<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 27, 1997.
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM S-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
NAVISTAR FINANCIAL CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 36-2472404
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
2850 WEST GOLF ROAD
ROLLING MEADOWS, ILLINOIS 60008
TELEPHONE: (847) 734-4000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANTS' PRINCIPAL EXECUTIVE OFFICES)
----------------
WILLIAM W. JONES, ESQ.
GENERAL COUNSEL
2850 WEST GOLF ROAD
ROLLING MEADOWS, ILLINOIS 60008
TELEPHONE: (847) 734-4000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
----------------
COPY TO:
KENNETH P. MORRISON, ESQ.
KIRKLAND & ELLIS
200 EAST RANDOLPH DRIVE
CHICAGO, ILLINOIS 60601
TELEPHONE: (312) 861-2000
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: As soon as practicable after this Registration Statement becomes
effective.
----------------
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933 check the following box. [_]
If the registrant elects to deliver its latest annual report to security
holders, or a complete and legible facsimile thereof, pursuant to Item
11(a)(1) of this Form, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
PROPOSED
AMOUNT MAXIMUM AMOUNT OF
TITLE OF SECURITIES TO BE AGGREGATE REGISTRATION
TO BE REGISTERED REGISTERED OFFERING PRICE FEE
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<S> <C> <C> <C>
9% Senior Subordinated
Notes due 2002, Series
B $100,000,000 $100,000,000 $30,303
</TABLE>
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(1) Calculated pursuant to Rule 457(f) under the Securities Act.
----------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT THAT SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION
8(A), MAY DETERMINE.
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<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED JUNE 27, 1997
PRELIMINARY PROSPECTUS
, 1997
LOGO
NAVISTAR FINANCIAL CORPORATION
OFFER TO EXCHANGE ITS 9% SENIOR SUBORDINATED NOTES DUE 2002, SERIES B FOR ANY
AND ALL OF ITS OUTSTANDING 9% SENIOR SUBORDINATED NOTES DUE 2002
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON ,
1997, UNLESS EXTENDED.
Navistar Financial Corporation, a Delaware corporation (the "Company") hereby
offers (the "Exchange Offer"), upon the terms and conditions set forth in this
Prospectus (the "Prospectus") and the accompanying Letter of Transmittal (the
"Letter of Transmittal"), to exchange $1,000 principal amount of its 9% Senior
Subordinated Notes due 2002, Series B (the "Exchange Notes"), registered under
the Securities Act of 1933, as amended (the "Securities Act"), pursuant to a
Registration Statement of which this Prospectus is a part, for each $1,000
principal amount of its outstanding 9% Senior Subordinated Notes due 2002 (the
"Old Notes"), of which $100,000,000 principal amount is outstanding. The form
and terms of the Exchange Notes are the same as the form and term of the Old
Notes except that (i) the Exchange Notes will bear a Series B designation, (ii)
the issuance of the Exchange Notes will have been registered under the
Securities Act and, therefore, the Exchange Notes will not bear legends
restricting the transfer thereof and (iii) holders of the Exchange Notes will
not be entitled to certain rights of holders of Old Notes under the
Registration Rights Agreement (as defined). The Exchange Notes will evidence
the same debt as the Old Notes (which they replace) and will be issued under
and be entitled to the benefits of the Indenture dated as of May 30, 1997 (the
"Indenture") by and among the Company and The Fuji Bank and Trust Company, as
trustee, governing the Old Notes. See "The Exchange Offer" and "Description of
the Notes." The Old Notes and the Exchange Notes are sometimes referred to
herein collectively as the "Notes."
The Company will accept for exchange any and all Old Notes validly tendered
and not withdrawn prior to 5:00 p.m., New York City time on , 1997,
unless extended by the Company in its sole discretion (such date, or such later
date to which the Exchange Offer may be extended, the "Expiration Date").
Tenders of Old Notes may be withdrawn at any time prior to 5:00 p.m. on the
Expiration Date. The Exchange Offer is subject to certain customary conditions.
See "The Exchange Offer."
SEE "RISK FACTORS" BEGINNING ON PAGE 13 FOR A DESCRIPTION OF CERTAIN RISKS TO
BE CONSIDERED BY HOLDERS WHO TENDER THEIR OLD NOTES IN THE EXCHANGE OFFER.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The Notes mature on June 1, 2002. Interest on the Notes will accrue at a rate
of 9% per annum and will be payable semi-annually in arrears on June 1 and
December 1 of each year, commencing December 1, 1997. Upon a Change of Control
Triggering Event (as defined), the holders of the Notes shall have the right,
at the holder's option, to require the Company to redeem the Notes, in whole or
in part, at a redemption price equal to 101% of the principal amount thereof,
plus accrued and unpaid interest to the redemption date.
(Cover page continued on following page)
The date of this Prospectus is , 1997.
<PAGE>
(Cover page continued)
The Notes are subordinated to all present and future Senior Indebtedness of
the Company (as defined). See "Description of the Notes." As of April 30, 1997,
after giving effect to the consummation of the Initial Offering and the
application of the estimated net proceeds therefrom as set forth under "Use of
Proceeds," the Company would have had outstanding approximately $1,215.3
million of Indebtedness (as defined), all of which would be senior to the
Notes, except the 1998 Notes (as defined), which would be pari passu with the
Notes, and no Indebtedness which would be subordinated to the Notes.
The Old Notes were sold by the Company on May 30, 1997 to J.P. Morgan
Securities Inc., Chase Securities Inc. and NationsBanc Capital Markets, Inc.
(the "Initial Purchasers") in a transaction not registered under the Securities
Act in reliance upon an exemption under the Securities Act (the "Initial
Offering"). The Initial Purchasers subsequently placed the Old Notes with (i)
qualified institutional buyers in reliance upon Rule 144A under the Securities
Act, (ii) a limited number of institutional accredited investors that agreed to
comply with certain transfer restrictions and other conditions and (iii)
qualified buyers outside the United States in reliance upon Regulation S under
the Securities Act. Accordingly, the Old Notes may not be reoffered, resold or
otherwise transferred in the United States unless registered under the
Securities Act or unless an applicable exemption from the registration
requirements of the Securities Act is available. The Exchange Notes are being
offered hereunder in order to satisfy the obligations of the Company under the
Registration Rights Agreement entered into by the Company and the Initial
Purchasers in connection with the Initial Offering (the "Registration Rights
Agreement"). See "The Exchange Offer."
Based upon an interpretation by the staff of the Securities and Exchange
Commission (the "Commission") set forth in certain no-action letters issued to
third parties, the Company believes that the Exchange Notes issued pursuant to
the Exchange Offer in exchange for Old Notes may be offered for resale, resold
and otherwise transferred by any holder thereof (other than any such holder
that is an "affiliate" of the Company within the meaning of Rule 405 under the
Securities Act) without compliance with the registration and prospectus
delivery requirements of the Securities Act, provided that such Exchange Notes
are acquired in the ordinary course of such holder's business and such holder
has no arrangement or understanding with any person to participate in the
distribution of such Exchange Notes. See "The Exchange Offer--Resale of the
Exchange Notes." Holders of Old Notes wishing to accept the Exchange Offer must
represent to the Company, as required by the Registration Rights Agreement,
that such conditions have been met. Each broker-dealer (a "Participating
Broker-Dealer") that receives Exchange Notes for its own account pursuant to
the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such Exchange Notes. The Letter of Transmittal
states that by so acknowledging and by delivering a prospectus, a participating
Broker-Dealer will not be deemed to admit that it is an "underwriter" within
the meaning of the Securities Act. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a Participating Broker-Dealer in
connection with resales of Exchange Notes received in exchange for Old Notes
where such Old Notes were acquired by such Participating Broker-Dealer as a
result of market-making activities or other trading activities. The Company has
agreed that, for a period of 180 days after the Expiration Date, it will make
this Prospectus available to any Participating Broker-Dealer for use in
connection with any such resale. See "Plan of Distribution."
The Company will not receive any proceeds from the Exchange Offer. The
Company has agreed to bear the expenses of the Exchange Offer. No underwriter
is being used in connection with the Exchange Offer.
There has not previously been any public market for the Old Notes or the
Exchange Notes. The Company does not intend to list the Exchange Notes on any
securities exchange or to seek approval for quotation through any automated
quotation system. There can be no assurance that an active market for the
Exchange Notes will develop. See "Risk Factors--Absence of a Public Market
Could Adversely Affect the Value of Exchange Notes." Moreover, to the extent
that Old Notes are tendered and accepted in the Exchange Offer, the trading
market for untendered and tendered but unaccepted Old Notes could be adversely
affected.
<PAGE>
THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL THE COMPANY ACCEPT
SURRENDERS FOR EXCHANGE FROM, HOLDERS OF OLD NOTES IN ANY JURISDICTION IN
WHICH THE EXCHANGE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE
WITH THE SECURITIES OR BLUE SKY LAWS OF SUCH JURISDICTION.
NO PERSON IS AUTHORIZED IN CONNECTION WITH ANY OFFERING HEREBY TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS OR
THE ACCOMPANYING LETTER OF TRANSMITTAL, AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY. NEITHER THE DELIVERY OF THIS PROSPECTUS OR THE
ACCOMPANYING LETTER OF TRANSMITTAL, NOR ANY EXCHANGE MADE HEREUNDER SHALL
UNDER ANY CIRCUMSTANCES CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF.
UNTIL , 1997 (90 DAYS AFTER COMMENCEMENT OF THE EXCHANGE OFFER),
ALL DEALERS EFFECTING TRANSACTIONS IN THE EXCHANGE NOTES, WHETHER OR NOT
PARTICIPATING IN THE EXCHANGE OFFER, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
The Exchange Notes will be available initially only in book-entry form and
the Company expects that the Exchange Notes issued pursuant to the Exchange
Offer will be represented by one or more Global Notes (as defined), which will
be deposited with, or on behalf of, The Depository Trust Company ("DTC") and
registered in its name or in the name of Cede & Co., its nominee, except with
respect to institutional "accredited investors" (within the meaning of Rule
501 (a)(1), (2), (3) or (7) under the Securities Act) who will receive
Exchange Notes in certificated form. Beneficial interests in the Global Notes
will be shown on, and transfers thereof will be effected through, records
maintained by DTC and its participants. After the initial issuance of the
Global Notes, notes in certificated form will be issued in exchange for the
Global Notes only under limited circumstances as set forth in the Indenture.
See "Book-Entry; Delivery and Form."
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This Prospectus includes "Forward-Looking Statements" within the meaning of
Section 27A of the Securities Act and Section 21E of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"). All statements other than
Statements of Historical Facts included in this Prospectus, including, without
limitation, certain statements under the "Prospectus Summary," "Business of
Navistar Financial Corporation" and "Relationship with Navistar International
Transportation Corp." and located elsewhere or incorporated by reference
herein regarding the Company's, Navistar International Transportation Corp.'s
and Navistar International Corporation's financial position and business
strategy, may constitute forward-looking statements. Although the Company
believes that the expectations reflected in such forward-looking statements
are reasonable, it can give no assurance that such expectations will prove to
have been correct. Important factors that could cause actual results to differ
materially from the Company's expectations ("Cautionary Statements") are
disclosed in this Prospectus, including, without limitation, in conjunction
with the forward-looking statements included in this Prospectus and under
"Risk Factors." All subsequent written and oral forward-looking statements
attributable to the Company or persons acting on its behalf are expressly
qualified in their entirety by the Cautionary Statements.
i
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Disclosure Regarding Forward-
Looking Statements............... i
Available Information............. ii
Incorporation of Certain
Information By Reference......... iii
Prospectus Summary................ 1
Risk Factors...................... 13
Use of Proceeds................... 17
Capitalization.................... 18
Selected Consolidated Financial
Data for the Company............. 19
Industry Segment Data for the
Company.......................... 22
Selected Consolidated Financial
Data for Navistar International
Corporation...................... 23
</TABLE>
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Business of Navistar Financial Corporation............................ 25
Statistical Data...................................................... 30
Relationship With Navistar International Transportation Corp.......... 33
Description of Other Financing Arrangements........................... 41
The Exchange Offer.................................................... 45
Description of the Notes.............................................. 53
Certain Federal Income Tax Consequences............................... 80
Plan of Distribution.................................................. 80
Legal Matters......................................................... 81
Experts............................................................... 81
</TABLE>
AVAILABLE INFORMATION
The Company has filed with the Commission a Registration Statement on Form
S-2 (the "Exchange Offer Registration Statement," which term shall encompass
all amendments, exhibits, annexes and schedules thereto) pursuant to the
Securities Act, and the rules and regulations promulgated thereunder, covering
the Exchange Offer contemplated hereby. This Prospectus does not contain all
the information set forth in the Exchange Offer Registration Statement. For
further information with respect to the Company and the Exchange Offer,
reference is made to the Exchange Offer Registration Statement. Statements
made in this Prospectus as to the contents of any contract, agreement or other
document referred to are not necessarily complete. With respect to each such
contract, agreement or other document filed as an exhibit to the Exchange
Offer Registration Statement, reference is made to the exhibit for a more
complete description of the document or matter involved, and each such
statement shall be deemed qualified in its entirety by such reference. The
Company files periodic reports and other information required of the Exchange
Act. The Exchange Offer Registration Statement, including the exhibits
thereto, and periodic reports and other information filed by the Company with
the Commission can be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Washington,
D.C. 20549, and inspected at the Commission's regional offices at 7 World
Trade Center, Suite 1300, New York, New York 10048 and Citicorp Center, Suite
1400, 500 West Madison Street, Chicago, Illinois 60661-2511. Copies of such
materials can be obtained from the Public Reference Section of the Commission
at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. The
Commission maintains a Web site that contains reports, proxy and information
statements and other information regarding registrants that file
electronically with the Commission. The address of such site is
http://www.sec.gov.
In addition, the Company has agreed that, whether or not it is required to
do so by the rules and regulations of the Commission, for so long as any Notes
remain outstanding, it will furnish to the registered holders of the Notes
and, to the extent permitted by applicable law or regulation, file with the
Commission (i) all quarterly and annual financial information that would be
required to be contained in a filing with the Commission on Forms 10-Q and 10-
K if the Company was required to file such Forms, including for each a
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and, with respect to the annual information only, a report thereof
by the Company's independent certified public accountants and (ii) all reports
that would be required to be filed on Form 8-K if it were required to file
such reports. In addition, for so long as any of the Notes remain outstanding,
the Company has agreed to make available to any prospective purchaser of the
Notes or beneficial owner of the Notes, in connection with any sale thereof,
the information required by Rule 144A(d)(4) under the Securities Act.
This Prospectus incorporates documents by reference which are not presented
herein or delivered herewith. These documents are available upon request from:
Corporate Treasurer, Navistar Financial Corporation, 2850
ii
<PAGE>
West Golf Road, Rolling Meadows, Illinois 60008, telephone: (847) 734-4000. In
order to ensure timely delivery of the documents, any request should be made
by , 1997 (five business days prior to the Expiration Date).
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents filed by the Company with the Commission pursuant to
the Exchange Act (File No. 1-4146-1) are incorporated herein by reference:
1. Annual Report on Form 10-K for the fiscal year ended October 31, 1996.
2. Quarterly Report on Form 10-Q for the fiscal quarter ended January 31,
1997.
3. Quarterly Report on Form 10-Q for the fiscal quarter ended April 30,
1997.
4. Current Report on Form 8-K as of May 27, 1997.
All reports and other documents filed by the Company pursuant to Sections
13(a), 13(c), 14 and 15(d) of the Exchange Act, that indicate on the cover
page thereof that they are to be incorporated by reference, after the date of
this Prospectus and prior to the Expiration Date, shall be deemed to be
incorporated by reference herein and to be a part hereof from the date of the
filing of such reports and documents.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained
herein (or in any other subsequently filed document which also is incorporated
or deemed to be incorporated by reference herein) modifies or supersedes such
previous statement. Any statement so modified or superseded shall not be
deemed, except as so modified or superseded, to constitute a part of this
Prospectus.
The Company's Annual Report on Form 10-K for the fiscal year ended October
31, 1996 (the "NFC 1996 10-K") and the Company's Quarterly Report on Form 10-Q
for the fiscal quarter ended April 30, 1997 (the "NFC April 1997 10-Q")
accompany this Prospectus as Appendix A and Appendix B, respectively.
iii
<PAGE>
PROSPECTUS SUMMARY
The following summary should be read in conjunction with, and is qualified in
its entirety by, the more detailed information and financial statements
appearing elsewhere in this Prospectus, including Appendix A and Appendix B
hereto and the documents delivered concurrently or incorporated by reference in
this Prospectus. Unless the context otherwise requires or as otherwise
specified herein, all references herein to "Navistar Financial," "NFC" or the
"Company" refer to Navistar Financial Corporation and its subsidiaries. The
fiscal years of Navistar International Corporation and its two principal
operating subsidiaries, the Company and Navistar International Transportation
Corp., end on October 31. Fiscal years are identified herein according to the
calendar year in which they end. For example, the fiscal year ended October 31,
1996 is referred to as "fiscal 1996."
THE COMPANY
Navistar Financial Corporation was incorporated in Delaware in 1949 and is a
wholly owned subsidiary of Navistar International Transportation Corp.
("Transportation"), which is wholly owned by Navistar International Corporation
("Navistar"). The Company provides wholesale, retail, and to a lesser extent,
lease financing in the United States for sales of new and used trucks sold by
Transportation and Transportation's dealers ("Transportation Dealers"). The
Company also finances wholesale accounts and selected retail accounts
receivable of Transportation. Sales of new and used products (including
trailers) of other manufacturers are also financed regardless of whether
designed or customarily sold for use with Transportation's truck products. The
Company provided wholesale financing for 94% and 93% of the new truck units
sold by Transportation to Transportation Dealers in the United States during
fiscal 1996 and fiscal 1995, respectively, and 95% and 94% for the six months
ended April 30, 1997 and 1996, respectively. The Company also provided retail
financing in fiscal 1996 for approximately 16% of the new truck units sold by
Transportation and Transportation Dealers compared to approximately 14% in
fiscal 1995, and approximately 13% and 18% for the six months ended April 30,
1997 and 1996, respectively. The Company's wholly owned insurance subsidiary,
Harco National Insurance Company ("Harco"), provides commercial physical damage
and liability insurance coverage to Transportation Dealers and retail
customers, and the general public through the independent insurance agency
system. In fiscal 1996, the Company had revenues of $252.8 million and EBITDA
(as defined) of $169 million. See "Business of Navistar Financial Corporation."
The Company's principal office is located at 2850 West Golf Road, Rolling
Meadows, Illinois 60008, and its telephone number is (847) 734-4000.
NAVISTAR INTERNATIONAL TRANSPORTATION CORP.
Transportation manufactures and markets medium and heavy duty trucks,
including school buses, mid-range diesel engines and service parts primarily in
the United States and Canada as well as in selected export markets.
Transportation offers a full line of diesel-powered products under the
"International" brand name in the common carrier, private carrier,
government/service, leasing, construction, energy/petroleum and student
transportation markets. Transportation has been the market leader in the United
States and Canada combined medium and heavy duty truck market in each of its
last 16 fiscal years and had a combined market share of 27.5% in fiscal 1996.
Transportation markets its truck products and service parts through the
largest retail organization in North America specializing in medium and heavy
trucks, which at April 30, 1997 included 953 dealers and retail outlets.
Service and customer support are also supplied at these locations. In the
United States and Canada, Transportation operates seven regional parts
distribution centers which allow 24-hour availability and same day shipment of
the parts most frequently requested by dealers and customers. In 1996,
Transportation established a
1
<PAGE>
distribution network in Mexico to better serve that growing market.
Transportation builds a family of mid-range diesel engines for use in its
medium trucks, school buses and selected heavy truck models and for sale to
original equipment manufacturers in the United States and Canada.
Transportation is the leading supplier of such engines in the 160-300
horsepower range. Transportation also provides financing and insurance for
Transportation Dealers and retail customers through the Company.
In fiscal 1996, Transportation adopted and began to implement a five-point
truck strategy designed to improve operating performance and increase
profitability. Specifically, this strategy is designed to enable
Transportation's truck division to achieve its part in Navistar's goal of
generating an average of 17.5% after tax return on equity over a business
cycle. The principal components of this strategy include:
. Reduce Product Complexity. Transportation believes that it can increase
manufacturing efficiency and improve product quality by reducing the
complexity of its product offerings. Historically, thousands of options
and a separate chassis design were offered for each truck model
manufactured by Transportation, which led to significant manufacturing
inefficiencies. In 1996, Transportation introduced a new ordering program
known as Diamond Spec(TM) for its premium conventional heavy duty trucks.
Under this program, Transportation rationalized the number of possible
option combinations by developing pre-packaged option groups which are
arranged under 11 categories (i.e., engine, chassis, electrical system)
based upon the most popular preferences of its customers. Transportation
also combined the chassis for three models offered in this premium
conventional product category into one chassis. This standardization of
option and chassis groups is expected to lead to significant operating
cost savings from increased manufacturing efficiency and better pricing
for purchased components. In addition, Transportation believes that this
program will result in an overall improvement in product quality and
shorter and more reliable delivery times.
. Increase Manufacturing Efficiency. Transportation believes that it can
achieve significant improvements in manufacturing efficiency by focusing
each of its principal truck manufacturing facilities on producing a
single type of truck model. To this end, Transportation transferred the
production of its stripped chassis from its Springfield, Ohio facility to
its Conway, Arkansas facility in fiscal 1996, in order to achieve
efficiencies in the production of medium duty trucks. Similarly,
Transportation established a joint venture with SST Truck Company, which
will focus on the production of the highly-complex Paystar(R) severe
service trucks, thereby permitting Transportation's Chatham, Ontario
facility to concentrate on manufacturing premium conventional heavy duty
trucks.
. Emphasize Product Development. Transportation believes that each of its
current truck models are equal to or exceed those of its competitors in
terms of satisfying its customers' needs. Nevertheless, Transportation
intends to continue to enhance and expand its current product offerings
in an effort to provide trucks that better satisfy its customers'
changing demands. In fiscal 1996, Transportation introduced the
International 9100 conventional truck to replace its 8200 heavy duty
regular conventional truck and made significant improvements to its
premium conventional models. In fiscal 1997 and fiscal 1998, a series of
model improvements are expected to be introduced for Transportation's
premium conventional heavy duty truck models.
. Expand Operations in Mexico. Transportation believes that there are
significant opportunities to increase sales of both trucks and engines in
Mexico and in other selected markets. During 1996, Transportation
significantly expanded its direct presence in Mexico by establishing a
dealer network with 24 locations and a parts distribution center and by
arranging for production at a contract manufacturer. In addition,
Navistar's Board approved the construction of a manufacturing facility to
be located near Monterey, Mexico. This medium duty and heavy duty truck
facility is anticipated to cost approximately $167 million and to begin
production in 1998. Its capacity will be 65 units per day on one shift.
Transportation believes that its Mexican operations will enable it to
expand into other Latin American countries, particularly as a result of
the favorable and cost effective trade agreements between Mexico and
other Latin American countries.
2
<PAGE>
. Establish Competitive Wage, Benefit and Productivity Levels. In 1996,
Transportation signed a new three-year collective bargaining agreement
with the Canadian Auto Workers (the "CAW"). Transportation expects to
achieve significant productivity gains as a result of favorable changes
in job classifications, work rules and training. Similarly,
Transportation intends to seek modifications to improve productivity
under its collective bargaining agreement with the United Automobile,
Aerospace & Agricultural Implement Workers of America (the "UAW"), which
is scheduled to expire on October 1, 1998.
THE INITIAL OFFERING
OLD NOTES............... The Old Notes were sold by the Company on May 30,
1997 to the Initial Purchasers pursuant to a Pur-
chase Agreement dated May 22, 1997 (the "Purchase
Agreement"). The Initial Purchasers subsequently
placed the Old Notes with (i) qualified institu-
tional buyers pursuant to Rule 144A under the Se-
curities Act, (ii) a limited number of institu-
tional accredited investors that agreed to comply
with certain transfer restrictions and other con-
ditions and (iii) qualified buyers outside the
United States in reliance upon Regulation S under
the Securities Act.
REGISTRATION RIGHTS Pursuant to the Purchase Agreement, the Company
AGREEMENT.............. and the Initial Purchasers entered into a Regis-
tration Rights Agreement dated as of May 30, 1997
(the "Registration Rights Agreement"), which
grants the holders of the Old Notes certain ex-
change and registration rights. The Exchange Of-
fer is intended to satisfy such exchange rights
which terminate upon the consummation of the Ex-
change Offer.
THE EXCHANGE OFFER
SECURITIES OFFERED...... $100,000,000 aggregate principal amount of 9% Se-
nior Subordinated Notes due June 1, 2002, Series
B, of the Company (the "Exchange Notes").
THE EXCHANGE OFFER...... $1,000 principal amount of Exchange Notes in ex-
change for each $1,000 principal amount of Old
Notes. As of the date hereof, $100,000,000 aggre-
gate principal amount of Old Notes are outstand-
ing. The Company will issue the Exchange Notes to
holders on or promptly after the Expiration Date.
Based on an interpretation by the staff of the
Commission set forth in no action letters issued
to third parties, the Company believes that Ex-
change Notes issued pursuant to the Exchange Of-
fer in exchange for Old Notes may be offered for
resale, resold and otherwise transferred by any
holder thereof (other than any such holder which
is an "affiliate" of the Company within the mean-
ing of Rule 405 under the Securities Act) without
compliance with the registration and prospectus
delivery provisions of the Securities Act, pro-
vided that such Exchange Notes are acquired in
the ordinary course of such holder's business and
that such holder does not intend to participate
and has no arrangement or understanding with any
person to participate in the distribution of such
Exchange Notes.
3
<PAGE>
Any Participating Broker-Dealer that acquired Old
Notes for its own account as a result of market-
making activities or other trading activities may
be a statutory underwriter. Each Participating
Broker-Dealer that receives Exchange Notes for
its own account pursuant to the Exchange Offer
must acknowledge that it will deliver a prospec-
tus in connection with any resale of such Ex-
change Notes. The Letter of Transmittal states
that by so acknowledging and by delivering a pro-
spectus, a Participating Broker-Dealer will not
be deemed to admit that it is an "underwriter"
within the meaning of the Securities Act. This
Prospectus, as it may be amended or supplemented
from time to time, may be used by a Participating
Broker-Dealer in connection with resales of Ex-
change Notes received in exchange for Old Notes
where such Old Notes were acquired by such Par-
ticipating Broker-Dealer as a result of market-
making activities or other trading activities.
The Company has agreed that, for a period of 180
days after the Expiration Date, it will make this
Prospectus available to any Participating Broker-
Dealer for use in connection with any such resale
(provided that the Company receive notice from
such Participating Broker-Dealer of its status as
a Participating Broker-Dealer within 30 days af-
ter the consummation of the Exchange Offer). See
"Plan of Distribution."
Any holder who tenders in the Exchange Offer with
the intention to participate, or for the purpose
of participating, in a distribution of the Ex-
change Notes could not rely on the position of
the staff of the Commission enunciated in no-ac-
tion letters and, in the absence of an exemption
therefrom, must comply with the registration and
prospectus delivery requirements of the Securi-
ties Act in connection with any resale transac-
tion. Failure to comply with such requirements in
such instance may result in such holder incurring
liability under the Securities Act for which the
holder is not indemnified by the Company.
EXPIRATION DATE......... 5:00 p.m., New York City time, on , 1997 unless
the Exchange Offer is extended, in which case the
term "Expiration Date" means the latest date and
time to which the Exchange Offer is extended.
ACCRUED INTEREST ON THE
NEW NOTES AND THE OLD
NOTES..................
Each Exchange Note will bear interest from its
issuance date. Holders of Old Notes that are ac-
cepted for exchange will receive accrued interest
thereon to, but not including, the issuance date
of the Exchange Notes. Such interest will be paid
with the first interest payment on the Exchange
Notes to the holder of the Exchange Note. Inter-
est on the Old Notes accepted for exchange will
cease to accrue upon issuance of the Exchange
Notes.
CONDITIONS TO THE
EXCHANGE OFFER.........
The Exchange Offer is subject to certain custom-
ary conditions, which may be waived by the Compa-
ny. See "The Exchange Offer--Conditions."
PROCEDURES FOR
TENDERING OLD NOTES....
Each holder of Old Notes wishing to accept the
Exchange Offer must complete, sign and date the
accompanying Letter of Transmittal, or a facsim-
ile thereof or transmit an Agents' Message in
connection with a book-entry transfer, in accor-
dance with the instructions contained herein
4
<PAGE>
and therein, and mail or otherwise deliver such
Letter of Transmittal, or such facsimile on such
Agent's Message, together with the Old Notes and
any other required documentation to the Exchange
Agent (as defined) at the address set forth here-
in. By executing the Letter of Transmittal or
Agent's Message, each holder will represent to
the Company that, among other things, the Ex-
change Notes acquired pursuant to the Exchange
Offer are being obtained in the ordinary course
of business of the person receiving such Exchange
Notes, whether or not such person is the holder,
that neither the holder nor any such other person
has any arrangement or understanding with any
person to participate in the distribution of such
Exchange Notes and that neither the holder nor
any such other person is an "affiliate," as de-
fined under Rule 405 of the Securities Act, of
the Company. See "The Exchange Offer--Purpose and
Effect of the Exchange Offer" and "--Procedures
for Tendering."
UNTENDERED OLD NOTES.... Following the consummation of the Exchange Offer,
holders of Old Notes eligible to participate but
who do not tender their Old Notes will not have
any further exchange rights and such Old Notes
will continue to be subject to certain restric-
tions on transfer. Accordingly, the liquidity of
the market for such Old Notes could be adversely
affected.
CONSEQUENCES OF FAILURE
TO EXCHANGE............
The Old Notes that are not exchanged pursuant to
the Exchange Offer will remain restricted securi-
ties. Accordingly, such Old Notes may be resold
only (i) to the Company, (ii) pursuant to Rule
144A or Rule 144 under the Securities Act or pur-
suant to some other exemption under the Securi-
ties Act, (iii) outside the United States to a
foreign person pursuant to the requirements of
Rule 904 under the Securities Act, or (iv) pursu-
ant to an effective registration statement under
the Securities Act. See "The Exchange Offer--Con-
sequences of Failure to Exchange."
SHELF REGISTRATION If any holder of the Old Notes (other than any
STATEMENT.............. such holder which is an "affiliate" of the Com-
pany within the meaning of Rule 405 under the Se-
curities Act) is not eligible under applicable
securities laws to participate in the Exchange
Offer, and such holder has satisfied certain con-
ditions relating to the provision of information
to the Company for use therein, the Company has
agreed to register the Old Notes on a shelf reg-
istration statement (the "Shelf Registration
Statement") and use its best efforts to cause it
to be declared effective by the Commission as
promptly as practical on or after the consumma-
tion of the Exchange Offer. The Company has
agreed to maintain the effectiveness of the Shelf
Registration Statement for, under certain circum-
stances, a maximum of two years, to cover resales
of the Old Notes held by any such holders.
SPECIAL PROCEDURES FOR
BENEFICIAL OWNERS......
Any beneficial owner whose Old Notes are regis-
tered in the name of a broker, dealer, commercial
bank, trust company or other nominee and who
wishes to tender should contact such registered
holder promptly and instruct such registered
holder to tender on such beneficial owner's be-
half. If such beneficial owner wishes to tender
on such owner's own behalf, such owner must,
prior to completing and executing the Letter of
Transmittal and delivering its Old Notes, either
make appropriate arrangements
5
<PAGE>
to register ownership of the Old Notes in such
owner's name or obtain a properly completed bond
power from the registered holder. The transfer of
registered ownership may take considerable time.
The Company will keep the Exchange Offer open for
not less than thirty business days in order to
provide for the transfer of registered ownership.
GUARANTEED DELIVERY
PROCEDURES.............
Holders of Old Notes who wish to tender their Old
Notes and whose Old Notes are not immediately
available or who cannot deliver their Old Notes,
the Letter of Transmittal or any other documents
required by the Letter of Transmittal to the Ex-
change Agent (or comply with the procedures for
book-entry transfer) prior to the Expiration Date
must tender their Old Notes according to the
guaranteed delivery procedures set forth in "The
Exchange Offer--Guaranteed Delivery Procedures."
WITHDRAWAL RIGHTS....... Tenders may be withdrawn at any time prior to
5:00 p.m., New York City time, on the Expiration
Date.
ACCEPTANCE OF OLD NOTES
AND DELIVERY OF
EXCHANGE NOTES......... The Company will accept for exchange any and all
Old Notes which are properly tendered in the Ex-
change Offer prior to 5:00 p.m., New York City
time, on the Expiration Date. The Exchange Notes
issued pursuant to the Exchange Offer will be de-
livered promptly following the Expiration Date.
See "The Exchange Offer--Terms of the Exchange
Offer."
FEDERAL INCOME TAX
CONSEQUENCES...........
The exchange pursuant to the Exchange Offer
should not be a taxable event for federal income
tax purposes. See "Certain Federal Income Tax
Consequences."
USE OF PROCEEDS......... There will be no cash proceeds to the Company
from the exchange pursuant to the Exchange Offer.
EXCHANGE AGENT.......... The Fuji Bank and Trust Company.
THE EXCHANGE NOTES
GENERAL................. The form and terms of the Exchange Notes are the
same as the form and terms of the Old Notes
(which they replace) except that (i) the Exchange
Notes bear a Series B designation, (ii) the Ex-
change Notes have been registered under the Secu-
rities Act and, therefore, will not bear legends
restricting the transfer thereof, and (iii) the
holders of Exchange Notes will not be entitled to
certain rights under the Registration Rights
Agreement, including the provisions providing for
an increase in the interest rate on the Old Notes
in certain circumstances relating to the timing
of the Exchange Offer, which rights will termi-
nate when the Exchange Offer is consummated. See
"The Exchange Offer--Purpose and Effect of the
Exchange Offer." The Exchange Notes will evidence
the same debt as the Old Notes and will be enti-
tled to the benefits of the Indenture. See "De-
scription of Exchange Notes."
ISSUER.................. Navistar Financial Corporation.
MATURITY DATE........... June 1, 2002.
6
<PAGE>
INTEREST PAYMENT June 1 and December 1 of each year, commencing
DATES................... December 1, 1997.
SINKING FUND............ None.
RANKING................. The Notes will be general obligations of the Com-
pany and will be subordinated to all existing and
future Senior Indebtedness of the Company (as de-
fined). The Notes will rank pari passu with all
existing and future senior subordinated Indebted-
ness of the Company, including the Company's ex-
isting 8 7/8% Senior Subordinated Notes due 1998
(the "1998 Notes"), and will rank senior to all
existing and future subordinated Indebtedness of
the Company. As a result of the restrictive cove-
nants contained in the Indenture (as defined)
pursuant to which the Notes will be issued and
pursuant to the Credit Agreement (as defined),
holders of the Notes will initially be secured,
subject to the subordination provisions contained
in the Indenture, equally and ratably with the
holders of the Senior Indebtedness of the Compa-
ny, by a lien on substantially all of the assets
of the Company. Such lien and security interest
is subject to release without prior notice to, or
the consent of, the holders of the Notes by
agreement of at least eighty-five percent of the
lenders under the Credit Agreement. As of April
30, 1997, after giving effect to the consummation
of the Initial Offering and the application of
the estimated net proceeds therefrom as set forth
under "Use of Proceeds," the Company would have
had outstanding approximately $1,215.3 million of
Indebtedness, all of which would rank senior to
the Notes, except the 1998 Notes which would be
pari passu with the Notes, and no Indebtedness
which would be subordinated to the Notes. The
Notes will be effectively subordinated to all In-
debtedness and other obligations (including obli-
gations to trade and other creditors) of the sub-
sidiaries of the Company. As of April 30, 1997,
the subsidiaries of the Company had $11.4 million
of other balance sheet liabilities to third par-
ties.
CHANGE OF CONTROL Upon a Change of Control Triggering Event, the
OFFER................... Company will, subject to certain conditions, make
an offer to purchase all outstanding Notes at a
purchase price of 101% of the principal amount
thereof plus accrued and unpaid interest to the
redemption date. The Credit Agreement imposes
certain limitations on the purchase of the Notes
upon a Change of Control Triggering Event. There
can be no assurance that upon a Change of Control
Triggering Event the Company will have sufficient
funds to purchase all or any portion of the
Notes.
CERTAIN COVENANTS....... The Indenture contains certain covenants that,
among other things, limit the ability of the Com-
pany or any of its subsidiaries to maintain or
incur indebtedness, create liens, enter into cer-
tain transactions with affiliates, or consummate
certain merger, consolidation or asset sale
transactions. In addition, the Company is re-
quired to maintain a Consolidated Fixed Charge
Coverage Ratio under the Indenture. These cove-
nants are subject to certain exceptions and qual-
ifications.
RISK FACTORS
Holders of the Old Notes should carefully consider the specific matters set
forth under "Risk Factors" as well as other information included in this
Prospectus before tendering the Old Notes in exchange for Exchange Notes.
7
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL DATA FOR THE COMPANY
The following consolidated financial data for the Company for each of the
five years ended October 31, 1996 and for the six months ended April 30, 1997
and 1996 has been derived from the Consolidated Financial Statements and notes
thereto contained in the NFC 1996 10-K and in the NFC April 1997 10-Q, which
accompany this Prospectus as Appendix A and Appendix B, respectively. Such
information is qualified in its entirety by, and should be read in conjunction
with the Consolidated Financial Statements and notes thereto and "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
included in the NFC 1996 10-K and the NFC April 1997 10-Q.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
APRIL 30, FISCAL YEAR ENDED OCTOBER 31,
-------------- -----------------------------------
1997 1996 1996 1995 1994 1993 1992
------ ------ ------ ------ ------ ------ ------
(UNAUDITED)
(IN MILLIONS OF DOLLARS)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:(1)
Revenues.................... $115.4 $129.4 $252.8 $228.2 $210.8 $231.9 $228.3
------ ------ ------ ------ ------ ------ ------
Expenses:
Interest expense.......... 31.5 36.8 73.2 75.1 62.7 74.6 82.2
Provision for losses on
receivables.............. 1.2 2.7 9.3 2.6 2.3 1.5 3.6
Other expense, net(2)..... 45.6 48.5 89.8 91.8 90.6 106.8 96.1
------ ------ ------ ------ ------ ------ ------
Total expenses.......... 78.3 88.0 172.3 169.5 155.6 182.9 181.9
------ ------ ------ ------ ------ ------ ------
Income before taxes on
income..................... 37.1 41.4 80.5 58.7 55.2 49.0 46.4
Taxes on income............. 14.4 16.1 31.1 22.5 21.2 17.7 16.9
Cumulative effect of changes
in accounting policy, net
of income taxes(3)......... -- -- -- -- -- (8.8) --
------ ------ ------ ------ ------ ------ ------
Net income.................. 22.7 25.3 49.4 36.2 34.0 22.5 29.5
Dividends paid.............. 30.0 10.0 26.0 9.0 25.6 22.6 16.0
------ ------ ------ ------ ------ ------ ------
Net income retained..... $ (7.3) $ 15.3 $ 23.4 $ 27.2 $ 8.4 $ (0.1) $ 13.5
====== ====== ====== ====== ====== ====== ======
</TABLE>
- --------
Table continued on the following page
8
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL DATA FOR THE COMPANY--(CONTINUED)
<TABLE>
<CAPTION>
AT APRIL 30, AT OCTOBER 31,
------------------ ------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
-------- -------- -------- -------- -------- -------- --------
(UNAUDITED)
(IN MILLIONS OF DOLLARS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:(1)
Cash, cash equivalents
and marketable
securities............. $ 125.1 $ 131.7 $ 134.8 $ 134.7 $ 158.8 $ 159.5 $ 209.7
Finance receivables:
Retail notes and lease
financing............. 681.1 746.4 733.3 747.2 513.9 823.5 955.1
Wholesale notes........ 200.8 323.9 100.5 268.2 230.6 212.5 81.5
Accounts............... 358.2 298.6 371.4 365.9 357.7 245.1 204.3
-------- -------- -------- -------- -------- -------- --------
Total................. 1,240.1 1,368.9 1,205.2 1,381.3 1,102.2 1,281.1 1,240.9
Allowance for losses... (12.0) (10.4) (11.6) (10.4) (8.2) (10.9) (12.4)
-------- -------- -------- -------- -------- -------- --------
Finance receivables,
net.................... 1,228.1 1,358.5 1,193.6 1,370.9 1,094.0 1,270.2 1,228.5
Other assets............ 429.2 412.5 465.4 369.1 282.0 195.5 170.5
-------- -------- -------- -------- -------- -------- --------
Total assets.......... $1,782.4 $1,902.7 $1,793.8 $1,874.7 $1,534.8 $1,625.2 $1,608.7
======== ======== ======== ======== ======== ======== ========
Senior debt............. $1,112.8 $1,278.1 $1,205.8 $1,230.3 $ 991.5 $1,099.2 $1,123.1
Subordinated debt....... 100.0 100.0 100.0 100.0 100.0 100.0 94.9
Other liabilities....... 297.2 253.9 208.3 287.7 217.7 206.6 171.2
Shareowner's equity..... 272.4 270.7 279.7 256.7 225.6 219.4 219.5
-------- -------- -------- -------- -------- -------- --------
Total liabilities and
shareowner's equity.. $1,782.4 $1,902.7 $1,793.8 $1,874.7 $1,534.8 $1,625.2 $1,608.7
======== ======== ======== ======== ======== ======== ========
<CAPTION>
SIX MONTHS ENDED
APRIL 30, FISCAL YEAR ENDED OCTOBER 31,
------------------ ------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
-------- -------- -------- -------- -------- -------- --------
(UNAUDITED)
(IN MILLIONS OF DOLLARS, EXCEPT RATIOS)
<S> <C> <C> <C> <C> <C> <C> <C>
OTHER DATA:(1)
EBITDA(4)............... $ 79.4 $ 86.0 $ 169.0 $ 144.9 $ 126.6 $ 133.3 $ 135.1
Cash flow from (used in)
operations............. 17.9 (42.1) (28.5) 111.2 20.0 55.3 12.5
Cash flow from (used in)
investing activities... 0.1 (15.1) 94.8 (339.7) 107.8 (54.0) (98.0)
Cash flow from (used in)
financing activities... (21.9) 61.0 (62.5) 203.1 (133.4) (46.6) 148.7
Ratio of EBITDA to
interest expense....... 2.5x 2.3x 2.3x 1.9x 2.0x 1.8x 1.6x
Ratio of EBITDA to fixed
charges(5)............. 2.4 2.1 2.2 1.8 1.9 1.7 1.6
Ratio of earnings to
fixed charges(6)....... 2.1 2.0 2.0 1.7 1.8 1.6 1.6
Ratio of debt to equity. 4.5 5.1 4.7 5.2 4.8 5.5 5.5
Ratio of senior debt to
capital funds(7)....... 3.0 3.4 3.2 3.4 3.0 3.4 3.6
Net losses (recoveries)
as a percentage of
average gross balance
of all outstanding
receivables............ 0.04% 0.03% 0.14% (0.03)% 0.04% 0.03% 0.16%
Percentage of net income
to average shareowner's
equity................. N/A N/A 18.1% 15.0% 15.1% 10.3% 13.8%
</TABLE>
- --------
Footnotes appear on the following page
9
<PAGE>
NOTES TO SUMMARY CONSOLIDATED FINANCIAL DATA FOR THE COMPANY
(1) Certain prior year amounts have been reclassified to conform with the
presentation used in the Consolidated Financial Statements for the six
months ended April 30, 1997 included in Appendix B.
(2) Includes a contribution to the Supplemental Trust (as defined) of $3.7
million in July 1993.
(3) In the third quarter of 1993, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 106, "Employer's Accounting for
Postretirement Benefits Other Than Pensions" ("SFAS 106") and SFAS No. 109,
"Accounting for Income Taxes" ("SFAS 109"), retroactive to November 1,
1992.
(4) EBITDA represents income from operations before the cumulative effect of
changes in accounting policy, interest expense, taxes on income and
depreciation and amortization expense. The Company believes EBITDA provides
additional information for measuring its ability to generate funds for
liquidity and capital requirements. This information is presented as a
supplement to the other data provided because it provides information which
the Company believes is useful for additional analysis. EBITDA should not
be considered in isolation or as a substitute for net income, cash flows
from operating activities and other consolidated operations or cash flow
statement data prepared in accordance with generally accepted accounting
principles or as a measure of the Company's profitability or liquidity.
(5) Calculated in accordance with the covenant regarding maintenance of
consolidated fixed charge coverage ratio contained in the Indenture. See
"Description of the Notes--Certain Covenants."
(6) The ratio of earnings to fixed charges is determined by dividing pretax
income from operations, adjusted for the cumulative effect of changes in
accounting policy, interest expense, debt expense amortization and the
portion of rental expense (25%) deemed representative of the interest
factor by the sum of interest expense, debt expense amortization and the
portion of rental expense deemed representative of the interest factor.
(7) Capital funds represent the sum of subordinated debt and shareowner's
equity.
10
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL DATA FOR NAVISTAR INTERNATIONAL CORPORATION
The following table sets forth summary consolidated financial data of
Navistar and its consolidated subsidiaries and is derived from Navistar's
consolidated financial statements and notes thereto. The summary financial data
set forth below is qualified in its entirety by, and should be read in
conjunction with, the Consolidated Financial Statements and notes thereto
included in Navistar's Annual Report to shareowners for the fiscal year ended
October 31, 1996 (the "Navistar 1996 Annual Report") and in Navistar's
Quarterly Report on Form 10-Q for the six months ended April 30, 1997 (the
"Navistar April 1997 10-Q").
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
APRIL 30, FISCAL YEAR ENDED OCTOBER 31,
-------------- --------------------------------------
1997 1996 1996 1995 1994 1993 1992
------ ------ ------ ------ ------ ------ ------
(UNAUDITED)
(IN MILLIONS OF DOLLARS)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT
DATA:(1)
Sales and revenues:
Sales of manufactured
products.............. $2,733 $2,785 $5,508 $6,125 $5,153 $4,510 $3,685
Finance and insurance
revenue(2)............ 88 101 197 167 152 181 177
Other income........... 26 26 49 50 32 30 35
------ ------ ------ ------ ------ ------ ------
Total sales and
revenues............. $2,847 $2,912 $5,754 $6,342 $5,337 $4,721 $3,897
====== ====== ====== ====== ====== ====== ======
Income (loss) before
income taxes(3)....... $ 73 $ 77 $ 105 $ 262 $ 158 $ (441) $ (145)
Income tax expense
(benefit)............. 28 29 40 98 56 (168) 2
------ ------ ------ ------ ------ ------ ------
Income (loss) of
continuing operations. 45 48 65 164 102 (273) (147)
Loss of discontinued
operations(4)......... -- -- -- -- (20) -- (65)
Cumulative effect of
changes in accounting
policy(5)............. -- -- -- -- -- (228) --
------ ------ ------ ------ ------ ------ ------
Net income (loss)...... $ 45 $ 48 $ 65 $ 164 $ 82 $ (501) $ (212)
====== ====== ====== ====== ====== ====== ======
<CAPTION>
AT APRIL 30, AT OCTOBER 31,
-------------- --------------------------------------
1997 1996 1996 1995 1994 1993 1992
------ ------ ------ ------ ------ ------ ------
(UNAUDITED)
(IN MILLIONS OF DOLLARS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Assets:
Manufacturing
operations........... $3,801 $3,840 $3,815 $4,018 $3,724 $3,645 $2,208
Financial services
operations........... 1,829 1,952 1,843 1,922 1,582 1,672 1,659
Eliminations.......... (426) (349) (332) (374) (259) (257) (240)
------ ------ ------ ------ ------ ------ ------
Total assets........ $5,204 $5,443 $5,326 $5,566 $5,047 $5,060 $3,627
====== ====== ====== ====== ====== ====== ======
Debt:
Manufacturing
operations........... $ 109 $ 125 $ 115 $ 127 $ 127 $ 175 $ 187
Financial services
operations........... 1,213 1,379 1,305 1,330 1,091 1,199 1,218
------ ------ ------ ------ ------ ------ ------
Total debt.......... $1,322 $1,504 $1,420 $1,457 $1,218 $1,374 $1,405
====== ====== ====== ====== ====== ====== ======
Shareowners' equity..... $ 959 $ 898 $ 916 $ 870 $ 817 $ 775 $ 338
====== ====== ====== ====== ====== ====== ======
</TABLE>
- --------
Table continued on the following page
11
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL DATA FOR NAVISTAR INTERNATIONAL CORPORATION--
(CONTINUED)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
APRIL 30, FISCAL YEAR ENDED OCTOBER 31,
------------- --------------------------------------
1997 1996 1996 1995 1994 1993 1992
------ ------ ------- ------- ------- ------- ------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
United States and Canadian
retail deliveries of
trucks and school buses.. 42,600 43,900 94,000 101,700 91,600 79,800 69,300
United States and Canadian
market share(6).......... 26.8% 26.2% 27.5% 26.7% 27.0% 27.6% 28.4%
Unit shipments:
Trucks................... 46,000 50,000 95,200 112,200 95,000 87,200 73,200
OEM engines.............. 89,300 78,500 163,200 154,200 130,600 118,200 97,400
Total manufacturing
operations debt as a
percent of total
manufacturing
capitalization........... 10.2% 12.2% 11.2% 12.7% 13.4% 18.4% 35.6%
</TABLE>
- --------
(1) Certain prior year amounts have been reclassified to conform with the
presentation used in the Consolidated Financial Statements for the six
months ended April 30, 1997 included in the Navistar April 1997 10-Q.
(2) Includes revenues of the Company as well as Navistar's other financial
services subsidiaries.
(3) Navistar contributed approximately 25.6 million shares of its Class B
common stock, valued at $513 million, to the Supplemental Trust (as
defined) in 1993.
(4) The 1994 loss of discontinued operations resulted from a $20 million charge
for environmental liabilities at production facilities of two formerly
owned businesses, Wisconsin Steel and Solar Turbine, Inc. The 1992 loss of
discontinued operations resulted from a $65 million charge for the
settlement of Navistar's obligation with the Pension Benefit Guaranty
Corporation.
(5) In the third quarter of 1993, Navistar adopted SFAS 106 and SFAS 109,
retroactive to November 1, 1992.
(6) Based on retail deliveries of medium duty trucks (Classes 5, 6 and 7),
including school buses, and heavy duty trucks (Class 8) in the United
States and Canada by Transportation and its dealers, compared to the
industry total in the United States and Canada of retail deliveries.
12
<PAGE>
RISK FACTORS
Holders of the Old Notes should carefully read this entire Prospectus,
including Appendices A and B hereto, the Navistar 1996 Annual Report, the
Navistar April 1997 10-Q and any other documents incorporated by reference
herein. Ownership of the Exchange Notes involves certain risks. The following
factors should be considered carefully in evaluating the Company and its
business before tendering the Old Notes in exchange for Exchange Notes. This
Prospectus contains forward-looking statements that involve risks and
uncertainties. Actual results could differ materially from those discussed
herein. Factors that could cause or contribute to such differences include,
but are not limited to, those identified below as well as those discussed
elsewhere in this Prospectus.
DEPENDENCE ON TRANSPORTATION'S BUSINESS; RELATIONSHIP WITH TRANSPORTATION
As a wholly owned finance subsidiary of Transportation, the Company's level
of financing activity is substantially dependent on the volume of sales of
both Transportation and the Transportation Dealers. Any material reduction in
the amount of these sales could adversely affect the Company. In addition, the
financial condition of the Transportation Dealers is to varying degrees
dependent on the financial condition of Transportation. Any material change in
Transportation's financial condition could adversely affect certain
Transportation Dealers, which in turn could have an adverse effect on the
Company.
The highly competitive medium and heavy duty truck market in which
Transportation operates is subject to considerable volatility. It moves in
response to cycles in the overall business environment and is particularly
sensitive to the industrial sector, which generates a significant portion of
the freight tonnage hauled. Truck demand also depends on general economic
conditions, interest rates and fuel costs. Governmental regulation, especially
in the environmental and safety areas, has impacted and will continue to
impact trucking operations and efficiency and equipment specifications.
Transportation competes with domestic companies and well-capitalized foreign
controlled domestic manufacturers. The intensity of this competition, which is
expected to continue, results in price discounting and margin pressures
throughout the industry and adversely affects Transportation's ability to
increase unit prices. Many of Transportation's competitors have greater
financial resources than Transportation, which may place Transportation at a
competitive disadvantage in responding to substantial industry changes in such
factors as changes in governmental regulations that require major additional
capital expenditures. In addition, certain of Transportation's competitors may
have lower overall labor costs.
Pursuant to an agreement between Transportation and the Company,
Transportation currently pays to the Company an acquisition fee on new
equipment notes purchased from Transportation, which will be discontinued
after fiscal 1998. Pursuant to such agreement, Transportation paid the Company
$5.7 million in fiscal 1996. The maximum fee payable under such agreement will
be $3.7 million in fiscal 1997 and $1.7 million in fiscal 1998. If such fee
had not been received by the Company in fiscal 1996, its ratio of EBITDA to
interest expense would have declined from 2.3 to 2.2. During the last five
fiscal years, the largest such fee paid by Transportation to the Company was
$9.7 million.
The Company's and Transportation's credit ratings have historically been
linked because of their parent-subsidiary status, the importance to
Transportation of the Company's financing support for the sale of
Transportation's products and the significant portion of the Company's
business that relates to the financing of Transportation's sales. Currently,
Transportation's and the Company's credit ratings are below investment grade
and the Company cannot predict when or whether the ratings for
Transportation's or the Company's debt obligations will improve. See
"Relationship with Navistar International Transportation Corp."
Neither Navistar nor Transportation has any obligation with respect to the
Notes.
LIQUIDITY AND FUNDING OPERATIONS
The Company has significant liquidity requirements. The Company has
traditionally obtained the funds to provide financing to Transportation
Dealers and retail customers from sales of receivables, commercial paper,
13
<PAGE>
short- and long-term bank borrowings, medium- and long-term debt issues and
equity capital. In March 1995, ratings on the Company's debt were upgraded by
Moody's Investors Service, Inc. ("Moody's"). Moody's raised its ratings for
the Company's debt from Ba3 to Ba2 for senior debt and from B2 to B1 for
subordinated debt. In March 1995, Duff & Phelps confirmed its debt ratings of
BB+ for senior debt and BB for subordinated debt. In October 1993, ratings on
the Company's debt were reviewed by Standard and Poor's Corporation ("Standard
and Poor's"). Standard and Poor's raised its ratings for the Company's debt
from B- to BB for senior debt and from CCC to B+ for subordinated debt. The
Company's commercial paper is rated "not prime" by Moody's. These debt ratings
have made bank borrowings and sales of receivables the Company's most
economical sources of financing. Effective March 29, 1996, the Company amended
its revolving credit agreement with a group of banks (the "Credit Agreement")
extending its maturity date to March 2001 and increasing the commitment
thereunder to $925 million. Also effective March 29, 1996, the Company amended
and restated its asset backed commercial paper program (the "ABCP Program"),
to increase the amount available thereunder to $400 million and to extend the
termination date of the liquidity facility established thereunder to March
2001. At April 30, 1997, unused commitments under the Credit Agreement and the
ABCP Program were $440 million, of which $145 million provided funding backup
for the outstanding short-term debt, and the remaining $295 million, when
combined with unrestricted cash and cash equivalents, made $298 million
available to fund the Company's general operations. The terms and conditions
of the Credit Agreement, the Indenture and the agreements pursuant to which
certain of the Company's other indebtedness was issued impose restrictions
that affect, among other things, the ability of the Company and its
subsidiaries to incur debt, create liens, make certain investments and engage
in business activities unrelated to those in which the Company currently is
engaged. The terms of the Company's indebtedness also require the Company to
meet specified financial tests. See "Description of Other Financing
Arrangements."
The Company expects to incur additional short- and long-term debt in the
future. The nature and amounts of such indebtedness can be expected to vary
from time to time as a result of the volume of the Company's business, market
conditions and other factors. In addition, the Company expects to continue to
sell and securitize receivables. The Company has filed shelf registration
statements providing for the issuance from time to time of asset-backed
securities relating to retail notes and, as of April 30, 1997, had
approximately $2.0 billion of remaining shelf registration available ($1.5
billion as of May 7, 1997 as a result of the issuance of $500 million of
asset-backed securities on such date).
The Company believes that cash generated by its operations, borrowings under
the Credit Agreement and the ABCP Program and funds generated by sales,
securitizations of receivables and the placement of term debt are sufficient
to satisfy its cash needs. However, if cash provided by operations, bank
borrowings, continued sales of receivables and the placement of term debt do
not provide the necessary liquidity, the Company would be required to restrict
its financing of Transportation's products and Transportation Dealers. A
significant reduction in such financing support could have a material adverse
effect on both the Company and Transportation. In addition, an impairment of
the Company's ability to sell or securitize its receivables, a reduction in
Transportation's sales, and a variety of other factors could affect the
Company's ability to meet its debt obligations.
SUBORDINATION OF THE NOTES
The payment of the principal of, premium, if any, and interest on the Notes
will be subordinate in right of payment to the prior payment in full of all
Senior Indebtedness of the Company, whether outstanding at the date of the
Indenture or thereafter incurred. In the event of a default in the payment or
prepayment of the principal of, premium, if any, or interest on any Senior
Indebtedness of the Company, the Company is prohibited from making any payment
with respect to the principal of, premium, if any, or interest on the Notes
unless and until such default has been cured or waived or all Senior
Indebtedness of the Company has been discharged or paid in full. The Notes are
also effectively subordinated to all existing and future liabilities
(including liabilities owed to trade creditors) of the subsidiaries of the
Company to the extent of the assets of each subsidiary of the Company.
In addition, upon any payment or distribution of the Company's assets to its
creditors upon any dissolution, winding-up, liquidation, reorganization,
bankruptcy, insolvency, receivership or other proceedings relating to the
14
<PAGE>
Company, whether voluntary or involuntary, the holders of Senior Indebtedness
of the Company will be entitled to receive payment in full of all amounts due
thereon before the holders of the Notes will be entitled to receive any
payment with respect to the principal of, premium, if any, or interest on the
Notes. By reason of such subordination, in the event of the insolvency of the
Company, holders of the Notes may receive less, ratably, than holders of
Senior Indebtedness of the Company and other creditors of the Company, or may
recover nothing. See "Description of the Notes--Subordination and Ranking."
The Senior Indebtedness of the Company is secured by a perfected first
priority security interest in substantially all of the assets of the Company,
including a pledge of all of the stock of each subsidiary of the Company. If a
default occurs with respect to Senior Indebtedness of the Company, the holders
thereof will have the right to exercise the remedies available to a secured
creditor under applicable law and pursuant to the Senior Indebtedness of the
Company. The Senior Indebtedness of the Company will have a prior and superior
claim to the assets of the Company in the event of the disposition of such
assets (which will be at the sole discretion and control of the holders of
Senior Indebtedness of the Company). However, as a result of the restrictive
covenants contained in the Indenture and pursuant to the Credit Agreement,
holders of the Notes will initially be secured, subject to the subordination
provisions contained in the Indenture, equally and ratably with the holders of
the Senior Indebtedness by a lien on substantially all of the assets of the
Company and the proceeds thereof. Such lien and security interest is subject
to release without prior notice to, or consent of, the holders of the Notes.
Giving effect to the sale of the Old Notes and the application of the
estimated net proceeds therefrom as set forth under "Use of Proceeds," as of
April 30, 1997, the Company would have outstanding $1,215.3 million of
Indebtedness, all of which would rank senior to the Notes, except for the 1998
Notes which would be pari passu with the Notes, and no indebtedness which is
subordinate to the Notes.
POTENTIAL INFLUENCE OF SUPPLEMENTAL TRUST
In July 1993, Navistar restructured its postretirement health care and life
insurance benefits pursuant to a settlement agreement that resolved litigation
between Navistar and a class of its employees, retirees and collective
bargaining organizations, including the UAW, as lead class plaintiff (the
"Settlement Agreement"). The Settlement Agreement provides for, among other
things, that Navistar establish a Supplemental Benefit Trust (the
"Supplemental Trust") for the purpose of funding certain retiree and health
benefits under a Supplemental Benefit Program. The Supplemental Trust
currently holds approximately 24.3 million shares of Navistar's non-voting
Class B common stock. On June 30, 1998, the non-voting Class B common stock
held by the Supplemental Trust will convert into voting Common Stock, which is
the same class of stock held by Navistar's other shareowners. Based upon the
49.1 million shares of Common Stock outstanding as of March 10, 1997, the
Supplemental Trust would hold approximately 33% of Navistar's voting stock
upon conversion. During the time that the Supplemental Trust owns such shares
following such conversion, it is likely that the Supplemental Trust will be
able to have a significant influence over those matters submitted to a vote of
Navistar's shareowners, including the election of directors and approval of
certain significant corporate transactions. The first shareowners' meeting at
which the Supplemental Trust could hold such an ownership percentage of voting
stock is currently scheduled for March 1999. A committee of five members acts
as administrator of the Supplemental Benefit Program (the "Committee") and as
such has the power to direct the voting of the common stock held by the
Supplemental Trust. Two of the members of the Committee are designees of the
UAW, one is a retired management employee and two are from Navistar and are
not affiliated with the UAW. The Settlement Agreement provided for the
addition of two seats to Navistar's Board of Directors (currently comprised of
13 persons), which are elected by the Committee on behalf of the Supplemental
Trust.
LABOR RELATIONS
At October 31, 1996, approximately 66% of Transportation's 14,187 employees
were covered under various collective bargaining agreements. The UAW
represents 6,902 of Transportation's active employees in the United States
pursuant to a collective bargaining agreement that is scheduled to expire on
October 1, 1998. Transportation intends to seek modifications to improve
productivity under the collective bargaining agreement
15
<PAGE>
to be negotiated with the UAW. The CAW represents 1,476 of Transportation's
active employees in Canada pursuant to a collective bargaining agreement that
is scheduled to expire on October 24, 1999. Any prolonged work stoppage or
strike at any one of Transportation's principal manufacturing facilities could
have a material adverse effect on the Company's business, financial condition
and results of operations. See "Relationship with Navistar International
Transportation Corp.--Business of Transportation--Labor Relations."
PENSION AND POSTRETIREMENT HEALTH CARE OBLIGATIONS OF TRANSPORTATION
Transportation has significant underfunded pension obligations. At October
31, 1996, the net pension liability of Transportation's underfunded pension
plans was approximately $607 million, compared to $587 million at October 31,
1995. Transportation's long-term objective is to fund its entire accumulated
benefit obligation over the next 7 to 10 years with funds that are principally
generated by operations.
In the event Transportation's pension plans were terminated for any reason
and plan assets were insufficient to meet guaranteed liabilities, the Pension
Benefit Guaranty Corporation ("PBGC") may have a right to take over these
plans as their administrator and trustee. In this event, the actual present
value of guaranteed pension liabilities may be determined in a manner
different from that used by Transportation to determine its unfunded vested
pension liability. Subject to certain limitations, the PBGC would have a claim
against Transportation (and potentially the Company) to the extent that plan
assets were not sufficient to meet the actuarial present value of guaranteed
liabilities, which claim against the Company may by law, under certain
circumstances, be senior to that of the Notes.
In addition to providing pension benefits, Transportation provides health
care and life insurance for a majority of its retired employees and their
spouses and certain dependents. In 1993, a trust was established to partially
fund this postretirement health care liability. This trust is funded by
contributions from Transportation and the funds in the trust are invested
primarily in equity securities. Transportation is required to make a
contribution of $200 million to the trust on or prior to June 30, 1998.
Transportation believes that it will be able to make such contribution from
its cash on hand.
ABSENCE OF A PUBLIC MARKET COULD ADVERSELY AFFECT THE VALUE OF EXCHANGE NOTES
The Old Notes were issued to, and the Company believes are currently owned
by, a relatively small number of beneficial owners. Prior to the Exchange
Offer, there has not been any public market for the Old Notes. The Old Notes
have not been registered under the Securities Act and will be subject to
restrictions on transferability to the extent that they are not exchanged for
Exchange Notes by holders who are entitled to participate in this Exchange
Offer. The holders of Old Notes (other than any such holder that is an
"affiliate" of the Company within the meaning of Rule 405 under the Securities
Act) who are not eligible to participate in the Exchange Offer are entitled to
certain registration rights, and the Company is required to file a Shelf
Registration Statement with respect to such Old Notes. The Exchange Notes will
constitute a new issue of securities with no established trading market. The
Company does not intend to list the Exchange Notes on any national securities
exchange or seek the admission thereof to trading in the National Association
of Securities Dealers Automated Quotation System. The Initial Purchasers have
advised the Company that they currently intend to make a market in the
Exchange Notes, but they are not obligated to do so and may discontinue such
market making at any time. In addition, such market making activity will be
subject to the limits imposed by the Securities Act and the Exchange Act and
may be limited during the Exchange Offer and the pendency of the Shelf
Registration Statement. Accordingly, no assurance can be given that an active
public or other market will develop for the Exchange Notes or as to the
liquidity of the trading market for the Exchange Notes. If a trading market
does not develop or is not maintained, holders of the Exchange Notes may
experience difficulty in reselling the Exchange Notes or may be unable to sell
them at all. If a market for the Exchange Notes develops, any such market may
be discontinued at any time.
If a public trading market develops for the Exchange Notes, future trading
prices of such securities will depend on many factors including, among other
things, prevailing interest rates, the Company's results of
16
<PAGE>
operations and market for similar securities. Depending on prevailing interest
rates, the market for similar securities and other factors, including the
financial condition of the Company, the Exchange Notes may trade at a discount
from their principal amount.
FAILURE TO FOLLOW EXCHANGE OFFER PROCEDURES COULD ADVERSELY AFFECT HOLDERS
Issuance of the Exchange Notes in exchange for the Old Notes pursuant to the
Exchange Offer will be made only after a timely receipt by the Company of such
Old Notes, a properly completed and duly executed Letter of Transmittal and
all other required documents. Therefore, holders of the Old Notes desiring to
tender such Old Notes in exchange for Exchange Notes should allow sufficient
time to ensure timely delivery. The Company is under no duty to give
notification of defects or irregularities with respect to the tenders of Old
Notes for exchange. Old Notes that are not tendered or are tendered but not
accepted will, following the consummation of the Exchange Offer, continue to
be subject to the existing restrictions upon transfer thereof, and, upon
consummation of the Exchange Offer certain registration rights with respect to
the Notes under the Registration Rights Agreement will terminate. In addition,
any holder of Old Notes who tenders in the Exchange Offer for the purpose of
participating in a distribution of the Exchange Notes may be deemed to have
received restricted securities, and if so, will be required to comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any resale transaction. Each broker-dealer that receives
Exchange Notes for its own account in exchange for Old Notes, where such Old
Notes were acquired by such broker-dealer as a result of market-making
activities or other trading activities, must acknowledge that it will deliver
a prospectus in connection with any resale of such Exchange Notes. See "Plan
of Distribution." To the extent that Old Notes are tendered and accepted in
the Exchange Offer, the trading market for untendered and tendered but
unaccepted Old Notes could be adversely affected. See "The Exchange Offer."
USE OF PROCEEDS
This Exchange Offer is intended to satisfy certain of the Company's
obligations under the Purchase Agreement and the Registration Rights
Agreement. The Company will not receive any cash proceeds from the issuance of
the Exchange Notes offered hereby. In consideration for issuing the Exchange
Notes contemplated in this Prospectus, the Company will receive Old Notes in
like principal amount, the form and terms of which are the same as the form
and terms of the Exchange Notes (which replace the Old Notes), except as
otherwise described herein.
The net proceeds from the sale of the Old Notes was approximately $97.5
million after deduction of the underwriting compensation and certain other
expenses. The Company used the net proceeds to repurchase $6.0 million of its
outstanding 1998 Notes and to reduce outstanding indebtedness under the Credit
Agreement. The 1998 Notes mature on November 15, 1998 and bear interest at 8
7/8% per annum. The Credit Agreement matures in March 2001 and bears interest
at floating rates. See "Description of Other Financing Arrangements."
Affiliates of each of the Initial Purchasers are lenders under the Credit
Agreement and in such capacity received a portion of the net proceeds from the
sale of the Old Notes.
17
<PAGE>
CAPITALIZATION
The following table sets forth the historical capitalization of the Company
as of April 30, 1997 (including short-term indebtedness) and as adjusted to
give effect to the sale of the Old Notes and the application of the estimated
net proceeds therefrom to repurchase $6 million of its outstanding 1998 Notes
and to repay approximately $91.5 million in borrowings under the Credit
Agreement. After giving effect to the Initial Offering, the Company's cash
interest payments for fiscal 1996 would have increased by approximately $3
million. See "Use of Proceeds." The Old Notes surrendered in exchange for
Exchange Notes will be retired and canceled and cannot be reissued.
Accordingly, issuance of the Exchange Notes will not result in any increase or
decrease in the indebtedness of the Company. As such, no effect has been given
to the Exchange Offer in the following capitalization table.
<TABLE>
<CAPTION>
AT APRIL 30, 1997
----------------------------
ACTUAL AS ADJUSTED
------------ --------------
(IN MILLIONS OF DOLLARS)
<S> <C> <C>
SENIOR DEBT:
Credit Agreement(1)............................... $ 500.0 $ 408.5
Capital Lease Obligations......................... 68.0 68.0
ABCP Program(1)................................... 399.8 399.8
Short-term debt................................... 145.0 145.0
------------ ------------
Total senior debt............................... 1,112.8 1,021.3
SUBORDINATED DEBT:
8 7/8% Senior Subordinated Notes due 1998......... 100.0 94.0
Notes offered hereby.............................. -- 100.0
------------ ------------
Total debt...................................... 1,212.8 1,215.3
Shareowner's equity(2)............................ 272.4 272.4
------------ ------------
Total capitalization............................ $ 1,485.2 $ 1,487.7
============ ============
Ratio of debt to equity........................... 4.5x 4.5x
Ratio of senior debt to capital funds(3).......... 3.0 2.7
</TABLE>
- --------
(1) At April 30, 1997, unused commitments under the Credit Agreement and the
ABCP Program were $440 million, of which $145 million provided funding
backup for the outstanding short-term debt and the remaining $295 million,
when combined with unrestricted cash and cash equivalents, made $298
million available to fund the Company's general operations.
(2) At May 31, 1997, shareowner's equity was $280 million.
(3) Capital funds represent the sum of subordinated debt and shareowner's
equity.
18
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA FOR THE COMPANY
The following selected consolidated financial data for the five-year period
ended October 31, 1996 was derived from the Company's consolidated financial
statements and notes thereto, which have been audited by Deloitte & Touche
LLP, independent auditors. The selected consolidated financial data for the
Company for the six months ended April 30, 1997 and 1996 was derived from
unaudited consolidated financial statements, which financial statements, in
the opinion of the Company, reflect all adjustments necessary for a fair
presentation of such information. Results for the interim periods are not
necessarily indicative of the results that might be expected for any other
interim period or for an entire year. This information should be read in
conjunction with the Consolidated Financial Statements and notes thereto and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" included in the NFC 1996 10-K and the NFC April 1997 10-Q, which
accompany this Prospectus as Appendix A and Appendix B, respectively.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
APRIL 30, FISCAL YEAR ENDED OCTOBER 31,
-------------- ------------------------------------
1997 1996 1996 1995 1994 1993 1992
------ ------ ------ ------ ------ ------ -------
(UNAUDITED)
(IN MILLIONS OF DOLLARS)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:(1)
Revenues:
Retail notes and lease
financing............... $ 51.9 $ 48.1 $ 97.7 $ 73.3 $ 71.4 $101.9 $ 100.7
Wholesale notes.......... 18.5 31.4 56.6 54.1 39.2 32.0 28.3
Accounts................. 14.3 12.8 26.6 29.2 22.2 17.5 14.8
Servicing fee income..... 10.1 10.6 20.5 18.3 17.3 10.6 8.6
Insurance premiums
earned.................. 16.5 21.1 42.0 44.6 51.1 57.4 59.9
Marketable securities.... 4.1 5.4 9.4 8.7 9.6 12.5 16.0
------ ------ ------ ------ ------ ------ -------
Total.................. 115.4 129.4 252.8 228.2 210.8 231.9 228.3
Expenses:
Cost of borrowing:
Interest expense....... 31.5 36.8 73.2 75.1 62.7 74.6 82.2
Other.................. 3.0 5.3 8.4 9.1 7.1 4.7 4.5
------ ------ ------ ------ ------ ------ -------
Total................ 34.5 42.1 81.6 84.2 69.8 79.3 86.7
Supplemental Trust
contribution............ -- -- -- -- -- 3.7 --
Credit, collection and
administrative.......... 14.5 13.8 28.2 27.9 25.9 26.1 26.8
Provision for losses on
receivables............. 1.2 2.7 9.3 2.6 2.3 1.5 3.6
Insurance claims and
underwriting............ 17.6 24.5 44.4 46.7 54.0 65.2 61.7
Other expense, net....... 10.5 4.9 8.8 8.1 3.6 7.1 3.1
------ ------ ------ ------ ------ ------ -------
Total.................. 78.3 88.0 172.3 169.5 155.6 182.9 181.9
------ ------ ------ ------ ------ ------ -------
Income before taxes on
income.................... 37.1 41.4 80.5 58.7 55.2 49.0 46.4
Taxes on income............ 14.4 16.1 31.1 22.5 21.2 17.7 16.9
Cumulative effect of
changes in accounting
policy, net of income
taxes(2).................. -- -- -- -- -- (8.8) --
------ ------ ------ ------ ------ ------ -------
Net income................. 22.7 25.3 49.4 36.2 34.0 22.5 29.5
Dividends paid............. 30.0 10.0 26.0 9.0 25.6 22.6 16.0
------ ------ ------ ------ ------ ------ -------
Net income retained...... $ (7.3) $ 15.3 $ 23.4 $ 27.2 $ 8.4 $ (0.1) $ 13.5
====== ====== ====== ====== ====== ====== =======
</TABLE>
- --------
Table continued on the following page
19
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA FOR THE COMPANY--(CONTINUED)
<TABLE>
<CAPTION>
AT APRIL 30, AT OCTOBER 31,
------------------ ------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
-------- -------- -------- -------- -------- -------- --------
(UNAUDITED) (IN MILLIONS OF DOLLARS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:(1)
Cash, cash equivalents
and marketable
securities............. $ 125.1 $ 131.7 $ 134.8 $ 134.7 $ 158.8 $ 159.5 $ 209.7
Finance receivables:
Retail notes and lease
financing............ 681.1 746.4 733.3 747.2 513.9 823.5 955.1
Wholesale notes....... 200.8 323.9 100.5 268.2 230.6 212.5 81.5
Accounts.............. 358.2 298.6 371.4 365.9 357.7 245.1 204.3
-------- -------- -------- -------- -------- -------- --------
Total............... 1,240.1 1,368.9 1,205.2 1,381.3 1,102.2 1,281.1 1,240.9
Allowance for losses.. (12.0) (10.4) (11.6) (10.4) (8.2) (10.9) (12.4)
-------- -------- -------- -------- -------- -------- --------
Finance receivables,
net.................... 1,228.1 1,358.5 1,193.6 1,370.9 1,094.0 1,270.2 1,228.5
Other assets............ 429.2 412.5 465.4 369.1 282.0 195.5 170.5
-------- -------- -------- -------- -------- -------- --------
Total assets........ $1,782.4 $1,902.7 $1,793.8 $1,874.7 $1,534.8 $1,625.2 $1,608.7
======== ======== ======== ======== ======== ======== ========
Senior debt............. $1,112.8 $1,278.1 $1,205.8 $1,230.3 $ 991.5 $1,099.2 $1,123.1
Subordinated debt....... 100.0 100.0 100.0 100.0 100.0 100.0 94.9
Other liabilities....... 297.2 253.9 208.3 287.7 217.7 206.6 171.2
Shareowner's equity..... 272.4 270.7 279.7 256.7 225.6 219.4 219.5
-------- -------- -------- -------- -------- -------- --------
Total liabilities
and shareowner's
equity............. $1,782.4 $1,902.7 $1,793.8 $1,874.7 $1,534.8 $1,625.2 $1,608.7
======== ======== ======== ======== ======== ======== ========
</TABLE>
- --------
Table continued on the following page
20
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA FOR THE COMPANY--(CONTINUED)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED APRIL 30, FISCAL YEAR ENDED OCTOBER 31,
------------------ ---------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
-------- -------- --------- --------- --------- -------- --------
(UNAUDITED)
(IN MILLIONS OF DOLLARS, EXCEPT RATIOS)
<S> <C> <C> <C> <C> <C> <C> <C>
OTHER DATA:(1)
EBITDA(3)............... $ 79.4 $ 86.0 $ 169.0 $ 144.9 $ 126.6 $ 133.3 $ 135.1
Cash flow from (used in)
operations............. 17.9 (42.1) (28.5) 111.2 20.0 55.3 12.5
Cash flow from (used in)
investing activities... 0.1 (15.1) 94.8 (339.7) 107.8 (54.0) (98.0)
Cash flow from (used in)
financing activities... (21.9) 61.0 (62.5) 203.1 (133.4) (46.6) 148.7
Ratio of EBITDA to
interest expense....... 2.5x 2.3x 2.3x 1.9x 2.0x 1.8x 1.6x
Ratio of EBITDA to fixed
charges(4)............. 2.4 2.1 2.2 1.8 1.9 1.7 1.6
Ratio of earnings to
fixed charges(5)....... 2.1 2.0 2.0 1.7 1.8 1.6 1.6
Ratio of debt to equity. 4.5 5.1 4.7 5.2 4.8 5.5 5.5
Ratio of senior debt to
capital funds(6)....... 3.0 3.4 3.2 3.4 3.0 3.4 3.6
Net losses (recoveries)
as a percentage of
average gross balance
of all outstanding
receivables............ 0.04% 0.03% 0.14% (0.03)% 0.04% 0.03% 0.16%
<CAPTION>
AT APRIL 30, AT OCTOBER 31,
------------------ ---------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
-------- -------- --------- --------- --------- -------- --------
(UNAUDITED)
(IN MILLIONS OF DOLLARS)
<S> <C> <C> <C> <C> <C> <C> <C>
PORTFOLIO ANALYSIS:(7)
Serviced retail notes
and lease financing.... $2,333.0 $2,340.8 $ 2,383.2 $ 2,169.1 $ 1,743.2 $1,524.8 $1,387.9
Serviced wholesale
notes.................. 670.2 909.7 685.9 854.5 577.1 559.0 402.3
Accounts................ 358.2 298.6 371.4 365.9 357.7 245.1 204.3
-------- -------- --------- --------- --------- -------- --------
Total serviced
receivables............ 3,361.4 3,549.1 3,440.5 3,389.5 2,678.0 2,328.9 1,994.5
Less:
Sold retail notes....... (1,533.3) (1,479.1) (1,522.2) (1,302.6) (1,152.1) (600.3) (290.3)
Sold wholesale notes.... (400.0) (500.0) (500.0) (500.0) (300.0) (300.0) (274.3)
Subordinated interests
in trusts.............. (70.3) (86.4) (86.1) (86.7) (49.9) (54.4) (62.3)
Unearned finance
charges................ (117.7) (114.7) (127.0) (118.9) (73.8) (93.1) (126.7)
-------- -------- --------- --------- --------- -------- --------
Total finance
receivables............ $1,240.1 $1,368.9 $ 1,205.2 $ 1,381.3 $ 1,102.2 $1,281.1 $1,240.9
======== ======== ========= ========= ========= ======== ========
</TABLE>
- -------
(1) Certain prior year amounts have been reclassified to conform with the
presentation used in the Consolidated Financial Statements for the six
months ended April 30, 1997 included in Appendix B.
(2) In the third quarter of 1993, the Company adopted SFAS 106 and SFAS 109,
retroactive to November 1, 1992.
(3) EBITDA represents income from operations before the cumulative effect of
changes in accounting policy, interest expense, taxes on income and
depreciation and amortization expense. The Company believes EBITDA
provides additional information for measuring its ability to generate
funds for liquidity and capital requirements. This information is
presented as a supplement to the other data provided because it provides
information which the Company believes is useful for additional analysis.
EBITDA should not be considered in isolation or as a substitute for net
income, cash flows from operating activities and other consolidated
operations or cash flow statement data prepared in accordance with
generally accepted accounting principles or as a measure of the Company's
profitability or liquidity.
(4) Calculated in accordance with the covenant regarding maintenance of
consolidated fixed charge coverage ratio contained in the Indenture. See
"Description of the Notes--Certain Covenants."
(5) The ratio of earnings to fixed charges is determined by dividing pretax
income from operations, adjusted for the cumulative effect of changes in
accounting policy, interest expense, debt expense amortization and the
portion of rental expense (25%) deemed representative of the interest
factor by the sum of interest expense, debt expense amortization and the
portion of rental expense deemed representative of the interest factor.
(6) Capital funds represent the sum of subordinated debt and shareowner's
equity.
(7) Unless otherwise indicated, information is presented on the basis of gross
balances, which for retail notes include unearned finance charges.
Information presented regarding serviced receivables includes receivables
owned by the Company and receivables which the Company has sold but
continues to service.
