<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 5, 1998
REGISTRATION NO. 333-47063
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
PRE-EFFECTIVE AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
NAVISTAR INTERNATIONAL CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
---------------
DELAWARE 3711 36-3359573
(STATE OR OTHER (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
JURISDICTION OF CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
INCORPORATION OR
ORGANIZATION)
455 NORTH CITYFRONT PLAZA
CHICAGO, ILLINOIS 60611
TELEPHONE: (312) 836-2000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL OFFICES)
ROBERT A. BOARDMAN
SENIOR VICE PRESIDENT AND GENERAL COUNSEL
455 NORTH CITYFRONT PLAZA
CHICAGO, ILLINOIS 60611
TELEPHONE: (312) 836-2000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPY TO:
DENNIS M. MYERS, ESQ.
KIRKLAND & ELLIS
200 EAST RANDOLPH DRIVE
CHICAGO, ILLINOIS 60601
(312) 861-2000
---------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, please 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. [_]
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 WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<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. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
PROSPECTUS
NAVISTAR INTERNATIONAL CORPORATION
OFFER TO EXCHANGE ITS SERIES B 7% SENIOR NOTES DUE 2003 FOR ANY AND ALL OF ITS
OUTSTANDING 7% SENIOR NOTES DUE 2003 AND TO EXCHANGE ITS SERIES B 8% SENIOR
SUBORDINATED NOTES DUE 2008 FOR ANY AND ALL OF ITS OUTSTANDING 8% SENIOR
SUBORDINATED NOTES DUE 2008.
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON APRIL 6,
1998, UNLESS EXTENDED.
Navistar International Corporation, a Delaware corporation ( the "NIC"),
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: (i) $1,000 principal
amount of its Series B 7% Senior Notes due 2003 (the "Senior Exchange Notes"),
which will have been 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 7%
Senior Notes due 2003 (the "Old Senior Notes"), of which $100,000,000 principal
amount is outstanding; and (ii) $1,000 principal amount of its Series B 8%
Senior Subordinated Notes due 2008 (the "Senior Subordinated Exchange Notes"
and, together with the Senior Exchange Notes, the "Exchange Notes"), which will
have been registered under the Securities Act pursuant to a Registration
Statement of which this Prospectus is a part, for each $1,000 principal amount
of its outstanding 8% Senior Subordinated Notes due 2008 (the "Old Senior
Subordinated Notes" and, together with the Old Senior Notes, the "Old Notes"),
of which $250,000,000 principal amount is outstanding. The form and terms of
the Exchange Notes are the same as the form and term of the Old Notes (which
they replace) except that (i) the Exchange Notes will bear a Series B
designation and a different CUSIP Number from the Old Notes, (ii) will have
been registered under the Securities Act and, therefore, will not bear legends
restricting its transfer thereof, and (iii) will not contain certain provisions
relating to an increase in the interest rate which were included in the terms
of the Old Notes in certain circumstances relating to the timing of the
Exchange Offer. The Senior Exchange Notes will evidence the same debt as the
Old Senior Notes (which they replace) and will be issued under and be entitled
to the benefits of the Indenture governing the Old Senior Notes dated February
4, 1998 (the "Senior Notes Indenture") among NIC and Harris Trust and Savings
Bank, as trustee (the "Senior Notes Trustee"). The Senior Subordinated Exchange
Notes will evidence the same debt as the Old Senior Subordinated Notes (which
they replace) and will be issued under and entitled to the benefits of the
Indenture governing the Old Senior Subordinated Notes dated February 4, 1998
(the "Senior Subordinated Notes Indenture" and, together with the Senior Notes
Indenture, the "Indentures") among NIC and the Harris Trust and Savings Bank,
as trustee (the "Senior Subordinated Notes Trustee" and together with the
Senior Notes Trustee, the "Trustees" and individually each a "Trustee"). See
"The Exchange Offer" and "Description of the Notes."
The Old Senior Notes and Senior Exchange Notes are sometimes collectively
referred to herein as the "Senior Notes," the Old Senior Subordinated Notes and
the Senior Subordinated Exchange Notes are sometimes collectively referred to
herein as the "Senior Subordinated Notes" and the Senior Notes and Senior
Subordinated Notes are sometimes collectively referred to herein as the
"Notes."
NIC 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 April 6, 1998, unless
extended by NIC in its sole discretion (the "Expiration Date"). In order to
extend the Exchange Offer, NIC will notify the Exchange Agent of any extension
by oral or writte n notice and will mail to the registered holders,
including the holders who previously tendered their Old
(Cover page continued on following page)
----------
SEE "RISK FACTORS" BEGINNING ON PAGE 20 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.
<PAGE>
(Continued from cover page)
Notes, 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. 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."
The Old Notes were sold by NIC on February 4, 1998 to the respective Initial
Purchasers (as defined) in transactions not registered under the Securities
Act in reliance upon an exemption under the Securities Act (the "Initial
Offerings"). The Initial Purchasers subsequently placed the Old Notes with (i)
qualified institutional buyers in reliance upon Rule 144A under the Securities
Act and (ii) 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 NIC
under the Registration Rights Agreements entered into by NIC and the
respective Initial Purchasers in connection with the Initial Offerings (the
"Registration Rights Agreements"). See "The Exchange Offer."
The Senior Notes are not redeemable at the option of NIC prior to maturity.
The Senior Subordinated Notes are redeemable, in whole or in part, at the
option of NIC at any time on or after February 1, 2003 at the redemption
prices set forth herein, together with accrued and unpaid interest, if any, to
the date of redemption. In addition, prior to February 1, 2001, NIC may, at
its option, redeem up to 35% of the original principal amount of the Senior
Subordinated Notes at 108.0% of the principal amount thereof, plus accrued and
unpaid interest, if any, to the applicable redemption date, with the net cash
proceeds of one or more Public Equity Offerings (as defined). Upon the
occurrence of a Change of Control (as defined), each holder of Notes may
require NIC to purchase all or a portion of such holder's Notes at a purchase
price equal to 101% of the aggregate principal amount thereof plus accrued and
unpaid interest, if any, to the date of purchase.
The Senior Notes are unsecured senior obligations of NIC, ranking pari passu
in right of payment with all existing and future unsubordinated Indebtedness
of NIC, and rank senior in right of payment to all existing and future
subordinated Indebtedness (as defined) of NIC, including the Senior
Subordinated Notes. The Senior Subordinated Notes are unsecured senior
subordinated obligations of NIC, ranking subordinate in right of payment to
all existing and future Senior Indebtedness (as defined) of NIC, including the
Senior Notes, and ranking pari passu in right of payment with all existing and
future senior subordinated Indebtedness of NIC and senior in right of payment
in all existing and future subordinated Indebtedness of NIC. As of October 31,
1997, after giving pro forma effect to the Initial Offerings and the
application of the net proceeds therefrom, NIC would have had $350 million of
total Indebtedness outstanding, of which $250 million would have been
subordinated Indebtedness and $100 million would have ranked senior in right
of payment of the Senior Subordinated Notes. In addition, the Senior Notes and
Senior Subordinated Notes are effectively subordinated to all existing and
future liabilities of the subsidiaries of NIC. As of October 31, 1997, after
giving pro forma effect to the Initial Offerings and the application of the
net proceeds therefrom, the amount of liabilities of such subsidiaries
(including trade payables) would have been approximately $4,431 million. See
"Description of the Notes."
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, NIC believes that the Exchange Notes issued pursuant to the
Exchange Offer in exchange for the 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 NIC 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 NIC, as required by the Registration Rights Agreements, 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
2
<PAGE>
(Continued from cover page)
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. NIC 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 within 30 days
after the consummation of the Exchange Offer of his status as a Participating
Broker-Dealer). See "Plan of Distribution."
NIC will not receive any proceeds from the Exchange Offer. NIC has agreed to
bear the expenses of the Exchange Offer which are estimated to be
approximately $300,000. 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. NIC 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.
The Exchange Notes will be available initially only in book-entry form.
Except as described under "Description of the Notes--Book-Entry; Delivery and
Form," NIC expects that the Exchange Notes issued pursuant to the Exchange
Offer will be represented by a Global Note (as defined), which will be
deposited with, or on behalf of, The Depository Trust Company (the
"Depository") and registered in its name or in the name of Cede & Co., its
nominee. Beneficial interests in the Global Note representing the Exchange
Notes will be shown on, and transfers thereof will be effected through,
records maintained by the Depository and its participants. After the initial
issuance of the Global Note, Notes in certificated form will be issued in
exchange for the Global Note only under limited circumstances as set forth in
the Indenture. See "Description of the Notes--Book-Entry; Delivery and Form."
The date of this Prospectus is March 5, 1998.
(End of cover page)
3
<PAGE>
FORWARD-LOOKING STATEMENTS
THIS PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF
SECTION 27A OF THE SECURITIES ACT. DISCUSSIONS CONTAINING SUCH FORWARD-LOOKING
STATEMENTS MAY BE FOUND IN THE MATERIAL SET FORTH UNDER "PROSPECTUS SUMMARY,"
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION" AND "BUSINESS" AS WELL AS WITHIN THIS PROSPECTUS GENERALLY. IN
ADDITION, WHEN USED IN THIS PROSPECTUS, THE WORDS "ANTICIPATES," "EXPECTS,"
"ESTIMATES," "INTENDS" AND SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY
FORWARD-LOOKING STATEMENTS. SUCH STATEMENTS ARE SUBJECT TO A NUMBER OF RISKS
AND UNCERTAINTIES. ACTUAL RESULTS IN THE FUTURE COULD DIFFER MATERIALLY FROM
THOSE DESCRIBED IN THE FORWARD-LOOKING STATEMENTS AS A RESULT OF THE RISK
FACTORS SET FORTH HEREIN AND THE OTHER MATTERS SET FORTH IN THIS PROSPECTUS.
