specified in Article 6.2 hereof.
"Eastern Europe" shall have the meaning specified in Article 9.5
hereof.
"EITF" means the Emerging Issues Task Force which is an accounting
standards setting organization operating under the auspices of the Financial
Accounting Standards Board and recognized by the Securities and Exchange
Commission as authorized to promulgate US GAAP.
"Equity Capital" means all capital paid in on shares of the Company
including any additional class specific share premium but, for the avoidance of
doubt, exclusive of any amount paid in on the general reserves.
"Europe JV Agreement" shall have the meaning specified in the second
whereas clause hereof.
"European Territory" shall have the meaning specified in Article 9.5
hereof.
"Goodyear JV Companies" means those companies listed in Schedule 1.1(a)
of the Europe JV Agreement. Any one of the Goodyear JV Companies is a "Goodyear
JV Company".
"Goodyear European Trademarks" shall have the same meaning specified in
all the Trademark License Agreements in effect on
3
X-10.2-10
<PAGE> 11
the Closing Date between Goodyear and the Goodyear JV Companies and the SRI JV
Companies.
"Greater European Territory" shall mean all the countries in Schedule
9.5(a) to 9.5(e) inclusive.
"Japan OE JVC" shall have the meaning specified in the Umbrella
Agreement.
"MOU" means the Memorandum of Understanding signed by SRI and Goodyear
on February 3, 1999.
"Major European Subsidiaries" means (i) the following SRI JV Companies:
Dunlop GmbH, Dunlop France S.A. and Dunlop Tyres Limited, and (ii) the following
Goodyear JV Companies: Deutsche Goodyear GmbH, Gummiwerke Fulda GmbH, Goodyear
Great Britain Limited, Goodyear France S.A. and Goodyear Luxembourg Tires S.A.
(to be formed), each of such companies considered alone without its Affiliates
controlled by it.
"Parties" means Goodyear, Goodyear Fra, Goodyear Lux, Goodyear Canada
and SRI and "Party" means one of the Parties, which Party may be a specific one
of the Parties as indicated by the context in which the word Party is used.
"Person" means any individual, corporation, limited liability company,
partnership, joint venture, association, joint stock company, trust, entity,
incorporated organization or government.
"Shareholders Agreement" shall have the meaning specified in the first
recital hereof.
"SRI European Trademarks" shall have the same meaning specified in all
the Trademark License Agreements in effect on the Closing Date between SRI and
the SRI JV Companies and the Goodyear JV Companies.
"SRI JV Companies" means Sumitomo Rubber Europe B.V. and those
companies listed in Schedule 1.1(b) of the Europe JV Agreement. Any one of the
SRI JV Companies is an "SRI JV Company".
"Tax" and "Taxes" shall mean (i) all taxes, assessments, levies,
imposts, duties, fees, withholdings, or other similar mandatory charges or
collections, including, without limitation, income taxes, receipts taxes, value
added taxes, franchise taxes, net worth taxes, transfer taxes, stamp taxes,
transaction taxes, stock transfer taxes,
4
X-10.2-11
<PAGE> 12
excise taxes, custom duties, trade taxes, capital taxes, capital contribution
taxes, net worth or franchise taxes of a Person, ad valorem taxes, sales, use,
real and personal property taxes, intangible assets taxes, waste tire taxes,
withholding taxes, minimum taxes and payroll and employee charges or
contributions, fees or other taxes which a Person is required to collect and pay
over to any government, and (ii) any interest, penalties, fines or additions to
tax imposed on a Tax described in clause (i) hereof, imposed by any Authority.
"Umbrella Agreement" shall have the meaning specified in the second
recital hereof.
"US GAAP" shall have the meaning specified in Article 6.8 hereof.
"Western Europe" shall have the meaning specified in Article 9.5
hereof.
1.2 DEFINITIONS CAN BE SUBSTANTIVE. If any provision in a definition is a
substantive provision conferring rights or imposing obligations on any Party,
notwithstanding that it is only in the definition Article, effect shall be given
to it as if it were a substantive provision of the Shareholders Agreement.
1.3 DEFINITIONS NOT IN ARTICLE I. Where any term is defined within the context
of any particular article, section or clause in this Shareholders Agreement, the
term so defined, unless it is clear from the context in question that the term
so defined has limited application to the relevant article, section or clause,
shall bear the meaning ascribed to it for all purposes in terms of this
Shareholders Agreement, notwithstanding that that term has not been defined in
this Article.
1.4 NON-WORKING DAY PERFORMANCE. Where any payment falls due or any other
obligation is to be performed on a day which is not a working day in the
jurisdiction where such payment is to be made or such obligation is to be
performed, then such payment shall be made or such obligation is to be performed
on the next succeeding working day.
1.5 CALCULATION OF DAY PERIODS. Except as otherwise specifically provided in
this Shareholders Agreement, where in this Shareholders Agreement any number of
days is prescribed in relation to the doing of a particular thing, those days
will be calculated exclusive of the first day and inclusive of the last day.
5
X-10.2-12
<PAGE> 13
ARTICLE II
COOPERATION AMONG THE SHAREHOLDERS
2.1 The Parties undertake to exercise their voting rights and influence on the
Company and on each Party's respective Affiliates to carry out the provisions of
this Shareholders Agreement, including without limitation voting for the
nominees for directors of the other Parties as set out in Article 4.1 and
permitting transfers to Affiliates as set out in Article 5.3, and to procure
that the Board of Directors of the Company and each of the Company's Affiliates
controlled by it, complies with the terms of this Shareholders Agreement.
ARTICLE III
GOVERNANCE OF THE COMPANY-SHAREHOLDERS
3.1 SHAREHOLDERS MEETINGS. The shareholders meeting is the supreme authority for
the governance of the Company. Any powers not conferred upon the Board of
Directors or other Persons shall be vested in the general meeting of
shareholders, within the limits set by law and the articles of incorporation.
All meetings of the shareholders shall be held in the municipalities of
Amsterdam, Haarlemmermeer or The Hague in The Netherlands, or at such other
place either within or without The Netherlands as shall be designated from time
to time by the Board of Directors and stated in the notice of the meeting or in
a duly executed waiver of notice thereof, provided that if such meeting is held
outside The Netherlands the entire issued share capital of the Company shall be
represented and all holders of depositary receipts for shares are present or
represented.
3.2 ANNUAL MEETING. An annual meeting of the shareholders of the Company,
commencing with the year 2000, shall be held on the second Tuesday in May of
each year, if not a legal holiday at the location where the meeting is to be
held and if such a legal holiday, then on the next secular day following, at
10:00 A.M., or at such other date and time as shall be designated from time to
time by the Board of Directors and stated in the notice of meeting, provided
that the meeting shall be held within six (6) months after the end of the fiscal
year, at which the shareholders shall elect directors by an absolute majority of
all the votes outstanding to serve until the next annual meeting of the
shareholders and until their successors are elected and qualified, or until
their earlier resignation or removal, and shall transact such other business as
may properly be brought before the meeting, such as adoption of the annual
accounts. The Parties agree to vote for the nominees for director of the other
Parties as set out in Article 4.1. At the annual meeting the shareholders may
transact
6
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<PAGE> 14
such other business as may be desired, notwithstanding that the same was not
specified in the notice of the meeting, provided that all shareholders are
present or represented at the meeting and any decision or resolution is made
unanimously.
3.3 SPECIAL MEETINGS. Special meetings of the shareholders may be held for any
purpose or purposes, unless otherwise prescribed by applicable statute or by the
articles of incorporation of the Company, and may be called by the Chairman and
President, by the Vice-Chairman, by the Secretary, by the Board of Directors, or
by the holders of at least one-tenth of the outstanding share capital of the
Company provided that the procedures of Section 220 et seq of Book 2 of the
Dutch Civil Code are observed, or by any director of the Company or shareholder
upon the written request of the holders of, not less than a majority of the
outstanding shares entitled to vote at such meeting and shall be called by any
director of the Company directed to do so by the Board of Directors or requested
to do so in writing by a majority of the Board of Directors. Any such written
request shall state the purpose or purposes of the proposed meeting. The "call"
and the "notice" of any such meeting shall be deemed to be synonymous.
3.4 VOTING. At all meetings of shareholders, every shareholder having the right
to vote shall be entitled to vote in person, or by proxy or power of attorney
appointed by an instrument in writing subscribed by such shareholder and bearing
a date not more than three years prior to said meeting, unless said instrument
shall provide for a longer period. Each shareholder shall have one vote for each
share of Equity Capital entitled to vote at such meeting registered in his name
on the books of the Company. A proxy or power of attorney is not required to be
made before a notary. A facsimile copy of the proxy or power of attorney shall
qualify as a writing, provided that the original copy shall thereafter be lodged
with the records of the Company. The chairman of the meeting shall in good faith
determine whether proxies or powers of attorney presented on behalf of a
shareholder are valid for the purposes of representation of the shareholder at
the meeting of shareholders. At all meetings of shareholders the voting may be
viva voce, except that, upon the request of any shareholder for a vote by ballot
on any matter, such vote on such matter shall be taken by ballot.
3.5 QUORUM. The holders of a majority of the shares issued and outstanding and
entitled to vote thereat, present in person or represented by proxy, shall
constitute a quorum at all meetings of the shareholders for the transaction of
any business, except as otherwise provided by the articles of incorporation of
the Company or this Shareholders Agreement.
7
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<PAGE> 15
If the holders of a majority of the shares issued and outstanding are
not present or represented at the meeting, a new meeting will be called.
Notwithstanding Section 230-3 of Book 2 of the Dutch Civil Code, at this meeting
the quorum requirement of this Article 3.5 must be met.
3.6 ADOPTION OF DECISIONS. Unless otherwise required by law, the articles of
incorporation of the Company or this Shareholders Agreement, subject to Article
3.6(b) below (a) all decisions of a meeting of shareholders shall be considered
adopted if voted for by an absolute majority of the votes cast, or (b)
notwithstanding the provisions of Article 3.6(a) above, so long as SRI together
with any of its Affiliates owns ten percent (10%) or more of the aggregate
amount of par value and class specific share premium paid in respect of the
issued and outstanding shares of the Company, the Parties agree that decisions
by the Company (or the Company or any Affiliate controlled by it, as set forth
below) in respect of matters referred to in this Article 3.6(b) below shall be
reserved solely for the shareholders and shall be taken at a shareholders
meeting and shall require the vote in favor of each shareholder entitled to vote
at such meeting of the Company (or the Company or any Affiliate controlled by
it, as the case may be), failing which any such decision shall be of no force or
effect. For purposes of this Article, any reference to the minority shareholder
means SRI. The voting requirement in this Article 3.6(b) as stated above shall
apply to the following items:
(i) Change of name of the Company or Affiliate controlled by it;
(ii) Use, or cessation of use, of the Dunlop or Goodyear name in
any name of the Company or Affiliate controlled by it, except
cessation when the Company or such controlled Affiliate has
gone out of existence;
(iii) Change in the articles of incorporation of the Company:
(A) except as may be required to permit an increase in
Equity Capital of the Company to be issued to its
shareholders in accordance with Article 6.3 (but
subject to the restrictions contained in Article 6.2)
of this Shareholders Agreement, for any purpose not
otherwise requiring the consent of the minority
shareholder under this Article 3.6; but
(B) only to the extent that such an increase is necessary
because funds are not available from the Company's
own cash resources or borrowed funds as referred to
in Article 6.3(i)(A) and (B);
8
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<PAGE> 16
(iv) Any dividend or other distribution (including capital
distributions) by the Company outside the limits of the agreed
dividend policy set out in Article 6.1 of this Shareholders
Agreement;
(v) Except to the extent that a transfer of shares pursuant to
Article 5.3 or a contribution to capital pursuant to Article
5.8 is considered a change in the share capital structure, any
change in the share capital structure of the Company including
any increase or reduction in share capital or convertible
securities, as well as any delegation to the Board of
Directors to this effect:
(A) except as may be required to permit an increase in
Equity Capital of the Company to be issued to its
shareholders in accordance with Article 6.3 (but
subject to the restrictions contained in Article 6.2)
of this Shareholders Agreement, for any purpose not
otherwise requiring a super majority vote under this
Article 3.6; but
(B) only to the extent that such an increase is necessary
because funds are not available from the Company's
own cash resources or borrowed funds as referred to
in Article 6.3(i)(A) and (B);
(vi) Any material change in the scope of business of the Company or
Affiliate controlled by it (including by acquisition) beyond
the permitted scope set forth in Article 9.4 of this
Shareholders Agreement;
(vii) Any material change in (or the termination of) any material
agreement or arrangement between the Company (or any Affiliate
controlled by it) and Goodyear or its Affiliates (other than
the Goodyear JV Companies or the SRI JV Companies) which is
contained in this Shareholders Agreement or the Alliance
Agreements or contemplated as being put in place on or before
the operational start-up date of the Alliance (other than any
change or termination which is in accordance with the terms of
(A) such agreement or arrangement, (B) this Shareholders
Agreement or (C) the Alliance Agreements);
(viii) Entry into, or subsequent material change in (but not the
termination of), any other material agreement between the
Company (or any Affiliate controlled by it) and Goodyear or
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its Affiliates (other than the Goodyear JV Companies or the
SRI JV Companies), except on an arm's length, commercial basis
(or any applicable basis previously agreed between Goodyear
and SRI);
(ix) Change in the country of incorporation of the Company, or
country in which the registered office or principal office
(headquarters) of the Company or a Major European Subsidiary
is located except where such company has gone out of
existence;
(x) Change in the fiscal year of the Company or a Major European
Subsidiary;
(xi) Change in external auditors of the Company or a Major European
Subsidiary (unless due to the resignation, misconduct or
inability to act as the auditors);
(xii) Change in accounting principles of the Company, unless
required (A) to conform to a change in the national accounting
rules applicable to such company or (B) to permit Goodyear to
consolidate such company following a change in the applicable
accounting rules;
(xiii) The dissolution or liquidation of the Company;
(xiv) During the first two years following the operational start-up
date of the Alliance, any acquisition of a business (by
purchase or merger), investment or disposal (including
discontinuance) by the Company or Affiliate controlled by it
which, either alone or taken together with any related prior
transactions, has a value greater than twenty percent (20%) of
the fair value of the "total assets" (within the meaning of
the EITF Issue No. 96-16 (as the same may be amended from time
to time)) of the Company and its Affiliates controlled by it,
taken as a whole; provided that (other than the closure of a
factory currently producing new Dunlop brand tires) the
closure of a factory, warehouse, sales offices, administrative
offices or cost centers shall not be deemed such a "disposal"
or a "discontinuance" by the Company or such Affiliate; and
(xv) After the first two years following the operational start-up
date of the Alliance, any acquisition of a business (by
purchase or merger), investment or disposal (including
discontinuance) by the Company or Affiliate controlled by it
which, either alone or taken together with any related prior
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transactions effected within the preceding twelve (12) months,
has a value greater than twenty percent (20%) of the fair
value of the "total assets" (as defined in sub-paragraph (xiv)
above) of the Company and its Affiliates controlled by it,
taken as a whole; provided that the closure of a factory
(other than, in the first two years following operational
start-up date of the Alliance, the closure of a factory
currently producing new Dunlop brand tires), warehouse, sales
office, administrative offices or cost centers shall not be
deemed such a "disposal" or a "discontinuance" and provided
further that this sub-paragraph shall not apply to such an
acquisition which is a "Strategic Investment".