21
<PAGE>
INDUSTRY SEGMENT DATA FOR THE COMPANY
<TABLE>
<CAPTION>
SIX MONTHS
ENDED APRIL 30, FISCAL YEAR ENDED OCTOBER 31,
----------------- --------------------------------------------
1997 1996 1996 1995 1994 1993 1992
-------- -------- -------- -------- -------- -------- --------
(UNAUDITED) (IN MILLIONS OF DOLLARS)
<S> <C> <C> <C> <C> <C> <C> <C>
REVENUES:
Finance operations...... $ 94.9 $ 102.9 $ 201.6 $ 175.1 $ 150.6 $ 164.2 $ 155.5
Insurance operations.... 20.5 26.5 51.2 53.1 60.2 69.7 72.8
-------- -------- -------- -------- -------- -------- --------
Total revenues........ $ 115.4 $ 129.4 $ 252.8 $ 228.2 $ 210.8 $ 231.9 $ 228.3
======== ======== ======== ======== ======== ======== ========
INCOME BEFORE TAXES:
Finance operations...... $ 34.4 $ 39.7 $ 74.2 $ 53.1 $ 49.9 $ 47.9 $ 36.6
Insurance operations.... 2.7 1.7 6.3 5.6 5.3 1.1 9.8
-------- -------- -------- -------- -------- -------- --------
Total income before
taxes................ $ 37.1 $ 41.4 $ 80.5 $ 58.7 $ 55.2 $ 49.0 $ 46.4
======== ======== ======== ======== ======== ======== ========
<CAPTION>
AT APRIL 30, AT OCTOBER 31,
----------------- --------------------------------------------
1997 1996 1996 1995 1994 1993 1992
-------- -------- -------- -------- -------- -------- --------
(UNAUDITED) (IN MILLIONS OF DOLLARS)
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS:
Finance operations...... $1,620.4 $1,737.1 $1,626.9 $1,701.9 $1,354.1 $1,473.5 $1,459.2
Insurance operations.... 162.0 165.6 166.9 172.8 180.7 151.7 149.5
-------- -------- -------- -------- -------- -------- --------
Total assets.......... $1,782.4 $1,902.7 $1,793.8 $1,874.7 $1.534.8 $1,625.2 $1,608.7
======== ======== ======== ======== ======== ======== ========
</TABLE>
22
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
FOR NAVISTAR INTERNATIONAL CORPORATION
The following selected consolidated financial data for Navistar for the five-
year period ended October 31, 1996 was derived from Navistar's consolidated
financial statements and notes thereto, which have been audited by Deloitte &
Touche LLP, independent auditors. The selected consolidated financial data for
Navistar for the six months ended April 30 , 1997 and 1996 was derived from
unaudited consolidated financial statements, which financial statements, in the
opinion of Navistar, reflect all adjustments necessary for a fair presentation
of such information. Results for the interim periods are not necessarily
indicative of the results that might be expected for any other interim period
or for an entire year. The selected financial data set forth below should be
read in conjunction with the Consolidated Financial Statements and notes
thereto included in the Navistar 1996 Annual Report and the Navistar April 1997
10-Q.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
APRIL 30, FISCAL YEAR ENDED OCTOBER 31,
-------------- -------------------------------------------
1997 1996 1996 1995 1994 1993 1992
------ ------ ------- ------- ------- ------- -------
(UNAUDITED)
(IN MILLIONS OF DOLLARS)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT
DATA:(1)
Sales and revenues:
Sales of manufactured
products............... $2,733 $2,785 $ 5,508 $ 6,125 $ 5,153 $ 4,510 $ 3,685
Finance and insurance
revenue(2)............. 88 101 197 167 152 181 177
Other income............ 26 26 49 50 32 30 35
------ ------ ------- ------- ------- ------- -------
Total sales and
revenues............. $2,847 $2,912 $ 5,754 $ 6,342 $ 5,337 $ 4,721 $ 3,897
====== ====== ======= ======= ======= ======= =======
Income (loss) before
income taxes(3)........ $ 73 $ 77 $ 105 $ 262 $ 158 $ (441) $ (145)
Income tax expense
(benefit).............. 28 29 40 98 56 (168) 2
------ ------ ------- ------- ------- ------- -------
Income (loss) of
continuing operations.. 45 48 65 164 102 (273) (147)
Loss of discontinued
operations(4).......... -- -- -- -- (20) -- (65)
Cumulative effect of
changes in accounting
policy(5).............. -- -- -- -- -- (228) --
------ ------ ------- ------- ------- ------- -------
Net income (loss)....... $ 45 $ 48 $ 65 $ 164 $ 82 $ (501) $ (212)
====== ====== ======= ======= ======= ======= =======
SELECTED BALANCE SHEET
DATA:
Assets:
Manufacturing
operations........... $3,801 $3,840 $ 3,815 $ 4,018 $ 3,724 $ 3,645 $ 2,208
Financial services
operations........... 1,829 1,952 1,843 1,922 1,582 1,672 1,659
Eliminations.......... (426) (349) (332) (374) (259) (257) (240)
------ ------ ------- ------- ------- ------- -------
Total assets........ $5,204 $5,443 $ 5,326 $ 5,566 $ 5,047 $ 5,060 $ 3,627
====== ====== ======= ======= ======= ======= =======
Debt:
Manufacturing
operations........... $ 109 $ 125 $ 115 $ 127 $ 127 $ 175 $ 187
Financial services
operations........... 1,213 1,379 1,305 1,370 1,091 1,199 1,218
------ ------ ------- ------- ------- ------- -------
Total debt.......... $1,322 $1,504 $ 1,420 $ 1,457 $ 1,218 $ 1,374 $ 1,405
====== ====== ======= ======= ======= ======= =======
Shareowners' equity..... $ 959 $ 898 $ 916 $ 870 $ 817 $ 775 $ 338
====== ====== ======= ======= ======= ======= =======
</TABLE>
- --------
Table continued on the following page
23
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
FOR NAVISTAR INTERNATIONAL CORPORATION--(CONTINUED)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
APRIL 30, FISCAL YEAR ENDED OCTOBER 31,
------------- --------------------------------------
1997 1996 1996 1995 1994 1993 1992
------ ------ ------- ------- ------- ------- ------
(UNAUDITED)
(IN MILLIONS OF DOLLARS, EXCEPT COMMON SHARE,
UNIT AND EMPLOYEE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
SUPPLEMENTAL DATA:
Dividends paid, Series G
Preferred Stock.......... $ 14 $ 14 $ 29 $ 29 $ 58 $ -- $ 29
Capital expenditures...... 58 55 117 139 87 110 55
Engineering and research
expense.................. 62 64 129 113 97 94 92
Depreciation and
amortization............. 60 55 101 81 72 75 77
Average number of Common,
Class B Common and
dilutive common
equivalent shares
outstanding
(in millions)............ 73.7 73.8 73.8 74.3 74.6 34.9 25.3
Number of employees:
Worldwide................ 15,117 15,122 14,187 16,079 14,910 13,612 13,945
United States............ 12,702 13,309 12,445 13,852 12,792 11,934 12,390
OPERATING DATA:
United States and Canadian
retail deliveries of
trucks and school buses.. 42,600 43,900 94,000 101,700 91,600 78,900 69,300
United States and Canadian
market share(6).......... 26.8% 26.2% 27.5% 26.7% 27.0% 27.6% 28.4%
Unit shipments:
Trucks................... 46,000 50,000 95,200 112,200 95,000 87,200 73,200
OEM engines.............. 89,300 78,500 163,200 154,200 130,600 118,200 97,400
Total manufacturing
operations debt as a
percent of total
manufacturing
capitalization........... 10.2% 12.2% 11.2% 12.7% 13.4% 18.4% 35.6%
</TABLE>
- --------
(1) Certain prior year amounts have been reclassified to conform with the
presentation used in the Consolidated Financial Statements for the six
months ended April 30, 1997 included in the Navistar April 1997 10-Q.
(2) Includes revenues of the Company as well as Navistar's other financial
service subsidiaries.
(3) Navistar contributed approximately 25.6 million shares of its Class B
common stock, valued at $513 million, to the Supplemental Trust in 1993.
(4) The 1994 loss of discontinued operations resulted from a $20 million
charge for environmental liabilities at production facilities of two
formerly owned businesses, Wisconsin Steel and Solar Turbine, Inc. The
1992 loss of discontinued operations resulted from a $65 million charge
for the settlement of Navistar's obligation with the PBGC.
(5) In the third quarter of 1993, Navistar adopted SFAS 106 and SFAS 109,
retroactive to November 1, 1992.
(6) Based on retail deliveries of medium duty trucks (Classes 5, 6 and 7),
including school buses, and heavy duty trucks (Class 8) in the United
States and Canada by Transportation and its dealers, compared to the
industry total in the United States and Canada of retail deliveries.
24
<PAGE>
BUSINESS OF NAVISTAR FINANCIAL CORPORATION
Navistar Financial was incorporated in 1949 and is a wholly owned subsidiary
of Transportation, which is wholly owned by Navistar. The Company provides
wholesale, retail, and to a lesser extent, lease financing in the United
States for sales of new and used trucks sold by Transportation and
Transportation Dealers. The Company also finances wholesale accounts and
selected retail accounts receivable of Transportation. Sales of new and used
products (including trailers) of other manufacturers are also financed
regardless of whether designed or customarily sold for use with
Transportation's truck products. The Company provided wholesale financing for
94% and 93% of the new truck units sold by Transportation to Transportation
Dealers in the United States during fiscal 1996 and fiscal 1995, respectively,
and 95% and 94% for the six months ended April 30, 1997 and 1996,
respectively. The Company also provided retail financing in fiscal 1996 for
approximately 16% of the new truck units sold by Transportation and
Transportation Dealers compared to approximately 14% in fiscal 1995 and
approximately 13% and 18% for the six months ended April 30, 1997 and 1996,
respectively. Certain of the financial arrangements between Transportation and
the Company are governed by the terms of a master intercompany agreement dated
as of April 26, 1993 and as amended on September 30, 1996 (the "Master
Intercompany Agreement"). In fiscal 1996, the Company had revenues of $252.8
million and EBITDA of $169 million. See "Relationship with Navistar
International Transportation Corp."
The Company's wholly owned insurance subsidiary, Harco, provides commercial
physical damage and liability insurance coverage to Transportation Dealers and
retail customers, and the general public through the independent insurance
agency system. Revenues from Harco accounted for 20%, 23% and 29% of the
Company's revenues in fiscal years 1996, 1995 and 1994, respectively, and 18%
and 20% of the Company's revenues for the six months ended April 30, 1997 and
1996, respectively.
FINANCING OPERATIONS
The following is a summary of the types of financing operations undertaken
by the Company.
Wholesale Notes
The Company provides wholesale, or "floor plan" financing, to Transportation
Dealers through wholesale notes. Transportation Dealers issue wholesale notes
to finance their purchases of new and used trucks, buses, trailers, engines,
and, to a minor extent, service parts, from Transportation and other
manufacturers. The percentage of new Transportation trucks sold directly to
Transportation Dealers in the United States for which the Company provided
financing was approximately 95% and 94% for the first six months of fiscal
1997 and 1996, respectively, 94% for fiscal 1996, and 93% for fiscal years
1995 and 1994. Revenues from wholesale notes accounted for 22%, 24% and 19% of
the Company's revenues in fiscal years 1996, 1995 and 1994, respectively, and
16% and 24% of the Company's revenues for the six months ended April 30, 1997
and 1996, respectively.
The Company finances 100% of the wholesale invoice price of new vehicles,
including destination charges, 75% of the "as-is" appraised retail value of
used vehicles taken in trade by a Transportation Dealer or purchased by a
Transportation Dealer from an outside source, and 100% of the purchase price
or the Company's appraised value for used vehicles purchased by a
Transportation Dealer from Transportation's used truck centers or the
Company's inventory of repossessed vehicles. The Company obtains a new
wholesale note for each financed vehicle, either by purchasing it from
Transportation upon Transportation's sale of a vehicle to a Transportation
Dealer or by creating it pursuant to signature authority of the Transportation
Dealer. Each wholesale note is secured by the vehicle being financed. In
addition, most Transportation Dealers have granted a security interest in
their service parts purchased from Transportation to secure all of their
indebtedness to the Company and Transportation.
Wholesale notes for new trucks are due on the earlier of the sale of the
truck or a specified date (generally no later than 12 months from the first
day of the month following the date of shipment to the Transportation Dealer).
If such notes are not paid at the end of such period, the notes may be
extended, subject to the
25
<PAGE>
Transportation Dealer making a payment equal to 10% of the original principal
amount thereof, and an additional 10% payment each 90 days thereafter until
paid in full. However, the Company has the discretion to waive any such
curtailment payments. Interest is charged monthly on the wholesale notes on a
floating rate basis at a spread over the prime rate. Management believes that
the Company's wholesale note terms are generally comparable to those offered
by other truck manufacturers. Transportation supports the Transportation
Dealer's payment of interest on the wholesale notes related to new vehicles
through a variety of programs. See "Relationship with Navistar International
Transportation Corp.--Master Intercompany Agreement--Payment of Financing
Charges by Transportation."
The Company provides financing for used trucks acquired by a Transportation
Dealer on a floating rate basis at a spread over the prime rate. Wholesale
notes for used trucks are due on the earlier of the sale of the truck or a
specified date generally no later than six months from the date of financing.
These notes also may be extended subject to a required 10% principal payment
at initial maturity and every 90 days thereafter until paid in full. The
Company may in its discretion waive such curtailment payments.
The Company conducts annual detailed credit reviews of Transportation
Dealers and establishes credit guidelines based on sales volume, financial
strength, capitalization and general business capabilities. The Company
conducts more frequent reviews if it detects a weakening of the Transportation
Dealer's financial condition. Generally, the Company verifies Transportation
Dealers' inventories monthly for weaker dealers and less frequently for
stronger dealers.
Transportation is obligated under various agreements to repurchase new
Transportation trucks from a terminated Transportation Dealer at a price equal
to at least the value of the related wholesale notes. The proceeds of such
repurchases are applied to repay the balance of such Transportation Dealer's
outstanding wholesale notes. Used vehicles which are repossessed by the
Company are sold to the highest bidder, and the proceeds are paid to the
Company. The Company or its transferee bears all losses on wholesale notes
related to financed vehicles which have been sold "out of trust" by a
Transportation Dealer (which occurs when the proceeds of the sale have not
been used to repay the related wholesale notes) and wholesale notes related to
used vehicles.
Wholesale Accounts
Substantially all of Transportation's wholesale accounts receivable arising
from selling goods (primarily service parts) and providing services to
Transportation Dealers are purchased by the Company on account terms
established by Transportation. Transportation pays to the Company a floating
rate service charge on the average outstanding balance of such accounts.
Revenues from the financing of wholesale accounts accounted for 2% of the
Company's revenues for each of the six months ended April 30, 1997 and 1996,
and 2% of the Company's revenues in each of the 1996, 1995 and 1994 fiscal
years.
The Company bears the risk of loss with respect to wholesale accounts. In
most cases, the Company has a first priority lien on the Transportation
Dealer's parts inventory. In addition, if a Transportation Dealer's dealer
agreement terminates for any reason, Transportation is obligated under various
agreements to repurchase a portion of the Transportation Dealer's service
parts inventory at a prescribed price. The proceeds of such repurchase (and
the proceeds from the sale of the Transportation Dealer's remaining parts
inventory) are applied first to repay any indebtedness of the Transportation
Dealer to the Company (including indebtedness with respect to wholesale notes
and wholesale accounts) and second, to repay any indebtedness of the
Transportation Dealer to Transportation.
Retail Financings
The Company finances sales by Transportation and Transportation Dealers of
new and used trucks, buses, trailers and related equipment to retail customers
through retail loans and leases ("retail financings"). The Company's share of
the retail financings of new trucks manufactured by Transportation was
approximately 13%
26
<PAGE>
and 18% for the six months ended April 30, 1997 and 1996, respectively, and
approximately 16%, 14% and 15% for fiscal years 1996, 1995 and 1994,
respectively. Revenues from retail financings accounted for 39%, 32% and 34%
of the Company's revenues in fiscal years 1996, 1995 and 1994, respectively,
and 45% and 37% for the six months ended April 30, 1997 and 1996,
respectively.
Historically, the Company acquired most of its retail financings through
purchases of retail instalment sales contracts from Transportation and
Transportation Dealers, but it now originates retail financings by providing
retail loans or leases directly to retail customers. The retail loans made by
the Company generally are fixed rate obligations and are secured by the
trucks, buses, trailers and equipment financed thereby. Most of the retail
loans provide for equal monthly payments that fully amortize the amount
financed over the original term to maturity, although some retail loans have
balloon payments due at maturity or other payment terms. The leases originated
by the Company generally obligate the lessee to make fixed monthly rental
payments. The Company bears the residual risk on approximately 12% of the $74
million of residual value outstanding at April 30, 1997 on its serviced lease
portfolio; the remaining residuals are guaranteed by either the lessee, the
seller or Transportation.
Prior to making retail financing available to a customer, the Company
performs a credit evaluation of the customer and determines an appropriate
credit limit. The terms of retail financings are generally consistent with
industry practice with respect to minimum down payments, maximum maturities
and size of balloon payments.
Retail financings for new vehicles originated by Transportation Dealers may
contain an obligation of the dealer to pay the Company an amount equal to a
percentage of the unpaid principal balance or unrecovered equipment cost of a
defaulted retail financing if the Company repossesses the vehicle within a
specified time. The extent of a particular Transportation Dealer's obligation
is adjusted based on several factors, including the amount of retail
financings originated by the Transportation Dealer which are significantly
past due, a limitation of the dealer's liability for any single customer,
whether the financed vehicle was new or used, and participation by the
Transportation Dealer in a limited liability program with the Company. After
the Company repossesses a vehicle, the Transportation Dealer who originally
sold the vehicle may elect either to repurchase the vehicle for the unpaid
principal balance or unrecovered equipment cost of the related retail
financing, or to pay the applicable amount. For purposes hereof, all of the
Transportation Dealers' obligations described in this paragraph are referred
to as "Contractual Liability."
Approximately 37% of the aggregate principal amount of retail financings
serviced by the Company (including both owned and sold) as of April 30, 1997
has the benefit of Contractual Liability of the Transportation Dealer that
sold the related vehicle. However, the Company's recent experience is that
competitive conditions are causing it increasingly to waive Contractual
Liability when acquiring retail financings, and the extent and terms of
Contractual Liability will continue to be subject to change as market
conditions require.
For retail financings which have the benefit of Contractual Liability, the
Company establishes and retains a dealer reserve account to serve as
additional security for all of such Transportation Dealer's underlying
obligations. Monthly, the Company pays to such Transportation Dealer a portion
of the reserve credited to the Transportation Dealer's reserve account during
that month, and periodically the Company pays to such Transportation Dealer
the amount by which its reserve account exceeds a specified limit. Generally,
a Transportation Dealer's reserve account is not charged for repossession
losses, unless the Transportation Dealer has ceased doing business.
The Master Intercompany Agreement obligates Transportation to purchase (i)
new vehicles which were originally sold by Transportation Dealers, (ii)
certain used vehicles sold by Transportation Dealers under programs announced
by Transportation from time to time and (iii) new and used vehicles which were
originally sold by Transportation directly to the end-user, in each case if
the vehicle was financed by the Company and if the Company repossesses the
vehicle within 180 days of default (or longer in certain limited
circumstances). The purchase price is equal to the unpaid principal balance or
unrecovered equipment cost of the related defaulted receivable net of
Contractual Liability, if any. Transportation resells such vehicles in
accordance with its
27
<PAGE>
customary procedures. The foregoing obligations (the "Transportation Purchase
Obligations") in any fiscal year are limited to the extent that
Transportation's aggregate losses upon resale of such repossessed financed
vehicles in such year equal either (a) 10% of liquidations by the Company of
all outstanding retail financings which the Company or certain of the
Company's affiliates own or in which they have an economic interest during
such fiscal year, or (b) if the gross balance (including unrecovered equipment
cost) minus unearned interest of retail financings acquired by the Company
during such fiscal year is less than $50,000,000, then 10% of the gross
balance at the beginning of such fiscal year of all retail financings which
the Company or such affiliates own or in which they have an economic interest.
The Master Intercompany Agreement, which provides for Transportation Purchase
Obligations, may be amended from time to time, provided that such amendment is
not materially adverse to the Company. Such an amendment could, among other
things, (i) modify the Transportation Purchase Obligations relating to retail
financings then outstanding or (ii) otherwise modify, limit or eliminate the
Transportation Purchase Obligations.
The Company's net loss figures set forth under "Statistical Data--Credit
Loss Experience" and "--Retail Delinquencies and Net Losses" reflect the fact
that the Company had the benefit of Contractual Liability or Transportation
Purchase Obligations, or both ("Loss Protection"), on a substantial portion of
its retail financings. The Company applies the same underwriting standards to
the acquisition of retail financings without regard to whether Loss Protection
is provided. Based on its experience, the Company believes that there is no
material difference between the rates of delinquency and repossession on
retail financings with Loss Protection as compared to retail financings
without Loss Protection. However, the Company's net loss experience on retail
financings without Loss Protection is higher than that on retail financings
with Loss Protection because of the payments made to the Company by the
Transportation Dealers and Transportation. The Master Intercompany Agreement
also provides that Transportation may guarantee the residual value on leases
on a case by case basis.
Retail Accounts
The Company provides interim retail account financing for purchases from
Transportation by selected governmental agencies, major fleet customers and
original equipment manufacturers, all of which are preapproved for
creditworthiness by the Company prior to such purchases. A retail account
typically is open from the date on which a truck is shipped by Transportation
to the date on which the customer either pays the purchase price or enters
into permanent financing for the truck. Such interim financing is not secured
and its term generally does not exceed 90 days. Transportation pays a service
charge to the Company on the average outstanding balances of such accounts.
These service charges accounted for 9%, 11% and 9% of the Company's revenues
in fiscal years 1996, 1995 and 1994, respectively, and 10% and 8% of the
Company's revenues for the six months ended April 30, 1997 and 1996,
respectively.
COMPETITION AND REGULATION
The retail financing business is highly competitive. Competition exists
principally among banks, commercial financing companies, other captive finance
companies and leasing companies. A number of those institutions have
substantially greater financial resources than the Company and from time to
time are able to borrow, and thus offer customers financing, at lower rates
than the Company may be in a position to offer.
Neither the Company nor Transportation extend consumer credit as defined in
the Federal Consumer Credit Protection Act.
LIQUIDITY AND FUNDING OPERATIONS
The Company has significant liquidity requirements. The Company has
historically obtained the funds to provide financing to Transportation Dealers
and retail customers from sales of receivables, commercial paper, short- and
long-term bank borrowings, medium- and long-term debt issues and equity
capital, but it has recently relied almost entirely upon bank borrowings and
the securitization of receivables. A principal reason for this shift in
funding strategy is the Company's senior and subordinated debt ratings, which
are (and have been since
28
<PAGE>
at least March 1995) Ba2/B1 from Moody's, BB+/BB from Duff & Phelps and BB/B+
from Standard & Poor's. The Corporation's commercial paper is rated "not
prime" by Moody's.
The Corporation obtains funds on a short-term basis from the Credit
Agreement and the ABCP Program, and it obtains term funding through
securitizations of its wholesale notes and its retail loans and, to a lesser
extent, through sale-leasebacks of vehicles subject to leases. Each of these
financing arrangements is described in "Description of Other Financing
Arrangements." At April 30, 1997, unused commitments under the Credit
Agreement and the ABCP Program were $440 million, of which $145 million
provided funding backup for the outstanding short-term debt and the remaining
$295 million, when combined with unrestricted cash and cash equivalents, made
$298 million available to fund the Company's general operations.
The terms and conditions of the Credit Agreement, the Indenture, and the
agreements pursuant to which certain of the Company's other indebtedness was
issued impose restrictions that affect, among other things, the ability of the
Company and its subsidiaries to incur debt, create liens, pay dividends, make
certain investments and engage in business activities unrelated to those in
which the Company currently is engaged. The terms of the Company's
indebtedness also require the Company to meet specified financial tests. See
"Description of Other Financing Arrangements."
The Company expects to incur additional short- and long-term debt in the
future. The nature and amounts of such indebtedness can be expected to vary
from time to time as a result of the volume of the Company's business, market
conditions and other factors. In addition, the Company expects to continue to
securitize and sell receivables in the public and private markets. On May 7,
1997, the Company effected the sale of $500 million of asset-backed securities
backed by a pool of retail loan receivables. In fiscal 1997, the Company
expects to issue up to $200 million of asset-backed securities backed by its
wholesale notes. In addition, depending on market conditions, the Company may
repurchase additional amounts of the 1998 Notes.
HARCO NATIONAL INSURANCE COMPANY
Harco provides physical damage and liability insurance coverage to
Transportation Dealers and retail customers, and the general public through
the independent insurance agency system. Approximately 53%, 57% and 64% of
Harco's net earned premium revenues for fiscal years 1996, 1995 and 1994,
respectively, and 44% and 53% for the six months ended April 30, 1997 and
1996, respectively, were from truck physical damage and liability insurance
produced through independent agents. Net earned premium revenues were $42, $45
and $51 million for fiscal years 1996, 1995 and 1994, respectively, and $17
and $21 million for the six months ended April 30, 1997 and 1996,
respectively. Harco has a rating of "A" from A.M. Best & Co.
Harco's "Dealer Pack" program provides a broad multiple line package policy
designed for truck dealers and truck lease and rental companies. Truck
physical damage coverage is written for retail customers of the Company for
terms up to 60 months. Harco also provides physical damage insurance coverage
for equipment financed by the Company through wholesale notes.
Cash flow generated by Harco's insurance operations is used for investment.
The investment portfolio is managed by professional portfolio managers
following relevant regulations, and at April 30, 1997, consisted of investment
grade debt securities (85%) and equity securities (15%). Investment portfolio
duration is approximately matched to the estimated duration of Harco's
liabilities.
ASSET AND LIABILITY INTEREST RATE MATCHING
The Company manages interest rate sensitivity by seeking to match floating
rate assets with floating rate debt, primarily borrowings under the Credit
Agreement, and fixed rate assets with fixed rate debt, equity and floating
rate debt. The Company has, and expects to continue, to limit the amount of
fixed rate assets effectively
29
<PAGE>
funded with floating rate debt by selling retail receivables on a fixed rate
basis, and to a lesser extent, by utilizing derivative financial instruments.
The Company's corporate policy prohibits the use of derivatives for
speculative purposes.
DIVIDENDS
The Company paid ordinary dividends to Transportation of $26 million during
fiscal 1996 and paid ordinary dividends to Transportation of $30 million
during the six months ended April 30, 1997. The Company expects to continue
paying such dividends in order to maintain the Company's debt to equity ratio
consistent with industry standards and to maximize the Company's return on
equity.
The Company is limited in its ability to pay dividends as a result of
covenants under the Credit Agreement and the 1998 Notes on the Company's ratio
of indebtedness to tangible net worth and as a result of the covenant in the
Indenture described under "Description of the Notes--Certain Covenants--
Limitation on Indebtedness."
INCOME MAINTENANCE
The Credit Agreement and the Amended and Restated Parent's Side Agreement
dated as of November 8, 1994 (the "Side Agreement") between Navistar and
Transportation each require Transportation to assure that the Company's income
before interest expense and income taxes is maintained at not less than 125%
of total interest expense. No support payments have been required under these
agreements since 1984. See "Description of Other Financing Arrangements" and
"Relationship with Navistar International Transportation Corp.--Side
Agreement."
STATISTICAL DATA
GROSS FINANCINGS ACQUIRED
The following table shows the volume of gross acquisitions of the Company
during each of the periods indicated:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
APRIL 30, FISCAL YEAR ENDED OCTOBER 31,
----------------- --------------------------------------------
1997 1996 1996 1995 1994 1993 1992
-------- -------- -------- -------- -------- -------- --------
In millions of dollars (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
Wholesale notes......... $1,216.3 $1,491.5 $2,705.8 $2,979.4 $2,306.6 $1,977.6 $1,547.7
Retail financings
New.................... 430.5 550.4 1,064.1 1,075.0 861.9 730.0 591.8
Used................... 117.5 135.8 281.7 242.3 217.2 168.4 185.9
-------- -------- -------- -------- -------- -------- --------
Total................. $1,764.3 $2,177.7 $4,051.6 $4,296.7 $3,385.7 $2,876.0 $2,325.4
======== ======== ======== ======== ======== ======== ========
</TABLE>
30
<PAGE>
CREDIT LOSS EXPERIENCE
The following table provides information about the Company's loss experience
(on both a gross and net basis) during each of the periods indicated for its
serviced portfolio, which includes notes that have been sold:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
APRIL 30, FISCAL YEAR ENDED OCTOBER 31,
------------- --------------------------------------
1997 1996 1996(1) 1995 1994 1993 1992
------ ----- ------- ------ ----- ------ -----
In millions of dollars, except ratios (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
Net losses (recoveries):
Retail financings........... $ 0.8 $ 0.5 $ 5.1 $ 0.3 $0.6 $(0.1) $2.4
Wholesale notes............. (0.1) 0.1 (0.2) (0.9) 0.1 0.8 0.8
Accounts.................... -- -- -- (0.2) 0.2 -- --
------ ----- ------ ------ ----- ------ -----
Total..................... $ 0.7 $ 0.6 $ 4.9 $(0.8) $0.9 $ 0.7 $3.2
====== ===== ====== ====== ===== ====== =====
Net losses (recoveries) as a
percentage of liquidations
minus
net losses:
Retail financings........... 0.13% 0.11% 0.48% 0.03% 0.07% (0.01)% 0.27%
Wholesale notes............. (0.01) 0.00 (0.01) (0.03) 0.01 0.04 0.06
Total..................... 0.04 0.03 0.13 (0.02) 0.03 0.03 0.13
Net losses (recoveries) as a
percentage of average gross
balance of all outstanding
receivables:(2)
Retail financings........... 0.06% 0.05% 0.22% 0.02% 0.04% 0.00% 0.17%
Wholesale notes............. (0.02) 0.01 (0.02) (0.13) 0.03 0.16 0.20
Accounts.................... 0.00 0.00 0.00 (0.05) 0.08 0.00 0.00
Total................... 0.04 0.03 0.14 (0.03) 0.04 0.03 0.16
</TABLE>
- --------
(1) The information presented herein for the fiscal year ended October 31,
1996 includes the effect of the bankruptcy of one of the Company's largest
obligors, with obligations under retail financings covering approximately
720 vehicles.
(2) April 30 amounts have been annualized.
31
<PAGE>
RETAIL DELINQUENCIES AND NET LOSSES
The following table provides an analysis of the delinquencies and net losses
with respect to serviced retail financings during each of the periods
indicated:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
APRIL 30, FISCAL YEAR ENDED OCTOBER 31,
-------------- ----------------------------------------
1997 1996 1996(1) 1995 1994 1993 1992
------ ------ ------- ------ ------ ------ ------
(UNAUDITED)
(IN MILLIONS OF DOLLARS, EXCEPT RATIOS)
<S> <C> <C> <C> <C> <C> <C> <C>
NEW AND USED VEHICLE
CONTRACTS:
Gross balance of retail
financings outstanding
at end of period....... $2,420 $2,377 $2,468 $2,191 $1,752 $1,529 $1,385
Gross balance of retail
financings with
payments past due by
over 60 days as a
percentage of gross
balance outstanding at
end of period.......... 0.70% 0.76% 0.32% 0.10% 0.07% 0.09% 0.19%
Average gross balance of
retail financings...... $2,441 $2,271 $2,345 $1,917 $1,605 $1,419 $1,370
Net losses (recoveries):
The Company........... $ 0.8 $ 0.5 $ 5.1 $ 0.3 $ 0.6 $ (0.1) $ 2.4
Transportation(2)..... 3.6 2.0 9.5 0.6 0.6 4.8 8.3
------ ------ ------ ------ ------ ------ ------
Combined.............. $ 4.4 $ 2.5 $ 14.6 $ 0.9 $ 1.2 $ 4.7 $ 10.7
====== ====== ====== ====== ====== ====== ======
Liquidations minus net
losses................. $ 594 $ 504 $1,073 $ 881 $ 855 $ 747 $ 839
Net losses (recoveries)
as a percentage of
liquidations minus net
losses:
The Company........... 0.13% 0.11% 0.48% 0.03% 0.07% (0.01)% 0.27%
Transportation........ 0.61 0.38 0.89 0.07 0.07 0.64 1.00
Combined.............. 0.74 0.49 1.37 0.10 0.14 0.63 1.27
Net losses (recoveries)
as a percentage of
average gross
balance(3):
The Company........... 0.06% 0.05% 0.22% 0.02% 0.04% 0.00% 0.17%
Transportation........ 0.30 0.17 0.41 0.03 0.03 0.34 0.63
Combined.............. 0.36 0.22 0.63 0.05 0.07 0.34 0.80
Repossessions as a
percentage of average
gross balance(3)....... 3.37% 1.93% 3.08% 0.92% 0.93% 1.94% 3.61%
</TABLE>
- --------
(1) The information presented herein for the fiscal year ended October 31,
1996 includes the effect of the bankruptcy of one of the Company's largest
obligors, with obligations under retail financings covering approximately
720 vehicles. As adjusted to eliminate the impact of that obligor's
bankruptcy, the combined net losses (recoveries), the combined net losses
(recoveries) as a percentage of liquidations minus net losses, combined
net losses (recoveries) as a percentage of average gross balance and
repossessions as a percentage of average gross balance for the same period
would have been $4 million, 0.39%, 0.17% and 1.65%, respectively.
(2) Losses incurred by Transportation on disposal of units acquired from the
Company under the repurchase arrangements described in "Business of
Navistar Financial Corporation--Financing Operations--Retail Financings."
(3) April 30 amounts have been annualized.
32
<PAGE>
RELATIONSHIP WITH NAVISTAR INTERNATIONAL TRANSPORTATION CORP.
BUSINESS OF TRANSPORTATION
Navistar, through its wholly owned subsidiary Transportation, manufactures
and markets medium and heavy duty trucks, including school buses, mid-range
diesel engines and service parts primarily in the United States and Canada as
well as in selected export markets. Transportation is the industry market
share leader in the United States and Canada combined medium and heavy duty
truck market, offering a full line of diesel-powered products in the common
carrier, private carrier, government/service, leasing, construction,
energy/petroleum and student transportation markets. Transportation also
produces mid-range diesel engines for use in its medium duty trucks, school
buses, selected heavy duty truck models and for sale to original equipment
manufacturers in the United States and Canada. Transportation markets its
products through an extensive distribution network which as of April 30, 1997
included 953 North American dealer and distribution outlets. Service and
customer support are also supplied at these outlets.
The Medium and Heavy Duty Truck Industry
Transportation competes in the North American market for medium and heavy
duty trucks, including school buses, which includes weight classes 5 and above
(16,000 lbs. and over). This market is subject to considerable volatility as
it moves in response to cycles in the overall business environment and is
particularly sensitive to the industrial sector, which generates a significant
portion of the freight tonnage hauled. Government regulation has impacted and
will continue to impact trucking operations and efficiency and the
specifications of equipment.
The following table shows retail truck deliveries in the combined United
States and Canadian markets for the six months ended April 30, 1997 and 1996,
and each of the five years ended October 31, 1996, in thousands of units.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
APRIL 30, FISCAL YEAR ENDED OCTOBER 31,
----------- -----------------------------
1997 1996 1996 1995 1994 1993 1992
----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Medium duty trucks and school buses... 68.0 69.3 145.8 151.8 134.2 122.5 118.3
Heavy duty trucks..................... 90.9 98.3 195.4 228.8 205.4 166.4 125.2
----- ----- ----- ----- ----- ----- -----
Total............................... 158.9 167.6 341.2 380.6 339.6 288.9 243.5
===== ===== ===== ===== ===== ===== =====
</TABLE>
- --------
Source: Based on monthly data published by the American Automobile
Manufacturers Associations ("AAMA") in the United States and Canada and other
sources.
The North American truck market is highly competitive. Major domestic
competitors include PACCAR, Ford and General Motors as well as foreign-
controlled domestic manufacturers, such as Freightliner, Mack and Volvo GM. In
addition, manufacturers from Japan (Hino, Isuzu, Nissan and Mitsubishi) are
competing in the United States and Canadian markets. The intensity of this
competitiveness, which is expected to continue, results in price discounting
and margin pressures throughout the industry. In addition to the influence of
price, market position is driven by product quality, engineering, styling and
utility and comprehensiveness of the distribution system.
Transportation Market Share
Transportation delivered 94,000 medium and heavy duty trucks, including
school buses, in North America in fiscal 1996, compared to a total of 101,700
for fiscal 1995, a decrease of 8% in overall units. During the six months
ended April 30, 1997, Transportation delivered 42,600 medium and heavy duty
trucks, including school buses, in North America, compared to 43,900 during
the six months ended April 30, 1996.
33
<PAGE>
The following table reflects Transportation's North American market shares:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED APRIL FISCAL YEAR
30, ENDED OCTOBER 31,
----------- -----------------
1997 1996 1996 1995
----- ----- -------- --------
<S> <C> <C> <C> <C>
PRODUCT CLASS:
Medium duty truck and school bus market....... 38.7% 39.1% 41.5% 39.2%
Heavy duty truck market (Class 8)............. 17.9 17.1 17.1 18.4
Combined medium and heavy duty truck and
school bus market............................ 26.8 26.2 27.5 26.7
</TABLE>
Transportation has maintained the leading combined market share in medium
and heavy duty trucks, including school buses, in the United States and Canada
in each of its last 16 fiscal years based on data obtained from the AAMA, the
United States Motor Vehicle Manufacturer's Association and R.L. Polk &
Company.
Business Strategy
In fiscal 1996, Transportation adopted and began to implement a five-point
truck strategy designed to improve operating performance and increase
profitability. Specifically, this strategy is designed to enable
Transportation's truck division to achieve its part in Navistar's goal of
generating an average of 17.5% after tax return on equity over a business
cycle. The principal components of this strategy include:
. Reduce Product Complexity. Transportation believes that it can increase
manufacturing efficiency and improve product quality by reducing the
complexity of its product offerings. Historically, thousands of options
and a separate chassis design were offered for each truck model
manufactured by Transportation, which led to significant manufacturing
inefficiencies. In 1996, Transportation introduced a new ordering
program known as Diamond Spec(TM) for its premium conventional heavy
duty trucks. Under this program, Transportation rationalized the number
of possible option combinations by developing pre-packaged option groups
which are arranged under 11 categories (i.e., engine, chassis,
electrical system) based upon the most popular preferences of its
customers. Transportation also combined the chassis for three models
offered in this premium conventional product category into one chassis.
This standardization of option and chassis groups is expected to lead to
significant operating cost savings from increased manufacturing
efficiency and better pricing for purchased components. In addition,
Transportation believes that this program will result in an overall
improvement in product quality and shorter and more reliable delivery
times.
. Increase Manufacturing Efficiency. Transportation believes that it can
achieve significant improvements in manufacturing efficiency by focusing
each of its principal truck manufacturing facilities on producing a
single type of truck model. To this end, Transportation transferred the
production of its stripped chassis from its Springfield, Ohio facility
to its Conway, Arkansas facility in fiscal 1996, in order to achieve
efficiencies in the production of medium duty trucks. Similarly,
Transportation established a joint venture with SST Truck Company, which
will focus on the production of the highly-complex Paystar(R) severe
service trucks, thereby permitting Transportation's Chatham, Ontario
facility to concentrate on manufacturing premium conventional heavy duty
trucks.
. Emphasize Product Development. Transportation believes that each of its
current truck models are equal to or exceed those of its competitors in
terms of satisfying its customers' needs. Nevertheless, Transportation
intends to continue to enhance and expand its current product offerings
in an effort to provide trucks that better satisfy its customers'
changing demands. In fiscal 1996, Transportation introduced the
International 9100 conventional truck to replace its 8200 heavy duty
regular conventional truck and made significant improvements to its
premium conventional models. In fiscal 1997 and fiscal 1998, a series of
model improvements are expected to be introduced for Transportation's
premium conventional heavy duty truck models.
. Expand Operations in Mexico. Transportation believes that there are
significant opportunities to increase sales of both trucks and engines
in Mexico and in other selected markets. During 1996, Transportation
significantly expanded its direct presence in Mexico by establishing a
dealer network
34
<PAGE>
with 24 locations and a parts distribution center and by arranging for
production at a contract manufacturer. In addition, Navistar's Board
approved the construction of a manufacturing facility to be located near
Monterey, Mexico. This medium duty and heavy duty truck facility is
anticipated to cost approximately $167 million and to begin production
in 1998. Its capacity will be 65 units per day on one shift.
Transportation believes that its Mexican operations will enable it to
expand into other Latin American countries, particularly as a result of
the favorable and cost effective trade agreements between Mexico and
other Latin American countries.
. Establish Competitive Wage, Benefit and Productivity Levels. In 1996,
Transportation signed a new three-year collective bargaining agreement
with the CAW. Transportation expects to achieve significant productivity
gains as a result of favorable changes in job classifications, work
rules and training. Similarly, Transportation intends to seek
modifications to improve productivity under its collective bargaining
agreement with the UAW, which is scheduled to expire on October 1, 1998.
Products
The following table illustrates the percentage of Transportation's
manufacturing sales by class of product based on dollar amount:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED APRIL FISCAL YEAR ENDED
30, OCTOBER 31,
----------- -----------------
1997 1996 1996 1995 1994
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
PRODUCT CLASS:
Medium duty trucks and school buses............ 34% 34% 35% 32% 32%
Heavy duty trucks.............................. 34 37 35 42 42
Service parts.................................. 14 13 14 12 14
Engines........................................ 18 16 16 14 12
----- ----- ----- ----- -----
Total.......................................... 100% 100% 100% 100% 100%
===== ===== ===== ===== =====
</TABLE>
Transportation manufacturers a full line of products in the common carrier,
private carrier, government/service, leasing, construction, energy/petroleum
and student transportation markets. Transportation offers diesel-powered
trucks and buses because of their improved fuel economy, ease of
serviceability and greater durability over gasoline-powered vehicles.
Transportation's heavy duty trucks generally use diesel engines purchased from
outside suppliers while its medium duty trucks are powered by a proprietary
line of mid-range diesel engines manufactured by Transportation. Based on
information published by R.L. Polk & Company, diesel-powered medium duty truck
shipments represented 87% of all medium duty truck shipments for
Transportation's fiscal year 1996 in the United States and Canada.
Transportation's truck and bus manufacturing operations in the United States
and Canada consist principally of the assembly of components manufactured by
its suppliers, although Transportation produces its own mid-range diesel truck
engines, sheet metal components (including cabs) and miscellaneous other
parts.
Engine and Foundry
Transportation builds diesel engines for use in its Class 5, 6 and 7 medium
duty trucks, school buses, selected Class 8 heavy duty truck models and for
sale to original equipment manufacturers in the United States and Canada.
Transportation also sells engines for industrial, agricultural and marine
applications. Transportation believes that its family of mid-range diesel
engines, each designed to provide superior performance in customer
applications, offers both low cost of ownership and excellent durability to
users.
Transportation has an agreement to supply its T444E electronically
controlled diesel engine to a domestic automotive company through the year
2000 for use in all of its diesel-powered light trucks and vans. Sales of the
35
<PAGE>
T444E to the automotive company accounted for approximately 87% of
Transportations's T444E sales in fiscal 1996. Shipments of V8 and I6 engines
to all original equipment manufacturers totaled a record 163,200 units in
fiscal 1996, an increase of 6% from the 154,200 units shipped in fiscal 1995.
Service Parts
Transportation's service parts program is vital to the maintenance of the
relationship with its customers and dealers. The sale of replacement parts
does not represent a separate and distinct business of Transportation.
Transportation's truck group makes decisions about the pricing of trucks and
replacement parts based upon a variety of factors which integrally link the
pricing and sale of replacement parts with the sale of medium and heavy duty
trucks, including school buses. The acceptable price for dealers and fleet
truck sales is determined by not only looking at the market price of the
individual trucks themselves, but also by analyzing the amount of future
replacement parts that will be purchased from Transportation over the truck's
life cycles and the total expected profit contribution, including future
replacement parts, expected to be realized on each sale. Accordingly, the
pricing of trucks and replacement parts are not independently determined.
Transportation recently introduced Fleet Charge(R) Gold to help customers
improve the way they manage their costs and continues to invest in business
systems to improve the processing of customer orders, speed delivery of parts
and link electronically with both customers and suppliers. In the United
States and Canada, Transportation operates seven regional parts distribution
centers, which allow it to offer 24-hour availability and same day shipment of
the parts most frequently requested by its customers.
Marketing and Distribution
United States and Canada Operations. Transportation's truck products are
distributed through the largest medium and heavy duty truck retail
organization in North America to virtually all key markets in the United
States and Canada. As part of its continuing program to adapt to changing
market conditions, Transportation has been assisting Transportation Dealers to
expand their operations to better serve their customers. Transportation's
truck distribution and service network in North America was composed of 953
dealer and retail outlets at April 30, 1997 and 957, 958 and 949 dealer and
distribution outlets at October 31, 1996, 1995 and 1994, respectively.
Included in these totals were 518, 504, 490 and 473 secondary and associate
locations at April 30, 1997 and October 31, 1996, 1995 and 1994, respectively.
Transportation has been rated first in the American Truck Dealers "Dealer
Attitude Survey" for each of the last two years. In 1996, Transportation
introduced its Customer Satisfaction Process, which is designed to focus
Transportation's entire dealer network on delivering measurable, continuous
improvements in customer service.
Retail Transportation Dealer activity is supported by five regional
operations in the United States and a general office in Canada. Transportation
has a national account sales group responsible for its 110 major national
account customers. Transportation's network of 13 used truck centers in the
United States provides sales and trade-in support to its dealers and national
account group, and markets all makes and models of reconditioned used trucks
to owner-operators and fleet buyers.
Mexican Operations. During 1996, Transportation significantly expanded its
direct presence in Mexico by establishing a dealer network with 24 locations
and a parts distribution center and by arranging for production at a contract
manufacturer. In addition, Navistar's Board approved the construction of a
manufacturing facility to be located near Monterey, Mexico. This medium and
heavy duty truck facility is anticipated to cost approximately $167 million
and to begin production in 1998. Its capacity will be 65 units per day on one
shift. Transportation believes that its Mexican operations will enable it to
expand into other Latin American countries, particularly as a result of the
favorable and cost effective trade agreements between Mexico and other Latin
American countries.
Other International Operations. Transportation exports trucks, components
and service parts to distributors and end-users in more than 75 countries.
International sales, excluding sales to Mexico, were $169
36
<PAGE>
million and $205 million for fiscal years 1996 and 1995, respectively, and $88
and $91 for the first six months of fiscal 1997 and 1996, respectively.
Transportation exported 3,824 trucks in fiscal 1996 and 4,944 trucks in fiscal
1995, excluding exports to Mexico and, cumulatively from fiscal 1992 through
fiscal 1996, was the leading exporter of Class 6-8 trucks from the United
States and Canada according to data provided by the AAMA.
Important Supporting Operations
Third Party Sales Financing Agreements. In the United States, Transportation
has an agreement with Associates Commercial Corporation to provide wholesale
financing to certain Transportation Dealers and retail financing to their
customers. This agreement expired as to retail financing on February 28, 1997
and is scheduled to expire as to wholesale financing on July 31, 1997.
Navistar International Corporation Canada has an agreement with a subsidiary
of General Electric Canadian Holdings Limited to provide financing for
Canadian Transportation Dealers and customers.
Foreign Insurance Subsidiary. Harbour Assurance Company of Bermuda Limited
("Harbour") offers a variety of programs to Navistar, including general
liability insurance, ocean cargo coverage for shipments to and from foreign
distributors and reinsurance coverage for various Transportation policies.
Harbour also writes minimal third party coverage and provides a variety of
insurance programs to Transportation, Transportation Dealers and customers.
Capital Expenditures and Research and Development
Transportation designs and manufactures its trucks and diesel engines to
meet or exceed specific industry requirements. New models are introduced and
improvements of current models are made, from time to time, in accordance with
operating plans and market requirements and not on a predetermined cycle.
Capital expenditures during the first six months of fiscal 1997 were $58
million compared with $55 million during the first six months of fiscal 1996.
The increase in expenditures for the first six months of fiscal 1997 was
primarily for machinery and tooling related to the new engine product programs
and construction of a new truck assembly facility. Capital expenditures
totaled $117 million, $139 million and $87 million during fiscal years 1996,
1995 and 1994, respectively. In general, such expenditures were used for truck
and engine development and ongoing facility maintenance programs.
Product development is an ongoing process at Transportation. Research and
development activities are directed toward the introduction of new products
and improvement of existing products and processes used in their manufacture.
Spending for research and development activities totaled $101 million, $91
million and $88 million for fiscal years 1996, 1995 and 1994, respectively.
Labor Relations
At October 31, 1996, approximately 66% of Transportation's 14,187 employees
were covered under various collective bargaining agreements. The UAW
represents 6,902 of Transportation's active employees in the United States
pursuant to a collective bargaining agreement that is scheduled to expire on
October 1, 1998. The CAW represents 1,476 of Transportation's active employees
in Canada pursuant to a new collective bargaining agreement entered into in
1996 that is scheduled to expire on October 24, 1999. The terms of this
agreement, including changes in work rules, job classifications and training
are expected to make production gains and quality increases possible.
Raw Materials and Energy Supplies
Transportation purchases raw materials, parts and components from numerous
outside suppliers but relies upon certain suppliers for a substantial number
of components for its truck products. Transportation's purchasing
centralization and strategies have been designed to improve access to the
lowest cost, highest quality sources of
37
<PAGE>
raw materials, parts and components, and to reduce inventory carrying
requirements. A portion of Transportation's requirements for raw materials and
supplies is filled by single source suppliers.
The impact of an interruption in supply would vary by commodity. Some parts
are generic to the industry while others are of a proprietary design requiring
unique tooling which would require time to recreate. However, Transportation's
exposure to a disruption in production as a result of an interruption of raw
materials and supplies is no greater than the industry as a whole. In order to
remedy any losses resulting from an interruption in supply, Transportation
maintains business interruption insurance for storms, fire and water damage.
While the Company believes that it has adequate assurances of continued
supply, the inability of a supplier to deliver could have an adverse effect on
production at certain of the Company's manufacturing locations.
Impact of Government Regulation
Truck and engine manufacturers continue to face increased governmental
regulation of their products, especially in the environmental and safety
areas. Transportation believes its products comply with all applicable
environmental and safety regulations.
Transportation incurred research and tooling costs to redesign its engine
product lines to meet United States Environmental Protection Agency ("EPA")
and California Air Resources Board ("CARB") emission standards effective for
the 1994 model year. Transportation faces additional costs through 1998 to
meet further tightening of these standards. In addition to the 1998 standards,
Transportation, along with other engine manufacturers, has signed a voluntary
agreement ("Statement of Principles") with the EPA and the CARB to achieve new
reductions in ozone-causing exhaust emissions by 2004. As a result of the
Statement of Principles, the EPA issued a Notice of Proposed Rulemaking
defining exhaust emission standards for the 2004 model year. A final rule is
expected in 1997. Transportation must also satisfy California's emission
standards in 2002 for engines used in medium-sized vehicles (which includes
vehicles up to 14,000 lbs. Gross Vehicle Weight Rating). Transportation
expects that its diesel engines will be able to meet all of these standards
within the required time-frame.
Emissions regulations in Canada and Mexico are similar, but not identical,
to the U.S. federal regulations. Although Canada's regulations impose
standards equivalent only to the U.S. standards for the 1990 model year,
diesel engine manufacturers, including Transportation, have voluntarily signed
several memorandums of understanding with the Canadian federal government,
agreeing to sell only engines meeting the 1994 U.S. emission standards in
model years 1995 to 1997. Canada has announced its intention to conform its
heavy-duty engine emission standards to the U.S. standards in 1998 and to
require low-sulfur diesel fuel beginning October 1, 1997. Mexico has adopted
the U.S. heavy diesel engine emission standards as of the 1994 model year but
has conditioned compliance on the availability of low-sulfur diesel fuel.
While Transportation has already proven its ability to meet the 2004 U.S.
standards, these proposed regulations have and will impose significant
research, design and tooling costs on Transportation and other diesel engine
manufacturers. Transportation's ability to comply with emissions requirements
which may be imposed in the future is an important element in maintaining and
improving Transportation's position in the diesel engine marketplace.
Significant capital and operating expenditures will be required to comply with
these emissions requirements.
Truck manufacturers are also subject to various noise standards imposed by
federal, state and local regulations. The engine is one of a truck's primary
noise sources, and Transportation therefore works closely with truck OEMs to
develop strategies to reduce engine noise. Transportation is also subject to
the National Traffic and Motor Vehicle Safety Act (the "Safety Act") and
Federal Motor Vehicle Safety Standards (the "Safety Standards") promulgated by
the National Highway Traffic Safety Administration. Transportation believes it
is in compliance with the Safety Act and the Safety Standards.
38
<PAGE>
Expenditures to comply with various environmental regulations relating to
the control of air, water and land pollution at production facilities and to
control noise levels and emissions from Transportation's products have not
been material except for two sites formerly owned by Transportation, Wisconsin
Steel in Chicago, Illinois, and Solar Turbine, Inc. in San Diego, California.
In 1994, Transportation recorded a $20 million after-tax charge as a loss of
discontinued operations for environmental liabilities and cleanup cost at
these two sites.
In addition, Transportation has been named a potentially responsible party
("PRP"), in conjunction with other parties, in a number of cases arising under
the Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended. These cases involve sites which allegedly have been
contaminated by wastes from current or former Transportation locations. Based
on information available to Transportation, which in most cases consists of
data related to quantities and characteristics of material generated at or
shipped to each site as well as cost estimates from PRPs and/or federal or
state regulatory agencies for the cleanup of these sites, a reasonable
estimate is calculated of Transportation's share, if any, of the probable
costs and is provided for in the financial statements. These obligations
generally are recognized no later than completion of the remedial feasibility
study and are not discounted to their present value. Transportation believes
that, based on these calculations, its share of the potential costs for the
cleanup of each site, other than the Wisconsin Steel and Solar sites, will not
have a material effect on Transportation's financial results. Transportation
reviews its accruals on a regular basis.
Legal Proceedings
Transportation and its subsidiaries are subject to various other claims
arising in the ordinary course of business, and are parties to various legal
proceedings which constitute ordinary routine litigation incidental to the
business of Transportation and its subsidiaries. In the opinion of
Transportation's management, none of these proceedings or claims are material
to the business or the financial condition of Transportation and its
subsidiaries.
MASTER INTERCOMPANY AGREEMENT
The operating relationship between the Company and Transportation is
governed by the Master Intercompany Agreement.
Purchase of Notes and Accounts Receivable
The Master Intercompany Agreement requires that Transportation, with limited
exceptions, offer the Company all wholesale and retail notes and instalment
sales contracts which Transportation acquires in the regular course of its
business from sales of trucks and related equipment to Transportation Dealers
and customers. Such offers must be on terms which will (together with charges
made to others for financing services) afford reasonable compensation for the
financing services rendered by the Company to Transportation and
Transportation Dealers with respect to the sale of Transportation products and
used goods. The Company in turn has agreed, to the extent that it is able to
finance such purchases, that it will purchase all such receivables without
recourse except those, if any, as to which the risk of loss is unacceptable to
the Company.
Pursuant to the Master Intercompany Agreement, the Company also purchases
Transportation's wholesale accounts receivable from Transportation Dealers
arising out of Transportation's sales of goods (primarily parts) and services
to such dealers. The Company receives compensation from Transportation in the
form of a floating rate service charge for financing these accounts.
The Master Intercompany Agreement also provides that the Company will
purchase retail accounts receivable from Transportation that arise out of
Transportation's sales to retail customers. The Company receives a floating
rate service charge from Transportation for financing these accounts.
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Payment of Financing Charges by Transportation
Transportation currently provides floor plan financing assistance for
Transportation Dealers through various interest credits and interest payments.
Upon sale of a vehicle to a Transportation Dealer, Transportation currently
issues an interest credit to the dealer in order to support the Transportation
Dealer's cost of wholesale financing on the related wholesale note to the
Transportation Dealer. Transportation also currently pays interest on behalf
of a Transportation Dealer during the period that a financed vehicle is in
transit to the Transportation Dealer. Further, Transportation periodically
implements special sales programs pursuant to which it agrees to pay interest
on behalf of Transportation Dealers for an extended period of time. Pursuant
to the Master Intercompany Agreement, Transportation pays the amount of
interest owing on the wholesale notes during the in-transit and any interest
free periods directly to the Company.
Transportation currently pays the Company an acquisition fee on new
equipment wholesale notes purchased from Transportation, which will be
discontinued after fiscal 1998. Pursuant to such agreement, Transportation
paid the Company $5.7 million in fiscal 1996. The maximum fee payable under
such agreement will be $3.7 million in fiscal 1997 and $1.7 million in fiscal
1998. During the last five fiscal years, the largest such fee paid by
Transportation to the Company was $9.7 million.
Payments to Transportation for Administrative and Other Services
The Company pays a fee to Transportation for data processing and other
administrative services based on the actual cost of the services performed.
The Company paid Transportation service fees of $1.1 million for each of the
six months ended April 30, 1997 and 1996, and $2.4 million, $2.4 million and
$2.5 million for fiscal years 1996, 1995 and 1994, respectively.
TAX ALLOCATION AGREEMENT
Pursuant to the Tax Allocation Agreement effective October 1, 1981, as
subsequently amended and supplemented (the "Tax Allocation Agreement"), the
Company is required to pay to Transportation an amount equal to the amount the
Company and its subsidiaries would pay with respect to federal corporate
income taxes if the Company and its subsidiaries filed federal tax returns on
a consolidated basis as an affiliated group of corporations, notwithstanding
the fact that the affiliated group of corporations including Navistar and its
subsidiaries may not have any federal tax liability. The Tax Allocation
Agreement contains similar provisions regarding state income taxes for states
that permit the filing of consolidated returns.
SIDE AGREEMENT
The Side Agreement requires either Transportation or Navistar to hold and
own 100% of the outstanding voting stock of the Company (other than shares
held by directors of the Company as qualifying shares). The Side Agreement
also requires Transportation not to permit the Company's consolidated income
before income taxes, interest expense and dividends on preferred stock to be
less than 125% of the Company's consolidated interest expense and dividends on
preferred stock for any period of four fiscal quarters immediately preceding
the date of measurement.
Navistar and Transportation are permitted to amend or waive any or all of
the provisions of the Side Agreement with the written approval of the lenders
providing at least two-thirds of the commitment under the Credit Agreement.
The Indenture does not require that the Side Agreement be maintained.
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DESCRIPTION OF OTHER FINANCING ARRANGEMENTS
CREDIT AGREEMENT
In April of 1993, the Company entered into the Credit Agreement with a group
of banks, including Bank of America Illinois (formerly known as Continental
Bank National Association), Bank of Nova Scotia, The Chase Manhattan Bank
(formerly known as Chemical Bank), Morgan Guaranty Trust Company of New York
and NationsBank, N.A., as co-arrangers. Effective March 29, 1996, the Company
amended its Credit Agreement, extending the maturity date of such agreement to
March 2001. In addition, the commitment of the Credit Agreement was increased
to $925 million and a new pricing and fee schedule was established. The
Company's borrowing capacity under the Credit Agreement is determined through
an asset base calculation, which includes assets of both the Company and each
of its subsidiaries. Amounts outstanding under the Credit Agreement are
secured by all the assets of the Company, including a pledge of all of the
stock of each of the Company's subsidiaries.
Three interest rate options are available for borrowings under the Credit
Agreement: (i) Base Rate Loans, tied to the higher of the prime rate or the
sum of 1/2 of 1% plus the Federal Funds rate; (ii) CD Loans, based on the
prevailing Certificate of Deposit rate; and (iii) Euro-Dollar Loans, based on
the London interbank offered rate ("LIBOR"), in each case plus a margin based
on the Company's long-term credit rating.
The Credit Agreement includes a number of restrictive covenants. For
example, the Company is required to maintain (i) a consolidated tangible net
worth of at least $175 million and (ii) consolidated interest expense,
preferred stock dividends and consolidated income before income taxes that is
at least 125% of its fixed charges (consisting of consolidated interest
expense and preferred stock dividends). In addition, the Company's total
consolidated debt to consolidated tangible net worth may not exceed 7 to 1.
The Company may not transfer its accounts receivable or prepay subordinated
debt below $100 million (including the Notes), except in accordance with the
terms contained in the Credit Agreement.
In addition, the Credit Agreement requires the Company to hold all of the
outstanding stock of each of its subsidiaries. The Credit Agreement requires
that the Company perform all of its obligations under the Master Intercompany
Agreement, not consent to amendments or modifications thereof which would be
materially adverse to the Company (except in certain limited circumstances)
and enforce the Master Intercompany Agreement against Transportation in
accordance with its terms. The Company is prohibited from engaging in
transactions with affiliates (except in certain limited circumstances) that
are not in the ordinary course of business and on an arm's-length basis. The
Credit Agreement also requires that the Company maintain adequate loan loss
reserves and its current dealer guideline program.
The Credit Agreement restricts the Company's ability to enter new lines of
business, limits the types of investments that the Company may make and
contains a negative pledge which prevents the Company from incurring or
suffering to exist liens on its assets, except in certain limited
circumstances. The Company is required to invest its cash and cash equivalents
(subject to certain limited exceptions) in marketable securities at the close
of business on each business day. The Credit Agreement also contains customary
covenants regarding reporting, insurance, conduct of business, maintenance of
existence and compliance with laws.
Events of default under the Credit Agreement include: (i) failure to pay
principal or interest when due; (ii) breach of a covenant or representation or
warranty (subject to certain limited cure periods); (iii) default on other
indebtedness in excess of $1 million; (iv) failure of the Company or a special
purpose subsidiary of the Company to meet its obligations in excess of $1
million relating to the sale of receivables; (v) Transportation or Navistar
ceasing to own 100% of the Company; (vi) certain change of control events with
respect to Transportation or Navistar; (vii) certain events of bankruptcy
involving the Company, Transportation or Navistar; (viii) a judgment against
the Company over $1 million remaining unsatisfied and unstayed for over 30
days; and (ix) certain other events of default.
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Effective May 27, 1997, the Company amended its Credit Agreement to: (i)
permit the Company to lend up to $100 million to Transportation, secured by
Transportation's service parts and new and used truck inventories; (ii) give
the Company up to $50 million of credit in its asset base calculation for
Mexican retail and wholesale receivables funded by the Company; and (iii)
adjust the asset base calculation for certain of the Company's subsidiaries,
which will have the effect of increasing the Company's asset base calculation.
SECURITIZATION PROGRAMS
The Company presently utilizes securitizations to fund a substantial portion
of its acquisitions of wholesale notes and retail notes (together with lease
receivables, the "receivables"). The Company relies upon the securitization
market, which provides it with funding at rates that are much lower than the
Company could obtain through issuing its own unsecured or secured corporate
debt obligations. The Company anticipates continuing to utilize
securitizations to fund its acquisitions of wholesale notes and retail notes.
Wholesale Notes Securitization
Since 1990, the Company has securitized its wholesale notes. On a daily
basis, the Company sells all newly arising wholesale notes, except those which
are ineligible and those which exceed a dealer concentration level which is
set by the Company (subject to a contractual maximum), to Navistar Financial
Securities Corporation ("NFSC"), a wholly owned special purpose subsidiary of
the Company. NFSC in turn sells the wholesale notes to a trust, which
effectively reinvests collections on outstanding trust receivables in such
newly originated wholesale notes. NFSC retains an interest in the trust, a
portion of which is subordinated to the investor certificates. At April 30,
1997, NFSC's retained interest in the trust constituted $212.8 million, of
which $69.4 million was subordinated to claims of investor certificateholders.
Each class or series of investor certificates represents an undivided
ownership interest in the wholesale notes held by the trust. Upon the
commencement of amortization (which will occur on the earlier of the scheduled
amortization period commencement date or the occurrence of an early
amortization event), collections on outstanding trust receivables will be used
to pay down the invested amount on the amortizing class or series. Typical
amortization events for the two Series 1990-A classes and the Series 1995
certificates identified below include payment defaults, material breaches of
representations and warranties by NFSC following notice and a cure period,
bankruptcy of the Company, Transportation or NFSC, and failure to meet certain
pool performance tests.
The outstanding investor certificates have the following principal terms:
<TABLE>
<CAPTION>
INVESTED SCHEDULED AMORTIZATION/ACCUMULATION
CERTIFICATES ISSUED AMOUNT PERIOD COMMENCEMENT DATE
------------ ------------- ------------ -----------------------------------
<S> <C> <C> <C>
Series 1990-A, Class A-
2...................... December 1990 $100,000,000 December 1997
Series 1990-A, Class A-
3...................... December 1990 $100,000,000 December 1998
Series 1995-1........... June 1995 $200,000,000 November 2003
</TABLE>
Retail Notes Securitizations
Since 1993, the Company has securitized a significant portion of its retail
loans. Approximately twice a year, the Company sells a pool of retail loans,
certain monies due or received thereunder, security interests in the vehicles
and equipment financed thereby and certain other property (collectively, the
"Property") to Navistar Financial Retail Receivables Corporation, a wholly
owned special purpose subsidiary of the Company ("NFRRC"). Immediately
thereafter, NFRRC transfers such Property to a trust formed specifically for
such transaction in exchange for either asset-backed notes or certificates
issued by such trust. The Company retains the option under certain
circumstances to repurchase the remaining pool of retail loans of any trust
once monies due and payable thereunder constitute 10% or less of aggregate
amount due and payable under such retail loans when initially purchased by the
trust. NFRRC retains a residual interest in each trust.
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As of April 30, 1997, trusts formed by NFRRC have issued an aggregate
principal amount of approximately $3.3 billion of asset-backed securities.
Each class of asset-backed securities may have a different interest rate. At
April 30, 1997, asset-backed securities from eight securitized transactions
originated by NFRRC remained outstanding and had a remaining aggregate
principal balance of approximately $1.3 billion.
On May 7, 1997, NFRRC established the Navistar Financial 1997-A Owner Trust,
which issued $500,000,000 in asset-backed securities.
The Company periodically enters into forward interest rate contracts to
manage its exposure to fluctuations in funding costs from the anticipated
securitization and sale of retail loans. The Company locks into an interest
rate by entering into a forward contract on a U.S. Treasury security whose
terms approximate those used to determine the selling price of the anticipated
sale of receivables. Gains or losses incurred with the closing of these
agreements are included as a component of the gain or loss on sale of
receivables.
Asset-Backed Commercial Paper Program
The Company and Truck Retail Instalment Paper Corp., a wholly owned
subsidiary of the Company ("TRIP"), established NFC Asset Trust (the "ABCP
Trust") in late 1994 for the purpose of issuing asset-backed commercial paper.
As a condition to issuance, all commercial paper must be rated at least "A-1"
by Standard & Poor's Ratings Group and "P-1" by Moody's. The Company currently
may issue up to $400 million in face amount of commercial paper under the ABCP
Program. The ABCP Trust has also issued approximately $14 million of
subordinated certificates. At April 30, 1997, the ABCP Trust had outstanding
commercial paper of $387 million.
The Company currently uses the ABCP Program to warehouse its retail loans
pending a permanent securitization of such loans as described above. Generally
on a monthly basis, TRIP purchases retail loans from the Company and then
pledges such loans to the ABCP Trust as collateral for a loan. The ABCP Trust
funds such loan through the issuance of commercial paper. When the Company
effects a retail loan securitization, a portion of the proceeds are used to
purchase the retail loans from TRIP, which in turn uses such proceeds to repay
the loan to the ABCP Trust and obtain a release of the ABCP Trust's lien on
the retail loans.
To support the commercial paper program, the Company has arranged a
liquidity facility with a syndicate of banks. Loans under the liquidity
facility are available either to repay maturing commercial paper if sufficient
funds are not otherwise available or to fund loans to TRIP. The lenders
provide liquidity, not credit support, for the ABCP Trust. The lenders'
commitments under the liquidity facility terminate in March 2001.
The ABCP Trust's ability to make loans to TRIP, issue commercial paper and
borrow funds from the lenders are subject to a number of conditions, including
having a sufficient borrowing base (which is based on the retail loans pledged
by TRIP) and sufficient amounts being held in reserve accounts. The program
restricts the weighted average maturity and remaining maturities of commercial
paper, and it imposes diversification requirements and limitations on average
maturity on the portfolio of retail loans financed through the ABCP Trust. The
program will terminate upon the occurrence of events based on portfolio
performance, insolvency events related to the Company, TRIP and the ABCP
Trust, defaults under the applicable documents, termination of the lenders'
commitments and certain other events.
TRIP also has the option of selling retail loans to the ABCP Trust for long-
term funding up to the available amount of liquidity, but it does not
presently anticipate using the ABCP Trust for this purpose. In the future, the
Company and TRIP may seek the ability to finance wholesale notes and lease
receivables through the ABCP Trust.
Common Elements of Securitization Programs
The securitizations of wholesale notes and retail loans (collectively, the
"receivables") effected by the Company, including the ABCP Program, share a
number of structural features. In the first step of each
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securitization, the receivables are sold by the Company to its subsidiary
(NFSC, NFRRC or TRIP, as applicable) in a transaction intended to qualify as a
true sale under applicable law. Each of NFSC, NFRRC and TRIP is a special
purpose corporation ("SPC") whose activities are limited to participating in
the securitization and related transactions and each SPC is intended to be a
bankruptcy remote entity.
In the second step of each securitization, the SPC either (in the case of
NFSC and NFRRC) transfers its interest in the receivables to the related
trust, which purchases and holds the receivables, or (in the case of TRIP)
transfers a security interest in the receivables to the related trust, which
makes a loan to TRIP secured by the receivables. The purpose of these
structural features is to remove the receivables from the Company and to
isolate them in a special purpose entity, so that such receivables would not
constitute part of the Company's estate in the event of a bankruptcy of the
Company.
In all of these transactions, the Company retains interests in the trusts,
in the form of residual interests, spread accounts or rights to excess spread
on the receivables, which interests provide the initial level of protection to
investors against credit losses on the sold receivables. Each of these
securitizations would constitute a Qualified Securitization Transaction under
the Indenture.
In each securitization, the Company is appointed as the servicer of the
receivables. The Company can be replaced as servicer in any securitization
upon a material default in the performance of its duties. In each
securitization, the Company makes certain representations and warranties with
respect to the receivables it sells to an SPC, and the Company remains
obligated to repurchase receivables with respect to which such representations
or warranties are subsequently determined to be untrue.
The sales of receivables in the wholesale note securitization and the retail
loan owner trust securitizations constitute sales under generally accepted
accounting principles, with the result that the sold receivables are removed
from the Company's balance sheet and the investors' interests in the related
trust are not reflected as liabilities. However, the SPCs' interests in the
related trusts are reflected on the Company's consolidated balance sheet as
assets.
SALE-LEASEBACKS
In the first quarter of fiscal 1997, the Company effected two sale-
leasebacks of vehicles that were subject to retail leases with end users. The
aggregate value of the leased vehicles was approximately $75 million. In these
transactions, the Company transferred the vehicles to third party lessors and
leased the vehicles back from the lessors under a "head lease." In each
transaction, the Company pledged the associated retail leases to the lessors
as collateral for their obligations under the head leases. Each of the sale-
leasebacks would constitute a Capitalized Lease Obligation and a Qualified
Securitization Transaction under the Indenture. The Company may effect
additional sale-leasebacks in the future.
1998 NOTES
The 1998 Notes were issued pursuant to an indenture, dated as of November
15, 1993, between the Company and First Trust, N.A. (as successor to
Continental Bank, National Association), as Trustee (the "1998 Notes
Indenture"). The 1998 Notes are limited to $100 million aggregate principal
amount and mature on November 15, 1998. Interest on the 1998 Notes accrues at
a rate of 8 7/8% per annum and is payable on May 15 and November 15 of each
year. The 1998 Notes are not redeemable by the Company prior to maturity and
are not subject to any mandatory sinking fund payments. The Company used a
portion of the net proceeds of the Initial Offering to purchase $6.0 million
of its outstanding 1998 Notes. In addition, depending on market conditions,
the Company may repurchase additional amounts of the 1998 Notes.
The 1998 Notes Indenture contains certain covenants that, among other
things, limit the ability of the Company or any of its subsidiaries to
maintain or incur indebtedness, create liens, enter into certain transactions
with affiliates, or consummate certain merger, consolidation or asset sale
transactions. In addition, the Company
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is required to maintain a Consolidated Fixed Charge Coverage Ratio of at least
1.25 to 1.0 (as of the end of any fiscal quarter) under the 1998 Notes
Indenture, provided that such ratio will be reduced to 1.10 to 1.0 for any
fiscal quarter in which the 1998 Notes are rated investment grade. These
covenants are subject to certain exceptions and qualifications.
The 1998 Notes are general obligations of the Company and are subordinated
to all senior indebtedness of the Company (as defined in the 1998 Notes
Indenture). The 1998 Notes rank pari passu with all senior subordinated
indebtedness of the Company (including the Notes offered hereby) and rank
senior to subordinated indebtedness of the Company. As a result of the
restrictive covenants contained in the 1998 Notes Indenture and pursuant to
the Credit Agreement, holders of the 1998 Notes are secured, subject to the
subordination provisions contained in the Indenture, equally and ratably with
the holders of the Senior Indebtedness of the Company, by a lien on
substantially all of the assets of the Company. Such lien and security
interest is subject to release without prior notice to, or the consent of, the
holders of the 1998 Notes.
Upon a Change of Control Triggering Event (as defined in the 1998 Notes
Indenture), the Company will, subject to certain conditions, make an offer to
purchase all outstanding 1998 Notes at a purchase price of 101% of the
principal amount thereof plus accrued and unpaid interest to the redemption
date. The Credit Agreement imposes certain limitations on the purchase of the
1998 Notes upon a Change of Control Triggering Event.
RECEIVABLES PURCHASE AGREEMENT
Until November 1994, the Company sold retail notes from time to time to TRIP
pursuant to a Receivables Purchase Agreement with TRIP and a group of banks
(collectively, the "Purchasers"). TRIP in turn immediately resold such retail
notes to the Purchasers. This Receivables Purchase Agreement was terminated in
November 1994, when the Company started utilizing the ABCP Program. Each sale
of retail notes was made without recourse to the Company or TRIP, but the
Purchasers held back 10% to 12% of the purchase price to cover any losses on
such notes. Under the Receivables Purchase Agreement, the Company is
responsible for administering, servicing and collecting the retail notes sold
to the Purchasers. As of April 30, 1997, the Purchasers had a remaining
unrecovered net investment of approximately $19 million in retail notes, and
the holdback maintained by TRIP was approximately $9 million. The Company
anticipates repaying the Purchasers' unrecovered net investment of $15.8
million on or before June 30, 1997.
THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
The Old Notes were originally sold by the Company on May 30, 1997 to the
Initial Purchasers pursuant to the Purchase Agreement. The Initial Purchasers
subsequently placed the Old Notes with (i) qualified institutional buyers in
reliance on Rule 144A under the Securities Act, (ii) a limited number of
institutional accredited investors that agreed to comply with certain transfer
restrictions and other conditions and (iii) qualified buyers outside the
United States in reliance upon Regulation S under the Securities Act. As a
condition of the Purchase Agreement, the Company entered into the Registration
Rights Agreement with the Initial Purchasers pursuant to which the Company has
agreed, for the benefit of the holders of the Old Notes, at the Company's
cost, to use its best efforts to (i) file the Exchange Offer Registration
Statement within 60 days after the date of the original issue of the Old Notes
with the Commission with respect to the Exchange Offer for the Exchange Notes:
(ii) use its best efforts to cause the Exchange Offer Registration Statement
to be declared effective under the Securities Act within 150 days after the
date of the original issuance of the Old Notes and (iii) unless the Exchange
Offer would not be permitted by applicable law or Commission policy, commence
the Exchange Offer and use its best efforts to issue the Exchange Notes on or
prior to 180 days after the date of the original issuance of the Old Notes.
Upon the Exchange Offer Registration Statement being declared effective, the
Company will offer the Exchange Notes in exchange for surrender of the Old
Notes. The Company will keep the Exchange Offer open for not less than 30
business days (or longer if required by applicable law) after the date on
which notice of the Exchange Offer is mailed to the holders of the Old Notes.
For each Old Note surrendered to the Company pursuant to the Exchange Offer,
the holder of such Old Note will receive an Exchange Note having a principal
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amount equal to that of the surrendered Old Note. Interest on each Old Note
will accrue from the last interest payment date on which interest was paid on
the Old Note or, if no interest has been paid on such Old Note, from the date
of its original issue to, but not including, the issuance date of the Exchange
Notes. Interest on each Exchange Note will accrue from the date of its original
issue.
Under existing interpretations of the staff of the Commission contained in
several no-action letters to third parties, the Exchange Notes will in general
be freely tradeable after the Exchange Offer without further registration under
the Securities Act. However, any purchaser of Old Notes who is an "affiliate"
of the Company or who intends to participate in the Exchange Offer for the
purpose of distributing the Exchange Notes (other than a broker-dealer) (i)
will not be able to rely on the interpretation of the staff of the Commission,
(ii) will not be able to tender its Old Notes in the Exchange Offer and (iii)
must comply with the registration and prospectus delivery requirements of the
Securities Act in connection with any sale or transfer of the Old Notes, unless
such sale or transfer is made pursuant to an exemption from such requirements.
As contemplated by these no-action letters and the Registration Rights
Agreement, each holder accepting the Exchange Offer is required to represent to
the Company in the Letter of Transmittal that (i) the Exchange Notes are to be
acquired by the holder or the person receiving such Exchange Notes, whether or
not such person is the holder, in the ordinary course of business, (ii) the
holder or any such other person (other than a broker-dealer referred to in the
next sentence) is not engaging and does not intend to engage, in distribution
of the Exchange Notes, (iii) the holder or any such other person has no
arrangement or understanding with any person to participate in the distribution
of the Exchange Notes, (iv) neither the holder nor any such other person is an
"affiliate" of the Company within the meaning of Rule 405 under the Securities
Act, and (v) the holder or any such other person acknowledges that if such
holder or any other person participates in the Exchange Offer for the purpose
of distributing the Exchange Notes it must comply with the registration and
prospectus delivery requirements of the Securities Act in connection with any
resale of the Exchange Notes and cannot rely on those no-action letters. As
indicated above, each Participating Broker-Dealer that receives an Exchange
Note for its own account in exchange for Old Notes must acknowledge that it (i)
acquired the Old Notes for its own account as a result of market-making
activities or other trading activities, (ii) has not entered into any
arrangement or understanding with the Company or any "affiliate" of the Company
(within the meaning of Rule 405 under the Securities Act) to distribute the
Exchange Notes to be received in the Exchange Offer and (iii) will deliver a
prospectus meeting the requirements of the Securities Act in connection with
any resale of such Exchange Notes. For a description of the procedures for
resales by Participant Broker-Dealers, see "Plan of Distribution."
In the event that changes in the law or the applicable interpretations of the
staff of the Commission do not permit the Company to effect such an Exchange
Offer, or if for any other reason the Exchange Offer is commenced and not
consummated within 225 days of the date of the original issuance of the Old
Notes, the Company will (i) file the Shelf Registration Statement covering
resales of the Old Notes; (ii) use its reasonable best efforts to cause the
Shelf Registration Statement to be declared effective under the Securities Act
and (iii) use its reasonable best efforts to keep effective the Shelf
Registration Statement until the earlier of (i) two years after the date of the
original issuance of the Old Notes or (ii) such time as all of the applicable
Old Notes have been sold thereunder. The Company will, in the event of the
filing of the Shelf Registration Statement, provide to each applicable holder
of the Old Notes copies of the prospectus which is a part of the Shelf
Registration Statement, notify each such holder when the Shelf Registration
Statement has become effective and take certain other actions as are required
to permit unrestricted resale of the Old Notes. A holder of the Old Notes that
sells such Old Notes pursuant to the Shelf Registration Statement generally
will be required to be named as a selling security holder in the related
prospectus and to deliver a prospectus to purchasers, will be subject to
certain of the civil liability provisions under the Securities Act in
connection with such sales and will be bound by the provisions of the
Registration Rights Agreement which are applicable to such a holder (including
certain indemnification obligations). In addition, each holder of the Old Notes
will be required to deliver information to be used in connection with the Shelf
Registration Statement and to provide comments on the Shelf Registration
Statement within the time periods set forth in the Registration Rights
Agreement in order to have their Old Notes included in the Shelf Registration
Statement and to benefit from the provisions set forth in the following
paragraph.
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The Registration Rights Agreement provides that (i) the Company will file an
Exchange Offer Registration Statement with the Commission on or prior to 60
days after the date of the original issuance of the Old Notes with the
Commission, (ii) the Company will use its best efforts to have the Exchange
Offer Registration Statement declared effective by the Commission on or prior
to 150 days after the date of the original issuance of the Old Notes (iii)
unless the Exchange Offer would not be permitted by applicable law or
Commission policy, the Company will commence the Exchange Offer and use its
best efforts to issue on or prior to 180 days after the date of the original
issuance of the Old Notes, Exchange Notes in exchange for all Old Notes
tendered prior thereto in the Exchange Offer and (iv) if obligated to file the
Shelf Registration Statement, the Company will use its best efforts to file
the Shelf Registration Statement with the Commission in a timely fashion. If
(a) the Company fails to file any of the Registration Statements required by
the Registration Rights Agreement or before the date specified for such
filing, (b) any of such Registration Statements is not declared effective by
the Commission on or prior to the date specified for such effectiveness, or
(c) the Company fails to consummate the Exchange Offer within 180 days of the
date of the original issuance of the Old Notes, or (d) the Shelf Registration
Statement or the Exchange Offer Registration Statement is declared effective
but thereafter ceases to be effective or usable in connection with resales of
Transfer Restricted Securities during the period specified in the Registration
Rights Agreement (each such event referred to in clauses (a) through (d) above
a "Registration Default"), the sole remedy available to holders of the Old
Notes will be the immediate assessment of Additional Interest as follows: the
per annum interest rate on the Old Notes will increase by 0.25% and the per
annum interest rate will increase by an additional 0.25% for each subsequent
90-day period during which the Registration Default remains uncured, up to a
maximum additional interest rate of 1.0% per annum in excess of 9% per annum.
All Additional Interest will be payable to holders of the Old Notes in cash on
each June 1 and December 1, commencing with the first such date occurring
after any such Additional Interest commences to accrue, until such
Registration Default is cured. After the date on which such Registration
Default is cured, the interest rate on the Old Notes will revert to 9% per
annum.
Holders of Old Notes will be required to make certain representations to the
Company (as described in the Registration Rights Agreement) in order to
participate in the Exchange Offer and will be required to deliver information
to be used in connection with the Shelf Registration Statement and to provide
comments on the Shelf Registration Statement within the time periods set forth
in the Registration Rights Agreement in order to have their Old Notes included
in the Shelf Registration Statement and benefit from the provisions regarding
Additional Interest set forth above.
The summary herein of certain provisions of the Registration Rights
Agreement does not purport to be complete and is subject to, and is qualified
in its entirety by, all the provisions of the Registration Rights Agreement, a
copy of which is filed as an exhibit to the Exchange Offer Registration
Statement of which this Prospectus is a part.
Following the consummation of the Exchange Offer, holders of the Old Notes
who were eligible to participate in the Exchange Offer but who did not tender
their Old Notes will not have any further registration rights and such Old
Notes will continue to be subject to certain restrictions on transfer.
Accordingly, the liquidity of the market for such Old Notes could be adversely
affected.
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this Prospectus
and in the Letter of Transmittal, the Company will accept any and all Old
Notes validly tendered and not withdrawn prior to 5:00 p.m., New York City
time, on the Expiration Date. The Company will issue $1,000 principal amount
of Exchange Notes in exchange for each $1,000 principal amount of outstanding
Old Notes accepted in the Exchange Offer. Holders may tender some or all of
their Old Notes pursuant to the Exchange Offer. However, Old Notes may be
tendered only in integral multiples of $1,000.
The form and terms of the Exchange Notes are the same as the form and terms
of the Old Notes except that (i) the Exchange Notes bear a Series B
designation and a different CUSIP Number from the Old Notes, (ii) the Exchange
Notes have been registered under the Securities Act and hence will not bear
legends restricting the transfer thereof and (iii) the holders of the Exchange
Notes will not be entitled to certain rights under the
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Registration Rights Agreement, including the provisions providing for an
increase in the interest rate on the Old Notes in certain circumstances
relating to the timing of the Exchange Offer, all of which rights will
terminate when the Exchange Offer is terminated. The Exchange Notes will
evidence the same debt as the Old Notes and will be entitled to the benefits
of the Indenture.
As of the date of this Prospectus, $100,000,000 aggregate principal amount
of Old Notes were outstanding. The Company has fixed the close of business on
, 1997 as the record date for the Exchange Offer for purposes of
determining the persons to whom this Prospectus and the Letter of Transmittal
will be mailed initially.
Holders of Old Notes do not have any appraisal or dissenters' rights under
the General Corporation Law of Delaware, or the Indenture in connection with
the Exchange Offer. The Company intends to conduct the Exchange Offer in
accordance with the applicable requirements of the Exchange Act and the rules
and regulations of the Commission thereunder.
The Company shall be deemed to have accepted validly tendered Old Notes
when, as and if the Company has given oral or written notice thereof to the
Exchange Agent. The Exchange Agent will act as agent for the tendering holders
for the purpose of receiving the Exchange Notes from the Company.
If any tendered Old Notes are not accepted for exchange because of an
invalid tender, the occurrence of certain other events set forth herein or
otherwise, the certificates for any such unaccepted Old Notes will be
returned, without expense, to the tendering holder thereof as promptly as
practicable after the Expiration Date.
Holders who tender Old Notes in the Exchange Offer will not be required to
pay brokerage commissions or fees or, subject to the instructions in the
Letter of Transmittal, transfer taxes with respect to the exchange of Old
Notes pursuant to the Exchange Offer. The Company will pay all charges and
expenses, other than transfer taxes in certain circumstances, in connection
with the Exchange Offer. See "--Fees and Expenses."
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" shall mean 5:00 p.m., New York City time, on
1997, unless the Company, in its sole discretion, extends the
Exchange Offer, in which case the term "Expiration Date" shall mean the latest
date and time to which the Exchange Offer is extended.