NIC UNDERTAKES NO OBLIGATION TO RELEASE THE RESULTS OF ANY REVISIONS TO THESE
FORWARD-LOOKING STATEMENTS THAT MAY BE MADE TO REFLECT ANY FUTURE EVENTS OR
CIRCUMSTANCES.
STATISTICAL AND MARKET DATA
MARKET DATA USED THROUGHOUT THIS PROSPECTUS WERE OBTAINED FROM INTERNAL
ESTIMATES AND INDUSTRY PUBLICATIONS, INCLUDING THOSE GENERATED BY THE AMERICAN
AUTOMOBILE MANUFACTURERS ASSOCIATIONS IN THE UNITED STATES AND CANADA, THE
UNITED STATES MOTOR VEHICLE MANUFACTURERS ASSOCIATION, R. L. POLK & COMPANY
AND POWER SYSTEMS RESEARCH OF MINNEAPOLIS, MINNESOTA AS WELL AS OTHER SOURCES.
THESE SOURCES GENERALLY STATE THAT THE INFORMATION CONTAINED THEREIN HAS BEEN
OBTAINED FROM SOURCES BELIEVED TO BE RELIABLE, BUT THAT THE ACCURACY AND
COMPLETENESS OF SUCH INFORMATION IS NOT GUARANTEED. NIC HAS NOT INDEPENDENTLY
VERIFIED SUCH MARKET DATA OR OBTAINED THE CONSENT OF ANY OF THE INDUSTRY
PUBLICATIONS REFERENCED HEREIN.
AVAILABLE INFORMATION
NIC has filed with the Commission a Registration Statement on Form S-4 (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 NIC 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. NIC files periodic
reports and other information pursuant to the requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). The Exchange Offer
Registration Statement, including the exhibits thereto, and periodic reports
and other information filed by NIC 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 60601. 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
4
<PAGE>
of such site is http://www.sec.gov. NIC's Common Stock is listed on the New
York, Chicago and Pacific Stock Exchanges. Reports and other information can
be inspected at the offices of the New York Stock Exchange, 20 Broad Street,
New York, New York 10005; the Chicago Stock Exchange at One Financial Plaza,
440 South LaSalle Street, Chicago, Illinois 60605; and the Pacific Stock
Exchange at 301 Pine Street, San Francisco, California 94104.
In addition, NIC 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 Old Notes or
Exchange Notes remain outstanding, it will furnish to the registered holders
of the Old Notes or the Exchange 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 NIC 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 NIC'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 Old Notes remain outstanding, NIC has agreed to make available to any
prospective purchaser of the Old Notes or beneficial owner of the Old 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. THE COMPANY HEREBY UNDERTAKES TO PROVIDE WITHOUT
CHARGE TO EACH PERSON TO WHOM A COPY OF THIS PROSPECTUS HAS BEEN DELIVERED,
UPON WRITTEN OR ORAL REQUEST OF SUCH PERSON, A COPY OF ANY OR ALL OF THE
DOCUMENTS INCORPORATED BY REFERENCE. THESE DOCUMENTS ARE AVAILABLE UPON
REQUEST FROM CORPORATE TREASURER, NAVISTAR INTERNATIONAL CORPORATION, 455
NORTH CITYFRONT PLAZA, CHICAGO, ILLINOIS 60611, TELEPHONE: (312) 836-2000. IN
ORDER TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS, ANY REQUEST SHOULD BE MADE
BY MARCH 30, 1998 (FIVE BUSINESS DAYS PRIOR TO THE EXPIRATION DATE).
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents filed by NIC with the Commission pursuant to the
Exchange Act (File No. 1-9618) are incorporated herein by reference:
1. Annual Report on Form 10-K for the fiscal year ended October 31, 1997.
2. Proxy Statement, dated February 2, 1998.
All reports and other documents filed by NIC pursuant to Sections 13(a),
13(c), 14 and 15(d) of the Exchange Act, 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
Exchange Offer Registration Statement.
5
<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 the documents incorporated by
reference in this Prospectus. Unless the context otherwise requires or as
otherwise specified herein, all references herein to "Navistar" or the
"Company" refer to Navistar International Corporation and its subsidiaries,
including its principal operating subsidiary, Navistar International
Transportation Corp. ("Transportation"). The fiscal years of the Company 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, 1997 is
referred to as "fiscal 1997."
THE COMPANY
Navistar 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. The Company
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. In addition,
Navistar 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 ("OEMs") in the United States and Canada. The Company
offers a full line of mid-range diesel engines and is the leading supplier of
such engines in the 160-300 horsepower range. In fiscal 1997, the Company's
manufacturing operations had revenues of $6,147 million and EBITDA (as defined)
of $268 million.
Navistar markets its truck products and service parts through the largest
retail organization in North America specializing in medium and heavy trucks,
which at October 31, 1997, included 992 dealers and retail outlets. Service and
customer support are also supplied at these locations. In the United States and
Canada, Navistar operates seven regional parts distribution centers which allow
24-hour availability and same day shipment of parts most frequently requested
by dealers and customers. To better serve the growing Mexican market, the
Company established a Mexican distribution network in 1996 and began
construction of a new truck assembly facility located near Monterrey, Mexico in
1997. Through Navistar Financial Corporation ("NFC"), 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 the Company and Navistar's dealers.
NFC also finances wholesale accounts and selected retail accounts receivable of
the Company.
COMPETITIVE STRENGTHS
The Company believes its key competitive strengths include the following:
Leading Market Position. The Company has been the leader in the combined
market share for Class 5 through 8 trucks, including school buses, in the
United States and Canada in each of its last 17 fiscal years. In fiscal 1997,
the Company's combined market share of the Class 5 through 8 truck market was
28.6%, a 1.1 percentage point increase in market share from the previous year.
For each of the last five fiscal years, the Company has been the leader in the
medium truck and school bus markets. In addition, the Company believes that it
is the largest supplier of replacement parts to the heavy and medium truck and
bus aftermarkets.
Commitment to Customer Satisfaction. In order to achieve high customer
satisfaction, the Company maintains the largest retail organization in North
America specializing in medium and heavy trucks. In addition, the Company
operates seven regional parts distribution centers in the United States and
Canada, enabling it to offer 24-hour availability and same day shipment of the
parts most frequently requested by customers. In 1997,
- -------------------------------------------------------------------------------
6
<PAGE>
- -------------------------------------------------------------------------------
Navistar was ranked number one for the third consecutive year by the annual
American Truck Dealers ("ATD") Attitude Survey, which evaluates OEMs on quality
and performance issues related to products, parts, policies and service.
Largest Supplier of Mid-Range Diesel Engines. The Company is the leading
supplier of mid-range diesel engines in the 160-300 horsepower range and is
currently the exclusive supplier of diesel engines to The Ford Motor Company
("Ford") for use in its diesel-powered light trucks and vans. On October 29,
1997, the Company finalized its agreement with Ford to supply newly-designed,
advanced technology engines through the year 2012 for use in Ford's F-series
pickup trucks and Econoline vans. This 10-year agreement is scheduled to become
effective beginning with model year 2003 and will replace the Company's current
agreement with Ford, which will expire after model year 2002. The Company has
been supplying diesel engines to Ford since 1982.
TRUCK STRATEGY
In fiscal 1997, the Company continued to implement its five-point truck
strategy, which the Company adopted in fiscal 1996 in order 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 17.5% after tax return on equity over
a business cycle. The principal components of this strategy as well as recent
achievements in its implementation include:
. Reduce Product Complexity. The Company 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. In 1997, Transportation
expanded its Diamond Spec(TM) ordering system and completed a successful
pilot program in 11 key markets for its medium trucks. This
standardization of option and chassis groups is expected to lead to
significant operating cost savings from increased manufacturing
efficiency and to 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.
. Focus Manufacturing Facilities. The Company 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. In order to sharpen the Company's focus on serving its
customers and markets, the Company recently announced a reorganization of
its truck group into six distinct businesses. The new organization will
consist of four vehicle centers--heavy truck, severe service truck,
medium truck and school bus, and two business centers--parts and
international. In fiscal 1996, Transportation transferred the production
of its stripped chassis from its Springfield, Ohio facility to its
Conway, Arkansas facility, in order to achieve efficiencies in the
production of medium duty trucks. Similarly, the Company established a
joint venture, 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. The Company believes that each of its
current truck models equals or exceeds those of its competitors in terms
of satisfying its customers' needs. Nevertheless, the Company 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 1997, Navistar's Board of Directors approved funding for its next
generation truck program (the "NGT Program"). Pursuant to the NGT
Program, the
- -------------------------------------------------------------------------------
7
<PAGE>
- -------------------------------------------------------------------------------
Company expects to make $350 million in capital expenditures and spend
$300 million in development costs over the next six years to develop and
manufacture a full line of world-class medium trucks, school buses and
regular conventional heavy trucks. These new models will offer enhanced
driver comfort, operating efficiency, overall appearance, quality and
performance. The design and development phases of the NGT Program are
currently underway and the Company expects the first new vehicles to be
available in mid-2001, with additional new vehicles to follow
approximately every six months through 2003. In 1997, Transportation also
introduced the International(R) 9100 conventional truck to replace the
International(R) 8200 conventional truck and made significant improvements
to its premium conventional models. Further model improvements are
expected to be introduced for Transportation's premium conventional heavy
duty truck models in fiscal 1998.
. Expand International Operations. The Company believes that there are
significant opportunities to increase sales of both trucks and engines in
Mexico and in other selected export markets. In 1997, the Company
captured approximately 11.5% of the Mexican truck market after
establishing a dealer network and a parts distribution center and
arranging for production at a contract manufacturer in 1996. The
Company's dealer network in Mexico was expanded from 23 to 38 locations
in 1997. The Company is currently constructing an assembly facility
located near Monterrey, Mexico. This medium duty and heavy duty truck
facility is anticipated to cost approximately $167 million and to begin
production by late 1998. Its capacity will be 65 units per shift. The
Company 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. The Company has also recently established a
presence in Brazil by forming a Brazilian subsidiary and signing an
agreement with a Brazilian equipment manufacturer to assemble commercial
trucks. The Company expects that production of its trucks in Brazil will
begin in late 1998.