A "Strategic Investment" means the direct or indirect
acquisition by the Company or any of its Affiliates controlled
by it of, or its investment in, all or a material portion of,
another tire manufacturer or tire distributor having
operations located in the European Territory for fair (market)
value, provided that, if so requested by any shareholder, the
Company or such Affiliate shall first have obtained at its
cost a fairness opinion issued by an investment bank of
recognized international standing as to the fairness to the
Company or such Affiliate of the price of the proposed
acquisition or investment, which opinion (if any) shall be
addressed to the shareholders of the Company and shall contain
no material qualification to the fairness valuation, any
standard qualification as to the scope of, and effort in
preparing to render such opinion not being deemed material for
this purpose.
This Article 3.6 prevails over each other provision in this Shareholders
Agreement and the articles of incorporation. The Board of Directors of the
Company shall ensure that each Person to whom the powers of the Board are
granted, delegated or otherwise conferred in accordance with this Shareholders
Agreement (including, without limitation, pursuant to Articles 4.12, 4.13, 4.14,
4.17, 4.19, 4.22 and 4.23 hereof) is made aware of, and instructed to act in a
manner consistent with, the provisions of this Article 3.6.
3.7 SHARE LEDGER. The original or duplicate share ledger shall be the only
evidence as to who are the shareholders entitled to examine the list required
under Article 3.8 of this Shareholders Agreement or the books of the Company, or
to vote in person or by proxy at any meeting of the shareholders.
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3.8 SHAREHOLDER'S LISTS. The Secretary or Assistant Secretary, who shall have
charge of the share ledger, shall prepare and make, at least ten days before
every meeting of shareholders, a complete list of the shareholders entitled to
vote at the meeting, in accordance with Article 5.6, arranged in alphabetical
order, and showing the address of each shareholder and the number of shares
registered in the name of each shareholder. Such list shall be open to the
examination of any shareholder, for any purpose germane to the meeting, during
ordinary business hours, for a period of at least ten days prior to the meeting,
either at a place within the city where the meeting is to be held, which place
shall be specified in the notice of the meeting, or, if not so specified, at the
place where the meeting is to be held. The list shall also be produced and kept
at the time and place of the meeting during the whole time thereof, and may be
inspected by any shareholder who is present.
3.9 NOTICE. Written or printed notice of each meeting of the shareholders,
whether annual or special, stating the place, date and hour of the meeting, and,
in the case of a special meeting, the purpose or purposes thereof, shall only be
given to each shareholder of record of the Company entitled to vote at such
meeting, either by internationally recognized private courier service to the
address shown on the Shareholder's Lists under Article 3.8 of this Shareholders
Agreement or by personal delivery of the notice at the address of the
shareholder for which a written acknowledgement is received, not less than
fifteen (15) days nor more than fifty (50) days prior to the meeting.
3.10 ATTENDANCE. Any shareholder may invite persons who are not shareholders or
proxies to attend a meeting of the shareholders, such persons being without a
voting right. If the number of invitees by a shareholder together with its
Affiliates shall exceed five (5), the consent of each of the other shareholders
at the beginning of the meeting, whether or not on the agenda of such meeting
shall first be obtained.
3.11 CONDUCT OF MEETING. The Chairman and President, or in his absence, the Vice
Chairman, shall open the meeting. The meeting shall first appoint the person who
opened the meeting as chairman of the meeting. If there is no person to open the
meeting, the shareholders present may elect a chairman of the meeting who shall
open the meeting. The meeting may adopt conditions for participation in the
assembly and the exercise of the voting right within the limits set by law, the
articles of incorporation and this Shareholders Agreement.
3.12 SHAREHOLDER MEETINGS WITHOUT NOTICE. If all shareholders are present and
consent to the holding of a meeting, no notice or formal convening of such
meeting shall be required and the meeting of shareholders may
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proceed immediately. No item not included in an agenda may be adopted unless all
the shareholders are present and none of them have objected.
3.13 SHAREHOLDERS MEETINGS BY TELEPHONE, VIDEO OR ELECTRONICALLY. Provided that
the following is in accordance with the laws of The Netherlands, and further
provided proper notice as contemplated in this Shareholders Agreement has been
given, meetings of the shareholders may be held by means of telephone, video or
other electronic communication facility if all persons participating in the
meeting are able to communicate with each other simultaneously throughout the
entire meeting.
3.14 CONSENT OF SHAREHOLDERS IN LIEU OF MEETING. Whenever the vote of
shareholders at a meeting thereof is required or permitted to be taken for or in
connection with any corporate action, by any provision of the applicable
statutes, the articles of incorporation or the Shareholders Agreement, the
meeting and vote of shareholders may be dispensed with if shareholders who would
have been entitled to vote upon the action if such meeting were held shall
consent in writing to such corporate action being taken. Any such writing may
consist of several documents, in like form, each signed by one or more of the
shareholders. Unless the contrary is stated therein, any such resolution or
decision shall be deemed to have been passed on the date of the latest signature
by the shareholders signing such writing. A facsimile copy of the writing signed
by a shareholder shall be acceptable evidence that such writing has been signed
by the shareholder whose signature appears on that facsimile, provided that the
original copy shall thereafter be lodged with the records of the Company. A
shareholder can also send his agreement to the resolution or decision proposed
in writing to the Chairman, or in his absence the Vice Chairman, by facsimile,
telegram, cable, telex, electronic mail or a similar technical device.
3.15 MINUTES. The minutes of all meetings shall be kept at the offices of the
Company. All writings of resolutions or decisions adopted by the shareholders
shall be kept with the minutes of the meetings of shareholders.
3.16 ENFORCEMENT OF DECISION The Parties shall ensure that the Company
complies with, and takes any action required to obtain and enforce, any final
decision mutually agreed to by Goodyear and SRI at a top level meeting or Award
rendered by an arbitrator in accordance with Article XVI, Settlement of
Disputes, of the Umbrella Agreement.
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ARTICLE IV
BOARD OF DIRECTORS
4.1 BOARD COMPOSITION.
(i) BOARD RESPONSIBILITIES. The Board of Directors ("Board")
consists of ten (10) members elected by the shareholders. The
Company shall be managed under the direction of its Board of
Directors, which shall exercise such powers and do such acts
and things as are set forth herein and in the Constituent
Documents of the Company, or as may be delegated to the Board
of Directors from time to time by the shareholders of the
Company. Except as otherwise expressly provided in the
Alliance Agreements, the Board of Directors shall determine
the policy of the Company, shall review and approve the
Company's quarterly financial statements and shall approve the
business plan referred to in Article 9.10. Day-to-day
management of the Europe JVC shall be delegated by the Board
of Directors to the President and the other officers and
employees of the Company.
(ii) GOODYEAR APPOINTMENTS. Goodyear will nominate seven (7)
directors, including the Chairman and President and the
functional directors responsible for various activities such
as sales of replacement tires under Goodyear European
Trademarks and sales to non-Japan-origin Automotive OEMs,
finance, human resources, legal, manufacturing and logistics
or other function(s) in place of the prior stated functions.
(iii) SRI APPOINTMENTS. SRI will nominate three (3) directors
including:
(A) The Vice-Chairman, who, along with the other board
members, will assist the Europe JVC's Chairman and President
in the supervision of the Europe JVC's overall operations and
will report to the Europe JVC's Chairman and President. The
Vice-Chairman shall be the second most senior executive in the
Europe JVC and shall be entitled to act in place of the
Chairman in the Chairman's absence at board meetings and
similar occasions;
The Vice-Chairman will have responsibilities for the
management of the relationship with Japan-origin Automotive
OEMs and all motorcycle OEMs and ATV OEMs (regardless of
origin) and for co-ordination between SRI and
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<PAGE> 22
Goodyear as regards those activities. The Vice-Chairman will
also have delegated authority for the management of the
replacement sales/marketing division responsible for tires
sold under the SRI European Trademarks (the "Dunlop
Replacement Sales Division"). The responsibilities of the
Vice-Chairman are described in Schedule 4.1;
(B) The Sales/Marketing director responsible for: the management
of the relationship with Japan-origin OEMs; and the sales of
SRI European Trademarks tires to automotive OEMs in the
European Territory and for sales to all motorcycle OEMs and
ATV OEMs; and
(C) The director responsible for technical matters relating to
tires sold under the SRI European Trademarks, including,
without limitation, the research and development activities in
the Europe JVC relating to SRI technology and intermingled
technology relating to those tires, and for coordinating
technical matters with Goodyear.
To ensure a cohesive management team, on or after the third anniversary date of
the operational start-up date of the Europe JVC, SRI's nomination of each of its
three (3) individual nominees to the Europe JVC's Board of Directors requires
the confirmation of the Chairman and President of the Europe JVC, which
confirmation may not unreasonably be withheld and may in any event be withheld
only once (i.e. with respect to one candidate only) for each vacancy, prior to
SRI's nominations being acted upon by the shareholders.
All members of the Europe JVC's Board shall be entitled to receive all financial
and other information regarding the Europe JVC's businesses. The initial
nominees of Goodyear and SRI to the Board of Directors will be designated prior
to the operational start-up date.
Directors need not be shareholders. Directors may be re-appointed. In addition
to the powers and authorities that this Shareholders Agreement and the articles
of incorporation of the Company expressly confer upon it, the Board of
Directors, subject to Article 3 hereof, may exercise all such powers of the
Company, and do all such lawful acts and things as are not by applicable statute
or by the articles of incorporation of the Company or by this Shareholders
Agreement directed or required to be exercised or done by the shareholders.
4.2 CHANGE IN COMPOSITION. Each member of the Board shall serve at the pleasure
of, and may be removed with or without cause by, the shareholders at the request
of the Party by which he or she was
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nominated or as otherwise provided in this Shareholders Agreement, the articles
of incorporation or by laws. Any shareholder removing a director shall be
responsible for and agrees with the other shareholders to indemnify the other
shareholders and the Company against all losses, liabilities and costs which the
other shareholders or the Company may incur arising out of, or in connection
with, any claim by the director for wrongful or unfair dismissal or redundancy
or other compensation arising out of the director's removal or loss of office.
In the event of a vacancy on the Board regardless of how caused and subject to
Article 4.1, the Party that nominated the member whose position is vacant shall
have the right to nominate a replacement, which shall be exercised as soon as
practicable. If there are no directors in office, then an election of directors
may be held in the manner provided by applicable statute, the articles of
incorporation and this Shareholders Agreement.
4.3 MEETINGS OF THE BOARD. The first meeting of the members of each newly
elected Board of Directors shall be held (i) at such time and place either
within or without The Netherlands as shall be provided by resolution of the
shareholders at the meeting at which such newly elected Board was elected, and
no notice of such meeting shall be necessary to the newly elected directors in
order legally to constitute the meeting, provided a quorum shall be present, or
(ii) if not so provided for by resolution of the shareholders or if a quorum
shall not be present, at such time and place as shall be consented to in writing
by a majority of the newly elected directors, provided that written or printed
notice of such meeting shall be given to each of the other directors not so
consenting in the same manner as provided in Article 4.4 of this Shareholders
Agreement with respect to the giving of notice for special meetings of the Board
except that it shall not be necessary to state the purpose of the meeting in
such notice; or (iii) regardless of whether or not the time and place of such
meeting shall be provided for by resolution of the shareholders, at such time
and place as shall be consented to in writing by all of the newly elected
directors.
Every director of the Company, upon his election, shall qualify by accepting the
office of director, and his attendance at, or his written approval of the
minutes of, any meeting of the Board subsequent to his election shall constitute
his acceptance of such office; or he may execute such acceptance by a separate
writing, which shall be placed in the minute book.
Board meetings will be held quarterly, and on such other dates and at such times
and places as shall be determined in each case as decided in good faith by the
Board. Meetings of the Board shall be convened and chaired by either the
Chairman, in case of his absence, by the Vice-Chairman, or in case of his
absence by another director appointed by the Chairman. Written notice of a
proposed meeting shall be given to
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directors at least three (3) days in advance of a meeting in Europe and at least
five (5) days in advance of a meeting outside Europe. Notice may be given by
facsimile, e-mail, telegram or delivered personally. The notice shall specify
the place, date, time and the proposed agenda in reasonable detail. The Board
may also adopt resolutions or decisions without a formal meeting if all members
of the Board may communicate with each other simultaneously by means of
telephone, video or other electronic communication facility. If reasonable
notice is given to all members of the Board, the Board may adopt resolutions or
decisions without a formal meeting, if there is a quorum of members who may
communicate with each other simultaneously by means of telephone, video or other
electronic communication facility. If all members are present and consent to the
holding of a meeting and all the items on the proposed agenda, no notice or
formal convening of a meeting shall be required, and the meeting shall proceed
immediately. Participation in a meeting by such means shall constitute presence
in person at such meeting. Any meeting of the Board of Directors shall be a
legal meeting without any notice thereof having been given if all directors
shall be present thereat. Notice need not be given to any member who signs a
waiver of notice (whether before or after the meeting) or who attends the
meeting without protesting the lack of notice prior to its commencement. The
Board may invite other persons not members of the Board to attend and/or
participate in its meeting, such invited person not having a right to vote.