In order to extend the Exchange Offer, the Company will notify the Exchange
Agent of any extension by oral or written notice and will mail to the
registered holders an announcement thereof, each prior to 9:00 a.m., New York
City time, on the next business day after the previously scheduled expiration
date.
The Company reserves the right, in its sole discretion, (i) to delay
accepting any Old Notes, to extend the Exchange Offer or to terminate the
Exchange Offer if any of the conditions set forth below under
"--Conditions" shall not have been satisfied, by giving oral or written notice
of such delay, extension or termination to the Exchange Agent or (ii) to amend
the terms of the Exchange Offer in any manner. Any such delay in acceptance,
extension, termination or amendment will be followed as promptly as
practicable by oral or written notice thereof to the registered holders.
INTEREST ON THE EXCHANGE NOTES
The Exchange Notes will bear interest from their date of issuance. Holders
of Old Notes that are accepted for exchange will receive accrued interest
thereon to, but not including, the date of issuance of the Exchange Notes.
Such interest will be paid with the first interest payment on the Exchange
Notes on December 1, 1997 to the persons who are registered holders of the
Exchange Notes on November 15, 1997. Interest on the Old Notes accepted for
exchange will cease to accrue upon issuance of the Exchange Notes.
Interest on the Exchange Notes is payable semi-annually on each June 1 and
December 1, commencing on December 1, 1997.
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PROCEDURES FOR TENDERING
Only a holder of Old Notes may tender such Old Notes in the Exchange Offer.
To tender in the Exchange Offer, a holder must complete, sign and date the
Letter of Transmittal, or a facsimile thereof, have the signatures thereon
guaranteed if required by the Letter of Transmittal or transmit an Agent's
Message in connection with a book-entry transfer, and mail or otherwise
deliver such Letter of Transmittal or such facsimile, or Agent's Message,
together with the Old Notes and any other required documents, to the Exchange
Agent prior to 5:00 p.m., New York City time, on the Expiration Date. To be
tendered effectively, the Old Notes, Letter of Transmittal or Agent's Message,
and other required documents must be completed and received by the Exchange
Agent at the address set forth below under "Exchange Agent" prior to 5:00
p.m., New York City time, on the Expiration Date. Delivery of the Old Notes
may be made by book-entry transfer in accordance with the procedures described
below. Confirmation of such book-entry transfer must be received by the
Exchange Agent prior to the Expiration Date.
The term "Agent's Message" means a message, transmitted by a book-entry
transfer facility to, and received by, the Exchange Agent forming a part of a
confirmation of a book-entry, which states that such book-entry transfer
facility has received an express acknowledgment from the participant in such
book-entry transfer facility tendering the Old Notes that such participant has
received and agrees: (i) to participate in the Automated Tender Option Program
("ATOP"); (ii) to be bound by the terms of the Letter of Transmittal; and
(iii) that the Company may enforce such agreement against such participant.
By executing the Letter of Transmittal or Agent's Message, each holder will
make to the Company the representations set forth above in the third paragraph
under the heading "--Purpose and Effect of the Exchange Offer."
The tender by a holder and the acceptance thereof by the Company will
constitute agreement between such holder and the Company in accordance with
the terms and subject to the conditions set forth herein and in the Letter of
Transmittal or Agent's Message.
THE METHOD OF DELIVERY OF OLD NOTES AND THE LETTER OF TRANSMITTAL OR AGENT'S
MESSAGE AND ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE
ELECTION AND SOLE RISK OF THE HOLDER. AS AN ALTERNATIVE TO DELIVERY BY MAIL,
HOLDERS MAY WISH TO CONSIDER OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES,
SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT
BEFORE THE EXPIRATION DATE. NO LETTER OF TRANSMITTAL OR OLD NOTES SHOULD BE
SENT TO THE COMPANY. HOLDERS MAY REQUEST THEIR RESPECTIVE BROKERS, DEALERS,
COMMERCIAL BANKS, TRUST COMPANIES OR NOMINEES TO EFFECT THE ABOVE TRANSACTIONS
FOR SUCH HOLDERS.
Any beneficial owner whose Old Notes are registered in the name of a broker,
dealer, commercial bank, trust company or other nominee and who wishes to
tender should contact the registered holder promptly and instruct such
registered holder to tender on such beneficial owner's behalf. See
"Instructions to Registered Holder and/or Book-Entry Transfer Facility
Participant from Beneficial Owner" included with the Letter of Transmittal.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the case
may be, must be guaranteed by an Eligible Institution (as defined below)
unless the Old Notes tendered pursuant thereto are tendered (i) by a
registered holder who has not completed the box entitled "Special Registration
Instructions" or "Special Delivery Instructions" on the Letter of Transmittal
or (ii) for the account of an Eligible Institution. In the event that
signatures on a Letter of Transmittal or a notice of withdrawal, as the case
may be, are required to be guaranteed, such guarantee must be by a member firm
of the Medallion System (an "Eligible Institution").
If the Letter of Transmittal is signed by a person other than the registered
holder of any Old Notes listed therein, such Old Notes must be endorsed or
accompanied by a properly completed bond power, signed by such registered
holder as such registered holder's name appears on such Old Notes with the
signature thereon guaranteed by an Eligible Institution.
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If the Letter of Transmittal or any Old Notes or bond powers are signed by
trustees, executors, administrators, guardians, attorneys-in-fact, offices of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and evidence satisfactory to the
Company of their authority to so act must be submitted with the Letter of
Transmittal.
The Company understands that the Exchange Agent will make a request promptly
after the date of this Prospectus to establish accounts with respect to the
Old Notes at the book-entry transfer facility, The Depository Trust Company
(the "Book-Entry Transfer Facility"), for the purpose of facilitating the
Exchange Offer, and subject to the establishment thereof, any financial
institution that is a participant in the Book-Entry Transfer Facility's system
may make book-entry delivery of Old Notes by causing such Book-Entry Transfer
Facility to transfer such Old Notes into the Exchange Agent's account with
respect to the Old Notes in accordance with the Book-Entry Transfer Facility's
procedures for such transfer. Although delivery of the Old Notes may be
effected through book-entry transfer into the Exchange Agent's account at the
Book-Entry Transfer Facility, unless an Agent's Message is received by the
Exchange Agent in compliance with ATOP, an appropriate Letter of Transmittal
properly completed and duly executed with any required signature guarantee and
all other required documents must in each case be transmitted to and received
or confirmed by the Exchange Agent at its address set forth below on or prior
to the Expiration Date, or, if the guaranteed delivery procedures described
below are complied with, within the time period provided under such
procedures. Delivery of documents to the Book-Entry Transfer Facility does not
constitute delivery to the Exchange Agent.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance of tendered Old Notes and withdrawal of tendered Old
Notes will be determined by the Company in its sole discretion, which
determination will be final and binding. The Company reserves the absolute
right to reject any and all Old Notes not properly tendered or any Old Notes
the Company's acceptance of which would, in the opinion of counsel for the
Company, be unlawful. The Company also reserves the right in their sole
discretion to waive any defects, irregularities or conditions of tender as to
particular Old Notes. The Company's interpretation of the terms and conditions
of the Exchange Offer (including the instructions in the Letter of
Transmittal) will be final and binding on all parties. Unless waived, any
defects or irregularities in connection with tenders of Old Notes must be
cured within such time as the Issuer shall determine. Although the Company
intends to notify holders of defects or irregularities with respect to tenders
of Old Notes, neither the Issuer, the Exchange Agent nor any other person
shall incur any liability for failure to give such notification. Tenders of
Old Notes will not be deemed to have been made until such defects or
irregularities have been cured or waived. Any Old Notes received by the
Exchange Agent that are not properly tendered and as to which the defects or
irregularities have not been cured or waived will be returned by the Exchange
Agent to the tendering holders, unless otherwise provided in the Letter of
Transmittal, as soon as practicable following the Expiration Date.
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Old Notes and (i) whose Old Notes are not
immediately available, (ii) who cannot deliver their Old Notes, the Letter of
Transmittal or any other required documents to the Exchange Agent or (iii) who
cannot complete the procedures for book-entry transfer, prior to the
Expiration Date, may effect a tender if:
(a) the tender is made through an Eligible Institution;
(b) prior to the Expiration Date, the Exchange Agent receives from such
Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery (by facsimile transmission, mail or hand delivery)
setting forth the name and address of the holder, the certificate number(s)
of such Old Notes and the principal amount of Old Notes tendered, stating
that the tender is being made thereby and guaranteeing that, within five
New York Stock Exchange trading days after the Expiration Date, the Letter
of Transmittal (or facsimile thereof) (or in the case of a book-entry
transfer, an Agent's Message) together with the certificate(s) representing
the Old Notes (or a confirmation of book-entry transfer of such Notes into
the Exchange Agent's account at the Book-Entry Transfer Facility), and any
other documents required by the Letter of Transmittal will be deposited by
the Eligible Institution with the Exchange Agent; and
(c) the certificate(s) representing all tendered Old Notes in proper form
for transfer (or a confirmation of book-entry transfer of such Old Notes
into the Exchange Agent's account at the Book-Entry Transfer
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Facility), together with a Letter of Transmittal (or facsimile thereof),
properly completed and duly executed, with any required signature
guarantees (or, in the case of a book-entry transfer, an Agent's Message)
and all other documents required by the Letter of Transmittal are received
by the Exchange Agent upon five New York Stock Exchange trading days after
the Expiration Date.
Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will be
sent to holders who wish to tender their Old Notes according to the guaranteed
delivery procedures set forth above.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Old Notes may be withdrawn
at any time prior to 5:00 p.m., New York City time, on the Expiration Date.
To withdraw a tender of Old Notes in the Exchange Offer, a telegram, telex,
letter or facsimile transmission notice of withdrawal must be received by the
Exchange Agent at its address set forth herein prior to 5:00 p.m., New York
City time, on the Expiration Date. Any such notice of withdrawal must (i)
specify the name of the person having deposited the Old Notes to be withdrawn
(the "Depositor"), (ii) identify the Old Notes to be withdrawn (including the
certificate number(s) and principal amount of such Old Notes, or, in the case
of Old Notes transferred by book-entry transfer, the name and number of the
account at the Book-Entry Transfer Facility to be credited), (iii) be signed
by the holder in the same manner as the original signature on the Letter of
Transmittal by which such Old Notes were tendered (including any required
signature guarantees) or be accompanied by documents of transfer sufficient to
have the Trustee with respect to the Old Notes register the transfer of such
Old Notes into the name of the person withdrawing the tender and (iv) specify
the name in which any such Old Notes are to be registered, if different from
that of the Depositor. All questions as to the validity, form and eligibility
(including time of receipt) of such notices will be determined by the Company,
whose determination shall be final and binding on all parties. Any Old Notes
so withdrawn will be deemed not to have been validly tendered for purposes of
the Exchange Offer and no Exchange Notes will be issued with respect thereto
unless the Old Notes so withdrawn are validly retendered. Any Old Notes which
have been tendered but which are not accepted for exchange will be returned to
the holder thereof without cost to such holder as soon as practicable after
withdrawal, rejection of tender or termination of the Exchange Offer. Properly
withdrawn Old Notes may be retendered by following one of the procedures
described above under "--Procedures for Tendering" at any time prior to the
Expiration Date.
CONDITIONS
Notwithstanding any other term of the Exchange Offer, the Company shall not
be required to accept for exchange, or exchange Exchange Notes for, any Old
Notes, and may terminate or amend the Exchange Offer as provided herein before
the acceptance of such Old Notes, if:
(a) any action or proceeding is instituted or threatened in any court or
by or before any governmental agency with respect to the Exchange Offer
which, in the sole judgment of the Company, might materially impair the
ability of the Company to proceed with the Exchange Offer or any material
adverse development has occurred in any existing action or proceeding with
respect to the Company or any of its subsidiaries; or
(b) any law, statute, rule, regulation or interpretation by the staff of
the Commission is proposed, adopted or enacted, which, in the sole judgment
of the Company, might materially impair the ability of the Company to
proceed with the Exchange Offer or materially impair the contemplated
benefits of the Exchange Offer to the Company; or
(c) any governmental approval has not been obtained, which approval the
Company shall, in its sole discretion, deem necessary for the consummation
of the Exchange Offer as contemplated hereby.
If the Company determines in its sole discretion that any of the conditions
are not satisfied, the Company may (i) refuse to accept any Old Notes and
return all tendered Old Notes to the tendering holders, (ii) extend the
Exchange Offer and retain all Old Notes tendered prior to the expiration of
the Exchange Offer, subject, however, to the rights of holders to withdraw
such Old Notes (see "--Withdrawal of Tenders") or (iii) waive such unsatisfied
conditions with respect to the Exchange Offer and accept all properly tendered
Old Notes which have not been withdrawn.
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EXCHANGE AGENT
The Fuji Bank and Trust Company has been appointed as Exchange Agent for the
Exchange Offer. Questions and requests for assistance, requests for additional
copies of this Prospectus or of the Letter of Transmittal and requests for
Notice of Guaranteed Delivery should be directed to the Exchange Agent
addressed as follows:
Overnight Courier:
By Mail: The Fuji Bank and Trust Company
The Fuji Bank and Trust Company Corporate Trust Department
Corporate Trust Department 2 World Trade Center
2 World Trade Center New York, New York 10048
New York, New York 10048 Attention: Thomas S. Moser
Attention: Thomas S. Moser
Facsimile Transmission:
By Hand: (212) 321-2468
The Fuji Bank and Trust Company
Corporate Trust Department
2 World Trade Center
New York, New York 10048
Attention: Thomas S. Moser
Confirm by Telephone:
(212) 898-2543
DELIVERY TO AN ADDRESS OTHER THAN SET FORTH ABOVE WILL NOT CONSTITUTE A
VALID DELIVERY.
FEES AND EXPENSES
The expenses of soliciting tenders will be borne by the Company. The
principal solicitation is being made by mail; however, additional solicitation
may be made by telegraph, telecopy, telephone or in person by officers and
regular employees of the Company and its affiliates.
The Company has not retained any dealer-manager in connection with the
Exchange Offer and will not make any payments to brokers, dealers, or others
soliciting acceptances of the Exchange Offer. The Company, however, will pay
the Exchange Agent reasonable and customary fees for its services and will
reimburse it for its reasonable out-of pocket expenses in connection
therewith.
The cash expenses to be incurred in connection with the Exchange Offer will
be paid by the Company. Such expenses include fees and expenses of the
Exchange Agent and Trustee, accounting and legal fees and printing costs,
among others.
ACCOUNTING TREATMENT
The Exchange Notes will be recorded at the same carrying value as the Old
Notes, which is face value, as reflected in the Company's accounting records
on the date of exchange. Accordingly, no gain or loss for accounting purposes
will be recognized by the Company. The expenses of the Exchange Offer will be
expensed over the term of the Exchange Notes.
CONSEQUENCES OF FAILURE TO EXCHANGE
The Old Notes that are not exchanged for Exchange Notes pursuant to the
Exchange Offer will remain restricted securities. Accordingly, such Old Notes
may be resold only (i) to the Company (upon redemption thereof or otherwise),
(ii) so long as the Old Notes are eligible for resale pursuant to Rule 144A,
to a person inside the United States whom the seller reasonably believes is a
qualified institutional buyer within the meaning of Rule 144A under the
Securities Act in a transaction meeting the requirements of Rule 144A, in
accordance
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with Rule 144 under the Securities Act, or pursuant to another exemption from
the registration requirements of the Securities Act (and based upon an opinion
of counsel reasonably acceptable to the Company), (iii) outside the United
States to a foreign person in a transaction meeting the requirements of Rule
904 under the Securities Act, or (iv) pursuant to an effective registration
statement under the Securities Act, in each case in accordance with any
applicable securities laws of any state of the United States.
RESALE OF THE EXCHANGE NOTES
With respect to resales of Exchange Notes, based on interpretations by the
staff of the Commission set forth in no-action letters issued to third
parties, the Company believes that a holder or other person who receives
Exchange Notes, whether or not such person is the holder (other than a person
that is an "affiliate" of the Company within the meaning of Rule 405 under the
Securities Act) who receives Exchange Notes in exchange for Old Notes in the
ordinary course of business and who is not participating, does not intend to
participate, and has no arrangement or understanding with any person to
participate, in the distribution of the Exchange Notes, will be allowed to
resell the Exchange Notes to the public without further registration under the
Securities Act and without delivering to the purchasers of the Exchange Notes
a prospectus that satisfies the requirements of Section 10 of the Securities
Act. However, if any holder acquires Exchange Notes in the Exchange Offer for
the purpose of distributing or participating in a distribution of the Exchange
Notes, such holder cannot rely on the position of the staff of the Commission
enunciated in such no-action letters or any similar interpretive letters, and
must comply with the registration and prospectus delivery requirements of the
Securities Act in connection with any resale transaction, unless an exemption
from registration is otherwise available. Further, each Participating Broker-
Dealer that receives Exchange Notes for its own account in exchange for Old
Notes, where such Old Notes were acquired by such Participating Broker-Dealer
as a result of market-making activities or other trading activities, must
acknowledge that it will deliver a prospectus in connection with any resale of
such Exchange Notes.
As contemplated by these no-action letters and the Registration Rights
Agreement, each holder accepting the Exchange Offer is required to represent
to the Company in the Letter of Transmittal that (i) the Exchange Notes are to
be acquired by the holder or the person receiving such Exchange Notes, whether
or not such person is the holder, in the ordinary course of business, (ii) the
holder or any such other person (other than a broker-dealer referred to in the
next sentence) is not engaging and does not intend to engage, in the
distribution of the Exchange Notes, (iii) the holder or any such other person
has no arrangement or understanding with any person to participate in the
distribution of the Exchange Notes, (iv) neither the holder nor any such other
person is an "affiliate" of the Company within the meaning of Rule 405 under
the Securities Act, and (v) the holder or any such other person acknowledges
that if such holder or other person participates in the Exchange Offer for the
purpose of distributing the Exchange Notes it must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any resale of the Exchange Notes and cannot rely on those no-
action letters. As indicated above, each Participating Broker-Dealer that
receives Exchange Notes for its own account in exchange for Old Notes must
acknowledge that it will deliver a prospectus in connection with any resale of
such Exchange Notes. For a description of the procedures for such resales by
Participating Broker-Dealers, see "Plan of Distribution."
DESCRIPTION OF THE NOTES
As used below in this "Description of the Notes" section, the "Company"
means Navistar Financial Corporation, but not any of its subsidiaries, unless
the context requires otherwise.
The Exchange Notes will be issued under an Indenture dated as of May 30,
1997 (the "Indenture") between the Company and The Fuji Bank and Trust
Company, as trustee (the "Trustee"). The terms of the Exchange Notes include
those stated in the Indenture and those made a part of the Indenture by
reference to the Trust Indenture Act of 1939, as amended, as in effect on the
date of the Indenture (the "TIA"). The form and terms of the Exchange Notes
are the same as the form and terms of the Old Notes (which they replace)
except that (i)
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the Exchange Notes bear a Series B designation, (ii) the issuance of the
Exchange Notes have been registered under the Securities Act and, therefore,
the Exchange Notes will not bear legends restricting the transfer thereof, and
(iii) the holders of Exchange Notes will not be entitled to certain rights
under the Registration Rights Agreement, including the provisions providing
for an increase in the interest rate on the Old Notes in certain circumstances
relating to the timing of the Exchange Offer, which rights will terminate when
the Exchange Offer is consummated. The Exchange Notes are subject to all such
terms, and holders of the Exchange Notes ("Holders") are referred to the
Indenture and the TIA for a statement of such terms. The following summary of
the material provisions of the Notes does not purport to be complete and is
subject to, and is qualified in its entirety by reference to the Notes and all
provisions of the Indenture, including the definitions therein of certain
terms and all terms made a part of the Indenture by reference to the TIA. A
copy of the Indenture has been filed as an exhibit to the Exchange Offer
Registration Statement of which this Prospectus forms a part. Certain
definitions of terms used in the following summary are set forth under "--
Certain Definitions" below. The Old Notes and the Exchange Notes are sometimes
referred to herein collectively as the "Notes."
GENERAL
The Notes will be general senior subordinated obligations of the Company,
will mature on June 1, 2002 (the "Maturity Date"), and will be limited to an
aggregate principal amount of $100,000,000. The Notes will be issued in
denominations of $1,000 and integral multiples thereof in fully registered
form. The Notes are exchangeable and transfers thereof will be registrable
without charge therefor, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge in connection
therewith.
The Notes will accrue interest at 9% per annum from the date of issuance
thereof (the "Closing Date"), or from the most recent interest payment date to
which interest has been paid or duly provided for, and accrued and unpaid
interest will be payable semi-annually on June 1 and December 1 of each year
beginning December 1, 1997. Interest will be paid to the Person in whose name
a Note is registered at the close of business on the May 15 or November 15
immediately preceding the relevant interest payment date. Interest will be
computed on the basis of a 360-day year of twelve full 30-day months and, for
periods of less than one month, the actual number of days elapsed. Interest on
overdue principal and (to the extent permitted by law) on overdue installments
of interest will accrue at a rate of 9% per annum.
Initially, the Trustee will act as paying agent and registrar of the Notes.
The Company may change any paying agent and registrar without notice.
SUBORDINATION AND RANKING
The Indebtedness evidenced by the Notes will be subordinated to the prior
payment when due of the principal of, and premium, if any, and accrued and
unpaid interest on, all existing and future Senior Indebtedness of the
Company. The Notes will rank pari passu with the 1998 Notes and with all
existing and future senior subordinated Indebtedness of the Company, and will
rank senior to all existing and future subordinated Indebtedness of the
Company (other than the 1998 Notes and other than Indebtedness of the Company
that is subordinated solely to Senior Indebtedness of the Company).
Anything in any Notes to the contrary notwithstanding, the Indebtedness
evidenced by the Notes shall be subordinate and junior in right of payment, in
all respects, to all Senior Indebtedness of the Company. Without limiting the
effect of the foregoing, "subordinate" and "junior" as used in the Indenture
shall include within their meanings the following:
(i) in the event of any insolvency or bankruptcy proceedings, and any
receivership, liquidation, reorganization or other similar proceedings in
connection therewith, relative to the Company or its creditors or its
property, and in the event of any proceedings for voluntary liquidation,
dissolution or other winding
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up of the Company, whether or not involving insolvency or bankruptcy
proceedings, then (A) all Senior Indebtedness of the Company shall first be
paid in full, or such payment be provided for, before any payment on
account of principal or interest is made upon the Indebtedness evidenced by
the Notes, and (B) in any such proceedings any payment or distribution of
any kind or character (including without limitation any distribution
realized from or attributable to any security interest of the Holders of
the Notes in property or assets of the Company), whether in cash or
property or securities which may be payable or deliverable in respect of
the Notes, shall be paid or delivered directly to the holders of such
Senior Indebtedness of the Company (or the representative or
representatives of such holders or the trustee or trustees under any
indenture under which any instruments evidencing any of such Senior
Indebtedness of the Company shall have been issued) for application in
payment thereof, unless and until such Senior Indebtedness of the Company
shall have been paid in full or such payment shall have been provided for;
provided that (1) in the event that payment or delivery of such cash,
property or securities to the Holders of the Notes is authorized by an
order or decree giving effect, and stating in such order or decree that
effect is given, to the subordination of the Notes to Senior Indebtedness
of the Company, and made by a court of competent jurisdiction in a
reorganization proceeding under any applicable law, no payment or delivery
of such cash, property or securities payable or deliverable with respect to
the Notes need be made to the holders of Senior Indebtedness of the
Company, (2) no such delivery need be made of securities which are issued
pursuant to voluntary reorganization, dissolution, or liquidation
proceedings by the Company or by the Company as reorganized, if such
securities are subordinate and junior to the payment of all Senior
Indebtedness of the Company then outstanding to the same extent as the
Notes and (3) if, pursuant to the foregoing, a payment or delivery of cash,
property or securities is to be made to the holders of Senior Indebtedness
of the Company (or their representative or representatives or the trustee
or trustees under any indenture under which any instruments evidencing any
such Senior Indebtedness of the Company shall have been issued) from a
distribution realized from or attributable to any security interest of the
Holders of the Notes in property or assets of the Company, such payment or
delivery shall be made (x) first, to the holders of any Senior Indebtedness
of the Company (or their representative or representatives) secured equally
and ratably with the Holders of the Notes with respect to such property or
assets or to the trustee or trustees under any indenture under which any
instruments evidencing any of such Senior Indebtedness of the Company shall
have been issued, ratably according to the aggregate amounts remaining
unpaid on account of such Senior Indebtedness of the Company held or
represented by each, until such Senior Indebtedness of the Company shall
have been paid in full or such payment shall have been provided for and (y)
then, to the extent such payment or delivery shall not be required to pay
the Senior Indebtedness of the Company referred to in the foregoing clause
(x), to the other holders of Senior Indebtedness of the Company (or their
representative or representatives or the trustee or trustees under any
indenture under which any instruments evidencing any of such Senior
Indebtedness of the Company shall have been issued), ratably according to
the aggregate amounts remaining unpaid on account of such Senior
Indebtedness of the Company held or represented by each, until such Senior
Indebtedness of the Company shall have been paid in full or such payment
shall have been provided for;
(ii) no payment or prepayment of any principal, premium (if any) or
interest on account of and no repurchase, redemption or other retirement
(whether at the option of the Holder or otherwise) of the Notes shall be
made, if at the time of such payment, prepayment, repurchase, redemption or
retirement, or immediately after giving effect thereto, there shall exist a
default in the payment or prepayment of any Senior Indebtedness of the
Company;
(iii) in the event that any Note is declared due and payable because of
the occurrence of an Event of Default (under circumstances when the
provisions of the foregoing clause (i) shall not be applicable), the
Holders of the Notes shall be entitled to payment only after there shall
first have been paid in full the Senior Indebtedness of the Company
outstanding at the time such Note so becomes due and payable because of
such Event of Default, or provision for such payment shall have been made;
and
(iv) in the event that (A) any of the events described in clauses (i),
(ii) and (iii) occurs and (B) notwithstanding the provisions therein, any
payment or distribution of assets of the Company of any kind or character
(including any distribution realized from or attributable to any security
interest of the Holders of
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the Notes in property or assets of the Company), whether in cash, property
or securities, shall be received by the Holders of the Notes (or their
representative or representatives or the Trustee under the Indenture)
before all Senior Indebtedness of the Company shall have been paid in full,
or provision made for such payment in accordance with the terms of the
Senior Indebtedness of the Company, except as provided in subclauses (1)
and (2) of the proviso to clause (i) above, such payment or distribution
shall be held in trust for the benefit of, and shall be paid over or
delivered to, the holders of such Senior Indebtedness of the Company (or
their representative or representatives or to the trustee or trustees under
any indenture pursuant to which any instruments evidencing any of such
Senior Indebtedness of the Company shall have been issued), as their
respective interests may appear under said clauses (i), (ii) and (iii), for
application to the payment of all such Senior Indebtedness of the Company
remaining unpaid to the extent necessary to pay such Senior Indebtedness of
the Company in full in accordance with its terms, after giving effect to
any concurrent payment or distribution to the holders of such Senior
Indebtedness of the Company.
No present or future holder of Senior Indebtedness of the Company shall be
prejudiced in his right to enforce subordination of the Notes by any act or
failure to act on the part of the Company.
These provisions are solely for the purpose of defining the relative rights
of the holders of Senior Indebtedness of the Company on the one hand, and the
Holders of the Notes on the other hand, and nothing in the Indenture shall
impair, as between the Company and the Holder of any Note, the obligation of
the Company, which is unconditional and absolute, to pay to the Holder thereof
the principal, premium, if any, and interest thereon in accordance with its
terms, nor shall anything in the Indenture prevent the Holder of a Note from
exercising all remedies otherwise permitted by applicable law or under the
Indenture or any Note upon default under the Indenture or any Note, subject to
the rights, if any, under the subordination provisions in the Indenture of
holders of Senior Indebtedness of the Company to receive cash, property or
securities otherwise payable or deliverable to the Holders of the Notes.
If the Company fails to make any payment on the Notes when due or within any
applicable grace period, whether or not such failure is on account of the
subordination provisions referred to above, such failure would constitute an
Event of Default under the Indenture and would enable the Holders to
accelerate the maturity of the Notes. See "--Events of Default."
By reason of such subordination, in the event of liquidation or insolvency,
creditors of the Company who are not holders of Senior Indebtedness of the
Company (other than the Holders or other equally subordinated obligations) may
recover less, ratably, than the holders of Senior Indebtedness of the Company
and may recover more, ratably, than the Holders of the Notes.
At April 30, 1997, the Company had approximately $1,112.8 million of
obligations outstanding which would constitute Senior Indebtedness of the
Company. Although the Indenture will restrict, but not prohibit, the
incurrence of Senior Indebtedness of the Company and other Indebtedness by the
Company and its Subsidiaries, the incurrence of significant amounts of
additional Indebtedness could have an adverse impact on the Company's ability
to service its Indebtedness, including the Notes. Moreover, the Indenture does
not impose any limitation on the incurrence by the Company or by any
Subsidiary of the Company of liabilities that are not Indebtedness under the
Indenture.
At April 30, 1997, after giving effect to the consummation of the Initial
Offering and the application of the estimated net proceeds therefrom as set
forth under "Use of Proceeds," there will be approximately $94.0 million of
Indebtedness of the Company which would be pari passu with the Notes and there
is no indebtedness subordinated to the Notes.
The Notes are effectively subordinated to all existing and future
liabilities (including liabilities owed to trade creditors) of the
Subsidiaries of the Company to the extent of the assets of each Subsidiary of
the Company. Any right of the Company to participate in any distribution of
the assets of its Subsidiaries upon the liquidation, reorganization or
insolvency thereof (and the consequent right of the Holders to benefit from
those assets) will
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be subject to the claims of creditors (including trade creditors) of such
Subsidiary, except to the extent that claims of the Company itself as a
creditor of such Subsidiary may be recognized, in which case the claims of the
Company would still be subordinate to any security interest in the assets of
such Subsidiary and any Indebtedness of such Subsidiary senior to that held by
the Company.
At the date of this Prospectus, the Notes would be solely the obligation of
the Company, and no Subsidiary of the Company would be obligated to the
Holders or obligated or required to pay any amounts due pursuant to the Notes
or make funds available therefor in the form of dividends or advances to the
Company. At April 30, 1997, the Subsidiaries of the Company had other
liabilities under generally accepted accounting principles (including trade
payables) to third parties of approximately $11.4 million. Such Indebtedness
includes various obligations not reported in the capitalization of the
Company, primarily current liabilities (other than short-term debt).
SINKING FUND
The Notes are not subject to any mandatory sinking fund.
CHANGE OF CONTROL
Upon the occurrence of a Change of Control Triggering Event (the date of
each such occurrence being the "Change of Control Date"), the Company will
notify the Holders in writing of such occurrence and will make an offer to
purchase (the "Change of Control Offer"), on a Business Day (the "Change of
Control Payment Date") not earlier than 30 nor later than 60 days following
the date notification of the Change of Control Triggering Event is first
given, all Notes then outstanding at a purchase price equal to 101% of the
principal amount thereof, plus accrued and unpaid interest, if any, to such
Change of Control Payment Date. Notice of a Change of Control Triggering Event
will be mailed by the Company to the Holders not more than 30 days after any
Change of Control Date.
None of the provisions relating to a purchase upon a Change of Control
Triggering Event are waivable by the Board of Directors of the Company. The
Company could, in the future, enter into certain transactions, including
certain recapitalizations of the Company, that would not constitute a Change
of Control Triggering Event with respect to the Change of Control purchase
feature of the Notes, but would increase the amount of Indebtedness
outstanding at such time. If a Change of Control Triggering Event were to
occur, there can be no assurance that the Company would have sufficient funds
to pay the redemption price for all Notes that the Company is required to
redeem. In the event that the Company were required to purchase outstanding
Notes pursuant to a Change of Control Offer, the Company expects that it would
need to seek third-party financing to the extent it does not have available
funds to meet its purchase obligations. However, there can be no assurance
that the Company would be able to obtain such financing.
With respect to the disposition of property or assets, the phrase "all or
substantially all" as used in the Indenture (including as set forth under "--
Merger, Consolidation, Etc." below) varies according to the facts and
circumstances of the subject transaction, has no clearly established meaning
under New York law (which governs the Indenture) and is subject to judicial
interpretation. Accordingly, in certain circumstances there may be a degree of
uncertainty in ascertaining whether a particular transaction would involve a
disposition of "all or substantially all" of the property or assets of a
Person and therefore it may be unclear as to whether a Change of Control has
occurred and whether the Holders are subject to a Change of Control Offer.
The Company would be required to obtain a consent from the lenders under the
present terms of the Credit Agreement to incur any Indebtedness to repurchase
outstanding Notes pursuant to a Change of Control Offer and to make payments
to the Holders pursuant to such Change of Control Offer. In addition, the
Company's ability to repurchase Notes may be limited by other then-existing
borrowing agreements. There can be no assurance that the Company will be able
to obtain such a consent or a waiver of such limitations. A Change of Control
Triggering Event would result in an event of default under the Credit
Agreement and permit the holders
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of the Indebtedness of the Company thereunder to declare all amounts
outstanding thereunder to be immediately due and payable, and the rights of
the Holders to receive the Change of Control purchase price for the Notes or
any other amount due on the Notes would be subordinated to the rights of the
holders of Senior Indebtedness of the Company in the manner set forth in the
Indenture. See "--Subordination and Ranking" and "--Events of Default."
If an offer is made to redeem Notes as a result of a Change of Control
Triggering Event, the Company will comply with all tender offer rules under
state and Federal securities laws, including, but not limited to, Section
14(e) under the Exchange Act and Rule 14e-1 thereunder, to the extent
applicable to such offer.
The Change of Control redemption feature of the Notes may in certain
circumstances make more difficult or discourage a takeover of Navistar,
Transportation or the Company and, thus, the removal of incumbent management.
CERTAIN COVENANTS
The Indenture will contain, among others, the following covenants:
Limitation on Indebtedness. (a) The Company will not, and the Company will
not cause or permit any of its Subsidiaries to, incur or otherwise become or
be liable in respect of any Indebtedness (including, without limitation,
Acquired Indebtedness) other than:
(1) Senior Indebtedness of the Company and Indebtedness of Subsidiaries
of the Company, provided that the aggregate outstanding principal amount of
the sum of Senior Indebtedness of the Company plus Indebtedness of
Subsidiaries of the Company shall not at any time exceed 500% of the sum of
the aggregate outstanding principal amount of Subordinated Indebtedness
plus Consolidated Tangible Net Worth, except that such 500% shall be
increased to 525% of such sum during any part or all of any three
consecutive calendar months immediately succeeding six consecutive calendar
months during which such aggregate outstanding principal amount has not
exceeded 500% of such sum;
(2) Subordinated Indebtedness of the Company, provided that the aggregate
outstanding principal amount thereof shall not at the time of incurrence
exceed 100% of Consolidated Tangible Net Worth; and
(3) Indebtedness between the Company and any of its Subsidiaries and
Indebtedness between Subsidiaries of the Company so long as held by the
Company or any Subsidiary of the Company.
(b) Notwithstanding anything in the Indenture to the contrary, the
consummation of any Qualified Securitization Transaction shall not be deemed
to be the incurrence or maintenance of Indebtedness by the Company or by any
Subsidiary of the Company.
Maintenance of Consolidated Fixed Charge Coverage Ratio. The Company will
not permit its Consolidated Fixed Charge Coverage Ratio as of the end of any
of its fiscal quarters to be less than 1.25 to 1.0, provided that such ratio
shall be 1.10 to 1.0 for any fiscal quarter in which the Notes are rated
Investment Grade by both Rating Agencies on the last day of such fiscal
quarter.
Limitation on Senior Subordinated Indebtedness. The Company will not, and
the Company will not cause or permit any Subsidiary Guarantor to, directly or
indirectly, in any event incur any (a) Indebtedness that purports to be by its
terms (or by the terms of any agreement governing such Indebtedness) both
subordinate to any other Indebtedness of the Company or of such Subsidiary
Guarantor, as the case may be, and senior or superior in any right of payment
or interest to the Notes or the Subsidiary Guarantees, as the case may be, or
(b) Indebtedness which by its terms (or by the terms of any agreement
governing such Indebtedness) is subordinated to any other Indebtedness of the
Company or of such Subsidiary Guarantor, as the case may be (other than
Indebtedness of the Company or of such Subsidiary Guarantor, as the case may
be (including the Notes or the Subsidiary Guarantees, as the case may be),
that is subordinated solely to Senior Indebtedness of the Company or Guarantor
Senior Indebtedness of such Subsidiary Guarantor), unless such Indebtedness is
also by its terms (or by the terms of any agreement governing such
Indebtedness) made expressly subordinate to the Notes or the Subsidiary
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Guarantees, as the case may be, to the same extent and in the same manner as
such Indebtedness is subordinated pursuant to subordination provisions that
are most favorable to the holders of any other Indebtedness of the Company or
of such Subsidiary Guarantor, as the case may be.
Limitation on Liens. The Company will not, and will not cause or permit any
of its Subsidiaries to, create, incur, assume or suffer to exist any Liens
upon any of their respective properties or assets (including, without
limitation, any asset in the form of the right to receive payments, fees or
other consideration or benefits) whether owned on the Issue Date or acquired
after the Issue Date, other than (i) Liens granted by the Company on property
or assets of the Company securing Senior Indebtedness of the Company that is
permitted by the Indenture, provided that the Notes are secured equally and
ratably with such Senior Indebtedness subject to the provisions set forth
under "--Subordination and Ranking" above; (ii) Liens granted by the Company
on property or assets of the Company securing Indebtedness of the Company that
is permitted by the Indenture and that is pari passu with the Notes, provided
that the Notes are secured on an equal and ratable basis with such Liens;
(iii) Liens granted by the Company on property or assets of the Company
securing Indebtedness of the Company that is permitted by the Indenture and
that is subordinated to the Notes, provided that the Notes are secured by
Liens ranking prior to such Liens; (iv) Liens existing on the Issue Date
immediately after giving effect to the consummation of the offering of the
Notes and the application of the net proceeds therefrom as set forth under
"Use of Proceeds" above to the extent and in the manner such Liens are in
effect on the Issue Date, provided that the Notes are secured equally and
ratably with the Indebtedness of the Company outstanding under the Credit
Agreement subject to the provisions set forth under "--Subordination and
Ranking" above; (v) Permitted Liens; (vi) Liens in respect of Acquired
Indebtedness permitted by the Indenture, provided that the Liens in respect of
such Acquired Indebtedness secured such Acquired Indebtedness at the time of
the incurrence of such Acquired Indebtedness by the Company and such Liens and
the Acquired Indebtedness were not incurred by the Company or by the Person
being acquired or from whom the assets were acquired in connection with, or in
anticipation of, the incurrence of such Acquired Indebtedness by the Company,
and provided, further that such Liens in respect of such Acquired Indebtedness
do not extend to or cover any property or assets of the Company or of any
Subsidiary of the Company other than the property or assets that secured the
Acquired Indebtedness prior to the time such Indebtedness became Acquired
Indebtedness of the Company; (vii) Liens granted by the Company or any
Subsidiary of the Company on property or assets of the Company or such
Subsidiary securing other Indebtedness permitted by the Indenture not to
exceed $2,000,000 in the aggregate; (viii) Liens granted in connection with
any Qualified Securitization Transaction; (ix) Liens arising from claims of
holders of Indebtedness against funds held in a defeasance trust for the
benefit of such holders; and (x) Liens granted by any Subsidiary of the
Company on property or assets of such Subsidiary securing Indebtedness of such
Subsidiary that is permitted by the Indenture; provided that the Company shall
cause any Subsidiary Guarantor that incurs such secured Indebtedness to secure
equally and ratably and on a parity with the Indebtedness of such Subsidiary
that is so secured such Subsidiary Guarantor's Subsidiary Guarantee.
Limitation on Payment Restrictions Affecting Subsidiaries. The Company will
not, and will not cause or permit any of its Subsidiaries to, directly or
indirectly, create or suffer to exist or allow to become effective any
consensual encumbrance or restriction of any kind on the ability of any such
Subsidiary to (i) pay dividends, in cash or otherwise, or make other payments
or distributions on its Capital Stock or any other equity interest or
participation in, or measured by, its profits, owned by the Company or by any
Subsidiary of the Company, or make payments on any Indebtedness owed to the
Company or to any Subsidiary of the Company; (ii) make loans or advances to
the Company or to any Subsidiary of the Company; or (iii) transfer any of
their respective property or assets to the Company or to any Subsidiary of the
Company, except for such encumbrances or restrictions existing under or by
reason of (A) applicable law or regulations; (B) customary provisions
restricting subletting or assignment of any lease governing a leasehold
interest of any Subsidiary of the Company; or (C) Indebtedness or any other
contractual requirements (including pursuant to any corporate governance
documents in the nature of a charter or by-laws) of a Securitization
Subsidiary arising in connection with a Qualified Securitization Transaction,
provided that any such encumbrances and restrictions apply only to such
Securitization Subsidiary.
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Limitation on Transactions with Affiliates. The Company will not, nor will
the Company cause or permit any of its Subsidiaries to (a) sell, lease,
transfer or otherwise dispose of any of its property or assets to, (b)
purchase any property or assets from, (c) make any Investment in, or (d) enter
into or amend or extend any contract, agreement or understanding with or for
the benefit of, any Affiliate of the Company or of any Subsidiary (an
"Affiliate Transaction"), other than Affiliate Transactions that are on terms
that are fair and reasonable to the Company or such Subsidiary of the Company
and that are no less favorable to the Company or such Subsidiary of the
Company than those that could be obtained in a comparable arm's length
transaction by the Company or such Subsidiary of the Company from an
unaffiliated party, provided that if the Company or any Subsidiary of the
Company enters into an Affiliate Transaction or series of Affiliate
Transactions involving or having an aggregate value of more than $10,000,000,
a majority of the Board of Directors of the Company shall, prior to the
consummation of such Affiliate Transaction, have determined in the reasonable
good faith judgment of such directors that such Affiliate Transaction meets
the foregoing standard. The foregoing restrictions shall not apply to (a) any
transaction between Wholly Owned Subsidiaries of the Company, or between the
Company and any Wholly Owned Subsidiary of the Company if such transaction is
not otherwise prohibited by the terms of the Indenture, (b) transactions
entered into pursuant to the terms of the Master Intercompany Agreement and
the Tax Allocation Agreement, (c) transactions entered into in the ordinary
course of business and (d) Qualified Securitization Transactions.
Limitation on Guarantees by Subsidiaries. The Company shall not cause or
permit any of its Subsidiaries, directly or indirectly, to guarantee the
payment of any Indebtedness of the Company or of any Subsidiary of the Company
unless such Subsidiary of the Company simultaneously executes and delivers a
supplemental indenture to the Indenture providing for the guarantee of payment
of the Notes by such Subsidiary of the Company and if any such guarantee is
given to any holders of Senior Indebtedness of the Company, such Subsidiary
Guarantor's Subsidiary Guarantee will be subordinated to Guarantor Senior
Indebtedness to the same extent and in the same manner as the Notes are
subordinated to Senior Indebtedness of the Company under the Indenture,
provided that no such guarantee of such other Indebtedness shall be permitted
by this provision unless (A) such guarantee of such other Indebtedness (1) is
unsecured, unless the Subsidiary Guarantee of such Subsidiary Guarantor is (I)
with respect to such Subsidiary Guarantor's guarantee of Senior Indebtedness
of the Company, secured equally and ratably with any Liens securing such
Subsidiary Guarantor's guarantee of such Senior Indebtedness, subject to the
provisions set forth under "--Subordination and Ranking" above, (II) with
respect to such Subsidiary Guarantor's guarantee of Indebtedness of the
Company ranking pari passu with the Notes, secured equally and ratably with
the Liens securing such Subsidiary Guarantor's guarantee of such pari passu
Indebtedness and (III) with respect to such Subsidiary Guarantor's guarantee
of Indebtedness of the Company that is subordinated to the Notes, secured on a
basis ranking prior to the Liens securing such Subsidiary Guarantor's
guarantee of such subordinated Indebtedness, (2) other than any guarantee by
such Subsidiary Guarantor of Senior Indebtedness of the Company incurred in
accordance with the Indenture, is not and does not purport to be senior or
superior in right of payment or otherwise to the Subsidiary Guarantee of such
Subsidiary Guarantor and (3) if such guarantee of such other Indebtedness is
of Indebtedness of the Company that is subordinated or junior to the Notes
(whether pursuant to its terms or by operation of law), is subordinated,
pursuant to a written agreement, to the Subsidiary Guarantee of such
Subsidiary Guarantor at least to the same extent and in the same manner as the
Subsidiary Guarantee of such Subsidiary Guarantor is (or would be if no
Guarantor Senior Indebtedness is then outstanding) subordinated to Guarantor
Senior Indebtedness, (B) the Subsidiary Guarantee of such Subsidiary Guarantor
is not subordinated or junior to any Indebtedness of such Subsidiary Guarantor
other than Guarantor Senior Indebtedness of such Subsidiary Guarantor and (C)
such Subsidiary of the Company waives, and agrees that it will not in any
manner whatsoever claim or take the benefit or advantage of, any rights of
reimbursement, indemnity or subrogation or any other rights against the
Company or any other Subsidiary of the Company as a result of any payment by
such Subsidiary of the Company under its Subsidiary Guarantee. Notwithstanding
the foregoing, any Subsidiary Guarantee shall provide by its terms that it
shall be automatically and unconditionally released and discharged upon either
(A) the unconditional release or discharge of such Subsidiary's guarantees of
all other Indebtedness of the Company (other than a release resulting from
payment under such Subsidiary's guarantees) or (B) any sale, exchange or
transfer, to any Person not an Affiliate of the Company, of all (but not less
than all) of the Capital Stock of such Subsidiary of the Company, or all or
substantially all of the assets of
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such Subsidiary of the Company, pursuant to a transaction which is in
compliance with all of the terms of the Indenture.
Limitation on Termination of Master Intercompany Agreement. The Company
shall not amend, modify, rescind, terminate or waive any of the provisions of
Article II.A.1 of the Master Intercompany Agreement (except to remove obsolete
references therein the removal of which would not be adverse to the Company)
or effect any other amendment of the Master Intercompany Agreement which would
materially and adversely affect the Company.
REPORTS
So long as any Note is outstanding, the Company will file with the
Commission and, within 15 days after it files them with the Commission, file
with the Trustee and mail or cause the Trustee to mail to the Holders at their
addresses as set forth in the register of the Notes copies of the annual
reports and of the information, documents and other reports which the Company
is required to file with the Commission pursuant to Section 13 or 15(d) of the
Exchange Act or which the Company would be required to file with the
Commission if the Company then had a class of securities registered under the
Exchange Act. In addition, the Company shall cause its annual report to
stockholder and any quarterly or other financial reports furnished to its
stockholder generally to be filed with the Trustee and mailed, no later than
the date such materials are mailed or made available to the Company's
stockholder, to the Holders at their addresses as set forth in the register of
Notes.
MERGER, CONSOLIDATION, ETC.
The Company will not, in a single transaction or series of related
transactions, consolidate or merge with or into, or sell, assign, transfer,
lease, convey or otherwise dispose of (and the Company will not cause or
permit any of its Subsidiaries to sell, assign, transfer, lease, convey or
otherwise dispose of) all or substantially all of the Company's and its
Subsidiaries' assets (determined on a consolidated basis for the Company and
its Subsidiaries) to, any Person or adopt a Plan of Liquidation unless: (i)
either (1) the Company shall be the surviving or continuing corporation or (2)
the Person (if other than the Company) formed by such consolidation or into
which the Company is merged or the Person which acquires by conveyance,
transfer or lease the properties and assets of the Company and its
Subsidiaries substantially as an entirety or in the case of a Plan of
Liquidation, or Person to which assets of the Company and its Subsidiaries
have been transferred (x) shall be a corporation organized and validly
existing under the laws of the United States or any State thereof or the
District of Columbia and (y) shall expressly assume, by supplemental indenture
(in form and substance satisfactory to the Trustee), executed and delivered to
the Trustee, the due and punctual payment of the principal of, and premium, if
any, and interest on all of the Notes and the performance of every covenant of
the Notes and the Indenture on the part of the Company to be performed or
observed; (ii) immediately after giving effect to such transaction and the
assumption contemplated by clause (i)(2)(y) above (including giving effect to
any Indebtedness and Acquired Indebtedness incurred or anticipated to be
incurred in connection with or in respect of such transaction), the Company
(in the case of clause (1) of the foregoing clause (i)) or such Person (in the
case of clause (2) thereof) shall have a Consolidated Tangible Net Worth
(immediately after the transaction but prior to any purchase accounting
adjustments relating to such transaction) equal to or greater than the
Consolidated Tangible Net Worth of the Company immediately prior to such
transaction; (iii) immediately before and after giving effect to such
transaction and the assumption contemplated by clause (i)(2)(y) above
(including giving effect to any Indebtedness and Acquired Indebtedness
incurred or anticipated to be incurred in connection with or in respect of the
transaction) no Default and no Event of Default shall have occurred or be
continuing; (iv) the Company or such Person shall have delivered to the
Trustee (A) an Officers' Certificate and an Opinion of Counsel, each stating
that such consolidation, merger, conveyance, transfer or lease or Plan of
Liquidation and, if a supplemental indenture is required in connection with
such transaction, such supplemental indenture, comply with this provision of
the Indenture and that all conditions precedent in the Indenture relating to
such transaction have been satisfied and (B) a certificate from the Company's
independent certified public accountants stating that the Company has made the
calculations required by clause (ii) above in accordance with the terms of
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the Indenture; and (v) each Subsidiary Guarantor, unless it is the other party
to the transaction, shall have by supplemental indenture confirmed that its
Subsidiary Guarantee shall apply, without alteration or amendment and in every
identical respect as its Subsidiary Guarantee applies on the date it was
granted under the Indenture to the obligations of the Company under the
Indenture and the Notes, to the obligations of the Company or such Person, as
the case may be, under the Indenture and the Notes after the consummation of
such transaction of the Company. Notwithstanding the foregoing, (x) a Wholly
Owned Subsidiary of the Company may consolidate with, or merge with or into,
or sell, assign, transfer, lease, convey or otherwise dispose of all or
substantially all of its assets to, the Company or another Wholly Owned
Subsidiary of the Company without complying with clause (ii) of the above and
(y) a series of transactions involving the sale of Receivables or interests
therein by the Company or a Securitization Subsidiary in connection with a
Qualified Securitization Transaction shall not be deemed to be the sale of all
or substantially all of the Company's assets to the extent such transactions
are consummated in the ordinary course of business.
For purposes of the foregoing, the transfer (by lease, assignment, sale or
otherwise, in a single transaction or series of transactions) of all or
substantially all of the properties or assets of one or more Subsidiaries of
the Company, the Capital Stock of which constitutes all or substantially all
of the properties and assets of the Company, shall be deemed to be the
transfer of all or substantially all of the properties and assets of the
Company.
Upon any such consolidation, merger, conveyance, lease or transfer in
accordance with the foregoing, the successor Person formed by such
consolidation or into which the Company is merged or to which such conveyance,
lease or transfer is made will succeed to, and be substituted for, and may
exercise every right and power of, the Company under the Indenture with the
same effect as if such successor had been named as the Company therein, and
thereafter (except in the case of a sale, assignment, transfer, lease,
conveyance or other disposition) the predecessor corporation will be relieved
of all further obligations and covenants under the Indenture and the Notes.
Each Subsidiary Guarantor, if any (other than any Subsidiary Guarantor whose
Subsidiary Guarantee is to be released in accordance with the terms of the
Subsidiary Guarantee and the Indenture in connection with any such
transaction), shall not, and the Company will not cause or permit any
Subsidiary Guarantor to, consolidate with or merge with or into any Person
unless (i) either (1) such Subsidiary Guarantor shall be the continuing or
surviving corporation or (2) the entity (if other than such Subsidiary
Guarantor) formed by such consolidation or into which such Subsidiary
Guarantor is merged shall be a corporation organized and validly existing
under the laws of the United States or any State thereof or the District of
Columbia and shall expressly assume, by a supplemental indenture executed and
delivered to the Trustee and satisfactory to the Trustee, all of the
obligations of such Subsidiary Guarantor under the Notes and the Indenture;
(ii) immediately before and immediately after giving effect to such
transaction and all other transactions occurring as a result of or in
connection therewith (including, without limitation, the incurrence of any
Indebtedness or Acquired Indebtedness or the granting of any Lien), no Default
or Event of Default shall have occurred and be continuing; and (iii) the
Company shall have delivered to the Trustee an Officers' Certificate and an
Opinion of Counsel each stating that such consolidation or merger and such
supplemental indenture comply with the Indenture. The foregoing provisions of
this paragraph shall not be deemed to be a qualification or a limitation of
any of the provisions of the first paragraph of this "--Merger, Consolidation,
Etc." section.
SECURITY
The Notes are not independently entitled to security. However, as a result
of the provisions of "--Certain Covenants--Limitation on Liens" discussed
above and pursuant to the terms of the Credit Agreement, the principal of and
interest on the Notes initially will be secured, subject to the subordination
provisions contained in the Indenture, equally and ratably with the principal
of and interest on the 1998 Notes and with the indebtedness owing under the
Credit Agreement and certain other obligations of the Company, by a lien on
substantially all of the assets of the Company and the proceeds thereof. The
lien on such assets or proceeds in favor of the Notes will terminate,
automatically and without prior notice, however, in the event the lenders
under
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the Credit Agreement release their lien thereon. The lenders under the Credit
Agreement may amend the coverage or other terms of the Credit Agreement
relating to the lien without the consent of the Holders of the Notes.
Any payments or proceeds realized or to be realized by the Holders of the
Notes from any collateral securing the principal of and interest on the Notes
will be subject fully to the subordination provisions contained in the
Indenture. See "--Subordination and Ranking." In the event that payments of
principal of and interest on the Notes are subordinated to payments on Senior
Indebtedness of the Company, any payments or proceeds otherwise payable to the
Holders of Notes out of the collateral therefor instead shall, in accordance
with the subordination provisions of the Indenture, be applied, first, ratably
to all Senior Indebtedness of the Company that is secured equally and ratably
by such collateral, until such Indebtedness is paid in full; second, ratably
to all unsecured Senior Indebtedness of the Company, until such Indebtedness
is paid in full; and third, to the extent then available, ratably to the
principal of and interest on the Notes and any other subordinated Indebtedness
that is secured by such collateral (including the 1998 Notes). In addition,
liens, if any, filed with respect to the collateral before the issuance of the
Notes may result in a reduction in the proceeds realized from collateral
shared by the private lenders under the Credit Agreement, the Holders of the
Notes and the holders of the Company's 1998 Notes, as described above.
EVENTS OF DEFAULT
The following are Events of Default under the Indenture:
(a) default in the payment of principal of, or premium, if any, on the
Notes when due at maturity, upon repurchase, upon acceleration or
otherwise, including, without limitation, failure of the Company to
repurchase the Notes on the date required following a Change of Control
Triggering Event, whether or not any such payment is prohibited by the
provisions described under "--Subordination and Ranking" above; or
(b) default in the payment of any installment of interest on the Notes
when due and continuance of such Default for 30 days or more, whether or
not such payment is prohibited by the provisions described under "--
Subordination and Ranking" above; or
(c) the Company fails to comply with the covenant described under
"Maintenance of Consolidated Fixed Charge Coverage Ratio" above and such
failure continues for 30 days or more, or fails to observe, perform or
comply with any of the provisions described under "--Merger, Consolidation,
Etc." above; or
(d) default (other than a default set forth in clauses (a), (b) and (c)
above) in the performance of, or breach of, any other covenant or warranty
of the Company or of any Subsidiary Guarantor in the Indenture, the Notes
or any Subsidiary Guarantee and failure to remedy such default or breach
within a period of 30 days after written notice from the Trustee or the
Holders of at least 25% in aggregate principal amount of the then
outstanding Notes; or
(e) default under any mortgage, indenture or instrument under which there
may be issued or by which there may be secured or evidenced any
Indebtedness for money borrowed by the Company or any Subsidiary of the
Company (or the payment of which is guaranteed by the Company or any
Subsidiary of the Company), which default results in the acceleration of
such Indebtedness prior to its express maturity and the principal amount of
any such Indebtedness, together with the principal amount of any other such
Indebtedness the maturity of which has been so accelerated, aggregates
$25,000,000 or more and such acceleration has not been rescinded or
annulled or such Indebtedness discharged in full within 30 days; or
(f) the entry by a court of competent jurisdiction of one or more
judgments, orders or decrees against the Company or any Subsidiary of the
Company or any of their respective property or assets in an aggregate
amount in excess of $25,000,000, which judgments, orders or decrees have
not been vacated, discharged, satisfied or stayed pending appeal within 30
days from the entry thereof and with respect to which legal enforcement
proceedings have been commenced; or
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(g) certain events of bankruptcy, insolvency or reorganization involving
the Company or any Material Subsidiary of the Company; or
(h) any Subsidiary Guarantee ceases to be in full force and effect (other
than in accordance with the terms of such Subsidiary Guarantee and the
Indenture and other than at any such time as and so long as such
Subsidiary's guarantee of all other Indebtedness of the Company and of the
Subsidiaries of the Company is no longer in full force and effect (unless
arising from the payment by such Subsidiary Guarantor under its guarantee
of such Indebtedness)) or is declared null and void or unenforceable or
found to be invalid (other than at any such time as and so long as such
Subsidiary Guarantor's guarantee of all other Indebtedness of the Company
and of the Company's Subsidiaries is declared null and void or
unenforceable or invalid (unless arising from payment by such Subsidiary
Guarantor under its guarantee of such Indebtedness)) or a Subsidiary
Guarantor denies its liability under its Subsidiary Guarantee (other than
by release of a Subsidiary Guarantor from its Subsidiary Guarantee in
accordance with the terms of the Indenture and the Subsidiary Guarantee and
other than at any such time and so long as such Subsidiary Guarantor denies
liability under its guarantee of all other Indebtedness of the Company and
of the Company's Subsidiaries (unless arising from payment by such
Subsidiary Guarantor under its guarantee of such Indebtedness)).
If an Event of Default (other than an Event of Default specified in clause
(g) above involving the Company) occurs and is continuing, then and in every
such case the Trustee or the Holders of not less than 25% in aggregate
principal amount of the then outstanding Notes may, and the Trustee shall upon
the request of Holders of not less than 25% in aggregate principal amount of
the Notes then outstanding, declare the unpaid principal of, premium, if any,
and accrued and unpaid interest on all the Notes then outstanding to be due
and payable, by a notice in writing to the Company (and to the Trustee, if
given by Holders) and upon such declaration such principal amount, premium, if
any, and accrued and unpaid interest will become immediately due and payable,
notwithstanding anything contained in the Indenture or the Notes to the
contrary, but subject to the provisions limiting payment described in "--
Subordination and Ranking" above. If an Event of Default specified in clause
(g) above involving the Company occurs, all unpaid principal of, and premium,
if any, and accrued and unpaid interest on the Notes then outstanding will
ipso facto become due and payable, subject to the prior payment in full of all
Senior Indebtedness of the Company, without any declaration or other act on
the part of the Trustee or any Holder.
Holders of the Notes may not enforce the Indenture or the Notes except as
provided in the Indenture. Subject to the provisions of the Indenture relating
to the duties of the Trustee, the Trustee is under no obligation to exercise
any of its rights or powers under the Indenture at the request, order or
direction of any of the Holders, unless such Holders have offered to the
Trustee reasonable indemnity. Subject to all provisions of the Indenture and
applicable law, the Holders of a majority in aggregate principal amount of the
then outstanding Notes have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or
exercising any trust or power conferred on the Trustee. The Trustee may
withhold from Holders notice of any continuing Default or Event of Default
(except a Default or Event of Default in the payment of principal of or
premium, if any, or interest on the Notes or that resulted from the failure of
the Company to comply with the provisions of "--Change of Control" or "--
Merger, Consolidation, Etc." above) if it determines that withholding notice
is in their interest. The Holders of a majority in aggregate principal amount
of the Notes then outstanding by notice to the Trustee may rescind an
acceleration and its consequences if all existing Events of Default (other
than the nonpayment of principal of and premium, if any, and interest on the
Notes which has become due solely by virtue of such acceleration) have been
cured or waived and if the recision would not conflict with any judgment or
decree. No such recision shall affect any subsequent Default or impair any
right consequent thereto.
The Holders of a majority in aggregate principal amount of the Notes then
outstanding may, on behalf of the Holders of all the Notes, waive any past
Default or Event of Default under the Indenture and its consequences, except
Default in the payment of principal of or premium, if any, or interest on the
Notes or in respect of a covenant or provision of the Indenture which cannot
be modified or amended without the consent of all Holders.
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Under the Indenture, two officers of the Company are required to provide a
certificate to the Trustee promptly upon any such officer obtaining knowledge
of any Default or Event of Default (provided that such officers shall provide
such certification at least annually whether or not they know of any Default
or Event of Default) that has occurred and, if applicable, describe such
Default or Event of Default and the status thereof.
AMENDMENT, SUPPLEMENT AND WAIVER
From time to time, the Company, when authorized by a resolution of its Board
of Directors, and the Trustee, may, without the consent of the Holders, amend,
waive or supplement the Indenture or the Notes for certain specified purposes,
including, among other things, curing ambiguities, defects or inconsistencies,
qualifying, or maintaining the qualification of, the Indenture under the TIA,
or making any change that does not adversely affect the rights of any Holder,
provided that the Company has delivered to the Trustee an Opinion of Counsel
stating that such change does not adversely affect the rights of any Holder.
Other amendments and modifications of the Indenture or the Notes may be made
by the Company, and the Trustee with the consent of the Holders of not less
than a majority of the aggregate principal amount of the Notes then
outstanding, provided that no such amendment or modification may, without the
consent of the Holder of each outstanding Note affected thereby: (i) reduce
the amount of Notes whose holders must consent to an amendment or waiver; (ii)
reduce the rate of, or extend the time for payment of, interest, including
defaulted interest, on any Note; (iii) reduce the principal of or premium on
or change the fixed maturity of any Note or alter the repurchase provisions
with respect thereto; (iv) make the principal of, or interest on, any Note
payable in money other than as provided for in the Indenture and the Notes;
(v) make any change in provisions relating to waivers of defaults, the ability
of Holders to enforce their rights under the Indenture or in the matters
discussed in these clauses (i) through (viii); (vi) waive a default in the
payment of principal of or interest on, or repurchase payment with respect to,
any Note, including, without limitation, a default to make a payment when
required upon a Change of Control Triggering Event; (vii) affect the ranking
of the Notes or any Subsidiary Guarantee or release any Subsidiary Guarantor
from its obligations under its Subsidiary Guarantee other than in accordance
with the Indenture; or (viii) after the Company's obligation to purchase the
Notes arises thereunder, amend, modify or change the obligation of the Company
to make and consummate a Change of Control Offer in the event of a Change of
Control Triggering Event or waive any default in the performance thereof or
modify any of the provisions or definitions with respect to any such offers.
No amendment or modification may adversely affect the rights of the holders
of Senior Indebtedness of the Company or holders of Guarantor Senior
Indebtedness unless the holders of such Senior Indebtedness consent to such
amendment or modification.
DEFEASANCE OR COVENANT DEFEASANCE OF INDENTURE
The Company may, at its option and at any time, terminate the obligations of
the Company and of the Subsidiary Guarantors with respect to the outstanding
Notes ("defeasance"). Such defeasance means that the Company shall be deemed
to have paid and discharged the entire Indebtedness represented by the
outstanding Notes, except for (i) the rights of holders of outstanding Notes
to receive payment in respect of the principal of, premium, if any, and
interest on such Notes when such payments are due, (ii) the Company's
obligations to issue temporary Notes, register the transfer or exchange of any
Notes, replace mutilated, destroyed, lost or stolen Notes and maintain an
office or agency for payments in respect of the Notes, (iii) the rights,
powers, trusts, duties and immunities of the Trustee, and (iv) the defeasance
provisions of the Indenture. In addition, the Company may, at its option and
at any time, elect to terminate its obligations with respect to certain
covenants that are set forth in the Indenture, some of which are described
under "--Certain Covenants" above, and any omission to comply with such
obligations shall not constitute a Default or an Event of Default with respect
to the Notes ("covenant defeasance").
In order to exercise either defeasance or covenant defeasance, (i) the
Company must irrevocably deposit with the Trustee, in trust, for the benefit
of the holders of the Notes, cash in United States dollars, U.S. Government
Obligations, or a combination thereof, in such amounts as will be sufficient,
in the opinion of a
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nationally recognized firm of independent public accountants, to pay the
principal of, premium, if any, and interest on the outstanding Notes to
redemption or maturity; (ii) the Company shall have delivered to the Trustee
an opinion of counsel to the effect that the holders of the outstanding Notes
will not recognize income, gain or loss for Federal income tax purposes as a
result of such defeasance or covenant defeasance and will be subject to
federal income tax on the same amounts, in the same manner and at the same
times as would have been the case if the act of such defeasance or covenant
defeasance had not occurred (in the case of defeasance, such opinion must
refer to and be based upon a ruling of the Internal Revenue Service or a
change in applicable Federal income tax laws); (iii) no Default or Event of
Default shall have occurred and be continuing immediately after giving effect
to such deposit; (iv) such defeasance or covenant defeasance shall not cause
the Trustee to have a conflicting interest with respect to any securities of
the Company; (v) such defeasance or covenant defeasance shall not result in a
breach or violation of, or constitute a default under, any material agreement
or instrument to which the Company is a party or by which it is bound; (vi)
the Company shall have delivered to the Trustee an opinion of counsel to the
effect that (A) the trust funds will not be subject to any rights of holders
of Senior Indebtedness of the Company, including, without limitation, those
arising under the Indenture and (B) after the 91st day following the deposit,
the trust funds will not be subject to the effect of any applicable
bankruptcy, insolvency, reorganization or similar laws affecting creditors'
rights generally; and (vii) the Company shall have delivered to the Trustee an
officers' certificate and an opinion of counsel, each stating that all
conditions precedent under the Indenture to either defeasance or covenant
defeasance, as the case may be, have been complied with.
SATISFACTION AND DISCHARGE
The Indenture will be discharged and will cease to be of further effect
(except as to surviving rights or registration of transfer or exchange of the
Notes, as expressly provided for in the Indenture) as to all outstanding Notes
when (i) either (a) all the Notes theretofore authenticated and delivered
(except lost, stolen or destroyed Notes which have been replaced or paid and
Notes for whose payment money has theretofore been deposited in trust or
segregated and held in trust by the Company and thereafter repaid to the
Company or discharged from such trust) have been delivered to the Trustee for
cancellation or (b) all Notes not theretofore delivered to the Trustee for
cancellation have become due and payable and the Company has irrevocably
deposited or caused to be deposited with the Trustee funds in an amount
sufficient to pay and discharge the entire Indebtedness on the Notes not
theretofore delivered to the Trustee for cancellation, for principal of,
premium, if any, and interest on the Notes to the date of deposit together
with irrevocable instructions from the Company directing the Trustee to apply
such funds to the payment thereof at maturity; (ii) the Company has paid all
other sums payable under the Indenture by the Company; and (iii) the Company
has delivered to the Trustee an Officers' Certificate and an opinion of
counsel stating that all conditions precedent under the Indenture relating to
the satisfaction and discharge of the Indenture have been complied with.
GOVERNING LAW
The Indenture will provide that it, the Notes and the Subsidiary Guarantees
will be governed by, and construed in accordance with, the laws of the State
of New York but without giving effect to applicable principles of conflicts of
law to the extent that the application of the law of another jurisdiction
would be required thereby.
THE TRUSTEE
The Indenture will provide that, except during the continuance of an Event
of Default, the Trustee will perform only such duties as are specifically set
forth in the Indenture. During the existence of an Event of Default, the
Trustee will exercise such rights and powers vested in it by the Indenture,
and use the same degree of care and skill in its exercise as a prudent person
would exercise or use under the circumstances in the conduct of such person's
own affairs.
The Indenture and the provisions of the TIA contain certain limitations on
the rights of the Trustee, should it become a creditor of the Company, to
obtain payments of claims in certain cases or to realize on certain
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property received in respect of any such claim as security or otherwise.
Subject to the TIA, the Trustee will be permitted to engage in other
transactions, provided that if the Trustee acquires any conflicting interest
as described in the TIA, it must eliminate such conflict or resign.
BOOK-ENTRY; DELIVERY AND FORM
The certificates representing the Notes will be issued in fully registered
form without interest coupons.
Notes sold in offshore transactions in reliance on Regulation S under the
Securities Act will initially be represented by a single, temporary global
Note in definitive, fully registered form without interest coupons (the
"Temporary Regulation S Global Note") and will be deposited with the Trustee
as custodian for the Depositary and registered in the name of a nominee of the
Depositary for the accounts of Euroclear System ("Euroclear") and Cedel,
Societe Anonyme ("Cedel"). The Temporary Regulation S Global Note will be
exchangeable for a single, permanent global note (the "Permanent Regulation S
Global Note," and, together with the Temporary Regulation S Global Note, the
"Regulation S Global Note") on or after July 9, 1997. Prior to the 40th day
after the later of the commencement of the Initial Offering and the Closing
Date, beneficial interests in the Temporary Regulation S Global Note may be
only held through Euroclear or Cedel, and any resale or other transfer of such
interests to U.S. persons shall not be permitted during such period unless
such resale or transfer is made pursuant to Rule 144A or Regulation S and in
accordance with the certification requirements described below.
Notes sold in reliance on Rule 144A will be represented by a single,
permanent global Note in definitive, fully registered form without interest
coupons (the "Restricted Global Note") and will be deposited with the Trustee
as custodian for and registered in the name of a nominee of the Depositary.
The Restricted Global Note and the Temporary Regulation S Global Note (and any
Notes issued in exchange therefor) will be subject to certain restrictions on
transfer set forth therein and will bear the legend regarding such
restrictions set forth under "Notice to Investors." Prior to the 40th day
after the later of the commencement of the Offering and the Closing Date, a
beneficial interest in the Temporary Regulation S Global Note may be
transferred to a person who takes delivery in the form of an interest in the
Restricted Global Note only upon receipt by the Trustee of a written
certification from the transferor to the effect that such transfer is being
made to a person whom the transferor reasonably believes is a "qualified
institutional buyer" within the meaning of Rule 144A in a transaction meeting
the requirements of Rule 144A. Beneficial interests in the Restricted Global
Note may be transferred to a person who takes delivery in the form of an
interest in the Regulation S Global Note whether before, on or after such 40th
day, only upon receipt by the Trustee of a written certification to the effect
that such transfer is being made in accordance with Regulation S. After the
Exchange Notes have been issued pursuant to a registered exchange under the
Securities Act, all certification requirements with respect to the Notes will
cease. Any beneficial interest in one of the Global Notes that is transferred
to a person who takes delivery in the form of an interest in the other Global
Note will, upon transfer, cease to be an interest in such Global Note and
become an interest in the other Global Note and, accordingly, will thereafter
be subject to all transfer restrictions, if any, and other procedures
applicable to beneficial interests in such other Global Note for as long as it
remains such an interest.
Notes originally purchased by institutional accredited investors who are not
qualified institutional buyers ("Non-Global Purchasers") will be issued Notes
in registered form without coupons ("Certificated Notes"). Upon the transfer
of Certificated Notes initially issued to a Non-Global Purchaser either to a
qualified institutional buyer or in accordance with Regulation S, such
Certificated Notes will, unless the relevant Global Note has previously been
exchanged in whole for Certificated Notes, be exchanged for an interest in a
Global Note. For a description of the restrictions on transfer of Certificated
Notes, see "Notice to Investors."
The Global Notes
Upon the issuance of the Regulation S Global Note and the Restricted Global
Note (each a "Global Note" and together the "Global Notes"), the Depositary or
its custodian will credit, on its internal system, the respective principal
amount of the individual beneficial interests represented by such Global Note
to the accounts
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of persons who have accounts with such Depositary. Such accounts initially
will be designated by or on behalf of the Initial Purchasers. Ownership of
beneficial interests in a Global Note will be limited to persons who have
accounts with the Depositary ("participants") or persons who hold interests
through participants. Ownership of beneficial interests in a Global Note will
be shown on, and the transfer of that ownership will be effected only through,
records maintained by the Depositary or its nominee (with respect to interests
of participants) and the records of participants (with respect to interests of
persons other than participants).
Investors may hold their interests in the Regulation S Global Note directly
though Cedel or Euroclear, if they are participants in such systems, or
indirectly through organizations that are participants in such system.
Beginning 40 days after the later of the commencement of the Initial Offering
and the Closing Date (but not earlier), investors may also hold such interest
through organizations other than Cedel or Euroclear that are participants in
the Depositary's system. Cedel and Euroclear will hold interests in the
Regulation S Global Note on behalf of their participants through the
Depositary.
So long as the Depositary, or its nominee, is the registered holder of a
Global Note, the Depositary or such nominee, as the case may be, will be
considered the sole owner or holder of the Notes represented by such Global
Note for all purposes under the Indenture and the Notes. No beneficial owner
of an interest in a Global Note will be able to transfer that interest except
in accordance with the procedures provided for under "Notice to Investors," as
well as the Depositary's applicable procedures and, if applicable, those of
Euroclear and Cedel.
Payments of the principal of, and interest on, the Global Notes will be made
to the Depositary or its nominee, as the case may be, as the registered owner
thereof. None of the Company, the Trustee or any Paying Agent will have any
responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests in the Global Notes
or for maintaining, supervising or reviewing any records relating to such
beneficial ownership interests.
The Company expects that the Depositary or its nominee, upon receipt of any
payment of principal or interest in respect of a Global Note will credit
participants' accounts with payments in amounts proportionate to their
respective beneficial interests in the principal amount of such Global Note as
shown on the records of the Depositary or its nominee. The Company also
expects that payments by participants to owners of beneficial interests in
such Global Note held through such participants will be governed by standing
instructions and customary practices, as is now the case with securities held
for the accounts of customers registered in the name of nominees for such
customers. Such payments will be the responsibility of such participants.
Transfers between participants in the Depositary will be effected in the
ordinary way in accordance with the Depositary rules and will be settled in
same-day funds.
The Depositary has advised the Company that it will take any action
permitted to be taken by a holder of Notes (including the presentation of
Notes for exchange as described below) only at the direction of one or more
participants to whose accounts an interest in the Global Notes is credited and
only in respect of such portion of the aggregate principal amount of Notes as
to which such participant or participants has or have given such direction.
The Depositary has advised the Company as follows: The Depositary is a
limited purpose trust company organized under the laws of the State of New
York, a "banking organization" within the meaning of New York Banking Law, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the Uniform Commercial Code and a "Clearing Agency" registered
pursuant to the provisions of Section 17A of the Exchange Act. The Depositary
was created to hold securities for its participants and facilitate the
clearance and settlement of securities transactions between participants
through electronic book-entry changes in accounts of its participants, thereby
eliminating the need for physical movement of certificates. Participants
include securities brokers and dealers, banks, trust companies and clearing
corporations and certain other organizations. Indirect access to the
Depositary system is available to others such as banks, brokers, dealers and
trust companies that clear through or maintain a custodial relationship with a
participant, either directly or indirectly ("indirect participants").
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Although the Depositary, Euroclear and Cedel have agreed to the foregoing
procedures in order to facilitate transfers of interests in the Global Notes
among participants of the Depositary, Euroclear and Cedel, they are under no
obligation to perform or continue to perform such procedures, and such
procedures may be discontinued at any time. Neither the Company nor the
Trustee will have any responsibility for the performance by the Depositary,
Euroclear or Cedel or their respective participants or indirect participants
of their respective obligations under the rules and procedures governing their
operations.
Certificated Notes
If the Depositary is at any time unwilling or unable to continue as a
depositary for the Global Notes and a successor depositary is not appointed by
the Company within 90 days, the Company will issue certificated notes in
exchange for the Global Notes.
CERTAIN DEFINITIONS
"Acquired Indebtedness" of any specified Person means Indebtedness of any
other Person and its Subsidiaries existing at the time such other Person
merged with or into or became a Subsidiary of such specified Person or assumed
by the specified Person in connection with the acquisition of assets from such
other Person including, without limitation, Indebtedness of such other Person
and its Subsidiaries incurred by the specified Person in connection with or in
anticipation of (a) such other Person and its Subsidiaries being merged with
or into or becoming a Subsidiary of such specified Person or (b) such
acquisition by the specified Person.
"Affiliate" means, when used with reference to any Person, any other Person
directly or indirectly controlling, controlled by, or under direct or indirect
common control with, the referent Person, as the case may be. For the purposes
of this definition, "control" when used with respect to any specified Person
means the power to direct or cause the direction of management or policies of
the referent Person, directly or indirectly, whether through the ownership of
voting securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative of the foregoing.
An "Associate" of, or a Person "associated" with, any Person, means (i) any
trust or other estate in which such Person has a substantial beneficial
interest or as to which such Person serves as trustee or in a similar
fiduciary capacity and (ii) any relative or spouse of such Person, or any
relative of such spouse, who has the same home as such Person.
"Capitalized Lease Obligation" means obligations under a lease that are
required to be classified and accounted for as capital lease obligations under
GAAP and, for purposes of the Indenture, the amount of such obligations at any
date shall be the capitalized amount of such obligations at such date,
determined in accordance with GAAP. The Stated Maturity of such obligation
shall be the date of the last payment of rent or any other amount due under
such lease prior to the first date upon which such lease may be terminated by
the lessee without penalty.
"Capital Stock" means, with respect to any Person, any and all shares,
interests, participations, rights in, or other equivalents (however designated
and whether voting or non-voting) of, such Person's capital stock, including
each class of Common or Preferred Stock of such Person, whether outstanding on
the Issue Date or issued after the Issue Date, and any and all rights,
warrants or options exchangeable for or convertible into such capital stock.
"Change of Control" means the occurrence of one or more of the following
events: (i) any "person" or "group" (as such terms are used in Section 13(d)
and 14(d) of the Exchange Act), other than employee or retiree benefit plans
or trusts sponsored or established by the Company or Transportation, is or
becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange
Act), directly or indirectly, of (A) securities of Navistar representing 25%
or more of the combined voting power of Navistar's then outstanding Voting
Stock, (B) securities of the Company representing 49% or more of the combined
voting power of the Company's then
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outstanding Voting Stock or (C) securities of Transportation representing 50%
or more of the combined voting power of Transportation's then outstanding
Voting Stock; (ii) the following individuals cease for any reason to
constitute more than three-fourths of the number of directors then serving on
the Board of Directors of Navistar: individuals who, on the date hereof,
constitute the Board of Directors and any new director (other than a director
whose initial assumption of the office is in connection with an actual or
threatened election contest, including but not limited to a consent
solicitation, relating to the election of directors of Navistar) whose
appointment or election by the Board of Directors or nomination for election
by the Company's stockholders was approved by the vote of at least two-thirds
( 2/3) of the directors then still in office or whose appointment, election or
nomination was previously so approved or recommended; (iii) the shareholders
of Navistar, of Transportation or of the Company shall approve any Plan of
Liquidation (whether or not otherwise in compliance with the provisions of the
Indenture); or (iv) the Company consolidates with or merges with or into
another Person, or the Company or any Subsidiary of the Company, directly or
indirectly, sells, assigns, conveys, transfers, leases or otherwise disposes
of, in one transaction or a series of related transactions, all or
substantially all of the property or assets of the Company and the
Subsidiaries of the Company (determined on a consolidated basis) to any
Person, or any Person consolidates with, or merges with or into, the Company,
in any such event pursuant to a transaction in which the outstanding Voting
Stock of the Company is converted into or exchanged for cash, securities or
other property, and, as a result of which, neither Navistar nor Transportation
has "beneficial ownership" (as set forth above), directly or indirectly of at
least 50% (fifty percent) of the combined voting power of the then outstanding
Voting Stock of the surviving or transferee corporation, provided that neither
(x) the merger of a Subsidiary of the Company into the Company or into any
Wholly Owned Subsidiary of the Company nor (y) a series of transactions
involving the sale of Receivables or interests therein in the ordinary course
of business by the Company or a Securitization Subsidiary in connection with a
Qualified Securitization Transaction, shall be deemed to be a Change of
Control.
For purposes of the foregoing, the transfer (by lease, assignment, sale or
otherwise, in a single transaction or series of transactions) of all or
substantially all of the properties or assets of one or more Subsidiaries of
the Company, the Capital Stock of which constitutes all or substantially all
of the properties and assets of the Company, shall be deemed to be the
transfer of all or substantially all of the properties and assets of the
Company.
"Change of Control Triggering Event" means the occurrence of both (a) a
Change of Control and (b) a Ratings Event.
"Common Stock" of any Person means any and all shares, interests or other
participations in, and other equivalents (however designated and whether
voting or non-voting) of such Person's common stock, whether outstanding on
the Issue Date or issued after the Issue Date, and includes, without
limitation, all series and classes of such common stock.
"Consolidated EBITDA" for any Person means, for any period for which it is
to be determined, the sum of, without duplication, the amounts for such
period, taken as a single accounting period, of (i) Consolidated Net Income of
such Person and its Consolidated Subsidiaries for such period; (ii) cash
payments made to the Company during such period or within 30 days after such
period by Navistar or Transportation pursuant to the Amended and Restated
Parents' Side Agreement, as amended and restated as of November 4, 1994, among
the Company, Navistar and Transportation or any other similar agreement; and
(iii) only to the extent Consolidated Net Income has been reduced thereby, (A)
Consolidated Tax Expense of such Person and its Consolidated Subsidiaries for
such period; (B) Consolidated Interest Expense of such Person for such period;
and (C) all depreciation and amortization expense (including, without
limitation, amortization of capitalized debt issuance costs) and other non-
cash expenses (other than any non-cash item which requires the accrual of or a
reserve for cash charges for any future period and other than any non-cash
charge constituting an extraordinary item of loss) of such Person and its
Consolidated Subsidiaries for such period, less the amount of consolidated
non-cash items increasing Consolidated Net Income for such period, all as
determined on a consolidated basis in conformity with GAAP.
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"Consolidated Fixed Charge Coverage Ratio" means, with respect to any
Person, the ratio of (a) the aggregate amount of Consolidated EBITDA of such
Person for the four full fiscal quarters ending on or immediately prior to the
date of measurement (such four full fiscal quarter period being referred to
herein as the "Four Quarter Period") to (b) the aggregate Consolidated Fixed
Charges of such Person for such Four Quarter Period.
"Consolidated Fixed Charges" means, with respect to any Person for any
period, the sum of, without duplication, the amounts for such period, taken as
a single accounting period, of (i) Consolidated Interest Expense; and (ii) the
product of (x) the amount of all dividend requirements (whether or not
declared) on Preferred Stock of such Person, whether in cash or otherwise
(except dividends payable in shares of Common Stock) paid, accrued or
scheduled to be paid or accrued during such period times (y) a fraction, the
numerator of which is one and the denominator of which is one minus the then
current effective consolidated Federal, state, local and foreign tax rate
(expressed as a decimal number between 1 and 0) of such Person (as reflected
in the audited consolidated financial statements of such Person for the most
recently completed fiscal year).
"Consolidated Interest Expense" means, with respect to any Person for any
period, the aggregate of the interest expense (without deduction of interest
income) of such Person for such period, on a consolidated basis, as determined
in accordance with GAAP, including (a) all amortization of original issue
discount; (b) the interest component of Capitalized Lease Obligations paid,
accrued and/or scheduled to be paid or accrued by such Person during such
period; (c) net cash costs under all Interest Rate Protection Agreements
(including amortization of fees); (d) all capitalized interest; (e) the
interest portion of any deferred payment obligations for such period; and (f)
25% (twenty-five percent) of the amount of all lease payments (other than
Capitalized Lease Obligations) paid, accrued and/or scheduled to be paid or
accrued by such Person during such period, provided that all amortization of
debt issuance costs shall be excluded in calculating Consolidated Interest
Expense.