. Establish Competitive Wage, Benefit and Productivity Levels.
Transportation expects to achieve significant productivity gains as a
result of favorable changes in job classifications, work rules and
training. In August 1997, Transportation's collective bargaining
agreement with the United Automobile, Aerospace & Agricultural Implement
Workers of America (the "UAW") was extended through October 1, 2002. This
contract contains significant changes from the prior agreement, enabling
the Company to better focus its assembly plants, simplify current product
lines, invest in new product development and
achieve more competitive wage, benefit and productivity levels. This new
agreement enabled the Company to reinstate its NGT Program and continue to
implement its five-point truck strategy. In 1996, Transportation signed a
new three-year collective bargaining agreement with the Canadian Auto
Workers (the "CAW").
The Company's principal executive office is located at 455 North Cityfront
Plaza Drive, Chicago, Illinois 60611, and its telephone number is (312) 836-
2000.
- -------------------------------------------------------------------------------
8
<PAGE>
- -------------------------------------------------------------------------------
THE INITIAL OFFERINGS
Senior Notes.................... The Old Senior Notes were sold by the
Company on February 4, 1998 to J.P.
Morgan Securities Inc., Credit Suisse
First Boston Corporation and Chase
Securities Inc. (the "Senior Notes
Initial Purchasers"), pursuant to a
Purchase Agreement dated January 30, 1998
(the "Senior Notes Purchase Agreement").
The Senior Notes Initial Purchasers
subsequently resold the Old Senior Notes
to qualified institutional buyers
pursuant to Rule 144A under the
Securities Act.
Senior Subordinated Notes....... The Old Senior Subordinated Notes were
sold by the Company on February 4, 1998
to J.P. Morgan Securities Inc., Credit
Suisse First Boston Corporation, Chase
Securities Inc., BancAmerica Robertson
Stephens and NationsBanc Montgomery
Securities L.L.C. (the "Senior
Subordinated Notes Initial Purchasers"
and together with the Senior Notes
Initial Purchasers, the "Initial
Purchasers") pursuant to a Purchase
Agreement dated January 30, 1998 (the
"Senior Subordinated Notes Purchase
Agreement" and together with the Senior
Notes Purchase Agreement, the "Purchase
Agreements"). The Senior Subordinated
Notes Initial Purchasers subsequently
resold the Old Senior Subordinated Notes
to (i) qualified institutional buyers
pursuant to Rule 144A under the
Securities Act and (ii) qualified buyers
outside the United States in reliance
upon Regulation S under the Securities
Act.
Registration Rights Agreements.. Pursuant to the Purchase Agreements, the
Company and each of the respective
Initial Purchasers entered into the
Registration Rights Agreements, each
dated as of February 4, 1998, each of
which grants the holder of the Old Notes
certain exchange and registration rights.
The Exchange Offer is intended to satisfy
such exchange rights which terminate upon
the consummation of the Exchange Offer.
THE EXCHANGE OFFER
Securities Offered:
Senior Notes.................. $100,000,000 aggregate principal amount
of Series B 7% Senior Notes due 2003.
Senior Subordinated Notes..... $250,000,000 aggregate principal amount
of Series B 8% Senior Subordinated Notes
due 2008.
The Exchange Offer.............. $1,000 principal amount of the Senior
Exchange Notes in exchange for each
$1,000 principal amount of Old Senior
Notes. As of the date hereof,
$100,000,000 aggregate principal amount
of Old Senior Notes are outstanding.
$1,000 principal amount of the Senior
Subordinated Exchange Notes in
- -------------------------------------------------------------------------------
9
<PAGE>
- --------------------------------------------------------------------------------
exchange for each $1,000 principal amount
of Old Senior Subordinated Notes. As of
the date hereof, $250,000,000 aggregate
principal amount of Old Senior
Subordinated Notes are outstanding. 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 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 which is an "affiliate" of
the Company within the meaning of Rule
405 under the Securities Act) without
compliance with the registration and
prospectus delivery provisions of the
Securities Act, provided 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.
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 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
(provided that the Company receive notice
from such Participating Broker-Dealer
within 30 days after the consummation of
the Exchange Offer of his status as a
Participating Broker-Dealer). 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 Exchange Notes could
not rely on the position of the staff of
the Commission enunciated in no-action
letters and, in the absence of an
exemption therefrom, must
- --------------------------------------------------------------------------------
10
<PAGE>
comply with the registration and
prospectus delivery requirements of the
Securities Act in connection with any
resale transaction. 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 April
6, 1998 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. 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, including the holders
who previously tendered their Old Notes,
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.
Accrued Interest on the
Exchange Notes and the Old
Notes.......................... Each Exchange Note will bear interest
from its issuance date. Holders of Old
Notes that are accepted for exchange will
receive, in cash, 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.
Interest on the Old Notes accepted for
exchange will cease to accrue upon
issuance of the Exchange Notes.
Conditions to the Exchange The Exchange Offer is subject to certain
Offer.......................... customary conditions, which may be waived
by the Company in its reasonable
discretion. See "The Exchange Offer--
Conditions."
Procedures for Tendering Old Each holder of Old Notes wishing to
Notes.......................... accept the Exchange Offer must complete,
sign and date the accompanying Letter of
Transmittal, or a facsimile thereof or
transmit an Agent's Message (as defined
herein) in connection with a book-entry
transfer, in accordance with the
instructions contained herein and
therein, and mail or otherwise deliver
such Letter of Transmittal, or such
facsimile, or 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 herein. By executing the Letter of
Transmittal or Agent's Message, each
holder will represent to the Company
that, among other things, the Exchange
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 defined under Rule 405 of
the Securities Act, of the Company. See
11
<PAGE>
"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 restrictions on transfer.
Accordingly, the liquidity of the market
for such Old Notes could be adversely
affected.
Consequences of Failure to The Old Notes that are not exchanged
Exchange....................... pursuant to the Exchange Offer will
remain restricted securities.
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 pursuant to some other
exemption under the Securities Act, (iii)
outside the United States to a foreign
person pursuant to the requirements of
Rule 904 under the Securities Act or (iv)
pursuant to an effective registration
statement under the Securities Act. See
"The Exchange Offer--Consequences of
Failure to Exchange."
Shelf Registration Statement.... If any holder of the Old Notes (other
than any such holder which is an
"affiliate" of the Company within the
meaning of Rule 405 under the Securities
Act) is not eligible under applicable
securities laws to participate in the
Exchange Offer, and such holder has
satisfied certain conditions relating to
the provision of information to the
Company for use therein, the Company has
agreed to register the Old Notes on a
shelf registration 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 consummation
of the Exchange Offer. The Company has
agreed to maintain the effectiveness of
the Shelf Registration Statement for,
under certain circumstances, a maximum of
two years, to cover resales of the Old
Notes held by any such holders.
Special Procedures for Any beneficial owner whose Old Notes are
Beneficial Owners.............. registered 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 behalf. 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 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 20 business days in
order to provide for the transfer of
registered ownership.
12
<PAGE>
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 Exchange 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 Exchange 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 delivered promptly following the
Expiration Date. See "The Exchange
Offer--Terms of the Exchange Offer."
Use of Proceeds................. There will be no cash proceeds to the
Company from the exchange pursuant to the
Exchange Offer.
Exchange Agent.................. Harris Trust and Savings Bank.
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 and a different CUSIP
Number from the Old Notes, (ii) the
Exchange Notes have been registered under
the Securities 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 Agreements, 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. 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 entitled to the benefits of the
respective Indentures. See "Description
of the Notes."
Maturity Dates:
Senior Notes.................. February 1, 2003.
Senior Subordinated Notes..... February 1, 2008.
Interest Payment Dates.......... February 1 and August 1 of each year,
commencing August 1, 1998.
13
<PAGE>
- --------------------------------------------------------------------------------
Optional Redemption:
Senior Notes.................. The Senior Notes are not redeemable at
the option of NIC prior to maturity.
Senior Subordinated Notes..... The Senior Subordinated Notes are
redeemable, in whole or in part, at the
option of NIC at any time on or after
February 1, 2003 at the redemption prices
set forth herein, together with accrued
and unpaid interest, if any, to the date
of redemption. In addition, prior to
February 1, 2001, NIC may, at its option,
redeem up to 35% of the original
principal amount the Senior Subordinated
Notes at 108.0% of the principal amount
thereof, plus accrued and unpaid
interest, if any, to the applicable
redemption date, with the net cash
proceeds of one or more Public Equity
Offerings. See "Description of the
Notes--Optional Redemption."
Ranking:
Senior Notes.................. The Senior Notes are unsecured senior
obligations of NIC, ranking pari passu in
right of payment with all existing and
future unsubordinated Indebtedness of
NIC, and rank senior in right of payment
to all existing and future subordinated
Indebtedness of NIC, including the Senior
Subordinated Notes. As of October 31,
1997, after giving pro forma effect to
the Initial Offerings and the application
of the net proceeds therefrom, NIC would
have had $350 million of total
Indebtedness outstanding, of which $250
million would have been subordinated
Indebtedness.
Senior Subordinated Notes..... The Senior Subordinated Notes are
unsecured senior subordinated obligations
of NIC, ranking subordinate in right of
payment to all existing and future Senior
Indebtedness of NIC, including the Senior
Notes, and ranking pari passu in right of
payment to all existing and future senior
subordinated Indebtedness of NIC and
senior in right of payment to all
existing and future subordinated
Indebtedness of NIC. As of October 31,
1997, on a pro forma basis after giving
effect to the Initial Offerings and the
application of the net proceeds
therefrom, NIC would have had $350
million of total Indebtedness
outstanding, of which $100 million would
have ranked senior in right of payment to
the Senior Subordinated Notes.
In addition, the Senior Notes and Senior
Subordinated Notes are effectively
subordinated to all existing and future
liabilities of the subsidiaries of NIC.