Each quarterly Board meeting shall include a report on all material actions
taken and material decisions made since the preceding quarterly meeting and all
material actions and decisions proposed. In addition, each quarterly Board
meeting (or a special meeting of the Board prior thereto) shall confirm the
appointment or removal, as the case may be, of any individuals as directors of
the Major European Subsidiaries including without limitation the managing
directors thereof, whose appointment or removal have occurred since the
preceding quarterly Board of Directors meeting.
4.4 SPECIAL MEETINGS. Special meetings of the Board of Directors may be called
at any time on at least two (2) days advance notice (in the case of meetings
held in Europe) or at least three (3) days advance notice (in the case of
meetings held outside Europe) by the Chairman and President, the Vice-Chairman
or the Secretary. The place may be within or without The Netherlands as
designated in the notice.
4.5 QUORUM AND DECISION MAKING. There shall be a quorum for the transaction of
business at any meeting when at least six of the members of the Board are
present in person or by proxy and at least four (4) members appointed by
Goodyear and two (2) appointed by SRI are present in person or by proxy; and
except as may be otherwise provided
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<PAGE> 25
by applicable law, the articles of incorporation of the Company or this
Shareholders Agreement, the act of a majority of the directors present in person
or by proxy at any meeting at which there is such a quorum shall be the act of
the Board of Directors. In the case of a tie vote on a matter, the Chairman
shall be entitled to a second or casting vote on such matter.
If at least two directors or one-third of the whole Board of Directors,
whichever is greater, is present in person or by proxy at any meeting at which a
quorum is not present, a majority of the directors present in person or by proxy
at such meeting shall have power successively to adjourn the meeting from time
to time to a subsequent date, which may be as early as the next day, without
notice to any director other than announcement at the meeting, as recorded in
minutes of such meeting. At such adjourned meeting, when at least four (4)
members of the Board are present in person or by proxy (which members may all be
members appointed by Goodyear), any business may be transacted which might have
been transacted at the original meeting which was adjourned.
4.6 WRITTEN STATEMENT IN LIEU OF MEETING. A resolution or decision in writing,
signed by all the members of the Board, shall be as valid and effectual as if
such resolution or decision had been passed at a meeting duly convened and held.
Any such writing may consist of several documents, in like form, each signed by
one or more of the members. Unless the contrary is stated therein, any such
resolution or decision shall be deemed to have been passed on the date of the
latest signature by the member signing such writing. A facsimile copy of the
writing, signed by a member, shall be acceptable evidence that such writing has
been signed by the member whose signature appears on that facsimile, provided
that the original copy shall thereafter be lodged with the records of the
Company. A member can also send his agreement to the resolution or decision
proposed in writing to the Chairman, or in his absence the Vice-Chairman or
Secretary, by telephone, telegram, electronic mail or a similar technical
device. The provisions of this Article 4.6 regarding written statements in lieu
of meetings shall also apply to committees of the Board.
4.7 PROXIES. At any meeting of the Board of Directors, any director may be
represented and vote by proxy or proxies appointed by an instrument in writing.
4.8 STANDING OR TEMPORARY COMMITTEES. Without prejudice to any powers vested in
the shareholders under this Shareholders Agreement, including without limitation
Article 3.6, the Board of Directors may, by resolution or resolutions passed by
a majority of the whole Board, designate one or more committees, such committee
to consist of two or more directors of the Company, provided that one (1) shall
be a member appointed by SRI if requested by any member appointed by SRI. The
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members of any committee shall be given reasonable notice of any committee
meeting. The Board may designate one or more directors as alternate members of
any committee, who may replace any absent or disqualified member at any meeting
of the committee. Any such committee, to the extent provided in said resolution
or resolutions or in this Shareholders Agreement, shall have and may exercise
all of the powers of the Board of Directors in the management of the Company,
and may authorize the seal of the Company (if any) to be affixed to all papers
which may require it; provided, however, that in the absence or disqualification
of any member of such committee or committees, the member or members thereof
present at any meeting and not disqualified from voting, whether or not he or
they constitute a quorum, may unanimously appoint another member of the Board of
Directors to act at the meeting if an alternate member of such committee is not
present and available to act at such meeting in the place of any such absent or
disqualified member. Such committee or committees shall, unless otherwise
provided by the Board of Directors, keep regular minutes of the transactions of
their meetings and shall cause them to be recorded in the books kept for that
purpose in the office of the Company and shall report the same to the Board of
Directors at its next meeting. The Secretary or an Assistant Secretary of the
Company may act as Secretary of the committee if the committee so requests.
The Parties intend that the Company may establish a group to be
called the "Executive Committee" that will consist of each member of the Board
of Directors and such other persons as the Company determines. The Parties agree
that the "Executive Committee" is not a committee of the Board of Directors as
referred to in this Article 4.8 and shall have no authority to exercise any
power of the Board of Directors.
4.9 COMPENSATION. No fees will be paid to, or such fees shall be waived by, any
individuals who are employees/associates of any of the Parties, the Company or
Affiliates for service on the boards of directors of the Company or such
Affiliates. The Parties agree that the Company and Affiliates controlled by the
Company shall pay usual and customary fees for service upon any supervisory
board of any of such companies by any person who is not an employee or associate
of the Parties, the Company or their Affiliates (such as workers and/or union
representatives or independent members, if any). The Board of Directors of the
Company or any Affiliate controlled by it may, by resolution provide for
reimbursement of expenses incurred by directors in attending each meeting;
provided that nothing herein contained shall be construed to preclude any
director from serving this Company or Affiliate controlled by it in any other
capacity and receiving his regular compensation therefor. Service on any
standing committees will be similarly treated as stated above for service on
such boards.
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4.10 RESIGNATIONS. Any director may resign at any time by giving a written
notice to the Chairman of the Board or the Secretary of the Company. Such
resignation shall take effect at the time specified therein; and unless
otherwise specified therein, the acceptance of such resignation shall not be
necessary to make it effective.
4.11 INDEMNIFICATION AND LIABILITY OF DIRECTORS AND OFFICERS. Subject to the
second paragraph of Article 4.11, if applicable, each person who is or was a
director or officer of the Company or Affiliate controlled by it or is or was
serving at the request of the Company or such Affiliate as a director or officer
of another corporation (including the heirs, executors, administrators or estate
of such person) shall be indemnified by the Company or such Affiliate, as the
case may be, as of right to the full extent permitted or authorized by the laws
of The Netherlands or the jurisdiction of incorporation of such Affiliate, as
the case may be, as now in effect and as hereafter amended, against any
liability, judgment, fine, amount paid in settlement, cost and expense
(including attorneys' fees) asserted or threatened against and incurred by such
person in his capacity as or arising out of his status as a director or officer
of the Company or such Affiliate or, if serving at the request of the Company or
such Affiliate, as a director or officer of another corporation. The
indemnification provided by this provision of the Shareholders Agreement shall
not be exclusive of any other rights to which those indemnified may be entitled
under the articles of incorporation or under any agreement, vote of shareholders
or disinterested directors or otherwise, and shall not limit in any way any
right which the Company or Affiliate controlled by it may have to make different
or further indemnifications with respect to the same or different persons or
classes of persons.
No person shall be liable to the Company or Affiliate controlled by it
for any loss, damage, liability or expense suffered by it on account of any
action taken or omitted to be taken by him as a director or officer of the
Company or such Affiliate or of any other corporation which he serves as a
director or officer at the request of the Company or such Affiliate, if such
person (i) exercised the same degree of care and skill as a prudent man would
have exercised under the circumstances in the conduct of his own affairs, or
(ii) took or omitted to take such action in reliance upon advice of counsel for
the Company or such Affiliate or upon statements made or information furnished
by directors, officers, employees or agents of the Company or such Affiliate
which he had no reasonable grounds to disbelieve.
4.12 REPRESENTATION OF THE COMPANY. Any two (2) directors of the Company or one
(1) director and a procuratiehouder (e.g. procurator) of the Company, provided
that one of the two directors or the director acting with
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a procurator is the President, or in the absence of (i) the President, or (ii)
the President and the director designated by the President or Goodyear to
substitute for the President or (iii) a designation by the President or Goodyear
of a person to substitute for the President, the Finance Director shall
represent and act on behalf of the Company. Such persons acting together may, in
writing, sub-delegate their authority within limits prescribed in such writing
to one of them alone, to another director or to a third person. The Board in
accordance with the articles of incorporation may grant to individual directors
the authority to represent the Company alone by power of attorney, resolution or
otherwise. If the grant of authority or power of attorney from the Board
specifically authorizes, directors may sub-delegate their authority to others.
Members of the Board of Directors shall take into account all outstanding
resolutions of the shareholders or Board when carrying out any action
representing the Company.
4.13 AGENTS. The Board from time to time may also appoint agents for the Company
as it shall deem necessary or advisable, each of whom shall serve at the
pleasure of the Board or for such period as the Board may specify, and shall
exercise such powers, have such titles and perform such duties as shall be
determined from time to time by the Board. The names and powers of the agents
will be registered with the Chamber of Commerce of the District where the
Company has its corporate registered office.
4.14 THE CHAIRMAN OF THE BOARD. The Chairman of the Board ("Chairman")
shall be elected or appointed by the shareholders (who shall be the same
individual elected or appointed as the President), he shall preside at all
meetings of the shareholders and directors at which he may be present and shall
have such other duties, powers and authority as may be delegated to him by the
shareholders. The Board of Directors may delegate such other authority and
assign such additional duties to the Chairman of the Board, other than those
conferred by law or this Shareholders Agreement to others, as it may from time
to time determine, and, to the extent permissible by law.
4.15 THE PRESIDENT. The President shall be elected or appointed by the
shareholders and will be the chief executive officer of the Company with such
general executive powers and duties of supervision and management as are usually
vested in the office of the chief executive officer of a corporation and he
shall carry into effect all directions and resolutions of the Board and shall
have such other duties, powers and authority as may be delegated to him by the
shareholders.
Notwithstanding Article 4.12, unless the shareholders otherwise
provide, the President, or any person designated in writing by him, shall have
full power and authority on behalf of this Company (i) to attend and
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to vote or take action at any meeting of the holders of securities of
corporations in which this Company may hold securities, and at such meetings
shall possess and may exercise any and all rights and powers incident to being a
holder of such securities and which as the holder thereof this Company may have
possessed and exercised if present, and (ii) to execute and deliver waivers of
notice and proxies for and in the name of the corporation with respect to any
such securities held by this Company.
He shall, unless the Board otherwise provides, be ex officio a member
of all standing committees.
The President may designate another director to act in the place of the
President when he is absent. If the President fails to designate another
director to act in his place when he is absent or in the event of the
President's disability, inability or refusal to act, Goodyear shall designate
the director to act in place of the President.
4.16 VICE-CHAIRMAN. In the absence of the Chairman or in the event of his
disability, inability or refusal to act, the Vice-Chairman shall perform the
duties and exercise the powers of the Chairman, and shall perform such other
duties as the Board of Directors may from time to time prescribe.
4.17 SECRETARY AND ASSISTANT SECRETARIES. The Secretary and any Assistant
Secretaries shall be elected or appointed by the Board of Directors. The
Secretary may attend all sessions of the Board and all meetings of the
shareholders, and shall record or cause to be recorded all votes taken and the
minutes of all proceedings in a minute book of the Company to be kept for that
purpose. He shall perform like duties for the executive and other standing
committees when requested by the Board or any such committee to do so.
It shall be the principal responsibility of the Secretary to give, or
cause to be given, notice of all meetings of the shareholders and of the Board
of Directors, but this shall not lessen the authority of others to give such
notice as is authorized elsewhere in this Shareholders Agreement.
The Secretary shall see that all books, records, lists and information,
or duplicates, required to be maintained in The Netherlands, or elsewhere, are
so maintained.
The Secretary shall keep in safe custody the seal of the Company, and
shall have authority to affix the seal to any instrument requiring it, and when
so affixed, he shall attest the seal by his signature. The Board of Directors
may give general authority to any other officer to affix the seal of the Company
and to attest the affixing by his signature. The Board shall
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delegate such power to the Secretary and register the powers of the Secretary at
the Chamber of Commerce in the District of The Netherlands where the Company has
its corporate registered office.
The Secretary shall perform such other duties and have such other
authority as may be prescribed elsewhere in this Shareholders Agreement or from
time to time by the Board of Directors or the President of the Company, under
whose direct supervision he shall be.
In the absence of the Secretary or in the event of his disability,
inability or refusal to act, the Assistant Secretary (or in the event there be
more than one Assistant Secretary, the Assistant Secretaries in the order
designated by the Board, or in the absence of any designation, then in the order
of their election) may perform the duties and exercise the powers of the
Secretary, and shall perform such other duties as the Board of Directors may
from time to time prescribe.
4.18 THE FINANCE DIRECTOR. The Board of Directors shall appoint one of its
members as a finance director ("Finance Director"). The Finance Director shall
have responsibility for the safekeeping of the funds and securities of the
Company, shall keep or cause to be kept full and accurate accounts of receipts
and disbursements in books belonging to the Company and shall keep, or cause to
be kept, all books belonging to the Company and shall keep, or cause to be kept,
all other books of account and accounting records of the Company. He shall
deposit or cause to be deposited all moneys and other valuable effects in the
name and to the credit of the Company in such depositories as may be designated
by the Board of Directors or by any officer of the Company to whom such
authority has been granted by the Board of Directors.
He shall disburse, or permit to be disbursed, the funds of the Company
as may be ordered, or authorized generally, by the Board, and shall render to
the President of the Company and the directors whenever they may require it, an
account of all his transactions as Finance Director and of those under his
jurisdiction, and of the financial condition of the Company.