"Consolidated Net Income" means, with respect to any Person for any period,
the consolidated net income (or deficit) of such Person and its Consolidated
Subsidiaries for such period, on a consolidated basis, as determined in
accordance with GAAP, provided that the net income of any other Person in
which the referent Person or any Subsidiary of the referent Person has a joint
interest with a third party (which interest does not cause the net income of
such other Person to be consolidated into the net income of the referent
Person in accordance with GAAP) shall be included only to the extent of the
amount that has been actually received by the referent Person or a Subsidiary
of the referent Person in the form of cash dividends or similar cash
distributions, and provided, further, that there shall be excluded (i) the net
income of any Person acquired in a "pooling of interests" transaction accrued
prior to the date it became a Subsidiary of the referent Person or is merged
into or consolidated with the referent Person or any Subsidiary of the
referent Person; (ii) any restoration to income of any contingency reserve,
except to the extent that provision for such reserve was made out of
Consolidated Net Income accrued at any time following the Issue Date; (iii)
any gain or loss, together with any related provisions for taxes, realized
upon the sale or other disposition (including, without limitation,
dispositions pursuant to sale-leaseback transactions) of any property or
assets which are not sold or otherwise disposed of in the ordinary course of
business (provided that sales of Receivables or interests therein pursuant to
Qualified Securitization Transactions shall be deemed to be in the ordinary
course of business) and upon the sale or other disposition of any Capital
Stock of any Subsidiary of the referent Person, (iv) any extraordinary gain or
extraordinary loss together with any related provision for taxes and any one
time gains or losses (including, without limitation, those related to the
adoption of new accounting standards) realized by the referent Person or any
of its Subsidiaries during the period for which such determination is made;
(v) income or loss attributable to discontinued operations (including, without
limitation, operations disposed of during such period whether or not such
operations were classified as discontinued); and (vi) in the case of a
successor to the referent Person by consolidation or merger or as a transferee
of the referent Person's assets, any earnings of the successor corporation
prior to such consolidation, merger or transfer of assets.
"Consolidated Stockholders' Equity" as of any date means with respect to any
Person the amount, determined in accordance with GAAP, by which the assets of
such Person and of its Wholly Owned Subsidiaries on a consolidated basis
exceed (a) the total liabilities of such Person and of its Wholly Owned
Subsidiaries on a consolidated basis, plus (b) any redeemable Preferred Stock
of such Person.
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"Consolidated Subsidiary" of any Person means a Subsidiary which for
financial reporting purposes is or, in accordance with GAAP, should be,
accounted for by such Person as a consolidated Subsidiary.
"Consolidated Tangible Net Worth" of a Person at any date means the sum of
(1) Consolidated Stockholders' Equity of such Person plus (2) such Person's
interest (proportionate to its equity interest) in the net worth of any Person
other than a Wholly Owned Subsidiary of the referent Person as of the date in
question, less (a) any revaluation or other write-ups subsequent to the Issue
Date in the book value of any asset owned by such Person or any Subsidiary of
such Person; (b) any amounts attributable to the cost of treasury stock and
the principal amount of any promissory notes receivable from the sale of
Capital Stock of such Person or of any of its Subsidiaries; and (c) all
unamortized debt discount and expense, unamortized deferred charges, goodwill,
patents, trademarks, service marks, trade names, copyrights, and other
intangible assets of such Person and its Subsidiaries.
"Consolidated Tax Expense" means, with respect to any Person for any period,
the aggregate of the U.S. Federal, state and local tax expense attributable to
taxes based on income and foreign income tax expenses of such Person and its
Consolidated Subsidiaries for such period (net of any income tax benefit)
payable with respect to such period pursuant to the Tax Allocation Agreement
or, if the Tax Allocation Agreement is no longer in effect or does not apply
to any such tax, determined in accordance with GAAP other than taxes (either
positive or negative) attributable to extraordinary or unusual gains or losses
or taxes attributable to sales or dispositions of assets.
"Credit Agreement" means the Amended and Restated Credit Agreement, dated as
of November 4, 1994, among the Company, the banks referred to therein and Bank
of America Illinois (formerly known as Continental Bank, N.A.), Bank of Nova
Scotia, The Chase Manhattan Bank (formerly known as Chemical Bank), Morgan
Guaranty Trust Company of New York and NationsBank, N.A., as co-arrangers, and
any refinancing, extension, renewal, modification, restatement or replacement
thereof (in whole or in part, and without limitation as to terms, conditions,
covenants and other provisions), as the same may be amended, supplemented or
otherwise modified from time to time.
"Currency Agreement" means any foreign exchange contract, currency swap
agreement or other similar agreement or arrangement designed to protect the
Company or any of its Subsidiaries against fluctuations in currency values to
or under which the Company or any of its Subsidiaries is a party or a
beneficiary on the date of the Indenture or becomes a party or a beneficiary
thereafter.
"Default" means any event that is, or after notice or passage of time or
both would be, an Event of Default (as defined in the Indenture).
"Disqualified Capital Stock" means any Capital Stock that, other than solely
at the option of the issuer thereof, by its terms (or by the terms of any
security into which it is convertible or exchangeable) is, or upon the
happening of an event or the passage of time would be, required to be redeemed
or repurchased, in whole or in part, prior to the first anniversary of the
Maturity Date or has, or upon the happening of an event or the passage of time
would have, a redemption or similar payment due on or prior to the first
anniversary of the Maturity Date, or is convertible into or exchangeable for
debt securities at the option of the holder thereof at any time prior to the
first anniversary of the Maturity Date.
"Event of Default" has the meaning set forth under "--Events of Default"
herein.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession of the United States, which are in effect as of the Issue Date.
"guarantee" means any obligation, contingent or otherwise, of any Person
directly or indirectly guaranteeing any Indebtedness of any other Person and,
without limiting the generality of the foregoing, any
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obligation, direct or indirect, contingent or otherwise, of such Person (i) to
purchase or pay (or advance or supply funds for the purchase or payment of)
such Indebtedness of such other Person (whether arising by virtue of
partnership arrangements, or by agreement to keep-well, to purchase assets,
goods, securities or services, to take-or-pay, or to maintain financial
statement conditions or otherwise) or (ii) entered into for purposes of
assuring in any other manner the obligee of such Indebtedness of the payment
thereof or to protect such obligee against loss in respect thereof (in whole
or in part), provided that the term "guarantee" shall not include endorsements
for collection or deposit in the ordinary course of business. The term
"guarantee" used as a verb has a corresponding meaning.
"Guarantor Senior Indebtedness" means any guarantee incurred by a Subsidiary
Guarantor in accordance with the Indenture of Senior Indebtedness of the
Company incurred in accordance with the Indenture, whether such Indebtedness
is outstanding on the Issue Date or thereafter, provided that Guarantor Senior
Indebtedness expressly shall not include: (i) any Indebtedness of such
Subsidiary Guarantor whether outstanding on the Issue Date or thereafter
incurred that is, pursuant to its terms or the terms of any agreement relating
thereto, subordinated or junior to any other Indebtedness of such Subsidiary
Guarantor; (ii) any Indebtedness of such Subsidiary Guarantor whether
outstanding on the Issue Date or thereafter incurred that is, by its terms or
the terms of any agreement relating thereto, pari passu with or subordinated
or junior to such Subsidiary Guarantor's Subsidiary Guarantee; (iii) the
Subsidiary Guarantee of such Subsidiary Guarantor; (iv) any Indebtedness or
any other obligation of such Subsidiary Guarantor to any of such Subsidiary
Guarantor's Subsidiaries or to any of such Subsidiary Guarantor's Affiliates,
or to any joint venture in which such Subsidiary Guarantor has an interest;
(v) to the extent such may be deemed Indebtedness of such Subsidiary
Guarantor, any liability for Federal, state, local, foreign or other taxes
owed or owing by such Subsidiary Guarantor or by any of its Subsidiaries
(including pursuant to the Tax Allocation Agreement); (vi) to the extent such
may be deemed Indebtedness of such Subsidiary Guarantor, obligations of such
Subsidiary Guarantor incurred in connection with the purchase of goods,
assets, materials or services in the ordinary course of business or
representing amounts recorded as accounts payable, trade payables or other
current liabilities of such Subsidiary Guarantor on the books of such
Subsidiary Guarantor (other than the current portion of any long-term
Indebtedness of such Subsidiary Guarantor that but for this clause (vi) would
constitute Guarantor Senior Indebtedness of such Subsidiary Guarantor); (vii)
to the extent such may be deemed Indebtedness of such Subsidiary Guarantor,
any amount owed by such Subsidiary Guarantor to employees for services
rendered to such Subsidiary Guarantor or to any of its Subsidiaries; and
(viii) that portion of any Indebtedness which at the time of incurrence was
incurred in violation of the Indenture.
"incur" means, with respect to any Indebtedness or other obligation of any
Person, to create, issue, incur (by conversion, exchange or otherwise),
assume, guarantee or otherwise become liable in respect of such Indebtedness
or other obligation or the recording, as required pursuant to GAAP or
otherwise, of any such Indebtedness or other obligation on the balance sheet
of such Person (and "incurrence," "incurred," "incurrable" and "incurring"
shall have meanings correlative to the foregoing), provided that the accrual
of interest (whether such interest is payable in cash or in kind) and the
accretion of original issue discount shall not be deemed an incurrence of
Indebtedness, provided, further, that (A) any Indebtedness or Capital Stock of
a Person existing at the time such Person becomes (after the Issue Date) a
Subsidiary (whether by merger, consolidation, acquisition or otherwise) of the
Company shall be deemed to be incurred or issued, as the case may be, by such
Subsidiary at the time it becomes a Subsidiary of the Company and (B) any
amendment, modification or waiver of any document pursuant to which
Indebtedness was previously incurred shall not be deemed to be an incurrence
of Indebtedness unless and then only to the extent such amendment,
modification or waiver increases the principal or premium thereof or interest
rate thereon (including by way of original issue discount).
"Indebtedness" means, with respect to any Person, at any date, any of the
following, without duplication, (i) any liability, contingent or otherwise, of
such Person (A) for borrowed money (whether or not the recourse of the lender
is to the whole of the assets of such Person or only to a portion thereof),
(B) evidenced by a note, bond, debenture or similar instrument or letters of
credit (including a purchase money obligation) or (C) for the
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payment of money relating to a Capitalized Lease Obligation or other
obligation (whether issued or assumed) relating to the deferred purchase price
of property, but excluding trade accounts payable of such Person arising in
the ordinary course of business; (ii) all conditional sale obligations and all
obligations under any title retention agreement (even if the rights and
remedies of the seller under such agreement in the event of default are
limited to repossession or sale of such property), but excluding trade
accounts payable of such Person arising in the ordinary course of business;
(iii) all obligations for the reimbursement of any obligor on any letter of
credit, banker's acceptance or similar credit transaction entered into in the
ordinary course of business; (iv) all Indebtedness of others secured by (or
for which the holder of such Indebtedness has an existing right, contingent or
otherwise, to be secured by) any Lien (other than in connection with property
subject to a Qualified Securitization Transaction) on any asset or property
(including, without limitation, leasehold interests and any other tangible or
intangible property) of such Person, whether or not such Indebtedness is
assumed by such Person or is not otherwise such Person's legal liability,
provided that if the obligations so secured have not been assumed by such
Person or are otherwise not such Person's legal liability, the amount of such
Indebtedness for the purposes of this definition shall be limited to the
lesser of the amount of such Indebtedness secured by such Lien or the fair
market value of the assets or property securing such Lien; (v) all
Indebtedness of others (including all dividends of other Persons the payment
of which is) guaranteed, directly or indirectly, by such Person or that is
otherwise its legal liability or which such Person has agreed to purchase or
repurchase or in respect of which such Person has agreed contingently to
supply or advance funds; (vi) all Disqualified Capital Stock issued by such
Person with the amount of Indebtedness represented by such Disqualified
Capital Stock being equal to the greater of its voluntary or involuntary
liquidation preference and its maximum fixed repurchase price, but excluding
accrued dividends if any; and (vii) all obligations under Currency Agreements
and Interest Rate Protection Agreements. For purposes hereof, the "maximum
fixed repurchase price" of any Disqualified Capital Stock which does not have
a fixed repurchase price shall be calculated in accordance with the terms of
such Disqualified Capital Stock as if such Disqualified Capital Stock were
purchased on any date on which Indebtedness shall be required to be determined
pursuant to the Indenture, and if such price is based upon, or measured by,
the fair market value of such Disqualified Capital Stock, such fair market
value shall be determined reasonably and in good faith by the Board of
Directors of the issuer of such Disqualified Capital Stock. The amount of
Indebtedness of any Person at any date shall be the outstanding balance
without duplication at such date of all unconditional obligations as described
above and the maximum liability, upon the occurrence of the contingency giving
rise to the obligation, of any contingent obligations at such date, provided
that the amount outstanding at any time of any Indebtedness issued with
original issue discount is the full amount of such Indebtedness less the
remaining unamortized portion of the original issue discount of such
Indebtedness at such time as determined in accordance with GAAP.
"Interest Rate Protection Agreement" means any interest rate protection
agreement, interest rate future agreement, interest rate option agreement,
interest rate swap agreement, interest rate cap agreement, interest rate
collar agreement, interest rate hedge agreement or other similar agreement or
arrangement designed to protect a Person or any Subsidiary against
fluctuations in interest rates to or under which such Person or any Subsidiary
of such Person is a party or a beneficiary on the Issue Date or becomes a
party or a beneficiary thereafter.
"Investment" by any Person means any direct or indirect (i) loan, advance or
other extension of credit or capital contribution (by means of transfers of
cash or other property (valued at the fair market value thereof as of the date
of transfer) to others or payments for property or services for the account or
use of others, or otherwise other than in the ordinary course of business);
(ii) purchase or acquisition of Capital Stock, bonds, notes, debentures or
other securities or evidences of Indebtedness issued by any other Person
(whether by merger, consolidation, amalgamation or otherwise and whether or
not purchased directly from the issuer of such securities or evidences of
Indebtedness); (iii) guarantee or assumption of the Indebtedness of any other
Person; and (iv) all other items that would be classified as investments
(including, without limitation, purchases of assets outside the ordinary
course of business) on a balance sheet of such Person prepared in accordance
with GAAP. Investments shall exclude (a) transactions between the Company and
Transportation pursuant to the Master Intercompany Agreement and (b)
extensions of loans, trade credit and advances to customers and suppliers to
the extent made in the ordinary course of business.
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"Investment Grade" means (i) with respect to S&P any of the rating
categories from and including AAA to and including BBB- and (ii) with respect
to Moody's any of the rating categories from and including Aaa to and
including Baa3.
"Issue Date" means the date on which the Notes are originally issued under
the Indenture.
"Lien" means, with respect to any Person, any mortgage, pledge, lien,
encumbrance, easement, restriction, covenant, right-of-way, charge or adverse
claim affecting title or resulting in an encumbrance against real or personal
property of such Person, or a security interest of any kind (including any
conditional sale or other title retention agreement, any lease in the nature
thereof, any option, right of first refusal or other similar agreement to
sell, in each case securing obligations of such Person and any filing of or
agreement to give any financing statement under the Uniform Commercial Code
(or equivalent statute or statutes) of any jurisdiction but excluding any such
filing or agreement which reflects ownership by a third party of (i) property
leased to the referent Person or any of its Subsidiaries under a lease that is
not in the nature of a conditional sale or title retention agreement or (ii)
accounts, general intangibles or chattel paper sold to the referent Person).
"Master Intercompany Agreement" means the Master Intercompany Agreement
dated as of April 26, 1993 and as amended on September 30, 1996, between the
Company and Transportation as it may be amended, modified, supplemented or
restated from time to time in accordance with the terms of the Indenture.
"Material Subsidiary" means, at any date of determination, any Subsidiary of
the Company that, together with its Subsidiaries, (i) for the most recent
fiscal year of the Company accounted for more than 5% of the consolidated
revenues of the Company or (ii) as of the end of such fiscal year, was the
owner of more than 5% of the consolidated assets of the Company, all as set
forth on the most recently available consolidated financial statements of the
Company and its Consolidated Subsidiaries for such fiscal year prepared in
conformity with GAAP.
"Maturity Date" means June 1, 2002.
"Moody's" means Moody's Investors Service, Inc. and its successors.
"Navistar" means Navistar International Corporation, a Delaware corporation
and the parent of Transportation.
"1998 Notes" means the 8 7/8% Senior Subordinated Notes due 1998 of the
Company issued under an indenture dated as of November 15, 1993 between the
Company and First Trust, N.A. (as successor to Continental Bank, N.A.).
"Permitted Liens" means (a) Liens for taxes, assessments and governmental
charges (other than any Lien imposed by the Employee Retirement Income
Security Act of 1974, as amended) that are not yet delinquent or are being
contested in good faith by appropriate proceedings promptly instituted and
diligently conducted and for which adequate reserves have been established or
other provisions have been made in accordance with generally accepted
accounting principles; (b) statutory mechanics', workmen's, materialmen's,
operators' or similar Liens imposed by law and arising in the ordinary course
of business for sums which are not yet due or are being contested in good
faith by appropriate proceedings promptly instituted and diligently conducted
and for which adequate reserves have been established or other provisions have
been made in accordance with generally accepted accounting principles; (c)
minor imperfections of, or encumbrances on, title that do not impair the value
of property for its intended use; (d) Liens (other than any Lien under the
Employee Retirement Income Security Act of 1974, as amended) incurred or
deposits made in the ordinary course of business in connection with workers'
compensation, unemployment insurance and other types of social security; (e)
Liens incurred or deposits made to secure the performance of tenders, bids,
leases, statutory or regulatory obligations, bankers' acceptances, surety and
appeal bonds, government contracts, performance and return of money bonds and
other obligations of a similar nature incurred in the ordinary course of
business (exclusive of obligations for the payment of borrowed money); (f)
easements, rights-of-way, municipal and zoning ordinances and similar
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charges, encumbrances, title defects or other irregularities that do not
materially interfere with the ordinary course of business of the Company or of
any of its Subsidiaries; (g) Liens (including extensions and renewals thereof)
upon real or tangible personal property acquired after the Issue Date,
provided that (I) such Lien is created solely for the purpose of securing
Indebtedness that is incurred in accordance with the Indenture to finance the
cost (including the cost of improvement or construction) of the item of
property or assets subject thereto and such Lien is created prior to, at the
time of or within 90 days after the later of the acquisition, the completion
of construction or the commencement of full operation of such property, (II)
the principal amount of the Indebtedness secured by such Lien does not exceed
100% of such cost and (III) any such Lien shall not extend to or cover any
property or assets of the Company or of any Subsidiary of the Company other
than such item of property or assets and any improvements on such item; (h)
leases or subleases granted to others that do not materially interfere with
the ordinary course of business of the Company or of any Subsidiary of the
Company; (i) any interest or title of a lessor in the property subject to any
Capitalized Lease Obligation, provided that any transaction related thereto
otherwise complies with the Indenture; (j) Liens arising from filing Uniform
Commercial Code financing statements regarding leases; (k) Liens arising from
the rendering of a final judgment or order against the Company or any
Subsidiary of the Company that does not give rise to an Event of Default; (l)
Liens securing reimbursement obligations with respect to letters of credit
incurred in accordance with the Indenture that encumber documents and other
property relating to such letters of credit and the products and proceeds
thereof; (m) Liens in favor of the Trustee arising under the Indenture; (n)
any Lien existing on property, shares of stock or Indebtedness of a Person at
the time such Person becomes a Subsidiary of the Company or is merged with or
consolidated into the Company or a Subsidiary of the Company or at the time of
sale, lease or other disposition of the properties of any Person as an
entirety or substantially as an entirety to the Company or any Subsidiary of
the Company; (o) Liens on property of any Subsidiary of the Company to secure
Indebtedness for borrowed money owed to the Company or to another Subsidiary
of the Company; and (p) Liens in favor of the Company.
"Person" means any individual, corporation, partnership, joint venture,
trust, estate, unincorporated organization or government or any agency or
political subdivision thereof.
"Plan of Liquidation" means, with respect to any Person, a plan (including
by operation of law) that provides for, contemplates or the effectuation of
which is preceded or accompanied by (whether or not substantially
contemporaneously) (i) the sale, lease, conveyance or other disposition of all
or substantially all of the assets of the referent Person and (ii) the
distribution of all or substantially all of the proceeds of such sale, lease,
conveyance or other disposition and all or substantially all of the remaining
assets of the referent Person to holders of Capital Stock of the referent
Person.
"Preferred Stock" means, as applied to the Capital Stock of any Person, the
Capital Stock of such Person (other than the Common Stock of such Person) of
any class or classes (however designated) that ranks prior, as to the payment
of dividends or as to the distribution of assets upon any voluntary or
involuntary liquidation, dissolution or winding-up of such Person, to shares
of Capital Stock of any other class of such Person.
"Qualified Capital Stock" means, with respect to any Person, any Capital
Stock of such Person that is not Disqualified Capital Stock or convertible
into or exchangeable or exercisable for Disqualified Capital Stock.
"Qualified Securitization Transaction" means any transaction or series of
transactions that have been or may be entered into by the Company or any of
its Subsidiaries in connection with or reasonably related to a transaction or
series of transactions in which the Company or any of its Subsidiaries may
sell, convey or otherwise transfer to (i) a Securitization Subsidiary or (ii)
any other Person, or may grant a security interest in, any Receivables or
interests therein secured by the merchandise or services financed thereby
(whether such Receivables are then existing or arising in the future) of the
Company or any of its Subsidiaries, and any assets related thereto including,
without limitation, all security or ownership interests in merchandise or
services financed thereby, the proceeds of such Receivables, and other assets
which are customarily sold or in respect of which security interests are
customarily granted in connection with securitization transactions involving
such assets.
76
<PAGE>
"Rating Agency" means each of (i) S&P and (ii) Moody's.
"Ratings Event" means the occurrence, as of any date, within the 90 day
period (the "Initial Period") commencing on the date of public notice (the
"Public Notice") of the occurrence of a Change of Control (which period shall
be extended for a period not to exceed 90 days beyond the Initial Period if
within the Initial Period the rating of the Notes is under publicly announced
consideration of (x) a possible downgrade or (y) a possible upgrade by (i)
both Rating Agencies or (ii) either Rating Agency in the event that one of the
Rating Agencies has rated the Notes Investment Grade within the Initial Period
(such Initial Period as so extended being referred to as the "Evaluation
Period")) of any of the following events:
(1) In the event that the Notes are rated Investment Grade by both Rating
Agencies immediately prior to the Public Notice, the failure of the Notes
to be rated Investment Grade by either or both of the Rating Agencies; or
(2) In the event that the Notes are rated Investment Grade by one of the
Rating Agencies immediately prior to the Public Notice, the earlier to
occur of (A) the Notes failing to be rated Investment Grade by such Rating
Agency or (B) the lapse of the Evaluation Period and the failure of the
Notes to be rated Investment Grade by the other Rating Agency; or
(3) In the event that the Notes are not rated Investment Grade by both of
the Rating Agencies immediately prior to the Public Notice, the lapse of
the Evaluation Period and the failure of either or both of the Rating
Agencies to rate the Notes Investment Grade.
"Receivables" means any right of payment from or on behalf of any obligor,
whether constituting an account, chattel paper, instrument, general intangible
or otherwise, arising from the financing by the Company or any Subsidiary of
the Company of merchandise or services, and monies due thereunder, security or
ownership interests in the merchandise and services financed thereby, records
related thereto, and the right to payment of any interest or finance charges
and other obligations with respect thereto, proceeds from claims on insurance
policies related thereto, any other proceeds related thereto, and any other
related rights.
"Secured Obligations" means all Secured Obligations as defined in the
Security, Pledge and Trust Agreement between the Company and Bankers Trust
Company, as Trustee, dated as of April 26, 1993 (as it may be amended, the
"Security Agreement").
"Securitization Subsidiary" means a Wholly Owned Subsidiary of the Company
which engages in no activities other than those reasonably related to or in
connection with the entering into of securitization transactions and which is
designated by the Board of Directors of the Company (as provided below) as a
Securitization Subsidiary (a) no portion of the Indebtedness or any other
obligations (contingent or otherwise) of which (i) is guaranteed by the
Company or any other Subsidiary of the Company, (ii) is recourse to or
obligates the Company or any other Subsidiary of the Company in any way other
than pursuant to representations, warranties and covenants (including those
related to servicing) entered into in the ordinary course of business in
connection with a Qualified Securitization Transaction or (iii) subjects any
property or asset of the Company or any other Subsidiary of the Company,
directly or indirectly, contingently or otherwise, to any Lien or to the
satisfaction thereof, other than pursuant to representations, warranties and
covenants (including those related to servicing) entered into in the ordinary
course of business in connection with a Qualified Securitization Transaction,
(b) with which neither the Company nor any other Subsidiary of the Company (i)
provides any credit support or (ii) has any contract, agreement, arrangement
or understanding other than on terms that are fair and reasonable and that are
no less favorable to the Company or such Subsidiary than could be obtained
from an unrelated Person (other than, in the case of subclauses (i) and (ii)
of this clause (b), representations, warranties and covenants (including those
relating to servicing) entered into in the ordinary course of business in
connection with a Qualified Securitization Transaction and intercompany notes
relating to the sale of Receivables to such Securitization Subsidiary) and (c)
with which neither the Company nor any Subsidiary of the Company has any
obligation to maintain or preserve such Subsidiary's financial condition or to
cause such Subsidiary to achieve certain levels of operating results. Any such
designation by the Board of Directors of the Company shall be
77
<PAGE>
evidenced to the Trustee by filing with the Trustee a certified copy of the
resolutions of the Board of Directors of the Company giving effect to such
designation.
"Senior Indebtedness of the Company" means (a) Indebtedness of the Company
under the Credit Agreement, and, as long as the Security Agreement is in
effect, without duplication, all Secured Obligations, and (b) any other
Indebtedness incurred by the Company in accordance with the Indenture, whether
such Indebtedness is outstanding on the Issue Date or thereafter, provided
that Senior Indebtedness of the Company expressly shall not include: (i) any
Indebtedness of the Company or any Secured Obligation (whether outstanding on
the Issue Date or thereafter incurred) that is, pursuant to its terms or the
terms of any agreement relating thereto, subordinated or junior to any other
Indebtedness of the Company, (ii) any Indebtedness of the Company or any
Secured Obligation (whether outstanding on the Issue Date or thereafter
incurred) that is, by its terms or the terms of any agreement relating
thereto, pari passu with or subordinated or junior to the Notes, (iii) the
Notes, (iv) any Indebtedness or any other obligation of the Company to any of
the Company's Subsidiaries or to any of the Company's Affiliates, or to any
joint venture in which the Company has an interest, (v) to the extent such may
be deemed Indebtedness of the Company, any liability for Federal, state,
local, foreign or other taxes owed or owing by the Company or by any of its
Subsidiaries (including pursuant to the Tax Allocation Agreement), (vi) to the
extent such may be deemed Indebtedness of the Company, obligations of the
Company incurred in connection with the purchase of goods, assets, materials
or services in the ordinary course of business or representing amounts
recorded as accounts payable, trade payables or other current liabilities of
the Company on the books of the Company (other than the current portion of any
long-term Indebtedness of the Company that but for this clause (vi) would
constitute Senior Indebtedness of the Company), (vii) to the extent such may
be deemed Indebtedness of the Company, any amount owed by the Company to
employees for services rendered to the Company or to any of its Subsidiaries,
and (viii) that portion of any Indebtedness which at the time of incurrence is
incurred in violation of the Indenture.
"S&P" means Standard & Poor's Ratings Services, a division of The McGraw-
Hill Companies, Inc., and its successors.
"Stated Maturity" means, with respect to any security or Indebtedness of a
Person, the date specified therein as the fixed date on which any principal of
such security or Indebtedness is due and payable, including pursuant to any
mandatory redemption provision (but excluding any provision providing for the
repurchase thereof at the option of the holder thereof).
"Subordinated Indebtedness" means the Notes, the 1998 Notes and any other
Indebtedness incurred, assumed or otherwise created by the Company pursuant to
an instrument or instruments providing expressly that such Indebtedness (i) is
subordinate in right of payment to the Notes or any other Indebtedness of the
Company or (ii) ranks pari passu with the Notes.
"Subsidiary" of any Person means (a) a corporation a majority of whose
Voting Stock is at the time, directly or indirectly, owned by such Person, by
one or more Subsidiaries of such Person or by such Person and one or more
Subsidiaries of such Person or (b) any other Person (other than a trust formed
in connection with a Qualified Securitization Transaction) in which such
Person, a Subsidiary of such Person or such Person and one or more
Subsidiaries of such Person, directly or indirectly, at the date of
determination thereof, have at least a majority ownership interest.
"Subsidiary Guarantee" means each Subsidiary Guarantee of the Notes issued
pursuant to "--Certain Covenants--Limitation on Guarantees by Subsidiaries"
above.
"Subsidiary Guarantor" means each Subsidiary of the Company that becomes a
guarantor of the Notes pursuant to "--Certain Covenants--Limitation on
Guarantees by Subsidiaries" above.
"Tax Allocation Agreement" means the Tax Allocation Agreement among Navistar
and its subsidiaries, effective as of October 1, 1981, as it has been and may
be amended and/or supplemented from time to time.
78
<PAGE>
"Transportation" means Navistar International Transportation Corp., a
Delaware corporation and the parent of the Company.
"Voting Stock" means, with respect to any Person, securities of any class or
classes of Capital Stock in such Person entitling the holders thereof (whether
at all times or only so long as no senior class of stock has voting power by
reason of any contingency) to vote in the election of members of the Board of
Directors or other governing body of such Person.
"Wholly Owned Subsidiary" means, with respect to any Person, any subsidiary
of such Person all the outstanding shares of Capital Stock (other than
directors' qualifying shares, if applicable) of which are owned directly by
such Person or another Wholly Owned Subsidiary of such Person.
79
<PAGE>
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following discussion is based on the current provisions of the Internal
Revenue Code of 1986, as amended (the "Code"), applicable Treasury
regulations, judicial authority and administrative rulings and practice. There
can be no assurance that the Internal Revenue Service (the "Service") will not
take a contrary view, and no ruling from the Service has been or will be
sought. Legislative, judicial or administrative changes or interpretations may
be forthcoming that could alter or modify the statements and conditions set
forth herein. Any such changes or interpretations may or may not be
retroactive and could affect the tax consequences to holders. Certain holders
(including insurance companies, tax-exempt organizations, financial
institutions, broker-dealers, foreign corporations and persons who are not
citizens or residents of the United States) may be subject to special rules
not discussed below. The Company recommends that each holder consult such
holder's own tax advisor as to the particular tax consequences of exchanging
such holder's Old Notes for Exchange Notes, including the applicability and
effect of any state, local or foreign tax laws.
The Company believes that the exchange of Old Notes for Exchange Notes
pursuant to the Exchange Offer will not be treated as an "exchange" for
federal income tax purposes because the Exchange Notes will not be considered
to differ materially in kind or extent from the Old Notes. Rather, the
Exchange Notes received by a holder will be treated as a continuation of the
Old Notes in the hands of such holder. As a result, there will be no federal
income tax consequences to holders exchanging Old Notes for Exchange Notes
pursuant to the Exchange Offer.
PLAN OF DISTRIBUTION
Each Participating Broker-Dealer that receives Exchange Notes for its own
account pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. This
Prospectus, as it may be amended or supplemented from time to time, may be
used by a Participating Broker-Dealer in connection with resales of Exchange
Notes received in exchange for Old Notes where such Old Notes were acquired as
a result of market-making activities or other trading activities. The Company
has agreed that for a period of 180 days after the Expiration Date, it will
make this Prospectus, as amended or supplemented, available to any
Participating Broker-Dealer for use in connection with any such resale
(provided that the Company receives notice from any Participating Broker-
Dealer of its status as a Participating Broker-Dealer within 30 days after the
consummation of the Exchange Offer). In addition, until , 1997 (90 days
after the commencement of the Exchange Offer), all dealers effecting
transactions in the Exchange Notes may be required to deliver a prospectus.
The Company will not receive any proceeds from any sales of the Exchange
Notes by Participating Broker-Dealers. Exchange Notes received by
Participating Broker-Dealers for their own account pursuant to the Exchange
Offer may be sold from time to time in one or more transactions in the over-
the-counter market, in negotiated transactions, through the writing of options
on the Exchange Notes or a combination of such methods of resale, at market
prices prevailing at the time of resale, at prices related to such prevailing
market prices or negotiated prices. Any such resale may be made directly to
purchasers or to or through brokers or dealers who may receive compensation in
the form of commissions or concessions from any such Participating Broker-
Dealer and/or the purchasers of any such Exchange Notes. Any Participating
Broker-Dealer that resells the Exchange Notes that were received by it for its
own account pursuant to the Exchange Offer and any broker or dealer that
participates in a distribution of such Exchange Notes may be deemed to be an
"underwriter" within the meaning of the Securities Act and any profit on any
such resale of Exchange Notes and any commissions or concessions received by
any such persons may be deemed to be underwriting compensation under the
Securities Act. The Letter of Transmittal states that by acknowledging that it
will deliver and by delivering a prospectus, a Participating Broker-Dealer
will not be deemed to admit that it is an "underwriter" within the meaning of
the Securities Act.
For a period of 180 days after the Expiration Date, the Company will
promptly send additional copies of this Prospectus and any amendment or
supplement to this Prospectus to any Participating Broker-Dealer that has
provided the Company with notice of its status as a Participating Broker-
Dealer within 30 days after the consummation of the Exchange Offer.
80
<PAGE>
LEGAL MATTERS
The validity of the Exchange Notes will be passed upon for the Company by
Kirkland & Ellis (a partnership including professional corporations), Chicago,
Illinois.
EXPERTS
The consolidated financial statements of Navistar Financial Corporation as
of October 31, 1996 and 1995 and for each of the three years in the period
ended October 31, 1996, included in Appendix A to this Prospectus have been
audited by Deloitte & Touche LLP, independent auditors, as stated in their
report appearing therein and have been so included in reliance upon the report
of such firm given upon their authority as experts in accounting and auditing.
81
<PAGE>
NAVISTAR
FINANCIAL
CORPORATION
LOGO
<PAGE>
PART II: INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 14: OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
Expenses which are payable by the Company in connection with the issuance
and distribution of the Exchange Notes being registered are estimated to be as
follows:
<TABLE>
<S> <C>
Registration fee................................................. $30,303
Printing costs................................................... *
Legal fees and expenses.......................................... *
Accounting fees and expenses..................................... *
Blue sky fees and expenses (including legal fees)................ *
Miscellaneous.................................................... *
-------
Total........................................................ $ *
=======
</TABLE>
- --------
*To be provided by amendment.
ITEM 15: INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the General Corporation Law of the State of Delaware ("DGCL")
contains detailed provisions for indemnification of directors and officers of
Delaware corporations against expenses, judgments, fines, and settlements in
connection with litigation.
The Company's Bylaws (Article XI) provide for the indemnification of
directors and officers of the Company to the fullest extent permitted by
Delaware law.
Policies of insurance are maintained by the Company under which the
Company's directors and officers are insured, within the limits and subject to
the limitations of the policies, against certain expenses in connection with
the defense of certain actions, suits, or proceedings and certain liabilities
which might be imposed as a result of certain actions, suits or proceedings,
to which they are parties by reason of being or having been such directors or
officers.
ITEM 16. EXHIBITS.
See Index to Exhibits.
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement;
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement;
II-1
<PAGE>
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at the time shall be deemed to
be the initial bona fide offering thereof;
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering;
(4) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of
the registrant's annual report pursuant to Section 13(a) or 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered, therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide
offering thereof;
(5) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the provisions, or
otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act of 1933 and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred
or paid by a directors, officer or controlling person of the registrant in
the successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to
a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of
such issue.
II-2
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE COMPANY
CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL THE
REQUIREMENTS FOR FILING ON FORM S-2 AND HAS DULY CAUSED THIS REGISTRATION
STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY
AUTHORIZED, IN CITY OF ROLLING MEADOWS, STATE OF ILLINOIS, ON THE 27TH DAY OF
JUNE, 1997.
Navistar Financial Corporation
/s/ John J. Bongiorno
By___________________________________
John J. Bongiorno
President and Chief Executive
Officer
KNOW ALL MEN BY THESE PRESENTS, THAT EACH PERSON WHOSE SIGNATURE APPEARS
BELOW CONSTITUTES AND APPOINTS JOHN J. BONGIORNO, R. WAYNE CAIN AND WILLIAM W.
JONES AND EACH OF THEM, HIS TRUE AND LAWFUL ATTORNEYS-IN-FACT AND AGENTS, WITH
FULL POWER OF SUBSTITUTION AND RESUBSTITUTION, FOR HIM AND IN HIS NAME, PLACE
AND STEAD, IN ANY AND ALL CAPACITIES, TO SIGN ANY OR ALL AMENDMENTS (INCLUDING
POST-EFFECTIVE AMENDMENTS) TO THIS REGISTRATION STATEMENT, AND TO FILE THE
SAME, WITH ALL EXHIBITS THERETO, AND OTHER DOCUMENTS IN CONNECTION THEREWITH,
WITH THE SECURITIES AND EXCHANGE COMMISSION, GRANTING UNTO SAID ATTORNEYS-IN-
FACT AND AGENTS, AND EACH OF THEM, FULL POWER AND AUTHORITY TO DO AND PERFORM
EACH AND EVERY ACT AND THING REQUISITE AND NECESSARY TO BE DONE IN AND ABOUT
THE PREMISES, AS FULLY TO ALL INTENTS AND PURPOSES AS HE MIGHT OR COULD DO IN
PERSON, HEREBY RATIFYING AND CONFIRMING ALL THAT SAID ATTORNEYS-IN-FACT AND
AGENTS OR ANY OF THEM, OR THEIR OR HIS SUBSTITUTE OR SUBSTITUTES, MAY LAWFULLY
DO OR CAUSE TO BE DONE BY VIRTUE HEREOF.
* * * * *
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN THE
CAPACITIES INDICATED ON THE 27TH DAY OF JUNE, 1997.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
/s/ John J. Bongiorno President and Chief Executive Officer;
___________________________________________ Director (Principal Executive Officer)
John J. Bongiorno
/s/ R. Wayne Cain Vice President and Treasurer; Director
___________________________________________ (Principal Financial Officer)
R. Wayne Cain
/s/ Phyllis E. Cochran Vice President and Controller; Director
___________________________________________ (Principal Accounting Officer)
Phyllis E. Cochran
Vice President, Operations; Director
___________________________________________
Jordan H. Feiger
/s/ John R. Horne Director
___________________________________________
John R. Horne
/s/ Thomas M. Hough Director
___________________________________________
Thomas M. Hough
Director
___________________________________________
Robert C. Lannert
/s/ J. Steven Keate Director
___________________________________________
J. Steven Keate
/s/ Thomas D. Silver Director
___________________________________________
Thomas D. Silver
</TABLE>
II-3
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
------- -------
<C> <S> <C>
4.1 Indenture, dated as of May 30, 1997, by and between the
Corporation and The Fuji Bank and Trust Company, as Trustee,
pursuant to which the Exchange Notes are to be issued.
4.2 Form of 9% Senior Subordinated Notes due 2002.
4.3 Indenture, dated as of November 15, 1993, between the
Corporation and Bank of America Illinois, formerly known as
Continental Bank, National Association, as Trustee, for 8 7/8%
Senior Subordinated Notes due 1998 for $100,000,000. Filed on
Registration No. 33-50541.
4.4 Purchase Agreement, dated as of May 22, 1997, by and among the
Corporation and J.P. Morgan Securities Inc., Chase Securities
Inc. and NationsBanc Capital Markets, Inc., as Initial
Purchasers.
4.5 Registration Rights Agreement, dated as of May 30, 1997, by
and among the Corporation and J.P. Morgan Securities Inc.,
Chase Securities Inc. and NationsBanc Capital Markets, Inc.,
as Initial Purchasers.
5.1 Opinion of Kirkland & Ellis as to legality of the securities
being offered.*
10.1 Pooling and Servicing Agreement dated as of December 1, 1990,
among the Corporation, as Servicer, Navistar Financial
Securities Corporation, as Seller, and Manufacturers Hanover
Trust Company, as Trustee. Filed on Registration No. 33-36767.
10.2 Purchase Agreement dated as of December 1, 1990, between the
Corporation and Navistar Financial Securities Corporation, as
Purchaser, with respect to the Dealer Note Trust 1990. Filed
on Registration No. 33-36767.
10.3 Security, Pledge and Trust Agreement between the Corporation
and Bankers Trust Company, Trustee, dated as of April 26,
1993. Filed on Form 8-K dated April 30, 1993. Commission File
No. 1-4146-1.
10.4 Amended and Restated Purchase Agreement among Truck Retail
Instalment Paper Corp., as Seller, the Corporation, certain
purchasers, Chemical Bank and Bank of America Illinois,
formerly known as Continental Bank N.A. as Co-Agents, and J.P.
Morgan Delaware as Administrative Agent, dated as of April 26,
1993. Filed on Form 8-K dated April 30, 1993. Commission File
No. 1-4146-1.
10.5 Master Inter-company Agreement dated as of April 26, 1993,
between the Corporation and Transportation. Filed on Form 8-K
dated April 30, 1993. Commission File No. 1-4146-1.
10.6 Inter-company Purchase Agreement dated as of April 26, 1993,
between the Corporation and Truck Retail Instalment Paper
Corp. Filed on Form 8-K dated April 30, 1993. Commission File
No. 1-4146-1.
10.7 Purchase Agreement dated as of May 3, 1994, between the
Corporation and Navistar Financial Retail Receivables
Corporation, as Purchaser, with respect to Navistar Financial
1994-A Owner Trust. Filed on Registration No. 33-50291.
10.8 Pooling and Servicing Agreement dated as of May 3, 1994, among
the Corporation, as Servicer, and Navistar Financial Retail
Receivables Corporation, as Seller, and Navistar Financial
1994-A Owner Trust, as Issuer. Filed on Registration No. 33-
50291.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
------- -------
<C> <S> <C>
10.9 Trust Agreement dated as of May 3, 1994, between Navistar
Financial Retail Receivables Corporation, as Seller, and
Chemical Bank Delaware, as Owner Trustee, with respect to
Navistar Financial 1994-A Owner Trust. Filed on Registration
No. 33-50291.
10.10 Indenture dated as of May 3, 1994, between Navistar Financial
1994-A Owner Trust and The Bank of New York, as Indenture
Trustee, with respect to Navistar Financial 1994-A Owner
Trust. Filed on Registration No. 33-50291.
10.11 Purchase Agreement dated as of August 3, 1994, between the
Corporation and Navistar Financial Retail Receivables
Corporation, as Purchaser, with respect to Navistar Financial
1994-B Owner Trust. Filed on Registration No. 33-50291.
10.12 Pooling and Servicing Agreement dated as of August 3, 1994,
among the Corporation, as Servicer, and Navistar Financial
Retail Receivables Corporation, as Seller, and Navistar
Financial 1994-B Owner Trust, as Issuer. Filed on Registration
No. 33-50291.
10.13 Trust Agreement dated as of August 3, 1994, between Navistar
Financial Retail Receivables Corporation, as Seller, and
Chemical Bank Delaware, as Owner Trustee, with respect to
Navistar Financial 1994-B Owner Trust. Filed on Registration
No. 33-50291.
10.14 Indenture dated as of August 3, 1994, between Navistar
Financial 1994-B Owner Trust and The Bank of New York, as
Indenture Trustee, with respect to Navistar Financial 1994-B
Owner Trust. Filed on Registration No.33-50291.
10.15 Amended and Restated Credit Agreement dated as of November 4,
1994, among the Corporation, certain banks, certain Co-
Arranger banks, and Morgan Guaranty Trust Company of New York,
as Administrative Agent. Filed on Form 8-K dated November 4,
1994. Commission File No. 1-4146-1.
10.16 Liquidity Agreement dated as of November 7, 1994, among NFC
Asset Trust, as Borrower, Chemical Bank, Bank of America
Illinois, The Bank of Nova Scotia, and Morgan Guaranty Trust
Company of New York, as Co-Arrangers, and Chemical Bank, as
Administrative Agent. Filed on Form 8-K dated November 4,
1994. Commission File No. 1-4146-1.
10.17 Appendix A to Liquidity Agreement at Exhibit 10.20. Filed on
Form 8-K dated November 4, 1994. Commission File No. 1-4146-1.
10.18 Collateral Trust Agreement dated as of November 7, 1994,
between NFC Asset Trust and Bankers Trust Company, as Trustee.
Filed on Form 8-K dated November 4, 1994. Commission File No.
1-4146-1.
10.19 Administration Agreement dated as of November 7, 1994, between
NFC Asset Trust and the Corporation, as Administrator. Filed
on Form 8-K dated November 4, 1994. Commission File No. 1-
4146-1.
10.20 Trust Agreement dated as of November 7, 1994, between Truck
Retail Instalment Paper Corp., as Depositor, and Chemical Bank
Delaware, as Owner Trustee. Filed on Form 8-K dated November
4, 1994. Commission File No. 1-4146-1.
10.21 Servicing Agreement dated as of November 7, 1994, between the
Corporation, as Servicer, and Truck Retail Instalment Paper
Corp. Filed on Form 8-K dated November 4, 1994. Commission
File No. 1-4146-1.
10.22 Servicing Agreement dated as of November 7, 1994, between the
Corporation, as Servicer, and NFC Asset Trust. Filed on Form
8-K dated November 4, 1994. Commission File No. 1-4146-1.
10.23 Receivables Purchase Agreement dated as of November 7, 1994,
between Truck Retail Instalment Paper Corp., as Seller, and
NFC Asset Trust, as Purchaser. Filed on Form 8-K dated
November 4, 1994. Commission File No. 1-4146-1.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
------- -------
<C> <S> <C>
10.24 Retail Receivables Purchase Agreement dated as of November 7,
1994, between Truck Retail Instalment Paper Corp. and the
Corporation. Filed on Form 8-K dated November 4, 1994.
Commission File No. 1-4146-1.
10.25 Lease Receivables Purchase Agreement dated as of November 7,
1994, between Truck Retail Instalment Paper Corp. and Navistar
Leasing Corporation. Filed on Form 8-K dated November 4, 1994.
Commission File No. 1-4146-1.
10.26 Purchase Agreement dated as of December 15, 1994, between the
Corporation and Navistar Financial Retail Receivables
Corporation, as Purchaser, with respect to Navistar Financial
1994-C Owner Trust. Filed on Registration No. 33-55865.
10.27 Pooling and Servicing Agreement dated as of December 15, 1994,
among the Corporation, as Servicer, and Navistar Financial
Retail Receivables Corporation, as Seller, and Navistar
Financial 1994-C Owner Trust, as Issuer. Filed on Registration
No. 33-55865.
10.28 Trust Agreement dated as of December 15, 1994, between
Navistar Financial Retail Receivables Corporation, as Seller,
and Chemical Bank Delaware, as Owner Trustee, with respect to
Navistar Financial 1994-C Owner Trust. Filed on Registration
No. 33-55865.
10.29 Indenture dated as of December 15, 1994, between Navistar
Financial 1994-C Owner Trust and The Bank of New York, as
Indenture Trustee, with respect to Navistar Financial 1994-C
Owner Trust. Filed on Registration No. 33-55865.
10.30 Purchase Agreement dated as of May 25, 1995, between the
Corporation and Navistar Financial Retail Receivables
Corporation, as Purchaser, with respect to Navistar Financial
1995-A Owner Trust. Filed on Registration No. 33-55865.
10.31 Pooling and Servicing Agreement dated as of May 25, 1995,
among the Corporation, as Servicer, and Navistar Financial
Retail Receivables Corporation, as Seller, and Navistar
Financial 1995-A Owner Trust, as Issuer. Filed on Registration
No. 33-55865.
10.32 Trust Agreement dated as of May 25, 1995, between Navistar
Financial Retail Receivables Corporation, as Seller, and
Chemical Bank Delaware, as Owner Trustee, with respect to
Navistar Financial 1995-A Owner Trust. Filed on Registration
No. 33-55865.
10.33 Indenture dated as of May 25, 1995, between Navistar Financial
1995-A Owner Trust and The Bank of New York, as Indenture
Trustee, with respect to Navistar Financial 1995-A Owner
Trust. Filed on Registration No. 33-55865.
10.34 Pooling and Servicing Agreement dated as of June 8, 1995,
among the Corporation, as Servicer, Navistar Financial
Securities Corporation, as Seller, Chemical Bank, as 1990
Trust Trustee, and The Bank of New York as Master Trust
Trustee. Filed on Registration No. 33-87374.
10.35 Series 1995-1 Supplement to the Pooling and Servicing
Agreement dated as of June 8, 1995, among the Corporation, as
Servicer, Navistar Financial Securities Corporation, as
Seller, and The Bank of New York, as Master Trust Trustee on
behalf of the Series 1995-1 Certificateholders. Filed on
Registration No. 33-87374.
10.36 Class A-4 Supplement to the 1990 Pooling and Servicing
Agreement dated June 8, 1995, among the Corporation, as
Servicer, Navistar Financial Securities Corporation, as
Seller, and Chemical Bank (Successor to Manufacturers Hanover
Trust Company), as Trustee. Filed on Registration No. 33-
87374.
10.37 Purchase Agreement dated as of June 8, 1995, between the
Corporation and Navistar Financial Securities Corporation, as
Purchaser, with respect to the Dealer Note Master Trust. Filed
on Registration No. 33-87374.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
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<C> <S> <C>
10.38 Purchase Agreement dated as of November 1, 1995, between the
Corporation and Navistar Financial Retail Receivables
Corporation, as Purchaser, with respect to Navistar Financial
1995-B Owner Trust. Filed on Registration No. 33-55865.
10.39 Pooling and Servicing Agreement dated as of November 1, 1995,
among the Corporation, as Servicer, and Navistar Financial
Retail Receivables Corporation, as Seller, and Navistar
Financial 1995-B Owner Trust, as Issuer. Filed on Registration
No. 33-55865.
10.40 Trust Agreement dated as of November 1, 1995, between Navistar
Financial Retail Receivables Corporation, as Seller, and
Chemical Bank Delaware, as Owner Trustee, with respect to
Navistar Financial 1995-B Owner Trust. Filed on Registration
No. 33-55865.
10.41 Indenture dated as of November 1, 1995, between Navistar
Financial 1995-B Owner Trust and The Bank of New York, as
Indenture Trustee, with respect to Navistar Financial 1995-B
Owner Trust. Filed on Registration No. 33-55865.
10.42 Amendment No. 1 dated as of March 29, 1996, to the Loan and
Security Agreement dated as of November 7, 1994, between Truck
Retail Instalment Paper Corp. ("TRIP") and NFC Asset Trust
(the "Trust") filed on Form 8-K dated June 5, 1996. Commission
File No. 1-4146-1.
10.43 Amendment No. 1 and Consent dated as of March 29, 1996, to the
Liquidity Agreement dated as of November 7, 1994, among NFC
Asset Trust, certain lenders, and Chemical Bank, as
Administrative Agent for the lenders filed on Form 8-K dated
June 5, 1996. Commission File No. 1-4146-1.
10.44 Amendment No. 2 dated as of March 29, 1996, to the Amended and
Restated Credit Agreement dated as of November 4, 1994, as
amended by Amendment No. 1 dated as of December 15, 1995,
among the Corporation, certain banks, certain Co-Arranger
banks, and Morgan Guaranty Trust Company of New York, as
Administrative Agent filed on Form 8-K dated June 5, 1996.
Commission File No. 1-4146-1.
10.45 Purchase Agreement dated as of May 30, 1996, between the
Corporation and Navistar Financial Retail Receivables
Corporation, as Purchaser, with respect to Navistar Financial
1996-A Owner Trust. Filed on Registration No. 33-55865.
10.46 Pooling and Servicing Agreement dated as of May 30, 1996,
among the Corporation, as Servicer, and Navistar Financial
Retail Receivables Corporation, as Seller, and Navistar
Financial 1996-A Owner Trust, as Issuer. Filed on Registration
No. 33-55865.
10.47 Trust Agreement dated as of May 30, 1996, between Navistar
Financial Retail Receivables Corporation, as Seller, and
Chemical Bank Delaware, as Owner Trustee, with respect to
Navistar Financial 1996-A Owner Trust. Filed on Registration
No. 33-55865.
10.48 Indenture dated as of November 6, 1996, between Navistar
Financial 1995-B Owner Trust and The Bank of New York, as
Indenture Trustee, with respect to Navistar Financial 1996-A
Owner Trust. Filed on Registration No. 33-55865.
10.49 Purchase Agreement dated as of November 6, 1996, between the
Corporation and Navistar Financial Retail Receivables
Corporation, as Purchaser, with respect to Navistar Financial
1996-B Owner Trust. Filed on Registration No. 33-55865.
10.50 Pooling and Servicing Agreement dated as of November 6, 1996,
among the Corporation, as Servicer, and Navistar Financial
Retail Receivables Corporation, as Seller, and Navistar
Financial 1996-B Owner Trust, as Issuer. Filed on Registration
No. 33-55865.
10.51 Trust Agreement dated as of November 6, 1996, between Navistar
Financial Retail Receivables Corporation, as Seller, and
Chemical Bank Delaware, as Owner Trustee, with respect to
Navistar Financial 1996-B Owner Trust. Filed on Registration
No. 33-55865.
</TABLE>
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<TABLE>
<CAPTION>
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NUMBER EXHIBIT
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<C> <S> <C>
10.52 Indenture dated as of November 6, 1996, between Navistar
Financial 1995-B Owner Trust and The Bank of New York, as
Indenture Trustee, with respect to Navistar Financial 1996-B
Owner Trust. Filed on Registration No. 33-55865.
10.53 Purchase Agreement dated as of May 7, 1997, between the
Corporation and Navistar Financial Retail Receivables
Corporation, as Purchaser, with respect to Navistar Financial
1997-A Owner Trust. Filed on Registration No. 33-55865.
10.54 Pooling and Servicing Agreement dated as of May 7, 1997, among
the Corporation, as Servicer, and Navistar Financial Retail
Receivables Corporation, as Seller, and Navistar Financial
1997-A Owner Trust, as Issuer. Filed on Registration No. 33-
55865.
10.55 Trust Agreement dated as of May 7, 1997, between Navistar
Financial Retail Receivables Corporation, as Seller, and Chase
Manhattan Bank Delaware, as Owner Trustee, with respect to
Navistar Financial 1997-A Owner Trust. Filed on Registration
No. 33-55865.
10.56 Indenture dated as of May 7, 1997, between Navistar Financial
1997-A Owner Trust and The Bank of New York, as Indenture
Trustee, with respect to Navistar Financial 1997-A Owner
Trust. Filed on Registration No. 33-55865.
10.57 Amendment No. 3 dated as of May 27, 1997, to the Amended and
Restated Credit Agreement dated as of November 4, 1994, as
amended by Amendment No. 1 dated as of December 15, 1995 and
Amendment No. 2 dated as of March 29, 1996, among the
Corporation, certain banks, certain Co-Arranger banks, and
Morgan Guaranty Trust Company of New York, as Administrative
Agent filed on Form 8-K dated June 17, 1997. Commission File
No. 1-4146-1.
12.1 Statements regarding computation of ratios.
13.1 The Corporation's Annual Report on Form 10-K for the fiscal
year ended October 31, 1996. Filed on Form 10-K dated January
22, 1997. Commission File No. 1-4146-1.
13.2 The Corporation's Quarterly Report on Form 10-Q for the fiscal
quarter ended January 31, 1997. Filed on Form 10-Q dated March
14, 1997. Commission File No. 1-4146-1.
13.3 The Corporation's Quarterly Report on Form 10-Q for the fiscal
quarter ended April 30, 1997. Filed on Form 10-Q dated June
13, 1997. Commission File No. 1-4146-1.
23.1 Consent of Deloitte & Touche LLP.
23.2 Consent of Kirkland & Ellis (included in Exhibit 5.1 above).*
24.1 Power of Attorney (included in Part II of the Registration
Statement).
25.1 Statement of Eligibility of Trustee.*
99.1 Form of Letter of Transmittal.*
99.2 Form of Notice of Guaranteed Delivery.*
99.3 Form of Tender Instructions.*
</TABLE>
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* To be filed by amendment.
<PAGE>
Exhibit 4.1
================================================================================
NAVISTAR FINANCIAL CORPORATION,
as Issuer
and
THE FUJI BANK AND TRUST COMPANY,
as Trustee
____________________
INDENTURE
Dated as of May 30, 1997
____________________
$100,000,000
9% Senior Subordinated Notes due 2002
================================================================================
<PAGE>
CROSS-REFERENCE TABLE
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<TABLE>
<CAPTION>
TIA Indenture
Section Section
- ------- ---------
<S> <C>
(S)310(a)(1)............................................. 7.10
(a)(2)............................................. 7.10
(a)(3)............................................. N.A.
(a)(4)............................................. N.A.
(a)(5)............................................. 7.10
(b)................................................ 7.8; 7.10; 10.2
(c)................................................ N.A.
(S)311(a)................................................ 7.11
(b)................................................ 7.11
(c)................................................ N.A.
(S)312(a)................................................ 2.5
(b)................................................ 10.3
(c)................................................ 10.3
(S)313(a)................................................ 7.6
(b)(1)............................................. 7.6
(b)(2)............................................. 7.6
(c)................................................ 7.6; 10.2
(d)................................................ 7.6
(S)314(a)................................................ 4.6; 4.7; 10.2
(b)................................................ N.A.
(c)(1)............................................. 10.4
(c)(2)............................................. 10.4
(c)(3)............................................. 10.4
(d)................................................ N.A.
(e)................................................ 10.5
(f)................................................ N.A.
(S)315(a)................................................ 7.1(b)
(b)................................................ 7.5; 10.2
(c)................................................ 7.1(a)
(d)................................................ 7.1(c)
(e)................................................ 6.11
(S)316(a) (last sentence)................................ 2.9
(a)(1)(A).......................................... 6.5
(a)(1)(B).......................................... 6.4
(a)(2)............................................. N.A.
(b)................................................ 6.6, 6.7
(c)................................................ 9.4
(S)317(a)(1)............................................. 6.8
(a)(2)............................................. 6.9
(b)................................................ 2.4
(S)318(a)................................................ 10.1
</TABLE>
<PAGE>
(c).......................... 10.1
- ---------------
N.A. means Not Applicable.
NOTE: This Cross-Reference Table shall not, for any purpose, be deemed to be a
part of this Indenture.
<PAGE>
TABLE OF CONTENTS
Page
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ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.1 Definitions...................................................1
SECTION 1.2 Incorporation by Reference of Trust Indenture Act............28
SECTION 1.3 Rules of Construction........................................29
ARTICLE II
THE SECURITIES
SECTION 2.1 Form and Dating..............................................30
SECTION 2.2 Execution and Authentication.................................32
SECTION 2.3 Registrar and Paying Agent...................................33
SECTION 2.4 Paying Agent To Hold Money in Trust..........................34
SECTION 2.5 Securityholder Lists.........................................34
SECTION 2.6 Transfer and Exchange........................................34
SECTION 2.7 Replacement Securities.......................................47
SECTION 2.8 Temporary Securities.........................................48
SECTION 2.9 Cancellation.................................................49
SECTION 2.10 Defaulted Interest...........................................49
SECTION 2.11 CUSIP or CINS Number.........................................51
SECTION 2.12 Payments of Interest.........................................51
ARTICLE III
[RESERVED]
ARTICLE IV
COVENANTS
SECTION 4.1 Payment of Securities........................................52
SECTION 4.2 Maintenance of Office or Agency..............................53
SECTION 4.3 Corporate Existence..........................................53
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SECTION 4.4 Payment of Taxes and Other Claims........................... 54
SECTION 4.5 Maintenance of Properties;
Insurance; Books and Records;
Compliance with Law...................................... 54
SECTION 4.6 Compliance Certificates..................................... 55
SECTION 4.7 Reports..................................................... 57
SECTION 4.8 Maintenance of Consolidated Fixed
Charge Coverage Ratio.................................... 58
SECTION 4.9 Limitation on Indebtedness.................................. 58
SECTION 4.10 Waiver of Stay, Extension or Usury
Laws..................................................... 59
SECTION 4.11 Change of Control........................................... 60
SECTION 4.12 Limitation on Transactions with
Affiliates............................................... 62
SECTION 4.13 Limitation on Liens......................................... 63
SECTION 4.14 Limitation on Payment Restrictions
Affecting Subsidiaries................................... 65
SECTION 4.15 Limitation on Guarantees by
Subsidiaries............................................. 65
SECTION 4.16 Limitation on Senior Subordinated
Indebtedness............................................. 67
SECTION 4.17 Limitation on Termination of Master
Intercompany Agreement................................... 68
ARTICLE V
SUCCESSOR CORPORATION
SECTION 5.1 Merger, Consolidation, Etc.................................. 68
SECTION 5.2 Successor Entity Substituted................................ 71
ARTICLE VI
DEFAULT AND REMEDIES
SECTION 6.1 Events of Default........................................... 72
SECTION 6.2 Acceleration................................................ 75
SECTION 6.3 Other Remedies.............................................. 76
SECTION 6.4 Waiver of Past Default...................................... 76
SECTION 6.5 Control by Majority......................................... 77
SECTION 6.6 Limitation on Suits......................................... 77
</TABLE>
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SECTION 6.7 Rights of Holders To Receive
Payment.................................................. 78
SECTION 6.8 Collection Suit by Trustee.................................. 78
SECTION 6.9 Trustee May File Proofs of Claim............................ 78
SECTION 6.10 Priorities.................................................. 79
SECTION 6.11 Undertaking for Costs....................................... 80
SECTION 6.12 Rights and Remedies Cumulative.............................. 80
SECTION 6.13 Delay or Omission Not Waiver................................ 80
SECTION 6.14 Restoration of Rights and Remedies.......................... 81
ARTICLE VII
TRUSTEE
SECTION 7.1 Duties of Trustee........................................... 81
SECTION 7.2 Rights of Trustee........................................... 83
SECTION 7.3 Individual Rights of Trustee................................ 84
SECTION 7.4 Trustee's Disclaimer........................................ 84
SECTION 7.5 Notice of Defaults.......................................... 84
SECTION 7.6 Reports by Trustee to Holders............................... 85
SECTION 7.7 Compensation and Indemnity.................................. 85
SECTION 7.8 Replacement of Trustee...................................... 86
SECTION 7.9 Successor Trustee by Merger, Etc............................ 88
SECTION 7.10 Eligibility; Disqualification............................... 88
SECTION 7.11 Preferential Collection of Claims
Against Company.......................................... 88
ARTICLE VIII
SATISFACTION AND DISCHARGE OF INDENTURE
SECTION 8.1 Termination of the Company's
Obligations.............................................. 89
SECTION 8.2 Legal Defeasance and Covenant
Defeasance............................................... 91
SECTION 8.3 Application of Trust Money.................................. 97
SECTION 8.4 Repayment to Company or Subsidiary
Guarantors............................................... 97
SECTION 8.5 Reinstatement............................................... 98
</TABLE>
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ARTICLE IX
AMENDMENTS, SUPPLEMENTS AND WAIVERS
<S> <C> <C>
SECTION 9.1 Without Consent of Holders................................. 98
SECTION 9.2 With Consent of Holders.................................... 99
SECTION 9.3 Compliance with Trust Indenture
Act..................................................... 101
SECTION 9.4 Revocation and Effect of Consents.......................... 101
SECTION 9.5 Notation on or Exchange of
Securities.............................................. 102
SECTION 9.6 Trustee to Sign Amendments, Etc............................ 103
ARTICLE X
MISCELLANEOUS
SECTION 10.1 Trust Indenture Act Controls............................... 103
SECTION 10.2 Notices.................................................... 103
SECTION 10.3 Communications by Holders with
Other Holders........................................... 105
SECTION 10.4 Certificate and Opinion of Counsel
as to Conditions Precedent.............................. 105
SECTION 10.5 Statements Required in Certificate
and Opinion of Counsel.................................. 106
SECTION 10.6 Rules by Trustee, Paying Agent,
Registrar............................................... 106
SECTION 10.7 Legal Holidays............................................. 106
SECTION 10.8 Governing Law.............................................. 107
SECTION 10.9 No Recourse Against Others................................. 107
SECTION 10.10 Successors................................................. 107
SECTION 10.11 Counterparts............................................... 107
SECTION 10.12 Severability............................................... 107
SECTION 10.13 Table of Contents, Headings, Etc........................... 108
SECTION 10.14 No Adverse Interpretation of Other
Agreements.............................................. 108
SECTION 10.15 Benefits of Indenture...................................... 108
SECTION 10.16 Independence of Covenants.................................. 108
</TABLE>
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ARTICLE XI
SUBORDINATION OF SECURITIES
SECTION 11.1 Agreement to Subordinate.................................... 109
SECTION 11.2 Subrogation................................................. 112
SECTION 11.3 Relative Rights............................................. 113
SECTION 11.4 Trustee To Effectuate
Subordination............................................ 114
SECTION 11.5 Trustee Not Fiduciary for Holders
of Senior Indebtedness of the
Company.................................................. 114
SECTION 11.6 Notice by Company........................................... 114
SECTION 11.7 Rights of Trustee........................................... 115
SECTION 11.8 Company May Not Impair
Subordination............................................ 115
SECTION 11.9 Rights of Paying Agent...................................... 115
SIGNATURES ................................................................ S-1
EXHIBIT A - Form of Security
EXHIBIT B - Terms of Subsidiary Guarantee
EXHIBIT C - Form of Subsidiary Guarantee
EXHIBIT D Form of Certificate of Transfer
EXHIBIT E Form of Certificate of Exchange
</TABLE>
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<PAGE>
INDENTURE dated as of May 30, 1997, between NAVISTAR FINANCIAL
CORPORATION, a Delaware corporation, as Issuer (the "Company"), and THE FUJI
BANK AND TRUST COMPANY, as Trustee (the "Trustee").
The Company has duly authorized the execution and delivery of this
Indenture to provide for the issuance of the 9% Senior Subordinated Notes due
June 1, 2002 of the Company (the "Securities") to be issued as provided for in
this Indenture. All things necessary to make the Securities, when duly issued
and executed by the Company and authenticated and delivered hereunder, the valid
obligations of the Company, and to make this Indenture a valid, binding
agreement of the Company, in accordance with their respective terms, have been
done.
The parties hereto agree as follows for the benefit of each other and
for the equal and ratable benefit of the Holders:
ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE
------------------------------------------
SECTION 1.1 Definitions.
"Acquired Indebtedness" of any specified Person means Indebtedness of
any other Person and its Subsidiaries existing at the time such other Person
merged with or into or became a Subsidiary of such specified Person or assumed
by the specified Person in connection with the acquisition of assets from such
other Person including, without limitation, Indebtedness of such other Person
and its Subsidiaries incurred by the specified Person in connection with or in
anticipation of (a) such other Person and its Subsidiaries being merged with or
into or becoming a Subsidiary of such specified Person or (b) such acquisition
by the specified Person.
"Additional Interest" shall have the meaning set forth in the
Registration Rights Agreement.
<PAGE>
-2-
"Affiliate" means, when used with reference to any Person, any other
Person directly or indirectly controlling, controlled by, or under direct or
indirect common control with, the referent Person, as the case may be. For the
purposes of this definition, "control" when used with respect to any specified
Person means the power to direct or cause the direction of management or
policies of the referent Person, directly or indirectly, whether through the
ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative of the foregoing.
"Agent" means any Registrar, Paying Agent or co-registrar. See
Section 2.3.
"Applicable Procedures" means with respect to any transfer or exchange
of interests in a Global Security, the rules and procedures of DTC, Euroclear or
Cedel that apply to such transfer or exchange.
An "Associate" of, or a Person "associated" with, any Person means (i)
any trust or other estate in which such Person has a substantial beneficial
interest or as to which such Person serves as trustee or in a similar fiduciary
capacity and (ii) any relative or spouse of such Person, or any relative of such
spouse, who has the same home as such Person.
"Bankruptcy Law" means Title 11 of the U.S. Code or any similar
Federal or state law for the relief, reorganization, adjustment or recomposition
of debtors.
"Board of Directors" means with respect to any Person, the Board of
Directors of such Person or any committee of such Board of Directors authorized
to act for it hereunder.
"Business Day" means any day except a Saturday, a Sunday or any day on
which banking institutions in either New York City, New York or Chicago,
Illinois are required or authorized by law or other governmental action to be
closed.
"Capitalized Lease Obligation" means obligations under a lease that
are required to be classified and accounted
<PAGE>
-3-
for as capital lease obligations under GAAP and, for purposes of this Indenture,
the amount of such obligations at any date shall be the capitalized amount of
such obligations at such date, determined in accordance with GAAP. The Stated
Maturity of such obligation shall be the date of the last payment of rent or any
other amount due under such lease prior to the first date upon which such lease
may be terminated by the lessee without penalty.
"Capital Stock" means, with respect to any Person, any and all shares,
interests, participations, rights in, or other equivalents (however designated
and whether voting or non-voting) of, such Person's capital stock, including
each class of Common or Preferred Stock of such Person, whether outstanding on
the Issue Date or issued after the Issue Date, and any and all rights, warrants
or options exchangeable for or convertible into such capital stock.
"Change of Control" means the occurrence of one or more of the
following events: (i) any "person" or "group" (as such terms are used in
Section 13(d) and 14(d) of the Exchange Act), other than employee or retiree
benefit plans or trusts sponsored or established by the Company or
Transportation, is or becomes the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of (A) securities of Navistar
representing 25% or more of the combined voting power of Navistar's then
outstanding Voting Stock, (B) securities of the Company representing 49% or more
of the combined voting power of the Company's then outstanding Voting Stock or
(C) securities of Transportation representing 50% or more of the combined voting
power of Transportation's then outstanding Voting Stock; (ii) the following
individuals cease for any reason to constitute more than three-fourths of the
number of directors then serving on the Board of Directors of Navistar:
individuals who, on the date hereof, constitute the Board of Directors and any
new director (other than a director whose initial assumption of the office is in
connection with an actual or threatened election contest, including but not
limited to a consent solicitation, relating to the election of directors of
Navistar) whose appointment or election by the Board of
<PAGE>
-4-
Directors or nomination for election by the Company's stockholders was approved
by the vote of at least two-thirds (2/3) of the directors then still in office
or whose appointment, election or nomination was previously so approved or
recommended; (iii) the shareholders of Navistar, of Transportation or of the
Company shall approve any Plan of Liquidation (whether or not otherwise in
compliance with the provisions of this Indenture); or (iv) the Company
consolidates with or merges with or into another Person, or the Company or any
Subsidiary of the Company, directly or indirectly, sells, assigns, conveys,
transfers, leases or otherwise disposes of, in one transaction or a series of
related transactions, all or substantially all of the property or assets of the
Company and the Subsidiaries of the Company (determined on a consolidated basis)
to any Person, or any Person consolidates with, or merges with or into, the
Company, in any such event pursuant to a transaction in which the outstanding
Voting Stock of the Company is converted into or exchanged for cash, securities
or other property, and, as a result of which, neither Navistar nor
Transportation has "beneficial ownership" (as set forth above), directly or
indirectly, of at least 50% (fifty percent) of the combined voting power of the
then outstanding Voting Stock of the surviving or transferee corporation,
provided that neither (x) the merger of a Subsidiary of the Company into the
Company or into any Wholly Owned Subsidiary of the Company nor (y) a series of
transactions involving the sale of Receivables or interests therein in the
ordinary course of business by the Company or a Securitization Subsidiary in
connection with a Qualified Securitization Transaction, shall be deemed to be a
Change of Control.
For purposes of the foregoing, the transfer (by lease, assignment,
sale or otherwise, in a single transaction or series of transactions) of all or
substantially all of the properties or assets of one or more Subsidiaries of the
Company, the Capital Stock of which constitutes all or substantially all of the
properties and assets of the Company, shall be deemed to be the transfer of all
or substantially all of the properties and assets of the Company.
<PAGE>
-5-
"Cedel" means Cedel Bank, societe anonyme.
"Change of Control Date" has the meaning provided in Section 4.11.
"Change of Control Offer" has the meaning provided in Section 4.11.
"Change of Control Payment Date" has the meaning provided in Section
4.11.
"Change of Control Triggering Event" means the occurrence of both (a)
a Change of Control and (b) a Ratings Event.
"Commission" means the Securities and Exchange Commission, as from
time to time constituted, created under the Exchange Act, or, if at any time
after the execution of this instrument such Commission is not existing and
performing the duties now assigned to it under the Trust Indenture Act, then the
body performing such duties at such time.
"Common Stock" of any Person means any and all shares, interests or
other participations in, and other equivalents (however designated and whether
voting or non-voting) of such Person's common stock, whether outstanding on the
Issue Date or issued after the Issue Date, and includes, without limitation, all
series and classes of such common stock.
"Company" means the party named as such in this Indenture until a
successor replaces it in accordance with the provisions of this Indenture and,
thereafter, means the successor.
"Consolidated EBITDA" for any Person means, for any period for which
it is to be determined, the sum of, without duplication, the amounts for such
period, taken as a single accounting period, of (i) Consolidated Net Income of
such Person and its Consolidated Subsidiaries for such period; (ii) cash
payments made to the Company during such period or within 30 days after such
period by Navistar or Transportation pursuant to the Amended and Restated
Parents' Side Agreement, as amended
<PAGE>
-6-
and restated as of November 4, 1994, among the Company, Navistar and
Transportation or any other similar agreement; and (iii) only to the extent
Consolidated Net Income has been reduced thereby, (A) Consolidated Tax Expense
of such Person and its Consolidated Subsidiaries for such period; (B)
Consolidated Interest Expense of such Person for such period; and (C) all
depreciation and amortization expense (including, without limitation,
amortization of capitalized debt issuance costs) and other non-cash expenses
(other than any non-cash item which requires the accrual of or a reserve for
cash charges for any future period and other than any non-cash charge
constituting an extraordinary item of loss) of such Person and its Consolidated
Subsidiaries for such period, less the amount of consolidated non-cash items
increasing Consolidated Net Income for such period, all as determined on a
consolidated basis in conformity with GAAP.
"Consolidated Fixed Charge Coverage Ratio" means, with respect to any
Person, the ratio of (a) the aggregate amount of Consolidated EBITDA of such
Person for the four full Fiscal Quarters ending on or immediately prior to the
date of measurement (such four full fiscal quarter period being referred to
herein as the "Four Quarter Period") to (b) the aggregate Consolidated Fixed
Charges of such Person for such Four Quarter Period.
"Consolidated Fixed Charges" means, with respect to any Person for any
period, the sum of, without duplication, the amounts for such period, taken as a
single accounting period, of (i) Consolidated Interest Expense; and (ii) the
product of (x) the amount of all dividend requirements (whether or not declared)
on Preferred Stock of such Person, whether in cash or otherwise (except
dividends payable in shares of Common Stock) paid, accrued or scheduled to be
paid or accrued during such period times (y) a fraction, the numerator of which
is one and the denominator of which is one minus the then current effective
consolidated Federal, state, local and foreign tax rate (expressed as a decimal
number between 1 and 0) of such Person (as reflected in the audited consolidated
financial statements of such Person for the most recently completed fiscal
year).
<PAGE>
-7-
"Consolidated Interest Expense" means, with respect to any Person for
any period, the aggregate of the interest expense (without deduction of interest
income) of such Person for such period, on a consolidated basis, as determined
in accordance with GAAP, including (a) all amortization of original issue
discount; (b) the interest component of Capitalized Lease Obligations paid,
accrued and/or scheduled to be paid or accrued by such Person during such
period; (c) net cash costs under all Interest Rate Protection Agreements
(including amortization of fees); (d) all capitalized interest; (e) the interest
portion of any deferred payment obligations for such period; and (f) 25%
(twenty-five percent) of the amount of all lease payments (other than
Capitalized Lease Obligations) paid, accrued and/or scheduled to be paid or
accrued by such Person during such period, provided that all amortization of
debt issuance costs shall be excluded in calculating Consolidated Interest
Expense.
"Consolidated Net Income" means, with respect to any Person for any
period, the consolidated net income (or deficit) of such Person and its
Consolidated Subsidiaries for such period, on a consolidated basis, as
determined in accordance with GAAP, provided that the net income of any other
Person in which the referent Person or any Subsidiary of the referent Person has
a joint interest with a third party (which interest does not cause the net
income of such other Person to be consolidated into the net income of the
referent Person in accordance with GAAP) shall be included only to the extent of
the amount that has been actually received by the referent Person or a
Subsidiary of the referent Person in the form of cash dividends or similar cash
distributions, and provided, further, that there shall be excluded (i) the net
income of any Person acquired in a "pooling of interests" transaction accrued
prior to the date it became a Subsidiary of the referent Person or is merged
into or consolidated with the referent Person or any Subsidiary of the referent
Person; (ii) any restoration to income of any contingency reserve, except to the
extent that provision for such reserve was made out of Consolidated Net Income
accrued at any time following the Issue Date; (iii) any gain or loss, together
with any related provisions for taxes, realized
<PAGE>
-8-
upon the sale or other disposition (including, without limitation, dispositions
pursuant to sale-leaseback transactions) of any property or assets which are not
sold or otherwise disposed of in the ordinary course of business (provided that
sales of Receivables or interests therein pursuant to Qualified Securitization
Transactions shall be deemed to be in the ordinary course of business) and upon
the sale or other disposition of any Capital Stock of any Subsidiary of the
referent Person; (iv) any extraordinary gain or extraordinary loss together with
any related provision for taxes and any one time gains or losses (including,
without limitation, those related to the adoption of new accounting standards)
realized by the referent Person or any of its Subsidiaries during the period for
which such determination is made; (v) income or loss attributable to
discontinued operations (including, without limitation, operations disposed of
during such period whether or not such operations were classified as
discontinued); and (vi) in the case of a successor to the referent Person by
consolidation or merger or as a transferee of the referent Person's assets, any
earnings of the successor corporation prior to such consolidation, merger or
transfer of assets.
"Consolidated Stockholders' Equity" as of any date means with respect
to any Person the amount, determined in accordance with GAAP, by which the
assets of such Person and of its Wholly Owned Subsidiaries on a consolidated
basis exceed (a) the total liabilities of such Person and of its Wholly Owned
Subsidiaries on a consolidated basis, plus (b) any redeemable Preferred Stock of
such Person.
"Consolidated Subsidiary" of any Person means a Subsidiary which for
financial reporting purposes is or, in accordance with GAAP, should be,
accounted for by such Person as a consolidated Subsidiary.
"Consolidated Tangible Net Worth" of a Person at any date means the
sum of (1) Consolidated Stockholders' Equity of such Person plus (2) such
Person's interest (proportionate to its equity interest) in the net worth of any
Person other than a Wholly Owned Subsidiary of the referent Person as of the
date in question, less (a) any revaluation or other write-ups subse-
<PAGE>
-9-
quent to the Issue Date in the book value of any asset owned by such Person or
any Subsidiary of such Person; (b) any amounts attributable to the cost of
treasury stock and the principal amount of any promissory notes receivable from
the sale of Capital Stock of such Person or of any of its Subsidiaries; and (c)
all unamortized debt discount and expense, unamortized deferred charges,
goodwill, patents, trademarks, service marks, trade names, copyrights, and other
intangible assets of such Person and its Subsidiaries.
"Consolidated Tax Expense" means, with respect to any Person for any
period, the aggregate of the U.S. Federal, state and local tax expense
attributable to taxes based on income and foreign income tax expenses of such
Person and its Consolidated Subsidiaries for such period (net of any income tax
benefit) payable with respect to such period pursuant to the Tax Allocation
Agreement or, if the Tax Allocation Agreement is no longer in effect or does not
apply to any such tax, determined in accordance with GAAP other than taxes
(either positive or negative) attributable to extraordinary or unusual gains or
losses or taxes attributable to sales or dispositions of assets.
"Credit Agreement" means the Amended and Restated Credit Agreement
dated as of November 4, 1994 among the Company, the banks referred to therein
and Bank of America Illinois (formerly known as Continental Bank, N.A.), Bank of
Nova Scotia, The Chase Manhattan Bank (formerly known as Chemical Bank), Morgan
Guaranty Trust Company of New York and NationsBank, N.A., as co-arrangers, and
any refinancing, extension, renewal, modification, restatement or replacement
thereof (in whole or in part, and without limitation as to terms, conditions,
covenants and other provisions), as the same may be amended, supplemented or
otherwise modified from time to time.
"Currency Agreement" means any foreign exchange contract, currency
swap agreement or other similar agreement or arrangement designed to protect the
Company or any of its Subsidiaries against fluctuations in currency values to or
under which the Company or any of its Subsidiaries is a party or a
<PAGE>
-10-
beneficiary on the date of this Indenture or becomes a party or a beneficiary
thereafter.
"Custodian" has the meaning provided in Section 6.1(b).
"Default" means any event that is, or after notice or passage of time
or both would be, an Event of Default.
"Defaulted Interest" has the meaning specified in Section 2.10.
"Disqualified Capital Stock" means any Capital Stock that, other than
solely at the option of the issuer thereof, by its terms (or by the terms of any
security into which it is convertible or exchangeable) is, or upon the happening
of an event or the passage of time would be, required to be redeemed or
repurchased, in whole or in part, prior to the first anniversary of the Maturity
Date or has, or upon the happening of an event or the passage of time would
have, a redemption or similar payment due on or prior to the first anniversary
of the Maturity Date, or is convertible into or exchangeable for debt securities
at the option of the holder thereof at any time prior to the first anniversary
of the Maturity Date.
"DTC" means The Depository Trust Company or its successors.
"Euroclear" means Morgan Guaranty Trust Company of New York (Brussels
Office) as operator of the Euroclear system.
"Event of Default" has the meaning provided in Section 6.1(a).
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Registration Statement" shall have the meaning set forth in
the Registration Rights Agreement.
<PAGE>
-11-
"Fiscal Quarter" means any quarter in any Fiscal Year, the duration of
such quarter being defined in accordance with GAAP.
"Fiscal Year" means a fiscal year of the Company and its Subsidiaries.
On the date of this Indenture the fiscal year of the Company and its
Subsidiaries ends October 31 of each year.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession of the United States, which are in effect as of the Issue Date.
"Global Security" means the global security, without coupons,
representing all or a portion of the Securities deposited with DTC substantially
in the form of Exhibit A attached hereto.
"guarantee" means any obligation, contingent or otherwise, of any
Person directly or indirectly guaranteeing any Indebtedness of any other Person
and, without limiting the generality of the foregoing, any obligation, direct or
indirect, contingent or otherwise, of such Person (i) to purchase or pay (or
advance or supply funds for the purchase or payment of) such Indebtedness of
such other Person (whether arising by virtue of partnership arrangements, or by
agreement to keep-well, to purchase assets, goods, securities or services, to
take-or-pay, or to maintain financial statement conditions or otherwise) or (ii)
entered into for purposes of assuring in any other manner the obligee of such
Indebtedness of the payment thereof or to protect such obligee against loss in
respect thereof (in whole or in part), provided that the term "guarantee" shall
not include endorsements for collection or deposit in the ordinary course of
business. The term "guarantee" used as a verb has a corresponding meaning.