As of October 31, 1997, after giving pro
forma effect to the Initial Offerings and
the application of the net proceeds
therefrom, the amount of liabilities of
such subsidiaries (including trade
payables) would have been approximately
$4,431 million. See "Description of the
Notes--Subordination of the Senior
Subordinated Notes; Ranking."
- --------------------------------------------------------------------------------
14
<PAGE>
- --------------------------------------------------------------------------------
Change of Control............... Upon the occurrence of a Change of
Control, each holder of Senior Notes and
the Senior Subordinated Notes may require
NIC to purchase all or a portion of such
holder's Senior Notes or Senior
Subordinated Notes, as the case may be, at
a purchase price equal to 101% of the
aggregate principal amount thereof, plus
accrued and unpaid interest, if any, to
the date of purchase. See "Description of
the Notes--Change of Control."
Certain Covenants............... The Indentures contain certain covenants
that, among other things, limit the
ability of NIC and its Restricted
Subsidiaries (as defined) to incur
additional indebtedness, pay dividends or
make certain other restricted payments,
engage in transactions with affiliates,
incur liens and engage in asset sales. The
Indentures also restrict the ability of
NIC and its Restricted Subsidiaries to
consolidate or merge with, or transfer all
or substantially all of their assets to,
another person. However, these limitations
are subject to a number of important
qualifications and exceptions. See
"Description of the Notes--Certain
Covenants."
After the Senior Notes have been assigned
an Investment Grade (as defined) rating,
NIC and its Restricted Subsidiaries will
no longer be subject to the provisions of
certain of the covenants listed above. See
"Description of the Notes--Certain
Covenants--Relating Only to the Senior
Notes--Application of Fall Away
Covenants."
Use of Proceeds:
Senior Notes.................. The net proceeds from the sale of the
Senior Notes were used to repay certain
outstanding indebtedness of Transportation
and for general corporate purposes.
Senior Subordinated Notes..... The net proceeds from the sale of the
Senior Subordinated Notes were used to
redeem all of NIC's Series G Convertible
Cumulative Preferred Stock. See "Use of
Proceeds."
RISK FACTORS
Holders of the Old Notes should carefully consider the specific matters set
forth under "Risk Factors" as well as the other information and data included
in this Prospectus before participating in the Exchange Offer.
- --------------------------------------------------------------------------------
15
<PAGE>
- --------------------------------------------------------------------------------
SUMMARY CONSOLIDATED FINANCIAL AND OPERATING DATA
The following table sets forth summary consolidated financial and operating
data of the Company and its consolidated subsidiaries for the periods
indicated. The Company's summary consolidated financial data was derived from
Navistar's consolidated financial statements and notes thereto. The summary
consolidated financial data set forth below is qualified in its entirety by and
should be read in conjunction with "Selected Consolidated Financial and
Operating Data," "Management's Discussion and Analysis of Results of Operations
and Financial Condition" and the Company's Consolidated Financial Statements
and notes thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED OCTOBER 31,
---------------------------------------
1997 1996 1995 1994 1993
------ ------ ------ ------ -------
(IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
SELECTED INCOME STATEMENT DATA:
Sales and revenues:
Sales of manufactured products. $6,147 $5,508 $6,125 $5,153 $ 4,510
Finance and insurance revenue
(1)........................... 174 197 167 152 181
Other income................... 50 49 50 32 30
------ ------ ------ ------ -------
Total sales and revenues..... 6,371 5,754 6,342 5,337 4,721
------ ------ ------ ------ -------
Costs and expenses:
Costs of products and services
sold.......................... 5,292 4,827 5,288 4,496 3,925
Other expenses (2)............. 763 739 705 608 1,146
Interest expense............... 74 83 87 75 91
------ ------ ------ ------ -------
Total costs and expenses..... 6,129 5,649 6,080 5,179 5,162
------ ------ ------ ------ -------
Income (loss) before income
taxes......................... 242 105 262 158 (441)
Income tax expense (benefit)... 92 40 98 56 (168)
------ ------ ------ ------ -------
Income (loss) of continuing
operations.................... 150 65 164 102 (273)
Loss of discontinued operations
(3)........................... -- -- -- (20) --
Cumulative effect of changes in
accounting policy (4)......... -- -- -- -- (228)
------ ------ ------ ------ -------
Net income (loss).............. $ 150 $ 65 $ 164 $ 82 $ (501)
====== ====== ====== ====== =======
Income (loss) of continuing
operations per common share (6)
Basic.......................... $ 1.66 $ .49 $ 1.83 $ .99 $ (8.63)
Diluted........................ $ 1.65 $ .49 $ 1.83 $ .99 $ (8.63)
Net income (loss) per common
share (6)
Basic.......................... $ 1.66 $ .49 $ 1.83 $ .72 $(15.19)
Diluted........................ $ 1.65 $ .49 $ 1.83 $ .72 $(15.19)
<CAPTION>
AT OCTOBER 31,
---------------------------------------
1997 1996 1995 1994 1993
------ ------ ------ ------ -------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C>
SELECTED BALANCE SHEET DATA:
Assets:
Manufacturing operations....... $4,111 $3,815 $4,018 $3,724 $ 3,645
Financial services operations.. 1,857 1,843 1,922 1,582 1,672
Eliminations................... (452) (332) (374) (259) (257)
------ ------ ------ ------ -------
Total assets................. $5,516 $5,326 $5,566 $5,047 $ 5,060
====== ====== ====== ====== =======
Debt:
Manufacturing operations....... $ 92 $ 115 $ 127 $ 127 $ 175
Financial services operations.. 1,224 1,305 1,330 1,091 1,199
------ ------ ------ ------ -------
Total debt................... $1,316 $1,420 $1,457 $1,218 $ 1,374
====== ====== ====== ====== =======
Preferred stock.................. $ 244 $ 244 $ 244 $ 244 $ 245
====== ====== ====== ====== =======
Total shareowners' equity........ $1,020 $ 916 $ 870 $ 817 $ 775
====== ====== ====== ====== =======
</TABLE>
- --------------------------------------------------------------------------------
16
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FISCAL YEAR ENDED OCTOBER 31,
------------------------------------------------
1997 1996 1995 1994 1993
------- ------- ------- ------- -------
(IN MILLIONS, EXCEPT MARKET SHARE
AND UNIT DATA)
<S> <C> <C> <C> <C> <C>
OTHER FINANCIAL AND OPERATING
DATA:
Capital expenditures.......... $ 172 $ 117 $ 139 $ 87 $ 110
Depreciation and amortization. 120 105 86 72 75
United States and Canadian
retail deliveries of trucks
and school buses............. 99,500 94,000 101,700 91,600 79,800
United States and Canadian
market share (5)............. 28.6% 27.5% 26.7% 27.0% 27.6%
Unit shipments:
Trucks and school buses..... 104,400 95,200 112,200 95,000 87,200
OEM engines................. 184,000 163,200 154,200 130,600 118,200
</TABLE>
- --------
(1) Includes revenues of NFC as well as the Company's other financial services
subsidiaries.
(2) The Company contributed approximately 25.6 million shares of its Class B
Common Stock valued at $513 million to the Supplemental Trust (as defined)
in 1993.
(3) The 1994 loss of discontinued operations resulted from a $20 million after
tax charge for environmental liabilities at production facilities of two
formerly owned businesses, Wisconsin Steel and Solar Turbine, Inc.
(4) 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.
(5) Based on retail deliveries of medium trucks (Classes 5, 6 and 7), including
school buses, and heavy 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.
(6) The net income (loss) per common share information for all periods
presented have been restated to reflect the new earnings per share
calculation required by Statement of Financial Accounting Standard No. 128
"Earnings Per Share." Income (loss) of continuing operations per common
share was computed as follows:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED OCTOBER 31,
----------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- -----
(IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Income (loss) of continuing operations........ $150 $ 65 $164 $102 $(273)
Less dividends on Series G Preferred Stock.... 29 29 29 29 29
---- ---- ---- ---- -----
Income (loss) of continuing operations
applicable to common stock (Basic and
Diluted)..................................... $121 $ 36 $135 $ 73 $(302)
==== ==== ==== ==== =====
Average shares outstanding (millions)
Basic........................................ 73.1 73.7 74.2 74.5 34.9
Dilutive effect of options outstanding..... .4 -- -- -- --
Conversion of Series D Preferred Stock..... .1 .1 .1 .1 --
---- ---- ---- ---- -----
Diluted...................................... 73.6 73.8 74.3 74.6 34.9
==== ==== ==== ==== =====
</TABLE>
Unexercised employee stock options to purchase shares of Navistar Common
Stock were not included in the diluted shares outstanding when the options'
exercise prices were greater than the average market price of Navistar
Common Stock during the respective periods. Additionally, the diluted
calculation excludes the effects of the conversion of the Series G
Preferred Stock as such conversion would produce anti-dilutive results. The
dilutive effect of options outstanding and the conversion of Series D
Preferred Stock were not included in 1993 diluted shares as such inclusion
would produce anti-dilutive results. Basic and diluted loss of discontinued
operations per common share in 1994 was $0.27. Basic and diluted loss from
the cumulative effect of changes in accounting policy per common share in
1993 was $6.56. In January of 1998, the Company repurchased approximately
3.2 million shares of its Class B Common Stock from the Supplemental Trust.
For the fiscal year ended October 31, 1997, after giving pro forma effect
to the Initial Offerings and the application of the net proceeds therefrom,
as if each had occurred as of the beginning of fiscal 1997 basic and
diluted income of continuing operations per common share and basic and
diluted net income per common share would have each been $1.93 and $1.92,
respectively.