He shall perform such other duties and shall have such other
responsibility and authority as may be prescribed elsewhere in this Shareholders
Agreement or from time to time by the Board of Directors.
He shall have the general duties, powers and responsibility of a
finance director of a corporation.
If required by the Board, he shall give the Company a bond in a sum and
with one or more sureties satisfactory to the Board, for the faithful
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performance of the duties of his office, and for the restoration to the Company,
in the 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 which belong to the Company.
4.19 DUTIES OF DIRECTORS MAY BE DELEGATED. If any director of the Company be
absent or unable to act, or for any other reason that the Board may deem
sufficient, the Board may delegate for the time being, some or all of the
functions, duties, powers and responsibilities of that director to any other
director, or to any other agent or employee of the Company or other responsible
person, provided the shareholder who appointed that director consents.
4.20 REMOVAL. Subject to the applicable provisions of law, any agent elected or
appointed by the Board of Directors, and any employee, may be removed or
discharged at any time by the affirmative vote of a majority of the Board of
Directors, but such removal or discharge shall be without prejudice to the
contract rights, if any, of the person so removed or discharged.
4.21 SALARIES AND COMPENSATION. Salaries and compensation of all directors of
the Company shall be fixed, increased or decreased by the shareholders or
persons or a committee delegated with the responsibility on behalf of the
shareholders. Salaries and compensation of all other appointed agents and
employees of the Company may be fixed, increased or decreased by the Board of
Directors, but until action is taken with respect thereto by the Board of
Directors, the same may be fixed, increased or decreased by the Chairman and
President or such other employees or agents as may be designated by the Board of
Directors to do so.
4.22 DELEGATION OF AUTHORITY TO HIRE, DISCHARGE AND DESIGNATE DUTIES. The Board
from time to time may delegate to the Chairman and President or other employee
of the Company, authority to hire, discharge and fix and modify the duties,
salary or other compensation of employees of the Company under their
jurisdiction, and the Board may delegate to such employee similar authority with
respect to obtaining and retaining for the Company the services of attorneys,
accountants and other experts.
4.23 CONTRACTS. The Board of Directors may authorize any employee or employees,
agent or agents, to enter into any contract or execute and deliver any
instrument in the name of and on behalf of the Company, and such authority may
be general or confined to specific instances.
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4.24 SUPERVISORY BOARD. The Parties agree that the Company shall not directly or
indirectly employ a number of employees in The Netherlands that shall cause the
Company to be required to have a supervisory board.
ARTICLE V
SHARES
5.1 SHAREHOLDING. No share certificates shall be issued. The Board of Directors
shall cause a share ledger to register the names and addresses of all
shareholders and the holders of rights of usufruct and pledge on shares shall be
recorded, the date on which they acquired their shares or rights on shares, the
number of shares held by each of them, the date of acknowledgement or service of
any notice of acquisition, as well as the amount paid up on each share and all
other information required to be recorded pursuant to the law. The share ledger
shall be kept up-to-date. Each shareholder, holder of a right of usufruct and
holder of a right of pledge on shares shall ensure that the Company is aware of
its address.
5.2 TRANSFER OF SHARES, CREATION OF USUFRUCT AND PLEDGE ON SHARES. Subject to
Article 5.3, the transfer of shares, the vesting or transfer of a right of
usufruct with respect to shares and the creation of a right of pledge on shares
shall be effected by notarial deed. The rights attached to any share may only be
exercised if the Company is a Party to the transaction, or after:
(i) the Company has acknowledged the transaction; or
(ii) the deed has been served on the Company; or
(iii) the Company has entered the transaction on its share register
on its own initiative;
all of the foregoing in accordance with the relevant provisions of the law.
5.3 SHARE TRANSFER AND PLEDGE RESTRICTIONS. The Parties will be prohibited from
selling, transferring or otherwise disposing of any of their equity interests in
the Company, from granting option rights or similar rights in respect of any
such interests, from creating any usufruct, and from pledging or otherwise
encumbering (or permitting the creation or subsistence of any usufruct, pledge
or other encumbrance over) such interests, except for:
(i) transfers in accordance with the exit provisions set out in
Article XVII of the Umbrella Agreement; or
(ii) transfers by each Party to not more than six (6) Affiliates of
which (in each case) Goodyear or SRI, as the case may be,
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owns directly or indirectly ninety-five percent (95%) or more
of the voting rights, provided that if such transferee ceases
to be such an at least ninety-five percent (95%) Affiliate,
prior thereto, Goodyear or SRI, as the case may be, will cause
such transferee to retransfer its interests in the Company
before it ceases to be an at least ninety-five percent (95%)
Affiliate to the Party which transferred such interest in the
Company to such transferee or to another ninety-five percent
(95%) Affiliate.
Notwithstanding any transfer under the provisions of this Article 5.3, a
transferor shall impose on a transferee, as a condition for the transfer, the
obligation to comply with the provisions of this Shareholders Agreement
(including this Article 5.3), as if it were a Party to this Shareholders
Agreement and be deemed to be a single Party with the ultimate transferor
through which such transferee acquired its interest (e.g. one of the Parties as
the case may be) and such transferee's rights and obligations shall be exercised
or performed by the transferor from whom the transferee acquired its interest,
as the case may be, and none of the other Parties shall be concerned or
interested in the relationship of, between or among the transferee(s) and the
ultimate transferor(s). The Parties shall continue to remain a Party to this
Shareholders Agreement for so long as any of the transferees ultimately
acquiring an equity interest in the Company, owns an equity interest in the
Company. This Article 5.3 shall apply to Goodyear, Goodyear Fra, Goodyear Lux
and Goodyear Canada as if Goodyear had transferred shares in the Company
pursuant to this Article 5.3 to each of Goodyear Fra, Goodyear Lux and Goodyear
Canada. Any transferee of shares in the Company shall, prior to exercising any
right or being subject to any obligations under this Shareholders Agreement,
execute and deliver a deed of adherence in the form of Exhibit 5.3 hereto.
The Parties agree to submit to a shareholders' vote under the share
transfer restriction clause in the articles of incorporation of the Company only
such share transfers that are permitted under this Article 5.3 and, as regards
any transfer under sub-paragraph (i) above, only after full compliance with the
procedures set forth in Article XVII of the Umbrella Agreement, including, if
necessary, the determination of the value of the equity interest in the Company
by an expert in accordance with paragraph 17.03(e) thereof. The parties agree to
vote in favor of any such permitted transfer and to vote against any transfer
that is not permitted. The Parties specifically waive any rights they have under
the last sentence of paragraph 3 of Section 195 of Book 2 of the Dutch Civil
Code, any rights under paragraph 5 of that Section to have an independent expert
appointed to value the shares in any manner that would be different from the
valuation in accordance with such paragraph 17.03(e), as well as any
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rights under the transfer provisions in the articles of incorporation reflecting
Section 195 of Book 2 of the Dutch Civil Code.
5.4 REGISTERED SHAREHOLDERS. Registered shareholders only shall be treated by
the Company as the holders and owners in fact of the shares standing to their
respective names and the Company shall not be bound to recognize any equitable
or other claim to or interest in such shares on the part of any other Person,
whether or not it shall have express or other notice thereof, except as
expressly provided by the laws of The Netherlands.
5.5 REGULATIONS. The Board of Directors shall have power and authority to make
all such rules and regulations as it may deem expedient concerning the issue,
transfer, conversion and registration of shareholding for shares of the capital
stock of the Company, not inconsistent with the laws of The Netherlands, the
articles of incorporation of the Company and this Shareholders Agreement.
5.6 FIXING RECORD DATE. In order that the Company may determine the shareholders
entitled to notice of or to vote at any meeting of shareholders or any
adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of shares 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 (60) nor less than fifteen (15) days
before the date of such meeting, nor more than sixty (60) days prior to any
other action, provided that all shareholders acknowledged by the Company in
accordance with Sections 196 a or 196 b of Book 2 of the Dutch Civil Code will
be deemed shareholders of record. A determination of shareholders of record
entitled to notice of or to vote at a meeting of shareholders shall apply to any
adjournment of the meeting; provided, however, that the Board of Directors may
fix a new record date for the adjourned meeting.
5.7 OWNERSHIP OF SHARES OF AFFILIATES WHOLLY-OWNED BY THE COMPANY.
Notwithstanding any other provisions hereof, in the case of all Affiliates
wholly-owned by the Company, without the prior written consent of the Parties
hereto, (i) no additional share capital shall be issued by an Affiliate
wholly-owned by the Company, except to the Company or Affiliates wholly-owned by
the Company, and (ii) no share capital shall be transferred to any Person,
except another Affiliate wholly-owned by the Company. In addition, with respect
to Major European Subsidiaries, no change of the capital structure shall be made
and no shares shall be transferred, without the prior written consent of SRI, if
as a result of
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such change or transfer, SRI (or any of its Affiliates) would lose some or all
of its entitlements to foreign tax credit with respect to that company.
5.8 CAPITAL CONTRIBUTIONS. The Parties agree that any Party to this Shareholders
Agreement can at any time make cash contributions to the general reserves of the
capital of the Company in connection with satisfying a specified obligation of
indemnification, reimbursement or otherwise. Whenever a Party makes such a
contribution, simultaneous with such contribution, SRI on the one hand and a
Party from among Goodyear, Goodyear Fra, Goodyear Lux or Goodyear Canada on the
other hand, shall subscribe to the lowest possible number of newly issued shares
in proportion to SRI's shareholding on the one hand and the aggregate
shareholding of Goodyear, Goodyear Fra, Goodyear Lux and Goodyear Canada on the
other hand, respectively, in the Company as of that time in order to preserve
their relative voting rights and shall pay in such amount of additional class
specific share premium as needed in order to preserve their relative economic
interest in the Company.
ARTICLE VI
DIVIDENDS AND FINANCE
6.1 DIVIDENDS. Unless the shareholders of the Company agree otherwise and
subject to the provisions of Article 6.2 hereof, the Company shall declare and
pay annual cash dividends to the maximum extent permitted by law up to 100% of
the profits of the Company and Affiliates controlled by it under US GAAP, if
any, in respect of each fiscal year, after taking into account any provisions as
the boards of directors of the Company and Affiliates controlled by it may deem
necessary in the best interest of the Company and Affiliates controlled by it,
respectively, and provided that declaration and payment of dividends is lawful.
Dividends upon the outstanding Equity Capital of the Company, subject to the
provisions of the articles of incorporation of the Company and of any applicable
law and of this Shareholders Agreement, may be declared by the shareholders at
any meeting. Subject to such provisions, and with the prior consent of all the
Parties, dividends may be paid, in property in lieu of cash.
Except as interim dividends are allowed as described below, distribution of the
profits of the Company shall take place subsequent to the adoption of the annual
accounts of the Company from which it appears that such distributions are
lawful. The Board of Directors may with due observance of Article 216, paragraph
4, Book 2 of the Dutch Civil Code, make one or more interim distributions on
Equity Capital prior to the adoption of the annual accounts for a particular
financial year.
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6.2 DEBT/EQUITY RATIOS. The Company and its Affiliates controlled by it, on a
consolidated basis, will be financed and managed so that, for the Company, at
the operational start-up date of the Alliance, the consolidated debt of the
Company will not exceed forty percent (40%) of the sum of the Company's
consolidated debt and the Company's consolidated shareholders' equity ("debt to
debt plus equity ratio"); thereafter the threshold debt to debt plus equity
ratio level will be forty percent (40%), above which temporary fluctuations will
be permitted, provided, however, that the Company has a plan to reduce its debt
to debt plus equity ratio to forty percent (40%) or below within nine (9)
months. If the debt to debt plus equity ratio set out above is exceeded for a
continuous period in excess of nine (9) months, then the Parties will proceed to
issue Equity Capital as provided in Article 6.3(i)(C). For the purpose of
Articles 6.2 and 6.3, the term "debt" shall mean borrowing from banks and
shareholders and long-term financial lease obligations.
6.3 FUTURE FUNDING ARRANGEMENTS.
(i) The Company will finance the funding requirements of the
Company and its Affiliates controlled by it, on a consolidated
basis, from the following sources (and, so far as reasonable
and practicable, in the preferred order set out below):
(A) own (Company and its Affiliates controlled by it
consolidated) cash resources;
(B) bank and third party borrowings or borrowings from
the Parties or their Affiliates;
(C) the issue of Equity Capital to the Parties (subject
to the terms of Article 3.6(b)(v) of this
Shareholders Agreement);
(ii) In the case of bank and third party borrowings (sub-paragraph
(i)(B) above), the Parties will provide any guarantee, letter
of comfort or similar assurances in connection with those
borrowings, if necessary, in proportion to each Party's share
of the Equity Capital at that time in the Company provided
that SRI receives adequate security (in a form reasonably
acceptable to SRI) over the Company's consolidated assets to
secure its obligations under such guarantee, letter of comfort
or similar assurance provided by it;
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(iii) In the case of borrowings from the Parties or their Affiliates
(sub-paragraph (i)(B) above):
(A) for borrowings with a term of three (3) years or
more, each Party will be entitled (but not obliged)
to provide the funding in proportion to its share of
the Equity Capital at that time in the Company;
(B) borrowings will only be incurred for the benefit, and
in the interests, of the Company or the applicable
Affiliate (and not primarily for the purpose of
conferring any special benefit on any of the Parties
or their Affiliates);
(C) the terms of the borrowing taken as a whole shall be
no less favorable than commercial rates available to
the Company or the applicable Affiliate at that time;
and
(D) no Party or its Affiliates shall have any obligation
to provide funding to the Company or any Affiliate
under sub-paragraphs (i)(B) or (iii).