<PAGE>
-12-
"Guarantor Senior Indebtedness" means any guarantee incurred by a
Subsidiary Guarantor in accordance with this Indenture of Senior Indebtedness of
the Company incurred in accordance with this Indenture, whether such
Indebtedness is outstanding on the Issue Date or thereafter, provided that
Guarantor Senior Indebtedness expressly shall not include: (i) any Indebtedness
of such Subsidiary Guarantor whether outstanding on the Issue Date or thereafter
incurred that is, pursuant to its terms or the terms of any agreement relating
thereto, subordinated or junior to any other Indebtedness of such Subsidiary
Guarantor; (ii) any Indebtedness of such Subsidiary Guarantor whether
outstanding on the Issue Date or thereafter incurred that is, by its terms or
the terms of any agreement relating thereto, pari passu with or subordinated or
junior to such Subsidiary Guarantor's Subsidiary Guarantee; (iii) the Subsidiary
Guarantee of such Subsidiary Guarantor; (iv) any Indebtedness or any other
obligation of such Subsidiary Guarantor to any of such Subsidiary Guarantor's
Subsidiaries or to any of such Subsidiary Guarantor's Affiliates, or to any
joint venture in which such Subsidiary Guarantor has an interest; (v) to the
extent such may be deemed Indebtedness of such Subsidiary Guarantor, any
liability for Federal, state, local, foreign or other taxes owed or owing by
such Subsidiary Guarantor or by any of its Subsidiaries (including pursuant to
the Tax Allocation Agreement); (vi) to the extent such may be deemed
Indebtedness of such Subsidiary Guarantor, obligations of such Subsidiary
Guarantor incurred in connection with the purchase of goods, assets, materials
or services in the ordinary course of business or representing amounts recorded
as accounts payable, trade payables or other current liabilities of such
Subsidiary Guarantor on the books of such Subsidiary Guarantor (other than the
current portion of any long-term Indebtedness of such Subsidiary Guarantor that
but for this clause (vi) would constitute Guarantor Senior Indebtedness of such
Subsidiary Guarantor); (vii) to the extent such may be deemed Indebtedness of
such Subsidiary Guarantor, any amount owed by such Subsidiary Guarantor to
employees for services rendered to such Subsidiary Guarantor or to any of its
Subsidiaries; and (viii) that portion of any Indebtedness which at the time of
incurrence was incurred in violation of this Indenture.
<PAGE>
-13-
"Guarantor Senior Representative" means the trustee, agent or
representative of holders of a class of Guarantor Senior Indebtedness who has
been identified in writing to the Trustee and the Subsidiary Guarantor.
"Holder" or "Securityholder" means the Person in whose name a Security
is registered on the Registrar's books.
"incur" means, with respect to any Indebtedness or other obligation of
any Person, to create, issue, incur (by conversion, exchange or otherwise),
assume, guarantee or otherwise become liable in respect of such Indebtedness or
other obligation or the recording, as required pursuant to GAAP or otherwise, of
any such Indebtedness or other obligation on the balance sheet of such Person
(and "incurrence," "incurred," "incurrable" and "incurring" shall have meanings
correlative to the foregoing), provided that the accrual of interest (whether
such interest is payable in cash or in kind) and the accretion of original issue
discount shall not be deemed an incurrence of Indebtedness, provided, further,
that (A) any Indebtedness or Capital Stock of a Person existing at the time such
Person becomes (after the Issue Date) a Subsidiary (whether by merger,
consolidation, acquisition or otherwise) of the Company shall be deemed to be
incurred or issued, as the case may be, by such Subsidiary at the time it
becomes a Subsidiary of the Company and (B) any amendment, modification or
waiver of any document pursuant to which Indebtedness was previously incurred
shall not be deemed to be an incurrence of Indebtedness unless and then only to
the extent such amendment, modification or waiver increases the principal or
premium thereof or interest rate thereon (including by way of original issue
discount).
"Indebtedness" means, with respect to any Person, at any date, any of
the following, without duplication, (i) any liability, contingent or otherwise,
of such Person (A) for borrowed money (whether or not the recourse of the lender
is to the whole of the assets of such Person or only to a portion thereof), (B)
evidenced by a note, bond, debenture or similar instrument or letters of credit
(including a purchase money obligation) or (C) for the payment of money relating
to a Capitalized Lease Obligation or other obligation (whether issued or
<PAGE>
-14-
assumed) relating to the deferred purchase price of property, but excluding
trade accounts payable of such Person arising in the ordinary course of
business; (ii) all conditional sale obligations and all obligations under any
title retention agreement (even if the rights and remedies of the seller under
such agreement in the event of default are limited to repossession or sale of
such property), but excluding trade accounts payable of such Person arising in
the ordinary course of business; (iii) all obligations for the reimbursement of
any obligor on any letter of credit, banker's acceptance or similar credit
transaction entered into in the ordinary course of business; (iv) all
Indebtedness of others secured by (or for which the holder of such Indebtedness
has an existing right, contingent or otherwise, to be secured by) any Lien
(other than in connection with property subject to a Qualified Securitization
Transaction) on any asset or property (including, without limitation, leasehold
interests and any other tangible or intangible property) of such Person, whether
or not such Indebtedness is assumed by such Person or is not otherwise such
Person's legal liability, provided that if the obligations so secured have not
been assumed by such Person or are otherwise not such Person's legal liability,
the amount of such Indebtedness for the purposes of this definition shall be
limited to the lesser of the amount of such Indebtedness secured by such Lien or
the fair market value of the assets or property securing such Lien; (v) all
Indebtedness of others (including all dividends of other Persons the payment of
which is) guaranteed, directly or indirectly, by such Person or that is
otherwise its legal liability or which such Person has agreed to purchase or
repurchase or in respect of which such Person has agreed contingently to supply
or advance funds; (vi) all Disqualified Capital Stock issued by such Person with
the amount of Indebtedness represented by such Disqualified Capital Stock being
equal to the greater of its voluntary or involuntary liquidation preference and
its maximum fixed repurchase price, but excluding accrued dividends if any; and
(vii) all obligations under Currency Agreements and Interest Rate Protection
Agreements. For purposes hereof, the "maximum fixed repurchase price" of any
Disqualified Capital Stock which does not have a fixed repurchase price shall be
calculated in accordance with the terms of such Disqualified Capital
<PAGE>
-15-
Stock as if such Disqualified Capital Stock were purchased on any date on which
Indebtedness shall be required to be determined pursuant to this Indenture, and
if such price is based upon, or measured by, the fair market value of such
Disqualified Capital Stock, such fair market value shall be determined
reasonably and in good faith by the Board of Directors of the issuer of such
Disqualified Capital Stock. The amount of Indebtedness of any Person at any date
shall be the outstanding balance without duplication at such date of all
unconditional obligations as described above and the maximum liability, upon the
occurrence of the contingency giving rise to the obligation, of any contingent
obligations at such date, provided that the amount outstanding at any time of
any Indebtedness issued with original issue discount is the full amount of such
Indebtedness less the remaining unamortized portion of the original issue
discount of such Indebtedness at such time as determined in accordance with
GAAP.
"Indenture" means this Indenture as amended or supplemented from time
to time pursuant to the terms hereof.
"Initial Global Securities" means the Regulation S Global Security and
the 144A Global Security, each of which contains a Securities Act Legend.
"Initial Securities" means the Securities containing a Securities Act
Legend.
"Institutional Accredited Investors" means an institution that is an
"accredited investor" as that term is defined in Rule 501(a)(1), (2), (3) or (7)
of Regulation D promulgated under the Securities Act.
"interest," when used with respect to any Security, means the amount
of all interest accruing on such Security, including all interest accruing
subsequent to the occurrence of any events specified in Sections 6.1(a)(viii)
and (ix) or which would have accrued but for any such event.
<PAGE>
-16-
"Interest Payment Date," when used with respect to any Security, means
the stated maturity of an installment of interest specified in such Security.
"Interest Rate," when used with respect to any Security, means the
rate per annum specified in such Security as the rate of interest accruing on
the principal amount of such Security.
"Interest Rate Protection Agreement" means any interest rate
protection agreement, interest rate future agreement, interest rate option
agreement, interest rate swap agreement, interest rate cap agreement, interest
rate collar agreement, interest rate hedge agreement or other similar agreement
or arrangement designed to protect a Person or any Subsidiary against
fluctuations in interest rates to or under which such Person or any Subsidiary
of such Person is a party or a beneficiary on the Issue Date or becomes a party
or a beneficiary thereafter.
"Investment" by any Person means any direct or indirect (i) loan,
advance or other extension of credit or capital contribution (by means of
transfers of cash or other property (valued at the fair market value thereof as
of the date of transfer) to others or payments for property or services for the
account or use of others, or otherwise other than in the ordinary course of
business); (ii) purchase or acquisition of Capital Stock, bonds, notes,
debentures or other securities or evidences of Indebtedness issued by any other
Person (whether by merger, consolidation, amalgamation or otherwise and whether
or not purchased directly from the issuer of such securities or evidences of
Indebtedness); (iii) guarantee or assumption of the Indebtedness of any other
Person; and (iv) all other items that would be classified as investments
(including, without limitation, purchases of assets outside the ordinary course
of business) on a balance sheet of such Person prepared in accordance with GAAP.
Investments shall exclude (a) transactions between the Company and
Transportation pursuant to the Master Intercompany Agreement and (b) extensions
of loans, trade credit and advances to customers and suppliers to the extent
made in the ordinary course of business.
<PAGE>
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"Investment Grade" means (i) with respect to S&P any of the rating
categories from and including AAA to and including BBB-and (ii) with respect to
Moody's any of the rating categories from and including Aaa to and including
Baa3.
"Issue Date" means the date on which the Securities are originally
issued under this Indenture.
"Legal Holiday" means any day other than a Business Day.
"Lien" means, with respect to any Person, any mortgage, pledge, lien,
encumbrance, easement, restriction, covenant, right-of-way, charge or adverse
claim affecting title or resulting in an encumbrance against real or personal
property of such Person, or a security interest of any kind (including any
conditional sale or other title retention agreement, any lease in the nature
thereof, any option, right of first refusal or other similar agreement to sell,
in each case securing obligations of such Person and any filing of or agreement
to give any financing statement under the Uniform Commercial Code (or equivalent
statute or statutes) of any jurisdiction but excluding any such filing or
agreement which reflects ownership by a third party of (i) property leased to
the referent Person or any of its Subsidiaries under a lease that is not in the
nature of a conditional sale or title retention agreement or (ii) accounts,
general intangibles or chattel paper sold to the referent Person).
"Master Intercompany Agreement" means the Master Intercompany
Agreement dated as of April 26, 1993 and as amended on September 30, 1996,
between the Company and Transportation as it may be amended, modified,
supplemented or restated from time to time in accordance with the terms of this
Indenture.
"Material Subsidiary" means, at any date of determination, any
Subsidiary of the Company that, together with its Subsidiaries, (i) for the most
recent Fiscal Year of the Company accounted for more than 5% of the consolidated
revenues of the Company or (ii) as of the end of such Fiscal Year, was the owner
of more than 5% of the consolidated assets of the Com-
<PAGE>
-18-
pany, all as set forth on the most recently available consolidated financial
statements of the Company and its Consolidated Subsidiaries for such Fiscal Year
prepared in conformity with GAAP.
"Maturity Date," when used with respect to any Security, means the
date specified in such Security as the fixed date on which the final installment
of principal of such Security is due and payable (in the absence of any
acceleration thereof pursuant to Section 6.2 or any Change of Control Offer).
"Moody's" means Moody's Investors Service, Inc. and its successors.
"Navistar" means Navistar International Corporation, a Delaware
corporation and the parent of Transportation.
"1998 Notes" means the 8 7/8% Senior Subordinated Notes due 1998 of
the Company issued under an indenture dated as of November 15, 1993 between the
Company and First Trust, N.A. (as successor to Continental Bank, N. A.).
"Offering Memorandum" means the offering memorandum dated May 22, 1997
relating to the Securities.
"Officer" means the Chairman, the President, any Vice President, the
Chief Financial Officer, the Treasurer, the Secretary or the Controller of the
Company.
"Officers' Certificate" means a certificate signed by two Officers or
by an Officer and an Assistant Treasurer or Assistant Secretary of the Company
and otherwise complying with the requirements of Section 10.4 and Section 10.5
as they relate to the making of an Officers' Certificate.
"Opinion of Counsel" means a written opinion from legal counsel who is
reasonably acceptable to the Trustee, which may include counsel to the Company
complying with the requirements of Section 10.4 and Section 10.5 as they relate
to the giving of an Opinion of Counsel.
<PAGE>
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"Paying Agent" means any Person authorized by the Company to pay the
principal of (and premium, if any) or interest on any Securities on behalf of
the Company.
"Permitted Liens" means (a) Liens for taxes, assessments and
governmental charges (other than any Lien imposed by the Employee Retirement
Income Security Act of 1974, as amended) that are not yet delinquent or are
being contested in good faith by appropriate proceedings promptly instituted and
diligently conducted and for which adequate reserves have been established or
other provisions have been made in accordance with generally accepted accounting
principles; (b) statutory mechanics', workmen's, materialmen's, operators' or
similar Liens imposed by law and arising in the ordinary course of business for
sums which are not yet due or are being contested in good faith by appropriate
proceedings promptly instituted and diligently conducted and for which adequate
reserves have been established or other provisions have been made in accordance
with generally accepted accounting principles; (c) minor imperfections of, or
encumbrances on, title that do not impair the value of property for its intended
use; (d) Liens (other than any Lien under the Employee Retirement Income
Security Act of 1974, as amended) incurred or deposits made in the ordinary
course of business in connection with workers' compensation, unemployment
insurance and other types of social security; (e) Liens incurred or deposits
made to secure the performance of tenders, bids, leases, statutory or regulatory
obligations, bankers' acceptances, surety and appeal bonds, government
contracts, performance and return of money bonds and other obligations of a
similar nature incurred in the ordinary course of business (exclusive of
obligations for the payment of borrowed money); (f) easements, rights-of-way,
municipal and zoning ordinances and similar charges, encumbrances, title defects
or other irregularities that do not materially interfere with the ordinary
course of business of the Company or of any of its Subsidiaries; (g) Liens
(including extensions and renewals thereof) upon real or tangible personal
property acquired after the Issue Date, provided that (I) such Lien is created
solely for the purpose of securing Indebtedness that is incurred in accordance
with this Indenture to finance the cost (including
<PAGE>
-20-
the cost of improvement or construction) of the item of property or assets
subject thereto and such Lien is created prior to, at the time of or within 90
days after the later of the acquisition, the completion of construction or the
commencement of full operation of such property, (II) the principal amount of
the Indebtedness secured by such Lien does not exceed 100% of such cost and
(III) any such Lien shall not extend to or cover any property or assets of the
Company or of any Subsidiary of the Company other than such item of property or
assets and any improvements on such item; (h) leases or subleases granted to
others that do not materially interfere with the ordinary course of business of
the Company or of any Subsidiary of the Company; (i) any interest or title of a
lessor in the property subject to any Capitalized Lease Obligation, provided
that any transaction related thereto otherwise complies with this Indenture; (j)
Liens arising from filing Uniform Commercial Code financing statements regarding
leases; (k) Liens arising from the rendering of a final judgment or order
against the Company or any Subsidiary of the Company that does not give rise to
an Event of Default; (l) Liens securing reimbursement obligations with respect
to letters of credit incurred in accordance with this Indenture that encumber
documents and other property relating to such letters of credit and the products
and proceeds thereof; (m) Liens in favor of the Trustee arising under this
Indenture; (n) any Lien existing on property, shares of stock or Indebtedness of
a Person at the time such Person becomes a Subsidiary of the Company or is
merged with or consolidated into the Company or a Subsidiary of the Company or
at the time of sale, lease or other disposition of the properties of any Person
as an entirety or substantially as an entirety to the Company or any Subsidiary
of the Company; (o) Liens on property of any Subsidiary of the Company to secure
Indebtedness for borrowed money owed to the Company or to another Subsidiary of
the Company; and (p) Liens in favor of the Company.
"Person" means any individual, corporation, partnership, joint
venture, trust, estate, unincorporated organization or government or any agency
or political subdivision thereof.
<PAGE>
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"Plan of Liquidation" means, with respect to any Person, a plan
(including by operation of law) that provides for, contemplates or the
effectuation of which is preceded or accompanied by (whether or not
substantially contemporaneously) (i) the sale, lease, conveyance or other
disposition of all or substantially all of the assets of the referent Person and
(ii) the distribution of all or substantially all of the proceeds of such sale,
lease, conveyance or other disposition and all or substantially all of the
remaining assets of the referent Person to holders of Capital Stock of the
referent Person.
"principal" of a debt security means the principal amount of the
security plus, when appropriate, the premium, if any, on the security.
"Preferred Stock" means, as applied to the Capital Stock of any
Person, the Capital Stock of such Person (other than the Common Stock of such
Person) of any class or classes (however designated) that ranks prior, as to the
payment of dividends or as to the distribution of assets upon any voluntary or
involuntary liquidation, dissolution or winding-up of such Person, to shares of
Capital Stock of any other class of such Person.
"Private Exchange Securities" shall have the meaning set forth in the
Registration Rights Agreement.
"Qualified Capital Stock" means, with respect to any Person, any
Capital Stock of such Person that is not Disqualified Capital Stock or
convertible into or exchangeable or exercisable for Disqualified Capital Stock.
"Qualified Securitization Transaction" means any transaction or series
of transactions that have been or may be entered into by the Company or any of
its Subsidiaries in connection with or reasonably related to a transaction or
series of transactions in which the Company or any of its Subsidiaries may sell,
convey or otherwise transfer to (i) a Securitization Subsidiary or (ii) any
other Person, or may grant a security interest in, any Receivables or interests
therein secured by the merchandise or services financed thereby (whether such
Re-
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ceivables are then existing or arising in the future) of the Company or any of
its Subsidiaries, and any assets related thereto including, without limitation,
all security interests in merchandise or services financed thereby, the proceeds
of such Receivables, and other assets which are customarily sold or in respect
of which security interests are customarily granted in connection with
securitization transactions involving such assets.
"QIB" means a "qualified institutional buyer" as defined in Rule 144A.
"Rating Agency" means each of (i) S&P and (ii) Moody's.
"Ratings Event" means the occurrence, as of any date, within the 90
day period (the "Initial Period") commencing on the date of public notice (the
"Public Notice") of the occurrence of a Change of Control (which period shall be
extended for a period not to exceed 90 days beyond the Initial Period if within
the Initial Period the rating of the Securities is under publicly announced
consideration of (x) a possible downgrade or (y) a possible upgrade by (i) both
Rating Agencies or (ii) either Rating Agency in the event that one of the Rating
Agencies has rated the Securities Investment Grade within the Initial Period
(such Initial Period as so extended being referred to as the "Evaluation
Period")) of any of the following events:
(1) In the event that the Securities are rated Investment Grade by
both Rating Agencies immediately prior to the Public Notice, the failure of the
Securities to be rated Investment Grade by either or both of the Rating
Agencies; or
(2) In the event that the Securities are rated Investment Grade by
one of the Rating Agencies immediately prior to the Public Notice, the earlier
to occur of (A) the Securities failing to be rated Investment Grade by such
Rating Agency or (B) the lapse of the Evaluation Period and the failure of the
Securities to be rated Investment Grade by the other Rating Agency; or
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(3) In the event that the Securities are not rated Investment Grade
by both of the Rating Agencies immediately prior to the Public Notice, the lapse
of the Evaluation Period and the failure of either or both of the Rating
Agencies to rate the Securities Investment Grade.
"Receivables" means any right of payment from or on behalf of any
obligor, whether constituting an account, chattel paper, instrument, general
intangible or otherwise, arising from the financing by the Company or any
Subsidiary of the Company of merchandise or services, and monies due thereunder,
security or ownership interests in the merchandise and services financed
thereby, records related thereto, and the right to payment of any interest or
finance charges and other obligations with respect thereto, proceeds from claims
on insurance policies related thereto, any other proceeds related thereto, and
any other related rights.
"Registrar" has the meaning provided in Section 2.3.
"Registration Rights Agreement" means the Registration Rights
Agreement dated the date hereof among the Company, the J.P. Morgan Securities
Inc., Chase Securities Inc. and NationsBanc Capital Markets Inc.
"Regular Record Date" for the interest payable on any Interest Payment
Date means the May 15 or November 15 (whether or not a Business Day), as the
case may be, next preceding such Interest Payment Date.
"Regulation S" means Regulation S promulgated under the Securities Act
(including any successor registration thereto) as it may be amended from time to
time.
"Restricted Physical Security" means a Physical Security containing a
Securities Act Legend.
"Rule 144" shall have the meaning set forth in the Registration Rights
Agreement.
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"Rule 144A" shall have the meaning set forth in the Registration
Rights Agreement.
"SEC" means the Securities and Exchange Commission.
"Secured Obligations" means all Secured Obligations as defined in the
Security, Pledge and Trust Agreement between the Company and Bankers Trust
Company, as Trustee, dated as of April 26, 1993 (as it may be amended, the
"Security Agreement").
"Securities" means the 9% Senior Subordinated Notes due 2002 issued,
authenticated and delivered under this Indenture, as amended or supplemented
from time to time pursuant to the terms of this Indenture.
"Securities Act" means the Securities Act of 1933, as amended.
"Securitization Subsidiary" means a Wholly Owned Subsidiary of the
Company which engages in no activities other than those reasonably related to or
in connection with the entering into of securitization transactions and which is
designated by the Board of Directors of the Company (as provided below) as a
Securitization Subsidiary (a) no portion of the Indebtedness or any other
obligations (contingent or otherwise) of which (i) is guaranteed by the Company
or any other Subsidiary of the Company, (ii) is recourse to or obligates the
Company or any other Subsidiary of the Company in any way other than pursuant to
representations, warranties and covenants (including those related to servicing)
entered into in the ordinary course of business in connection with a Qualified
Securitization Transaction or (iii) subjects any property or asset of the
Company or any other Subsidiary of the Company, directly or indirectly,
contingently or otherwise, to any Lien or to the satisfaction thereof, other
than pursuant to representations, warranties and covenants (including those
related to servicing) entered into in the ordinary course of business in
connection with a Qualified Securitization Transaction, (b) with which neither
the Company nor any other Subsidiary of the Company (i) provides any credit
support or (ii) has any contract, agree-
<PAGE>
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ment, arrangement or understanding other than on terms that are fair and
reasonable and that are no less favorable to the Company or such Subsidiary than
could be obtained from an unrelated Person (other than, in the case of
subclauses (i) and (ii) of this clause (b), representations, warranties and
covenants (including those relating to servicing) entered into in the ordinary
course of business in connection with a Qualified Securitization Transaction and
intercompany notes relating to the sale of Receivables to such Securitization
Subsidiary) and (c) with which neither the Company nor any Subsidiary of the
Company has any obligation to maintain or preserve such Subsidiary's financial
condition or to cause such Subsidiary to achieve certain levels of operating
results. Any such designation by the Board of Directors of the Company shall be
evidenced to the Trustee by filing with the Trustee a certified copy of the
resolutions of the Board of Directors of the Company giving effect to such
designation.
"Senior Indebtedness of the Company" means (a) Indebtedness of the
Company under the Credit Agreement, and, as long as the Security Agreement is in
effect, without duplication, all Secured Obligations, and (b) any other
Indebtedness incurred by the Company in accordance with this Indenture, whether
such Indebtedness is outstanding on the Issue Date or thereafter, provided that
Senior Indebtedness of the Company expressly shall not include: (i) any
Indebtedness of the Company or any Secured Obligation (whether outstanding on
the Issue Date or thereafter incurred) that is, pursuant to its terms or the
terms of any agreement relating thereto, subordinated or junior to any other
Indebtedness of the Company, (ii) any Indebtedness of the Company or any Secured
Obligation (whether outstanding on the Issue Date or thereafter incurred) that
is, by its terms or the terms of any agreement relating thereto, pari passu with
or subordinated or junior to the Securities, (iii) the Securities, (iv) any
Indebtedness or any other obligation of the Company to any of the Company's
Subsidiaries or to any of the Company's Affiliates, or to any joint venture in
which the Company has an interest, (v) to the extent such may be deemed
Indebtedness of the Company, any liability for Federal, state, local, foreign or
other taxes owed or owing by the
<PAGE>
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Company or by any of its Subsidiaries (including pursuant to the Tax Allocation
Agreement), (vi) to the extent such may be deemed Indebtedness of the Company,
obligations of the Company incurred in connection with the purchase of goods,
assets, materials or services in the ordinary course of business or representing
amounts recorded as accounts payable, trade payables or other current
liabilities of the Company on the books of the Company (other than the current
portion of any long-term Indebtedness of the Company that but for this clause
(vi) would constitute Senior Indebtedness of the Company), (vii) to the extent
such may be deemed Indebtedness of the Company, any amount owed by the Company
to employees for services rendered to the Company or to any of its Subsidiaries,
and (viii) that portion of any Indebtedness which at the time of incurrence was
incurred in violation of this Indenture.
"Senior Representative" means the trustee, agent or representative of
holders of a class of Senior Indebtedness of the Company who has been identified
in writing to the Trustee and the Company.
"Shelf Registration Statement" shall have the meaning set forth in the
Registration Rights Agreement.
"Special Record Date" for the payment of any Defaulted Interest means
a date fixed by the Trustee pursuant to Section 2.10.
"S&P" means Standard & Poor's Ratings Services, a division of The
McGraw-Hill Companies, Inc., and its successors.
"Stated Maturity" means, with respect to any security or Indebtedness
of a Person, the date specified therein as the fixed date on which any principal
of such security or Indebtedness is due and payable, including pursuant to any
mandatory redemption provision (but excluding any provision providing for the
repurchase thereof at the option of the holder thereof).
"Subordinated Indebtedness" means the Securities, the 1998 Notes and
any other Indebtedness incurred, assumed or otherwise created by the Company
pursuant to an instrument or in-
<PAGE>
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struments providing expressly that such Indebtedness (i) is subordinate in right
of payment to the Securities or any other Indebtedness of the Company or (ii)
ranks pari passu with the Securities.
A "Subsidiary" of any Person means (a) a corporation a majority of
whose Voting Stock is at the time, directly or indirectly, owned by such Person,
by one or more Subsidiaries of such Person or by such Person and one or more
Subsidiaries of such Person or (b) any other Person (other than a trust formed
in connection with a Qualified Securitization Transaction) in which such Person,
a Subsidiary of such Person or such Person and one or more Subsidiaries of such
Person, directly or indirectly, at the date of determination thereof, have at
least a majority ownership interest.
"Subsidiary Guarantee" means each Subsidiary Guarantee of the
Securities issued pursuant to Section 4.15.
"Subsidiary Guarantor" means each Subsidiary of the Company that
becomes a guarantor of the Securities pursuant to Section 4.15.
"Tax Allocation Agreement" means the Tax Allocation Agreement among
Navistar and its subsidiaries, effective as of October 1, 1981, as it has been
and may be amended and/or supplemented from time to time.
"TIA" means the Trust Indenture Act of 1939 (15 U.S. Code
(S)(S)77aaa-77bbbb) as in effect on the date of this Indenture.
"Transportation" means Navistar International Transportation Corp., a
Delaware corporation and the parent of the Company.
"Trustee" means the party named as such in this Indenture until a
successor replaces it in accordance with the provisions of this Indenture and
thereafter means such successor.
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"Trust Officer" means an officer or administrator of the Trustee
assigned to the Corporate Trust Administration Department or similar department
performing corporate trust work, or any successor to such department or, in the
case of a successor trustee, an officer assigned to the department, division or
group performing the corporate trust work of such successor.
"Unrestricted Global Securities" means one or more Global Securities
that do not and are not required to bear the Securities Act Legend.
"Unrestricted Physical Securities" means one or more Physical
Securities that do not and are not required to bear the Securities Act Legend.
"Unrestricted Securities" means the Securities that do not and are not
required to bear the Securities Act Legend.
"Voting Stock" means, with respect to any Person, securities of any
class or classes of Capital Stock in such Person entitling the holders thereof
(whether at all times or only so long as no senior class of stock has voting
power by reason of any contingency) to vote in the election of members of the
Board of Directors or other governing body of such Person.
"Wholly Owned Subsidiary" means, with respect to any Person, any
Subsidiary of such Person all of the outstanding shares of Capital Stock (other
than directors' qualifying shares, if applicable) of which are owned directly by
such Person or another Wholly Owned Subsidiary of such Person.
SECTION 1.2 Incorporation by Reference of Trust Indenture Act.
Whenever this Indenture refers to a provision of the TIA, the
provision shall be deemed incorporated by reference in and made a part of this
Indenture. The following TIA terms used in this Indenture have the following
meanings:
(a) "Commission" means the SEC;
(b) "indenture securities" means the Securities;
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(c) "indenture security holder" means a Securityholder;
(d) "indenture to be qualified" means this Indenture;
(e) "indenture trustee" or "institutional trustee" means the Trustee;
and
(f) "obligor" on the indenture securities means the Company or any
other obligor on the Securities.
All other TIA terms used in this Indenture that are defined by the
TIA, defined by TIA reference to another statute or defined by the Securities
Act or the Exchange Act and not otherwise defined herein have the meanings so
assigned to them therein.
SECTION 1.3 Rules of Construction.
Unless the context otherwise requires:
(a) a term has the meaning assigned to it;
(b) "or" is not exclusive;
(c) words in the singular include the plural, and words in the plural
include the singular;
(d) provisions apply to successive events and transactions;
(e) "herein," "hereof" and other words of similar import refer to
this Indenture as a whole and not to any particular Article, Section or
other Subdivision; and
(f) unless otherwise specified herein, all accounting terms used
herein shall be interpreted, all accounting determinations hereunder shall
be made, and all financial statements required to be delivered hereunder
shall be prepared in accordance with generally accepted accounting
principles as in effect from time to time, applied on a
<PAGE>
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basis consistent with the most recent audited consolidated financial
statements of the Company.
ARTICLE II
THE SECURITIES
--------------
SECTION 2.1 Form and Dating.
(a) Global Securities. Securities offered and sold to QIBs in
reliance on Rule 144A shall be issued initially substantially in the form of
Exhibit A hereto in the name of Cede & Co. as nominee of DTC, duly executed by
the Company and authenticated by the Trustee as hereinafter provided. Any such
Security shall be referred to herein as the "144A Global Security." Securities
offered and sold in reliance on Regulation S shall be issued initially
substantially in the form of Exhibit A hereto in the name of Cede & Co. as
nominee of DTC, duly executed by the Company and authenticated by the Trustee as
hereinafter provided. Any such Security shall be referred to herein as the
"Regulation S Global Security." Unrestricted Global Securities shall be issued
initially in accordance with Sections 2.6(b)(iv), 2.6(c)(ii) and 2.6(e) in the
name of Cede & Co. as nominee of DTC, duly executed by the Company and
authenticated by the Trustee as hereinafter provided. The aggregate principal
amount of each of the Global Security may from time to time be increased or
decreased by adjustments made on the records of the Trustee as hereinafter
provided.
Each Global Security shall represent such of the outstanding
Securities as shall be specified therein and each shall provide that it shall
represent the aggregate principal amount of outstanding Securities from time to
time endorsed thereon and that the aggregate principal amount of outstanding
Securities represented thereby may from time to time be reduced or increased, as
appropriate, to reflect exchanges, redemptions and transfers of interests
therein in accordance with the terms of this Indenture. Any change in the
aggregate principal amount of a Global Security to reflect the amount of any
in-
<PAGE>
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crease or decrease in the principal amount of outstanding Securities represented
thereby shall be made by the Trustee in accordance with reasonable instructions
given by the Holder thereof as required by Section 2.6 hereof and shall be
conclusively reflected on the books and records of the Trustee.
Upon the issuance of the Global Security to DTC, DTC shall credit, on
its internal book-entry registration and transfer system, its Participant's
accounts with the respective interests owned by such Participants. Interests in
the Global Securities shall be limited to Participants, including Euroclear and
Cedel, and indirect Participants.
The Participants shall not have any rights either under this
Indenture or under any Global Security with respect to such Global Security held
on their behalf by DTC, and DTC may be treated by the Company, the Trustee and
any agent of the Company or the Trustee as the absolute owner of such Global
Security for the purpose of receiving payment of or on account of the principal
of and, subject to the provisions of this Indenture, interest and Additional
Interest, if any, on the Global Securities and for all other purposes.
Notwithstanding the foregoing, nothing herein shall prevent the Company, the
Trustee or any agent of the Company or the Trustee from giving effect to any
written certification, proxy or other authorization furnished by DTC or impair,
as between DTC and its Participants, the operation of customary practices of DTC
governing the exercise of the rights of an owner of a beneficial interest in any
Global Security.
The provisions of the "Operating Procedures of the Euroclear System"
and "Terms and Conditions Governing Use of Euroclear" and the "General Terms and
Conditions of Cedel Bank" and "Customer Handbook" of Cedel, as in effect from
time to time, shall be applicable to interests in the Regulation S Global
Security that are held by the Participants through Euroclear or Cedel.
(b) Physical Securities. Securities offered and sold to
Institutional Accredited Investors who are not also QIBs shall be issued
initially substantially in the form of Ex-
<PAGE>
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hibit A hereto, in certificated form and issued in the names of the purchasers
thereof (or their nominees), duly executed by the Company and authenticated by
the Trustee as hereinafter provided. Such Securities, together with any
Securities subsequently issued, whether pursuant to the terms of Section 2.6
hereof or otherwise, that are not Global Securities, shall be referred to herein
as the "Physical Securities."
(c) Securities. The provisions of the form of Securities contained
in Exhibit A hereto are incorporated herein by reference. The Securities and
the Trustee's Certificates of Authentication shall be substantially in the form
of Exhibit A hereto. The Securities may have notations, legends or endorsements
required by law, stock exchange rule or usage and provided to the Trustee in
writing by the Company. The Company shall approve the form of the Securities
and any notation, legend or endorsement on them. If required, the Securities
may bear the appropriate legend regarding original issue discount for federal
income tax purposes. Each Security shall be dated the date of its
authentication. The terms and provisions contained in the Securities shall
constitute, and are hereby expressly made, a part of this Indenture.
SECTION 2.2 Execution and Authentication.
Two Officers of the Company shall sign the Securities for the Company
by manual or facsimile signature.
If an Officer whose signature is on a Security no longer holds that
office at the time the Trustee authenticates the Security, the Security shall be
valid nevertheless.
A Security shall not be valid until an authorized officer of the
Trustee manually signs the certificate of authentication on the Security. The
signature shall be conclusive evidence that the Security has been authenticated
under this Indenture.
The Trustee shall authenticate (i) Initial Securities for issue on the
Issue Date in the aggregate principal amount of $100,000,000, (ii) Private
Exchange Securities from time to
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time only in exchange for a like principal amount of Initial Securities and
(iii) Unrestricted Securities from time to time only in exchange for a like
principal amount of Initial Securities, in each case upon a written order signed
by an Officer of the Company. The order shall be based upon a Board Resolution
of the Company and shall specify the amount of Securities to be authenticated
and the date on which the original issue of Securities is to be authenticated.
The order shall also provide instructions concerning registration, legends, if
any, pursuant to Section 2.6(f), amounts for each Holder and delivery. The
aggregate principal amount of Securities outstanding at any time may not exceed
$100,000,000 except as provided in Section 2.7. The Securities shall be issued
only in registered form, without coupons and only in denominations of $1,000 and
any integral multiple thereof.
SECTION 2.3 Registrar and Paying Agent.
The Company shall maintain an office or agency where Securities may be
presented for registration of transfer or for exchange ("Registrar") and an
office or agency where Securities may be presented for payment ("Paying Agent").
The Company may have one or more additional paying agents. The term "Paying
Agent" includes any additional paying agent.
The Company shall enter into an appropriate agency agreement with any
Agent not a party to this Indenture. The agreement shall implement the
provisions of this Indenture that relate to such Agent and shall, if required,
incorporate the provisions of the TIA. The Company shall notify the Trustee of
the name and address of any such Agent. If the Company fails to maintain a
Registrar or Paying Agent, the Trustee shall act as such and shall be entitled
to appropriate compensation in accordance with the provisions of Section 7.7.
The Company initially appoints the Trustee as Registrar and Paying
Agent. The Company shall give written notice to the Trustee in the event that
the Company decides to act as Registrar.
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SECTION 2.4 Paying Agent To Hold Money in Trust.
The Company shall require each Paying Agent to agree in writing to
hold in trust for the benefit of Securityholders or the Trustee all money held
by the Paying Agent for the payment of principal of or interest on the
Securities (whether such money has been paid to it by the Company or any other
obligor on the Securities), and the Company and the Paying Agent shall each
notify the Trustee of any default by the Company (or any other obligor on the
Securities) in making any such payment. The Company at any time may require a
Paying Agent to pay all money held by it to the Trustee and account for any
funds disbursed and the Trustee may at any time during the continuance of any
payment default, upon written request to a Paying Agent, require such Paying
Agent to pay all money held by it to the Trustee and to account for any funds
disbursed. Upon making such payment the Paying Agent shall have no further
liability for the money delivered to the Trustee.
SECTION 2.5 Securityholder Lists.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
Securityholders. If the Trustee is not the Registrar, the Company shall furnish
to the Trustee at least five Business Days before each Interest Payment Date and
at such other times as the Trustee may request in writing a list in such form
and as of such date as the Trustee may reasonably require of the names and
addresses of Securityholders.
SECTION 2.6 Transfer and Exchange.
(a) Transfer and Exchange of Global Securities. Transfer of the
Global Securities shall be by delivery. Global Securities may not be
transferred as or exchanged for Physical Securities except (i) if DTC notifies
the Company that it is unwilling or unable to continue to act as depositary with
respect to the Global Securities or ceases to be a clearing agency registered
under the Exchange Act and, in either case, a successor depositary registered as
a clearing agency under the Exchange Act is not appointed by the Company within
120 days,
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(ii) at any time if the Company in its sole discretion determines that the
Global Securities (in whole but not in part) should be exchanged for Physical
Securities or (iii) if the owner of an interest in the Global Securities
requests such Physical Securities, following an Event of Default under this
Indenture, in a writing delivered through DTC to the Trustee.
Upon the occurrence of any of the events specified in the previous
paragraph, Physical Securities shall be issued in such names as DTC shall
instruct the Trustee and the Trustee shall cause the aggregate principal amount
of the applicable Global Security to be reduced accordingly and direct DTC to
make a corresponding reduction in its book-entry system. The Company shall
execute and the Trustee shall authenticate and deliver to the Person designated
in such instructions a Physical Security in the appropriate principal amount.
The Trustee shall deliver such Physical Securities to the Persons in whose names
such Securities are so registered. Physical Securities issued in exchange for
an Initial Global Security pursuant to this Section 2.6 (a) shall bear the
Securities Act Legend and shall be subject to all restrictions on transfer
contained therein. Global Securities may also be exchanged or replaced, in
whole or in part, as provided in Sections 2.7 and 2.8. Every Security
authenticated and delivered in exchange for, or in lieu of, a Global Security or
any portion thereof, pursuant to Section 2.7 or 2.8, shall be authenticated and
delivered in the form of, and shall be, a Global Security. A Global Security
may not be exchanged for another Security other than as provided in this Section
2.6(a).
(b) Transfer and Exchange of Interests in Global Securities. The
transfer and exchange of interests in Global Securities shall be effected
through DTC, in accordance with this Indenture and the procedures of DTC
therefor. Interests in Initial Global Securities shall be subject to
restrictions on transfer comparable to those set forth herein to the extent
required by the Securities Act. The Trustee shall have no obligation to
ascertain DTC's compliance with any such restrictions on transfer. Transfers of
interests in Global Securities shall also require compliance with subparagraph
(i) below, as
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well as one or more of the other following subparagraphs as applicable:
(i) All Transfers and Exchanges of Interests in Global Securities.
In connection with all transfers and exchanges of interests in Global
Securities (other than transfers of interests in a Global Security to
Persons who take delivery thereof in the form of an interest in the same
Global Security), the transferor of such interest must deliver to the
Registrar (1) instructions given in accordance with the Applicable
Procedures from a Participant or an indirect Participant directing DTC to
credit or cause to be credited an interest in the specified Global Security
in an amount equal to the interest to be transferred or exchanged, (2) a
written order given in accordance with the Applicable Procedures containing
information regarding the Participant account to be credited with such
increase and (3) instructions given by the Holder of the Global Security to
effect the transfer referred to in (1) and (2) above.
(ii) Transfer of Interests in the Same Initial Global Security.
Interests in any Initial Global Security may be transferred to Persons who
take delivery thereof in the form of an interest in the same Initial Global
Security in accordance with the transfer restrictions set forth in Section
2.6(f) hereof. It shall be the sole responsibility of the selling
beneficial owner to deliver these transfer documents, if any are required,
to the Company and the Trustee shall have no responsibility or duty to
collect the transfer documentation set forth in Section 2.6(f).
(iii) Transfer of Interests to Another Initial Global Security.
Interests in any Initial Global Security may be transferred to Persons who
take delivery thereof in the form of an interest in another Initial Global
Security if the Registrar receives the following:
(A) if the transferee will take delivery in the form of an
interest in the 144A Global Security, then the transferor must deliver
a certificate in the form of Exhibit D hereto, including the
certifications in item 1 thereof; or
(B) if the transferee will take delivery in the form of an
interest in the Regulation S Global Security, then
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the transferor must deliver a certificate in the form of Exhibit D
hereto, including the certifications in item 2 thereof.
(iv) Transfer and Exchange of Interests in Initial Global Security
for Interests in an Unrestricted Global Security. Interests in any Initial
Global Security may be exchanged by the holder thereof for an interest in
the Unrestricted Global Security or transferred to a Person who takes
delivery thereof in the form of an interest in the Unrestricted Global
Security if:
(A) such exchange or transfer is effected pursuant to the
Exchange Registration Statement in accordance with the Registration
Rights Agreement and the Company delivers an Officers' Certificate to
the Trustee stating that such Exchange Registration Statement has
become effective and directing the Trustee to effect the exchange or
transfer on the terms set forth therein;
(B) any such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration Rights
Agreement and the Company delivers an Officers' Certificate to the
Trustee stating that such Shelf Registration Statement has become
effective and directing the Trustee to effect the exchange or transfer
on the terms set forth therein; or
(C) the Registrar receives the following:
(1) if the holder of such an interest in an Initial Global
Security proposes to exchange it for an interest in the
Unrestricted Global Security, a certificate from such Holder in
the
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form of Exhibit E hereto, including the certifications in item
1(a) thereof;
(2) if the holder of such an interest in an Initial Global
Security proposes to transfer it to a Person who shall take
delivery thereof in the form of an interest in an Unrestricted
Global Security, a certificate in the form of Exhibit D hereto,
including the certification in item 4 thereof; and
(3) in each such case set forth in this paragraph (C), an
Opinion of Counsel in form reasonably acceptable to the Company
and the Trustee, to the effect that such exchange or transfer is
in compliance with the Securities Act and, that the restrictions
on transfer contained herein and in Section 2.6(f) hereof are not
required in order to maintain compliance with the Securities Act.
If any such transfer is effected pursuant to paragraph (B) above at a time
when an Unrestricted Global Security has not yet been issued, the Company
shall issue and, upon receipt of an authentication order in accordance with
Section 2.2, the Trustee shall authenticate one or more Unrestricted Global
Securities in an aggregate principal amount equal to the principal amount
of interests in the Initial Global Security transferred pursuant to
paragraph (B) above, provided the Company has made appropriate arrangements
with DTC prior to delivery of such an authentication order to the Trustee.
(v) Notation by the Trustee of Transfer of Interests Among Global
Securities. Upon satisfaction of the requirements for transfer of
interests in Global Securities pursuant to clauses (iii) or (iv) above, the
Trustee shall reduce or cause to be reduced the aggregate principal amount
of the relevant Global Security from which the interests are being
transferred, and increase or cause to be increased the aggregate principal
amount of the Global Se-
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curity to which the interests are being transferred, in each case, by the
principal amount so transferred and shall direct DTC to make corresponding
adjustments in its book-entry system. No transfer of interests of a Global
Security shall be effected until, and any transferee pursuant thereto shall
succeed to the rights of a holder of such interests only when, the
Registrar has made appropriate adjustments to the applicable Global
Security in accordance with this paragraph.
(c) Transfer or Exchange of Physical Securities for Interests in a
Global Security.
(i) If any Holder of Physical Securities required to contain the
Securities Act Legend proposes to exchange such Securities for an interest
in a Global Security or to transfer such Physical Securities to a Person
who takes delivery thereof in the form of an interest in a Global Security,
then, upon receipt by the Registrar of the following documentation (all of
which may initially be submitted by facsimile, provided arrangements
satisfactory to the Trustee are made for delivery of the originals):
(A) if the Holder of such Physical Registered Securities proposes
to exchange such Securities for an interest in an Initial Global
Security, a certificate from such Holder in the form of Exhibit E
hereto, including the certifications in item 2 thereof;
(B) if such Physical Securities are being transferred to a QIB in
accordance with Rule 144A under the Securities Act, a certificate to
the effect set forth in Exhibit D hereto, including the certifications
in item 1 thereof; or
(C) if such Physical Securities are being transferred to a Non-
U.S. Person (as defined in Regulation S) in an offshore transaction in
accordance with Rule 904 under the Securities Act, a certificate
<PAGE>
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to the effect set forth in Exhibit D hereto, including the
certifications in item 2 thereof;
the Trustee shall cancel the Physical Securities, increase or cause to be
increased the aggregate principal amount of, in the case of clause (B)
above, the 144A Global Security, in the case of clause (C) above, the
Regulation S Global Security, and direct DTC to make a corresponding
increase in its book-entry system.
(ii) A Holder of Physical Securities required to contain the
Securities Act Legend may exchange such Securities for an interest in the
Unrestricted Global Security or transfer such Restricted Physical
Securities to a Person who takes delivery thereof in the form of an
interest in the Unrestricted Global Security only:
(A) if such exchange or transfer is effected pursuant to the
Exchange Registration Statement in accordance with the Registration
Rights Agreement and the Company delivers an Officers' Certificate to
the Trustee stating that such Exchange Registration Statement has
become effective and directing the Trustee to effect the exchange or
transfer on the terms set forth therein;
(B) any such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration Rights
Agreement and the Company delivers an Officers' Certificate to the
Trustee stating that such Shelf Registration Statement has become
effective and directing the Trustee to effect the exchange or transfer
on the terms set forth therein;
(C) upon receipt by the Registrar of the following documentation
(all of which may be submitted by facsimile):
(1) if the Holder of such Physical Securities proposes to
exchange such Securities for an interest in the Unrestricted
Global Security, a
<PAGE>
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certificate from such Holder in the form of Exhibit E hereto,
including the certifications in item 1(b) thereof;
(2) the Holder of such Registered Securities proposes to
transfer such Securities to a Person who shall take delivery
thereof in the form of an interest in the Unrestricted Global
Security, a certificate in the form of Exhibit D hereto,
including the certifications in item 4 thereof; and
(3) in each such case set forth in this paragraph (C), an
Opinion of Counsel in form reasonably acceptable to the Company,
to the effect that such exchange or transfer is in compliance
with the Securities Act and that the restrictions on transfer
contained herein and in Section 2.6(f) hereof are not required in
order to maintain compliance with the Securities Act.
If any such transfer is effected pursuant to paragraph (B) above at a time
when an Unrestricted Global Security has not yet been issued, the Company
shall issue and, upon receipt of an authentication order in accordance with
Section 2.2, the Trustee shall authenticate (i) one or more Unrestricted
Global Securities in an aggregate principal amount equal to the principal
amount of Physical Securities transferred pursuant to paragraph (B) above.
(d) Transfer and Exchange of Physical Securities.
(i) Transfer of a Physical Security to Another Physical Security.
Following the occurrence of one or more of the events specified in Section
2.6(a), a Physical Security may be transferred to Persons who take delivery
thereof in the form of another Physical Security if the Registrar receives
the following:
(A) if the transfer is being effected pursuant to and in
accordance with Rule 144A, then the trans-
<PAGE>
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feror must deliver a certificate in the form of Exhibit D hereto,
including the certifications in item 3(a) thereof; or
(B) if the transfer is being effected pursuant to and in
accordance with Regulation S, then the transferor must deliver a
certificate in the form of Exhibit D hereto, including the
certifications in item 3(b) thereof.
(ii) Transfer and Exchange of Restricted Physical Security for
Physical Security Which Does Not Bear the Securities Act Legend. Following
the occurrence of one or more of the events specified in Section 2.6(a) and
the receipt by the Trustee of an Officers' Certificate stating that such
events have occurred, a Restricted Physical Security may be exchanged by
the Holder thereof for a Physical Security or transferred to a Person who
takes delivery thereof in the form of a Physical Security which does not
bear the Securities Act Legend if:
(A) such exchange or transfer is effected pursuant to the
Exchange Registration Statement in accordance with the Registration
Rights Agreement and the receipt by the Trustee of an Officers'
Certificate stating that such events have occurred;
(B) any such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration Rights
Agreement and the receipt by the Trustee of an Officers' Certificate
stating that such events have occurred; or
(C) the Registrar receives a certificate from such Holder in the
form of Exhibit E hereto, including the certifications in item 1(c)
thereof and an Opinion of Counsel in form reasonably acceptable to the
Company, to the effect that such exchange or transfer is in compliance
with the Securities Act and, that the restrictions on transfer
contained herein and in Section 2.6(f) hereof are not required
<PAGE>
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in order to maintain compliance with the Securities Act.
(iii) Exchange of Physical Securities. When Physical Securities
are presented by a Holder to the Registrar with a request to register the
exchange of such Physical Securities for an equal principal amount of
Physical Securities of other authorized denominations, the Registrar shall
make the exchange as requested only if the Physical Securities are endorsed
or accompanied by a written instrument of transfer in form satisfactory to
the Registrar duly executed by such Holder or by his attorney duly
authorized in writing and shall be issued only in the name of such Holder
or its nominee and the transfer documentation required in Section
2.6(d)(ii). The Physical Securities issued in exchange for Physical
Securities shall bear the Securities Act Legend and shall be subject to all
restrictions on transfer contained herein in each case to the same extent
as the Physical Securities so exchanged.
(iv) Return of Physical Securities. In the event of a transfer
pursuant to clauses (i) or (ii) above and the Holder thereof as delivered
certificates representing an aggregate principal amount of Securities in
excess of that to be transferred, the Company shall execute and the Trustee
shall authenticate and deliver to the Holder of such Security without
service charge, a new Physical Security or Securities of any authorized
denomination requested by the Holder, in an aggregate principal amount
equal to the portion of the Security not so transferred.
(e) Exchange Offer. Upon the occurrence of the Exchange Offer (as
defined in the Registration Rights Agreement) in accordance with the
Registration Rights Agreement, the Company shall issue and, upon receipt of an
Officers' Certificate stating that the Exchange Registration Statement has
become effective and that the Exchange Offer has occurred and an authentication
order in accordance with Section 2.2, the Trustee shall authenticate one or more
Unrestricted Global Securities in an aggregate principal amount equal to the
principal amount of the interests in the Initial Global Securities and
Re-
<PAGE>
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stricted Physical Securities tendered for acceptance by persons participating
therein. Concurrently with the issuance of such Securities, the Trustee shall
cause the aggregate principal amount of the applicable Initial Global Securities
to be reduced accordingly and direct DTC to make a corresponding reduction in
its book-entry system. The Trustee shall cancel any Restricted Physical
Certificates in accordance with Section 2.9 hereof.
In the case that one or more of the events specified in Section 2.6(a)
have occurred, upon the occurrence of such Exchange Offer, the Company shall
issue and, upon receipt of an authentication order in accordance with Section
2.2, the Trustee shall authenticate Unrestricted Physical Securities in an
aggregate principal amount equal to the principal amount of the Restricted
Physical Securities tendered for acceptance by persons participating therein.
(f) Legends.
Each Initial Global Security and each Restricted Physical Security
shall bear the legend (the "Securities Act Legend") in substantially the
following form:
"THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY ISSUED
IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE UNITED
STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND THE
SECURITY EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED
IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM.
EACH PURCHASER OF THE SECURITY EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE
SELLER MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF
THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER. THE HOLDER OF THE
SECURITY EVIDENCED HEREBY AGREES FOR THE BENEFIT OF THE COMPANY THAT (A)
SUCH SECURITY MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (1)(a)
TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED
INSTITUTIONAL BUYER (AS DEFINED IN RULE
<PAGE>
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144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF
RULE 144A, (b) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER
THE SECURITIES ACT OR (c) OUTSIDE THE UNITED STATES TO A FOREIGN PERSON IN
A TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 UNDER THE SECURITIES
ACT, (2) TO THE COMPANY OR (3) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH ANY APPLICABLE SECURITIES
LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION
AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY
ANY PURCHASER FROM IT OF THE SECURITY EVIDENCED HEREBY OF THE RESALE
RESTRICTIONS SET FORTH IN (A) ABOVE."
(g) Global Security Legend. Each Global Security shall bear a legend
in substantially the following form:
"UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR
SECURITIES IN DEFINITIVE FORM, THIS SECURITY MAY NOT BE TRANSFERRED EXCEPT
AS A WHOLE BY THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC")
TO A NOMINEE OF DTC, OR BY ANY SUCH NOMINEE OF DTC, OR BY DTC TO A
SUCCESSOR DEPOSITORY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITORY. UNLESS
THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF DTC, TO
THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT,
AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH
OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY
PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC). ANY TRANSFER, PLEDGE OR
OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL
INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE,
BUT NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR THEREOF OR
SUCH
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SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY
SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET
FORTH IN SECTION 2.6 OF THE INDENTURE."
(h) Cancellation and/or Adjustment of Global Securities. At such
time as all interests in the Global Securities have been exchanged for Physical
Securities, all Global Securities shall be returned to or retained and canceled
by the Trustee in accordance with Section 2.9 hereof. At any time prior to such
cancellation, if any interest in a Global Security is exchanged for an interest
in another Global Security or for Physical Securities, the principal amount of
Securities represented by such Global Security shall be reduced accordingly and
all such changes to such Global Security shall be reflected on the books and
records of the Trustee, by the Trustee to reflect such reduction.
(i) General Provisions Relating to All Transfers and Exchanges.
(i) To permit registrations of transfers and exchanges, the
Company shall execute and the Trustee shall authenticate Global Securities
and Physical Securities upon a written order signed by an Officer of the
Company or at the Registrar's request.
(ii) No service charge shall be made to a Holder for any
registration of transfer or exchange, but the Company may require payment
of a sum sufficient to cover any stamp or transfer tax or similar
governmental charge payable in connection therewith (other than any such
stamp or transfer taxes or similar governmental charge payable upon
exchange or transfer pursuant to Sections 2.8 and 4.11 hereof).
(iii) All Global Securities and Physical Securities issued upon
any registration of transfer or exchange of Global Securities or Physical
Securities shall be the valid obligations of the Company, evidencing the
same debt, and entitled to the same benefits under this Inden-
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ture, as the Global Securities or Physical Securities surrendered upon such
registration of transfer or exchange.
(iv) The Company shall not be required (A) to issue, to register
the transfer of or to exchange Securities during a period beginning at the
opening of business 15 days before the day of any selection of Securities
for redemption and ending at the close of business on the day of selection,
(B) to register the transfer of or to exchange any Security so selected for
redemption in whole or in part, except the unredeemed portion of any
Security being redeemed in part or (C) to register the transfer of or to
exchange a Security between a record date and the next succeeding Interest
Payment Date.
(v) Prior to due presentment for the registration of a transfer of
any Security, the Trustee, any Agent and the Company may deem and treat the
Person in whose name any Security is registered as the absolute owner of
such Security for the purpose of receiving payment of principal of and
interest on such Securities and for all other purposes, and none of the
Trustee, any Agent or the Company shall be affected by notice to the
contrary.
SECTION 2.7 Replacement Securities.
If any mutilated Security is surrendered to the Trustee, the Company
shall execute and the Trustee shall authenticate and deliver in exchange
therefor a new Security of like tenor and principal amount and bearing a number
not contemporaneously outstanding.
If there shall be delivered to the Company and the Trustee (i)
evidence to their satisfaction of the destruction, loss or theft of any Security
and (ii) such security or indemnity as may be reasonably required by them to
save each of them and any agent of either of them harmless, then, in the absence
of notice to the Company or the Trustee that such Security has been acquired by
a bona fide purchaser, the Company shall execute and upon its request the
Trustee shall authenticate and deliver, in lieu of any such destroyed, lost or
stolen Secu-
<PAGE>
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rity, a new Security of like tenor and principal amount, having endorsed thereon
and bearing a number not contemporaneously outstanding.
Upon the issuance of any new Security under this Section, the Company
may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee) connected therewith.
Every new Security issued pursuant to this Section in lieu of any
destroyed, lost or stolen Security shall constitute an original additional
contractual obligation of the Company whether or not the destroyed, lost or
stolen Security shall be at any time enforceable by anyone, and shall be
entitled to all the benefits of this Indenture equally and proportionately with
any and all other Securities duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to
the extent lawful) all other rights and remedies with respect to the replacement
or payment of mutilated, destroyed, lost or stolen Securities.
SECTION 2.8 Temporary Securities.
Pending the preparation of definitive Securities, the Company may
execute and, upon Company Order, the Trustee shall authenticate and deliver,
temporary Securities which are printed, lithographed typewritten, mimeographed
or otherwise produced, in any authorized denomination, substantially of the
tenor of the definitive Securities in lieu of which they are issued, and with
such appropriate insertions, omissions, substitutions and other variations as
the officers executing such Securities may determine, as evidenced by their
execution of such Securities.
If temporary Securities are issued, the Company will cause definitive
Securities to be prepared without unreasonable delay. After the preparation of
definitive Securities, the temporary Securities shall be exchangeable for
definitive Securities upon surrender of the temporary Securities at any office
<PAGE>
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or agency of the Company designated pursuant to Section 10.2, without charge to
the Holder. Upon surrender for cancellation of any one or more temporary
Securities the Company shall execute and the Trustee shall authenticate and
deliver in exchange therefor a like principal amount of definitive Securities of
authorized denominations and like tenor. Until so exchanged the temporary
Securities shall in all respects be entitled to the same benefits under this
Indenture as definitive Securities.
SECTION 2.9 Cancellation.
All Securities surrendered for payment, redemption or registration of
transfer or exchange shall, if surrendered to any Person other than the Trustee,
be delivered to the Trustee and shall be promptly canceled by it. The Company
may at any time deliver to the Trustee for cancellation any Securities
previously authenticated and delivered hereunder which the Company may have
acquired in any manner whatsoever, and all Securities so delivered shall be
promptly canceled by the Trustee. No Securities shall be authenticated in lieu
of or in exchange for any Securities canceled as provided in this Section,
except as expressly permitted by this Indenture. All canceled Securities held
by the Trustee shall be destroyed by the Trustee and upon the Company's written
request, the Trustee shall deliver a certificate of destruction to the Company.
SECTION 2.10 Defaulted Interest.
Any interest on any Security which is payable, but is not punctually
paid or duly provided for, on any Interest Payment Date (herein called
"Defaulted Interest") shall forthwith cease to be payable to the Holder on the
relevant Regular Record Date by virtue of having been such Holder, and such
Defaulted Interest may be paid by the Company, at its election in each case, as
provided in clause (1) or (2) below:
(1) The Company may elect to make payment of any Defaulted Interest
to the Persons in whose names the Securities (or their respective
Predecessor Securities) are registered at the close of business on a
Special Record Date
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for the payment of such Defaulted Interest, which shall be fixed in the
following manner. The Company shall notify the Trustee in writing of the
amount of Defaulted Interest proposed to be paid on each Security and the
date of the proposed payment, and at the same time the Company shall
deposit with the Trustee an amount of money equal to the aggregate amount
proposed to be paid in respect of such Defaulted Interest or shall make
arrangements satisfactory to the Trustee for such deposit prior to the date
of the proposed payment, such money when deposited to be held in trust for
the benefit of the Persons entitled to such Defaulted Interest as in this
clause provided. Thereupon the Company shall fix a Special Record Date for
the payment of such Defaulted Interest which shall be not more than 15 days
prior to the date of the proposed payment. The Company shall promptly
notify the Trustee of such Special Record Date and, in the name and at the
expense of the Company, the Trustee shall cause notice of the proposed
payment of such Defaulted Interest and the Special Record Date therefor to
be mailed, first-class postage prepaid, to each Holder at his address as it
appears in the Security Register, not less than five Business Days prior to
such Special Record Date. Notice of the proposed payment of such Defaulted
Interest and the Special Record Date therefor having been so mailed, such
Defaulted Interest shall be paid not later than the fifteenth day after
such Special Record Date to the Persons in whose names the Securities (or
their respective Predecessor Securities) are registered at the close of
business on such Special Record Date.
(2) The Company may make payment of any Defaulted Interest in any
other lawful manner not inconsistent with the requirements of any
securities exchange on which the Securities may be listed, and upon such
notice as may be required by such exchange, if, after notice given by the
Company to the Trustee of the proposed payment pursuant to this clause,
such manner of payments shall be deemed practicable by the Trustee.
<PAGE>
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SECTION 2.11 CUSIP or CINS Number.
The Company in issuing the Securities may use a "CUSIP" or "CINS"
number, and if so, such CUSIP or CINS number shall be included in notices of
redemption or exchange as a convenience to Holders; provided that any such
notice may state that no representation is made as to the correctness or
accuracy of the CUSIP or CINS number printed in the notice or on the Securities,
and that reliance may be placed only on the other identification numbers printed
on the Securities. The Company will promptly notify the Trustee of any change
in the CUSIP or CINS number.
SECTION 2.12 Payments of Interest.
(a) The Holder of a Physical Security at the close of business on the
Regular Record Date with respect to any Interest Payment Date shall be entitled
to receive the interest and Additional Interest, if any, payable on such
Interest Payment Date notwithstanding any transfer or exchange of such Physical
Security subsequent to the regular record date and prior to such Interest
Payment Date, except if and to the extent the Company shall default in the
payment of the interest or Additional Interest due on such Interest Payment
Date, in which case such Defaulted Interest and Additional Interest, if any,
shall be paid in accordance with Section 2.10; provided that, in the event of an
exchange of a Physical Security for a beneficial interest in any Global Security
subsequent to a regular record date or any special record date and prior to or
on the related Interest Payment Date or other payment date under Section 2.10,
any payment of the interest and Additional Interest payable on such payment date
with respect to any such Physical Security shall be made to the Person in whose
name such Physical Security was registered on such record date. Payments of
interest on the Global Securities will be made to the Holder of the Global
Security on each Interest Payment Date; provided that, in the event of an
exchange of all or a portion of a Global Security for Physical Security
subsequent to the regular record date or any special record date and prior to or
on the related Interest Payment Date or other payment date under Section 2.10
any payment of interest or Additional
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Interest payable on such Interest Payment Date or other payment date with
respect to the Physical Security shall be made to the Holder of the Global
Security.
(b) The Trustee shall pay interest and Additional Interest, if any,
to DTC, with respect to any Global Security held by DTC, on the applicable
Interest Payment Date in accordance with instructions received from the Company
at least five Business Days before the applicable Interest Payment Date. The
Company shall deliver such instructions in the form of an Officers' Certificate
setting forth Additional Interest in the aggregate and per $1,000 principal
amount of Securities to be paid on such Interest Payment Date.
ARTICLE III
[RESERVED]
ARTICLE IV
COVENANTS
---------
SECTION 4.1 Payment of Securities.
The Company shall pay the principal of and interest on the Securities
on the dates and in the manner provided in the Securities and this Indenture.
An installment of principal or interest shall be considered paid on
the date due if the Trustee or Paying Agent (other than the Company or any
Subsidiary of the Company or any Affiliate of any thereof) holds on such date by
12:00 noon, New York City time, immediately available funds designated for and
sufficient to pay such installment.
The Company shall pay interest on overdue principal and on overdue
installments of interest, in each case at the
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rate per annum specified in the Securities, to the extent lawful.
SECTION 4.2 Maintenance of Office or Agency.
The Company shall maintain in the Borough of Manhattan, the City of
New York, an office or agency, where Securities may be surrendered for
registration of transfer or exchange or for presentation for payment and where
notices and demands to or upon the Company in respect of the Securities and this
Indenture may be served. The Company will give prompt written notice to the
Trustee of the location, and any change in the location, of such office or
agency. If at any time the Company shall fail to maintain any such required
office or agency or shall fail to furnish the Trustee with the address thereof,
such presentations, surrenders, notices and demands may be made or served at the
address of the Trustee set forth in Section 10.2.
The Company may also from time to time designate one or more other
offices or agencies where the Securities may be presented or surrendered for any
or all such purposes and may from time to time rescind such designations,
provided that no such designation or rescission shall in any manner relieve the
Company of its obligation to maintain an office or agency in the Borough of
Manhattan, the City of New York, for such purposes. The Company will give
prompt written notice to the Trustee of any such designation or rescission and
of any change in the location of any such other office or agency.
The Company hereby initially designates the offices of the Trustee as
set forth in Section 10.2 as an agency of the Company in accordance with Section
2.3.
SECTION 4.3 Corporate Existence.
Subject to Article V hereof, the Company shall do or cause to be done,
at its own cost and expense, all things necessary to and will cause each of its
Subsidiaries to, preserve and keep in full force and effect the corporate
existence and rights (charter and statutory), licenses and/or franchises of
<PAGE>
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the Company and each of its Subsidiaries, provided that the Company shall not be
required to preserve any such right, license or franchise, or the corporate
existence of any of its Subsidiaries, if in the reasonable and good faith
judgment of the Board of Directors of the Company (i) such preservation or
existence is not desirable in the conduct of business of the Company or such
Subsidiary and (ii) the loss of such right, license or franchise or the
dissolution of such Subsidiary is not adverse in any material respect to the
Holders or to the Company or the ability of the Company to satisfy its
obligations hereunder.
SECTION 4.4 Payment of Taxes and Other Claims.
The Company shall and shall cause each of its Subsidiaries to pay or
discharge or cause to be paid or discharged, before the same shall become
delinquent, (a) all material taxes, assessments and governmental charges levied
or imposed upon its or its Subsidiaries' income, profits or property and (b) all
material lawful claims for labor, materials and supplies which, if unpaid, might
by law become a Lien upon its property or the property of any of its
Subsidiaries, provided that the Company shall not be required to pay or
discharge or cause to be paid or discharged any such tax, assessment, charge or
claim whose amount, applicability or validity is being contested in good faith
by appropriate negotiations or proceedings promptly instituted and diligently
conducted and for which disputed amounts adequate reserves (in the reasonable
and good faith judgment of the Board of Directors of the Company) have been
made.
SECTION 4.5 Maintenance of Properties; Insurance; Books and Records;
Compliance with Law.
(a) The Company shall, and shall cause each of its Subsidiaries to,
at all times cause all properties used or useful in the conduct of its business
to be maintained and kept in good condition, repair and working order
(reasonable wear and tear excepted) and supplied with all necessary equipment,
and shall cause to be made all necessary repairs, renewals, replacements,
betterments and improvements thereto, provided that
<PAGE>
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nothing in this Section 4.5 shall prevent the Company or any Subsidiary from
discontinuing the operation or maintenance of any of such properties, or
disposing of any of them, if such discontinuance or disposal is (i) in the
ordinary course of business, (ii) in the reasonable and good faith judgment of
the Board of Directors of the Company or the Subsidiary concerned, as the case
may be, desirable in the conduct of the business of the Company or such
Subsidiary, as the case may be, or (iii) otherwise permitted by this Indenture.
(b) The Company shall, and shall cause each of its Subsidiaries to
maintain with financially sound and reputable insurers such insurance (including
appropriate self insurance) as may be required by law and such other insurance,
to such extent and against such hazards and liabilities consistent with practice
on the Issue Date, as the Company in its reasonable and good faith judgment
determines is required, taking into account its business and financial
condition.
(c) The Company shall, and shall cause each of its Subsidiaries to,
keep proper books of record and account, in which full and correct entries shall
be made of all business and financial transactions of the Company and each
Subsidiary of the Company and reflect on its financial statements adequate
accruals and appropriations to reserves, all in accordance with generally
accepted accounting principles consistently applied to the Company and its
Subsidiaries taken as a whole.
(d) The Company shall and shall cause each of its Subsidiaries to
comply with all statutes, laws, ordinances, or government rules and regulations
to which it is subject, non-compliance with which would materially adversely
affect the business, earnings, properties, assets or financial condition of the
Company and its Subsidiaries taken as a whole.
SECTION 4.6 Compliance Certificates.
(a) The Company shall deliver to the Trustee, within 120 days after
the end of its Fiscal Year, Officers' Certificates of the Company signed by the
Officers specified under TIA (S)314(a)(4) stating (i) that a review of the
activities of the
<PAGE>
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Company during the preceding Fiscal Year has been made under the supervision of
the signing Officers with a view to determining whether the Company has kept,
observed, performed and fulfilled its obligations under this Indenture and the
Securities, and (ii) that, to the knowledge of such Officer, no Default or Event
of Default has occurred (or, if a Default or Event of Default shall have
occurred, describing all such Defaults or Events of Default of which such
Officer may have knowledge, their status and what action the Company is taking
or proposes to take with respect thereto). The first certificate to be delivered
pursuant to this Section 4.6(a) shall be for the first Fiscal Year of the
Company ending after the Issue Date.
(b) So long as not contrary to the then current recommendations of
the American Institute of Certified Public Accountants, the Company shall cause
its independent public accountants to deliver to the Trustee within 120 days
after the end of each Fiscal Year a written statement by such accountants
stating (A) that their audit examination has included a review of the relevant
provisions of this Indenture and the Securities as they relate to accounting
matters, and (B) whether, in connection with their audit examination, any
Default or Event of Default has come to their attention and if such a Default or
Event of Default has come to their attention, specifying the nature and period
of existence thereof, provided that, without any restriction as to the scope of
the audit examination, such independent certified public accountants shall not
be liable by reason of any failure to obtain knowledge of any such Default or
Event of Default that would not be disclosed in the course of an audit
examination conducted in accordance with generally accepted auditing standards.
(c) The Company will, so long as any of the Securities are
outstanding, deliver to the Trustee, promptly after any Officer becoming aware
of (i) any Default, Event of Default or default in the performance of any
covenant, agreement or condition contained in the Securities or this Indenture
or (ii) any event of default under any other Indebtedness referred to in Section
6.1(a)(iv) or (v), an Officers' Certificate specify-
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ing such Default, Event of Default, default or event of default and what action
the Company is taking or proposes to take with respect thereto.
SECTION 4.7 Reports.
So long as any Security is outstanding, the Company shall file with
the SEC the annual reports, quarterly reports and the information, documents and
other reports required to be filed by the Company with the SEC pursuant to
Sections 13 and 15(d) of the Exchange Act, whether or not the Company has or is
required to have a class of securities registered under the Exchange Act, at the
time it is or would be required to file the same with the SEC and within 15 days
after it is or would be required to file such reports, information or documents
with the SEC shall mail such reports, information and documents to the Holders
at their addresses set forth in the Register of Securities maintained by the
Registrar and the Trustee. In accordance with the provisions of TIA (S)314(a),
at any time that the Company has (whether or not required by the Exchange Act) a
class of securities registered under the Exchange Act, and at any time that the
Company is required to file such reports, information and documents pursuant to
the first sentence of this Section 4.7, the Company (at its own expense) shall
file with the Trustee, within 15 days after it is or would be required to file
them with the SEC, copies of the annual reports and of the information,
documents and other reports (or copies of such portions of any of the foregoing
as the SEC may by rules and regulations prescribe) which the Company is required
to file with the SEC pursuant to Section 13 or 15 of the Exchange Act or
pursuant to the first sentence of this Section 4.7. The Company also shall
comply with the other provisions of TIA (S)314(a).
If the Company is required to furnish annual or quarterly reports to
its stockholder pursuant to the Exchange Act, the Company shall cause any annual
report furnished to its stockholder generally and any quarterly or other
financial reports furnished by it to its stockholder generally to be filed with
the Trustee and mailed, no later than the date such materials are mailed or made
available to the Company's stock-
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holder, to the Holders at their addresses appearing in the register of
Securities maintained by the Registrar and the Trustee. If the Company is not
required to furnish annual or quarterly reports to its stockholder pursuant to
the Exchange Act, the Company shall cause its financial statements, including
any notes thereto (and with respect to annual reports, an auditors' report by a
firm of established national reputation reasonably satisfactory to the Trustee),
and a "Management's Discussion and Analysis of Financial Condition and Results
of Operations," to be so mailed to the Holders within 120 days after the end of
each of its Fiscal Years and within 60 days after the end of each of its first
three fiscal quarters.
SECTION 4.8 Maintenance of Consolidated Fixed Charge Coverage Ratio.
The Company will not permit its Consolidated Fixed Charge Coverage
Ratio as of the end of any of its fiscal quarters to be less than 1.25 to 1.0,
provided that such ratio shall be 1.10 to 1.0 for any fiscal quarter in which
the Securities are rated Investment Grade by both Rating Agencies on the last
day of such fiscal quarter.
The Company shall furnish to the Trustee an Officers' Certificate
within 45 days after the end of each Fiscal Quarter of the Company (105 days
after the end of its Fiscal Year) setting forth the calculation of this ratio
and stating whether or not the Company is in compliance with this Section 4.8
SECTION 4.9 Limitation on Indebtedness.
(a) The Company will not, and the Company will not cause or permit
any of its Subsidiaries to, incur or otherwise become or be liable in respect of
any Indebtedness (including, without limitation, Acquired Indebtedness) other
than:
(1) Senior Indebtedness of the Company and Indebtedness of
Subsidiaries of the Company, provided that the aggregate outstanding
principal amount of the sum of Senior Indebtedness of the Company plus
Indebtedness of the Subsidiaries of the Company shall not at any time
exceed 500%
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of the sum of the aggregate outstanding principal amount of Subordinated
Indebtedness plus Consolidated Tangible Net Worth, except that such 500%
shall be increased to 525% of such sum during any part or all of any three
consecutive calendar months immediately succeeding six consecutive calendar
months during which such aggregate outstanding principal amount has not
exceeded 500% of such sum;
(2) Subordinated Indebtedness of the Company, provided that the
aggregate outstanding principal amount thereof shall not at the time of
incurrence exceed 100% of Consolidated Tangible Net Worth; and
(3) Indebtedness between the Company and any of its Subsidiaries
and Indebtedness between Subsidiaries of the Company so long as held by the
Company or any Subsidiary of the Company.
(b) Notwithstanding anything in this Indenture to the contrary, the
consummation of any Qualified Securitization Transaction shall not be deemed to
be the incurrence or maintenance of Indebtedness by the Company or any
Subsidiary of the Company.
SECTION 4.10 Waiver of Stay, Extension or Usury Laws.
The Company and each Subsidiary Guarantor covenants (to the extent
that it may lawfully do so) that it will not at any time insist upon, plead, or
in any manner whatsoever claim or take the benefit or advantage of, any stay or
extension law or any usury law or other law that would prohibit or forgive the
Company or such Subsidiary Guarantor from paying all or any portion of the
principal of or interest on the Securities as contemplated herein or in the
Securities, wherever enacted, now or at any time hereafter in force, or that may
affect the covenants or the performance of this Indenture; and (to the extent
that it may lawfully do so) the Company and each Subsidiary Guarantor hereby
expressly waives all benefit or advantage of any such law, and covenants that it
will not hinder, delay or
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impede the execution of any power herein granted to the Trustee, but will suffer
and permit the execution of every such power as though no such law had been
enacted.
SECTION 4.11 Change of Control.
Upon the occurrence of a Change of Control Triggering Event (the date
of each such occurrence being the "Change of Control Date"), the Company shall
notify the Holders in writing of such occurrence and shall make an offer to
purchase (the "Change of Control Offer"), on a Business Day (the "Change of
Control Payment Date") not earlier than 30 nor later than 60 days following the
date notification of the Change of Control Triggering Event is first given, all
Securities then outstanding at a purchase price equal to 101% of the principal
amount thereof, plus accrued and unpaid interest, if any, to such Change of
Control Payment Date.
Notice of a Change of Control Triggering Event shall be mailed by the
Company to the Holders not more than 30 days after any Change of Control Date at
their last registered addresses with a copy to the Trustee and the Paying Agent.
The Change of Control Offer shall remain open from the time of mailing for at
least 20 Business Days and until 4:00 p.m., New York City time, on the Change of
Control Payment Date. The notice, which shall govern the terms of the Change of
Control Offer, shall include such disclosures as are required by law and shall
state:
(a) that the Change of Control Offer is being made pursuant to this
Section 4.11 and that all Securities will be accepted for payment;
(b) the purchase price (including the amount of accrued interest, if
any) for each Security and the Change of Control Payment Date;
(c) that any Security not tendered for payment will continue to
accrue interest in accordance with the terms thereof;
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(d) that any Security accepted for payment pursuant to the Change of
Control Offer shall cease to accrue interest after the Change of Control
Payment Date unless the Company shall default in the payment thereof;
(e) that Holders electing to have Securities purchased pursuant to a
Change of Control Offer will be required to surrender their Securities to
the Paying Agent at the address specified in the notice prior to 4:00 p.m.,
New York City time, on the Change of Control Payment Date and must complete
any form letter of transmittal proposed by the Company and acceptable to
the Trustee and the Paying Agent;
(f) that Holders of Securities will be entitled to withdraw their
election if the Paying Agent receives, not later than 4:00 p.m., New York
City time, on the Change of Control Payment Date, a facsimile transmission
(confirmed by overnight delivery of the original thereof) or letter setting
forth the name of the Holder, the principal amount of Securities the Holder
delivered for purchase, the Security certificate number (if any) and a
statement that such Holder is withdrawing his election to have such
Securities purchased;
(g) that Holders whose Securities are purchased only in part will be
issued Securities equal in principal amount to the unpurchased portion of
the Securities surrendered;
(h) the instructions that Holders must follow in order to tender
their Securities; and
(i) the circumstances and relevant facts known to the Company
regarding such Change of Control.
On the Change of Control Payment Date, the Company shall (i) accept
for payment Securities or portions thereof tendered pursuant to the Change of
Control Offer, (ii) deposit with the Paying Agent money sufficient to pay the
purchase price of all Securities or portions thereof so tendered and ac-
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cepted and (iii) deliver to the Trustee the Securities so accepted together with
an Officers' Certificate setting forth the Securities or portions thereof
tendered to and accepted for payment by the Company. The Paying Agent shall
promptly mail or deliver to the Holders of Securities so accepted payment in an
amount equal to the purchase price, and the Trustee shall promptly authenticate
and mail or deliver to such Holders a new Security equal in principal amount to
any unpurchased portion of the Security surrendered. Any Securities not so
accepted shall be promptly mailed or delivered by the Company to the Holder
thereof. The Company will publicly announce the results of the Change of Control
Offer not later than the third Business Day following the Change of Control
Payment Date.
The Company shall comply, to the extent applicable, with the
requirements of Section 14(e) under the Exchange Act, and any other securities
laws or regulations in connection with the purchase of Securities pursuant to a
Change of Control Offer. To the extent that the provisions of any securities
laws or regulations conflict with provisions of this Section 4.11, the Company
shall comply with the applicable securities laws and regulations and shall not
be deemed to have breached its obligations under this Section 4.11 by virtue
thereof.
SECTION 4.12 Limitation on Transactions with Affiliates.
The Company will not, nor will the Company cause or permit any of its
Subsidiaries to (a) sell, lease, transfer or otherwise dispose of any of its
property or assets to, (b) purchase any property or assets from, (c) make any
Investment in, or (d) enter into or amend or extend any contract, agreement or
understanding with or for the benefit of, any Affiliate of the Company or of any
Subsidiary (an "Affiliate Transaction"), other than Affiliate Transactions that
are on terms that are fair and reasonable to the Company or such Subsidiary of
the Company and that are no less favorable to the Company or such Subsidiary of
the Company than those that could be obtained in a comparable arm's length
transaction by the Company or such Subsidiary of the Company from an
unaffiliated party, provided that if the Company or any Subsidiary of the
Company enters
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into an Affiliate Transaction or series of Affiliate Transactions involving or
having an aggregate value of more than $10,000,000, a majority of the Board of
Directors of the Company shall, prior to the consummation of such Affiliate
Transaction, have determined in the reasonable good faith judgment of such
directors that such Affiliate Transaction meets the foregoing standard. The
foregoing restrictions shall not apply to (a) any transaction between Wholly
Owned Subsidiaries of the Company, or between the Company and any Wholly Owned
Subsidiary of the Company if such transaction is not otherwise prohibited by the
terms of this Indenture, (b) transactions entered into pursuant to the terms of
the Master Intercompany Agreement and the Tax Allocation Agreement, (c)
transactions entered into in the ordinary course of business and (d) Qualified
Securitization Transactions.
SECTION 4.13 Limitation on Liens.
The Company will not, and will not cause or permit any of its
Subsidiaries to, create, incur, assume or suffer to exist any Liens upon any of
their respective properties or assets (including, without limitation, any asset
in the form of the right to receive payments, fees or other consideration or
benefits) whether owned on the Issue Date or acquired after the Issue Date,
other than (i) Liens granted by the Company on property or assets of the Company
securing Senior Indebtedness of the Company that is permitted by this Indenture,
provided that the Securities are secured equally and ratably with such Senior
Indebtedness subject to the provisions set forth in Article XI hereof; (ii)
Liens granted by the Company on property or assets of the Company securing
Indebtedness of the Company that is permitted by this Indenture and that is pari
passu with the Securities, provided that the Securities are secured on an equal
and ratable basis with such Liens; (iii) Liens granted by the Company on
property or assets of the Company securing Indebtedness of the Company that is
permitted by this Indenture and that is subordinated to the Securities, provided
that the Securities are secured by Liens ranking prior to such Liens; (iv) Liens
existing on the Issue Date immediately after giving effect to the consummation
of the offering of the Securities
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and the application of the net proceeds therefrom as set forth under "Use of
Proceeds" in the Offering Memorandum to the extent and in the manner such Liens
are in effect on the Issue Date, provided that the Securities are secured
equally and ratably with the Indebtedness of the Company outstanding under the
Credit Agreement subject to the provisions set forth in Article XI hereof; (v)
Permitted Liens; (vi) Liens in respect of Acquired Indebtedness permitted by
this Indenture, provided that the Liens in respect of such Acquired Indebtedness
secured such Acquired Indebtedness at the time of the incurrence of such
Acquired Indebtedness by the Company and such Liens and the Acquired
Indebtedness were not incurred by the Company or by the Person being acquired or
from whom the assets were acquired in connection with, or in anticipation of,
the incurrence of such Acquired Indebtedness by the Company, and, provided,
further that such Liens in respect of such Acquired Indebtedness do not extend
to or cover any property or assets of the Company or of any Subsidiary of the
Company other than the property or assets that secured the Acquired Indebtedness
prior to the time such Indebtedness became Acquired Indebtedness of the Company;
(vii) Liens granted by the Company or by any Subsidiary of the Company on
property or assets of the Company or such Subsidiary securing other Indebtedness
permitted by this Indenture not to exceed $2,000,000 in the aggregate; (viii)
Liens granted in connection with any Qualified Securitization Transaction; (ix)
Liens arising from claims of holders of Indebtedness against funds held in a
defeasance trust for the benefit of such holders; and (x) Liens granted by any
Subsidiary of the Company on property or assets of such Subsidiary securing
Indebtedness of such Subsidiary that is permitted by this Indenture, provided
that the Company shall cause any Subsidiary Guarantor that incurs such secured
Indebtedness to secure equally and ratably and on a parity with the Indebtedness
of such Subsidiary that is so secured such Subsidiary Guarantor's Subsidiary
Guarantee.
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SECTION 4.14 Limitation on Payment Restrictions Affecting
Subsidiaries.