- --------------------------------------------------------------------------------
17
<PAGE>
- --------------------------------------------------------------------------------
SUPPLEMENTAL UNAUDITED FINANCIAL INFORMATION
The following table sets forth certain unaudited supplemental financial
information of the Company (with the Company's financial services operations
set forth on an equity basis of accounting). The Company has included this
supplemental information to assist prospective investors in evaluating an
investment in the Notes. This information should not be considered in isolation
or as a substitute for the Company's financial data that has been prepared in
accordance with generally accepted accounting principles. The information set
forth herein should be read in conjunction with "Selected Consolidated
Financial and Operating Data," "Management's Discussion and Analysis of Results
of Operations and Financial Condition" and the Company's Consolidated Financial
Statements and the notes thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED OCTOBER 31,
------------------------------------------------
1997 1996 1995 1994 1993
------------------- ------ ------ ------ ------
PRO FORMA(1) ACTUAL
------------ ------
(IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
SELECTED CONDENSED STATEMENT
OF INCOME:
Sales of manufactured
products.................... $6,147 $6,147 $5,508 $6,125 $5,153 $4,510
Other income................. 44 44 42 43 25 16
------ ------ ------ ------ ------ ------
Total sales and
revenues.............. 6,191 6,191 5,550 6,168 5,178 4,526
------ ------ ------ ------ ------ ------
Cost of products sold........ 5,270 5,274 4,818 5,280 4,494 3,919
Other expenses (2)........... 744 746 704 679 576 1,097
Interest expense............. 27 7 6 9 10 12
------ ------ ------ ------ ------ ------
Total costs and
expenses.............. 6,041 6,027 5,528 5,968 5,080 5,028
------ ------ ------ ------ ------ ------
Income (loss) before income
taxes
Manufacturing operations... 150 164 22 200 98 (502)
Financial services
operations................ 78 78 83 62 60 61
------ ------ ------ ------ ------ ------
Income (loss) before
income taxes.......... 228 242 105 262 158 (441)
Income tax expense (benefit). 87 92 40 98 56 (168)
------ ------ ------ ------ ------ ------
Income (loss) of continuing
operations.................. 141 150 65 164 102 (273)
Loss of discontinued
operations (3).............. -- -- -- -- (20) --
Cumulative effect of changes
in
accounting policy (4)....... -- -- -- -- -- (228)
------ ------ ------ ------ ------ ------
Net income (loss)............ 141 150 65 164 82 (501)
Less dividends on Series G
preferred stock............. -- 29 29 29 29 29
------ ------ ------ ------ ------ ------
Net income (loss) applicable
to common stock............. $ 141 $ 121 $ 36 $ 135 $ 53 $ (530)
====== ====== ====== ====== ====== ======
<CAPTION>
AT OCTOBER 31,
------------------------------------------------
1997 1996 1995 1994 1993
------------------- ------ ------ ------ ------
AS
ADJUSTED(5) ACTUAL
------------ ------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
SELECTED CONDENSED BALANCE
SHEET DATA:
Cash, cash equivalents and
marketable securities....... $ 829 $ 802 $ 707 $ 876 $ 665 $ 462
Property and equipment, net.. 706 706 666 642 549 608
Total assets................. 4,145 4,111 3,815 4,018 3,724 3,645
Postretirement benefits
liabilities................. 1,178 1,178 1,344 1,334 1,292 1,345
Total debt................... 371 92 115 127 127 175
Total shareowners' equity.... 780 1,020 916 870 817 775
</TABLE>
- --------------------------------------------------------------------------------
18
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FISCAL YEAR ENDED OCTOBER 31,
---------------------------------------
1997 1996 1995 1994 1993
--------------- ---- ---- ---- -----
PRO
FORMA(1) ACTUAL
-------- ------
(IN MILLIONS, EXCEPT RATIOS)
<S> <C> <C> <C> <C> <C> <C>
OTHER FINANCIAL DATA:
EBITDA (6)............................. $274 $268 $118 $284 $176 $(421)
Dividends received from NFC............ 40 40 26 9 26 23
Cash provided by (used in):
Operations........................... NA 438 -- 400 280 192
Investment programs.................. NA (241) 39 (378) (46) (509)
Financing activities................. NA (76) (48) (60) (112) 472
Ratio of EBITDA to interest expense.... 10.1x 38.3x 19.7x 31.6x 17.6x
Ratio of total debt to EBITDA (7)...... 1.4x 0.3x 1.0x 0.4x 0.7x
</TABLE>
- --------
(1) Gives pro forma effect to the Initial Offerings and the application of the
net proceeds therefrom as if each had occurred as of the beginning of
fiscal 1997. Pro forma adjustments include: (i) a net increase in interest
expense of $20 million; (ii) a corresponding reduction in cost of products
sold and other expense of an aggregate $6 million due to lower profit-
sharing expense; (iii) a corresponding decrease in income tax expense of $5
million; and (iv) the elimination of dividends paid on the Series G
Convertible Cumulative Preferred Stock of $29 million. The pro forma
information does not purport to represent what the Company's results of
operations actually would have been if the Initial Offerings had actually
occurred as of such dates or what such results will be for any future
periods.
(2) The Company contributed approximately 25.6 million of shares of its Class B
Common Stock valued at $509 million to the Supplemental Trust in 1993.
(3) The 1994 loss of discontinued operations resulted from a $20 million after
tax charge for environmental liabilities at production facilities of two
formerly owned businesses, Wisconsin Steel and Solar Turbine, Inc.
(4) In the third quarter of 1993, the Company adopted SFAS 106 and SFAS 109,
retroactive to November 1, 1992.
(5) Gives effect to the sale of the Old Notes in the Initial Offerings and the
application of the net proceeds therefrom as if each had occurred on
October 31, 1997. See "Capitalization."
(6) EBITDA represents income from manufacturing 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.
(7) For the purpose of this ratio, total debt was calculated in the pro forma
column by giving effect to the sale of the Old Notes in the Initial
Offerings and the application of the net proceeds therefrom as if each had
occurred on October 31, 1997.
- --------------------------------------------------------------------------------
19
<PAGE>
RISK FACTORS
Holders of the Old Notes should carefully consider the following factors in
addition to the other information contained in this Prospectus. 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.
MARKET AND GENERAL ECONOMIC CONDITIONS
Navistar's ability to be profitable depends in part on the varying
conditions in the medium and heavy truck, mid-range diesel engine and service
parts markets. See "Business." The truck markets in which the Company competes
are subject to considerable volatility. Such markets move in response to
cycles in the overall business environment and are particularly sensitive to
the industrial sector, which generates a significant portion of the freight
tonnage hauled. Truck and engine demand also depend on general economic
conditions, interest rate levels and fuel costs.
COMPETITION
The North American truck market, in which Navistar competes, is highly
competitive. Navistar's 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, well-capitalized manufacturers
from Japan (Hino, Isuzu, Nissan, Mitsubishi) are attempting to increase their
North American sales levels. The intensity of this competition, which is
expected to continue, results in price discounting and margin pressures
throughout the industry and adversely affects Navistar's ability to increase
or maintain vehicle prices. Many of Navistar's competitors have greater
financial resources, which may place Navistar at a competitive disadvantage in
responding to substantial industry changes, such as changes in governmental
regulations that require major additional capital expenditures. In addition,
certain of Navistar's competitors may have lower overall labor costs.
FUTURE CAPITAL REQUIREMENTS
Navistar has announced plans for approximately $350 million in capital
spending over the next six years for the NGT Program. Capital expenditures for
fiscal 1998 are expected to be approximately $370 million, of which $25
million is to be spent for the NGT Program. Additional capital expenditures
are planned for the completion of the truck assembly facility in Mexico,
increased manufacturing capacity at the Indianapolis engine plant,
commencement of truck operations in Brazil and improvements to existing
facilities and products. Navistar's investment in the NGT Program will also
include $300 million in development expense over the next six years, of which
approximately $50 million is planned for 1998.
The Company will be required to make substantial cash expenditures over the
next several years to implement its NGT Program and to meet its other capital
expenditure and development objectives. Historically, Navistar has relied on
cash balances and cash provided by operations to meet its funding
requirements. The amount of cash generated by Navistar's business varies with
industry volumes in the medium and heavy truck markets. No assurance can be
given that Navistar will have the cash balances necessary to implement its NGT
Program and to meet its other capital requirements or that financing will be
available or, if available, that it will be available on satisfactory terms.
The future availability of financing will depend on many factors, including
Navistar's earnings, credit ratings, the outlook for truck industry demand and
the capital resources of financial institutions. If adequate funds are not
available, the Company may be required to cut back or discontinue the NGT
Program or other product development or capital improvement programs. See
"Management's Discussion and Analysis of Results of Operations and Financial
Condition--Liquidity and Capital Resources" and
"--Business Environment."
From and after July 1, 1998, the Settlement Agreement in respect of
Navistar's postretirement healthcare and life insurance benefits (the
"Settlement Agreement") gives the Supplemental Trust established thereunder
20
<PAGE>
the exclusive right, subject to certain limited exceptions, to conduct public
offerings of Common Stock for a period of 5 years (the "Window Period"),
subject to earlier termination at such time as the Supplemental Trust has
received net proceeds of $500 million from qualifying sales of Common Stock.
During this period, Navistar will be prohibited from conducting public
offerings of equity securities for working capital or other purposes unless
the Supplemental Committee (as defined) under the Supplemental Trust otherwise
consents. To date, the Company believes that the Supplemental Trust has
received approximately $78 million in net proceeds from qualifying sales of
Common Stock. See "--Potential Influence of Supplemental Trust."
RELIANCE ON MAJOR CUSTOMER
Ford accounted for approximately 14% of the Company's revenues during fiscal
1997 and fiscal 1996 and approximately 12% for fiscal 1995. Although the
Company has contracts with Ford that continue through 2012, such contracts
provide for supplying Ford's requirements for particular models, rather than
for manufacturing a specific quantity of products. The loss of Ford as a
customer or a significant decrease in demand for the models or a group of
related models that utilize the Company's products could have a material
adverse effect on the Company.