(iv) In the case of any increase of the Equity Capital
(sub-paragraph (i)(C) above), the following shall apply:
(A) each Party will be entitled (but not obliged) to
participate in the funding in proportion to its share
in the Equity Capital immediately prior to the
increase (or a portion of that share) and will be
provided with the information on the intended new
funding and the intended purpose thereof;
(B) if all Parties participate in the new equity funding
in proportion to their shares in the Equity Capital
immediately prior to the increase, each Party shall
subscribe to the minimum number of shares (in each
case of the class of shares that it already holds)
that would be needed to allow it to preserve its
relative voting rights (or in the case of Goodyear,
Goodyear Fra, Goodyear Lux and Goodyear Canada, to
allow them to preserve their aggregate relative
voting rights) and contribute in exchange for such
shares:
(x) the aggregate par value of the shares issued
to it;
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<PAGE> 38
(y) an amount of class specific share premium
equal to the amount needed to allow that
Party to maintain its share in the Equity
Capital that is equal to that immediately
prior to the increase; and
(z) the remainder of that Party's contribution,
which will be contributed into the Company's
general reserve;
(C) if one Party does not wish to participate in the new
equity funding except for the aggregate par value of
the shares as described below,
(x) each Party shall subscribe to the minimum
number of shares (in each case of the class
of shares that it already holds) that would
be needed to allow it to preserve its
relative voting rights (or in the case of
Goodyear, Goodyear Fra, Goodyear Lux and
Goodyear Canada, to allow them to preserve
their aggregate relative voting rights) and
contribute in exchange for such shares the
aggregate par value of the shares issued to
it; and
(y) the other Party shall pay the remainder of
the new equity funding, which shall be
allocated to, on the one hand, the class
specific share premium account that relates
to the class of shares issued to it and, on
the other, the general reserves in
accordance with the principles contained in
Schedule 6.3(iv)(C);
(D) if one Party wishes to participate in the new equity
funding by contributing an amount that is less than
the amount that would be in proportion to its share
in the Equity Capital immediately prior to the
increase but more than the aggregate par value of the
minimum number of shares that would need to be issued
to it to preserve its voting rights (or in the case
of Goodyear, Goodyear Fra, Goodyear Lux and Goodyear
Canada, to allow them to preserve their aggregate
relative voting rights), the amount of the new equity
funding will be divided into the following two
portions:
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<PAGE> 39
(x) a portion that will be contributed by the
Parties in proportion to their shares in the
Equity Capital immediately prior to the
increase, which amount will be calculated on
the basis of the amount that the relevant
Party is willing to contribute and shall be
contributed in accordance with the
principles set out in sub-paragraphs (iv)(B)
above; and
(y) a portion that will be solely contributed by
the other Party, which will be contributed
in accordance with the principles set out in
sub-paragraph (iv)(C)(y) above;
(E) if any Party decides not to contribute its full pro
rata share and the result of that decision would be
that (but for this sub-paragraph (E)) that Party
would lose some tax benefit (for example, foreign tax
credit), the Parties will use their respective best
endeavors to implement an alternative funding which
will not have that result, provided however that said
alternative structure does not result in or cause any
cost or tax to, or the loss of any anticipated
benefit, right or deduction by, the other Parties or
the Company, it being understood and agreed by the
Parties that if the Parties are not able to mutually
agree on such alternative funding structure within a
reasonable period of time (being not more than 45
days from the presentation of a complete proposal on
the matter), the Company will be permitted
immediately to proceed with the new equity funding in
accordance with sub-paragraphs (iv)(A) through (D)
immediately above.
(F) If and to the extent a Party has unconditionally
agreed to contribute a portion of the new equity
funding and the Parties have agreed on the
subscription of shares at a specific subscription
price and the allocation of the Parties'
contributions in the Company's accounts, but such
Party subsequently fails to make the agreed
contribution within 30 days of the date on which the
contribution was due, the other Party may subscribe
to such shares at the relevant terms and conditions,
provided that it makes the contribution on those
shares within 30 days of the end of the 30 days
period mentioned above.
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6.4 CREATION OF RESERVES. As provided in Article 6.1, the Board of Directors may
set apart out of any of the funds of the Company available for dividends a
reserve or reserves for any proper purpose, or may abolish any such reserve in
the manner in which it was created.
6.5 MONEYS. The moneys of the Company shall be deposited in the name of the
Company in such bank or banks or trust company or trust companies as the Board
of Directors shall designate, and shall be drawn out only by checks, drafts,
payment orders or wire transfers signed or authorized by persons designated by
resolution adopted by the Board of Directors, except that the Board of Directors
may delegate said powers in the manner herein provided in this Article 6.5 of
this Shareholders Agreement. The Board of Directors may by resolution authorize
certain employees of the Company to designate any bank or banks or trust company
or trust companies in which moneys of the Company may be deposited, and to
designate the persons who may sign checks drawn on any particular bank account
or bank accounts of the Company, whether created by direct designation of the
Board of Directors or by an authorized employee or employees as aforesaid.
6.6 FISCAL YEAR. Subject to Article 3.6, the shareholders shall have power to
fix and from time to time change the fiscal year of the Company by amendment to
the articles of incorporation of the Company. In the absence of action by the
shareholders, however, the fiscal year of the Company shall end each year on
December 31, until such time, if any, as the fiscal year shall be changed by the
shareholders.
6.7 DIRECTORS' STATEMENT. The Board of Directors shall present at each annual
meeting of the shareholders a full and clear statement of the business and
conditions of the Company, unless this is not required pursuant to Article 396
of Book 2 of the Dutch Civil Code. When called for by vote of the shareholders,
the Board of Directors shall present to any special meeting of the shareholders,
a full and clear statement of the business and condition of the Company.
6.8 FINANCIAL INFORMATION TO BE PROVIDED BY THE COMPANY TO THE PARTIES. The
Company will provide to the Parties financial information on a monthly,
quarterly and annual basis, including income statements, balance sheets and cash
flow statements. The financial information to be provided by the Company will be
in accordance with United States of America generally accepted accounting
principles ("US GAAP") translated into US Dollars ("US GAAP Dollar Statements").
If requested, such income statements and balance sheets will be in a format
necessary for Japanese reporting purposes.
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The Company will also provide Goodyear with sales and production information and
any other supplementary financial information, applicable notes or other
information which Goodyear may reasonably request, including information needed
for tax filings. The Company will also provide SRI with sales and production
information and any other supplementary financial information, applicable notes
or other information which SRI may reasonably request, including information
needed for tax filings. Other information of Affiliates controlled by the
Company or information by country shall also be available upon the reasonable
request of SRI if such information has otherwise already been prepared for
reasons other than such request, provided that the Company and Affiliates
controlled by it are under no obligation to prepare such information or to
provide any of such information (other than on an aggregate basis) with regard
to sales outside the European Territory where the provision of such information
would be in breach of any law.
The annual consolidated US GAAP Dollar Statements for the Company will be
audited by internationally recognized independent auditors. The cost of
maintaining and providing all the foregoing information to the Parties shall be
at the cost of the Company, except that SRI will bear the costs of converting
the information provided by the Company into a format necessary for Japanese
reporting purposes, if requested by SRI, unless it is otherwise already being
prepared for another purpose.
All Parties, including internal auditing personnel, shall at all reasonable
times be given access to the auditors of the Company or Affiliates controlled by
it. The members of the Board of Directors of the Company shall be permitted to
communicate all information they may receive in respect of the Company's
business to the Party that appointed or nominated that member to such Board. The
Company and Affiliates controlled by it will conduct their business and keep
their books and records in accordance with applicable law and in accordance with
Goodyear's applicable Business Conduct Policy.
6.9 REPURCHASE OF SHARES. Subject to Article 3.6 and the authorization by the
general meeting, the Company may acquire fully paid up shares of its own share
capital in accordance with the laws of The Netherlands provided that the shares
of any shareholder shall not be repurchased by the Company without that
shareholder's consent.
ARTICLE VII
BOOKS AND RECORDS; TAX INQUIRY
7.1 BOOKS, ACCOUNTS AND RECORDS. The books, accounts and records of the Company,
except as may be otherwise required by the laws of The
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Netherlands, may be kept outside of The Netherlands at such place or places as
the Board of Directors may from time to time determine. The Board of Directors
shall determine whether to what extent and the conditions upon which any Person,
shall have any right to inspect any account or book or document of the Company,
except as conferred by applicable law or by resolution of the shareholders or
directors, provided that each shareholder will be permitted to inspect the
accounts and books of the Company or Affiliates controlled by it at any time as
reasonably requested.
7.2 TAX TREATMENT OF TECHNOLOGY LICENSE. In the event any fees under license
agreements paid to SRI or Goodyear by any of the SRI JV Companies or the
Goodyear JV Companies is the subject of any audit or inquiry by a tax Authority,
the recipient of such fee (SRI or Goodyear or both, as the case may be) shall
provide to the applicable SRI JV Company or Goodyear JV Company such documents,
information and assistance as the Company may reasonably request in order that
the Company may respond to such audit or inquiry.
ARTICLE VIII
TRANSFER PRICING POLICY AND SERVICE CHARGE
8.1 EUROPE JVC TRANSFER PRICING POLICY. The transfer pricing policy for
transactions between, on the one hand, the Company and Affiliates controlled by
it and, on the other hand, Goodyear and any other of its Affiliates is set forth
on Schedule 8.1. The Parties will agree a pricing policy for transactions
between, on the one hand, the Company and Affiliates controlled by it and, on
the other hand, SRI and any of its Affiliates.
8.2 SERVICE CHARGE. The Company and Affiliates controlled by it will be able to
perform certain business functions on a regional basis at a lower total cost. In
order to benefit from sharing services each company within Goodyear's European
Region will at its option enter into a service agreement. The service agreement
is essentially a cost sharing arrangement that sets out the procedure for
allocation of the costs among the participating entities. A Central Service
Center, located in Colmar-Berg, Luxembourg, will accumulate the costs incurred
in providing services to the participants and allocate these costs including
appropriate markups to reflect commercial transactions without further markup,
on a basis agreed to by the participants. Services will be performed in various
locations, those performed outside of the Central Service Center are billed to
the Central Service Center to be included in the pool of costs to be allocated
pursuant to the service agreement. The services provided under the service
agreement are (but not limited to):
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general administration, services, marketing services, materials management
services, production services, product policy services, purchasing services,
data processing services, financial services, and personnel administration
services.
Each year, costs will be estimated for the following year and provisional
allocations of such budgeted costs among the participants determined. The
provisional budget and allocation to be used will be discussed by the
participants at Goodyear's European Region finance directors conference which is
generally scheduled to be held in December each year. Once agreement has been
reached on the budget and the provisional allocation, an update to the service
agreement is signed by the participating entities. Each participant will be
charged monthly for the budgeted agreed to amount. Following the end of the
relevant year, once the actual costs and the actuals for the allocation are
determined and audited by an independent firm or accountants, a final correction
to the billing for the participants is made.
ARTICLE IX
EUROPE JVC OPERATING PROVISIONS
The Parties to this Shareholders Agreement hereby agree to the
following terms, conditions and provisions regarding the Europe JVC:
9.1 REPORTING LINES. All Board members will report to the Europe JVC's Chairman
and President (in addition the directors referred to in Articles 4.1(iii) (B)
and (C) of this Shareholders Agreement will also report to the Europe JVC's
Vice-Chairman) and will have delegated authority to manage their respective
operations on a day-to-day basis. Several Board members will for purposes of
operating efficiency and management accountability, have more than one reporting
line, as shown in Schedule 9.1.
9.2 OEM COUNCIL. To ensure coordination of all OEM activities of the Europe JVC
at the European region level, an OEM council will be established by the Europe
JVC. This council will have the responsibility to coordinate the implementation
of each of the global OEM strategies of SRI and Goodyear in the European
Territory for SRI European Trademarks tires and Goodyear European Trademarks
tires to service customer requirements. This council will include, without
limitation, both the Chairman and President and the Vice-Chairman, and others as
determined appropriate.
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9.3 CONDUCT OF BUSINESS. The business of the Europe JVC and each of its
Affiliates controlled by it will be conducted in accordance with its own
respective best interests as determined by its own respective board of
directors.
9.4 PERMITTED SCOPE OF BUSINESS OF THE EUROPE JVC. The Company, which will act
as a holding company, which together with Affiliates controlled by it, will
manufacture, distribute and sell air springs and all types of tires (other than
aircraft tires) together with Extended Products and Extended Services (as
defined in the Alliance Agreements) and related activities including, without
limitation, retreading (excluding aviation retreading) in the Sales Territories
as described in Article 9.5 below (Greater European Territory) and will engage
in all activities which are in furtherance of any of the foregoing.
9.5 SALES TERRITORIES. (a) The Europe JVC and Affiliates controlled by it shall
have the exclusive right to sell the products and services described in Article
9.4 of this Shareholders Agreement in the countries listed in Schedule 9.5(a)
(the "European Territory") with such countries being divided in two groups, one
for "Western Europe" and one for "Eastern Europe" as indicated on such schedule.
(b) The Europe JVC and Affiliates controlled by it shall have a non-
exclusive right to sell the products and services described in Article 9.4 of
this Shareholders Agreement ("Products") only via Affiliates of Goodyear via a
transfer priced sale pursuant to Schedule 8.1 to Goodyear Affiliates in the
countries:
(i) of Turkey or Morocco; or
(ii) in the case of Products bearing any Goodyear European
Trademark, the countries of Sub-Equatorial Africa and in the
case of Products bearing any SRI European Trademark, to only
the countries of Sub-Equatorial Africa in which the right to
sell such Products is not held or controlled by others (the
countries of Sub-Equatorial Africa for this purpose are listed
on Schedule 9.5(b)).
The Parties agree that Goodyear and its Affiliates (other than the
Europe JVC and Affiliates controlled by it) shall have a right and intend, to
establish a 100% owned company (the "Rebilling Export Center") for the export of
tires and related products. The Rebilling Export Center shall be permitted to
acquire and resell and facilitate the sales of Goodyear and associate brands
tires from whatever source, including without limitation, Products bearing any
Goodyear European Trademark.
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The Products bearing any Goodyear European Trademark acquired from the
Europe JVC and Affiliates controlled by it will be transferred to the Rebilling
Export Center at Cost plus five percent (5%) plus R & D/ technical expenses, as
described in item 1 under, FINISHED GOODS, of Schedule 8.1.