The Company will not, and will not cause or permit any of its
Subsidiaries to, directly or indirectly, create or suffer to exist or allow to
become effective any consensual encumbrance or restriction of any kind on the
ability of any such Subsidiary to (i) pay dividends, in cash or otherwise, or
make other payments or distributions on its Capital Stock or any other equity
interest or participation in, or measured by, its profits, owned by the Company
or by any Subsidiary of the Company, or make payments on any Indebtedness owed
to the Company or to any Subsidiary of the Company; (ii) make loans or advances
to the Company or to any Subsidiary of the Company; or (iii) transfer any of
their respective property or assets to the Company or to any Subsidiary of the
Company, except for such encumbrances or restrictions existing under or by
reason of (A) applicable law or regulations; (B) customary provisions
restricting subletting or assignment of any lease governing a leasehold interest
of any Subsidiary of the Company; or (C) Indebtedness or any other contractual
requirements (including pursuant to any corporate governance documents in the
nature of a charter or by-laws) of a Securitization Subsidiary arising in
connection with a Qualified Securitization Transaction, provided that any such
encumbrances and restrictions apply only to such Securitization Subsidiary.
SECTION 4.15 Limitation on Guarantees by Subsidiaries.
The Company shall not cause or permit any of its Subsidiaries,
directly or indirectly, to guarantee the payment of any Indebtedness of the
Company or of any Subsidiary of the Company unless such Subsidiary of the
Company simultaneously executes and delivers a supplemental indenture (the
substantive provisions of which are in Exhibit B hereto) to this Indenture
providing for the guarantee of payment of the Securities by such Subsidiary of
the Company and if any such guarantee is given to any holders of Senior
Indebtedness of the Company, such Subsidiary Guarantor's Subsidiary Guarantee
will be subordinated to Guarantor Senior Indebtedness as set forth in Ex-
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hibit B hereto, provided that no such guarantee of such other Indebtedness shall
be permitted by this Section 4.15 unless (A) such guarantee of such other
Indebtedness (1) is unsecured, unless the Subsidiary Guarantee of such
Subsidiary Guarantor is (I) with respect to such Subsidiary Guarantor's
guarantee of Senior Indebtedness of the Company, secured equally and ratably
with any Liens securing such Subsidiary Guarantor's guarantee of such Senior
Indebtedness, subject to the provisions set forth in Article XI hereof, (II)
with respect to such Subsidiary Guarantor's guarantee of Indebtedness of the
Company ranking pari passu with the Securities, secured equally and ratably with
the Liens securing such Subsidiary Guarantor's guarantee of such pari passu
Indebtedness and (III) with respect to such Subsidiary Guarantor's guarantee of
Indebtedness of the Company that is subordinated to the Securities, secured on a
basis ranking prior to the Liens securing such Subsidiary Guarantor's guarantee
of such subordinated Indebtedness, (2) other than any guarantee by such
Subsidiary Guarantor of Senior Indebtedness of the Company incurred in
accordance with this Indenture, is not and does not purport to be senior or
superior in right of payment or otherwise to the Subsidiary Guarantee of such
Subsidiary Guarantor and (3) if such guarantee of such other Indebtedness is of
Indebtedness of the Company that is subordinated or junior to the Securities
(whether pursuant to its terms or by operation of law), is subordinated,
pursuant to a written agreement, to the Subsidiary Guarantee of such Subsidiary
Guarantor at least to the same extent and in the same manner as the Subsidiary
Guarantee of such Subsidiary Guarantor is (or would be if no Guarantor Senior
Indebtedness is then outstanding) subordinated to Guarantor Senior Indebtedness,
(B) the Subsidiary Guarantee of such Subsidiary Guarantor is not subordinated or
junior to any Indebtedness of such Subsidiary Guarantor other than Guarantor
Senior Indebtedness of such Subsidiary Guarantor and (C) such Subsidiary of the
Company waives, pursuant to Section 12.5 of Exhibit B and agrees that it will
not in any manner whatsoever claim or take the benefit or advantage of, any
rights of reimbursement, indemnity or subrogation or any other rights against
the Company or any other Subsidiary of the Company as a result of any payment by
such Subsidiary Guarantor under its Subsidiary Guarantee. The sup-
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plemental indenture shall supplement this Indenture by, among other things,
creating an additional Article XII applicable to such Subsidiary Guarantor and
any other Subsidiary Guarantors in the form set forth in Exhibit B hereto and,
in connection with the execution and delivery of the supplemental indenture,
such Subsidiary Guarantor shall execute and deliver a Guarantee substantially in
the form of Exhibit C hereto. Such Article XII shall not become effective until
the provisions of Section 12.2 have been complied with.
Notwithstanding the foregoing, any Subsidiary Guarantee will be
subject to release under the conditions described in Section 12.4 of Exhibit B
hereto.
SECTION 4.16 Limitation on Senior Subordinated Indebtedness.
The Company will not, and the Company will not cause or permit any
Subsidiary Guarantor to, directly or indirectly, in any event incur any (a)
Indebtedness that purports to be by its terms (or by the terms of any agreement
governing such Indebtedness) both subordinate to any other Indebtedness of the
Company or of such Subsidiary Guarantor, as the case may be, and senior or
superior in any right of payment or interest to the Securities or the Subsidiary
Guarantees, as the case may be, or (b) Indebtedness which by its terms (or by
the terms of any agreement governing such Indebtedness) is subordinated to any
other Indebtedness of the Company or of such Subsidiary Guarantor, as the case
may be (other than Indebtedness of the Company or of such Subsidiary Guarantor,
as the case may be (including the Securities or the Subsidiary Guarantees, as
the case may be), that is subordinated solely to Senior Indebtedness of the
Company or Guarantor Senior Indebtedness of such Subsidiary Guarantor), unless
such Indebtedness is also by its terms (or by the terms of any agreement
governing such Indebtedness) made expressly subordinate to the Securities or the
Subsidiary Guarantees, as the case may be, to the same extent and in the same
manner as such Indebtedness is subordinated pursuant to subordination provisions
that are most favorable to the holders of any other Indebtedness of the Company
or of such Subsidiary Guarantor, as the case may be.
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SECTION 4.17 Limitation on Termination of Master Intercompany
Agreement.
The Company shall not amend, modify, rescind, terminate or waive any
of the provisions of Article II.A.1 of the Master Intercompany Agreement (except
to remove obsolete references therein the removal of which will not be adverse
to the Company) or effect any other amendment of the Master Intercompany
Agreement which would materially and adversely affect the Company.
ARTICLE V
SUCCESSOR CORPORATION
---------------------
SECTION 5.1 Merger, Consolidation, Etc.
(a) The Company will not, in a single transaction or series of
related transactions, consolidate or merge with or into, or sell, assign,
transfer, lease, convey or otherwise dispose of (and the Company will not cause
or permit any of its Subsidiaries to sell, assign, transfer, lease, convey or
otherwise dispose of) all or substantially all of the Company's and its
Subsidiaries' assets (determined on a consolidated basis for the Company and its
Subsidiaries) to, any Person or adopt a Plan of Liquidation unless: (i) either
(1) the Company shall be the surviving or continuing corporation or (2) the
Person (if other than the Company) formed by such consolidation or into which
the Company is merged or the Person which acquires by conveyance, transfer or
lease the properties and assets of the Company and its Subsidiaries
substantially as an entirety or in the case of a Plan of Liquidation, or Person
to which assets of the Company and its Subsidiaries have been transferred (x)
shall be a corporation organized and validly existing under the laws of the
United States or any State thereof or the District of Columbia and (y) shall
expressly assume, by supplemental indenture (in form and substance satisfactory
to the Trustee), executed and delivered to the Trustee, the due and punctual
payment of the principal of, and premium, if any, and interest
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on all of the Securities and the performance of every covenant of the Securities
and this Indenture on the part of the Company to be performed or observed; (ii)
immediately after giving effect to such transaction and the assumption
contemplated by clause(i)(2)(y) above (including giving effect to any
Indebtedness and Acquired Indebtedness incurred or anticipated to be incurred in
connection with or in respect of such transaction), the Company (in the case of
clause (1) of the foregoing clause (i)) or such Person (in the case of clause
(2) thereof) shall have a Consolidated Tangible Net Worth (immediately after the
transaction but prior to any purchase accounting adjustments relating to such
transaction) equal to or greater than the Consolidated Tangible Net Worth of the
Company immediately prior to such transaction; (iii) immediately before and
after giving effect to such transaction and the assumption contemplated by
clause (i)(2)(y) above (including giving effect to any Indebtedness and Acquired
Indebtedness incurred or anticipated to be incurred in connection with or in
respect of the transaction) no Default and no Event of Default shall have
occurred or be continuing; (iv) the Company or such Person shall have delivered
to the Trustee (A) an Officers' Certificate and an Opinion of Counsel, each
stating that such consolidation, merger, conveyance, transfer or lease or Plan
of Liquidation and, if a supplemental indenture is required in connection with
such transaction, such supplemental indenture, comply with this provision of
this Indenture and that all conditions precedent in this Indenture relating to
such transaction have been satisfied and (B) a certificate from the Company's
independent certified public accountants stating that the Company has made the
calculations required by clause (ii) above in accordance with the terms of this
Indenture; and (v) each Subsidiary Guarantor, unless it is the other party to
the transaction, shall have by supplemental indenture confirmed that its
Subsidiary Guarantee shall apply, without alteration or amendment and in every
identical respect as its Subsidiary Guarantee applies on the date it was granted
under this Indenture to the obligations of the Company under this Indenture and
the Securities, to the obligations of the Company or such Person, as the case
may be, under this Indenture and the Securities after the consummation of such
transaction of the Company. Notwithstanding the forego-
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ing, (x) a Wholly Owned Subsidiary of the Company may consolidate with, or merge
with or into, or sell, assign, transfer, lease, convey or otherwise dispose of
all or substantially all of its assets to, the Company or another Wholly Owned
Subsidiary of the Company without complying with clause (ii) of the above and
(y) a series of transactions involving the sale of Receivables or interests
therein by the Company or a Securitization Subsidiary in connection with a
Qualified Securitization Transaction shall not be deemed to be the sale of all
or substantially all of the Company's assets to the extent such transactions are
consummated in the ordinary course of business.
For purposes of the foregoing, the transfer (by lease, assignment,
sale or otherwise, in a single transaction or series of transactions) of all or
substantially all of the properties or assets of one or more Subsidiaries of the
Company, the Capital Stock of which constitutes all or substantially all of the
properties and assets of the Company, shall be deemed to be the transfer of all
or substantially all of the properties and assets of the Company.
(b) A Subsidiary Guarantor shall not, and the Company shall not cause
or permit a Subsidiary Guarantor to, consolidate with or merge with or into any
Person unless:
(i) except in the circumstances where the Subsidiary Guarantee of
the Subsidiary Guarantor is to be released in accordance with Section 12.4,
such Subsidiary Guarantor or, if the merger or consolidation involves the
Company, the Company shall be the continuing person, or the resulting or
surviving person (the "surviving entity") shall be a corporation organized
and existing under the laws of the United States or any State thereof or
the District of Columbia;
(ii) except in the circumstances where the Subsidiary Guarantee of
the Subsidiary Guarantor is to be released in accordance with Section 12.4
or where the Company is the surviving entity, the surviving entity shall
expressly assume, by a supplemental indenture executed and delivered
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to the Trustee, in form and substance reasonably satisfactory to the
Trustee, all of the obligations of such Subsidiary Guarantor under the
Securities and this Indenture, as modified by such supplemental indenture,
and its Subsidiary Guarantee;
(iii) immediately before and immediately after giving effect to
such transaction and all other transactions occurring as a result of or in
connection therewith (including, without limitation the incurrence of any
Indebtedness or Acquired Indebtedness or the granting of any Lien) no
Default or Event of Default shall have occurred and be continuing; and
(iv) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that such consolidation
or merger, and if a supplemental indenture is required in connection with
such transaction or series of transactions, such supplemental indenture,
complies with this Section 5.1(b) and that all conditions precedent
provided for in this Indenture relating to the transaction or series of
transactions have been satisfied and that such supplemental indenture
constitutes the legal, valid and binding obligation of the Company
enforceable in accordance with its terms subject to the customary
exceptions.
The foregoing provisions of this Section 5.1(b) shall not be deemed to be a
qualification or limitation of any of the provisions of Section 5.1(a).
SECTION 5.2 Successor Entity Substituted.
Upon any consolidation or merger, or any conveyance, lease or transfer
of all or substantially all of the assets of the Company in accordance with
Section 5.1, the successor Person formed by such consolidation or into which the
Company is merged or to which such conveyance, lease or transfer is made shall
succeed to, and be substituted for, and may exercise every right and power of,
the Company under this Indenture with the same effect as if such successor
Person had been named as
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the Company herein; and thereafter (except in the case of a sale, assignment,
transfer, conveyance, lease or other disposition) the Company shall be
discharged from all obligations and covenants under this Indenture and the
Securities.
ARTICLE VI
DEFAULT AND REMEDIES
--------------------
SECTION 6.1 Events of Default.
(a) "Event of Default", wherever used herein, means any one of the
following events (whatever the reason for such Event of Default and whether it
shall be voluntary or involuntary or be effected by operation of law or pursuant
to any judgment, decree or order of any court or any order, rule or regulation
of any administrative or governmental body):
(i) the Company defaults in the payment of principal of, or
premium, if any, on the Securities when due at maturity, upon repurchase,
upon acceleration or otherwise, including, without limitation, failure of
the Company to repurchase the Securities on the date required following a
Change of Control Triggering Event, whether or not any such payment is
prohibited by the provisions of Article XI; or
(ii) the Company defaults in the payment of any installment of
interest on the Securities when due and continuance of such Default for 30
days or more, whether or not such payment is prohibited by the provisions
of Article XI; or
(iii) the Company or any Subsidiary Guarantor defaults in the
performance of or breaches any covenant, warranty or agreement in, or
provision of, the Securities, any Subsidiary Guarantee or this Indenture
(other than defaults specified in clause (i) or (ii) above or clause (v)
below), and such Default or breach continues for a period of
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30 days or more after written notice to the Company by the Trustee or to
the Company and the Trustee by the Holders of at least 25% in aggregate
principal amount of the then outstanding Securities; or
(iv) default under any mortgage, indenture or instrument under
which there may be issued or by which there may be secured or evidenced any
Indebtedness for money borrowed by the Company or any Subsidiary of the
Company (or the payment of which is guaranteed by the Company or any
Subsidiary of the Company), which default results in the acceleration of
such Indebtedness prior to its express maturity and the principal amount of
any such Indebtedness, together with the principal amount of any other such
Indebtedness the maturity of which has been so accelerated, aggregates
$25,000,000 or more and such acceleration has not been rescinded or
annulled or such Indebtedness discharged in full within 30 days; or
(v) any Subsidiary Guarantee ceases to be in full force and effect
(other than in accordance with the terms of such Subsidiary Guarantee and
this Indenture and other than at such time as and so long as such
Subsidiary's guarantee of all other Indebtedness of the Company and of the
Company's Subsidiaries is no longer in full force and effect (unless
arising from the payment by such Subsidiary Guarantor under its guarantee
of such Indebtedness)) or is declared null and void or unenforceable or
found to be invalid (other than at any such time as and so long as such
Subsidiary Guarantor's guarantee of all other Indebtedness of the Company
and of the Company's Subsidiaries is declared null and void or
unenforceable or invalid (unless arising from payment by such Subsidiary
Guarantor under its guarantee of such Indebtedness)) or any Subsidiary
Guarantor denies its liability under its Subsidiary Guarantee (other than
by release of a Subsidiary Guarantor from its Subsidiary Guarantee in
accordance with the terms of this Indenture and the Subsidiary Guarantee
and other than at any such time as and so long as such Subsidiary Guarantor
denies liability under its guarantee of all
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other Indebtedness of the Company and of the Company's Subsidiaries (unless
arising from payment by such Subsidiary Guarantor under its guarantee of
such Indebtedness)); or
(vi) the Company fails to comply with Section 4.8 hereof for 30
days or more, or the Company fails to observe, perform or comply with any
of the terms or provisions of Article V of this Indenture; or
(vii) the entry by a court of competent jurisdiction of one or
more judgments, orders or decrees against the Company or any Subsidiary of
the Company or any of their respective property or assets in an aggregate
amount in excess of $25,000,000, which judgments, orders or decrees have
not been vacated, discharged, satisfied or stayed pending appeal within 30
days from the entry thereof and with respect to which legal enforcement
proceedings have been commenced; or
(viii) the Company or any Material Subsidiary pursuant to or
within the meaning of any Bankruptcy Law:
(A) commences a voluntary case or proceeding, or
(B) consents to the entry of an order for relief against it in an
involuntary case or proceeding, or
(C) consents to the appointment of a Custodian of it or for all
or substantially all of its property, or
(D) makes a general assignment for the benefit of its creditors,
or
(E) files an answer or consent seeking reorganization or relief,
or
(F) shall admit in writing its inability to pay its debts
generally; or
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(ix) a court of competent jurisdiction enters an order or decree
under any Bankruptcy Law that:
(A) is for relief against the Company or any of its Material
Subsidiaries in an involuntary case or proceeding, or
(B) appoints a Custodian of the Company or any of its Material
Subsidiaries for all or substantially all of its properties, or
(C) orders the liquidation of the Company or any of its Material
Subsidiaries, and in each case the order or decree remains unstayed
and in effect for 60 days.
(b) For purposes of this Section 6.1, the term "Custodian" means any
receiver, trustee, assignee, liquidator, sequestrator or similar official
charged with maintaining possession or control over property for one or more
creditors.
SECTION 6.2 Acceleration.
If an Event of Default (other than an Event of Default relating to the
Company and specified in Section 6.1(a)(viii) or (ix) above) occurs and is
continuing, the Trustee or Holders of at least 25% in aggregate principal amount
of the then outstanding Securities may, by written notice to the Company (and to
the Trustee, if given by the Holders), and the Trustee shall upon the request of
Holders of not less than 25% in aggregate principal amount of the outstanding
Securities, by written notice to the Company, declare the unpaid principal of,
premium, if any, and accrued and unpaid interest on all the Securities then
outstanding to be due and payable immediately, and the same shall become
immediately due and payable. If an Event of Default relating to the Company and
specified in Section 6.1(a)(viii) or (ix) occurs and is continuing, the unpaid
principal of, premium and accrued and unpaid interest on all the Securities
shall ipso facto become and be immediately due and payable without any
declaration or other act on the part of the Trustee or any Holder. The Holders
of, in the aggregate,
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at least a majority in principal amount of the then outstanding Securities by
notice to the Trustee may rescind an acceleration and its consequences if all
existing Events of Default (except the nonpayment of principal and interest on
the Securities that has become due solely as a result of the acceleration of the
Securities) have been cured or waived and if the rescission would not conflict
with any judgment or decree. No such rescission shall affect any subsequent
default or impair any right consequent thereto.
SECTION 6.3 Other Remedies.
If an Event of Default occurs and is continuing, the Trustee may
pursue any available remedy by proceeding at law or in equity to collect the
payment of principal of or interest on the Securities or to enforce the
performance of any provision of the Securities or this Indenture.
The Trustee may maintain a proceeding even if it does not possess any
of the Securities or does not produce any of them in the proceeding, and any
such proceeding instituted by the Trustee shall be brought in its own name as
trustee of an express trust, and any recovery of judgment shall, after provision
for the payment of the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel, be for the ratable benefit of
the Holders of the Securities in respect of which such judgment has been
recovered.
SECTION 6.4 Waiver of Past Default.
Subject to Sections 6.7 and 9.2, the Holders of, in the aggregate, at
least a majority in principal amount of the then outstanding Securities by
notice to the Trustee may waive an existing Default or Event of Default and its
consequences, except a Default or Event of Default specified in Section
6.1(a)(i) or (ii) or a Default or Event of Default in respect of any provision
hereof which cannot be modified or amended without the consent of the Holder so
affected pursuant to Section 9.2. When a Default or Event of Default is so
waived, it shall be deemed cured and cease to exist; but no such waiver
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shall extend to any subsequent or other Default or Event of Default or impair
any right consequent thereto.
SECTION 6.5 Control by Majority.
The Holders of a majority in principal amount of the then outstanding
Securities may (i) direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or exercising any trust or
power conferred on it, including, without limitation, any remedies provided for
in Section 6.3, and (ii) direct the Trustee to notify each trustee under any
instrument governing the rights of holders of Indebtedness subordinated in right
of payment to the Securities for the purpose of effecting the payment blockage
provisions thereunder. The Trustee may refuse, however, to follow any direction
that conflicts with law, the Securities or this Indenture, or that the Trustee
determines may be unduly prejudicial to the rights of another Securityholder,
that may involve the Trustee in personal liability or if the Trustee determines
that it does not have adequate indemnification against any loss or expense,
provided that the Trustee may take any other action deemed proper by the Trustee
which is not inconsistent with such direction.
SECTION 6.6 Limitation on Suits.
A Securityholder may not pursue any remedy with respect to this
Indenture or the Securities unless:
(a) the Holder gives to the Trustee written notice of a continuing
Event of Default;
(b) the Holders of at least 25% in principal amount of the then
outstanding Securities make a written request to the Trustee to pursue a
remedy;
(c) such Holder or Holders offer and, if requested, provide to the
Trustee indemnity reasonably satisfactory to the Trustee against any loss,
liability or expense;
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(d) the Trustee does not comply with the request within 30 days after
receipt of the request; and
(e) during such 30-day period the Holders of at least a majority in
principal amount of the then outstanding Securities do not give the Trustee
a direction which is inconsistent with the request.
A Securityholder may not use this Indenture to prejudice the rights of
another Securityholder or to obtain a preference or priority over such other
Securityholder.
SECTION 6.7 Rights of Holders To Receive Payment.
Notwithstanding any other provision of this Indenture, the right of
any Holder to receive payment of principal of and interest on a Security, on or
after the respective due dates expressed in the Security, or to bring suit for
the enforcement of any such payment on or after such respective dates, is
absolute and unconditional and shall not be impaired or affected without the
consent of such Holder.
SECTION 6.8 Collection Suit by Trustee.
If an Event of Default specified in Section 6.1(a)(i) or (ii) occurs
and is continuing, the Trustee may recover judgment in its own name and as
trustee of an express trust against the Company or any other obligor on the
Securities for the whole amount of principal and accrued interest remaining
unpaid, together with interest overdue on principal and, to the extent that
payment of such interest is lawful, interest on overdue installments of
interest, in each case at the Interest Rate and such further amount as shall be
sufficient to cover the costs and expenses of collection, including the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel.
SECTION 6.9 Trustee May File Proofs of Claim.
The Trustee shall be entitled and empowered to file such proofs of
claim and other papers or documents as may be
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necessary or advisable in order to have the claims of the Trustee (including any
claim for the reasonable compensation, expenses, disbursements and advances of
the Trustee, its agents and counsel) and the Securityholders allowed in any
judicial proceedings relative to the Company or any of its Subsidiaries (or any
other obligor upon the Securities), its creditors or its property and shall be
entitled and empowered to collect and receive any monies or other property
payable or deliverable on any such claims and to distribute the same, and any
Custodian in any such judicial proceedings is hereby authorized by each
Securityholder to make such payments to the Trustee and, in the event that the
Trustee shall consent to the making of such payments directly to the
Securityholders, to pay to the Trustee any amount due to it for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agent and
counsel, and any other amounts due the Trustee under Section 7.7. Nothing herein
contained shall be deemed to authorize the Trustee to authorize or consent to or
accept or adopt on behalf of any Securityholder any plan of reorganization,
arrangement, adjustment or composition affecting the Securities or the rights of
any Holder thereof, or to authorize the Trustee to vote in respect of the claim
of any Securityholder in any such proceeding.
SECTION 6.10 Priorities.
If the Trustee collects any money pursuant to this Article VI, it
shall, subject to the provisions of Article XI hereof, pay out such money in the
following order:
First: to the Trustee for amounts due under Section 7.7;
Second: subject to Article XI, to Holders for interest accrued on the
Securities, ratably, without preference or priority of any kind, according
to the amounts due and payable on the Securities for interest; and
Third: subject to Article XI, to Holders for principal amounts owing under
the Securities, ratably, without preference or priority of any kind,
according to the amounts due and payable on the Securities for principal.
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The Trustee, upon prior written notice to the Company, may fix a
record date and payment date for any payment to Securityholders pursuant to this
Section 6.10.
SECTION 6.11 Undertaking for Costs.
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted by
it as Trustee, a court in its discretion may require the filing by any party
litigant in the suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in the suit, having due regard to
the merits and good faith of the claims or defenses made by the party litigant.
This Section 6.11 does not apply to a suit by the Trustee, a suit by a Holder
pursuant to Section 6.7, or a suit by any Holder, or group of Holders, holding
in the aggregate more than 10% in principal amount of the outstanding
Securities.
SECTION 6.12 Rights and Remedies Cumulative.
No right or remedy herein conferred upon or reserved to the Trustee or
to the Holders is intended to be exclusive of any other right or remedy, and
every remedy shall, to the extent permitted by law, be cumulative and in
addition to every other right and remedy given hereunder or now or hereafter
existing at law or in equity or otherwise. The assertion or employment of any
right or remedy hereunder, or otherwise, shall not prevent the concurrent
assertion or employment of any other appropriate right or remedy.
SECTION 6.13 Delay or Omission Not Waiver.
No delay or omission of the Trustee or of any Holder of any Security
to exercise any right or remedy accruing upon any Event of Default shall impair
any such right or remedy or constitute a waiver of any such Event of Default or
an acquiescence therein. Every right and remedy given by this Article 6 or by
law to the Trustee or to the Holders may be exercised
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from time to time, and as often as may be deemed expedient, by the Trustee or by
the Holders, as the case may be.
SECTION 6.14 Restoration of Rights and Remedies.
If the Trustee or any Holder has instituted any proceeding to enforce
any right or remedy under this Indenture and such proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
the Trustee or to such Holder, then and in every case, subject to any
determination in such proceeding, the Company, the Trustee and the Holders shall
be restored severally and respectively to their former positions hereunder and
thereafter all rights and remedies of the Trustee and the Holders shall continue
as though no such proceeding had been instituted.
ARTICLE VII
TRUSTEE
-------
SECTION 7.1 Duties of Trustee.
(a) If an Event of Default known to the Trustee has occurred and is
continuing, the Trustee shall exercise such of the rights and powers vested in
it by this Indenture and use the same degree of care and skill in their exercise
as a prudent person would exercise or use under the circumstances in the conduct
of his own affairs.
(b) Except during the continuance of an Event of Default:
(i) The Trustee need perform only those duties as are specifically
set forth in this Indenture or the TIA and no others and no implied
covenants or obligations shall be read into this Indenture against the
Trustee.
(ii) In the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed
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therein, upon certificates or opinions furnished to the Trustee and
conforming to the requirements of this Indenture. However, in the case of
any such certificate or opinions which by any provision hereof are
specifically required to be furnished to the Trustee, the Trustee shall
examine such certificates and opinions to determine whether or not they
conform to the requirements of this Indenture.
(c) Notwithstanding anything to the contrary herein contained, the
Trustee may not be relieved from liability for its own negligent action, its own
negligent failure to act, or its own willful misconduct, except that:
(i) This paragraph does not limit the effect of paragraph (b) of
this Section 7.1.
(ii) The Trustee shall not be liable for any error of judgment made
in good faith by a Trust Officer, unless it is proved that the Trustee was
negligent in ascertaining the pertinent facts.
(iii) The Trustee shall not be liable with respect to any action
it takes or omits to take in good faith in accordance with a direction
received by it pursuant to Sections 6.2, 6.4 and 6.5.
(d) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder or in the exercise of any of its
rights or powers if it shall have reasonable grounds for believing that
repayment of such funds or adequate indemnity against such risk or liability is
not reasonably assured to it.
(e) Every provision of this Indenture that in any way relates to the
Trustee is subject to paragraphs (a), (b), (c) and (d) of this Section 7.1.
(f) The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree in
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writing with the Company. Money held in trust by the Trustee need not be
segregated from other funds except to the extent required by law.
SECTION 7.2 Rights of Trustee.
Subject to Section 7.1:
(a) The Trustee may rely and shall be protected in acting or
refraining from acting upon any document reasonably believed by it to be
genuine and to have been signed or presented by the proper Person. The
Trustee shall not be bound to make any investigation into the facts or
matters stated in any resolution, certificate, statement, instrument,
opinion, report, notice, request, direction, consent, order, bond,
debenture, note, other evidence of indebtedness or other paper or document,
but the Trustee, in its discretion, may make such further inquiry or
investigation into such facts or matters as it may see fit, and, if the
Trustee shall determine to make such further inquiry or investigation, it
shall be entitled during normal business hours and upon reasonable advance
notice to the Company to examine the books, records and premises of the
Company, personally or by agent or attorney.
(b) Before the Trustee acts or refrains from acting with respect to
any matter contemplated by this Indenture, it may require an Officers'
Certificate or an Opinion of Counsel, which shall conform to the provisions
of Section 10.5. The Trustee shall not be liable for any action it takes
or omits to take in good faith in reliance on such certificate or opinion.
(c) The Trustee may act through its attorneys and agents and shall
not be responsible for the misconduct or negligence of any agent (other
than the negligence or willful misconduct of an agent who is an employee of
the Trustee) appointed with due care.
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(d) The Trustee shall not be liable for any action it takes or omits
to take in good faith and without negligence which it reasonably believes
to be authorized or within its rights or powers conferred upon it by this
Indenture or the TIA.
(e) The Trustee may consult with counsel and the advice or opinion of
such counsel as to matters of law shall be full and complete authorization
and protection from liability in respect of any action taken, omitted or
suffered by it hereunder in good faith and in accordance with the advice or
opinion of such counsel.
SECTION 7.3 Individual Rights of Trustee.
The Trustee in its individual capacity or any other capacity may
become the owner or pledgee of Securities and may otherwise deal with the
Company, or its Subsidiaries and Affiliates with the same rights it would have
if it were not Trustee. Any Agent may do the same with like rights. However,
the Trustee is subject to Sections 7.10 and 7.11.
SECTION 7.4 Trustee's Disclaimer.
The Trustee makes no representation as to the validity or adequacy of
this Indenture or the Securities, and it shall not be accountable for the
Company's use of the proceeds from the Securities, and it shall not be
responsible for any statement of the Company in this Indenture, or any statement
in the Securities other than the Trustee's certificate of authentication.
SECTION 7.5 Notice of Defaults.
If a Default or an Event of Default with respect to the Securities
occurs and is continuing and the Trustee receives written notice of such Default
or Event of Default, the Trustee shall mail to each Securityholder notice of the
Default or Event of Default within 60 days after the occurrence thereof in
accordance with TIA (S)313(c). Except in the case of a Default or an Event of
Default in payment of principal of or in-
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terest on any Security, including on acceleration, and the failure to make
payment when required by Section 4.11, and except in the case of a failure to
comply with Article V hereof, the Trustee may withhold the notice to the
Securityholders for a period not to exceed 60 days if and so long as a committee
of its Trust Officers in good faith determines that withholding the notice is in
the interest of Securityholders.
SECTION 7.6 Reports by Trustee to Holders.
To the extent required by TIA (S)313(a), within 45 days after June 1
of each year commencing with 1998 and for as long as there are Securities
outstanding hereunder, the Trustee shall mail to each Securityholder the
Company's brief report dated as of such date that complies with TIA (S)313(a).
The Trustee also shall comply with TIA (S)313(b) and TIA (S)313(c) and (d). A
copy of such report at the time of its mailing to Securityholders shall be filed
with the SEC, if required, and each stock exchange, if any, on which the
Securities are listed.
The Company shall promptly notify the Trustee if the Securities become
listed on any stock exchange and the Trustee shall comply with TIA (S)313(d).
SECTION 7.7 Compensation and Indemnity.
The Company shall pay to the Trustee, the Paying Agent and the
Registrar from time to time reasonable compensation for their respective
services rendered hereunder. The Trustee's, the Paying Agent's and the
Registrar's compensation shall not be limited by any law on compensation of a
trustee of an express trust. The Company shall reimburse the Trustee, the
Paying Agent and the Registrar upon request for all reasonable out-of-pocket
disbursements, expenses and advances (including reasonable fees and expenses of
counsel) incurred or made by each of them in connection with entering into this
Indenture the performance of its duties under this Indenture in addition to the
compensation for their respective services under this Indenture. Such expenses
shall include the reasonable compensation, out-of-pocket disbursements and
expenses of the Trus-
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tee's, the Paying Agent's and the Registrar's agents and counsel.
The Company shall indemnify the Trustee, the Paying Agent and the
Registrar for, and hold each of them harmless against, any claim, demand,
expense (including but not limited to attorneys' fees and expenses), loss or
liability incurred by each of them arising out of or in connection with the
administration of this Indenture and their respective duties hereunder. Each of
the Trustee, the Paying Agent and the Registrar shall notify the Company
promptly of any claim asserted against it for which it may seek indemnity.
However, failure by the Trustee, the Paying Agent or the Registrar to so notify
the Company shall not relieve the Company of its obligations hereunder. The
Company need not reimburse any expense or indemnify against any loss or
liability incurred by the Trustee, the Paying Agent or the Registrar through the
Trustee's, the Paying Agent's or the Registrar's, as the case may be, own
willful misconduct, negligence or bad faith.
To secure the Company's payment obligations in this Section 7.7, each
of the Trustee, the Paying Agent and the Registrar shall have a lien prior to
the Securities on all money or property held or collected by it, in its capacity
as Trustee, Paying Agent or Registrar, as the case may be, except money or
property held in trust to pay principal of or interest on particular Securities.
When any of the Trustee, the Paying Agent and the Registrar incurs
expenses or renders services after an Event of Default specified in Section
6.1(a)(viii) or (ix) occurs, the expenses and the compensation for the services
are intended to constitute expenses of administration under any Bankruptcy Law.
SECTION 7.8 Replacement of Trustee.
The Trustee may resign at any time by so notifying the Company in
writing, such resignation to be effective upon the appointment of a successor
Trustee. The Holders of a majority in principal amount of the outstanding
Securities may remove the Trustee by so notifying the Trustee in writing and may
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appoint a successor Trustee with the Company's consent which consent shall not
be unreasonably withheld. The Company may remove the Trustee if:
(a) the Trustee fails to comply with Section 7.10;
(b) the Trustee is adjudged a bankrupt or an insolvent;
(c) a receiver or other public officer takes charge of the Trustee or
its property; or
(d) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason (the Trustee in such event being referred to
herein as the retiring Trustee), the Company shall promptly appoint a successor
Trustee. Within one year after the successor Trustee takes office, the Holders
of a majority in principal amount of the Securities may appoint a successor
Trustee to replace the successor Trustee appointed by the Company.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Immediately after that,
the retiring Trustee shall transfer all property held by it as Trustee to the
successor Trustee (subject to the lien provided in Section 7.7), the resignation
or removal of the retiring Trustee shall become effective, and the successor
Trustee shall have all the rights, powers and duties of the Trustee under this
Indenture. A successor Trustee shall mail notice of its succession to each
Securityholder.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company or the
Holders of at least 25% in principal amount of then outstanding Securities may
petition any court of competent jurisdiction for the appointment of a successor
Trustee.
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If the Trustee fails to comply with Section 7.10, any Securityholder
may petition any court of competent jurisdiction for the removal of the Trustee
and the appointment of a successor Trustee.
Notwithstanding replacement of the Trustee pursuant to this Section
7.8, the Company's obligations under Section 7.7 shall continue for the benefit
of the retiring Trustee.
SECTION 7.9 Successor Trustee by Merger, Etc.
If the Trustee consolidates with, merges or converts into, or
transfers all or substantially all of its corporate trust business to, another
corporation or national banking association, the resulting, surviving or
transferee corporation or national banking association without any further act
shall be the successor Trustee, provided such corporation or national banking
association shall be otherwise qualified and eligible under this Article VII.
SECTION 7.10 Eligibility; Disqualification.
This Indenture shall always have a Trustee who satisfies the
requirements of TIA (S)310(a)(1) and (2). The Trustee shall have a combined
capital and surplus of at least $200,000,000 as set forth in its most recent
published annual report of condition. The Trustee shall comply with TIA
(S)310(b), provided that there shall be excluded from the operation of TIA
(S)310(b)(1) any indenture or indentures under which other securities, or
certificates of interest or participation in other securities, of the Company
are outstanding if the requirements for such exclusion set forth in TIA
(S)310(b)(1) are met. The provisions of TIA (S)310 shall apply to the Company,
as obligor of the Securities.
SECTION 7.11 Preferential Collection of Claims Against Company.
The Trustee shall comply with TIA (S)311(a), excluding any creditor
relationship listed in TIA (S)311(b). A Trustee who has resigned or been
removed shall be subject to TIA (S)311(a) to
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the extent indicated therein. The provisions of TIA (S)311 shall apply to the
Company as obligor on the Securities.
ARTICLE VIII
SATISFACTION AND DISCHARGE OF INDENTURE
---------------------------------------
SECTION 8.1 Termination of the Company's Obligations.
The Company's obligations under the Securities and this Indenture
shall terminate, and the obligations of any Subsidiary Guarantor shall
terminate, except those obligations referred to in the penultimate paragraph of
this Section 8.1, if all Securities previously authenticated and delivered
(other than destroyed, lost or stolen Securities which have been replaced or
paid or Securities for whose payment money has theretofore been deposited with
the Trustee or the Paying Agent in trust or segregated and held in trust by the
Company and thereafter repaid to the Company, as provided in Section 8.4) have
been delivered to the Trustee for cancellation and the Company has paid all sums
payable by it hereunder, or if:
(a) all Securities have otherwise become due and payable hereunder;
(b) the Company shall have irrevocably deposited or caused to be
deposited with the Trustee or a trustee satisfactory to the Trustee, under
the terms of an irrevocable trust agreement in form and substance
satisfactory to the Trustee, as trust funds in trust solely for the benefit
of the Holders for that purpose, cash or cash equivalents in such amount as
is sufficient without consideration of reinvestment of such interest, to
pay principal of, premium, if any, and interest on the outstanding
Securities to maturity or redemption, provided that the Trustee shall have
been irrevocably instructed to apply such cash or cash equivalents to the
payment of said principal, premium, if any, and interest with respect to
the Securi-
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ties, and, provided, further, that from and after the time of deposit, the
money deposited shall not be subject to the rights of holders of Senior
Indebtedness of the Company or Guarantor Senior Indebtedness pursuant to
the provisions of Article XI or Article XII;
(c) no Default or Event of Default with respect to this Indenture or
the Securities shall have occurred and be continuing on the date of such
deposit or shall occur as a result of such deposit and such deposit will
not result in a breach or violation of, or constitute a default under, any
other instrument to which the Company is a party or by which it is bound;
(d) the Company shall have paid all other sums payable by it
hereunder;
(e) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent providing for the termination of the Company's and each
Subsidiary Guarantor's obligation under the Securities and this Indenture
have been complied with. Such Opinion of Counsel shall also state that such
satisfaction and discharge does not result in a default under any Senior
Indebtedness of the Company (if then in effect) or any other agreement or
instrument then known to such counsel that binds or affects the Company.
Notwithstanding the foregoing paragraph, the Company's obligations in
Sections 2.5, 2.6, 2.7, 2.8, 4.1, 4.2 and 7.7 and any Subsidiary Guarantor's
obligations in respect thereof shall survive until the Securities are no longer
outstanding. After the Securities are no longer outstanding, the Company's
obligations in Sections 7.7, 8.4 and 8.5 and any Subsidiary Guarantor's
obligations in respect thereof shall survive.
After such delivery or irrevocable deposit the Trustee upon request
shall acknowledge in writing the discharge of the Company's and any Subsidiary
Guarantor's obligations under
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the Securities and this Indenture except for those surviving obligations
specified above.
SECTION 8.2 Legal Defeasance and Covenant Defeasance.
(a) The Company may, at its option by resolution of the Board of
Directors of the Company, at any time, with respect to the Securities, elect to
have either paragraph (b) or paragraph (c) below be applied to the outstanding
Securities upon compliance with the conditions set forth in paragraph (d).
(b) Upon the Company's exercise under paragraph (a) of the option
applicable to this paragraph (b), the Company and any Subsidiary Guarantor shall
be deemed to have been released and discharged from its obligations with respect
to the outstanding Securities on the date the conditions set forth below are
satisfied (hereinafter, "legal defeasance"). For this purpose, such legal
defeasance means that the Company shall be deemed to have paid and discharged
the entire indebtedness represented by the outstanding Securities, which shall
thereafter be deemed to be "outstanding" only for the purposes of paragraph
cbelow and the other Sections of and matters under this Indenture referred to in
(i) and (ii) below, and to have satisfied all its other obligations under such
Securities and this Indenture insofar as such Securities are concerned (and the
Trustee, at the expense of the Company, shall execute proper instruments
acknowledging the same), and Holders of the Securities and the Subsidiary
Guarantees and any amounts deposited under paragraph (d) below shall cease to be
subject to any obligations to, or the rights of, any holder of Senior
Indebtedness of the Company or Guarantor Senior Indebtedness under Article XI,
Article XII or otherwise, except for the following which shall survive until
otherwise terminated or discharged hereunder: (i) the rights of Holders of
outstanding Securities to receive solely from the trust fund described in
paragraph (d) below and as more fully set forth in such paragraph, payments in
respect of the principal of, premium, if any, and interest on such Securities
when such payments are due, (ii) the Company's obligations with respect to such
Securities under Sections 2.6, 2.7 and 4.2, and, with respect to the Trustee,
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under Section 7.7 and any Subsidiary Guarantor's obligations in respect thereof,
(iii) the rights, powers, trusts, duties and immunities of the Trustee hereunder
and (iv) this Section 8.2 and Section 8.5. Subject to compliance with this
Section 8.2, the Company may exercise its option under this paragraph (b)
notwithstanding the prior exercise of its option under paragraph (c) below with
respect to the Securities.
(c) Upon the Company's exercise under paragraph (a) of the option
applicable to this paragraph (c), the Company shall be released and discharged
from its obligations under any covenant contained in Article V and Article XI
and in Sections 4.5 through 4.9, 4.11 through 4.17 and Section 5.1 with respect
to the outstanding Securities on and after the date the conditions set forth
below are satisfied (hereinafter, "covenant defeasance"), and the Securities
shall thereafter be deemed to be not "outstanding" for the purpose of any
direction, waiver, consent or declaration or act of Holders (and the
consequences of any thereof) in connection with such covenants, but shall
continue to be deemed "outstanding" for all other purposes hereunder and Holders
of the Securities and the Subsidiary Guarantees and any amounts deposited under
paragraph (d) below shall cease to be subject to any obligations to, or the
rights of, any holder of Senior Indebtedness of the Company or Guarantor Senior
Indebtedness under Article XI, Article XII or otherwise. For this purpose, such
covenant defeasance means that, with respect to the outstanding Securities, the
Company and any Subsidiary Guarantor may omit to comply with and shall have no
liability in respect of any term, condition or limitation set forth in any such
covenant, whether directly or indirectly, by reason of any reference elsewhere
herein to any such covenant or by reason of any reference in any such covenant
to any other provision herein or in any other document and such omission to
comply shall not constitute a Default or an Event of Default under Section
6.1(a)(iii), but, except as specified above, the remainder of this Indenture and
such Securities shall be unaffected thereby.
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(d) The following shall be the conditions to application of either
paragraph (b) or paragraph (c) above to the outstanding Securities:
(i) the Company shall irrevocably have deposited or caused to be
deposited with the Trustee as trust funds in trust for the purpose of
making the following payments, specifically pledged as security for, and
dedicated solely to, the benefit of the Holders of such Securities, (x)
money in an amount or (y) direct non-callable obligations of, or non-
callable obligations guaranteed by, the United States of America for the
payment of which guarantee or obligation the full faith and credit of the
United States is pledged ("U.S. Government Obligations") maturing as to
principal, premium, if any, and interest in such amounts of money and at
such times as are sufficient without consideration of any reinvestment of
such interest, to pay principal of and interest on the outstanding
Securities not later than one day before the due date of any payment, or
(z) a combination thereof, sufficient, in the opinion of a nationally
recognized firm of independent public accountants expressed in a written
certification thereof delivered to the Trustee, to pay and discharge and
which shall be applied by the Trustee (or other qualifying trustee) to pay
and discharge principal of, premium, if any, and interest on the
outstanding Securities on the Maturity Date or otherwise in accordance with
the terms of this Indenture and of such Securities, provided that the
Trustee (or other qualifying trustee) shall have received an irrevocable
written order from the Company instructing the Trustee (or other qualifying
trustee) to apply such money or the proceeds of such U.S. Government
Obligations to said payments with respect to the Securities;
(ii) no Default or Event of Default with respect to the Securities
or this Indenture shall have occurred and be continuing immediately after
giving effect to such deposit (or, insofar as Section 6.1(a)(viii) or (ix)
is concerned, at any time during the period ending on the 91st day after
the date of such deposit (it being understood
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that this condition shall not be deemed satisfied until the expiration of
such period); provided, however, that actions taken by the Company in
connection with the creation of the trust fund into which funds for the
purpose of defeasance of the Securities are deposited that are not in
compliance with Sections 4.9, 4.13 and 4.14 and the failure of the Company
to comply with Section 4.8 as a result of the incurrence of indebtedness to
create such trust fund deposit, in each case, shall not be deemed a Default
or Event of Default under this Indenture);
(iii) such legal defeasance or covenant defeasance shall not cause
the Trustee to have a conflicting interest with respect to any Securities
of the Company or any Subsidiary Guarantor;
(iv) such legal defeasance or covenant defeasance shall not result
in a breach or violation of, or constitute a Default or Event of Default
under any agreement or instrument to which the Company or any Subsidiary
Guarantor is a party or by which it is bound;
(v) in the case of an election under paragraph (b) above, the
Company shall have delivered to the Trustee an Opinion of Counsel stating
that (x) the Company has received from, or there has been published by, the
Internal Revenue Service a ruling or (y) since the date of this Indenture,
there has been a change in the applicable Federal income tax law, in either
case to the effect that, and based thereon such opinion shall confirm that,
the Holders of the outstanding Securities will not recognize income, gain
or loss for Federal income tax purposes as a result of such legal
defeasance and will be subject to Federal income tax on the same amounts,
in the same manner and at the same times as would have been the case if
such legal defeasance had not occurred;
(vi) in the case of an election under paragraph (c) above, the
Company shall have delivered to the Trustee an Opinion of Counsel to the
effect that the Holders of the outstanding Securities will not recognize
income, gain or
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loss for Federal income tax purposes as a result of such covenant
defeasance and will be subject to Federal income tax on the same amounts,
in the same manner and at the same times as would have been the case if
such covenant defeasance had not occurred;
(vii) in the case of an election under either paragraph (b) or (c)
above, an Opinion of Counsel to the effect that, (x) the trust funds will
not be subject to any rights of any holders of other Indebtedness,
including, without limitation, Senior Indebtedness of the Company, and (y)
after the 91st day following the deposit, the trust funds will not be
subject to the effect of any applicable Bankruptcy Law, provided that if a
court were to rule under any such law in any case or proceeding that the
trust funds remained property of the Company, no opinion needs to be given
as to the effect of such laws on the trust funds except the following: (A)
assuming such trust funds remained in the Trustee's possession prior to
such court ruling to the extent not paid to Holders of Securities, the
Trustee will hold, for the benefit of the Holders of Securities, a valid
and enforceable security interest in such trust funds that is not avoidable
in bankruptcy or otherwise, subject only to principles of equitable
subordination, (B) the Holders of Securities will be entitled to receive
adequate protection of their interests in such trust funds if such trust
funds are used, and (C) no property, rights in property or other interests
granted to the Trustee or the Holders of Securities in exchange for or with
respect to any of such funds will be subject to any prior rights of any
other person, subject only to prior Liens granted under Section 364 of
Title 11 of the U.S. Bankruptcy Code (or any section of any other
Bankruptcy Law having the same effect), but still subject to the foregoing
clause (B); and
(viii) the Company shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating that (x) all
conditions precedent provided for relating to either the legal defeasance
under paragraph (b)
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above or the covenant defeasance under paragraph (c) above, as the case may
be, have been complied with and (y) if any other Indebtedness of the
Company shall then be outstanding or committed, such legal defeasance or
covenant defeasance will not violate the provisions of the agreements or
instruments evidencing such Indebtedness.
(e) All money and U.S. Government Obligations (including the proceeds
thereof) deposited with the Trustee pursuant to paragraph (d) above in respect
of the outstanding Securities shall be held in trust and applied by the Trustee,
in accordance with the provisions of such Securities and this Indenture, to the
payment, either directly or through any Paying Agent (other than the Company or
any Affiliate of the Company) as the Trustee may determine, to the Holders of
such Securities of all sums due and to become due thereon in respect of
principal, premium and interest, but such money need not be segregated from
other funds except to the extent required by law.
The Company shall pay and indemnify the Trustee against any tax, fee
or other charge imposed on or assessed against the U.S. Government Obligations
deposited pursuant to paragraph (d) above or the principal, premium, if any, and
interest received in respect thereof other than any such tax, fee or other
charge which by law is for the account of the Holders of the outstanding
Securities.
Anything in this Section 8.2 to the contrary notwithstanding, the
Trustee shall deliver or pay to the Company from time to time upon the request,
in writing, by the Company any money or U.S. Government Obligations held by it
as provided in paragraph (d) above which, in the opinion of a nationally
recognized firm of independent public accountants expressed in a written
certification thereof delivered to the Trustee, are in excess of the amount
thereof which would then be required to be deposited to effect an equivalent
legal defeasance or covenant defeasance.
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SECTION 8.3 Application of Trust Money.
The Trustee shall hold in trust money or U.S. Government Obligations
deposited with it pursuant to Sections 8.1 and 8.2, and shall apply the
deposited money and the money from U.S. Government Obligations in accordance
with this Indenture to the payment of principal of, premium, if any, and
interest on the Securities.
SECTION 8.4 Repayment to Company or Subsidiary Guarantors.
Subject to Sections 7.7, 8.1 and 8.2, the Trustee shall promptly pay
to the Company, or if deposited with the Trustee by any Subsidiary Guarantor, to
such Subsidiary Guarantor, upon receipt by the Trustee of an Officers'
Certificate, any excess money, determined in accordance with Section 8.2, held
by it at any time. The Trustee and the Paying Agent shall pay to the Company or
any Subsidiary Guarantor, as the case may be, upon receipt by the Trustee or the
Paying Agent, as the case may be, of an Officers' Certificate, any money held by
it for the payment of principal, premium, if any, or interest that remains
unclaimed for two years after payment to the Holders is required (unless
otherwise provided under operation of law), provided that the Trustee and the
Paying Agent before being required to make any payment may, but need not, at the
expense of the Company cause to be published once in a newspaper of general
circulation in The City of New York or mail to each Holder entitled to such
money notice that such money remains unclaimed and that after a date specified
therein, which shall be at least 30 days from the date of such publication or
mailing, any unclaimed balance of such money then remaining will be repaid to
the Company. After payment to the Company or any Subsidiary Guarantor, as the
case may be, Securityholders entitled to money must look solely to the Company
for payment as general creditors unless an applicable abandoned property law
designates another person, and all liability of the Trustee or Paying Agent with
respect to such money shall thereupon cease.
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SECTION 8.5 Reinstatement.
If the Trustee or Paying Agent is unable to apply any money or U.S.
Government Obligations in accordance with this Indenture by reason of any legal
proceeding or by reason of any order or judgment of any court or governmental
authority enjoining, restraining or otherwise prohibiting such application, then
and only then the Company's and each Subsidiary Guarantor's, if any, obligations
under this Indenture and the Securities shall be revived and reinstated as
though no deposit had been made pursuant to this Indenture until such time as
the Trustee is permitted to apply all such money or U.S. Government Obligations
in accordance with this Indenture, provided that if the Company or the
Subsidiary Guarantors, as the case may be, has made any payment of principal of,
premium, if any, or interest on any Securities because of the reinstatement of
its obligations, the Company or the Subsidiary Guarantors, as the case may be,
shall be, subrogated to the rights of the holders of such Securities to receive
such payment from the money or U.S. Government Obligations held by the Trustee
or Paying Agent.
ARTICLE IX
AMENDMENTS, SUPPLEMENTS AND WAIVERS
-----------------------------------
SECTION 9.1 Without Consent of Holders.
Without the consent of any Holders, the Company, when authorized by
resolutions of its Board of Directors (copies of which shall be delivered to the
Trustee) and the Trustee may amend, waive or supplement this Indenture or the
Securities without notice to or consent of any Holder for any of the following
purposes:
(a) to cure any ambiguity, defect or inconsistency, provided that
such amendment or supplement does not adversely affect the rights of any
Holder;
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(b) to provide for uncertificated Securities in addition to or in
place of certificated Securities;
(c) to comply with any requirements of the SEC under the TIA;
(d) to evidence the succession in accordance with Article V hereof of
another Person to the Company and the assumption by any such successor of
the covenants of the Company herein and in the Securities;
(e) to add any Subsidiary of the Company as a Subsidiary Guarantor
pursuant to the terms of Section 4.16 and Article XII;
(f) to evidence and provide for the acceptance of appointment
hereunder by a separate or successor Trustee with respect to the
Securities; or
(g) to make any other change that does not adversely affect the
rights of any Holder;
provided, however, that in making such change, the Trustee may rely upon an
Opinion of Counsel stating that such change does not adversely affect the rights
of any Holder.
SECTION 9.2 With Consent of Holders.
Subject to Section 6.7 and the provisions of this Section 9.2, the
Company, when authorized by resolution of its Board of Directors (copies of
which shall be delivered to the Trustee) and the Trustee may amend or supplement
this Indenture, the Securities or any Subsidiary Guarantee with the written
consent of the Holders of at least a majority in principal amount of the
Securities then outstanding. Subject to Section 6.7 and the provisions of this
Section 9.2, the Holders of, in the aggregate, at least a majority in principal
amount of the then outstanding Securities affected may waive compliance by the
Company and any Subsidiary Guarantor with any provision of this Indenture, the
Securities or any Subsidiary Guarantee without notice to any other
Securityholder. However, without
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the consent of each Securityholder affected, an amendment, supplement or waiver,
including a waiver pursuant to Section 6.4, may not:
(a) reduce the aggregate principal amount of Securities the Holders
of which must consent to an amendment, supplement or waiver of any
provision of or with respect to this Indenture, the Securities or any
Subsidiary Guarantee; or
(b) reduce the rate of, change the method of calculation of, or
extend the time for, payment of interest, including default interest, on
any Security; or
(c) reduce the principal of or premium on or change the Stated
Maturity of any Security or alter the repurchase provisions with respect
thereto; or
(d) make the principal of, or interest on, any Security payable in
money other than as provided herein, or
(e) make any change in provisions relating to waivers of defaults,
the ability of Holders to enforce their rights under this Indenture or in
the matters discussed in clauses (a) through (h); or
(f) waive a default in the payment of the principal of, interest on,
or repurchase payment required hereunder with respect to, any Security,
including, without limitation, a default to make a payment when required
upon a Change of Control Triggering Event; or
(g) adversely affect the ranking of the Securities or any Subsidiary
Guarantee or release any Subsidiary Guarantor from any of its obligations
under its Subsidiary Guarantee in this Indenture other than in compliance
with Section 12.4 of Exhibit B hereto;
(h) after the Company's obligation to purchase Securities arises
thereunder, amend, modify or change the obligation of the Company to make
and consummate a Change of
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Control Offer in the event of a Change of Control Triggering Event or waive
any default in the performance thereof or modify any of the provisions or
definitions with respect to such offers.
It shall not be necessary for the consent of the Holders under this
Section 9.2 to approve the particular form of any proposed amendment, supplement
or waiver, but it shall be sufficient if such consent approves the substance
thereof.
After an amendment, supplement or waiver under this Section 9.2
becomes effective, the Company shall mail to the Holders affected thereby a
notice briefly describing the amendment, supplement or waiver. Any failure of
the Company to mail such notice, or any defect therein, shall not, however, in
any way impair or affect the validity of any such supplemental indenture.
Notwithstanding the foregoing, no amendment shall modify any provision of this
Indenture so as to affect adversely the rights of any holder of Senior
Indebtedness of the Company or Guarantor Senior Indebtedness to the benefits of
the subordination provisions under this Indenture without the consent of such
holder.
SECTION 9.3 Compliance with Trust Indenture Act.
Every amendment to or supplement of this Indenture or the Securities
shall be set forth in a supplemental indenture that complies with the TIA as
then in effect.
SECTION 9.4 Revocation and Effect of Consents.
Until an amendment, supplement or waiver becomes effective, a consent
to it by a Holder is a continuing consent by the Holder and every subsequent
Holder of that Security or portion of that Security that evidences the same debt
as the consenting Holder's Security, even if notation of the consent is not made
on any Security. However, any such Holder or subsequent Holder may revoke the
consent as to his Security or portion of a Security. Such revocation shall be
effective only if the Trustee receives the notice of revocation before the date
the amendment, supplement or waiver becomes effective. Not-
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withstanding the above, nothing in this paragraph shall impair the right of any
Securityholder under (S)316(b) of the TIA.
The Company may, but shall not be obligated to, fix a record date for
the purpose of determining the Holders entitled to consent to any amendment,
supplement or waiver which record date shall be at least 10 days prior to the
first solicitation of such consent. If a record date is fixed, then
notwithstanding the second and third sentences of the immediately preceding
paragraph, those Persons who were Holders at such record date (or their duly
designated proxies), and only those Persons, shall be entitled to consent to
such amendment, supplement or waiver or to revoke any consent previously given,
whether or not such Persons continue to be Holders after such record date. Such
consent shall be effective only for actions taken within 90 days after such
record date.
After an amendment, supplement or waiver becomes effective, it shall
bind every Securityholder unless it makes a change described in any of clauses
(a) through (h) of Section 9.2. In that case the amendment, supplement or
waiver shall bind each Holder of a Security who has consented to it.
SECTION 9.5 Notation on or Exchange of Securities.
If an amendment, supplement or waiver changes the terms of a Security,
the Trustee shall (in accordance with the specific written direction of the
Company) request the Holder of the Security to deliver it to the Trustee. The
Trustee shall (in accordance with the specific direction of the Company) place
an appropriate notation on the Security about the changed terms and return it to
the Holder. Alternatively, if the Company or the Trustee so determines, the
Company in exchange for the Security shall issue and the Trustee shall
authenticate a new Security that reflects the changed terms. Failure to make
the appropriate notation or issue a new Security shall not affect the validity
and effect of such amendment, supplement or waiver.
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SECTION 9.6 Trustee to Sign Amendments, Etc.
The Trustee shall sign any amendment, supplement or waiver authorized
pursuant to this Article IX if the amendment, supplement or waiver does not
adversely affect the rights, duties or immunities of the Trustee. If it does,
the Trustee may, but need not, sign it. In signing any amendment, supplement or
waiver, the Trustee shall be entitled to receive, if requested, an indemnity
reasonably satisfactory to it and to receive, and shall be fully protected in
relying upon, an Officers' Certificate and an Opinion of Counsel stating that
the execution of any amendment, supplement or waiver authorized pursuant to this
Article IX is authorized or permitted by this Indenture and that it constitutes
the legal, valid and binding obligation of the Company and, if applicable, the
Subsidiary Guarantors, subject to the customary exceptions.
ARTICLE X
MISCELLANEOUS
-------------
SECTION 10.1 Trust Indenture Act Controls.
The provisions of TIA (S)(S)310 through 317 that impose duties on any
person (including the provisions automatically deemed included unless expressly
excluded by this Indenture) are a part of and govern this Indenture, whether or
not physically contained herein.
If any provision of this Indenture limits, qualifies or conflicts with
the duties imposed by the above paragraph, the imposed duties shall control.
SECTION 10.2 Notices.
Any notice or communication shall be sufficiently given if in writing
and delivered in person or mailed by first-class mail or by telecopier, followed
by first-class mail, or by overnight service guaranteeing next-day delivery,
addressed as follows:
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(a) if to the Company:
Navistar Financial Corporation
2850 West Golf Road
Rolling Meadows, Illinois 60008
Attention: General Counsel
Telecopier Number: (847) 734-4090
with a copy to:
Kirkland & Ellis
200 E. Randolph Drive
Chicago, Illinois 60601
Attention: Kenneth P. Morrison, Esq.
Telecopier Number: (312) 861-2200
(b) if to the Trustee:
The Fuji Bank and Trust Company
Corporate Trust Administration Department
2 World Trade Center
New York, NY 10048
Attention: Sharon Moore
Telecopier Number: (212)-321-2468
The Company or the Trustee by notice to the other may designate
additional or different addresses for subsequent notices or communications.
Any notice or communication mailed to a Securityholder, including any
notice delivered in connection with TIA (S)310(b), TIA (S)313(c), TIA (S)314(a)
and TIA (S)315(b), shall be mailed to such Holder, first-class postage prepaid,
at his address as it appears on the registration books of the Registrar and
shall be sufficiently given to such Holder if so mailed within the time
prescribed.
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Failure to mail a notice or communication to a Securityholder or any
defect in it shall not affect its sufficiency with respect to other
Securityholders. Except for a notice to the Trustee, which is deemed given only
when received by an officer in the corporate trust administration department of
the Trustee, if a notice or communication is mailed in the manner provided
above, it is duly given, whether or not the addressee receives it.
SECTION 10.3 Communications by Holders with Other Holders.
Securityholders may communicate pursuant to TIA (S)312(b) with other
Securityholders with respect to their rights under this Indenture or the
Securities. The Company, the Trustee, the Registrar and any other Person shall
have the protection of TIA (S)312(c).
SECTION 10.4 Certificate and Opinion of Counsel as to Conditions
Precedent.
Upon any request or application by the Company or any Subsidiary
Guarantor to the Trustee to take any action under this Indenture, the Company or
any Subsidiary Guarantor shall furnish to the Trustee at the request of the
Trustee (a) an Officers' Certificate in form and substance reasonably
satisfactory to the Trustee stating that, in the opinion of the signers, all
conditions precedent, if any, provided for in this Indenture relating to the
proposed action have been complied with (which officer signing such certificate
may rely, as to matters of law, on an Opinion of Counsel), (b) an Opinion of
Counsel in form and substance reasonably satisfactory to the Trustee stating
that, in the opinion of counsel, all such conditions have been complied with
(which counsel, as to factual matters, may rely on an Officers' Certificate) and
(c) where applicable, a certificate or opinion by an independent certified
public accountant satisfactory to the Trustee that complies with TIA (S)314(c).
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SECTION 10.5 Statements Required in Certificate and Opinion of
Counsel.
Each certificate and Opinion of Counsel with respect to compliance
with a condition or covenant provided for in this Indenture shall include:
(a) a statement that the Person making such certificate or rendering
such Opinion of Counsel has read such covenant or condition;
(b) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or Opinion of Counsel are based;
(c) a statement that, in the opinion of such Person, he has made such
examination or investigation as is necessary to enable him to express an
informed opinion as to whether or not such covenant or condition has been
complied with; and
(d) a statement as to whether or not, in the opinion of such Person,
such condition or covenant has been complied with.
SECTION 10.6 Rules by Trustee, Paying Agent, Registrar.
The Trustee may make reasonable rules in accordance with the Trustee's
customary practices for action by or at a meeting of Securityholders. The
Paying Agent or Registrar may make reasonable rules for its functions.
SECTION 10.7 Legal Holidays.
If a payment date is a Legal Holiday at a place of payment, payment
may be made at that place on the next succeeding day that is not a Legal
Holiday, and no interest shall accrue for the intervening period.
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SECTION 10.8 Governing Law.
THE LAWS OF THE STATE OF NEW YORK SHALL GOVERN THIS INDENTURE, THE
SECURITIES AND THE SUBSIDIARY GUARANTEES WITHOUT REGARD TO PRINCIPLES OF
CONFLICTS OF LAW. THE COMPANY AND EACH SUBSIDIARY GUARANTOR AGREES TO SUBMIT TO
THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK IN ANY ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS INDENTURE, THE SECURITIES AND THE
SUBSIDIARY GUARANTEES.
SECTION 10.9 No Recourse Against Others.
A trustee, director, officer, employee, stockholder or beneficiary, as
such, of the Company or any Subsidiary Guarantor shall not have any liability
for any obligations of the Company or any Subsidiary Guarantor under the
Securities or this Indenture or for any claim based on, in respect of or by
reason of such obligations or their creation. Each Security holder by accepting
a Security waives and releases all such liability.
SECTION 10.10 Successors.
All agreements of the Company or any Subsidiary Guarantor in this
Indenture and the Securities shall bind its successor. All agreements of the
Trustee in this Indenture shall bind its successor.
SECTION 10.11 Counterparts.
The parties may sign any number of counterparts of this Indenture.
Each such counterpart shall be an original, but all of them together represent
the same agreement.
SECTION 10.12 Severability.
In case any provision in this Indenture, the Securities or in any
Subsidiary Guarantee shall be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby, and a Holder shall have no claim therefor against
any party hereto.
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SECTION 10.13 Table of Contents, Headings, Etc.
The table of contents, cross-reference sheet and headings of the
Articles and Sections of this Indenture have been inserted for convenience of
reference only, and are not to be considered a part hereof, and shall in no way
modify or restrict any of the terms or provisions hereof.
SECTION 10.14 No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret another indenture, loan or
debt agreement of the Company or of any Subsidiary Guarantor or any of their
respective Subsidiaries. Any such indenture, loan or debt agreement may not be
used to interpret this Indenture.
SECTION 10.15 Benefits of Indenture.
Nothing in this Indenture, in the Securities or in any Subsidiary
Guarantee, express or implied, shall give to any person, other than the parties
hereto and their successors hereunder and the Holders, any benefit or any legal
or equitable right, remedy or claim under this Indenture, the Securities or in
any Subsidiary Guarantee.
SECTION 10.16 Independence of Covenants.
All covenants and agreements in this Indenture, the Securities and the
Subsidiary Guarantees shall be given independent effect so that if any
particular action or condition is not permitted by any of such covenants, the
fact that it would be permitted by an exception to, or otherwise be within the
limitations of, another covenant shall not avoid the occurrence of a Default or
an Event of Default if such action is taken or condition exists.
<PAGE>
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ARTICLE XI
SUBORDINATION OF SECURITIES
---------------------------
SECTION 11.1 Agreement to Subordinate.
The Company covenants and agrees, and each Holder of Securities, by
his acceptance thereof, likewise covenants and agrees, that the indebtedness
represented by the Securities and the payment of the principal of and interest
on each and all of the Securities is hereby expressly subordinated, to the
extent and in the manner hereinafter set forth, in right of payment to the prior
payment in full of Senior Indebtedness of the Company.
Anything in the Securities or in this Indenture to the contrary
notwithstanding, the indebtedness evidenced by the Securities shall be
subordinate and junior in right of payment, in all respects, to all Senior
Indebtedness of the Company, whether outstanding at the Issue Date or incurred
after the Issue Date. Without limiting the effect of the foregoing,
"subordinate" and "junior" as used herein shall include within their meanings
the following:
(i) in the event of any insolvency or bankruptcy proceedings, and
any receivership, liquidation, reorganization or other similar proceedings
in connection therewith, relative to the Company or its creditors or its
property, and in the event of any proceedings for voluntary liquidation,
dissolution or other winding up of the Company, whether or not involving
insolvency or bankruptcy proceedings, then (A) all Senior Indebtedness of
the Company shall first be paid in full, or such payment be provided for,
before any payment on account of principal or interest is made upon the
Indebtedness evidenced by the Securities, and (B) in any such proceedings
any payment or distribution of any kind or character (including without
limitation any distribution realized from or attributable to any security
interest of the Holders of the Securities in property or assets of the
Company), whether in cash or
<PAGE>
-110-
property or securities which may be payable or deliverable in respect of
the Securities, shall be paid or delivered directly to the holders of such
Senior Indebtedness of the Company (or the representative or
representatives of such holders or the trustee or trustees under any
indenture under which any instruments evidencing any of such Senior
Indebtedness of the Company shall have been issued) for application in
payment thereof, unless and until such Senior Indebtedness of the Company
shall have been paid in full or such payment shall have been provided for;
provided that (1) in the event that payment or delivery of such cash,
property or securities to the Holders of the Securities is authorized by an
order or decree giving effect, and stating in such order or decree that
effect is given, to the subordination of the Securities to Senior
Indebtedness of the Company, and made by a court of competent jurisdiction
in a reorganization proceeding under any applicable law, no payment or
delivery of such cash, property or securities payable or deliverable with
respect to the Securities need be made to the holders of Senior
Indebtedness of the Company, (2) no such delivery need be made of
securities which are issued pursuant to voluntary reorganization,
dissolution, or liquidation proceedings by the Company or by the Company as
reorganized, if such securities are subordinate and junior to the payment
of all Senior Indebtedness of the Company then outstanding to the same
extent as the Securities and (3) if, pursuant to the foregoing, a payment
or delivery of cash, property or securities is to be made to the holders of
Senior Indebtedness of the Company (or their representative or
representatives or the trustee or trustees under any indenture under which
any instruments evidencing any such Senior Indebtedness of the Company
shall have been issued) from a distribution realized from or attributable
to any security interest of the Holders of the Securities in property or
assets of the Company, such payment or delivery shall be made (x) first, to
the holders of any Senior Indebtedness of the Company (or their
representative or representatives) secured equally and ratably with the
Holders of the Securities with respect to such property or assets or to
<PAGE>
-111-
the trustee or trustees under any indenture under which any instruments
evidencing any of such Senior Indebtedness of the Company shall have been
issued, ratably according to the aggregate amounts remaining unpaid on
account of such Senior Indebtedness of the Company held or represented by
each, until such Senior Indebtedness of the Company shall have been paid in
full or such payment shall have been provided for and (y) then, to the
extent such payment or delivery shall not be required to pay the Senior
Indebtedness of the Company referred to in the foregoing clause (x), to the
other holders of Senior Indebtedness of the Company (or their
representative or representatives or the trustee or trustees under any
indenture under which any instruments evidencing any of such Senior
Indebtedness of the Company shall have been issued), ratably according to
the aggregate amounts remaining unpaid on account of such Senior
Indebtedness of the Company held or represented by each, until such Senior
Indebtedness of the Company shall have been paid in full or such payment
shall have been provided for;
(ii) no payment or prepayment of any principal, premium (if any) or
interest on account of and no repurchase, redemption or other retirement
(whether at the option of the Holder or otherwise) of the Securities shall
be made, if at the time of such payment, prepayment, repurchase, redemption
or retirement, or immediately after giving effect thereto, there shall
exist a default in the payment or prepayment of any Senior Indebtedness of
the Company;
(iii) in the event that any Security is declared due and payable
because of the occurrence of an Event of Default (under circumstances when
the provisions of the foregoing clause (i) shall not be applicable), the
Holders of the Securities shall be entitled to payment only after there
shall first have been paid in full the Senior Indebtedness of the Company
outstanding at the time such Security so becomes due and payable because of
such Event of Default, or provision for such payment shall have been made;
and
<PAGE>
-112-
(iv) in the event that (A) any of the events described in clauses
(i), (ii) and (iii) occurs and (B) notwithstanding the provisions therein,
any payment or distribution of assets of the Company of any kind or
character (including any distribution realized from or attributable to any
security interest of the Holders of the Securities in property or assets of
the Company), whether in cash, property or securities, shall be received by
the Holders of the Securities (or their representative or representatives
or the Trustee under this Indenture) before all Senior Indebtedness of the
Company shall have been paid in full, or provision made for such payment in
accordance with the terms of the Senior Indebtedness of the Company, except
as provided in subclauses (1) and (2) of the proviso to clause (i) above,
such payment or distribution shall be held in trust for the benefit of, and
shall be paid over or delivered to, the holders of such Senior Indebtedness
of the Company (or their representative or representatives or to the
trustee or trustees under any indenture pursuant to which any instruments
evidencing any of such Senior Indebtedness of the Company shall have been
issued), as their respective interests may appear under said clauses (i),
(ii) and (iii), for application to the payment of all such Senior
Indebtedness of the Company remaining unpaid to the extent necessary to pay
such Senior Indebtedness of the Company in full in accordance with its
terms, after giving effect to any concurrent payment or distribution to the
holders of such Senior Indebtedness of the Company.
SECTION 11.2 Subrogation.
Subject to the payment in full of all Senior Indebtedness of the
Company, Holders of the Securities shall be subrogated to the rights of the
holders of Senior Indebtedness of the Company to receive payments or
distributions of cash, property or securities of the Company applicable to the
Senior Indebtedness of the Company until all amounts owing on the Securities
shall be paid in full, and as between the Company, its creditors other than
holders of such Senior Indebtedness, and
<PAGE>
-113-
Holders of the Securities, no such payment or distribution made to the holders
of such Senior Indebtedness by virtue of this Article XI which otherwise would
have been made to the Securityholders shall be deemed to be a payment by the
Company on account of such Senior Indebtedness, it being understood that the
provisions of this Article XI are and are intended solely for the purpose of
defining the relative rights of the Holders of the Securities, on the one hand,
and the holders of Senior Indebtedness of the Company, on the other hand.
SECTION 11.3 Relative Rights.
Nothing contained in this Article XI or elsewhere in this Indenture or
in the Securities is intended to or shall impair, as between the Company, its
creditors other than the holders of its Senior Indebtedness, and the Holders of
Securities, the obligation of the Company, which is absolute and unconditional,
to pay to the holders of the Securities the principal of and interest on the
Securities as and when the same shall become due and payable in accordance with
their terms, or is intended to or shall affect the relative rights of the
Holders of the Securities and creditors of the Company other than the holders of
its Senior Indebtedness, nor shall anything herein or therein prevent the
Trustee or the Holder of any Security from exercising all remedies otherwise
permitted by applicable law upon default under this Indenture, subject to the
rights, if any, under this Article XI of the holders of Senior Indebtedness of
the Company to receive cash, property or securities otherwise payable or
deliverable to the Securityholders.
Upon payment or distribution of assets of the Company referred to in
this Article XI, the Trustee and the Holders of the Securities shall be entitled
to rely upon any order or decree made by any court of competent jurisdiction in
which any such dissolution, winding up, liquidation or reorganization proceeding
affecting the affairs of the Company is pending or upon a certificate of the
trustee in bankruptcy, receiver, assignee for the benefit of creditors,
liquidating trustee, or agent or other person making any payment or
distribution, to the Trustee or to the Holders of the Securities for the purpose
of ascertaining the persons entitled to participate in such
<PAGE>
-114-
payment or distribution, the holders of the Senior Indebtedness of the Company
and other indebtedness of the Company, the amount thereof or payable thereon,
the amount paid or distributed thereon and all other facts pertinent thereto or
to this Article XI.
Nothing contained in this Article or elsewhere in this Indenture, or
in any of the Securities, shall affect the obligations of the Company to make,
or prevent the Company from making, payment of the principal of or interest on
the Securities in accordance with the provisions hereof and thereof, except as
otherwise provided in this Article XI.
SECTION 11.4 Trustee To Effectuate Subordination.
Each holder of Securities, by his acceptance thereof, authorizes and
directs the Trustee on his behalf to take such action as may be necessary or
appropriate to effectuate the subordination provided in this Article XI and
appoints the Trustee his attorney-in-fact for any and all such purposes.
SECTION 11.5 Trustee Not Fiduciary for Holders of Senior
Indebtedness of the Company.
The Trustee shall not be deemed to owe any fiduciary duty to the
holders of Senior Indebtedness of the Company and shall not be liable to any
such holders if it shall mistakenly pay over or distribute to Securityholders or
the Company or any other person moneys or assets to which any holders of Senior
Indebtedness of the Company shall be entitled by virtue of this Article XI or
otherwise.
SECTION 11.6 Notice by Company.
The Company shall give prompt written notice to the Trustee of any
fact known to the Company that would prohibit the making of any payment of
moneys to or by the Trustee pursuant to this Article. Subject to the provisions
of Sections 7.5 and 7.1 but notwithstanding any other provisions of this
Indenture, the Trustee and any Paying Agent shall not be charged with knowledge
of the existence of any facts that would pro-
<PAGE>
-115-
hibit the making of any payment of moneys to or by the Trustee or such Paying
Agent, or the taking of any other action by the Trustee or such Paying Agent,
unless and until the Trustee or such Paying Agent shall have received written
notice thereof from the Company at least three Business Days prior to the making
of any such payment, the Securityholders, the holders of any Senior Indebtedness
of the Company or the representative of any such holders.
SECTION 11.7 Rights of Trustee.
The Trustee shall be entitled to all the rights set forth in this
Article XI with respect to any Senior Indebtedness of the Company by the time
held by the Trustee, to the same extent as any other holder of Senior
Indebtedness.
SECTION 11.8 Company May Not Impair Subordination.
No right of any present or future holder of any Senior Indebtedness of
the Company to enforce the subordination herein shall at any time or in any way
be prejudiced or impaired by any act or failure to act on the part of the
Company or by any noncompliance by the Company with the terms, provisions and
covenants of this Indenture, regardless of any knowledge thereof any such holder
may have or be otherwise charged with.
SECTION 11.9 Rights of Paying Agent.
In case at any time any Paying Agent other than the Trustee shall have
been appointed by the Company and be then acting hereunder, the term "Trustee"
as used in this Article shall in such case (unless the context shall require
otherwise) be construed as extending to and including such Paying Agent within
its meaning as fully for all intents and purposes as if such Paying Agent were
named in this Article XI in addition to or in place of the Trustee, provided
that Sections 11.6 and 11.7 shall not apply to the Company if it acts as Paying
Agent.
This instrument may be executed in any number of counterparts, each of
which so executed shall be deemed to be
<PAGE>
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an original, but all such counterparts shall together constitute but one and the
same instrument.
<PAGE>
S-1
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed as of the date first written above.
NAVISTAR FINANCIAL CORPORATION,
as Issuer
By: /s/ R. Wayne Cain
----------------------------
Name: R. Wayne Cain
Title: Vice President
and Treasurer
THE FUJI BANK AND TRUST COMPANY,
as Trustee
By: /s/ Sharon Moore
----------------------------
Name: Sharon Moore
Title: Vice President
<PAGE>
Exhibit A
(FORM OF FACE OF SECURITY)
No. [ ] $ [ ]
9% SENIOR SUBORDINATED NOTE DUE 2002
NAVISTAR FINANCIAL CORPORATION promises to pay
to [ ] or registered assigns the
principal sum of[ ] Dollars on
June 1, 2002.
Interest Payment Dates: June 1, December 1 and at maturity
Record Dates: May 15, November 15 and 15 days prior to maturity
By:____________________________
Authorized Signature
By:____________________________
Authorized Signature
Dated: May 30, 1997
Certificate of Authentication
This is one of the 9% Senior Subordinated Notes due 2002 referred to
in the within-mentioned indenture.
, as Trustee
-------------------------------
By:____________________________
Authorized Signatory
<PAGE>
(FORM OF REVERSE OF SECURITY)
9% SENIOR SUBORDINATED NOTE DUE 2002
1. Interest. NAVISTAR FINANCIAL CORPORATION, a Delaware corporation
(the "Company," which definition shall include any successor thereto in
accordance with the Indenture (as defined below)), promises to pay, until the
principal hereof is paid or made available for payment, interest on the
principal amount set forth on the reverse side hereof at a rate of 9% per annum.
Interest on the Securities will accrue from and including the most recent date
to which interest has been paid or, if no interest has been paid, from and
including May 30, 1997 through but excluding the date on which interest is paid.
Interest shall be payable in arrears on June 1, December 1 and at the stated
maturity (each an "Interest Payment Date"), commencing December 1, 1997.
Interest will be computed on the basis of a 360-day year of twelve full 30-day
months and, for periods of less than one month, the actual number of days
elapsed. Interest on overdue principal and (to the extent permitted by law) on
overdue installments of interest will accrue at a rate equal to 9% per annum.
2. Method of Payment. The Company will pay interest on the
Securities (except defaulted interest) to the Persons who are registered Holders
of Securities at the close of business on the May 15 or November 15 next
preceding the Interest Payment Date. Holders must surrender Securities to a
Paying Agent to collect principal payments. The Company will pay principal,
premium, if any, and interest in money of the United States that at the time of
payment is legal tender for payment of public and private debts. At the
Company's option, interest may be paid by check mailed to the registered address
of the Holder of this Security.
3. Paying Agent and Registrar. Initially, The Fuji Bank and Trust
Company (the "Trustee") will act as Paying Agent and Registrar. The Company may
change any Paying Agent, Regis-
A-2
<PAGE>
trar or co-Registrar without notice. Neither the Company nor any of its
Subsidiaries may act as Paying Agent, Registrar or co-Registrar.
4. Indenture. The Company issued the Securities under an Indenture
dated as of May 30, 1997 (the "Indenture") between the Company and the Trustee.
This Security is one of an issue of Securities of the Company issued under the
Indenture. The terms of the Securities include those stated in the Indenture
and those made part of the Indenture by reference to the Trust Indenture Act of
1939 (15 U.S. Code (S)(S)77aaa-77bbbb) as amended from time to time. The
Securities are subject to all such terms, and Securityholders are referred to
the Indenture and such Act for a statement of them. Capitalized terms used
herein and not otherwise defined have the meanings set forth in the Indenture.
The Securities are general unsecured obligations of the Company limited in
aggregate principal amount to $100,000,000. The Indenture limits, among other
things, the incurrence of certain Indebtedness by the Company and its
Subsidiaries; transactions by the Company and its Subsidiaries with certain
Affiliates; the granting of Liens by the Company or any of its Subsidiaries;
certain guarantees issued by Subsidiaries of the Company and the ability of the
Company and the Subsidiary Guarantors to merge with or into another entity. The
limitations are subject to a number of important qualifications and exceptions.
The Company must report to the Trustee annually whether it is in compliance with
the limitations contained in the Indenture.
5. Offers to Purchase. Section 4.11 of the Indenture provides upon
the occurrence of a Change of Control and subject to further limitations
contained therein, the Company shall make an offer to purchase the Securities in
accordance with the procedures set forth in the Indenture.
6. Denominations, Transfer, Exchange. The Securities are in
registered form without coupons in denominations of $1,000 and integral
multiples of $1,000. A Holder may transfer or exchange Securities in accordance
with the Indenture. The Registrar may require a Holder, among other things, to
furnish appropriate endorsements and transfer documents and to pay to it any
taxes and fees required by law or permitted by the In-
A-3
<PAGE>
denture. The Registrar need not transfer or exchange any Security or portion of
a Security selected for redemption, or transfer or exchange any Securities for a
period of 15 days before a selection of Securities to be redeemed.
7. Persons Deemed Owners. The registered holder of a Security may be
treated as the owner of it for all purposes.
8. Unclaimed Money. If money for the payment of principal or
interest remains unclaimed for two years, the Trustee or Paying Agent will pay
the money back to the Company at its request. After that, Holders entitled to
the money must look to the Company for payment as general creditors unless an
"abandoned property" law designates another Person.
9. Amendment, Supplement, Waiver. The Company and the Trustee may,
without the consent of the holders of any outstanding Securities, amend, waive
or supplement the Indenture, the Securities or Subsidiary Guarantee for certain
specified purposes, including, among other things, curing ambiguities, defects
or inconsistencies, maintaining the qualification of the Indenture under the
Trust Indenture Act of 1939 or making any other change that does not adversely
affect the rights of any Holder. Other amendments and modifications of the
Indenture, the Securities or any Subsidiary Guarantee may be made by the Company
and the Trustee with the consent of the Holders of not less than a majority of
the aggregate principal amount of the outstanding Securities, subject to certain
exceptions requiring the consent of the Holders of the particular Securities to
be affected.
10. Successor Corporation. When a successor corporation assumes all
the obligations of its predecessor under the Securities and the Indenture and
the transaction complies with the terms of Article V of the Indenture, the
predecessor corporation, subject to certain exceptions, will be released from
those obligations.