HOLDING COMPANY STRUCTURE
NIC, the issuer of the Notes, is a holding company with no significant
business operations other than (i) holding the capital stock of Transportation
and Navistar International Corporation Mexico S.A. de C.V. ("Navimex"), other
subsidiaries and joint venture interests and (ii) advancing funds to, and
receiving funds from, its direct and indirect subsidiaries. In repaying its
indebtedness, including the Notes, NIC must rely on dividends and other
payments made to it by Transportation and its other direct and indirect
subsidiaries. In addition, the Indentures governing the Notes will allow the
Company the ability to make substantial investments (including, without
limitation, contributions of assets) in joint ventures.
The holders of the Notes have no direct claims against the assets of NIC's
subsidiaries. The ability of NIC's subsidiaries to make payments to NIC will
be affected by the obligations of such subsidiaries to their creditors. Claims
of holders of indebtedness of NIC, including the Notes, against the cash flow
and assets of NIC's subsidiaries will be effectively subordinated to claims of
such creditors. In addition, the rights of the holders of the Notes to
participate in the assets of any subsidiary of NIC upon such subsidiary's
liquidation or recapitalization will be subject to the prior claims of such
subsidiary's creditors. As of October 31, 1997, after giving pro forma effect
to the Initial Offerings and the application of the net proceeds therefrom,
the direct and indirect subsidiaries of NIC would have had approximately
$4,431 million of liabilities (including trade payables). The ability of NIC's
subsidiaries to make payments to NIC will also be subject to, among other
things, applicable state corporate laws and contractual restrictions. State
corporate laws applicable to NIC's subsidiaries generally prohibit the payment
of dividends by any given subsidiary unless such subsidiary has capital
surplus or net profits in the current or immediately preceding year. In
addition, the payment of dividends by NFC is limited by the terms of several
of its financings. See "Description of Other Financing Arrangements."
SUBORDINATION OF THE SENIOR SUBORDINATED NOTES
The payment on the principal of, premium, if any, and interest on the Senior
Subordinated Notes will be subordinate in right of payment to the prior
payment in full of all Senior Indebtedness of NIC, including the Senior Notes,
whether outstanding at the date of the indenture in respect of the Senior
Subordinated Notes or thereafter incurred. As of October 31, 1997, after
giving pro forma effect to the Initial Offerings and the application of the
net proceeds therefrom, NIC would have had $100 million in Senior Indebtedness
outstanding, all of which would rank senior to the Senior Subordinated Notes,
and no indebtedness which would be subordinated to the Senior Subordinated
Notes. Additional Senior Indebtedness can be incurred by NIC from time to
time, subject to certain restrictions. 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 NIC, NIC is prohibited from making any payment with
respect to the principal of, premium, if any, or interest on the Senior
Subordinated Notes unless and until
21
<PAGE>
such default has been cured or waived or all Senior Indebtedness of NIC has
been discharged or paid in full. In addition, the Senior Subordinated Notes
will be effectively subordinated to all existing and future liabilities of the
subsidiaries of NIC. As of October 31, 1997, after giving pro forma effect to
the Initial Offerings and the application of the net proceeds therefrom, the
amount of such liabilities (including trade payables) would have been
approximately $4,431 million. See "--Holding Company Structure."
In addition, upon any payment or distribution of NIC's assets to its
creditors upon any dissolution, winding-up, liquidation, reorganization,
bankruptcy, insolvency, receivership or other proceedings relating to NIC,
whether voluntary or involuntary, the holders of Senior Indebtedness of NIC
will be entitled to receive payment in full of all amounts due thereon before
the holders of the Senior Subordinated Notes will be entitled to receive any
payment with respect to the principal of, premium, if any, or interest on the
Senior Subordinated Notes. By reason of such subordination, in the event of
the insolvency of NIC, holders of the Senior Subordinated Notes may receive
less, ratably, than holders of Senior Indebtedness of NIC and other creditors
of NIC, or may recover nothing. See "Description of the Notes--Subordination
of Senior Subordinated Notes; Ranking."
IMPACT OF GOVERNMENT REGULATION
Truck and engine manufacturers continue to face increasing governmental
regulation of their products, especially in the areas of environment and
safety. As a diesel engine manufacturer, Navistar has incurred research and
tooling costs to redesign its engine product lines to meet the United States
Environmental Protection Agency ("U.S. EPA") and California Air Resources
Board ("CARB") emission standards effective for the 1998 model year. In
addition, Navistar expects to continue to incur research, design and tooling
costs to: (i) achieve further reductions in ozone-causing exhaust emissions by
2004 in accordance with the voluntary agreement entered into by Navistar,
along with other engine manufacturers, with the U.S. EPA and CARB and (ii)
satisfy the 1998 Clean Fuel Fleet Vehicle requirements and California's
emission standards in 2002 for engines used in medium-size vehicles. Navistar
expects that its diesel engines will be able to meet all of these standards
within the required time frames.
Truck manufacturers are also subject to various noise standards imposed by
federal, state and local regulations, and to the National Traffic and Motor
Vehicle Safety Act and Federal Motor Vehicle Safety Standards promulgated by
the National Highway Traffic Safety Administration. Navistar believes it is in
compliance with such standards.
Complying with such laws and regulations has added and will continue to add
to the cost of Navistar's products, and increases the capital-intensive nature
of Navistar's business. If the present level of price competition continues,
it may become increasingly difficult for manufacturers of engines and trucks
to recover these costs and, accordingly, lower margins may result. See
"Business--Impact of Government Regulation."
PENSION AND POSTRETIREMENT HEALTH CARE OBLIGATIONS
Navistar has significant underfunded pension obligations. At October 31,
1997, the accumulated benefit obligation of Navistar's underfunded pension
plans was approximately $445 million, compared to $607 million at October 31,
1996. In November 1997, Navistar contributed $100 million to the hourly
pension plan. Navistar's long-term objective is to fund its entire accumulated
pension benefit obligation over the next 5 to 8 years with funds that are
principally generated by operations.
In the event Navistar'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 Navistar to determine its unfunded vested pension
liability. Subject to certain limitations, the PBGC would have a claim against
Navistar to the extent that plan assets were not sufficient to meet the
actuarial present value of guaranteed liabilities.
In addition to providing pension benefits, Navistar provides health care and
life insurance for a majority of its retired employees and their spouses and
certain dependents and will provide retiree health care and life
22
<PAGE>
insurance benefits for most of its existing employees hired before July 1,
1993. In 1993, a trust was established to partially fund this post-retirement
health care liability (the "Base Trust"). In November 1997, Navistar
contributed $200 million to the Base Trust satisfying the balance of its $500
million prefunding obligation, although Navistar will remain obligated to make
future contributions to the Base Trust on a pay-as-you-go basis. These
benefits are provided as part of the Settlement Agreement.
POTENTIAL INFLUENCE OF SUPPLEMENTAL TRUST
In July 1993, Navistar restructured its postretirement health care and life
insurance benefits pursuant to the 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 provides, 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 19.9 million shares of Navistar's non-voting Class B Common
Stock. On July 1, 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 49.2
million shares of Common Stock currently outstanding, the Supplemental Trust
would hold approximately 29% of Navistar's voting stock upon conversion. As a
result of such stock ownership, 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, following such conversion. A
committee of five members acts as administrator of the Supplemental Benefit
Program (the "Supplemental 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 Supplemental Committee are designees of the UAW, one is a retired
management employee and two are independent from either Navistar or the UAW.
In addition, the Settlement Agreement provides for the addition of three seats
to Navistar's Board of Directors, one of which is elected by the UAW and two
of which are elected by the Supplemental Committee on behalf of the
Supplemental Trust. Navistar's Board of Directors is currently comprised of 14
persons.
RISK OF LOSS OF TAX BENEFITS
If, as a result of any transaction involving Navistar's equity securities,
an "ownership change" occurs for federal income tax purposes, the Company's
ability to use its substantial net operating losses (the "NOLs") to offset
taxable income, and thereby reduce Navistar's tax liability, would be severely
limited, requiring an adjustment to Navistar's deferred tax asset reflected in
its Statement of Financial Condition. The Settlement Agreement requires that
Navistar not sell or acquire Common Stock or other securities or take other
actions if to do so would put Navistar at risk of an "ownership change" or
would limit the ability of the Supplemental Trust to sell on or after July 1,
1998 Common Stock up to an amount equal to $500 million less proceeds from
prior sales of Common Stock (which amount is currently approximately $372
million) without putting Navistar's NOLs at risk. The Company believes, based
on the information currently available to it, that the redemption of the
Series G Convertible Cumulative Preferred Stock should not, by itself, put the
Company at risk of an "ownership change" or restrict the ability of the
Supplemental Trust to sell up to an additional $372 million of stock. See
"Management's Discussion and Analysis of Results of Operations and Financial
Condition--Income Taxes" for a discussion of the Company's NOLs.
As part of the Settlement Agreement, a provision (the "Prohibited Transfer
Provision") was added to NIC's Certificate of Incorporation to protect against
certain transfers of equity securities which could cause an "ownership
change." Although the Prohibited Transfer Provision is intended to prevent
transfers which could cause an "ownership change," Navistar may not be able to
prevent every transaction that could cause an "ownership change." By its
terms, the Prohibited Transfer Provision will expire on June 30, 2001.
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
23
<PAGE>
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 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 or
Agent's Message 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 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."
24
<PAGE>
USE OF PROCEEDS
This Exchange Offer is intended to satisfy certain of the Company's
obligations under the Purchase Agreements and the Registration Rights
Agreements. 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 Senior Notes (after deducting the
discounts to the Initial Purchasers and the expenses in connection with such
offering) were approximately $98 million. The Company has used or expects to
use such net proceeds as follows: (i) approximately $47 million will be used
to repay the 9% Sinking Fund Debentures due June 15, 2004 of Transportation
(the "9% Debentures"), including all accrued and unpaid interest thereon; and
(ii) approximately $27 million has been used to repay the 8% Secured Note due
August 15, 2002 of Transportation (the "8% Note"), including all accrued and
unpaid interest thereon. Any remaining proceeds will be for general corporate
purposes, including working capital.