Products bearing any SRI European Trademark will be sold for export by
the Europe JVC and Affiliates controlled by it using the Rebilling Export Center
as an invoicing agent only to make such sales. The Rebilling Export Center may
upon mutual agreement service all aspects of such sales requested by the Europe
JVC and Affiliates controlled by it for the cost of providing such services.
The Parties agree that the Products bearing any Goodyear European Trademark
or any SRI European Trademark manufactured by or for the Europe JVC and
Affiliates controlled by it shall be sold or exported for sales as described
above, and in addition as otherwise described in (c), (d) and (e) below.
(c) The Europe JVC and Affiliates controlled by it and the Rebilling Export
Center shall have a non-exclusive right to sell Products to:
(i) Israel;
(ii) the countries of French Africa (the countries of French Africa
for this purpose are listed on Schedule 9.5(c)); and/or
(iii) the countries of Russia/CIS (the countries of Russia/CIS for
this purpose are listed on Schedule 9.5(c)).
(d) The Europe JVC and Affiliates controlled by it and the Rebilling Export
Center shall have a non-exclusive right to:
(i) sell Products bearing any SRI European Trademark to SRI's
exclusive distributors in the countries of the Middle East
(the countries of the Middle East for this purpose are listed
on Schedule 9.5(d)), subject, in the case of sales of such
Products in those countries, to prior notification to and
approval from SRI and to a commission to be agreed upon
between the seller (the Europe JVC or Affiliates controlled by
it or their agent) and SRI, to be paid to SRI; and
(ii) sell Products bearing any Goodyear European Trademark to
Goodyear's exclusive or non-exclusive distributors in the
countries of the Middle East (the countries of the Middle East
for this purpose are listed on Schedule 9.5(d)), subject,
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in the case of sales of such Products in those countries, to
prior notification and approval from Goodyear and to a
commission to be agreed upon between the seller (the Europe
JVC or Affiliate controlled by it or the Rebilling Export
Center) and Goodyear, to be paid to Goodyear.
(e) The Europe JVC and Affiliates controlled by it and the Rebilling Export
Center shall have a non-exclusive right to sell Products to:
(i) in the case of Products bearing any Goodyear European
Trademark, the countries listed on Schedule 9.5(e) (the
"Miscellaneous Countries"); and
(ii) in the case of Products bearing any SRI European Trademark, to
only the countries of the Miscellaneous Countries in which the
right to sell such Products is not held or controlled by
others.
The Europe JVC and its Affiliates controlled by it will in no event be
permitted to make sales to any countries if such sales would be prohibited by
any European, Japanese or US law.
9.6 BRAND POLICIES. The Europe JVC will promote the market profile of both the
Goodyear European Trademarks and the SRI European Trademarks. The Europe JVC
will seek to maintain and enlarge the sales of tires under the Goodyear European
Trademarks and of tires sold under the SRI European Trademarks in both the OEM
market and in the replacement market.
9.7 SALES STRUCTURE; PRICING AND MARKETING POLICIES.
(i) Replacement sales - For replacement sales, the Europe JVC and
its affiliates controlled by it will have separate sales
divisions, being the Dunlop Replacement Sales Division and a
separate division for replacement tires sold under the
Goodyear European Trademarks. The Europe JVC will be
responsible for the coordination and integration of management
of both the Goodyear European Trademarks and the SRI European
Trademarks at the European region level to ensure that the
best interests of the Europe JVC are promoted.
(ii) OEM sales - For OEM sales, subject to the principles regarding
the global management of OEM relationships with Japan-origin
Automotive OEMs set out in Article XI of the Umbrella
Agreement and within the parameters of the three-
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year business plan, the SRI European Trademarks personnel
under the SRI-appointed OEM Sales/Marketing Director within
the Europe JVC will manage and integrate the sales, marketing
and technical activities (except the ultimate decision on
pricing and marketing strategy) of tires under the SRI
European Trademarks with Japan-origin Automotive OEM accounts
and all motorcycle OEM accounts and ATV OEM accounts in the
European Territory. It is intended that the Europe JVC's
resources will be used in a manner such that the relationships
existing with automotive OEMs prior to the establishment of
the Europe JVC are not harmed, but are improved.
The SRI-appointed OEM Sales/Marketing Director will also
manage the relationship with the Japan-origin Automotive OEMs
and all motorcycle OEMs and ATV OEMs (regardless of origin).
The SRI-appointed OEM Sales/Marketing Director will also be
responsible for sales of SRI European Trademark tires to
non-Japan origin OEMs within the strategy developed by
Goodyear. Goodyear agrees that the strategy developed by
Goodyear to promote sales of SRI European Trademark tires to
non-Japan OEMs will incorporate the opportunity for the
SRI-appointed OEM sales/marketing director to have direct
exposure to the non-Japan-origin OEMs in order to support the
development of ongoing business relations to communicate that
there are adequate resources in Europe and elsewhere for the
global support of the Dunlop brand. The SRI-appointed OEM
Sales/Marketing Director will also have a line of
communication with SRI and the Japan OE JVC to maintain and
coordinate the global relationships with Japan-origin
Automotive OEMs and all motorcycle OEMs and ATV OEMs for the
Europe JVC's operations.
The Europe JVC's tires under the Goodyear European Trademarks
will be sold and marketed to all non-Japan-origin OEM accounts
in the European Territory by Goodyear European Trademarks
personnel. The Goodyear-appointed OEM Sales/Marketing Director
will be responsible for sales of Goodyear European Trademark
tires to Japan-origin OEMs within the strategy developed by
SRI.
(iii) Pricing and Marketing policies- The pricing and marketing
policies of the Europe JVC with respect to all OEM accounts
and replacement sales will be established and maintained by
the Europe JVC. The marketing programs for each specific
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brand will be in line with such applicable marketing policies
and will promote the best interests of the Europe JVC. The
Chairman and President of the Europe JVC will make all final
pricing and marketing strategy determinations.
9.8 MANUFACTURING/SOURCING. The Europe JVC and its Affiliates controlled by it,
will seek to utilize its own manufacturing capacity to the fullest extent
possible but will be permitted to source (in accordance with the relevant
transfer pricing principles set out in Schedule 8.1 and the conditions of the
relevant Trademark License Agreement) tires from any of Goodyear's and its
Affiliates' factories inside or outside of the European Territory and from any
of SRI's and its Affiliates' factories outside of the European Territory if this
is commercially attractive to the Europe JVC.
The Europe JVC and its Affiliates controlled by it will also continue
off-take arrangements in place at the operational start-up date of the Alliance
with SRI, Goodyear and their Affiliates on the currently applicable terms (even
if they are inconsistent with the relevant transfer pricing principles set out
in Schedule 8.1) for a period of two (2) years from the operational start-up
date of the Alliance. Such arrangements (except those relating to warranty tires
as after-sales service for OEM tires) will be reviewed at the end of that period
and thereafter annually by the Europe JVC and will be continued if it is in the
best interest of the Europe JVC (and the continuation of the off-take
arrangements is acceptable to the counter-party to the arrangement). The Parties
agree that prior to the Closing, Goodyear will provide to SRI, as of the Closing
Date, a list and description of (a) all off-take arrangements, and (b)
arrangements for warranty tires as after sales service for OEM tires, in each
case as between Goodyear and its Affiliates (other than the Goodyear JV
Companies) on the one hand and the Goodyear JV Companies regarding the Goodyear
Businesses on the other hand. The Parties agree that prior to the Closing, SRI
will provide to Goodyear, as of the Closing Date, a list and description of (a)
all off-take arrangements and (b) arrangements for warranty tires as after sales
service for OEM tires, in each case as between SRI and its Affiliates on the one
hand and the SRI JV Companies regarding the SRI Businesses on the other hand.
The Parties confirm that allocation (and any rationalization identified
and decided upon) of manufacture of particular sizes and types of tires as
between the manufacturing facilities of the Europe JVC and its Affiliates
controlled by it, will be determined in accordance with the best interests of
the Europe JVC (and without discriminating on non-economic grounds against the
facilities formerly owned by SRI in favor of those formerly owned by Goodyear
and vice versa). Likewise, allocation (and any rationalization) of manufacture
as between the manufacturing
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facilities of the Europe JVC and its Affiliates controlled by it, of Goodyear
(outside the Europe JVC and its Affiliates controlled by it) and of SRI (outside
the Europe JVC and its Affiliates controlled by it) will be determined on a
basis which does not discriminate on non-economic grounds against the Europe JVC
and its Affiliates controlled by it in favor of Goodyear's other interests or
SRI's other interests.
9.9 NON-COMPETE.
(i) Goodyear and SRI and their Affiliates (other than the Europe
JVC and each Affiliate controlled by it) will be restricted
from competing, directly or indirectly, with the Europe JVC
and each Affiliate controlled by it in the business of
manufacturing and/or selling the types of tires specified in
Article 9.4 hereof in the European Territory, provided that
Goodyear's Affiliates Sava Tires ("Sava") and T.C. Debica
("Debica") will be permitted to continue to manufacture tires
in their respective jurisdictions and to make sales in the
European Territory of tires manufactured by them under the
Sava and Debica trademarks, respectively. Subject to existing
contractual and practical restrictions, Goodyear intends (but
without being under any legal obligation to do so) that future
sales in the European Territory (outside the countries of the
former Yugoslavia and Poland) of tires manufactured by Sava
and Debica, respectively, are effected through the Europe
JVC's sales network. With respect to Sava, if Goodyear
exercises its call right to acquire 100% of the equity in
Sava, SRI can elect to have Goodyear complete a transaction to
transfer such 100% interest in Sava to the Europe JVC in
exchange for consideration equal to Sava's then fair market
value. With respect to Debica, if Goodyear is able to obtain
100% of the equity in Debica, SRI can elect to have Goodyear
complete a transaction to transfer such 100% interest in
Debica to the Europe JVC in an exchange for consideration
equal to Debica's then fair market value. With respect to a
prospective transaction regarding Sava or Debica as described
above, Goodyear's obligation to proceed with such a
transaction is conditioned upon Goodyear determining how to
structure the transfer of either Sava or Debica to the Europe
JVC without the restrictions or requirements of Article 6.3,
including without limitation the source of funds or any
preferred order of financing. For the avoidance of doubt, the
Parties confirm that, subject to Article XII of the Umbrella
Agreement, the restrictions in this Article 9.9 shall not
affect, in regards to the Sumitomo or Ohtsu trademark tires:
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(A) the manufacture of said tires outside the European
Territory; or
(B) sales or the manufacturing (outside the European
Territory) by The Ohtsu Tire & Rubber Co., Ltd or
Sumitomo Corporation under the "Sumitomo" or "Ohtsu"
trademarks or under trademarks owned or held by
either of those companies.
(ii) In the event that the Europe JVC does not sell sufficient
tires under the "SRIXON" trademark in one or more of the
relevant jurisdictions in the European Territory, SRI shall be
permitted to make such minimum number of sales in each of the
relevant jurisdictions as is necessary to preserve the
trademark rights to the SRIXON trademark and the relevant
Trademark License Agreements referred to in Article 5.03(a) of
the Umbrella Agreement shall become non-exclusive for such
sales as to the SRIXON trademark.
(iii) VIOLATION OF NON-COMPETITION. Each Party acknowledges and
agrees that any breach of any agreement, condition or
provision contained in Article 9.9 will result in irreparable
harm and damage to the other Parties and/or the Europe JVC or
applicable Affiliate controlled by it and that such harm or
damage may be extremely difficult to quantify. Accordingly,
each Party hereby consents to the entry of an interim order or
injunction, temporary or permanent, in any applicable court,
enjoining them from any further violations of its undertaking
if satisfactory evidence of such violation is presented to the
applicable court and the court grants said relief.
(iv) COSTS AND EXPENSES. Upon the occurrence of a breach of this
Article 9.9, the Party seeking enforcement of this Article
shall have a right upon presentation of satisfactory evidence
of such breach to the applicable court to collect from the
Party in breach, in addition to any other amounts owing or
remedies allowed, all costs and expense incurred in the
enforcement of its rights hereunder.
9.10 BUSINESS PLAN. The Europe JVC's Board will develop annually a
three year forward business plan. The first year of this plan will serve as the
operational budget for the ensuing calendar year and will serve as the benchmark
against which operational results are judged and
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executive incentive compensation is paid. As a part of the normal business
planning process of the Europe JVC, each proposed business plan shall be
discussed by representatives of SRI and Goodyear at a time that such plan can
still be amended to take account of the results of that discussion. There will
be no closures of any factories currently producing new SRI European Trademarks
tires prior to the second anniversary of the operational start-up of the Europe
JVC, it being understood that downsizing or reducing the workforce of any
factory by up to fifty percent (50%) shall not be deemed a closure.
9.11 OFFICES AND BRANCHES. The registered office of the Company shall be in
Amsterdam in The Netherlands. The Company may establish other offices and
branches inside as well as outside The Netherlands. The initial office where the
Board of Directors is located ("Executive Office") shall be in Brussels, Belgium
and the initial offices where the principal office of the Company is located
("Headquarters") shall be in Colmar-Berg, Grand Duchy of Luxembourg.
9.12 INSURANCES. On and after the Closing Date, the Europe JVC shall be
responsible for determining the type, value and duration of insurance coverages
to be maintained by the Europe JVC and Affiliates controlled by it. The Parties
agree that the Europe JVC and Affiliates controlled by it may obtain their
insurance coverages from Goodyear and/or Affiliates of Goodyear or as part of
Goodyear's or its Affiliates' worldwide insurance program upon payment or
incurring their applicable portion of costs for such coverage, on terms
(including cost) that are generally no less favorable than provided to Goodyear
or its Affiliates under the same or similar conditions.
9.13 CERTAIN FEES. Subject to Article XI of the Europe JV Agreement, the
aggregate fee payable by each of the licensees under the Technology License
Agreements (in respect of the rights thereunder) and the Trademark License
Agreements (in respect of the export selling rights thereunder) granted by SRI
to the SRI JV Companies and the Goodyear JV Companies and for the acceptance by
SRI of (i) the restrictions on competition contained in Article 9.9 of this
Shareholders Agreement and (ii) the restriction on competition contained in
Article 17.05(d)(i) of the Umbrella Agreement shall be one per cent (1%) of Net
Sales (as defined in the Technology License Agreements) of the licensee and
Affiliates controlled by it.