11. Defaults and Remedies. Events of Default are set forth in the
Indenture. Subject to certain limitations in the Indenture, if an Event of
Default (other than an Event of Default specified in Section 6.1(a)(viii) or
(ix) of the Inden-
A-4
<PAGE>
ture with respect to the Company) occurs and is continuing, then the holders of
not less than 25% in aggregate principal amount of the outstanding Securities
may, or the Trustee may, declare the principal of, premium, if any, plus accrued
interest, if any, to be due and payable immediately. If an Event of Default
specified in Section 6.1(a)(viii) or (ix) of the Indenture with respect to the
Company occurs and is continuing, the principal of, premium, if any, and accrued
interest on all of the Securities shall ipso facto become and be immediately due
and payable without any declaration or other act on the part of the Trustee or
any Holder. Securityholders may not enforce the Indenture or the Securities
except as provided in the Indenture. The Trustee may require indemnity
reasonably satisfactory to it before it enforces the Indenture or the
Securities. Subject to certain limitations, Holders of a majority in principal
amount of the then outstanding Securities may direct the Trustee in its exercise
of any trust or power. The Trustee may withhold from Securityholders notice of
any continuing default (except a default in payment of principal or interest or
a failure to comply with Article V of the Indenture) if it determines that
withholding notice is in their interests. The Company must furnish an annual
compliance certificate to the Trustee.
12. Trustee Dealings with Company. The Trustee, in its individual or
any other capacity, may make loans to, accept deposits from, and perform
services for the Company or its Affiliates, and may otherwise deal with the
Company or its Affiliates, as if it were not Trustee.
13. No Recourse Against Others. A director, officer, employee,
stockholder or beneficiary, as such, of the Company or any Subsidiary Guarantor
shall not have any liability for any obligations of the Company or any
Subsidiary Guarantor under the Securities, the Indenture or any Subsidiary
Guarantee or for any claim based on, in respect of or by reason of, such
obligations or their creation. Each Securityholder by accepting a Security
waives and releases all such liability. The waiver and release are part of the
consideration for the issue of the Securities.
A-5
<PAGE>
14. Defeasance. The Indenture contains provisions (which provisions
apply to this Security) for defeasance at any time of (a) the entire
indebtedness of the Company and any Subsidiary Guarantor or this Security and
(b) certain restrictive covenants and related Defaults and Events of Default, in
each case upon compliance by the Company with certain conditions set forth
therein.
15. Authentication. This Security shall not be valid until the
Trustee signs the certificate of authentication on the other side of this
Security.
16. Abbreviations. Customary abbreviations may be used in the name
of a Securityholder or an assignee, such as: TEN COM (= tenants in common),
TENANT (= tenants by the entireties), JT TEN (= joint tenants with right of
survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (=
Uniform Gifts to Minors Act).
17. Subordination. The Company's payment of principal of, premium,
if any, and interest on the Securities is subordinated in right of payment, to
the extent and in the manner provided in Article XI of the Indenture, to the
prior payment in full of the Senior Indebtedness of the Company. Each Holder of
the Securities, by his acceptance hereof, covenants and agrees that all payments
of the principal of, premium, if any, and interest on the Securities by the
Company shall be subordinated in accordance with the provisions of Article XI of
the Indenture, and each Holder accepts and agrees to be bound by such
provisions.
18. GOVERNING LAW. THE INDENTURE, THIS SECURITY AND EACH SUBSIDIARY
GUARANTEE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW.
19. Guarantees. This Security may after the date hereof be entitled
to certain Subsidiary Guarantees made for the benefit of the Holders. Reference
is hereby made to Section 4.15 of the Indenture and to Exhibit B to the
Indenture for the terms of any Subsidiary Guarantee (including any terms of
subordination of such Subsidiary Guarantee that may apply).
A-6
<PAGE>
The Company will furnish to any Securityholder upon written request
and without charge a copy of the Indenture. Requests may be made to:
Navistar Financial Corporation
2850 W. Golf Road
Rolling Meadows, Illinois 60008
Telephone: (847) 734-4000
Telecopy: (847) 734-4090
Attention: General Counsel
A-7
<PAGE>
ASSIGNMENT FORM
If you the holder want to assign this Security, fill in the form below and have
your signature guaranteed:
I or we assign and transfer this Security to
________________________________________________________________________________
(Insert assignee's social security or tax ID number)_______________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Print or type assignee's name, address and zip code) and irrevocably
appoint ________________ agent to transfer this Security on the books of the
Company. The agent may substitute another to act for him.
Date: Your signature:_______________________________________
(Sign exactly as your name appears on
the other side of this Security)
Signature Guarantee:____________________________________________________________
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you wish to have this Security purchased by the Company pursuant to
Section 4.11 of the Indenture, check the Box: [ ]
If you wish to have a portion of this Security purchased by the
Company pursuant to Section 4.11 of the Indenture, state the amount: $ _________
Date:__________ Your Signature:_____________________________________
(Sign exactly as your name appears on the other side of this Security)
Signature Guarantee:________________________________
<PAGE>
EXHIBIT B
ARTICLE XII
GUARANTEE OF SECURITIES
-----------------------
SECTION 12.1 Subsidiary Guarantee.
Subject to the provisions of this Article XII, each Subsidiary
Guarantor hereby jointly and severally unconditionally guarantees to each Holder
of a Security authenticated and delivered by the Trustee and to the Trustee and
its successors and assigns, irrespective of the validity and enforceability of
this Indenture, the Securities or the obligations of the Company or any other
Subsidiary Guarantors to the Holders or the Trustee hereunder or thereunder,
that: (a) the principal of, premium, if any, and interest on the Securities will
be duly and punctually paid in full when due, whether at maturity, by
acceleration or otherwise, and interest on the overdue principal and (to the
extent permitted by law) interest, if any, on the Securities and all other
obligations of the Company or the Subsidiary Guarantors to the Holders or the
Trustee hereunder or thereunder (including fees or expenses) and all other
obligations with respect to the Securities and this Indenture will be promptly
paid in full or performed, all in accordance with the terms hereof and thereof;
and (b) in case of any extension of time of payment or renewal of any
Securities, the same will be promptly paid in full when due or performed in
accordance with the terms of the extension or renewal, whether at Stated
Maturity, by acceleration or otherwise. Failing payment when due of any amount
so guaranteed, or failing performance of any other obligation of the Company to
the Holders, for whatever reason, each Subsidiary Guarantor will be obligated to
pay, or to perform or cause the performance of, the same immediately. An Event
of Default under this Indenture or the Securities shall constitute an event of
default under this Subsidiary Guarantee, and shall entitle the Holders of
Securities to accelerate the obligations of the Subsidiary Guarantors hereunder
in the same manner and to the same extent as the obligations of the Company.
B-1
<PAGE>
Each of the Subsidiary Guarantors hereby agrees that its obligations
hereunder shall be unconditional, irrespective of the validity, regularity or
enforceability of the Securities or this Indenture, the absence of any action to
enforce the same, any waiver or consent by any holder of the Securities with
respect to any provisions hereof or thereof, any release of any other Subsidiary
Guarantor, the recovery of any judgment against the Company, any action to
enforce the same, whether or not a Subsidiary Guarantee is affixed to any
particular Security, or any other circumstance which might otherwise constitute
a legal or equitable discharge or defense of a guarantor. Each of the
Subsidiary Guarantors hereby waives the benefit of diligence, presentment,
demand of payment, filing of claims with a court in the event of insolvency or
bankruptcy of the Company, any right to require a proceeding first against the
Company, protest, notice and all demands whatsoever and covenants that its
Subsidiary Guarantee will not be discharged except by complete performance of
the obligations contained in the Securities, this Indenture and this Subsidiary
Guarantee. If any Holder or the Trustee is required by any court or otherwise
to return to the Company or to any Subsidiary Guarantor, or any custodian,
trustee, liquidator or other similar official acting in relation to the Company
or such Subsidiary Guarantor, any amount paid by the Company or such Subsidiary
Guarantor to the Trustee or such Holder, this Subsidiary Guarantee, to the
extent theretofore discharged, shall be reinstated in full force and effect.
Each Subsidiary Guarantor further agrees that, as between it, on the one hand,
and the Holders of Securities and the Trustee, on the other hand, (a) subject to
this Article XII, the maturity of the obligations guaranteed hereby may be
accelerated as provided in Article VI hereof for the purposes of this Subsidiary
Guarantee, notwithstanding any stay, injunction or other prohibition preventing
such acceleration in respect of the obligations guaranteed hereby, and (b) in
the event of any acceleration of such obligations as provided in Article VI
hereof, such obligations (whether or not due and payable) shall forthwith become
due and payable by the Subsidiary Guarantors for the purpose of this Subsidiary
Guarantee.
This Subsidiary Guarantee shall remain in full force and effect and
continue to be effective should any petition be
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filed by or against the Company for liquidation or reorganization, should the
Company become insolvent or make an assignment for the benefit of creditors or
should a receiver or trustee be appointed for all or any significant part of the
Company's assets, and shall, to the fullest extent permitted by law, continue to
be effective or be reinstated, as the case may be, if at any time payment and
performance of the Securities are, pursuant to applicable law, rescinded or
reduced in amount, or must otherwise be restored or returned by any obligee on
the Securities, whether as a "voidable preference," "fraudulent transfer" or
otherwise, all as though such payment or performance had not been made. In the
event that any payment, or any part thereof, is rescinded, reduced, restored or
returned, the Securities shall, to the fullest extent permitted by law, be
reinstated and deemed reduced only by such amount paid and not so rescinded,
reduced, restored or returned.
No stockholder, officer, director, employer or incorporator, past,
present or future, or any Subsidiary Guarantor, as such, shall have any personal
liability under this Subsidiary Guarantee by reason of his, her or its status as
such stockholder, officer, director, employer or incorporator.
The Subsidiary Guarantors shall have the right to seek contribution
from any non-paying Subsidiary Guarantor so long as the exercise of such right
does not impair the rights of the Holders under this Subsidiary Guarantee.
Each Subsidiary Guarantor, and by its acceptance hereof each Holder,
hereby confirms that it is the intention of all such parties that the guarantee
by each Subsidiary Guarantor pursuant to its Subsidiary Guarantee not constitute
a fraudulent transfer or conveyance for purposes of the Bankruptcy Law, the
Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act or any
similar Federal or state law. To effectuate the foregoing intention, the
Holders and each Subsidiary Guarantor hereby irrevocably agrees that the
obligations of each Subsidiary Guarantor under the Subsidiary Guarantees shall
be limited to the maximum amount as will, after giving effect to all other
contingent and fixed liabilities of each Subsidiary Guarantor (including, but
not limited to, the Guarantor Senior Indebtedness of each Subsidiary Guarantor)
re-
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<PAGE>
sult in the obligations of each Subsidiary Guarantor under the Subsidiary
Guarantees not constituting such fraudulent transfer or conveyance.
SECTION 12.2 Execution and Delivery of Subsidiary Guarantee.
To further evidence the Subsidiary Guarantee set forth in Section
12.1, each Subsidiary Guarantor hereby agrees that a notation of such Subsidiary
Guarantee, substantially in the form included in Exhibit C hereto, shall be
endorsed on each Security authenticated and delivered by the Trustee after such
Subsidiary Guarantee is executed and executed by either manual or facsimile
signature of an Officer of each Subsidiary Guarantor. The validity and
enforceability of any Subsidiary Guarantee shall not be affected by the fact
that it is not affixed to any particular Security.
Each of the Subsidiary Guarantors hereby agrees that its Subsidiary
Guarantee set forth in Section 12.1 shall remain in full force and effect
notwithstanding any failure to endorse on each Security a notation of such
Subsidiary Guarantee.
If an Officer of a Subsidiary Guarantor whose signature is on this
Indenture or a Security no longer holds that office at the time the Trustee
authenticates such Security or at any time thereafter, such Subsidiary
Guarantor's Subsidiary Guarantee of such Security shall be valid nevertheless.
The delivery of any Security by the Trustee, after the authentication
thereof hereunder, shall constitute due delivery of any Subsidiary Guarantee set
forth in this Indenture on behalf of the Subsidiary Guarantor.
SECTION 12.3 Additional Subsidiary Guarantors.
Any person may become a Subsidiary Guarantor by executing and
delivering to the Trustee (a) a supplemental indenture in form and substance
satisfactory to the Trustee, which subjects such person to the provisions of
this Indenture as a Subsidiary Guarantor, and (b) an Opinion of Counsel to the
effect that such supplemental indenture has been duly authorized and executed by
such person and constitutes the legal, valid,
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binding and enforceable obligation of such person (subject to such customary
exceptions concerning fraudulent conveyance laws, creditors' rights and
equitable principles as may be acceptable to the Trustee in its discretion).
SECTION 12.4 Release of a Subsidiary Guarantor.
(a) In the event that each other holder of Indebtedness of the
Company or of any of the Company's Subsidiaries of which a Subsidiary Guarantor
has guaranteed the payment thereof unconditionally releases a Subsidiary
Guarantor of all of its obligations under such guarantee pursuant to a written
agreement in form and substance satisfactory to the Trustee (other than a
release resulting from payment under such guarantee) such Subsidiary Guarantor
shall be automatically and unconditionally released from all obligations under
its Subsidiary Guarantee, provided that a release of a Subsidiary Guarantor may
only be obtained under the circumstances described in this sentence if an
Officers' Certificate to that effect has been delivered to the Trustee.
(b) In addition, except in the case where the prohibition on transfer
in Section 5.1(a) is applicable, upon the sale or disposition of all (but not
less than all) of the Capital Stock of a Subsidiary Guarantor by the Company or
a Subsidiary of the Company, or upon the consolidation or merger of a Subsidiary
Guarantor with or into any Person (in each case, other than to the Company or an
Affiliate of the Company), such Subsidiary Guarantor shall be deemed
automatically and unconditionally released and discharged from all obligations
under this Article XII without any further action required on the part of the
Trustee or any Holder, provided that each such Subsidiary Guarantor is sold or
disposed of in accordance with Article V.
(c) The Trustee shall deliver an appropriate instrument evidencing
the release of a Subsidiary Guarantor upon receipt of a request of the Company
accompanied by an Officers' Certificate certifying as to the compliance with
this Section 12.4. Any Subsidiary Guarantor not so released or the entity
surviving such Subsidiary Guarantor, as applicable, will remain
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<PAGE>
or be liable under its Subsidiary Guarantee as provided in this Article XII.
The Trustee shall execute any documents reasonably requested by the
Company or a Subsidiary Guarantor in order to evidence the release of such
Subsidiary Guarantor from its obligations under its Subsidiary Guarantee
endorsed on the Securities and under this Article XII.
Except as set forth in Articles IV and V and this Section 12.4,
nothing contained in this Indenture or in any of the Securities shall prevent
any consolidation or merger of a Subsidiary Guarantor with or into the Company
or another Subsidiary Guarantor or shall prevent any sale or conveyance of the
property of a Subsidiary Guarantor as an entirety or substantially as an
entirety to the Company or another Subsidiary Guarantor.
SECTION 12.5 Waiver of Subrogation.
Each Guarantor hereby irrevocably waives any claim or other rights
which it may now or hereafter acquire against the Company or any of its
Subsidiaries that arise from the existence, payment, performance or enforcement
of such Subsidiary Guarantor's obligations under this Subsidiary Guarantee and
this Indenture, including, without limitation, any right of subrogation,
reimbursement, exoneration, indemnification, and any right to participate in any
claim or remedy of any Holder of Securities against the Company or any of its
Subsidiaries, whether or not such claim, remedy or right arises in equity, or
under contract, statute or common law, including, without limitation, the right
to take or receive from the Company or any of its Subsidiaries, directly or
indirectly, in cash or other property or by set-off or in any other manner,
payment or security on account of such claim or other rights. If any amount
shall be paid to any Subsidiary Guarantor in violation of the preceding sentence
and the Securities shall not have been paid in full, such amount shall have been
deemed to have been paid to such Subsidiary Guarantor for the benefit of, and
held in trust for the benefit of, the Holders of the Securities, and shall,
subject to the subordination provisions of this Article and to Article XI,
forthwith be paid to the Trustee for the
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benefit of such Holders to be credited and applied upon the Securities, whether
matured or unmatured, in accordance with the terms of this Indenture. Each
Subsidiary Guarantor acknowledges that it will receive direct and indirect
benefits from the financing arrangements contemplated by this Indenture and that
the waiver set forth in this Section 12.5 is knowingly made in contemplation of
such benefits.
SECTION 12.6 Agreement to Subordinate.
Each Subsidiary Guarantor covenants and agrees, and each Holder of
Securities, by his acceptance thereof, likewise covenants and agrees, that the
indebtedness represented by such Subsidiary Guarantor's Subsidiary Guarantee and
the payment of the principal of and interest on each and all of the Securities
pursuant to such Subsidiary Guarantor's Subsidiary Guarantee is hereby expressly
subordinated, to the extent and in the manner hereinafter set forth, in right of
payment to the prior payment in full of Guarantor Senior Indebtedness.
Anything in the Subsidiary Guarantee, the Securities or in this
Indenture to the contrary notwithstanding, the indebtedness evidenced by such
Subsidiary Guarantor's Subsidiary Guarantee shall be subordinate and junior in
right of payment, in all respects, to all Guarantor Senior Indebtedness of such
Subsidiary Guarantor, whether outstanding at the Issue Date or incurred after
the Issue Date. Without limiting the effect of the foregoing, "subordinate" and
"junior" as used herein shall include within their meanings the following:
(i) in the event of any insolvency or bankruptcy proceedings, and
any receivership, liquidation, reorganization or other similar proceedings
in connection therewith, relative to the Subsidiary Guarantor or its
creditors or its property, and in the event of any proceedings for
voluntary liquidation, dissolution or other winding up of the Subsidiary
Guarantor, whether or not involving insolvency or bankruptcy proceedings,
then (A) all Guarantor Senior Indebtedness of such Subsidiary Guarantor
shall first be paid in full, or such payment be provided for, before any
payment on account of principal or interest is made upon the Indebtedness
evidenced by the Subsidiary
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Guarantee of such Subsidiary Guarantor, and (B) in any such proceedings any
payment or distribution of any kind or character (including without
limitation any distribution realized from or attributable to any security
interest of the Holders of the Securities in property or assets of such
Subsidiary Guarantor), whether in cash or property or securities which may
be payable or deliverable in respect of the Subsidiary Guarantee of such
Subsidiary Guarantor, shall be paid or delivered directly to the holders of
such Guarantor Senior Indebtedness of such Subsidiary Guarantor (or the
representative or representatives of such holders or the trustee or
trustees under any indenture under which any instruments evidencing any of
such Guarantor Senior Indebtedness of such Subsidiary Guarantor shall have
been issued) for application in payment thereof, unless and until such
Guarantor Senior Indebtedness of such Subsidiary Guarantor shall have been
paid in full or such payment shall have been provided for; provided that
(1) in the event that payment or delivery of such cash, property or
securities to the Holders of the Securities is authorized by an order or
decree giving effect, and stating in such order or decree that effect is
given, to the subordination of the Subsidiary Guarantee of such Subsidiary
Guarantor to Guarantor Senior Indebtedness of such Subsidiary Guarantor,
and made by a court of competent jurisdiction in a reorganization
proceeding under any applicable law, no payment or delivery of such cash,
property or securities payable or deliverable with respect to the
Securities need be made to the holders of Guarantor Senior Indebtedness of
such Subsidiary Guarantor, (2) no such delivery need be made of securities
which are issued pursuant to voluntary reorganization, dissolution, or
liquidation proceedings by such Subsidiary Guarantor or by such Subsidiary
Guarantor as reorganized, if such securities are subordinate and junior to
the payment of all Guarantor Senior Indebtedness of such Subsidiary
Guarantor then outstanding to the same extent as the Subsidiary Guarantee
of such Subsidiary Guarantor and (3) if, pursuant to the foregoing, a
payment or delivery of cash, property or securities is to be made to the
holders of Guarantor Senior Indebtedness of such Subsidiary Guarantor (or
their representative or representatives or the trustee or
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<PAGE>
trustees under any indenture under which any instruments evidencing any
such Guarantor Senior Indebtedness of such Subsidiary Guarantor shall have
been issued) from a distribution realized from or attributable to any
security interest of the Holders of the Securities in property or assets of
such Subsidiary Guarantor, such payment or delivery shall be made (x)
first, to the holders of any Guarantor Senior Indebtedness of such
Subsidiary Guarantor (or their representative or representatives) secured
equally and ratably with the Holders of the Securities with respect to such
property or assets or to the trustee or trustees under any indenture under
which any instruments evidencing any of such Guarantor Senior Indebtedness
of such Subsidiary Guarantor shall have been issued, ratably according to
the aggregate amounts remaining unpaid on account of such Guarantor Senior
Indebtedness of such Subsidiary Guarantor held or represented by each,
until such Guarantor Senior Indebtedness of such Subsidiary Guarantor shall
have been paid in full or such payment shall have been provided for and (y)
then, to the extent such payment or delivery shall not be required to pay
the Guarantor Senior Indebtedness of such Subsidiary Guarantor referred to
in the foregoing clause (x), to the other holders of Guarantor Senior
Indebtedness of such Subsidiary Guarantor (or their representative or
representatives or the trustee or trustees under any indenture under which
any instruments evidencing any of such Guarantor Senior Indebtedness of
such Subsidiary Guarantor shall have been issued), ratably according to the
aggregate amounts remaining unpaid on account of such Guarantor Senior
Indebtedness of such Subsidiary Guarantor held or represented by each,
until such Guarantor Senior Indebtedness of such Subsidiary Guarantor shall
have been paid in full or such payment shall have been provided for;
(ii) no payment or prepayment of any principal, premium (if any) or
interest on account of and no repurchase, redemption or other retirement
(whether at the option of the Holder or otherwise) of the Securities shall
be made, if at the time of such payment, prepayment, repurchase, redemption
or retirement, or immediately after giving effect thereto, there shall
exist a default in the payment
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<PAGE>
or prepayment of any Guarantor Senior Indebtedness of such Subsidiary
Guarantor;
(iii) in the event that any Security is declared due and payable
because of the occurrence of an Event of Default (under circumstances when
the provisions of the foregoing clause (i) shall not be applicable), the
Holders of the Securities shall be entitled to payment only after there
shall first have been paid in full the Guarantor Senior Indebtedness of
such Subsidiary Guarantor outstanding at the time such Security so becomes
due and payable because of such Event of Default, or provision for such
payment shall have been made; and
(iv) in the event that (A) any of the events described in clauses
(i), (ii) and (iii) occurs and (B) notwithstanding the provisions therein,
any payment or distribution of assets of such Subsidiary Guarantor of any
kind or character (including any distribution realized from or attributable
to any security interest of the Holders of the Securities in property or
assets of such Subsidiary Guarantor), whether in cash, property or
securities, shall be received by the Holders of the Securities (or their
representative or representatives or the Trustee under this Indenture)
before all Guarantor Senior Indebtedness of such Subsidiary Guarantor shall
have been paid in full, or provision made for such payment in accordance
with the terms of the Guarantor Senior Indebtedness of such Subsidiary
Guarantor, except as provided in subclauses (1) and (2) of the proviso to
clause (i) above, such payment or distribution shall be held in trust for
the benefit of, and shall be paid over or delivered to, the holders of such
Guarantor Senior Indebtedness of such Subsidiary Guarantor (or their
representative or representatives or to the trustee or trustees under any
indenture pursuant to which any instruments evidencing any of such
Guarantor Senior Indebtedness of such Subsidiary Guarantor shall have been
issued), as their respective interests may appear under said clauses (i),
(ii) and (iii), for application to the payment of all such Guarantor Senior
Indebtedness of such Subsidiary Guarantor remaining unpaid to the extent
necessary to pay such Guarantor Senior Indebt-
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<PAGE>
edness of such Subsidiary Guarantor in full in accordance with its terms,
after giving effect to any concurrent payment or distribution to the
holders of such Guarantor Senior Indebtedness of such Subsidiary Guarantor.
SECTION 12.7 Subrogation.
Subject to the payment in full of all Guarantor Senior Indebtedness,
holders of a Subsidiary Guarantee shall be subrogated to the rights of the
holders of Guarantor Senior Indebtedness of such Subsidiary Guarantor to receive
payments or distributions of cash, property or securities of such Subsidiary
Guarantor applicable to Guarantor Senior Indebtedness of such Subsidiary
Guarantor until all amounts owing on the Securities pursuant to such Subsidiary
Guarantor's Subsidiary Guarantee shall be paid in full, and as between such
Subsidiary Guarantor, its creditors other than holders of such Guarantor Senior
Indebtedness, and holders of such Subsidiary Guarantee, no such payment or
distribution made to the holders of such Guarantor Senior Indebtedness by virtue
of this Article XII which otherwise would have been made to such holders shall
be deemed to be a payment by such Subsidiary Guarantor on account of such
Guarantor Senior Indebtedness, it being understood that the provisions of this
Article XII are and are intended solely for the purpose of defining the relative
rights of the holders of such Subsidiary Guarantee, on the one hand, and the
holders of Guarantor Senior Indebtedness, on the other hand.
SECTION 12.8 Relative Rights.
Nothing contained in this Article XII or elsewhere in this Indenture
or in the Securities or this Subsidiary Guarantee is intended to or shall
impair, as between the Subsidiary Guarantor, its creditors other than the
holders of its Guarantor Senior Indebtedness, and the holders of its Subsidiary
Guarantee, the obligation of such Subsidiary Guarantor, which is absolute and
unconditional, to pay to the holders of the Securities pursuant to its
Subsidiary Guarantee the principal of and interest on the Securities as and when
the same shall become due and payable in accordance with their terms, or is
intended to or shall affect the relative rights of the holders of its Subsidiary
Guarantee and creditors of such Subsidiary Guar-
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<PAGE>
antor other than the holders of its Guarantor Senior Indebtedness, nor shall
anything herein or therein prevent the Trustee or any holder of its Subsidiary
Guarantee from exercising all remedies otherwise permitted by applicable law
upon default under this Indenture, subject to the rights, if any, under this
Article XII of the holders of Guarantor Senior Indebtedness to receive cash,
property or securities otherwise payable or deliverable to the Securityholders.
Upon payment or distribution of assets of such Subsidiary Guarantor
referred to in this Article XII, the Trustee and the holders of the Securities
shall be entitled to rely upon any order or decree made by any court of
competent jurisdiction in which any such dissolution, winding up, liquidation or
reorganization proceeding affecting the affairs of such Subsidiary Guarantor is
pending or upon a certificate of the trustee in bankruptcy, receiver, assignee
for the benefit of creditors, liquidating trustee, or agent or other person
making any payment or distribution, to the Trustee or to the holders of its
Subsidiary Guarantee for the purpose of ascertaining the persons entitled to
participate in such payment or distribution, the holders of its Guarantor Senior
Indebtedness and other indebtedness of such Subsidiary Guarantor, the amount
thereof or payable thereon, the amount paid or distributed thereon and all other
facts pertinent thereto or to this Article XII.
Nothing contained in this Article or elsewhere in this Indenture, or
in any of the Securities or this Subsidiary Guarantee, shall affect the
obligations of such Subsidiary Guarantor to make, or prevent such Subsidiary
Guarantor from making, payment of the principal of or interest on the Securities
pursuant to its Subsidiary Guarantee in accordance with the provisions hereof
and thereof, except as otherwise provided in this Article XII.
SECTION 12.9 Trustee to Effectuate Subordination.
Each holder of a Subsidiary Guarantee, by his acceptance thereof,
authorizes and directs the Trustee on his behalf to take such action as may be
necessary or appropriate to effectuate the subordination provided in this
Article XII and ap-
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points the Trustee his attorney-in-fact for any and all such purposes.
SECTION 12.10 Trustee Not Fiduciary for Holders of Guarantor Senior
Indebtedness.
The Trustee shall not be deemed to owe any fiduciary duty to the
holders of Guarantor Senior Indebtedness and shall not be liable to any such
holders if it shall mistakenly pay over or distribute to holders of a Subsidiary
Guarantee or any Subsidiary Guarantor or any other person moneys or assets to
which any holders of Guarantor Senior Indebtedness shall be entitled by virtue
of this Article XII or otherwise.
SECTION 12.11 Notice By Subsidiary Guarantor.
The Subsidiary Guarantor shall give prompt written notice to the
Trustee of any fact known to such Subsidiary Guarantor that would prohibit the
making of any payment of moneys to or by the Trustee pursuant to this Article.
Subject to the provisions of Sections 7.5 and 7.1 but notwithstanding any other
provisions of this Indenture, the Trustee and any Paying Agent shall not be
charged with knowledge of the existence of any facts that would prohibit the
making of any payment of moneys to or by the Trustee or such Paying Agent, or
the taking of any other action by the Trustee or such Paying Agent, unless and
until the Trustee or such Paying Agent shall have received written notice
thereof from such Subsidiary Guarantor at least three Business Days prior to the
making of any such payment, the Securityholders, the holders of any Guarantor
Senior Indebtedness or the representative of any such holders.
SECTION 12.12 Rights of Trustee.
The Trustee shall be entitled to all the rights set forth in this
Article XII with respect to any Guarantor Senior Indebtedness of such Subsidiary
Guarantor by the time held by the Trustee, to the same extent as any other
holder of Guarantor Senior Indebtedness.
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SECTION 12.13 Subsidiary Guarantor May Not Impair Subordination.
No right of any present or future holder of any Guarantor Senior
Indebtedness of such Subsidiary Guarantor to enforce the subordination herein
shall at any time or in any way be prejudiced or impaired by any act or failure
to act on the part of such Subsidiary Guarantor or by any noncompliance by such
Subsidiary Guarantor with the terms, provisions and covenants of this Indenture,
regardless of any knowledge thereof any such holder may have or be otherwise
charged with.
SECTION 12.14 Rights of Paying Agent.
In case at any time any Paying Agent other than the Trustee shall have
been appointed by the Company and be then acting hereunder, the term "Trustee"
as used in this Article shall in such case (unless the context shall require
otherwise) be construed as extending to and including such Paying Agent within
its meaning as fully for all intents and purposes as if such Paying Agent were
named in this Article XII in addition to or in place of the Trustee, provided
that Sections 12.11 and 12.12 shall not apply to such Subsidiary Guarantor if it
acts as Paying Agent.
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<PAGE>
EXHIBIT C
GUARANTEE
---------
For value received, the undersigned hereby unconditionally guarantees
to the Holder of this Security the payments of principal of, premium, if any,
and interest on this Security in the amounts and at the time when due and
interest on the overdue principal, premium, if any, and interest, if any, of
this Security, if lawful, and the payment or performance of all other
obligations of the Company under the Indenture or the Securities, to the Holder
of this Security and the Trustee, all in accordance with and subject to the
terms and limitations of this Security, Article XII of the Indenture and this
Subsidiary Guarantee. This Subsidiary Guarantee will become effective in
accordance with Article XII of the Indenture and its terms shall be evidenced
therein. The validity and enforceability of any Subsidiary Guarantee shall not
be affected by the fact that it is not affixed to any particular Security.
The obligations of the undersigned to the Holders of Securities and to
the Trustee pursuant to the Subsidiary Guarantee and the Indenture are expressly
set forth in Article XII of the Indenture and reference is hereby made to the
Indenture for the precise terms of the Subsidiary Guarantee and all of the other
provisions of the Indenture to which this Subsidiary Guarantee relates. The
Indebtedness evidenced by this Subsidiary Guarantee is, to the extent and in the
manner provided in the Indenture, subordinate and subject in right of payment to
the prior payment in full in cash or cash equivalents of all Guarantor Senior
Indebtedness as defined in the Indenture, and this Subsidiary Guarantee is
issued subject to such provisions. Each Holder of a Security, by accepting the
same, (a) agrees to and shall be bound by such provisions, (b) authorizes and
directs the Trustee, on behalf of such Holder, to take such action as may be
necessary to appropriate to effectuate the subordination as provided in the
Indenture and (c) appoints the Trustee attorney-in-fact of such Holder for such
purpose, provided that such subordination provisions shall cease to affect
amounts deposited in accordance with the defeasance provisions of the Indenture
upon the terms and conditions set forth therein.
<PAGE>
This Subsidiary Guarantee is subject to release upon the terms set
forth in the Indenture.
[NAME OF GUARANTOR]
By:______________________
Name:
Title:
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<PAGE>
EXHIBIT D
FORM OF CERTIFICATE OF TRANSFER
Navistar Financial Corporation
2850 West Golf Road
Rolling Meadows, Illinois 60008
Attention:
[Name and Address of Registrar]
Re: 9% Senior Subordinated Notes due 2002
Reference is hereby made to the Indenture, dated as of May 30, 1997
(the "Indenture"), between Navistar Financial Corporation (the "Issuer") and The
Fuji Bank and Trust Company, as trustee. Capitalized terms used but not defined
herein shall have the meanings given to them in the Indenture.
________________, (the "Transferor") owns and proposes to transfer the
Security[s] specified in Annex A hereto in the principal amount of $___ in such
Security[s] (the "Transfer"), to ________ (the "Transferee"), as further
specified in Annex A hereto. In the event that Transferor holds Physical
Securities, this Certificate is accompanied by one or more certificates
aggregating at least the principal amount of Securities proposed to be
Transferred. In connection with the Transfer, the Transferor hereby certifies
that:
1. [_] CHECK IF TRANSFEREE WILL TAKE AN INTEREST IN THE 144A GLOBAL SECURITY.
The Transfer is being effected pursuant to and in accordance with Rule 144A
under the United States Securities Act of 1933, as amended (the "Securities
Act"), and, accordingly, the Transferor hereby further certifies that the
Securities are being transferred to a Person that the Transferor reasonably
believes is purchasing the Securities for its own account, or for one or more
accounts with respect to which such Person exercises sole investment discretion,
and such Person and each such account is a "qualified institutional buyer"
within the meaning of Rule 144A in a transaction meeting the requirements of
Rule 144A and such Transfer is in compliance
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with any applicable blue sky securities laws of any state of the United States.
Upon consummation of the proposed Transfer in accordance with the terms of the
Indenture, the transferred Security will be subject to the restrictions on
transfer enumerated in the Securities Act Legend and in the Indenture and the
Securities Act.
2. [_] CHECK IF TRANSFEREE WILL TAKE AN INTEREST IN THE REGULATION S GLOBAL
SECURITY PURSUANT TO REGULATION S. The Transfer is being effected pursuant to
and in accordance with Rule 904 under the Securities Act and, accordingly, the
Transferor hereby further certifies that (i) the Transfer is not being made to a
person in the United States and (x) at the time the buy order was originated,
the Transferee was outside the United States or such Transferor and any Person
acting on its behalf reasonably believed and believes that the Transferee was
outside the United States or (y) the transaction was executed in, on or through
the facilities of a designated offshore securities market and neither such
Transferor nor any Person acting on its behalf knows that the transaction was
prearranged with a buyer in the United States, (ii) no directed selling efforts
have been made in contravention of the requirements of Rule 904(b) of Regulation
S under the Securities Act and (iii) the transaction is not part of a plan or
scheme to evade the registration requirements of the Securities Act. Upon
consummation of the proposed transfer in accordance with the terms of the
Indenture, the Security will be subject to the restrictions on Transfer
enumerated in the Securities Act Legend printed on the Regulation S Global
Security and in the Indenture and the Securities Act.
3. [_] CHECK AND COMPLETE IF TRANSFEREE WILL TAKE DELIVERY OF A RESTRICTED
PHYSICAL SECURITY PURSUANT TO RULE 144A OR REGULATION S. One or more of the
events specified in Section 2.6(a) of the Indenture have occurred and the
Transfer is being effected in compliance with the transfer restrictions
applicable to Securities bearing the Securities Act Legend and pursuant to and
in accordance with the Securities Act, and accordingly the Transferor hereby
further certifies that (check one):
(a) [_] such Transfer is being effected pursuant to and in accordance
with Rule 144A under the Securities Act and the
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<PAGE>
Transferor certifies to the effect set forth in paragraph 1 above; or
(b) [_] such Transfer is being effected pursuant to and in accordance
with Rule 904 under the Securities Act and the Transferor certifies to the
effect set forth in paragraph 2 above.
4. [_] CHECK IF TRANSFEREE WILL TAKE AN INTEREST IN THE UNRESTRICTED GLOBAL
SECURITY The Transfer is being effected pursuant to and in accordance with Rule
144 under the Securities Act and in compliance with the transfer restrictions
contained in the Indenture, and the restrictions on transfer contained in the
Indenture and the Securities Act Legend are not
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<PAGE>
required in order to maintain compliance with the Securities Act. Upon
consummation of the proposed Transfer in accordance with the terms of the
Indenture, the transfer Securities will no longer be subject to the restrictions
on transfer enumerated in the Securities Act Legend and in the Indenture and the
Securities Act.
5. [_] CHECK IF TRANSFEREE WILL TAKE AN INTEREST IN THE PHYSICAL GLOBAL
SECURITY THAT DOES NOT BEAR THE SECURITIES ACT LEGEND One or more of the events
specified in Section 2.6(a) of the Indenture have occurred and the Transfer is
being effected pursuant to and in accordance with Rule 144 under the Securities
Act and in compliance with the transfer restrictions contained in the Indenture,
and the restrictions on transfer contained in the Indenture and the Securities
Act Legend are not required in order to maintain compliance with the Securities
Act. Upon consummation of the proposed Transfer in accordance with the terms of
the Indenture, the transferred Securities will no longer be subject to the
restrictions on transfer enumerated in the Securities Act Legend and in the
Indenture and the Securities Act.
This certificate and the statements contained herein are made for your
benefit and the benefit of the Company and the Guarantors.
___________________________________
[Insert Name of Transferor]
By: _______________________________
Name:
Title:
Dated:_________________
D-4
<PAGE>
FORM OF ANNEX A TO CERTIFICATE
OF TRANSFER
1. The Transferor owns and proposes to transfer the following:
[CHECK ONE OF (a) OR (b)]
(a) [_] Interests in the
(i) [_] 144A Global Security (CUSIP _____), or
(ii) [_] Regulation S Global Security (CINS _____).
(b) [_] Physical Security.
2. That the Transferee will hold:
[CHECK ONE]
(a) [_] Interests in the:
(i) [_] 144A Global Security (CUSIP _____), or
(ii) [_] Regulation S Global Security (CINS _____), or
(iii) [_] Unrestricted Global Security (CUSIP _____); or
(b) [_] Physical Securities that bear the Securities Act Legend;
(c) [_] Physical Securities that do not bear the Securities Act Legend;
in accordance with the terms of the Indenture.
D-5
<PAGE>
EXHIBIT E
FORM OF CERTIFICATE OF EXCHANGE
Navistar Financial Corporation
2850 West Golf Road
Rolling Meadows, Illinois 60008
Attention:
[Name and Address of Registrar]
Re: 9% Senior Subordinated Notes due 2002
(CUSIP _______________)
Reference is hereby made to the Indenture, dated as of May 30, 1997
(the "Indenture"), between Navistar Financial Corporation (the "Issuer") and The
Fuji Bank and Trust Company, as trustee. Capitalized terms used but not defined
herein shall have the meanings given to them in the Indenture.
__________, (the "Holder") owns and proposes to exchange the
Security[s] specified herein, in the principal amount of $___ in such
Security[s] (the "Exchange"). In the event Holder holds Physical Securities,
this Certificate is accompanied by one or more certificates aggregating at least
the principal amount of Securities proposed to be Exchanged. In connection with
the Exchange, the Holder hereby certifies that:
1. EXCHANGE OF RESTRICTED PHYSICAL SECURITIES OR INTERESTS IN THE INITIAL
GLOBAL SECURITY FOR PHYSICAL SECURITIES THAT DO NOT BEAR THE SECURITIES ACT
LEGEND OR UNRESTRICTED GLOBAL SECURITIES
(a) [_] CHECK IF EXCHANGE IS FROM INITIAL GLOBAL SECURITIES TO THE
UNRESTRICTED GLOBAL SECURITY. In connection with the Exchange of the Holder's
Initial Global Security to the Unrestricted Global Security in an equal
principal amount, the Holder hereby certifies (i) the Unrestricted Global
Securities are being acquired for the Holder's own account without transfer,
(ii) such Exchange has been effected in compliance with
E-1
<PAGE>
the transfer restrictions applicable to the Initial Global Securities and
pursuant to and in accordance with the Securities Act of 1933, as amended (the
"Securities Act") and (iii) the restrictions on transfer contained in the
Indenture and the Securities Act Legend are not required in order to maintain
compliance with the Securities Act.
(B) [_] CHECK IF EXCHANGE IS FROM RESTRICTED PHYSICAL SECURITIES TO AN
INTEREST IN THE UNRESTRICTED GLOBAL SECURITY. In connection with the Holder's
Exchange of Restricted Physical Securities for Interest in the Unrestricted
Global Security, (i) the Interest in the Unrestricted Global Security are being
acquired for the Holder's own account without transfer, (ii) such Exchange has
been effected in compliance with the transfer restrictions applicable to
Restricted Physical Securities and pursuant to and in accordance with the
Securities Act and (iii) the restrictions on transfer contained in the Indenture
and the Securities Act Legend are not required in order to maintain compliance
with the Securities Act.
(C) [_] CHECK IF EXCHANGE IS FROM RESTRICTED PHYSICAL SECURITIES TO
PHYSICAL SECURITIES THAT DO NOT BEAR THE SECURITIES ACT LEGEND. In connection
with the Holder's Exchange of a Restricted Physical Security for Physical
Securities that do not bear the Securities Act Legend, the Holder hereby
certifies (i) the Physical Securities that do not bear the Securities Act Legend
are being acquired for the Holder's own account without transfer, (ii) such
Exchange has been effected in compliance with the transfer restrictions
applicable to Restricted Physical Securities and pursuant to and in accordance
with the Securities Act, (iii) the restrictions on transfer contained in the
Indenture and the Securities Act Legend are not required in order to maintain
compliance with the Securities Act and (iv) one or more of the events specified
in Section 2.6(a) of the Indenture have occurred.
2. [_] CHECK IF EXCHANGE IS FROM RESTRICTED PHYSICAL SECURITIES TO INTERESTS
IN AN INITIAL GLOBAL SECURITY . In connection with the Exchange of the Holder's
Restricted Physical Security for interests in the Initial Global Security in the
[CHECK ONE] [_] 144A Global Security, [_] Regulation S Global Se
E-2
<PAGE>
curity, with an equal principal amount, (i) the interests in the Initial Global
Security are being acquired for the Holder's own account without transfer and
(ii) such Exchange has been effected in compliance with the transfer
restrictions applicable to the Restricted Physical Security and pursuant to and
in accordance with the Securities Act. Upon consummation of the proposed
Exchange in accordance with the terms of the Indenture, the Initial Global
Security issued will be subject to the restrictions on transfer enumerated in
the Securities Act Legend printed on the Initial Global Securities and in the
Indenture and the Securities Act.
This certificate and the statements contained herein are made for your
benefit and the benefit of the Company and the Guarantors.
______________________________
[Insert Name of Holder]
By: __________________________
Name:
Title:
Dated:_________________
E-3
<PAGE>
Exhibit 4.2
[FORM OF FACE OF SECURITY]
No. $
9% SENIOR SUBORDINATED NOTE DUE 2002
NAVISTAR FINANCIAL CORPORATION promises to pay to
_______________________ or registered assigns the principal sum of
_______________ Dollars on June 1, 2002.
Interest Payment Dates: June 1, December 1 and at maturity
Record Dates: May 15, November 15 and 15 days prior to maturity
By: ____________________________
Authorized Signature
By: ____________________________
Authorized Signature
Dated:
Certificate of Authentication
This is one of the 9% Senior Subordinated Notes due 2002 referred to
in the within-mentioned indenture.
The Fuji Bank and Trust Company,
as Trustee
By: ____________________________
Authorized Signatory
<PAGE>
[FORM OF REVERSE OF SECURITY]
9% SENIOR SUBORDINATED NOTE DUE 2002
1. Interest. NAVISTAR FINANCIAL CORPORATION, a Delaware corporation (the
"Company," which definition shall include any successor thereto in accordance
with the Indenture (as defined below)), promises to pay, until the principal
hereof is paid or made available for payment, interest on the principal amount
set forth on the face hereof at a rate of 9% per annum. Interest on the
Securities will accrue from and including the most recent date to which interest
has been paid or, if no interest has been paid, from and including May 30, 1997
through but excluding the date on which interest is paid. Interest shall be
payable in arrears on June 1, December 1 and at the stated maturity (each an
"Interest Payment Date"), commencing December 1, 1997. Interest will be
computed on the basis of a 360-day year of twelve full 30-day months and, for
periods of less than one month, the actual number of days elapsed. Interest on
overdue principal and (to the extent permitted by law) on overdue installments
of interest will accrue at a rate equal to 9% per annum.
2. Method of Payment. The Company will pay interest on the Securities
(except defaulted interest) to the Persons who are registered Holders of
Securities at the close of business on the May 15 or November 15 next preceding
the Interest Payment Date. Holders must surrender Securities to a Payment Agent
to collect principal payments. The Company will pay principal, premium, if any,
and interest in money of the United States that at the time of payment is legal
tender for payment of public and private debts. At the Company's option,
interest may be paid by check mailed to the registered address of the Holder of
this Security.
3. Paying Agent and Registrar. Initially, The Fuji Bank and Trust
Company (the "Trustee") will act as Paying Agent and Registrar. The Company may
change any Paying Agent, Registrar or co-Registrar without notice.
4. Indenture. The Company issued the Securities under an Indenture dated
as of May 30, 1997 (the "Indenture") between the Company and the Trustee. This
Security is one of an issue of Securities of the Company issued under the
Indenture. The terms of the Securities include those stated in the Indenture
and those made part of the Indenture by reference to the Trust Indenture Act of
1939 (15 U.S. Code (S)(S)77aaa-77bbbb) as amended from time to time. The
Securities are subject to all such terms, and Securityholders are referred to
the Indenture and such Act for a statement of them. Capitalized terms used
herein and not otherwise defined have the meanings set forth in the Indenture.
The Securities are general unsecured obligations of the Company limited in
aggregate principal amount to $100,000,000. The Indenture limits, among other
things, the incurrence of certain Indebtedness by the Company and its
2
<PAGE>
Subsidiaries; transactions by the Company and its Subsidiaries with certain
Affiliates; the granting of Liens by the Company or any of its Subsidiaries;
certain guarantees issued by Subsidiaries of the Company and the ability of the
Company and the Subsidiary Guarantors to merge with or into another entity. The
limitations are subject to a number of important qualifications and exceptions.
The Company must report to the Trustee annually whether it is in compliance with
the limitations contained in the Indenture.
5. Offers to Purchase. Section 4.11 of the Indenture provides upon the
occurrence of a Change of Control and subject to further limitations contained
therein, the Company shall make an offer to purchase the Securities in
accordance with the procedures set forth in the Indenture.
6. Denominations, Transfer, Exchange. The Securities are in registered
form without coupons in denominations of $1,000 and integral multiples of
$1,000. A Holder may transfer or exchange Securities in accordance with the
Indenture. The Registrar may require a Holder, among other things, to furnish
appropriate endorsements and transfer documents and to pay to it any taxes and
fees required by law or permitted by the Indenture. The Registrar need not
transfer or exchange any Security or portion of a Security selected for
redemption, or transfer or exchange any Securities for a period of 15 days
before a selection of Securities to be redeemed.
7. Persons Deemed Owners. The registered holder of a Security may be
treated as the owner of it for all purposes.
8. Unclaimed Money. If money for the payment of principal or interest
remains unclaimed for two years, the Trustee or Paying Agent will pay the money
back to the Company at its request. After that, Holders entitled to the money
must look to the Company for payment as general creditors unless an "abandoned
property" law designates another Person.
9. Amendment, Supplement, Waiver. The Company and the Trustee may,
without the consent of the holders of any outstanding Securities, amend, waiver
or supplement the Indenture, the Securities or Subsidiary Guarantee for certain
specified purposes, including, among other things, curing ambiguities, defects
or inconsistencies, maintaining the qualification of the Indenture under the
Trust Indenture Act of 1939 or making any other change that does not adversely
affect the rights of any Holder. Other amendments and modifications of the
Indenture, the Securities or any Subsidiary Guarantee may be made by the Company
and the Trustee with the consent of the Holders of not less than a majority of
the aggregate principal amount of the outstanding Securities, subject to certain
exceptions requiring the consent of the Holders of the particular Securities to
be affected.
3
<PAGE>
10. Successor Corporation. When a successor corporation assumes all the
obligations of its predecessor under the Securities and the Indenture and the
transaction complies with the terms of Article V of the Indenture, the
predecessor corporation, subject to certain exceptions, will be released from
those obligations.
11. Defaults and Remedies. Events of Default are set forth in the
Indenture. Subject to certain limitations in the Indenture, if an Event of
Default (other than an Event of Default specified in Section 6.1(a)(viii) or
(ix) of the Indenture with respect to the Company) occurs and is continuing,
then the holders of note less than 25% in aggregate principal amount of the
outstanding Securities may, or the Trustee may, declare the principal of,
premium, if any, plus accrued interest, if any, to be due and payable
immediately. If an Event of Default specified in Section 6.1(a)(viii) or (ix) of
the Indenture with respect to the Company occurs and is continuing, the
principal of, premium, if any, and accrued interest on all of the Securities
shall ipso facto become and be immediately due and payable without any
declaration or other act on the part of the Trustee or any Holder.
Securityholders may not enforce the Indenture or the Securities except as
provided in the Indenture. The Trustee may require indemnity reasonably
satisfactory to it before it enforces the Indenture or the Securities. Subject
to certain limitations, Holders of a majority in principal amount of the then
outstanding Securities may direct the Trustee in its exercise of any trust or
power. The Trustee may withhold from Securityholders notice of any continuing
default (except a default in payment of principal or interest or a failure to
comply with Article V of the Indenture) if it determines that withholding notice
is in their interests. The Company must furnish an annual compliance certificate
to the Trustee.
12. Trustee Dealings with Company. The Trustee, in its individual or any
other capacity, may make loans to, accept deposits from, and perform services
for the Company or its Affiliates, and may otherwise deal with the Company or
its Affiliates, as if it were not Trustee.
13. No Recourse Against Others. A director, officer, employee,
stockholder or beneficiary, as such, of the Company or any Subsidiary Guarantor
shall not have any liability for any obligations of the Company or any
Subsidiary Guarantor under the Securities, the Indenture or any Subsidiary
Guarantee or for any claim based on, in respect of or by reason of, such
obligations or their creation. Each Securityholder by accepting a Security
waives and releases all such liability. The waiver and release are part of the
consideration for the issue of the Securities.
14. Defeasance. The Indenture contains provisions (which provisions apply
to this Security) for defeasance at any time of (a) the entire indebtedness of
the Company and any Subsidiary
4
<PAGE>
Guarantor or this Security and (b) certain restrictive covenants and related
Defaults and Events of Default, in each case upon compliance by the Company with
certain conditions set forth therein.
15. Authentication. This Security shall not be valid until the Trustee
signs the certificate of authentication on the other side of this Security.
16. Abbreviations. Customary abbreviations may be used in the name of a
Securityholder or an assignee, such as: TEN COM (= tenants in common), TENANT
(= tenants by the entireties), JT TEN (= joint tenants with right of
survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (=
Uniform Gifts to Minors Act).
17. Subordination. The Company's payment of principal of, premium, if
any, and interest on the Securities is subordinated in right of payment, to the
extent and in the manner provided in Article XI of the Indenture, to the prior
payment in full of the Senior Indebtedness of the Company. Each Holder of the
Securities, by his acceptance hereof, covenants and agrees that all payments of
the principal of, premium, if any, and interest on the Securities by the Company
shall be subordinated in accordance with the provisions of Article XI of the
Indenture, and each Holder accepts and agrees to be bound by such provisions.
18. GOVERNING LAW. THE INDENTURE, THIS SECURITY AND EACH SUBSIDIARY
GUARANTEE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW.
19. Guarantees. This Security may after the date hereof be entitled to
certain Subsidiary Guarantees made for the benefit of the Holders. Reference is
hereby made to Section 4.15 of the Indenture and to Exhibit B to the Indenture
for the terms of any Subsidiary Guarantee (including any terms of subordination
of such Subsidiary Guarantee that may apply).
The Company will furnish to any Securityholder upon written request and
without charge a copy of the Indenture. Requests may be made to:
Navistar Financial Corporation
2850 W. Golf Road
Rolling Meadows, Illinois 60008
Telephone: (847) 734-4000
Telecopy: (847) 734-4090
Attention: General Counsel
5
<PAGE>
ASSIGNMENT FORM
If you the holder want to assign this Security, fill in the form below and have
your signature guaranteed:
I or we assign and transfer this Security to
________________________________________________________________________________
(Insert assignee's social security or tax ID number)____________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Print or type assignee's name, address and zip code) and irrevocably appoint
________________________________________________________________________________
agent to transfer this Security on the books of the Company. The agent may
substitute another to act for him.
________________________________________________________________________________
Date:______________ Your signature:______________________
(Sign exactly as your name
appears on the other side of
this Security)
Signature Guarantee:____________________________________________________________
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you wish to have this Security purchased by the Company pursuant to
Section 4.11 of the Indenture, check the Box: [ ]
If you wish to have a portion of this Security purchased by the Company
pursuant to Section 4.11 of the Indenture, state the amount: $______________
Date:____________________ Your signature:_________________
(Sign exactly as your name appears on the other side of this Security)
Signature Guarantee:________________
<PAGE>
Exhibit 4.4
NAVISTAR FINANCIAL CORPORATION
$100,000,000
9% Senior Subordinated Notes due 2002
Purchase Agreement
May 22, 1997
J.P. MORGAN SECURITIES INC.
CHASE SECURITIES INC.
NATIONSBANC CAPITAL MARKETS, INC.
c/o J.P. Morgan Securities Inc.
60 Wall Street
New York, New York 10260-0060
Ladies and Gentlemen:
Navistar Financial Corporation, a Delaware corporation (the "Company"),
proposes to issue and sell to J.P. Morgan Securities Inc., Chase Securities Inc.
and NationsBanc Capital Markets, Inc. (the "Initial Purchasers") $100,000,000
aggregate principal amount of its 9% Senior Subordinated Notes due 2002 (the
"Securities"). The Securities will be issued pursuant to the provisions of an
Indenture to be dated as of May 30, 1997 (the "Indenture") by and between the
Company and The Fuji Bank & Trust Company, as Trustee (the "Trustee").
The sale of the Securities to the Initial Purchasers will be made without
registration of the Securities under the Securities Act of 1933, as amended, and
the rules and regulations thereunder (collectively, the "Securities Act"), in
reliance upon the exemption therefrom provided by Section 4(2) of the Securities
Act. Holders of the Securities will have the benefits of a Registration Rights
Agreement to be dated as of May 30, 1997 among the Company and the Initial
Purchasers (the "Registration Rights Agreement").
The Company hereby agrees with the Initial Purchasers as follows:
1. The Company hereby agrees, upon the basis of your representations and
warranties contained in Section 2 hereof, to issue and sell the Securities to
the several Initial Purchasers as hereinafter provided, and each Initial
Purchaser, upon the basis of the representations and warranties herein
contained, but subject to the conditions hereinafter stated, agrees to purchase,
severally and not jointly, from the Company the respective principal
<PAGE>
amount of Securities set forth opposite such Initial Purchaser's name in
Schedule I hereto at a price equal to 98% of their principal amount (the
"Purchase Price").
2. The Company understands that the Initial Purchasers intend (x) to offer
privately the Securities as soon after this Agreement has become effective as in
the judgment of the Initial Purchasers is advisable and (y) initially to offer
the Securities upon the terms set forth in the Offering Memorandum (as defined
below).
The Company confirms that it has authorized the Initial Purchasers, subject
to the restrictions set forth below, to distribute copies of the Offering
Memorandum in connection with the offering of the Securities. Each Initial
Purchaser hereby makes to the Company the following representations, warranties
and covenants:
(i) it is a qualified institutional buyer within the meaning of Rule
144A under the Securities Act; and
(ii) (A) it will not solicit offers for, or offer to sell, the
Securities by any form of general solicitation or general advertising (as
those terms are used in Regulation D under the Securities Act) and (B) it
will solicit offers for the Securities only from, and will offer the
Securities only to, (1) persons whom it reasonably believes to be
"qualified institutional buyers" within the meaning of Rule 144A under the
Securities Act, (2) institutions which it reasonably believes are
"accredited investors" as defined in Rule 501(a)(1), (2), (3) or (7) of
Regulation D under the Securities Act ("Accredited Investors") who, in the
case of purchasers described in this clause (B)(2), purchase not less than
$250,000 principal amount of Securities for their own account and for any
discretionary account for which they are acquiring Securities and provide
it a letter in the form of Annex A to the Offering Memorandum or (3) upon
the terms and conditions set forth in Annex I to this Agreement.
3. Payment for the Securities shall be made to the Company by wire
transfer in immediately available funds, to the account specified by the Company
to the Initial Purchasers no later than noon the Business Day (as defined below)
prior to the Closing Date (as defined below), on May 30, 1997, or at such other
time on the same or such other date, not later than the fifth Business Day
thereafter, as the Initial Purchasers and the Company may agree upon in writing.
The time and date of such payment for the Securities are referred to herein as
the "Closing Date." As used herein, the term "Business Day" means any day other
than a day on which banks are permitted or required to be closed in New York
City.
Payment for the Securities sold in reliance on Rule 144A under the
Securities Act or in offshore transactions in reliance on Regulation S under the
Securities Act shall be made against delivery to the nominee of The Depository
Trust Company for the account of the Initial Purchasers of one or more global
notes representing such Securities (collectively, the "Global Note"), with any
transfer taxes payable in connection with the transfer to the Initial Purchasers
of the Securities duly paid by the Company. Payment for Securities sold to
Accredited Investors shall be made against delivery to the Initial Purchasers of
one or more
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<PAGE>
certificated notes ("Certificated Notes") registered in such names and in such
denominations as the Initial Purchasers shall request in writing not later than
two full Business Days prior to the Closing Date, with any transfer taxes
payable in connection with the transfer to the Initial Purchasers of such
Securities duly paid by the Company. The Global Note and the Certificated Notes
will be made available for inspection by the Initial Purchasers at the office of
J.P. Morgan Securities Inc. at the address set forth above not later than 1:00
P.M., New York City time, on the Business Day prior to the Closing Date.
4. The Company represents and warrants to each of the Initial Purchasers
that:
(a) A preliminary offering memorandum, dated May 13, 1997 (the
"Preliminary Offering Memorandum") and an offering memorandum, dated May
22, 1997 (the "Offering Memorandum") have been prepared in connection with
the offering of the Securities. The Preliminary Offering Memorandum or the
Offering Memorandum and any amendments or supplements thereto, or, to the
best of the Company's knowledge, the annual report on Form 10-K for the
year ended October 31, 1996 of Navistar International Corporation
("Navistar"), the quarterly report on Form 10-Q for the quarter ended
January 31, 1997 of Navistar and the 1996 Annual Report to Shareowners of
Navistar (such reports with respect to Navistar are referred to herein
collectively as the "Navistar Reports"), did not and will not, as of their
respective dates, contain an untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading,
provided that this representation and warranty shall not apply to any
statements or omissions made in reliance upon and in conformity with
information relating to any Initial Purchaser furnished to the Company in
writing by such Initial Purchaser expressly for use therein;
(b) the audited financial statements, and the related notes thereto,
included in the Offering Memorandum present fairly the consolidated
financial position of the Company and its subsidiaries and the results of
their respective operations and the changes in their respective
consolidated cash flows, as of the dates and for the periods indicated, and
said financial statements have been prepared in conformity with generally
accepted accounting principles applied on a consistent basis throughout the
periods involved; the unaudited consolidated financial statements and the
related notes thereto included in the Offering Memorandum present fairly
the consolidated financial position of the Company and its subsidiaries as
of the dates and for the periods indicated and the results of their
operations and the changes in their consolidated cash flows, subject to
year-end audit adjustments, have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis throughout the
periods involved and have been prepared on a basis substantially consistent
with that of the audited financial statements referred to above except as
otherwise stated therein; the summary and selected financial and
statistical data included in the Offering Memorandum present fairly the
information shown therein and have been prepared and compiled on a basis
consistent with the audited and un-
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<PAGE>
audited financial statements of the Company or Navistar, except as
otherwise stated therein; and Deloitte & Touche, who are reporting upon the
audited consolidated financial statements of the Company and its
consolidated subsidiaries (each a "Subsidiary," and collectively, the
"Subsidiaries"), and the related schedules included in the Offering
Memorandum are independent public accountants as defined in the Securities
Act;
(c) the Company owns, directly or indirectly, free and clear of any
mortgage, pledge, security interest, lien, claim or other encumbrance or
restriction on transferability or voting (other than as may be imposed by
the Securities Act and the various state securities laws), all of the
outstanding capital stock of each Subsidiary of the Company, except for the
pledge to the banks and other secured parties under the Amended and
Restated Credit Agreement dated as of November 4, 1994 among the Company,
the banks referred to therein and The Chase Manhattan Bank, Bank of America
Illinois, NationsBank N.A., Bank of Nova Scotia and Morgan Guaranty Trust
Company of New York as co-arrangers (as amended to the date hereof, the
"Credit Agreement") and under the Security, Pledge and Trust Agreement
between the Company and Bankers Trust Company, as trustee, dated as of
April 26, 1993 (as amended to the date hereof, the "Security Agreement");
all of the outstanding capital stock of each Subsidiary of the Company has
been duly authorized and validly issued and is fully paid and non-
assessable;
(d) since the respective dates as of which information is given in
the Offering Memorandum there has not been (A) any change in the Company's
issued capital stock, warrants or options except pursuant to the terms of
the instruments governing the same or pursuant to the exercise of such
options or warrants, or the issuance of certain options or (B) any material
adverse change, or any development involving a prospective material adverse
change, in or affecting the general affairs, the management, business,
prospects, financial position, stockholder's equity or results of
operations, of the Company and the Subsidiaries, taken as a whole (a
"Material Adverse Change");
(e) since the respective dates as of which information is given in
the Offering Memorandum, except as disclosed therein, (i) there have been
no transactions entered into by the Company or by any of the Subsidiaries,
including those entered into in the ordinary course of business, which are
material to the Company and the Subsidiaries taken as a whole; and (ii)
there has been no dividend or distribution of any kind declared, paid or
made by the Company on any class of its capital stock, except for quarterly
dividends in accordance with the Company's past practice;
(f) the Company and each Subsidiary has been duly incorporated under
the laws of its jurisdiction of incorporation; the Company and each
Subsidiary is a validly existing corporation in good standing under the
laws of its jurisdiction of incorporation, with full power and corporate
authority to own, lease and operate its
-4-
<PAGE>
properties and conduct its business as described in the Offering
Memorandum, and is duly qualified as a foreign corporation for the
transaction of business and is in good standing under the laws of each
other jurisdiction in which it owns or leases properties, or conducts any
business, so as to require such qualification, except where the failure to
be so qualified or in good standing would have a material adverse effect on
the general affairs, business, prospects, management, financial position,
stockholder's equity or results of operations of the Company and the
Subsidiaries, taken as a whole (a "Material Adverse Effect");
(g) this Agreement has been duly authorized, executed and delivered
by the Company;
(h) the Registration Rights Agreement has been duly authorized by the
Company, and when executed and delivered by the Company (assuming due
authorization, execution and delivery thereof by the Initial Purchasers),
the Registration Rights Agreement will constitute a legal, valid and
binding agreement of the Company enforceable against the Company in
accordance with its terms, except that the enforcement thereof may be
subject to (i) bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereafter in effect relating to creditors' rights
generally and (ii) general principles of equity and the discretion of the
court before which any proceeding therefor may be brought;
(i) the execution and delivery of the Indenture has been duly and
validly authorized by the Company and, when executed and delivered by the
Company (assuming due authorization, execution and delivery thereof by the
Trustee), the Indenture will constitute a legal, valid and binding
agreement of the Company enforceable against the Company in accordance with
its terms, except that the enforcement thereof may be subject to (i)
bankruptcy, insolvency, reorganization, moratorium or other similar laws
now or hereafter in effect relating to creditors' rights generally and (ii)
general principles of equity and the discretion of the court before which
any proceeding therefor may be brought; and the Securities and the
Indenture conform in all material respects to the descriptions thereof in
the Offering Memorandum;
(j) the Securities have been duly and validly authorized by the
Company for issuance and when executed by the Company and authenticated by
the Trustee in accordance with the provisions of the Indenture, and
delivered to and paid for by the Initial Purchasers in accordance with the
terms hereof, will have been duly executed, authenticated, issued and
delivered and will constitute legal, valid and binding obligations of the
Company entitled to the benefits provided by the Indenture and enforceable
against the Company in accordance with their terms, except that the
enforcement thereof may be subject to (i) bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to creditors' rights generally and (ii) general principles of
equity and the discretion of the court before which any proceeding therefor
may be brought;
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<PAGE>
(k) the execution and delivery by the Company of, and the performance
by the Company of all of the provisions of its obligations under, this
Agreement, the Indenture, the Registration Rights Agreement, the Securities
and the consummation by the Company of the transactions herein and therein
contemplated and as set forth in the Offering Memorandum, (i) have been
duly authorized by all necessary corporate action on the part of the
Company, (ii) do not and will not result in any violation of the
Certificate of Incorporation or the By-laws of the Company and (iii) do not
and will not conflict with, or result in a breach or violation of any of
the terms or provisions of, or constitute a default (or an event which,
with notice or lapse of time, or both, would constitute a default) under,
or give rise to any right to accelerate the maturity or require the
prepayment of any indebtedness or the purchase of any capital stock under,
or result in the creation or imposition of any lien, charge or encumbrance
upon any properties or assets of the Company or of any Subsidiary under,
(A) any contract, indenture, mortgage, deed of trust, loan agreement, note,
lease, partnership agreement or other agreement or instrument to which the
Company or any such Subsidiary is a party or by which any of them may be
bound or to which any of their respective properties or assets may be
subject, (B) (assuming compliance with the Securities Act with respect to
the exchange of the Securities for the Exchange Securities (as defined in
the Registration Rights Agreement) and the other obligations of the Company
under the Registration Rights Agreement) any applicable law or statute,
rule or regulation (other than the securities or Blue Sky laws of the
various states of the United States of America) or (C) any judgment, order
or decree of any government, governmental instrumentality, agency, body or
court, domestic or foreign, having jurisdiction over the Company or any
such Subsidiary or any of their respective properties or assets, except,
with respect to clause (iii), any violation, conflict, or breach which
would not reasonably be expected, individually or in the aggregate, to have
a Material Adverse Effect;
(l) neither the Company nor any agent acting on its behalf has taken
or will take any action that will cause this Agreement or the sale,
issuance, execution or delivery of the Securities to violate Regulation G,
T, U or X of the Board of Governors of the Federal Reserve System, in each
case as in effect, or as the same may hereafter be in effect, on the
Closing Date;
(m) the Company and each Subsidiary has good and marketable title to
all real and personal property described in the Offering Memorandum as
being owned by it and good and marketable title to a leasehold estate in
the real and personal property described therein as being leased by it,
free and clear of all liens, charges, encumbrances or restrictions, except,
in each case, as described in the Offering Memorandum or to the extent the
failure to have such title or the existence of such liens, charges,
encumbrances or restrictions would not have a Material Adverse Effect;
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<PAGE>
(n) no authorization, approval, consent, order, registration,
qualification or license of, or filing with, any government, governmental
instrumentality, agency, body or court, domestic or foreign or third party
(other than as have been or will be prior to the Closing Date obtained
under the securities or Blue Sky laws of the various states of the United
States of America and assuming compliance with the Securities Act with
respect to the exchange of the Securities for the Exchange Securities and
the other obligations of the Company under the Registration Rights
Agreement), is required for the valid authorization, issuance, sale and
delivery of the Securities, or the performance by the Company of all of its
obligations under this Agreement, the Indenture, the Registration Rights
Agreement or the Securities, or the consummation by the Company of the
transactions contemplated by this Agreement, the Indenture, the
Registration Rights Agreement or the Offering Memorandum, except where the
failure to obtain such authorization, approval, consent, order,
registration, qualification or license or to make any such filing would not
reasonably be expected, individually or in the aggregate, to have a
material adverse effect on the consummation of the transactions
contemplated in, or the fulfillment of the terms of, this Agreement, the
Offering Memorandum, the Indenture or the Registration Rights Agreement;
(o) neither the Company nor any of the Subsidiaries (i) is in
violation of its Certificate of Incorporation or By-Laws or (ii) is in
breach or violation of any of the terms or provisions of, or with the
giving of notice or lapse of time, or both, would be in default under, any
contract, indenture, mortgage, deed of trust, loan agreement, note, lease,
partnership agreement, or other agreement or instrument to which the
Company or any Subsidiary is a party or by which any of them may be bound
or to which any of their properties or assets may be subject, except for
such violations or defaults that would not have a Material Adverse Effect;
(p) except as described in the Offering Memorandum, there is no
action, suit or proceeding before or by any government, governmental
instrumentality, agency, body or court, domestic or foreign, now pending
or, to the best knowledge of the Company after due inquiry, threatened
against or affecting the Company or any of the Subsidiaries that could have
a Material Adverse Effect or that could have a material adverse effect on
the consummation of the transactions contemplated in, or the fulfillment of
the terms of, this Agreement, the Offering Memorandum, the Indenture or the
Registration Rights Agreement; there is no action, suit or proceeding
before or by any government, governmental instrumentality, agency, body or
court, now pending, or to the best knowledge of the Company, threatened
against or affecting the Company or any of the Subsidiaries that would be
required to be described in a registration statement pursuant to Item 103
of Regulation S-K filed pursuant to the Securities Act that is not
described in the Offering Memorandum;
(q) each of the Company and the Subsidiaries owns, possesses or has
obtained all material licenses, permits, certificates, consents, orders,
approvals and
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<PAGE>
other authorizations from, and has made all material declarations and
filings with, all federal, state, local and other governmental authorities
(including foreign regulatory agencies) and all courts and other tribunals,
domestic or foreign, necessary to own or lease, as the case may be, and to
operate its properties and to carry on its business as conducted as of the
date hereof, except in each case where the failure to obtain licenses,
permits, certificates, consents, orders, approvals and other
authorizations, or to make all declarations and filings, would not have a
Material Adverse Effect, and none of the Company or any of the Subsidiaries
has received any notice of any proceeding relating to revocation or
modification of any such license, permit, certificate, consent, order,
approval or other authorization, except as described in the Offering
Memorandum and except, in each case, where such revocation or modification
would not have a Material Adverse Effect; and the Company and each of the
Subsidiaries are in material compliance with all laws and regulations
relating to the conduct of their respective businesses as conducted as of
the date hereof, except where noncompliance with such laws or regulations
would not have a Material Adverse Effect;
(r) neither the Company nor any affiliate (as defined in Rule 501(b)
of Regulation D under the Securities Act ("Regulation D")) of the Company
has directly, or through any agent, sold, offered for sale, solicited
offers to buy or otherwise negotiated in respect of, any security (as
defined in the Securities Act) which is or will be integrated with the sale
of the Securities in a manner that would require the registration under the
Securities Act of the offering contemplated by the Offering Memorandum;
(s) neither the Company nor, to the best of the Company's knowledge,
any person acting on its behalf has offered or sold the Securities by means
of any general solicitation or general advertising within the meaning of
Rule 502(c) under the Securities Act or, with respect to Securities sold
outside the United States to non-U.S. persons (as defined in Rule 902 under
the Securities Act), by means of any directed selling efforts within the
meaning of Rule 902 under the Securities Act and the Company and any of its
affiliates and any person acting on their behalf has complied with and will
implement the "offering restriction" within the meaning of such Rule 902;
(t) it is not necessary in connection with the offer, sale and
delivery of the Securities in the manner contemplated by this Agreement to
register the Securities under the Securities Act or to qualify an indenture
under the TIA;
(u) the Securities satisfy the requirements set forth in Rule
144A(d)(3) under the Securities Act;
(v) all of the outstanding shares of capital stock of the Company
have been duly authorized and validly issued, are fully paid and non-
assessable; and, ex-
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<PAGE>
cept as described in the Offering Memorandum, there are no outstanding
rights (including, without limitation, preemptive rights), warrants or
options to acquire, or instruments convertible into or exchangeable for,
any shares of capital stock or other equity interest in the Company or in
any of the Subsidiaries, or any contract, commitment, agreement,
understanding or arrangement of any kind relating to the issuance of any
capital stock of the Company or any such Subsidiary, any such convertible
or exchangeable securities or any such rights, warrants or options; and
(w) the Company has taken all necessary actions under the Credit
Agreement and under the Security Agreement to secure the holders of the
Securities equally and ratably with all other indebtedness and other
obligations of the Company secured thereby, subject to the subordination
provisions of the Indenture.
5. The Company covenants and agrees with each Initial Purchaser as
follows:
(a) before distributing any amendment or supplement to the Offering
Memorandum, to furnish to the Initial Purchasers a copy of the proposed
amendment or supplement for review and not to distribute any such proposed
amendment or supplement to which the Initial Purchasers reasonably objects;
(b) if, at any time prior to the completion of the initial placement
of the Securities, any event shall occur as a result of which it is
necessary to amend or supplement the Offering Memorandum in order that the
Offering Memorandum does not contain an untrue statement of a material fact
or omit to state a material fact necessary in order to make the statements
therein, in the light of the circumstances at the time the Offering
Memorandum is delivered to a purchaser, not misleading, or if it is
necessary to amend or supplement the Offering Memorandum to comply with
law, forthwith to prepare and furnish, at the sole expense of the Company,
to the Initial Purchasers and to the dealers (whose names and addresses the
Initial Purchasers will furnish to the Company) to which Securities may
have been sold by the Initial Purchasers on behalf of the Initial
Purchasers and to any other dealers upon request, such amendments or
supplements to the Offering Memorandum as may be necessary so that the
Offering Memorandum as so amended or supplemented will not contain an
untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances at the time the Offering Memorandum is delivered to a
purchaser, not misleading or so that the Offering Memorandum will comply
with law;
(c) to use its best efforts (i) to register or qualify the Securities
for offering and sale by the Initial Purchasers and by dealers under the
securities or Blue Sky laws of such jurisdictions as the Initial Purchasers
shall reasonably request and to continue such qualifications in effect so
long as reasonably required for distribution of the Securities and (ii) to
pay all fees and expenses (including reasonable fees and disbursements of
counsel for the Initial Purchasers) incurred in connection with the
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<PAGE>
determination of the eligibility of the Securities for investment under the
laws of such jurisdictions as the Initial Purchasers may designate;
provided that in no event shall the Company be obligated to qualify to do
business in any jurisdiction where it is not now so qualified or to take
any action that would subject it to taxation or service of process in
suits, other than those arising out of the Offering or sale of the
Securities, in any jurisdiction where it is not now so subject;
(d) so long as the Securities are outstanding, to furnish to the
Initial Purchasers copies of all reports or other communications (financial
or other) required to be furnished to holders of the Securities, and copies
of any reports and financial statements furnished to or filed with the
Commission or any national securities exchange;
(e) during the period beginning on the date hereof and continuing to
and including the Business Day following the Closing Date, not to offer,
sell, contract to sell, or otherwise dispose of any debt securities of or
guaranteed by the Company which are substantially similar to the
Securities;
(f) to use the net proceeds of the offering of Securities as set
forth in the Offering Memorandum under the caption "Use of Proceeds;"
(g) if requested by you, to use its best efforts to cause such
Securities to be eligible for the PORTAL trading system of the National
Association of Securities Dealer, Inc.;
(h) to furnish to the holders of the Securities as soon as reasonably
practicable after the end of each fiscal year an annual report (including a
balance sheet and statements of income, stockholder's equity and cash flows
of the Company and its consolidated subsidiaries certified by independent
public accountants) and, as soon as reasonably practicable after the end of
each of the first three quarters of each fiscal year (beginning with the
fiscal quarter ending after the date of the Offering Memorandum),
consolidated summary financial information of the Company and its
subsidiaries of such quarter in reasonable detail;
(i) during the period of two years after the Time of Delivery, not
to, and not to permit any of its "affiliates" (as defined in Rule 144 under
the Securities Act) to, resell any of the Securities which constitute
"restricted securities" under Rule 144 that have been reacquired by any of
them;
(j) to pay all costs and expenses incident to the performance of its
obligations hereunder, including without limiting the generality of the
foregoing, all costs and expenses (i) incident to the preparation,
issuance, execution, authentication and delivery of the Securities,
(including any expenses of the Trustee and the Trustee's counsel), (ii)
incident to the preparation and printing of the Offering Memorandum and any
preliminary offering memorandum (including in each case all exhibits,
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<PAGE>
amendments and supplements thereto), (iii) incurred in connection with the
registration or qualification of the Securities under the laws of such
jurisdictions as the Initial Purchasers may designate (including fees and
disbursements of Cahill Gordon & Reindel, counsel for the Initial
Purchasers, in connection with such registration or qualification(not to
exceed $10,000)), (iv) in connection with the printing (including word
processing and duplication costs) and delivery of this Agreement, the
Indenture, the Registration Rights Agreement and the Blue Sky Survey,
including mailing and shipping, as herein provided, and (v) payable to
rating agencies in connection with the rating of the Securities;
(k) to take all reasonable action that is appropriate or necessary to
assure that its offerings of other securities will not be integrated for
purposes of the Securities Act with the offerings contemplated hereby;
(l) not to solicit any offer to buy or offer to sell Securities by
means of any form of general solicitation or general advertising within the
meaning of Rule 502(c) of Regulation D under the Securities Act;
(m) while the Securities remain outstanding and are "restricted
securities" within the meaning of Rule 144(a)(3) under the Securities Act,
during any period in which it is not subject to Section 13 or 15(d) under
the Exchange Act, to make available to the Initial Purchasers and any
holder of Securities in connection with any sale thereof and any
prospective purchaser of Securities, in each case upon request and within a
reasonable time period, the information specified in, and meeting the
requirements of, Rule 144A(d)(4) ("Rule 144A(d)(4) Information") under the
Securities Act (or any successor thereto); and
(n) not to take any action prohibited by Regulation M under the
Exchange Act (or any successor provision), in connection with the
distribution of the Securities contemplated hereby.
6. The several obligations of the Initial Purchasers hereunder to
purchase the Securities on the Closing Date are subject to the performance by
the Company of its obligations hereunder and to the following additional
conditions:
(a) each of the representations and warranties of the Company
contained herein shall be true and correct on and as of the Closing Date as
if made on and as of the Closing Date and the Company shall have complied,
in all material respects, with all agreements and all conditions on its
part to be performed or satisfied hereunder at or prior to the Closing
Date;
(b) subsequent to the execution and delivery of this Agreement and
prior to the Closing Date, there shall not have occurred any downgrading,
nor shall any notice have been given of (i) any intended or potential
downgrading or (ii) any review or possible change that does not indicate an
improvement, in the rating ac-
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<PAGE>
corded any securities of or guaranteed by the Company by any "nationally
recognized statistical rating organization," as such term is defined for
purposes of Rule 436(g)(2) under the Securities Act;
(c) since the respective dates as of which information is given in
the Offering Memorandum there shall not have been any Material Adverse
Change, otherwise than as set forth in the Offering Memorandum, the effect
of which in the sole judgment of the Initial Purchasers makes it
impracticable or inadvisable to proceed with the offering or the delivery
of the Securities on the terms and in the manner contemplated in the
Offering Memorandum;
(d) the Initial Purchasers shall have received on and as of the
Closing Date a certificate, addressed to the Initial Purchasers and dated
the Closing Date, of an executive officer of the Company satisfactory to
the Initial Purchasers to the effect set forth in subsections (a) through
(c) of this Section and to the further effect that since the respective
dates as of which information is given in the Offering Memorandum there has
not occurred any Material Adverse Change, otherwise than as set forth in
the Offering Memorandum, provided that the officer making such certificate
may rely upon his knowledge as to pending or threatened proceedings;
(e) the Initial Purchasers shall have received on the Closing Date a
signed opinion of Kirkland & Ellis, special counsel for the Company, in
form and substance satisfactory to Cahill Gordon & Reindel, counsel to the
Initial Purchasers, dated the Closing Date and addressed to the Initial
Purchasers, to the effect as set forth in Annex III hereto.
(f) the Initial Purchasers shall have received on the Closing Date a
signed opinion of William W. Jones, General Counsel of the Company in form
and substance satisfactory to Cahill Gordon & Reindel, counsel to the
Initial Purchasers, dated the Closing Date and addressed to the Initial
Purchasers to the effect that:
(i) the Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State
of Delaware with full power and authority (corporate and other) to
own, lease and operate its properties and to conduct its business as
described in the Offering Memorandum;
(ii) the Company has been duly qualified as a foreign
corporation for the transaction of business and is in good standing in
all states of the United States (except Alaska and Hawaii) and in the
District of Columbia;
(iii) each Subsidiary has been duly incorporated and is validly
existing as a corporation under the laws of its jurisdiction of
incorporation with power and authority (corporate and other) to own,
lease and operate its properties and to conduct its business, and has
been duly qualified as a foreign
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<PAGE>
corporation for the transaction of business and is in good standing in
the respective states set forth in Exhibit I to such opinion;
(iv) the authorized capital stock of the Company is as set
forth in the Offering Memorandum;
(v) all the outstanding shares of capital stock of each
Subsidiary have been duly authorized and validly issued and are fully
paid and non-assessable, and, except as otherwise set forth in the
Offering Memorandum, are directly or indirectly owned by the Company
free and clear of any mortgage, pledge, security interest, lien, claim
or other encumbrance or restriction on transferability or voting
(other than as may be imposed by the Securities Act and the various
state securities laws);
(vi) all of the outstanding shares of capital stock of the
Company have been duly authorized and validly issued, are fully paid
and non-assessable;
(vii) except as described in the Offering Memorandum, there is
no action, suit or proceeding before or by any government,
governmental instrumentality, agency, body or court, domestic or
foreign, now pending or, to the best knowledge of such counsel,
threatened against or affecting the Company or any of the Subsidiaries
that could have a Material Adverse Effect or that could have a
material adverse effect on the consummation of the transactions
contemplated in, or the fulfillment of the terms of, this Agreement,
the Offering Memorandum, the Indenture or the Registration Rights
Agreement; there is no action, suit or proceeding before or by any
government, governmental instrumentality, agency, body or court, now
pending, or to the best knowledge of such counsel, threatened against
or affecting the Company or any Subsidiary that would be required to
be described in a registration statement filed pursuant to the
Securities Act that is not described in the Offering Memorandum;
(viii) The execution and delivery by the Company of, and the
performance by the Company of all of the provisions of its obligations
under, this Agreement, the Indenture, the Registration Rights
Agreement, the Securities, and the consummation by the Company of the
transactions contemplated therein and in the Offering Memorandum, do
not and will not conflict with, or result in a breach or violation of
any of the terms or provisions of, or constitute a default (or an
event which, with notice or lapse of time, or both, would constitute a
default) under, or give rise to any right to accelerate the maturity
or require the prepayment of any indebtedness or the purchase of any
capital stock under, or result in the creation or imposition of any
lien, charge or encumbrance upon any properties or assets of the
Company or of
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<PAGE>
any Subsidiary under, (A) any contract, indenture, mortgage, deed of
trust, loan agreement note, lease, partnership agreement or other
agreement or instrument to which the Company or any Subsidiary is a
party or by which any of them may be bound or to which any of their
respective properties or assets may be subject or (B) any judgment,
order or decree of any government, governmental instrumentality,
agency, body or court, domestic or foreign, having jurisdiction over
the Company or any Subsidiary or any of their respective properties or
assets.