The net proceeds from the sale of the Old Senior Subordinated Notes (after
deducting discounts to the Initial Purchasers and the expenses in connection
with such offering) were approximately $244 million, which will be used to
redeem NIC's Series G Convertible Cumulative Preferred Stock (the "Series G
Preferred") and to pay accumulated and unpaid dividends thereon.
The Company intends to repay the 9% Debentures and redeem the Series G
Preferred as soon as practical after completion of the Initial Offerings.
Pending such uses outlined above, the Company will invest such net proceeds
from the Initial Offerings in short-term, investment grade, interest-bearing
securities.
25
<PAGE>
CAPITALIZATION
The following table sets forth the historical capitalization of the Company
as of October 31, 1997 and as adjusted to give effect to the sale of the Old
Notes in the Initial Offerings and the application of the net proceeds
therefrom. 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. See "Use of Proceeds."
<TABLE>
<CAPTION>
AT OCTOBER 31, 1997
--------------------
ACTUAL AS ADJUSTED
------- -----------
(IN MILLIONS)
<S> <C> <C>
Cash, cash equivalents and marketable securities (1)(2)... $ 965 $ 992
======= =======
TOTAL DEBT (INCLUDING CURRENT PORTION):
Manufacturing operations:
6 1/4% Sinking Fund Debentures, due 1998................ $ 3 $ 3
9% Sinking Fund Debentures, due 2004.................... 45 --
8% Secured Note, due 2002............................... 26 --
Capitalized leases and other obligations................ 18 18
Mexican credit facility (3)............................. -- --
7% Senior Notes, due 2003............................... -- 100
8% Senior Subordinated Notes, due 2008.................. -- 250
------- -------
Total manufacturing operations debt................... 92 371
Financial services operations:
Asset-backed commercial paper program................... 541 541
Bank credit facility.................................... 393 393
8 7/8% Senior Subordinated Notes due 1998............... 94 94
9% Senior Subordinated Notes due 2002................... 100 100
Capitalized leases...................................... 96 96
------- -------
Total financial services debt......................... 1,224 1,224
------- -------
Total debt............................................ 1,316 1,595
SHAREOWNERS' EQUITY:
Series G convertible cumulative preferred stock
(liquidation
preference $240 million)............................... 240 --
Series D convertible junior preference stock
(liquidation
preference $4 million)................................. 4 4
Common Stock............................................ 1,659 1,659
Class B Common Stock (2)................................ 471 471
Retained earnings (deficit)............................. (1,301) (1,301)
Treasury stock, at cost................................. (53) (53)
------- -------
Total shareowners' equity............................. 1,020 780
------- -------
Total capitalization.................................. $ 2,336 $ 2,375
======= =======
</TABLE>
- --------
(1) In November 1997, Navistar contributed $100 million to the hourly pension
plan and $200 million to the Base Trust. These contributions were funded
from existing cash balances.
(2) In January 1998, the Company repurchased approximately 3.2 million shares
of its Class B Common Stock from the Supplemental Trust. The purchase
price of approximately $83 million was funded from existing cash balances.
(3) In November 1997, the Company's Mexican subsidiary established a $125
million credit facility to be used to fund the development of the
Company's Mexican operations. As of December 31, 1997, an aggregate of $35
million of borrowings was outstanding under such facility. All of such
subsidiary's indebtedness under such facility is guaranteed on a senior
basis by NIC.
26
<PAGE>
SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA
The selected consolidated financial data for Navistar for the five year
period ended October 31, 1997 was derived from Navistar's audited consolidated
financial statements and notes thereto. The selected consolidated financial
data set forth below should be read in conjunction with "Management's
Discussion and Analysis of Results of Operations and Financial Condition" and
the Company's Consolidated Financial Statements and notes thereto included
elsewhere in this Prospectus.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED OCTOBER 31,
---------------------------------------
1997 1996 1995 1994 1993
------ ------ ------ ------ -------
(IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
SELECTED INCOME STATEMENT DATA:
Sales and revenues:
Sales of manufactured products. $6,147 $5,508 $6,125 $5,153 $ 4,510
Finance and insurance revenue
(1)........................... 174 197 167 152 181
Other income................... 50 49 50 32 30
------ ------ ------ ------ -------
Total sales and revenues..... 6,371 5,754 6,342 5,337 4,721
------ ------ ------ ------ -------
Costs and expenses:
Costs of products and services
sold.......................... 5,292 4,827 5,288 4,496 3,925
Other expenses (2)............. 763 739 705 608 1,146
Interest expense............... 74 83 87 75 91
------ ------ ------ ------ -------
Total costs and expenses..... 6,129 5,649 6,080 5,179 5,162
------ ------ ------ ------ -------
Income (loss) before income
taxes........................... 242 105 262 158 (441)
Income tax expense (benefit)..... 92 40 98 56 (168)
------ ------ ------ ------ -------
Income (loss) of continuing
operations...................... 150 65 164 102 (273)
Loss of discontinued operations
(3)............................. -- -- -- (20) --
Cumulative effect of changes in
accounting policy (4)........... -- -- -- -- (228)
------ ------ ------ ------ -------
Net income (loss)................ $ 150 $ 65 $ 164 $ 82 $ (501)
====== ====== ====== ====== =======
Income (loss) of continuing
operations per common share (7)
Basic.......................... $ 1.66 $ .49 $ 1.83 $ .99 $ (8.63)
Diluted........................ $ 1.65 $ .49 $ 1.83 $ .99 $ (8.63)
Net income (loss) per common
share (7)
Basic.......................... $ 1.66 $ .49 $ 1.83 $ .72 $(15.19)
Diluted........................ $ 1.65 $ .49 $ 1.83 $ .72 $(15.19)
<CAPTION>
AT OCTOBER 31,
---------------------------------------
1997 1996 1995 1994 1993
------ ------ ------ ------ -------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C>
SELECTED BALANCE SHEET DATA:
Assets:
Manufacturing operations....... $4,111 $3,815 $4,018 $3,724 $ 3,645
Financial services operations.. 1,857 1,843 1,922 1,582 1,672
Eliminations................... (452) (332) (374) (259) (257)
------ ------ ------ ------ -------
Total assets................. $5,516 $5,326 $5,566 $5,047 $ 5,060
====== ====== ====== ====== =======
Debt:
Manufacturing operations....... $ 92 $ 115 $ 127 $ 127 $ 175
Financial services operations.. 1,224 1,305 1,330 1,091 1,199
------ ------ ------ ------ -------
Total debt................... $1,316 $1,420 $1,457 $1,218 $ 1,374
====== ====== ====== ====== =======
Preferred stock.................. $ 244 $ 244 $ 244 $ 244 $ 245
====== ====== ====== ====== =======
Total shareowners' equity........ $1,020 $ 916 $ 870 $ 817 $ 775
====== ====== ====== ====== =======
</TABLE>
27
<PAGE>
<TABLE>
<CAPTION>
FISCAL YEAR ENDED OCTOBER 31,
------------------------------------------------
1997 1996 1995 1994 1993
-------- -------- -------- -------- --------
(IN MILLIONS, EXCEPT RATIO, EMPLOYEES,
MARKET SHARE AND UNIT DATA)
<S> <C> <C> <C> <C> <C>
OTHER FINANCIAL DATA:
Dividends paid, Series G
Preferred Stock......... $ 29 $ 29 $ 29 $ 58 $ --
Capital expenditures..... 172 117 139 87 110
Engineering and research
expense................. 124 129 113 97 94
Depreciation and
amortization............ 120 105 86 72 75
Average number of Common,
Class B Common and
dilutive common
equivalent shares
outstanding............. 73.6 73.8 74.3 74.6 34.9
Ratio of earnings to
fixed charges (5)....... 3.7x 2.1x 3.5x 2.7x --
OPERATING DATA:
Number of employees:
Worldwide.............. 16,168 14,187 16,079 14,910 13,612
United States.......... 13,493 12,445 13,852 12,792 11,934
United States and
Canadian retail
deliveries of trucks and
school buses............ 99,500 94,000 101,700 91,600 79,800
United States and
Canadian market share
(6)..................... 28.6% 27.5% 26.7% 27.0% 27.6%
Unit shipments:
Trucks and school
buses................. 104,400 95,200 112,200 95,000 87,200
OEM engines............ 184,000 163,200 154,200 130,600 118,200
</TABLE>
- --------
(1) Includes revenues of NFC as well as Navistar's other financial service
subsidiaries.
(2) The Company contributed approximately 25.6 million shares of its Class B
Common Stock valued at $513 million to the Supplemental Trust in 1993.
(3) The 1994 loss of discontinued operations resulted from a $20 million after
tax charge for environmental liabilities at production facilities of two
formerly owned businesses, Wisconsin Steel and Solar Turbine, Inc.
(4) In the third quarter of 1993, the Company adopted SFAS 106 and SFAS 109,
retroactive to November 1, 1992.
(5) The ratio of earnings to fixed charges is determined by dividing pretax
income from continuing operations, adjusted for interest expense, debt
expense amortization and the portion of rental expense deemed
representative of an interest factor by the sum of interest expense, debt
expense amortization and the portion of rental expense deemed
representative of the interest factor. Earnings were insufficient to cover
fixed charges by approximately $441 million in fiscal 1993. For the fiscal
year ended October 31, 1997, after giving pro forma effect to the Initial
Offerings and the application of the net proceeds therefrom, as if each
had occurred as of the beginning of fiscal 1997, the Company's ratio of
earnings to fixed charges would have been 3.0x.
(6) Based on retail deliveries of medium trucks (Classes 5, 6 and 7),
including school buses, and heavy 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.