ARTICLE X
INCONSISTENCY BETWEEN THIS SHAREHOLDERS AGREEMENT
AND THE ARTICLES OF INCORPORATION
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10.1 INCONSISTENCY. Notwithstanding anything herein implied or contained to the
contrary, in the event of an inconsistency between the provisions of this
Shareholders Agreement and the rights and obligations of the Parties under the
articles of incorporation of the Company, as between the Parties only
notwithstanding that as between the Parties (or any one Party) and any third
Person the result may be different, the provisions of this Shareholders
Agreement shall prevail as between the Parties.
ARTICLE XI
RELATIONSHIP OF THE PARTIES
11.1 NO PARTNERSHIP OR AGENCY. Except as otherwise agreed in writing, the
relationship of the Parties inter se shall be governed by the terms of this
Shareholders Agreement and nothing contained herein shall be deemed to
constitute a partnership or agency between them and neither shall they by reason
of the actions of any one of them incur any personal liability to any third
Person as co-partners or agents and none of them shall be entitled or empowered
to represent or hold out to any third Person that the relationship between them
is that of a partnership or agency.
ARTICLE XII
EFFECTIVE DATE; TERM; TERMINATION; DURATION
12.1 EFFECTIVE DATE. This Shareholders Agreement shall become effective at the
Closing.
12.2 TERM. After this Shareholders Agreement becomes effective, this
Shareholders Agreement shall continue in effect for so long as SRI and its
transferees (under Article 5.3) together own ten percent (10%) or more of the
aggregate amount of par value and class specific share premium paid in respect
of the issued and outstanding shares of the Company, and upon this ceasing to be
the case, this Shareholders Agreement, except for this Article 12.2, Article 1,
Article 6.3(iv)(A), (B), (C), (D) and (F) but not (E) and Article 13, shall
automatically terminate of its own accord and be of no further force or effect,
provided that the termination of this Shareholders Agreement, except for this
Article 12.2, Article 1, Article 6.3(iv)(A), (B), (C), (D) and (F) but not (E)
and Article 13, shall not deprive any minority shareholders of the rights to
which all shareholders are entitled under the laws of The Netherlands. In
addition, upon the termination of this Shareholders Agreement, SRI shall have
the right to attend and vote at shareholder meetings, and an entitlement to
dividends, distributions and returns of capital in proportion to its pro
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rata share of the Equity Capital. Without prejudice to the foregoing sentence,
Goodyear shall have the right, upon or at any time after such termination, to
change the capital structure of the Company solely to reduce the voting rights
of SRI to the level of its pro rata share in the Equity Capital.
12.3 TERMINATION BY EITHER PARTY. This Shareholders Agreement may be terminated
or cancelled by either Goodyear or SRI, at said Party's option, at any time
during the term of this Shareholders Agreement if the circumstances or events
listed in paragraphs (a), (b) or (c) of Article 17.01 of the Umbrella Agreement
apply to said Party and a Global Exit has occurred in accordance with the
Umbrella Agreement. The Parties agree that Section 201(a) of Book 2 of the Dutch
Civil Code will not apply in relation to shares in the Company provided that the
Parties exit rights under Article 17.01(h) of the Umbrella Agreement would apply
in relation to shares in the Company.
12.4 DURATION OF THE COMPANY. The existence of the Company shall be perpetual.
ARTICLE XIII
MISCELLANEOUS PROVISIONS
13.1 AMENDMENTS. This Shareholders Agreement may be amended, modified or
superseded, and any of the terms, covenants or conditions hereof may be waived,
only by a written instrument expressly referencing this Shareholders Agreement
as being amended, modified, superceded or waived, executed by the Parties, or,
in the case of a waiver, by the Party or Parties waiving compliance.
13.2 WAIVERS. The failure at any time of any Party to require performance by
another Party of any responsibility or obligation provided for in the
Shareholders Agreement shall in no way affect the full right to require such
performance at any time thereafter, nor shall the waiver by any Party of a
breach of any provision of this Shareholders Agreement by another Party
constitute a waiver of any succeeding breach of the same or any other provision
nor constitute a waiver of the responsibility or obligation itself.
13.3 ASSIGNABILITY. Neither this Shareholders Agreement nor any right or
obligation thereunder may be assigned or delegated in whole or in part by any
Party without the prior written consent of the other Parties, and any such
attempted assignment or delegation without such consent shall be null, void AB
INITIO and without effect. Any permitted assignment of this Shareholders
Agreement shall be binding upon and inure to the
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benefit of the Parties hereto and their respective successors and permitted
assigns and the assignor shall, unless the Parties agree otherwise, remain
liable for the obligations of any of its permitted assigns. No assignment of the
obligations and rights under this Shareholders Agreement may take place without
the assignee being a shareholder of the Company.
13.4 SEVERABILITY. If any one or more of the provisions contained in this
Shareholders Agreement or any document executed in connection therewith shall be
invalid, illegal or unenforceable in any respect under any applicable law, the
validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired; PROVIDED, HOWEVER, that in
such case the Parties agree to use their best efforts (but without the
incurrence of unreasonable cost or liability) to achieve the purpose of the
invalid provision by a new legally valid stipulation.
13.5 NOTICES. All notices, requests, demands and other communications required
or permitted under this Shareholders Agreement shall be in writing and shall be
deemed to have been duly given if delivered by hand, or sent by courier (and, in
either case duly receipted) or facsimile transmission (provided that, in the
case of facsimile transmission, a confirmation copy thereof shall be delivered
by hand or sent by courier (and, in either case duly receipted) within two (2)
days of transmission) as follows (until notice of a change thereof is given as
provided in this Article 13.5):
(a) if to Goodyear, to:
The Goodyear Tire & Rubber Company
1144 East Market Street
Akron, Ohio 44316-0001, U.S.A.
Attention: Corporate Secretary
Facsimile: (330) 796 7861
(b) if to Goodyear Fra, to:
Goodyear S.A.
101 Avenue De La Chataigneraie
Bp 310
92506 Rueil-Malmaison Cedex - France
Attention: Finance Director
Facsimile: 33 1 47 16 2317
(c) if to Goodyear Lux, to:
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Goodyear S.A.
Avenue Gordon Smith
L-7750 Colmar-Berg
Grand Duchy of Luxembourg
Attention: Finance Director
Facsimile: 352 8199 2709
(d) if to Goodyear Canada, to:
Goodyear Canada Inc.
450 Kipling Avenue
Toronto, Ontario M8Z 5E1
Canada
Attention: President
Facsimile: 1-416-201-4249
(e) if to SRI, to:
Sumitomo Rubber Industries, Ltd.
6-9, 3-Chome
Wakinohama-cho, Chuo-ku
Kobe 651-007, Japan
Attention: General Manager, Legal Department
Facsimile: 81-78-265-3111
All notices given in accordance with this Article 13.5 are (subject to
the foregoing provisions) effective, if delivered by hand or mailed by courier,
at the time of delivery, and, if communicated by facsimile, at the time of
receipt of confirmation of a successful transmission.
13.6 SET-OFF. Any amount payable by one Party to the other Party under this
Shareholders Agreement that is not disputed by the other Party or has been
determined to be payable by one Party to another Party by the arbitration or
judicial procedure in accordance with the provisions of the Umbrella Agreement,
may be set off against any amount owed to such Party by such other Party under
this Shareholders Agreement or otherwise that is itself not disputed by the
other Party or is the result of such arbitration or judicial process.
13.7 GOVERNING LAW, DISPUTES AND LANGUAGE.
(a) THIS SHAREHOLDERS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, UNITED STATES OF AMERICA,
WITHOUT GIVING EFFECT TO ITS PRINCIPLES OR RULES OF CONFLICT OF LAWS TO THE
EXTENT SUCH PRINCIPLES OR RULES
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WOULD REQUIRE OR PERMIT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION.
(b) The Parties hereto acknowledge that this Shareholders Agreement and
all other agreements contemplated to be delivered in connection therewith,
incorporate certain negotiated terms and therefore no presumption shall arise
favoring any Party hereto by virtue of authorship of any provisions of this
Shareholders Agreement, exhibits, schedules or any documents specifically
referenced herein.
(c) This Shareholders Agreement has been written in English and the
English version shall be the definitive text even if for convenience or
otherwise it is translated into another language.
(d) Except as may be otherwise specifically provided in this
Shareholders Agreement, any dispute between the Parties in regard to the
interpretation of, the effect of, the Parties' respective rights and obligations
under, or a breach of any matter arising out of this Shareholders Agreement
shall be decided by the procedures in the Umbrella Agreement.
13.8 TERMINATION PRIOR TO CLOSING. This Shareholders Agreement may be terminated
in accordance with the provisions of Article 18.08 of the Umbrella Agreement.
13.9 THIRD PARTIES. Except as specifically set forth or referred in the Alliance
Agreements, nothing expressed or implied herein is intended or shall be
construed to confer upon or give any Person or entity other than the Parties
hereto, their Affiliates and subsidiaries from time to time and their permitted
successors and assigns any rights or remedies under or by reason of this
Shareholders Agreement.
13.10 TITLES TO ARTICLES AND SUBPARTS. The various titles of articles or
subparts of this Shareholders Agreement are used solely for the purpose of
convenience and shall not be used for interpreting or construing any word,
clause, article or subparts of this Shareholders Agreement.
13.11 COUNTERPARTS. This Shareholders Agreement may be executed simultaneously
in multiple counterparts, each of which shall be deemed an original, but all of
which taken together shall constitute one and the same instrument.
13.12 SINGULAR AND PLURAL; GENDER. Whenever the context requires, words used in
the singular shall be construed to mean or include the plural and vice versa,
and pronouns of any gender shall be deemed to include and designate the
masculine, feminine or neuter gender.
49
X-10.2-56
<PAGE> 57
13.13 INCORPORATION. The Parties hereto hereby agree that Articles 4.05,
ANNOUNCEMENTS AND CONFIDENTIALITY, 4.06, PRESERVATION OF AND ACCESS TO BOOKS AND
RECORDS, 18.08, TERMINATION PRIOR TO CLOSING, 18.09, ENTIRE AGREEMENT, 18.11,
COSTS AND TAXES, and 18.12, REMEDIES, of the Umbrella Agreement are hereby
incorporated into and made a part of this Shareholders Agreement by this
reference. The term "Party" and/or "Parties" in the above referenced sections of
the Umbrella Agreement shall be deemed to include all the Parties to this
Shareholders Agreement.
50
X-10.2-57
<PAGE> 58
IN WITNESS WHEREOF, the Parties hereto have caused this Shareholders
Agreement to be duly executed, all as of the day and year first above written.
THE GOODYEAR TIRE & RUBBER COMPANY
/S/ Samir Gibara
---------------------------------------
By: Samir Gibara
Title: Chairman of the Board, Chief
Executive Officer and President
GOODYEAR S.A.
a French corporation
/S/ Samir Gibara
---------------------------------------
By : Samir Gibara
Title: Attorney-in-Fact
GOODYEAR S.A.
a Luxembourg corporation
/S/ Samir Gibara
---------------------------------------
By: Samir Gibara
Title: Attorney-in-Fact
GOODYEAR CANADA INC.
/S/ Samir Gibara
---------------------------------------
By: Samir Gibara
Title: Attorney-in-Fact
SUMITOMO RUBBER INDUSTRIES , LTD.