Such counsel shall also advise, based on its participation in the
preparation of the Offering Memorandum and conferences with officers and
representatives of the Company, representatives of the independent public
accountants for the Company, representatives of the Initial Purchasers and
counsel to the Initial Purchasers, that nothing has come to its attention that
leads it to believe that the Offering Memorandum (as supplemented, if
applicable) (other than the financial statements, supporting schedules and other
financial and statistical data set forth therein, as to which no advice need be
given), as of its date or as of the Closing Date, contained or contains an
untrue statement of a material fact or omitted or omits to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
(g) on the date of the issuance of the Offering Memorandum and also
on the Closing Date, Deloitte & Touche shall have furnished to the Initial
Purchasers letters, dated the respective dates of delivery thereof, in form
and substance satisfactory to the Initial Purchasers, containing statements
and information of the type customarily included in accountants' "comfort
letters" to underwriters with respect to the financial statements and
certain financial information relating to the Company contained in the
Offering Memorandum;
(h) the Company shall have executed and delivered the Registration
Rights Agreement substantially in the form attached hereto as Annex II;
(i) the Initial Purchasers shall have received on and as of the
Closing Date an opinion of Cahill Gordon & Reindel, counsel to the Initial
Purchasers, with respect to the validity of the Indenture and the
Securities, and such other related matters as the Initial Purchasers may
reasonably request, and such counsel shall have received such papers and
information as they may reasonably request to enable them to pass upon such
matters;
(j) the Initial Purchasers shall have received on and as of the
Closing Date a certificate dated the Closing Date and addressed to the
Initial Purchasers signed by either the Vice President and Treasurer of the
Company or the Vice President and Controller to the effect that neither the
Company nor any of its Subsidiaries is in breach or violation of any of the
terms or provisions of, or with the giving of notice or lapse of time, or
both, would be in default under any contract, indenture,
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<PAGE>
mortgage, deed of trust, loan agreement, note, lease, partnership
agreement, or other agreement or instrument to which the Company or any
Subsidiary is a party or by which any of them may be bound or to which any
of their respective properties or assets may be subject, except for any
such breach or violation which would not have a Material Adverse Effect;
and
(k) on or prior to the Closing Date the Company shall have furnished
to the Initial Purchasers such further certificates and documents as the
Initial Purchasers or their counsel, Cahill Gordon & Reindel, shall
reasonably request.
7. The Company agrees to indemnify and hold harmless each Initial
Purchaser, its officers and directors, and each person, if any, who controls any
Initial Purchaser within the meaning of either Section 15 of the Securities Act
or Section 20 of the Exchange Act, from and against any and all losses, claims,
damages and liabilities (including, without limitation, the legal fees and other
expenses incurred in connection with any suit, action or proceeding or any claim
asserted) caused by any untrue statement or alleged untrue statement of a
material fact contained in the Offering Memorandum (as amended or supplemented
if the Company shall have furnished any amendments or supplements thereto) or
any preliminary offering memorandum, or the Navistar Reports, or caused by any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading except insofar as such
losses, claims, damages or liabilities are caused by any untrue statement or
omission or alleged untrue statement or omission (i) made in reliance upon and
in conformity with information relating to the Initial Purchasers furnished to
the Company in writing by the Initial Purchasers expressly for use therein or
(ii) contained in the Preliminary Offering Memorandum if any Initial Purchaser
failed to send or deliver a copy of the Offering Memorandum to a U.S. person (as
defined in Regulation S) and who asserts such losses, claims, damages or
liabilities on or prior to the delivery of written confirmation of sale of the
Securities to such person and such Offering Memorandum would have corrected such
untrue statement or omission and it shall have been determined that such losses,
claims, damages or liabilities would not have arisen had the Offering Memorandum
been delivered or sent.
Each Initial Purchaser agrees, severally and not jointly, to indemnify and
hold harmless the Company, its directors and officers and each person who
controls the Company within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act to the same extent as the foregoing indemnity
from the Company to each Initial Purchaser, but only with reference to
information relating to such Initial Purchaser furnished to the Company in
writing by such Initial Purchaser expressly for use in the Offering Memorandum,
any amendment or supplement thereto, or any preliminary offering memorandum.
For purposes of this Section 7 and paragraphs (a) and (b) of Section 4 hereof,
the only written information furnished by the Initial Purchasers to the Company
expressly for use in the Offering Memorandum is the information in the last
paragraph of the cover page of the Offering Memorandum, the first paragraph on
page 2 of the Offering Memorandum and the
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<PAGE>
first paragraph and the third sentence of the third paragraph and the eighth and
tenth paragraphs under the caption in the "Plan of Distribution" section of the
Offering Memorandum.
If any suit, action, proceeding (including any governmental or regulatory
investigation), claim or demand shall be brought or asserted against any person
in respect of which indemnity may be sought pursuant to either of the two
preceding paragraphs, such person (the "Indemnified Person") shall promptly
notify the person against whom such indemnity may be sought (the "Indemnifying
Person") in writing, and the Indemnifying Person, upon request of the
Indemnified Person, shall retain counsel satisfactory to the Indemnified Person
to represent the Indemnified Person and any others the Indemnifying Person may
designate in such proceeding and shall pay the fees and expenses of such counsel
related to such proceeding. In any such proceeding, any Indemnified Person
shall have the right to retain its own counsel, but the fees and expenses of
such counsel shall be at the expense of such Indemnified Person unless (i) the
Indemnifying Person and the Indemnified Person shall have mutually agreed to the
contrary, (ii) the Indemnifying Person has failed within a reasonable time to
retain counsel satisfactory to the Indemnified Person or (iii) the named parties
in any such proceeding (including any impleaded parties) include both the
Indemnifying Person and the Indemnified Person and representation of both
parties by the same counsel would be inappropriate due to actual or potential
differing interests between them. It is understood that the Indemnifying Person
shall not, in connection with any proceeding or related proceeding in the same
jurisdiction, be liable for the reasonable fees and expenses of more than one
separate firm (in addition to any local counsel) for all Indemnified Persons,
and that all such reasonable fees and expenses shall be reimbursed as they are
incurred. Any such separate firm for the Initial Purchasers and such control
persons of Initial Purchasers shall be designated in writing by J.P. Morgan
Securities Inc. and any such separate firm for the Company, its directors and
officers and such control persons of the Company shall be designated in writing
by the Company. The Indemnifying Person shall not be liable for any settlement
of any proceeding effected without its written consent, but if settled with such
consent or if there be a final judgment for the plaintiff, the Indemnifying
Person agrees to indemnify any Indemnified Person from and against any loss or
liability by reason of such settlement or judgment. Notwithstanding the
foregoing sentence, if at any time an Indemnified Person shall have requested an
Indemnifying Person to reimburse the Indemnified Person for fees and expenses of
counsel as contemplated by the third sentence of this paragraph, the
Indemnifying Person agrees that it shall be liable for any settlement of any
proceeding effected without its written consent if (i) such settlement is
entered into more than 60 days after receipt by such Indemnifying Person of the
aforesaid request and (ii) such Indemnifying Person shall not have reimbursed
the Indemnified Person in accordance with such request prior to the date of such
settlement (or delivered a notice to such Indemnified Person setting forth its
good faith objection to such request's conformity to the provisions of this
Section 7). No Indemnifying Person shall, without the prior written consent of
the Indemnified Person, effect any settlement of any pending or threatened
proceeding in respect of which any Indemnified Person is or could have been a
party and indemnity could have been sought hereunder by such Indemnified Person,
unless such settlement includes an unconditional written release, in form and
substance reasonably satisfactory to the Indemnified
-16-
<PAGE>
Person, of such Indemnified Person from all liability on claims that are the
subject matter of such proceeding.
If the indemnification provided for in the first and second paragraphs of
this Section 7 is for any reason unavailable to, or insufficient to hold
harmless, an Indemnified Person in respect of any losses, claims, damages or
liabilities referred to therein, then each Indemnifying Person under such
paragraph, in lieu of indemnifying such Indemnified Person thereunder, shall
contribute to the amount paid or payable by such Indemnified Person as a result
of such losses, claims, damages or liabilities (i) in such proportion as is
appropriate to reflect the relative benefits received by the Company on the one
hand and the Initial Purchasers on the other hand from the offering of the
Securities or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law, in such proportion as is appropriate to reflect not
only the relative benefits referred to in clause (i) above but also the relative
fault of the Company on the one hand and the Initial Purchasers on the other in
connection with the statements or omissions that resulted in such losses,
claims, damages or liabilities, as well as any other relevant equitable
considerations. The relative benefits received by the Company on the one hand
and the Initial Purchasers on the other shall be deemed to be in the same
respective proportions as the net proceeds from the offering (before deducting
expenses) received by the Company and the total discounts and the commissions
actually received by the Initial Purchasers, in each case as set forth in the
table on the cover of the Offering Memorandum, bear to the aggregate offering
price of the Securities. The relative fault of the Company on the one hand and
the Initial Purchasers on the other shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact relates to
information supplied by the Company or by the Initial Purchasers and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission.
The Company and the Initial Purchasers agree that it would not be just and
equitable if contribution pursuant to this Section 7 were determined by pro rata
allocation (even if the Initial Purchasers were treated as one entity for such
purpose) or by any other method of allocation that does not take account of the
equitable considerations referred to in the immediately preceding paragraph.
The amount paid or payable by an Indemnified Person as a result of the losses,
claims, damages and liabilities referred to in the immediately preceding
paragraph shall be deemed to include, subject to the limitations set forth
above, any legal or other expenses incurred by such Indemnified Person in
connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 7, in no event shall an Initial
Purchaser be required to contribute any amount in excess of the amount by which
the total price at which the Securities purchased by it were offered exceeds the
amount of any damages that such Initial Purchaser has otherwise been required to
pay or has paid by reason of such untrue or alleged untrue statement or omission
or alleged omission. No person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The Initial Purchasers' obligations to contrib-
-17-
<PAGE>
ute pursuant to this Section 7 are several in proportion to the respective
principal amounts of Securities set forth opposite their names in Schedule I
hereto, and not joint.
The indemnity and contribution agreements contained in this Section 7 are
in addition to any liability which the Indemnifying Persons may otherwise have
to the Indemnified Persons referred to above.
The indemnity and contribution agreements contained in this Section 7 and
the representations and warranties of the Company as set forth in this Agreement
shall remain operative and in full force and effect regardless of (i) any
termination of this Agreement, (ii) any investigation made by or on behalf of
any Initial Purchaser or any person controlling any Initial Purchaser or by or
on behalf of the Company, its officers or directors or any other person
controlling the Company and (iii) acceptance of and payment for any of the
Securities.
8. Notwithstanding anything herein contained, this Agreement may be
terminated in the absolute discretion of the Initial Purchasers, by notice given
to the Company, if after the execution and delivery of this Agreement and prior
to the Closing Date (i) trading generally shall have been suspended or
materially limited on or by, as the case may be, any of the New York Stock
Exchange, the American Stock Exchange or the National Association of Securities
Dealers, Inc., (ii) trading of any securities of or guaranteed by the Company
shall have been suspended on any exchange or in any over-the-counter market,
(iii) a general moratorium on commercial banking activities in New York shall
have been declared by either Federal or New York State authorities or (iv) there
shall have occurred any outbreak or escalation of hostilities or any change in
financial markets or any calamity or crisis that, in the judgment of the Initial
Purchasers, is material and adverse and which, in the judgment of the Initial
Purchasers, makes it impracticable or inadvisable to market the Securities on
the terms and in the manner contemplated in the Offering Memorandum.
9. This Agreement shall become effective upon the execution and delivery
hereof by the parties hereto.
10. If this Agreement shall be terminated by the Initial Purchasers
because of any failure or refusal on the part of the Company to comply with the
terms or to fulfill any of the conditions of this Agreement, or if for any
reason the Company shall be unable to perform its obligations under this
Agreement, the Company agrees to reimburse the Initial Purchasers for all
out-of-pocket expenses (including the reasonable fees and expenses of their
counsel) reasonably incurred by the Initial Purchasers in connection with this
Agreement or the offering contemplated hereunder. The Company shall not be
obligated to reimburse the Initial Purchasers for any out-of-pocket expenses
reasonably incurred by the Initial Purchasers if this Agreement is terminated by
the Initial Purchasers pursuant to Section 8(i), (iii) and (iv) hereof.
11. This Agreement shall inure to the benefit of and be binding upon the
Initial Purchasers and the Company, any controlling person referred to herein
and their respective
-18-
<PAGE>
successors, heirs and legal representatives. Nothing expressed or mentioned in
this Agreement is intended or shall be construed to give any person, firm or
corporation, other than the Initial Purchasers and the Company and their
respective successors, heirs and legal representatives and the controlling
persons and officers and directors referred to in Section 7 and their heirs and
legal representatives, any legal or equitable right, remedy or claim under or in
respect of this Agreement or any provision herein contained. No purchaser of
Securities from any Initial Purchaser shall be deemed to be a successor merely
by reason of such purchase.
12. Any action by the Initial Purchasers hereunder may be taken by the
Initial Purchasers jointly or by J.P. Morgan Securities Inc. alone or on behalf
of the Initial Purchasers, and any such action taken by J.P. Morgan Securities
Inc. alone shall be binding upon the Initial Purchasers. All notices and other
communications hereunder shall be in writing and shall be deemed to have been
duly given if mailed or transmitted by any standard form of telecommunication.
Notices to the Initial Purchasers shall be given to them at the following
address: J.P. Morgan Securities Inc., 60 Wall Street, New York, New York 10260;
Attention: Syndicate Department. Notices to the Company shall be given to it at
2850 West Golf Road, Rolling Meadows, IL 60008; Attention: William W. Jones
(facsimile (847) 734-4090).
13. This Agreement may be signed in counterparts, each of which shall be
an original (or a facsimile copy thereof) and all of which together shall
constitute one and the same instrument.
14. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO THE CONFLICTS OF
LAWS PROVISIONS THEREOF.
-19-
<PAGE>
If the foregoing is in accordance with your understanding, please sign and
return four counterparts hereof.
Very truly yours,
NAVISTAR FINANCIAL
CORPORATION
By: /s/ R. Wayne Cain
-----------------------
Name: R. Wayne Cain
Title: Vice President and Treasurer
Accepted: May 22, 1997
J.P. MORGAN SECURITIES INC.
CHASE SECURITIES INC.
NATIONSBANC CAPITAL MARKETS, INC.
By: J.P. Morgan Securities Inc.
By: /s/ Douglas A. Cruikshank
----------------------------
Name: Douglas A. Cruikshank
Title: Vice President
S-1
<PAGE>
ANNEX I
(A) In addition to offers pursuant to clauses (B)(1) and (B)(2) of
paragraph 2(ii) of the Agreement, the Initial Purchasers intend to offer and
sell the Securities in accordance with Regulation S under the Securities Act.
Accordingly, each Initial Purchaser agrees that neither it, its affiliates nor
any persons acting on its or their behalf has engaged or will engage in any
directed selling efforts with respect to the Securities and it and they have
complied and will comply with the offering restrictions requirement of
Regulation S. Each Initial Purchaser agrees that, at or prior to confirmation
of sale of Securities (other than a sale pursuant to and in accordance with
paragraph 2(ii) of the Agreement to purchasers described in clauses (B)(1) and
(B)(2) thereof), it will have sent to each distributor, dealer or person
receiving a selling concession, fee or other remuneration that purchases
Securities from it during the restricted period a confirmation or notice to
substantially the following effect:
"The Securities covered hereby have not been registered under the U.S.
Securities Act of 1933 (the "Act") and may not be offered and sold within
the United States or to, or for the account or benefit of, U.S. persons (i)
as part of their distribution at any time or (ii) otherwise until 40 days
after the later of the commencement of the offering and the closing date,
except in either case in accordance with Regulation S (or Rule 144A if
available) under the Act. Terms used above have the meaning given to them
by Regulation S."
Terms used in this paragraph have the meanings given to them by Regulation S.
Each of the Initial Purchasers further agrees that it has not entered and
will not enter into any contractual arrangement with respect to the distribution
or delivery of the Securities in accordance with this paragraph (A), except with
its affiliates or with the prior written consent of the Company.
(B) Each of the Initial Purchasers further represents and agrees that (i)
it has not offered or sold, and will not offer or sell, in the United Kingdom by
means of any document, any Securities other than to persons whose ordinary
activities involve them in acquiring, holding, managing or disposing of
investments (as principal or agent) for the purposes of their business or which
it is reasonable to expect will so do, or in circumstances which do not
otherwise constitute an offer to the public within the meaning of the Public
Offers of Securities Regulations 1995 of Great Britain, (ii) it has complied,
and will comply, with all applicable provisions of the Financial Services Act
1986 and any regulation promulgated thereto of Great Britain with respect to
anything done by it in relation to the Securities in, from or otherwise
involving the United Kingdom, and (iii) it has only issued
<PAGE>
-3-
or passed on, and will only issue or pass on, in the United Kingdom, any
document received by it in connection with the issuance of the Securities to a
person who is of a kind described in Article 11(3) of the Financial Services Act
1986 (Investment Advertisements) (Exemptions) Order 1995 of Great Britain or is
a person to whom the document may otherwise lawfully be issued or passed on.
(C) Each of the Initial Purchasers agrees that it will not offer, sell or
deliver any of the Securities in any jurisdiction outside the United States
except under circumstances that will result in compliance with the applicable
laws thereof, and that it will take at its own expense whatever action is
required to permit its purchase and resale of the Securities in such
jurisdictions. Each of the Initial Purchasers understands that no action has
been taken to permit a public offering in any jurisdiction outside the United
States where action would be required for such purposes. Each of the Initial
Purchasers agrees not to cause any advertisement of the Securities to be
published in any newspaper or periodical or posted in any public place and not
to issue any circular relating to the Securities.
<PAGE>
-4-
ANNEX II
[Form of Registration Rights Agreement]
<PAGE>
-5-
ANNEX III
[Form of Kirkland & Ellis Opinion]
<PAGE>
SCHEDULE I
<TABLE>
<CAPTION>
Principal Amount
of Securities
Initial Purchaser to be Purchased
- ----------------- ---------------
<S> <C>
J.P. Morgan Securities Inc.......................... $ 50,000,000
Chase Securities Inc................................ 25,000,000
NationsBanc Capital Markets, Inc.................... 25,000,000
------------
Total.......................................... $100,000,000
</TABLE>
<PAGE>
Exhibit 4.5
REGISTRATION RIGHTS AGREEMENT
Dated as of May 30, 1997
among
NAVISTAR FINANCIAL CORPORATION
and
J.P. MORGAN SECURITIES INC.,
CHASE SECURITIES INC.
and
NATIONSBANC CAPITAL MARKETS, INC.
<PAGE>
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "Agreement") is dated as of
May 30, 1997, by and among NAVISTAR FINANCIAL CORPORATION, a Delaware
corporation (the "Company"), and J.P. MORGAN SECURITIES INC., CHASE SECURITIES
INC. and NATIONSBANC CAPITAL MARKETS, INC. (collectively, the "Initial
Purchasers").
This Agreement is entered into in connection with the Purchase
Agreement, dated as of May 22, 1997, among the Company and the Initial
Purchasers (the "Purchase Agreement") relating to the sale by the Company to the
Initial Purchasers, severally, of $100,000,000 aggregate principal amount of its
9% Senior Subordinated Notes due 2002 (the "Notes"). In order to induce the
Initial Purchasers to enter into the Purchase Agreement, the Company has agreed
to provide the registration rights set forth in this Agreement for the equal
benefit of the Initial Purchasers and their direct and indirect transferees.
The execution and delivery of this Agreement is a condition to the Initial
Purchasers' obligation to purchase the Notes under the Purchase Agreement.
The parties hereby agree as follows:
1. Definitions
As used in this Agreement, the following terms shall have the
following meanings:
Additional Interest: See Section 4.
Advice: See Section 5.
Applicable Period: See Section 2(b).
Closing Date: The Closing Date as defined in the Purchase Agreement.
Company: See the introductory paragraph to this Agreement.
Consummation Date: The 180th day after the Closing.
<PAGE>
-2-
Effectiveness Date: The 150th day after the Closing Date.
Effectiveness Period: See Section 3(a).
Event Date: See Section 4(b).
Exchange Act: The Securities Exchange Act of 1934, as amended, and
the rules and regulations of the SEC promulgated thereunder.
Exchange Offer: See Section 2(a).
Exchange Registration Statement: See Section 2(a).
Exchange Securities: See Section 2(a).
Filing Date: The 60th day after the Closing Date.
Holder: Any record holder of Registrable Securities.
Indemnified Person: See Section 7.
Indemnifying Person: See Section 7.
Indenture: The Indenture, dated as of May 30, 1997, between the
Company and The Fuji Bank & Trust Company, as trustee, pursuant to which the
Notes are being issued, as amended or supplemented from time to time in
accordance with the terms thereof.
Initial Purchasers: See the introductory paragraph to this Agreement.
Initial Shelf Registration: See Section 3(a).
Inspectors: See Section 5(p).
Issue Date: The original issue date of the Notes.
NASD: See Section 5(t).
Notes: See the preamble to this Agreement.
<PAGE>
-3-
Participant: See Section 7.
Participating Broker-Dealer: See Section 2(b).
Person: An individual, corporation, partnership, joint venture,
trust, estate, unincorporated organization or government or any agency or
political subdivision thereof.
Private Exchange: See Section 2(b).
Private Exchange Securities: See Section 2(b).
Prospectus: The prospectus included in any Registration Statement
(including, without limitation, a prospectus that includes any information
previously omitted from a prospectus filed as part of an effective registration
statement in reliance upon Rule 430A promulgated under the Securities Act), as
amended or supplemented by any prospectus supplement, with respect to the terms
of the offering of any portion of the Registrable Securities covered by such
Registration Statement, and all other amendments and supplements to the
Prospectus, including post-effective amendments, and all material incorporated
by reference or deemed to be incorporated by reference in such Prospectus.
Records: See Section 5(p).
Registrable Securities: The Notes upon original issuance of the Notes
and at all times subsequent thereto, each Exchange Security as to which Section
2(c)(1)(i) hereof is applicable upon original issuance and at all times
subsequent thereto and, if issued, the Private Exchange Securities, until in the
case of any such Notes, Exchange Securities or Private Exchange Securities, as
the case may be, (i) a Registration Statement (other than, with respect to any
Exchange Security as to which Section 2(c)(1)(i) hereof is applicable, the
Exchange Registration Statement) covering such Notes, Exchange Securities or
Private Exchange Securities has been declared effective by the SEC and such
Notes, Exchange Securities or Private Exchange Securities, as the case may be,
have been disposed of in accordance with such effective Registration Statement,
<PAGE>
-4-
(ii) such Notes, Exchange Securities or Private Exchange Securities, as the case
may be, are sold in compliance with Rule 144, or (iii) such Notes, Exchange
Securities or Private Exchange Securities, as the case may be, cease to be
outstanding.
Registration Statement: Any registration statement of the Company,
including, but not limited to, the Exchange Registration Statement, that covers
any of the Registrable Securities pursuant to the provisions of this Agreement,
including the Prospectus, amendments and supplements to such registration
statement, including post-effective amendments, all exhibits, and all material
incorporated by reference or deemed to be incorporated by reference in such
registration statement.
Rule 144: Rule 144 promulgated under the Securities Act, as such rule
may be amended from time to time, or any similar rule (other than Rule 144A) or
regulation hereafter adopted by the SEC providing for offers and sales of
securities made in compliance therewith resulting in offers and sales by
subsequent holders that are not affiliates of an issuer of such securities being
free of the registration and prospectus delivery requirements of the Securities
Act.
Rule 144A: Rule 144A promulgated under the Securities Act, as such
rule may be amended from time to time, or any similar rule (other than Rule 144)
or regulation hereafter adopted by the SEC.
Rule 415: Rule 415 promulgated under the Securities Act, as such rule
may be amended from time to time, or any similar rule or regulation hereafter
adopted by the SEC.
SEC: The Securities and Exchange Commission.
Securities Act: The Securities Act of 1933, as amended, and the rules
and regulations of the SEC promulgated thereunder.
Shelf Notice: See Section 2(c).
<PAGE>
-5-
Shelf Registration: See Section 3(b).
Subsequent Shelf Registration: See Section 3(b).
TIA: The Trust Indenture Act of 1939, as amended.
Trustee: The trustee as defined in the Indenture and, if existent,
the trustee under any indenture governing the Exchange Securities and Private
Exchange Securities (if any).
Underwritten registration or underwritten offering: A registration in
which securities of the Company are sold to an underwriter for reoffering to the
public.
2. Exchange Offer
(a) The Company agrees to file with the SEC as soon as practicable
after the Closing Date, but in no event later than the Filing Date, an
offer to exchange (the "Exchange Offer") any and all of the Registrable
Securities for a like aggregate principal amount of debt securities of the
Company which are identical in all material respects to the Notes (the
"Exchange Securities") (and which are entitled to the benefits of a trust
indenture which is identical in all material respects to the Indenture
(other than such changes as are necessary to comply with any requirements
of the SEC to effect or maintain the qualification of such trust indenture
under the TIA) and which has been qualified under the TIA), except that the
Exchange Securities shall have been registered pursuant to an effective
Registration Statement under the Securities Act and shall contain no
restrictive legend thereon. The Company agrees to use its reasonable best
efforts to keep the Exchange Offer open for at least 30 business days (or
longer if required by applicable law) after the date notice of the Exchange
Offer is mailed to Holders and to consummate the Exchange Offer on or prior
to the Effectiveness Date. The Exchange Offer will be registered under the
Securities Act on the appropriate form (the "Exchange Registration
Statement") and will comply with all applicable tender offer rules and
regulations under the
<PAGE>
-6-
Exchange Act. If after such Exchange Registration Statement is initially
declared effective by the SEC, the Exchange Offer or the issuance of the
Exchange Securities thereunder is interfered with by any stop order,
injunction or other order or requirement of the SEC or any other
governmental agency or court such Exchange Registration Statement shall be
deemed not to have become effective for purposes of this Agreement. Each
Holder who participates in the Exchange Offer will be deemed to represent
that any Exchange Securities received by it will be acquired in the
ordinary course of its business, that at the time of the consummation of
the Exchange Offer such Holder will have no arrangement with any person to
participate in the distribution of the Exchange Securities in violation of
the provisions of the Securities Act, and that such Holder is not an
affiliate of the Company within the meaning of the Securities Act. Upon
consummation of the Exchange Offer in accordance with this Section 2, the
provisions of this Agreement shall continue to apply, mutatis, mutandis,
solely with respect to Registrable Securities that are Private Exchange
Securities and Exchange Securities held by Participating Broker-Dealers,
and the Company shall have no further obligation to register Registrable
Securities (other than Private Exchange Securities and other than Exchange
Securities as to which clause (c)(1)(i) hereof applies) pursuant to Section
3 of this Agreement. No securities other than the Exchange Securities shall
be included in the Exchange Registration Statement.
(b) The Company shall include within the Prospectus contained in the
Exchange Registration Statement one or more section(s) reasonably
acceptable to the Initial Purchasers, which shall contain a summary
statement of the positions taken or policies made by the Staff of the SEC
with respect to the potential "underwriter" status of any broker-dealer
that is the beneficial owner (as defined in Rule 13d-3 under the Exchange
Act) of Exchange Securities received by such broker-dealer in the Exchange
Offer (a "Participating Broker-Dealer"), whether such positions or policies
have been publicly disseminated by the Staff of
<PAGE>
-7-
the SEC or such positions or policies, in the reasonable judgment of the
Initial Purchasers, represent the prevailing views of the Staff of the SEC.
Such section(s) shall also allow the use of the prospectus by all persons
subject to the prospectus delivery requirements of the Securities Act,
including all Participating Broker-Dealers, and include a statement
describing the means by which Participating Broker-Dealers may resell the
Exchange Securities.
The Company shall use its reasonable best efforts to keep the Exchange
Registration Statement effective and to amend and supplement the Prospectus
contained therein in order to permit such Prospectus to be lawfully
delivered by all persons subject to the prospectus delivery requirements of
the Securities Act for such period of time as such persons must comply with
such requirements in order to resell the Exchange Securities, provided that
such period shall not exceed 180 days (or such longer period if extended
pursuant to the last paragraph of Section 5) (the "Applicable Period").
Notwithstanding the foregoing, the Company shall have no obligation to keep
the Exchange Registration Statement effective or to amend and supplement
the Prospectus contained therein in the event that the Company has not
received written notice within 30 days following the completion of the
Exchange Offer that a participating Broker-Dealer received Exchange
Securities in the Exchange Offer.
If, prior to consummation of the Exchange Offer, an Initial Purchaser
holds any Notes acquired by it and having the status of an unsold allotment
in the initial distribution, the Company upon the request of such Initial
Purchaser shall, simultaneously with the delivery of the Exchange
Securities in the Exchange Offer, issue and deliver to each such Initial
Purchaser, in exchange (the "Private Exchange") for the Notes held by such
Initial Purchaser, a like principal amount of debt securities of the
Company that are identical in all material respects to the Exchange
Securities (the "Private Exchange Securi-
<PAGE>
-8-
ties") (and which are issued pursuant to the same indenture as the Exchange
Securities) except for the placement of a restrictive legend on such
Private Exchange Securities. The Private Exchange Securities shall bear the
same CUSIP number as the Exchange Securities. Interest on the Exchange
Securities and Private Exchange Securities will accrue from the last
interest payment date on which interest was paid on the Notes surrendered
in exchange therefor or, if no interest has been paid on the Notes, from
the Issue Date.
Any indenture under which the Exchange Securities or the Private
Exchange Securities will be issued shall provide that the holders of any of
the Exchange Securities and the Private Exchange Securities will vote and
consent together on all matters (to which such holders are entitled to vote
or consent) as one class and that none of the holders of the Exchange
Securities and the Private Exchange Securities will have the right to vote
or consent as a separate class on any matter (to which such holders are
entitled to vote or consent).
(c) If (1) prior to the consummation of the Exchange Offer, the
Company reasonably determines in good faith or Holders of at least a
majority in aggregate principal amount of the Registrable Securities notify
the Company that they have reasonably determined in good faith that (i) in
the opinion of counsel, the Exchange Securities would not, upon receipt, be
tradeable by such Holders who are not affiliates of the Company without
restriction under the Securities Act and without restrictions under
applicable blue sky or state securities laws or (ii) in the opinion of
counsel, the SEC is unlikely to permit the consummation of the Exchange
Offer and/or (2) subsequent to the consummation of the Private Exchange,
holders of at least a majority in aggregate principal amount of the Private
Exchange Securities so request with respect to the Private Exchange
Securities and/or (3) the Exchange Offer is commenced and not consummated
prior to the 45th day following the Consummation Date for any reason, then
the
<PAGE>
-9-
Company shall promptly deliver to the Holders and the Trustee notice
thereof (the "Shelf Notice") and shall thereafter file an Initial Shelf
Registration as set forth in Section 3 (which only in the circumstances
contemplated by clause (2) of this sentence will relate solely to the
Private Exchange Securities) pursuant to Section 3. The parties hereto
agree that, following the delivery of a Shelf Notice to the Holders of
Registrable Securities (only in the circumstances contemplated by clauses
(1) and/or (3) of the preceding sentence), the Company shall not have any
further obligation to conduct the Exchange Offer or the Private Exchange
under this Section 2.
3. Shelf Registration
If a Shelf Notice is delivered as contemplated by Section 2(c), then:
(a) Initial Shelf Registration. The Company shall as promptly as
reasonably practicable prepare and file with the SEC a Registration
Statement for an offering to be made on a continuous basis pursuant to Rule
415 covering all of the Registrable Securities (the "Initial Shelf
Registration"). If the Company shall have not yet filed an Exchange
Registration Statement, the Company shall use its reasonable best efforts
to file with the SEC the Initial Shelf Registration on or prior to the
Filing Date. Otherwise, the Company shall use its reasonable best efforts
to file with the SEC the Initial Shelf Registration within 60 days of the
delivery of the Shelf Notice. The Initial Shelf Registration shall be on
Form S-2 or another appropriate form permitting registration of such
Registrable Securities for resale by such holders in the manner or manners
designated by them (including, without limitation, one or more underwritten
offerings). The Company shall not permit any securities other than the
Registrable Securities to be included in the Initial Shelf Registration or
any Subsequent Shelf Registration. The Company shall use its reasonable
best efforts to cause the Initial Shelf Registration to be declared
effective under the Securities Act on or prior to the 120th day after the
filing thereof
<PAGE>
-10-
with the SEC and to keep the Initial Shelf Registration continuously
effective under the Securities Act until the date which is 24 months from
the Issue Date (subject to extension pursuant to the last paragraph of
Section 5 hereof) (the "Effectiveness Period"), or such shorter period
ending when (i) all Registrable Securities covered by the Initial Shelf
Registration have been sold in the manner set forth and as contemplated in
the Initial Shelf Registration or (ii) a Subsequent Shelf Registration
covering all of the Registrable Securities has been declared effective
under the Securities Act.
(b) Subsequent Shelf Registrations. If the Initial Shelf Registration
or any Subsequent Shelf Registration ceases to be effective for any reason
at any time during the Effectiveness Period (other than because of the sale
of all of the securities registered thereunder), the Company shall use its
reasonable best efforts to obtain the prompt withdrawal of any order
suspending the effectiveness thereof, and in any event shall within 45 days
of such cessation of effectiveness amend the Shelf Registration in a manner
reasonably expected to obtain the withdrawal of the order suspending the
effectiveness thereof, or file an additional "shelf" Registration Statement
pursuant to Rule 415 covering all of the Registrable Securities (a
"Subsequent Shelf Registration"). If a Subsequent Shelf Registration is
filed, the Company shall use its reasonable best efforts to cause the
Subsequent Shelf Registration to be declared effective as soon as
practicable after such filing and to keep such Registration Statement
continuously effective for a period equal to the number of days in the
Effectiveness Period less the aggregate number of days during which the
Initial Shelf Registration or any Subsequent Shelf Registration was
previously continuously effective. As used herein the term "Shelf
Registration" means the Initial Shelf Registration and any Subsequent Shelf
Registration.
(c) Supplements and Amendments. The Company shall promptly supplement
and amend the Shelf Registration if
<PAGE>
-11-
required by the rules, regulations or instructions applicable to the
registration form used for such Shelf Registration, if required by the
Securities Act, or if reasonably requested by the Holders of a majority in
aggregate principal amount of the Registrable Securities covered by such
Registration Statement or by any underwriter of such Registrable
Securities.
4. Additional Interest
(a) The Company and the Initial Purchasers agree that the Holders of
Registrable Securities will suffer damages if the Company fails to fulfill
its obligations under Section 2 or Section 3 hereof and that it would not
be feasible to ascertain the extent of such damages with precision.
Accordingly, the Company agrees to pay, as liquidated damages, additional
interest on the Registrable Securities ("Additional Interest") under the
circumstances and to the extent set forth below (each of which shall be
given independent effect and shall not be duplicative):
(i) if neither the Exchange Registration Statement nor the Initial
Shelf Registration has been filed on or prior to the Filing Date,
Additional Interest shall accrue on the Registrable Securities over and
above the stated interest at a rate of .25% per annum for the first 90 days
immediately following the Filing Date, such Additional Interest rate
increasing by an additional .25% per annum at the beginning of each
subsequent 90-day period;
(ii) if neither the Exchange Registration Statement nor the Initial
Shelf Registration is declared effective by the SEC on or prior to the
Effectiveness Date, Additional Interest shall accrue on the Registrable
Securities included or which should have been included in such Registration
Statement over and above the stated interest at a rate of .25% per annum
for the first 90 days immediately following the day after the Effectiveness
Date, such Additional Interest rate increasing by an additional .25% per
annum at the beginning of each subsequent 90-day period; and
<PAGE>
-12-
(iii) if (A) the Company has not exchanged Exchange Securities for all
Notes validly tendered in accordance with the terms of the Exchange Offer
on or prior to the Consummation Date or (B) the Exchange Registration
Statement ceases to be effective at any time prior to the time that the
Exchange Offer is consummated or (C) if applicable, the Shelf Registration
has been declared effective and such Shelf Registration ceases to be
effective at any time during the Effectiveness Period, then Additional
Interest shall accrue on the Registrable Securities (over and above any
interest otherwise payable on the Registrable Securities) at a rate of .25%
per annum for the first 90 days commencing on the (x) 181st day after the
Issue Date, in the case of (A) above, or (y) the day the Exchange
Registration Statement ceases to be effective in the case of (B) above, or
(z) the day such Shelf Registration ceases to be effective in the case of
(C) above, such Additional Interest rate increasing by an additional .25%
per annum at the beginning of each such subsequent 90-day period;
provided, however, that the Additional Interest rate on the Registrable
Securities may not exceed at any one time in the aggregate 1.0% per annum; and
provided, further, that (1) upon the filing of the Exchange Registration
Statement or a Shelf Registration as required hereunder (in the case of clause
(i) of this Section 4), (2) upon the effectiveness of the Exchange Registration
Statement or the Shelf Registration as required hereunder (in the case of clause
(ii) of this Section 4), or (3) upon the exchange of Exchange Securities for all
Notes tendered (in the case of clause (iii)(A) of this Section 4), or upon the
effectiveness of the Exchange Registration Statement which had ceased to remain
effective (in the case of (iii)(B) of this Section 4), or upon the effectiveness
of the Shelf Registration which had ceased to remain effective (in the case of
(iii)(C) of this Section 4), Additional Interest on the Registrable Securities
as a result of such clause (or the relevant subclause thereof), as the case may
be, shall cease to accrue. It being understood and agreed that, notwithstanding
any provision to the contrary, so long as any Registrable Security is
<PAGE>
-13-
then covered by an effective Shelf Registration Statement, no Additional
Interest shall accrue on such Registrable Security.
(b) The Company shall notify the Trustee within one business day after
each and every date on which an event occurs in respect of which Additional
Interest is required to be paid (an "Event Date"). The Company shall pay
the Additional Interest due on the Registrable Securities by depositing
with the Trustee, in trust, for the benefit of the Holders thereof, on or
before the applicable semi-annual interest payment date, immediately
available funds in sums sufficient to pay the Additional Interest then due
to Holders of Registrable Securities. The Additional Interest due shall be
payable on each interest payment date to the record Holder of Registrable
Securities entitled to receive the interest payment to be made on such date
as set forth in the Indenture. The amount of Additional Interest will be
determined by multiplying the applicable Additional Interest rate by the
principal amount of the affected Registrable Securities of such Holders,
multiplied by a fraction, the numerator of which is the number of days such
Additional Interest rate was applicable during such period (determined on
the basis of a 360-day year comprised of twelve 30-day months and, in the
case of a partial month, the actual number of days elapsed), and the
denominator of which is 360. Each obligation to pay Additional Interest
shall be deemed to accrue immediately following the occurrence of the
applicable Event Date. The parties hereto agree that the Additional
Interest provided for in this Section 4 constitutes a reasonable estimate
of the damages that may be incurred by Holders of Registrable Securities by
reason of the failure of a Shelf Registration or Exchange Offer to be filed
or declared effective, or a Shelf Registration to remain effective, as the
case may be, in accordance with this Section 4.
5. Registration Procedures
In connection with the registration of any Registrable Securities
pursuant to Sections 2 or 3 hereof, the Company
<PAGE>
-14-
shall effect such registrations to permit the sale of such Registrable
Securities in accordance with the intended method or methods of disposition
thereof, and pursuant thereto the Company shall:
(a) Use its reasonable best efforts to prepare and file with the SEC,
as soon as practicable after the date hereof but in any event prior to the
Filing Date in the case of the Exchange Registration Statement and the 45th
day following the Consummation Date in the case of the Shelf Registration
Statement, a Registration Statement or Registration Statements as
prescribed by Section 2 or 3, and to use its reasonable best efforts to
cause each such Registration Statement to become effective and remain
effective as provided herein, provided that, if (1) such filing is pursuant
to Section 3, or (2) a Prospectus contained in an Exchange Registration
Statement filed pursuant to Section 2 is required to be delivered under the
Securities Act by any Participating Broker-Dealer who seeks to sell
Exchange Securities during the Applicable Period, before filing any
Registration Statement or Prospectus or any amendments or supplements
thereto, the Company shall upon written request furnish to and afford the
Holders of the Registrable Securities and each such Participating Broker-
Dealer, as the case may be, covered by such Registration Statement, their
counsel and the managing underwriters, if any, a reasonable opportunity to
review copies of all such documents (including copies of any documents to
be incorporated by reference therein and all exhibits thereto) proposed to
be filed.
(b) Prepare and file with the SEC such amendments and post-effective
amendments to each Shelf Registration or Exchange Registration Statement,
as the case may be, as may be necessary to keep such Registration Statement
continuously effective for the Effectiveness Period or the Applicable
Period, as the case may be; cause the related Prospectus to be supplemented
by any required Prospectus supplement, and as so supplemented to be filed
pursuant to Rule 424 (or any similar provisions then in force) under
<PAGE>
-15-
the Securities Act; and comply with the provisions of the Securities Act,
the Exchange Act and the rules and regulations of the SEC promulgated
thereunder applicable to it with respect to the disposition of all
securities covered by such Registration Statement as so amended or in such
Prospectus as so supplemented and with respect to the subsequent resale of
any securities being sold by a Participating Broker-Dealer covered by any
such Prospectus; the Company shall not be deemed to have used its
reasonable best efforts to keep a Registration Statement effective during
the Applicable Period if the Company voluntarily takes any action that
would result in selling Holders of the Registrable Securities covered
thereby or Participating Broker-Dealers seeking to sell Exchange Securities
not being able to sell such Registrable Securities or such Exchange
Securities during that period unless such action is in the best interest of
the Company (as determined by its board of directors), required by
applicable law or unless the Company complies with this Agreement,
including without limitation, the provisions of paragraph 5(k) hereof and
the last paragraph of this Section 5.
(c) If (1) a Shelf Registration is filed pursuant to Section 3, or (2)
a Prospectus contained in an Exchange Registration Statement filed pursuant
to Section 2 is required to be delivered under the Securities Act by any
Participating Broker-Dealer who seeks to sell Exchange Securities during
the Applicable Period, notify the selling Holders of Registrable
Securities, or each such Participating Broker-Dealer, as the case may be,
their counsel and the managing underwriters, if any, who have provided the
Company with their names and addresses promptly (but in any event within
two business days), and confirm such notice in writing, (i) when a
Prospectus or any Prospectus supplement or post-effective amendment has
been filed, and, with respect to a Registration Statement or any post-
effective amendment, when the same has become effective under the
Securities Act (including in such notice a written statement that any
Holder may, upon request, obtain, without charge, one conformed copy of
such Registra
<PAGE>
-16-
tion Statement or post-effective amendment including financial statements
and schedules, documents incorporated or deemed to be incorporated by
reference and exhibits), (ii) of the issuance by the SEC of any stop order
suspending the effectiveness of a Registration Statement or of any order
preventing or suspending the use of any preliminary prospectus or the
initiation of any proceedings for that purpose, (iii) of the receipt by the
Company of any notification with respect to the suspension of the
qualification or exemption from qualification of a Registration Statement
or any of the Registrable Securities or the Exchange Securities to be sold
by any Participating Broker-Dealer for offer or sale in any jurisdiction,
or the initiation or threatening of any proceeding for such purpose, (iv)
of the happening of any event or any information becoming known that makes
any statement made in such Registration Statement or related Prospectus or
any document incorporated or deemed to be incorporated therein by reference
untrue in any material respect or that requires the making of any changes
in such Registration Statement, Prospectus or documents so that, in the
case of the Registration Statement, it will not contain any untrue
statement of a material fact or omit to state any material fact required to
be stated therein or necessary to make the statements therein not
misleading, and that in the case of the Prospectus, it will not contain any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made, not
misleading, and (v) of the Company's reasonable determination that a post-
effective amendment to a Registration Statement would be appropriate.
(d) If (1) a Shelf Registration is filed pursuant to Section 3, or (2)
a Prospectus contained in an Exchange Registration Statement filed pursuant
to Section 2 is required to be delivered under the Securities Act by any
Participating Broker-Dealer who seeks to sell Exchange Securities during
the Applicable Period, use its reasonable
<PAGE>
-17-
best efforts to prevent the issuance of any order suspending the
effectiveness of a Registration Statement or of any order preventing or
suspending the use of a Prospectus or suspending the qualification (or
exemption from qualification) of any of the Registrable Securities or the
Exchange Securities to be sold by any Participating Broker-Dealer, for sale
in any jurisdiction, and, if any such order is issued, to use its
reasonable best efforts to obtain the withdrawal of any such order at the
earliest possible moment.
(e) If a Shelf Registration is filed pursuant to Section 3 and if
requested by the managing underwriters, if any, or the Holders of a
majority in aggregate principal amount of the Registrable Securities being
sold in connection with an underwritten offering, (i) promptly incorporate
in a prospectus supplement or post-effective amendment such information as
the managing underwriters, if any, or such Holders or counsel reasonably
request to be included therein, or (ii) make all required filings of such
prospectus supplement or such post-effective amendment as soon as
practicable after the Company has received notification of the matters to
be incorporated in such prospectus supplement or post-effective amendment.
(f) If (1) a Shelf Registration is filed pursuant to Section 3, or (2)
a Prospectus contained in an Exchange Registration Statement filed pursuant
to Section 2 is required to be delivered under the Securities Act by any
Participating Broker-Dealer who seeks to sell Exchange Securities during
the Applicable Period, furnish to each selling Holder of Registrable
Securities and to each such Participating Broker-Dealer who so requests and
to counsel and each managing underwriter, if any, without charge, one
conformed copy of the Registration Statement or Statements and each post-
effective amendment thereto, including financial statements and schedules,
and if requested, all documents incorporated or deemed to be incorporated
therein by reference and all exhibits.
<PAGE>
-18-
(g) If (1) a Shelf Registration is filed pursuant to Section 3, or (2)
a Prospectus contained in an Exchange Registration Statement filed pursuant
to Section 2 is required to be delivered under the Securities Act by any
Participating Broker-Dealer who seeks to sell Exchange Securities during
the Applicable Period, deliver to each selling Holder of Registrable
Securities, or each such Participating Broker-Dealer, as the case may be,
their counsel, and the underwriters, if any, without charge, as many copies
of the Prospectus or Prospectuses (including each form of preliminary
prospectus) and each amendment or supplement thereto and any documents
incorporated by reference therein as such Persons may reasonably request;
and, subject to the last paragraph of this Section 5, the Company hereby
consents to the use of such Prospectus and each amendment or supplement
thereto by each of the selling holders of Registrable Securities or each
such Participating Broker-Dealer, as the case may be, and the underwriters
or agents, if any, and dealers (if any), in connection with the offering
and sale of the Registrable Securities covered by or the sale by
Participating Broker-Dealers of the Exchange Securities pursuant to such
Prospectus and any amendment or supplement thereto.
(h) Prior to any public offering of Registrable Securities or any
delivery of a Prospectus contained in the Exchange Registration Statement
by any Participating Broker-Dealer who seeks to sell Exchange Securities
during the Applicable Period, to use its reasonable best efforts to
register or qualify, and to cooperate with the selling Holders of
Registrable Securities or each such Participating Broker-Dealer, as the
case may be, the underwriters, if any, and their respective counsel in
connection with the registration or qualification (or exemption from such
registration or qualification) of such Registrable Securities for offer and
sale under the securities or Blue Sky laws of such jurisdictions within the
United States as any selling Holder, Participating Broker-Dealer, or the
managing underwriters reasonably request in writing, provided that where
Exchange Securities held by Participating
<PAGE>
-19-
Broker-Dealers or Registrable Securities are offered other than through an
underwritten offering, the Company agrees to cause its counsel to perform
Blue Sky investigations and file registrations and qualifications required
to be filed pursuant to this Section 5(h); keep each such registration or
qualification (or exemption therefrom) effective during the period such
Registration Statement is required to be kept effective and do any and all
other reasonable acts or things necessary or advisable to enable the
disposition in such jurisdictions of the Exchange Securities held by
Participating Broker-Dealers or the Registrable Securities covered by the
applicable Registration Statement, provided that the Company shall not be
required to (A) qualify generally to do business in any jurisdiction where
it is not then so qualified, (B) take any action that would subject it to
general service of process in any such jurisdiction where it is not then so
subject or (C) subject itself to taxation in any such jurisdiction.
(i) If a Shelf Registration is filed pursuant to Section 3, reasonably
cooperate with the selling Holders of Registrable Securities and the
managing underwriters, if any, to facilitate the timely preparation and
delivery of certificates representing Registrable Securities to be sold,
which certificates shall not bear any restrictive legends and shall be in a
form eligible for deposit with The Depository Trust Company ("DTC"); and
enable such Registrable Securities to be registered in such names as the
managing underwriter or underwriters, if any, or Holders may request.
(j) Use its reasonable best efforts to cause the Registrable
Securities covered by the Registration Statement to be registered with or
approved by such other United States governmental agencies or authorities
of the United States as may be necessary to enable the seller or sellers
thereof or the underwriters, if any, to consummate the disposition of such
Registrable Securities, except as may be required solely as a consequence
of the
<PAGE>
-20-
nature of such selling Holder's business, in which case the Company will
cooperate in all reasonable respects with the filing of such Registration
Statement and the granting of such approvals.
(k) If (1) a Shelf Registration is filed pursuant to Section 3, or (2)
a Prospectus contained in an Exchange Registration Statement filed pursuant
to Section 2 is required to be delivered under the Securities Act by any
Participating Broker-Dealer who seeks to sell Exchange Securities during
the Applicable Period, upon the occurrence of any event contemplated by
paragraph 5(c)(iv) or 5(c)(v) above, as promptly as practicable prepare and
(subject to Section 5(a) above) file with the SEC, solely at the expense of
the Company, a supplement or post-effective amendment to the Registration
Statement or a supplement to the related Prospectus or any document
incorporated or deemed to be incorporated therein by reference, or file any
other required document so that, as thereafter delivered to the purchasers
of the Registrable Securities being sold thereunder or to the purchasers of
the Exchange Securities to whom such Prospectus will be delivered by a
Participating Broker-Dealer, any such Prospectus will not contain an untrue
statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading.
(l) Use its reasonable best efforts to cause the Registrable
Securities covered by a Registration Statement or the Exchange Securities,
as the case may be, to be rated with the appropriate rating agencies, if so
requested by the Holders of a majority in aggregate principal amount of
Registrable Securities covered by such Registration Statement or the
Exchange Securities, as the case may be, or the managing underwriters, if
any.
(m) Prior to the effective date of the first Registration Statement
relating to the Registrable Securities, (i) provide the Trustee with
printed certificates for the
<PAGE>
-21-
Registrable Securities in a form eligible for deposit with DTC and (ii)
provide a CUSIP number for the Registrable Securities.
(n) Use its best efforts to cause all Registrable Securities covered
by such Registration Statement or the Exchange Securities, as the case may
be, to be (i) listed on each securities exchange, if any, on which similar
securities issued by the Company are then listed, or (ii) authorized to be
quoted on the National Association of Securities Dealers Automated
Quotation System ("NASDAQ") or the National Market System of NASDAQ if
similar securities of the Company are so authorized.
(o) In connection with an underwritten offering of Registrable
Securities pursuant to a Shelf Registration, enter into an underwriting
agreement as is customary in underwritten offerings and take all such other
actions as are reasonably requested by the managing underwriters in order
to expedite or facilitate the registration or the disposition of such
Registrable Securities, and in such connection, (i) make such
representations and warranties to the underwriters, with respect to the
business of the Company and its subsidiaries, if any, and the Registration
Statement, Prospectus and documents, if any, incorporated or deemed to be
incorporated by reference therein, in each case, as are customarily made by
issuers to underwriters in underwritten offerings, and confirm the same if
and when requested; (ii) obtain an opinion of counsel to the Company and
updates thereof in form and substance reasonably satisfactory to the
managing underwriters, addressed to the underwriters covering the matters
customarily covered in opinions requested in underwritten offerings and
such other matters as may be reasonably requested by underwriters; (iii)
obtain "cold comfort" letters and updates thereof in form and substance
reasonably satisfactory to the managing underwriters from the independent
certified public accountant(s) of the Company (and, if necessary, any other
independent certified public accountants of any subsidiary of the
<PAGE>
-22-
Company or of any business acquired by the Company for which financial
statements and financial data are, or are required to be, included in the
Registration Statement), addressed to each of the underwriters, such
letters to be in customary form and covering matters of the type
customarily covered in "cold comfort" letters in connection with
underwritten offerings and such other matters as may be reasonably
requested by underwriters; and (iv) if an underwriting agreement is entered
into, the same shall contain indemnification provisions and procedures no
less favorable than those set forth in Section 7 hereof (or such other
provisions and procedures acceptable to Holders of a majority in aggregate
principal amount of Registrable Securities covered by such Registration
Statement and the managing underwriters or agents) with respect to all
parties to be indemnified pursuant to said Section. The above shall be done
at each closing under such underwriting agreement, or as and to the extent
required thereunder.
(p) If (1) a Shelf Registration is filed pursuant to Section 3, or (2)
a Prospectus contained in an Exchange Registration Statement filed pursuant
to Section 2 is required to be delivered under the Securities Act by any
Participating Broker-Dealer who seeks to sell Exchange Securities during
the Applicable Period, make available for inspection by any selling Holder
of such Registrable Securities being sold, or each such Participating
Broker-Dealer, as the case may be, any underwriter participating in any
such disposition of Registrable Securities, if any, and any attorney,
accountant or other agent retained by any such selling holder or each such
Participating Broker-Dealer, as the case may be, or underwriter
(collectively, the "Inspectors"), at the offices where normally kept,
during reasonable business hours, all financial and other records,
pertinent corporate documents and properties of the Company and its
subsidiaries (collectively, the "Records"), as shall be reasonably
necessary to enable them to exercise any applicable due diligence
responsibilities, and cause the officers, directors
<PAGE>
-23-
and employees of the Company to supply all information in each case
reasonably requested by any such Inspector in connection with such
Registration Statement. Records determined in good faith by the Company to
be confidential shall not be disclosed by any Inspector notified of such
determination unless (i) the disclosure of such Records is necessary to
avoid or correct a misstatement or omission in such Registration Statement,
(ii) the release of such Records is ordered pursuant to a subpoena or other
order from a court of competent jurisdiction or (iii) the information in
such Records has been made generally available to the public. Each selling
Holder of such Registrable Securities and each such Participating Broker-
Dealer will be required to agree that information obtained by it as a
result of such inspections shall be deemed confidential and shall not be
used by it as the basis for any market transactions in the securities of
the Company unless and until such is made generally available to the
public. Each selling Holder of such Registrable Securities and each such
Participating Broker-Dealer will be required to further agree that it will,
upon learning that disclosure of such Records is sought in a court of
competent jurisdiction, give notice to the Company and allow the Company at
its expense to undertake appropriate action to prevent disclosure of the
Records deemed confidential.
(q) Provide an indenture trustee for the Registrable Securities or the
Exchange Securities, as the case may be, and cause the Indenture or the
trust indenture provided for in Section 2(a), as the case may be, to be
qualified under the TIA not later than the effective date of the Exchange
Offer or the first Registration Statement relating to the Registrable
Securities; and in connection therewith, cooperate with the trustee under
any such indenture and the holders of the Registrable Securities, to effect
such changes to such indenture as may be required for such indenture to be
so qualified in accordance with the terms of the TIA; and execute, and use
its reasonable best efforts to cause such trustee to execute, all documents
as may be required to effect such changes, and all other
<PAGE>
-24-
forms and documents required to be filed with the SEC to enable such
indenture to be so qualified in a timely manner.
(r) Comply in all material respects with all applicable rules and
regulations of the SEC and make generally available to its securityholders
earning statements satisfying the provisions of Section 11(a) of the
Securities Act and Rule 158 thereunder (or any similar rule promulgated
under the Securities Act) no later than 90 days after the end of any 12-
month period (i) commencing at the end of any fiscal quarter in which
Registrable Securities are sold to underwriters in a firm commitment or
best efforts underwritten offering and (ii) if not sold to underwriters in
such an offering, commencing on the first day of the first fiscal quarter
of the Company after the effective date of a Shelf Registration Statement,
which statements shall cover said 12-month periods.
(s) If an Exchange Offer or a Private Exchange is to be consummated,
upon delivery of the Registrable Securities by Holders to the Company (or
to such other Person as directed by the Company) in exchange for the
Exchange Securities or the Private Exchange Securities, as the case may be,
the Company shall mark, or caused to be marked, on such Registrable
Securities that such Registrable Securities are being cancelled in exchange
for the Exchange Securities or the Private Exchange Securities, as the case
may be; in no event shall such Registrable Securities be marked as paid or
otherwise satisfied.
(t) Reasonably cooperate with each seller of Registrable Securities
covered by any Registration Statement and each underwriter, if any,
participating in the disposition of such Registrable Securities and their
respective counsel in connection with any filings required to be made with
the National Association of Securities Dealers, Inc. (the "NASD").
(u) Use its reasonable best efforts to take all other steps necessary
to effect the registration of the
<PAGE>
-25-
Registrable Securities covered by a Registration Statement contemplated
hereby.
The Company may require each seller of Registrable Securities or
Participating Broker-Dealer as to which any registration is being effected to
furnish to the Company such information regarding such seller or Participating
Broker-Dealer and the distribution of such Registrable Securities or Exchange
Securities to be sold by such Participating Broker-Dealer, as the case may be,
as the Company may, from time to time, reasonably request. The Company may
exclude from such registration the Registrable Securities of any seller or
Participating Broker-Dealer who unreasonably fails to furnish such information
within a reasonable time after receiving such request. Each seller as to which
any Shelf Registration is being effected is deemed to agree to furnish promptly
to the Company all information required to be disclosed in order to make the
information previously furnished to the Company by such seller not materially
misleading.
Each Holder of Registrable Securities and each Participating Broker-
Dealer agrees by acquisition of such Registrable Securities or Exchange
Securities to be sold by such Participating Broker-Dealer, as the case may be,
that, upon receipt of any notice from the Company of the happening of any event
of the kind described in Section 5(c)(ii), 5(c)(iii), 5(c)(iv), or 5(c)(v), such
Holder will forthwith discontinue disposition of such Registrable Securities
covered by such Registration Statement or Prospectus or Exchange Securities to
be sold by such Participating Broker-Dealer, as the case may be, until such
holder's receipt of the copies of the supplemented or amended Prospectus
contemplated by Section 5(k), or until it is advised in writing (the "Advice")
by the Company that the use of the applicable Prospectus may be resumed, and has
received copies of any amendments or supplements thereto. In the event the
Company shall give any such notice, each of the Effectiveness Period and the
Applicable Period shall be extended by the number of days during such periods
from and including the date of the giving of such notice to and including the
date when each seller of Registrable Securities covered by such Reg-
<PAGE>
-26-
istration Statement or Exchange Securities to be sold by such Participating
Broker-Dealer, as the case may be, shall have received (x) the copies of the
supplemented or amended Prospectus contemplated by Section 5(k) or (y) the
Advice.
6. Registration Expenses
(a) All fees and expenses incident to the performance of or compliance
with this Agreement by the Company shall be borne by the Company whether or
not the Exchange Offer or a Shelf Registration is filed or becomes
effective, including, without limitation, (i) all registration and filing
fees (including, without limitation, (A) fees with respect to filings
required to be made with the NASD in connection with an underwritten
offering and (B) fees and expenses of compliance with state securities or
Blue Sky laws (including, without limitation, reasonable fees and
disbursements of counsel in connection with Blue Sky qualifications of the
Registrable Securities or Exchange Securities and determination of the
eligibility of the Registrable Securities or Exchange Securities for
investment under the laws of such jurisdictions in the United States (x)
where the holders of Registrable Securities are located, in the case of the
Exchange Securities, or (y) as provided in Section 5(h), in the case of
Registrable Securities or Exchange Securities to be sold by a Participating
Broker-Dealer during the Applicable Period)), (ii) printing expenses
(including, without limitation, expenses of printing certificates for
Registrable Securities or Exchange Securities in a form eligible for
deposit with DTC and of printing prospectuses if the printing of
prospectuses is requested by the managing underwriters, if any, or, in
respect of Registrable Securities or Exchange Securities to be sold by any
Participating Broker-Dealer during the Applicable Period, by the Holders of
a majority in aggregate principal amount of the Registrable Securities
included in any Registration Statement or of such Exchange Securities, as
the case may be), (iii) messenger, telephone and delivery expenses, (iv)
fees and disbursements of counsel for the Company and fees and disburse-
<PAGE>
-27-
ments of special counsel for the sellers of Registrable Securities (subject
to the provisions of Section 6(b)), (v) fees and disbursements of all
independent certified public accountants referred to in Section 5(o)(iii)
(including, without limitation, the expenses of any special audit and "cold
comfort" letters required by or incident to such performance), (vi) rating
agency fees, (vii) Securities Act liability insurance, if the Company
desires such insurance, (viii) fees and expenses of all other Persons
retained by the Company, (ix) internal expenses of the Company (including,
without limitation, all salaries and expenses of officers and employees of
the Company performing legal or accounting duties), (x) the expense of any
annual audit, (xi) the fees and expenses incurred in connection with the
listing of the securities to be registered on any securities exchange, if
applicable, and (xii) the expenses relating to printing, word processing
and distributing all Registration Statements, underwriting agreements,
securities sales agreements, indentures and any other documents necessary
in order to comply with this Agreement. In the event of an underwritten
offering of Registrable Securities the Company shall not be responsible for
any "roadshow expenses" in connection therewith.
(b) In connection with any Shelf Registration hereunder, the Company
shall reimburse the Holders of the Registrable Securities being registered
in such registration for the reasonable fees and disbursements of not more
than one counsel (in addition to appropriate local counsel) chosen by the
Holders of a majority in aggregate principal amount of the Registrable
Securities to be included in such Registration Statement. Such Holders
shall be responsible for any and all other out-of-pocket expenses of the
Holders of Registrable Securities incurred in connection with the
registration of the Registrable Securities.
7. Indemnification
The Company agrees to indemnify and hold harmless each Holder of
Registrable Securities if a Shelf Registration
<PAGE>
-28-
is filed pursuant to Section 3 and each Participating Broker-Dealer selling
Exchange Securities during the Applicable Period, the officers and directors of
each such person, and each person, if any, who controls any such person within
the meaning of either Section 15 of the Securities Act or Section 20 of the
Exchange Act (each, a "Participant"), from and against any and all losses,
claims, damages and liabilities (including, without limitation, the legal fees
and other expenses incurred in connection with any suit, action or proceeding or
any claim asserted) caused by any untrue statement or alleged untrue statement
of a material fact contained in any Registration Statement (or any amendment
thereto) or Prospectus (as amended or supplemented if the Company shall have
furnished any amendments or supplements thereto) or any preliminary prospectus,
or caused by any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading,
except insofar as such losses, claims, damages or liabilities are caused by any
untrue statement or omission or alleged untrue statement or omission made in
reliance upon and in conformity with information relating to any Participant
furnished to the Company in writing by such Participant expressly for use
therein; provided that the foregoing indemnity with respect to any preliminary
prospectus shall not inure to the benefit of any Participant (or to the benefit
of any person controlling such Participant) from whom the person asserting any
such losses, claims, damages or liabilities purchased Registrable Securities or
Exchange Securities if such untrue statement or omission or alleged untrue
statement or omission made in such preliminary prospectus is completely remedied
in the related Prospectus (as amended or supplemented if the Company shall have
furnished any amendments or supplements thereto) and a copy of the related
Prospectus (as so amended or supplemented) shall not have been furnished to such
person at or prior to the sale of such Registrable Securities or Exchange
Securities, as the case may be, to such person.
Each Participant will be required to agree, severally and not jointly,
to indemnify and hold harmless the Company,
<PAGE>
-29-
its directors, its officers and each person who controls the Company within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act to
the same extent as the foregoing indemnity from the Company to each Participant,
but only with reference to information relating to such Participant furnished to
the Company in writing by such Participant expressly for use in any Registration
Statement or Prospectus, any amendment or supplement thereto, or any preliminary
prospectus. The liability of any Participant under this paragraph shall in no
event exceed the proceeds received by such Participant from sales of Registrable
Securities giving rise to such obligations.
If any suit, action, proceeding (including any governmental or
regulatory investigation), claim or demand shall be brought or asserted against
any person in respect of which indemnity may be sought pursuant to either of the
two preceding paragraphs, such person (the "Indemnified Person") shall promptly
notify the person against whom such indemnity may be sought (the "Indemnifying
Person") in writing, and the Indemnifying Person, upon request of the
Indemnified Person, shall retain counsel satisfactory to the Indemnified Person
to represent the Indemnified Person and any others the Indemnifying Person may
designate in such proceeding and shall pay the fees and expenses of such counsel
related to such proceeding. In any such proceeding, any Indemnified Person
shall have the right to retain its own counsel, but the fees and expenses of
such counsel shall be at the expense of such Indemnified Person unless (i) the
Indemnifying Person and the Indemnified Person shall have mutually agreed to the
contrary, (ii) the Indemnifying Person has failed within a reasonable time to
retain counsel satisfactory to the Indemnified Person or (iii) the named parties
in any such proceeding (including any impleaded parties) include both the
Indemnifying Person and the Indemnified Person and representation of both
parties by the same counsel would be inappropriate due to actual or potential
differing interests between them. It is understood that the Indemnifying Person
shall not, in connection with any proceeding or related proceeding in the same
jurisdiction, be liable for the fees and expenses of more than one separate firm
(in addition to any lo
<PAGE>
-30-
cal counsel) for all Indemnified Persons, and that all such fees and expenses
shall be reimbursed as they are incurred. Any such separate firm for the
Participants and such control persons of Participants shall be designated in
writing by Participants who sold a majority in interest of Registrable
Securities sold by all such Participants and any such separate firm for the
Company, its directors, officers and such control persons of the Company shall
be designated in writing by the Company. The Indemnifying Person shall not be
liable for any settlement of any proceeding effected without its written
consent, but if settled with such consent or if there be a final judgment for
the plaintiff, the Indemnifying Person agrees to indemnify any Indemnified
Person from and against any loss or liability by reason of such settlement or
judgment. Notwithstanding the foregoing sentence, if at any time an Indemnified
Person shall have requested an Indemnifying Person to reimburse the Indemnified
Person for fees and expenses actually incurred by counsel as contemplated by the
third sentence of this paragraph, the Indemnifying Person agrees that it shall
be liable for any settlement of any proceeding effected without its written
consent if (i) such settlement is entered into more than 60 days after receipt
by such Indemnifying Person of the aforesaid request and (ii) such Indemnifying
Person shall not have reimbursed the Indemnified Person in accordance with such
request prior to the date of such settlement (or delivered a notice to such
Indemnified Person setting forth its good faith objection to such request's
conformity to the provisions of this Section 7). No Indemnifying Person shall,
without the prior written consent of the Indemnified Person, effect any
settlement of any pending or threatened proceeding in respect of which any
Indemnified Person is or could have been a party and indemnity could have been
sought hereunder by such Indemnified Person, unless such settlement includes an
unconditional written release in form and substance satisfactory to the
Indemnified Person, of such Indemnified Person from all liability on claims that
are the subject matter of such proceeding.
If the Indemnification provided for in the first and second paragraphs
of this Section 7 is unavailable to, or insufficient to hold harmless, an
Indemnified Person in respect
<PAGE>
-31-
of any losses, claims, damages or liabilities referred to therein, then each
Indemnifying Person under such paragraph, in lieu of indemnifying such
Indemnified Person thereunder, shall contribute to the amount paid or payable by
such Indemnified Person as a result of such losses, claims, damages or
liabilities in such proportion as is appropriate to reflect the relative fault
of the Company on the one hand and the Participants on the other in connection
with the statements or omissions that resulted in such losses, claims, damages
or liabilities, as well as any other relevant equitable considerations. The
relative fault of the Company on the one hand and the Participants on the other
shall be determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged omission
to state a material fact relates to information supplied by the Company or by
the Participants and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The parties shall agree that it would not be just and equitable if
contribution pursuant to this Section 7 were determined by pro rata allocation
(even if the Participants were treated as one entity for such purpose) or by any
other method of allocation that does not take account of the equitable
considerations referred to in the immediately preceding paragraph. The amount
paid or payable by an Indemnified Person as a result of the losses, claims,
damages and liabilities referred to in the immediately preceding paragraph shall
be deemed to include, subject to the limitations set forth above, any legal or
other expenses incurred by such Indemnified Person in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this Section 7, in no event shall a Participant be required to
contribute any amount in excess of the amount by which proceeds received by such
Participant from sales of Registrable Securities exceeds the amount of any
damages that such Participant has otherwise been required to pay by reason of
such untrue or alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Se-
<PAGE>
-32-
curities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation.
The indemnity and contribution agreements contained in this Section 7
will be in addition to any liability which the Indemnifying Persons may
otherwise have to the Indemnified Persons referred to above.
8. Rule 144 and Rule 144A
The Company covenants that it will file the reports required to be
filed by it under the Securities Act and the Exchange Act and the rules and
regulations adopted by the SEC thereunder in a timely manner and, if at any time
the Company is not required to file such reports, it will, upon the request of
any Holder of Registrable Securities, within a reasonable time period make
publicly available other information so long as necessary to permit sales
pursuant to Rule 144 and Rule 144A under the Securities Act. The Company
further covenants that it will take such further action as any Holder of
Registrable Securities may reasonably request, all to the extent required from
time to time to enable such holder to sell Registrable Securities without
registration under the Securities Act within the limitation of the exemptions
provided by (a) Rule 144 and Rule 144A under the Securities Act, as such Rules
may be amended from time to time, or (b) any similar rule or regulation
hereafter adopted by the SEC.
9. Underwritten Registrations
If any of the Registrable Securities covered by any Shelf Registration
are to be sold in an underwritten offering, the investment banker or investment
bankers and manager or managers that will manage the offering will be selected
by the Holders of a majority in aggregate principal amount of such Registrable
Securities included in such offering and be reasonably acceptable to the
Company.
No Holder of Registrable Securities may participate in any
underwritten registration hereunder unless such Holder (a) agrees to sell such
Holder's Registrable Securities on the
<PAGE>
-33-
basis provided in any underwriting arrangements approved by the Persons entitled
hereunder to approve such arrangements and (b) completes and executes all
questionnaires, powers of attorney, indemnities, underwriting agreements and
other documents required under the terms of such underwriting arrangements.
10. Miscellaneous
(a) Remedies. In the event of a breach by the Company of any of its
obligations under this Agreement, each Holder of Registrable Securities, in
addition to being entitled to exercise all rights provided herein, in the
Indenture or, in the case of the Initial Purchasers, in the Purchase
Agreement or granted by law, including recovery of damages, will be
entitled to specific performance of its rights under this Agreement. The
Company agrees that monetary damages would not be adequate compensation for
any loss incurred by reason of a breach by it of any of the provisions of
this Agreement and hereby further agree that, in the event of any action
for specific performance in respect of such breach, the Company shall waive
the defense that a remedy at law would be adequate.
(b) No Inconsistent Agreements. The Company has not, as of the date
hereof, entered and shall not, after the date of this Agreement, enter into
any agreement with respect to any of its securities that is inconsistent
with the rights granted to the Holders of Registrable Securities in this
Agreement or otherwise conflicts with the provisions hereof. The Company
has not entered and will not enter into any agreement with respect to any
of its securities which will grant to any Person piggy-back rights with
respect to a Registration Statement.
(c) Adjustments Affecting Registrable Securities. The Company shall
not, directly or indirectly, take any action with respect to the
Registrable Securities as a class that would adversely affect the ability
of the Holders of Registrable Securities to include such Registrable
Securities in a registration undertaken pursuant to this Agreement.
<PAGE>
-34-
(d) Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions
hereof may not be given, unless the Company has obtained the written
consent of Holders of at least a majority of the then outstanding aggregate
principal amount of Registrable Securities. Notwithstanding the foregoing,
a waiver or consent to depart from the provisions hereof with respect to a
matter that relates exclusively to the rights of Holders of Registrable
Securities whose securities are being sold pursuant to a Registration
Statement and that does not directly or indirectly affect, impair, limit or
compromise the rights of other Holders of Registrable Securities may be
given by Holders of at least a majority in aggregate principal amount of
the Registrable Securities being sold by such Holders pursuant to such
Registration Statement, provided that the provisions of this sentence may
not be amended, modified or supplemented except in accordance with the
provisions of the immediately preceding sentence.
(e) Notices. All notices and other communications (including without
limitation any notices or other communications to the Trustee) provided for
or permitted hereunder shall be made in writing by hand-delivery,
registered first-class mail, next-day air courier or telecopier:
(i) if to a Holder of Registrable Securities, at the most current
address given by the Trustee to the Company; and
(ii) if to the Company, at 2850 West Golf Road, Rolling Meadows,
Illinois, 60008, Attention: Wayne Cain; with a copy to Kirkland & Ellis,
200 East Randolph Drive, Chicago, Illinois, 60601, Attention: Kenneth P.
Morrison.
All such notices and communications shall be deemed to have been duly
given: when delivered by hand, if personally delivered; five business days
after being deposited in the mail, postage prepaid, if mailed; one business day
after being
<PAGE>
-35-
timely delivered to a next-day air courier; and when receipt is acknowledged by
the addressee, if telecopied.
Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the trustee under the
Indenture at the address specified in such Indenture.
(f) Successors and Assigns. This Agreement shall inure to the benefit
of and be binding upon the successors and assigns of each of the parties,
including without limitation and without the need for an express
assignment, subsequent Holders of Registrable Securities; provided, that,
with respect to the indemnity and contribution agreements in Section 7,
each Holder of Registrable Securities subsequent to the Initial Purchasers
shall be bound by the terms thereof if such Holder elects to include
Registrable Securities in a Shelf Registration; provided, however, that
this Agreement shall not inure to the benefit of or be binding upon a
successor or assign of a Holder unless and to the extent such successor or
assign holds Registrable Securities.
(g) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which
taken together shall constitute one and the same agreement.
(h) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(i) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO
CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD
TO PRINCIPLES OF CONFLICTS OF LAW. EACH OF THE PARTIES HERETO AGREES TO
SUBMIT TO THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK IN ANY
ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT.
<PAGE>
-36-
(j) Severability. If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction to be invalid,
illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the
parties hereto shall use their best efforts to find and employ an
alternative means to achieve the same or substantially the same result as
that contemplated by such term, provision, covenant or restriction. It is
hereby stipulated and declared to be the intention of the parties that they
would have executed the remaining terms, provisions, covenants and
restrictions without including any of such that may be hereafter declared
invalid, illegal, void or unenforceable.
(k) Entire Agreement. This Agreement, together with the Purchase
Agreement, is intended by the parties as a final expression of their
agreement, and is intended to be a complete and exclusive statement of the
agreement and understanding of the parties hereto in respect of the subject
matter contained herein and therein.
(l) Securities Held by the Company or Its Affiliates. Whenever the
consent or approval of holders of a specified percentage of Registrable
Securities is required hereunder, Registrable Securities held by the
Company or any of its affiliates (as such term is defined in Rule 405 under
the Securities Act) shall not be counted in determining whether such
consent or approval was given by the Holders of such required percentage.
<PAGE>
S-1
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
NAVISTAR FINANCIAL CORPORATION
By: /s/ R. Wayne Cain
--------------------------------
Name: R. Wayne Cain
Title: Vice President
and Treasurer
J.P. MORGAN SECURITIES INC.
CHASE SECURITIES INC.
NATIONSBANC CAPITAL MARKETS, INC.
By: J.P. Morgan Securities Inc.
By: /s/ Douglas A. Cruikshank
--------------------------------
Name: Douglas A. Cruikshank
Title: Vice President
<PAGE>
<TABLE>
<CAPTION>
Exhibit 12.1
NAVISTAR FINANCIAL CORPORATION AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
Six Months
Ended April 30 Year Ended October 31
-------------- ------------------------------------------
1997 1996 1996 1995 1994 1993 1992
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
(Millions of Dollars)
Earnings:
Income before
income taxes
& cumulative
effect of
accounting
changes $ 37.1 $ 41.4 $ 80.5 $ 58.7 $ 55.2 $ 49.0 $ 46.4
Interest on 31.5 36.8 73.2 75.1 62.7 74.6 82.2
indebtedness
Amortization of
debt issuance
expense 0.8 3.0 3.7 4.6 3.9 2.9 2.9
Interest included
in rental
expense 0.3 0.3 0.6 0.7 0.7 0.7 0.7
------ ------ ------ ------ ------ ------ ------
Total earnings $ 69.7 $ 81.5 $158.0 $139.1 $122.5 $127.2 $132.2
====== ====== ====== ====== ====== ====== ======
Fixed charges:
Interest on
indebtedness $ 31.5 $ 36.8 $ 73.2 $ 75.1 $ 62.7 $ 74.6 $ 82.2
Amortization of
debt issuance
expense $ 0.8 $ 3.0 $ 3.7 $ 4.6 $ 3.9 $ 2.9 $ 2.9
Interest
included in
rental
expense $ 0.3 $ 0.3 $ 0.6 $ 0.7 $ 0.7 $ 0.7 $ 0.7
------ ------ ------ ------ ------ ------ ------
Total fixed
charges $ 32.6 $ 40.1 $ 77.5 $ 80.4 $ 67.3 $ 78.2 $ 85.8
====== ====== ====== ====== ====== ====== ======
Ratio of
earnings to
fixed charges 2.1x 2.0x 2.0x 1.7x 1.8x 1.6x 1.5x
====== ====== ====== ====== ====== ====== ======
</TABLE>
<PAGE>
Exhibit 12.1
NAVISTAR FINANCIAL CORPORATION AND SUBSIDIARIES
COMPUTATION OF DEBT TO EQUITY RATIO
<TABLE>
<CAPTION>
Six Months
Ended April 30 Year Ended October 31
------------------ -----------------------------------------------
1997 1996 1996 1995 1994 1993 1992
-------- ------- ------- ------- ------- ------- -------
(Millions of Dollars)
<S> <C> <C> <C> <C> <C> <C> <C>
Senior debt $1,112.8 1,278.1 1,205.8 1,230.3 991.5 1,099.2 1,123.1
Subordinated debt 100.0 100.0 100.0 100.0 100.0 100.0 94.9
-------- ------- ------- ------- ------- ------- -------
Total debt 1,212.8 1,378.1 1,305.8 1,330.3 1,091.5 1,199.2 1,218.0
======== ======= ======= ======= ======= ======= =======
Shareowner's equity 272.4 270.7 279.7 256.7 225.6 219.4 219.5
======== ======= ======= ======= ======= ======= =======
Debt to equity ratio 4.5:1 5.1:1 4.7:1 5.2:1 4.8:1 5.5:1 5.5:1
======== ======= ======= ======= ======= ======= =======
</TABLE>
<PAGE>
Exhibit 12.1
NAVISTAR FINANCIAL CORPORATION AND SUBSIDIARIES
COMPUTATION OF SENIOR DEBT TO CAPITAL FUNDS RATIO
<TABLE>
<CAPTION>
Six Months
Ended April 30 Year Ended October 31
----------------- -----------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
-------- -------- -------- -------- -------- -------- --------
(Millions of Dollars)
<S> <C> <C> <C> <C> <C> <C> <C>
Senior debt $1,112.8 $1,278.1 $1,205.8 $1,230.3 $ 991.5 $1,099.2 $1,123.1
======== ======== ======== ======== ======== ======== ========
Subordinated debt 100.0 100.0 100.0 100.0 100.0 100.0 94.9
-------- -------- -------- -------- -------- -------- --------
Shareowner's equity 272.4 270.7 279.7 256.7 225.6 219.4 219.5
======== ======== ======== ======== ======== ======== ========
Total capital funds 372.4 370.7 379.7 356.7 325.6 319.4 314.4
======== ======== ======== ======== ======== ======== ========
Senior debt to
capital funds ratio 3.0:1 3.4:1 3.2:1 3.4:1 3.0:1 3.4:1 3.6:1
======== ======== ======== ======== ======== ======== ========
</TABLE>
<PAGE>
Exhibit 12.1
NAVISTAR FINANCIAL CORPORATION AND SUBSIDIARIES
COMPUTATION OF RATIO OF EBITDA TO INTEREST EXPENSE
<TABLE>
<CAPTION>
Six Months
Ended April 30 Year Ended October 31
-------------- ------------------------------------------
1997 1996 1996 1995 1994 1993 1992
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
(Millions of Dollars)
Income before
income taxes & $37.1 $41.4 $ 80.5 $ 58.7 $ 55.2 $ 49.0 $ 46.4
cumulative
effect of
accounting
changes
Interest on
indebtedness 31.5 36.8 73.2 75.1 62.7 74.6 82.2
Depreciation and
amortization
expense 10.8 7.8 15.3 11.1 8.7 9.7 6.5
----- ----- ------ ------ ------ ------ ------
EBITDA $79.4 $86.0 $169.0 $144.9 $126.6 $133.3 $135.1
===== ===== ====== ====== ====== ====== ======
Interest expense $31.5 $36.8 $ 73.2 $ 75.1 $ 62.7 $ 74.6 $ 82.2
===== ===== ====== ====== ====== ====== ======
Ratio of EBITDA
to interest
expense 2.4x 2.1x 2.2x 1.8x 1.9x 1.7x 1.6x
===== ===== ====== ====== ====== ====== ======
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit 12.1
NAVISTAR FINANCIAL CORPORATION AND SUBSIDIARIES
COMPUTATION OF RATIO OF EBITDA TO FIXED CHARGES*
Six Months
Ended April 30 Year Ended October 31
-------------- ------------------------------------------
1997 1996 1996 1995 1994 1993 1992
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
(Millions of Dollars)
Income before
income taxes
& cumulative
effect of
accounting
changes $ 37.1 $ 41.4 $ 80.5 $ 58.7 $ 55.2 $ 49.0 $ 46.4
Interest on
indebtedness 31.5 36.8 73.2 75.1 62.7 74.6 82.2
Depreciation and
amortization
expense
(excluding
amortization of
debt issuance
expense) 10.0 4.8 11.6 6.5 4.8 6.8 3.6
Amortization of
debt issuance
expense 0.8 3.0 3.7 4.6 3.9 2.9 2.9
Interest included
in rental
expense 0.3 0.3 0.6 0.7 0.7 0.7 0.7
------ ------ ------ ------ ------ ------ ------
EBITDA $ 79.7 $ 86.3 $169.6 $145.6 $127.3 $134.0 $137.4
====== ====== ====== ====== ====== ====== ======
Fixed charges:
Interest on
indebtedness $ 31.5 $ 36.8 $ 73.2 $ 75.1 $ 62.7 $ 74.6 $ 82.2
Amortization of
debt issuance
expense $ 0.8 $ 3.0 $ 3.7 $ 4.6 $ 3.9 $ 2.9 $ 2.9
Interest
included in
rental
expense $ 0.3 $ 0.3 $ 0.6 $ 0.7 $ 0.7 $ 0.7 $ 0.7
------ ------ ------ ------ ------ ------ ------
Total fixed
charges $ 32.6 $ 40.1 $ 77.5 $ 80.4 $ 67.3 $ 78.2 $ 85.8
====== ====== ====== ====== ====== ====== ======
Ratio of EBITDA
to fixed
charges 2.4x 2.1x 2.2x 1.8x 1.9x 1.7x 1.6x
====== ====== ====== ====== ====== ====== ======
</TABLE>
* Calculated in accordance with the covenant regarding maintenance of
consolidated fixed charge coverage ratio contained in the Indenture.
<PAGE>
Exhibit 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of Navistar Financial
Corporation on Form S-2 of our report dated December 16, 1996, included in the
Annual Report on Form 10-K of Navistar Financial Corporation for the year ended
October 31, 1996, and to the use of our report dated December 16, 1996,
appearing in the Prospectus, which is part of this Registration Statement.
We also consent to the reference to us under the headings "Selected Consolidated
Financial Data for the Company," "Selected Consolidated Financial Data for
Navistar International Corporation" and "Experts" in such Prospectus.
Deloitte & Touche LLP
Chicago, Illinois
June 26, 1997