/S/ Naoto Saito
---------------------------------------
By: Naoto Saito
Title: Chairman
51
X-10.2-58
<PAGE> 1
EXHIBIT 12
THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
(Dollars in millions)
9 MONTHS
ENDED TWELVE MONTHS ENDED
SEPTEMBER 30, DECEMBER 31,
------------ --------------------------------------------------------
1999 1998 1997 1996 1995 1994
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
EARNINGS
- --------
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES $ 234.6 $ 1,002.7 $ 743.3 $ 811.5 $ 869.8 $ 855.9
Add:
Amortization of previously capitalized interest 8.5 10.7 11.0 11.6 11.7 10.2
Minority interest in net income of
consolidated subsidiaries with fixed charges 21.7 33.6 45.1 45.9 30.1 16.9
Proportionate share of fixed charges of investees
accounted for by the equity method 4.1 4.8 6.5 5.1 5.3 2.5
Proportionate share of net loss of investees
accounted for by the equity method -- 0.2 0.1 2.7 0.5 0.2
--------- --------- --------- --------- --------- ---------
Total additions 34.3 49.3 62.7 65.3 47.6 29.8
Deduct:
Capitalized interest 8.7 6.6 6.2 5.4 5.1 5.7
Minority interest in net loss of consolidated subsidiaries 2.4 2.9 3.6 4.4 3.3 0.3
Undistributed proportionate share of net income
of investees accounted for by the equity method -- -- -- -- 0.2 7.2
--------- --------- --------- --------- --------- ---------
Total deductions 11.1 9.5 9.8 9.8 8.6 13.2
TOTAL EARNINGS $ 257.8 $ 1,042.5 $ 796.2 $ 867.0 $ 908.8 $ 872.5
========= ========= ========= ========= ========= =========
FIXED CHARGES
- -------------
Interest expense $ 123.5 $ 147.8 $ 119.5 $ 128.6 $ 135.0 $ 129.4
Capitalized interest 8.7 6.6 6.2 5.4 5.1 5.7
Amortization of debt discount, premium or expense 5.1 7.1 0.1 0.3 0.4 0.7
Interest portion of rental expense 43.2 57.7 63.0 68.2 75.8 81.9
Proportionate share of fixed charges of investees
accounted for by the equity method 4.1 4.8 6.5 5.1 5.3 2.5
--------- --------- --------- --------- --------- ---------
TOTAL FIXED CHARGES $ 184.6 $ 224.0 $ 195.3 $ 207.6 $ 221.6 $ 220.2
========= ========= ========= ========= ========= =========
TOTAL EARNINGS BEFORE FIXED CHARGES $ 442.4 $ 1,266.5 $ 991.5 $ 1,074.6 $ 1,130.4 $ 1,092.7
========= ========= ========= ========= ========= =========
RATIO OF EARNINGS TO FIXED CHARGES 2.40 5.65 5.08 5.18 5.10 4.96
</TABLE>
X-12-1
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTIANS SUMMARY FINANCIAL INFORMATION FOR THE GOODYEAR TIRE &
RUBBER COMPANY AND SUBSIDIARIES EXTRACTED FROM THE CONSOLIDATED STATEMENT OF
INCOME AND RETAINED EARNINGS AND THE CONSOLIDATED BALANCE SHEET AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 233
<SECURITIES> 0
<RECEIVABLES> 2,730
<ALLOWANCES> 91
<INVENTORY> 2,285
<CURRENT-ASSETS> 5,628
<PP&E> 11,011
<DEPRECIATION> 5,499
<TOTAL-ASSETS> 13,135
<CURRENT-LIABILITIES> 4,534
<BONDS> 1,673
0
0
<COMMON> 156
<OTHER-SE> 3,523
<TOTAL-LIABILITY-AND-EQUITY> 13,135
<SALES> 9,329
<TOTAL-REVENUES> 9,329
<CGS> 7,531
<TOTAL-COSTS> 7,531
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 124
<INCOME-PRETAX> 235
<INCOME-TAX> 35
<INCOME-CONTINUING> 200
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 200
<EPS-BASIC> 1.28
<EPS-DILUTED> 1.26
</TABLE>
<PAGE> 1
EXHIBIT 99.1
THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
SEGMENT INFORMATION
Unaudited
<TABLE>
<CAPTION>
THREE MONTHS
(In millions) ENDED SIX MONTHS
------------------------ ENDED
MAR. 31, JUN. 30, JUN. 30,
1999 1999 1999
-------- -------- --------
<S> <C> <C> <C>
SALES:
North American Tire $1,507.1 $1,579.8 $3,086.9
European Union Tire 503.5 470.8 974.3
Eastern Europe, Africa and Middle East Tire 181.2 189.3 370.5
Latin American Tire 240.6 219.2 459.8
Asia Tire 141.0 148.8 289.8
-------- -------- --------
TOTAL TIRES 2,573.4 2,607.9 5,181.3
Engineered Products 308.7 328.7 637.4
Chemical Products 228.4 223.2 451.6
-------- -------- --------
TOTAL SEGMENT SALES 3,110.5 3,159.8 6,270.3
Inter-SBU Sales (120.4) (112.9) (233.3)
Other 1.1 1.8 2.9
-------- -------- --------
NET SALES $2,991.2 $3,048.7 $6,039.9
======== ======== ========
INCOME:
North American Tire $ 91.7 $ 24.3 $ 116.0
European Union Tire 45.3 35.3 80.6
Eastern Europe, Africa and Middle East Tire 9.8 11.4 21.2
Latin American Tire 30.1 16.0 46.1
Asia Tire 3.6 7.8 11.4
-------- -------- --------
TOTAL TIRES 180.5 94.8 275.3
Engineered Products 20.5 30.8 51.3
Chemical Products 28.7 30.2 58.9
-------- -------- --------
TOTAL SEGMENT INCOME (EBIT) 229.7 155.8 385.5
Rationalizations and other actions (167.4) 9.6 (157.8)
Interest expense (37.7) (39.6) (77.3)
Foreign currency exchange 34.6 (1.1) 33.5
Minority interest in net income of subsidiaries (4.5) (6.5) (11.0)
Inter SBU-Income (14.0) (12.2) (26.2)
Other (6.0) (11.0) (17.0)
-------- -------- --------
INCOME FROM CONTINUING OPERATIONS $ 34.7 $ 95.0 $ 129.7
BEFORE INCOME TAXES ======== ======== ========
</TABLE>
- X - 99.1 - 1 -
<PAGE> 1
EXHIBIT 99.2
THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
SEGMENT INFORMATION
Unaudited
<TABLE>
<CAPTION>
(In millions) THREE MONTHS ENDED
--------------------------------------------
MAR. 31, JUN. 30, SEP. 30, DEC. 31,
1998 1998 1998 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
SALES:
North American Tire $1,523.3 $1,550.9 $1,603.8 $1,557.2
European Union Tire 469.1 501.9 523.7 566.3
Eastern Europe, Africa and 202.4 201.4 222.6 223.6
Middle East Tire
Latin American Tire 335.5 327.0 302.6 280.5
Asia Tire 116.8 117.6 123.8 143.6
-------- -------- -------- --------
TOTAL TIRES 2,647.1 2,698.8 2,776.5 2,771.2
Engineered Products 328.7 329.9 311.9 308.8
Chemical Products 260.7 244.0 236.6 229.5
-------- -------- -------- --------
TOTAL SEGMENT SALES 3,236.5 3,272.7 3,325.0 3,309.5
Inter-SBU Sales (143.4) (131.9) (129.2) (119.8)
Other 0.9 (3.3) (4.1) 13.4
-------- -------- -------- --------
NET SALES $3,094.0 $3,137.5 $3,191.7 $3,203.1
======== ======== ======== ========
INCOME:
North American Tire $ 110.2 $ 89.2 $ 94.9 $ 84.3
European Union Tire 49.7 58.3 39.8 51.9
Eastern Europe, Africa and 26.1 20.8 31.6 23.9
Middle East Tire
Latin American Tire 60.2 53.7 40.1 32.1
Asia Tire 3.0 4.8 1.6 (1.9)
-------- -------- -------- --------
TOTAL TIRES 249.2 226.8 208.0 190.3
Engineered Products 33.1 34.5 22.3 21.9
Chemical Products 34.3 40.6 34.5 30.2
-------- -------- -------- --------
TOTAL SEGMENT INCOME (EBIT) 316.6 301.9 264.8 242.4
Rationalizations and other actions 61.1 12.3 53.2 11.0
Interest expense (30.3) (34.0) (41.4) (42.1)
Foreign currency exchange 5.3 9.2 0.3 (12.2)
Minority interest in net income (8.8) (7.1) (9.7) (5.9)
of subsidiaries
Inter-SBU Income (17.3) (15.5) (16.4) (11.9)
Other (2.6) (1.9) (6.9) (11.4)
-------- -------- -------- --------
INCOME FROM CONTINUING OPERATIONS $ 324.0 $ 264.9 $ 243.9 $ 169.9
BEFORE INCOME TAXES ======== ======== ======== ========
</TABLE>
- X - 99.2 - 1 -
<PAGE> 1
EXHIBIT 99.3
THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
SEGMENT INFORMATION
Unaudited
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS NINE MONTHS TWELVE MONTHS
(In millions) ENDED ENDED ENDED ENDED
MAR. 31, JUN. 30, SEP. 30, DEC. 31,
1998 1998 1998 1998
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
SALES:
North American Tire $ 1,523.3 $ 3,074.2 $ 4,678.0 $ 6,235.2
European Union Tire 469.1 971.0 1,494.7 2,061.0
Eastern Europe, Africa and 202.4 403.8 626.4 850.0
Middle East Tire
Latin American Tire 335.5 662.5 965.1 1,245.6
Asia Tire 116.8 234.4 358.2 501.8
--------- --------- --------- ---------
TOTAL TIRES 2,647.1 5,345.9 8,122.4 10,893.6
Engineered Products 328.7 658.6 970.5 1,279.3
Chemical Products 260.7 504.7 741.3 970.8
--------- --------- --------- ---------
TOTAL SEGMENT SALES 3,236.5 6,509.2 9,834.2 13,143.7
Inter-SBU Sales (143.4) (275.3) (404.5) (524.3)
Other 0.9 (2.4) (6.5) 6.9
--------- --------- --------- ---------
NET SALES $ 3,094.0 $ 6,231.5 $ 9,423.2 $12,626.3
========= ========= ========= =========
INCOME:
North American Tire $ 110.2 $ 199.4 $ 294.3 $ 378.6
European Union Tire 49.7 108.0 147.8 199.7
Eastern Europe, Africa and 26.1 46.9 78.5 102.4
Middle East Tire
Latin American Tire 60.2 113.9 154.0 186.1
Asia Tire 3.0 7.8 9.4 7.5
--------- --------- --------- ---------
TOTAL TIRES 249.2 476.0 684.0 874.3
Engineered Products 33.1 67.6 89.9 111.8
Chemical Products 34.3 74.9 109.4 139.6
--------- --------- --------- ---------
TOTAL SEGMENT INCOME (EBIT) 316.6 618.5 883.3 1,125.7
Rationalizations and other actions 61.1 73.4 126.6 137.6
Interest expense (30.3) (64.3) (105.7) (147.8)
Foreign currency exchange 5.3 14.5 14.8 2.6
Minority interest in net income (8.8) (15.9) (25.6) (31.5)
of subsidiaries
Inter-SBU Income (17.3) (32.8) (49.2) (61.1)
Other (2.6) (4.5) (11.4) (22.8)
--------- --------- --------- ---------
INCOME FROM CONTINUING OPERATIONS $ 324.0 $ 588.9 $ 832.8 $ 1,002.7
BEFORE INCOME TAXES ========= ========= ========= =========
</TABLE>
- X - 99.3 - 1 -
<PAGE> 1
EXHIBIT 99.4
THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
SEGMENT INFORMATION
Unaudited
<TABLE>
(In millions) YEAR ENDED DECEMBER 31,
-----------------------------------
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
SALES:
North American Tire $ 6,235.2 $ 6,207.5 $ 6,123.8
European Union Tire 2,061.0 2,022.5 2,291.0
Eastern Europe, Africa and Middle East Tire 850.0 904.7 578.6
Latin American Tire 1,245.6 1,413.4 1,368.5
Asia Tire 501.8 666.9 736.2
--------- --------- ---------
TOTAL TIRES 10,893.6 11,215.0 11,098.1
Engineered Products 1,279.3 1,324.0 1,269.4
Chemical Products 970.8 1,089.1 1,152.7
--------- --------- ---------
TOTAL SEGMENT SALES 13,143.7 13,628.1 13,520.2
Inter-SBU Sales (524.3) (569.5) (546.3)
Other 6.9 6.7 11.8
--------- --------- ---------
NET SALES $12,626.3 $13,065.3 $12,985.7
========= ========= =========
INCOME:
North American Tire $ 378.6 $ 382.5 $ 316.2
European Union Tire 199.7 166.7 220.1
Eastern Europe, Africa and Middle East Tire 102.4 102.4 79.7
Latin American Tire 186.1 233.5 226.8
Asia Tire 7.5 58.6 70.2
--------- --------- ---------
TOTAL TIRES 874.3 943.7 913.0
Engineered Products 111.8 130.1 118.5
Chemical Products 139.6 128.3 136.2
--------- --------- ---------
TOTAL SEGMENT INCOME (EBIT) 1,125.7 1,202.1 1,167.7
Rationalizations and other actions 137.6 (265.2) (116.4)
Interest expense (147.8) (119.5) (128.6)
Foreign currency exchange 2.6 34.1 (7.4)
Minority interest in net income of subsidiaries (31.5) (44.6) (43.1)
Inter-SBU Income (61.1) (54.7) (66.0)
Other (22.8) (8.9) 5.3
--------- --------- ---------
INCOME FROM CONTINUING OPERATIONS $ 1,002.7 $ 743.3 $ 811.5
BEFORE INCOME TAXES ========= ========= =========
</TABLE>
- X - 99.4 - 1 -
<PAGE> 2
EXHIBIT 99.4
THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
SEGMENT INFORMATION
Unaudited
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------
(In millions) 1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
ASSETS:
North American Tire $ 3,944.6 $ 3,596.6 $ 3,443.5
European Union Tire 1,690.0 1,460.4 1,568.1
Eastern Europe, Africa and Middle East Tire 898.1 663.0 355.3
Latin American Tire 993.8 979.5 859.7
Asia Tire 744.0 522.3 655.8
--------- --------- ---------
TOTAL TIRES 8,270.5 7,221.8 6,882.4
Engineered Products 678.9 630.3 568.2
Chemical Products 576.5 541.0 566.6
--------- --------- ---------
TOTAL SEGMENT ASSETS 9,525.9 8,393.1 8,017.2
Corporate 1,063.4 1,061.8 1,234.6
Discontinued Operations -- 462.5 420.0
--------- --------- ---------
ASSETS $10,589.3 $ 9,917.4 $ 9,671.8
========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------
CAPITAL EXPENDITURES: 1998 1997 1996
------- ------- -------
<S> <C> <C> <C>
North American Tire $ 325.7 $ 229.5 $ 205.0
European Union Tire 73.9 78.9 79.2
Eastern Europe, Africa and Middle East Tire 95.7 85.9 25.8
Latin American Tire 67.7 73.5 81.9
Asia Tire 55.2 57.0 64.2
------- ------- -------
TOTAL TIRES 618.2 524.8 456.1
Engineered Products 49.6 46.4 48.5
Chemical Products 95.2 60.9 59.3
------- ------- -------
TOTAL SEGMENT CAPITAL EXPENDITURES 763.0 632.1 563.9
Corporate 75.4 64.7 49.6
Discontinued Operations -- 2.2 4.0
------- ------- -------
CAPITAL EXPENDITURES $ 838.4 $ 699.0 $ 617.5
======= ======= =======
DEPRECIATION:
North American Tire $ 212.7 $ 201.4 $ 196.4
European Union Tire 51.5 48.1 48.0
Eastern Europe, Africa and Middle East Tire 33.4 24.7 16.7
Latin American Tire 38.9 36.7 27.4
Asia Tire 27.8 28.3 22.1
------- ------- -------
TOTAL TIRES 364.3 339.2 310.6
Engineered Products 32.4 29.3 26.8
Chemical Products 34.4 32.5 28.1
------- ------- -------
TOTAL SEGMENT DEPRECIATION 431.1 401.0 365.5
Corporate 56.7 52.9 54.4
------- ------- -------
DEPRECIATION $ 487.8 $ 453.9 $ 419.9
======= ======= =======
</TABLE>
- X - 99.4 - 2 -