(7) The net income (loss) per common share information for all periods
presented have been restated to reflect the new earnings per share
calculation required by Statement of Financial Accounting Standard No. 128
"Earnings Per Share." Income (loss) of continuing operations per common
share was computed as follows:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED OCTOBER 31,
----------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- -----
(IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Income (loss) of continuing operations........ $150 $ 65 $164 $102 $(273)
Less dividends on Series G Preferred Stock.... 29 29 29 29 29
---- ---- ---- ---- -----
Income (loss) of continuing operations
applicable to common stock (Basic and
Diluted)..................................... $121 $ 36 $135 $ 73 $(302)
==== ==== ==== ==== =====
Average shares outstanding (millions)
Basic........................................ 73.1 73.7 74.2 74.5 34.9
Dilutive effect of options outstanding..... .4 -- -- -- --
Conversion of Series D Preferred Stock..... .1 .1 .1 .1 --
---- ---- ---- ---- -----
Diluted...................................... 73.6 73.8 74.3 74.6 34.9
==== ==== ==== ==== =====
</TABLE>
Unexercised employee stock options to purchase shares of Navistar Common
Stock were not included in the diluted shares outstanding when the options'
exercise prices were greater than the average market price of Navistar
Common Stock during the respective periods. Additionally, the diluted
calculation excludes the effects of the conversion of the Series G
Preferred Stock as such conversion would produce anti-dilutive results. The
dilutive effect of options outstanding and the conversion of Series D
Preferred Stock were not included in 1993 diluted shares as such inclusion
would produce anti-dilutive results. Basic and diluted loss of discontinued
operations per common share in 1994 was $0.27. Basic and diluted loss from
the cumulative effect of changes in accounting policy per common share in
1993 was $6.56. In January of 1998, the Company repurchased approximately
3.2 million shares of its Class B Common Stock from the Supplemental Trust.
28
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
The following discussion and analysis should be read in conjunction with the
Company's Financial Statements and notes thereto included elsewhere in this
Prospectus. Certain statements under this caption constitute "forward-looking
statements" under Section 27A of the Securities Act and involve risks and
uncertainties. The Company's actual results may differ significantly from the
results discussed in such forward-looking statements. Factors that might cause
such a difference include, but are not limited to, those discussed under the
captions "Risk Factors" and "Business Environment."
GENERAL
NIC is a holding company and its principal operating subsidiary is
Transportation. The Company's manufacturing operations are engaged in the
manufacture and marketing of Class 5 through 8 trucks, including school buses,
mid-range diesel engines and service parts primarily in the United States and
Canada. These products are also sold to distributors in selected export
markets. The financial services operations of the Company provide wholesale,
retail and lease financing, and commercial physical damage and liability
insurance coverage to the Company's dealers and retail customers and to the
general public through an independent insurance agency system.
The discussion and analysis reviews the operating and financial results, and
liquidity and capital resources of manufacturing operations and financial
services operations. Manufacturing operations include the financial results of
the financial services operations included on a one-line basis under the
equity method of accounting. Financial services operations include NFC, its
domestic insurance subsidiary as well as the Company's foreign finance and
insurance companies. See Note 1 to the Financial Statements.
BUSINESS ENVIRONMENT
Sales of Class 5 through 8 trucks are cyclical, with demand affected by such
economic factors as industrial production, construction, demand for consumer
durable goods, interest rates and the earnings and cash flow of dealers and
customers. Reflecting the stability of the general economy, demand for new
trucks remained strong during 1997. An improvement in the number of new truck
orders has increased the Company's order backlog to 45,300 units at October
31, 1997 from 20,900 units at October 31, 1996. Retail deliveries in 1998
continue to be highly dependent on the rate at which new truck orders are
received. The Company will evaluate order receipts and backlog throughout the
year and will balance production with demand as appropriate.
The Company currently projects 1998 United States and Canadian Class 8 heavy
truck demand to be 195,000 units, a slight decrease from 1997. Class 5, 6 and
7 medium truck demand, excluding school buses, is forecast at 116,000 units,
slightly lower than in 1997. Demand for school buses is expected to decrease
8% in 1998 to 30,500 units. Mid-range diesel engine shipments by the Company
to original equipment manufacturers in 1998 are expected to be 215,700 units,
17% higher than in 1997. The Company's service parts sales are projected to
grow 9% to approximately $875 million.
The Supplemental Trust, which was created in 1993 for the benefit of the
Company's current and future retirees and administered by a five person trust
committee, owned all of the outstanding Class B Common Stock at October 31,
1997, which represented approximately one-third of the Company's outstanding
Common Stock. The Class B Common Stock has restricted voting rights and
transfer provisions but, on July 1, 1998, will convert into Common Stock with
full voting rights and no transfer restrictions.
During August 1997, the Company's current master contract with the UAW was
extended through October 1, 2002. This contract allows the Company to focus
its assembly plants, simplify current product lines, invest in new product
development, and achieve more competitive wage, benefit and productivity
levels.
29
<PAGE>
During 1997, the Company entered into a ten-year agreement, effective with
model year 2003, to supply newly designed, advanced technology engines through
the year 2012 to Ford for use in its diesel-powered light trucks and vans. The
Company's current engine agreement with Ford was extended through model year
2002.
The Company is currently considering an internal corporate reorganization,
whereby, among other things, Transportation's engine and service parts
operations and NFC would become direct subsidiaries of NIC.
RESULTS OF OPERATIONS
The Company reported net income of $150 million for 1997, or $1.65 per
common share, reflecting higher sales of manufactured products. Net income was
$65 million, or $0.49 per common share, in 1996 and $164 million, or $1.83 per
common share, in 1995. Net income in 1996 included a one-time $35 million
pretax charge for costs related to the termination of the NGT Program. In
August 1997, the Company and the UAW reached agreement on a master contract
extension that enabled the Company to reinstate this program. The remaining
accrual for the 1996 charge at the time of the announcement was not material.
The Company's manufacturing operations reported income before income taxes
of $164 million in 1997 compared with pretax income of $22 million in 1996 and
$200 million in 1995. The increase in 1997 reflects higher sales of trucks and
diesel engines as well as the effects of improved pricing and various cost
improvement initiatives. The decrease in 1996 from 1995 reflects a decline in
demand for trucks as well as the charge for termination of the Company's NGT
Program.
The Company's financial services operations had income before income taxes
of $78 million, $83 million and $62 million in 1997, 1996 and 1995,
respectively.
NFC's pretax income in 1997 was $75 million, a 7% decrease from $81 million
in 1996. The change is primarily a result of lower income on sales of retail
receivables and a decline in wholesale financing activity. The reduced gains
on sales resulted from lower margins on retail notes reflecting higher market
interest rates prior to the date of sale. NFC's pretax income increased $22
million in 1996 from the $59 million reported in 1995 primarily due to higher
income on sales of retail notes and an increased volume of wholesale
financing.
Earnings from the foreign finance and insurance subsidiaries were $3
million, $2 million and $3 million in 1997, 1996 and 1995, respectively.
SALES AND REVENUES. Industry retail sales of Class 5 through 8 trucks
totaled 347,400 units in 1997, a 2% increase from the 341,200 units sold in
1996, but 9% lower than the 380,600 units sold in 1995. Class 8 heavy truck
sales totaled 196,800 units, comparable to the 195,400 units sold in 1996 but
a decrease of 14% from the 228,800 units sold in 1995. Industry sales of Class
5, 6 and 7 medium trucks, including school buses, totaled 150,600 units in
1997, a 3% increase from 1996 when 145,800 units were sold, and comparable to
the 151,800 units sold in 1995. Industry sales of school buses, which
accounted for 22% of the medium truck market, increased slightly from 1996 to
33,200 units.
Sales and revenues of $6,371 million in 1997 were 11% higher than the $5,754
million reported in 1996 and comparable to the $6,342 million reported in
1995. Sales of trucks, mid-range diesel engines and service parts totaled
$6,147 million in 1997, 12% above the $5,508 million reported for 1996 and
comparable to the $6,125 million reported in 1995.
The Company maintained its position as sales leader in the combined United
States and Canadian Class 5 through 8 truck market in 1997 with a 28.6% market
share, an increase from the 27.5% share in 1996 and the 26.7% share in 1995.
(Sources: American Automobile Manufacturer's Association, the United States
Motor Vehicle Manufacturer's Association and R. L. Polk & Company.) In 1997,
the Company's share of the Class 8 heavy truck market increased to 18.6% from
17.1% in 1996 and 18.4% in 1995.
Shipments of mid-range diesel engines by the Company to other OEMs during
1997 were a record 184,000 units, a 13% increase from 1996 and a 19%
improvement over 1995. Higher shipments to Ford to meet consumer demand for
the light trucks and vans which use this engine was the primary reason for the
increase.
30
<PAGE>
Service parts sales of $806 million in 1997 increased from the $760 million
reported in 1996 and were 10% higher than the $730 million reported in 1995 as
a result of dealer and national account volume growth.
Finance and insurance revenue for 1997 was $174 million, 12% lower than the
$197 million reported in 1996 primarily as a result of a decline in wholesale
financing activity. Revenues from financial services operations increased 18%
between 1996 and 1995 primarily as a result of higher income on sales of
retail notes.
COSTS AND EXPENSES. Manufacturing gross margin was 14.2% of sales in 1997,
compared with 12.5% in 1996 and 13.8% in 1995. The increase in gross margin is
primarily due to lower production costs and improved pricing offset by a
provision for employee profit sharing. Factors which contributed to the change
in gross margin between 1996 and 1995 included lower sales volumes, more
competitive pricing and the costs of terminating the NGT Program.
Engineering and research expense was $124 million in 1997, $129 million in
1996 and $113 million in 1995, reflecting continuing investment in new truck
and engine products as well as improvements to existing products.
Marketing and administrative expense was $365 million in 1997 compared with
$319 million in 1996 and $307 million in 1995. The change between 1997 and
1996 is the result of higher sales and distribution costs, and an increase in
the provision for payment to employees as provided by the Company's
performance incentive programs. The $12 million increase in the expense
between 1996 and 1995 reflects investment in the implementation of the
Company's strategy to reduce costs and complexity in its manufacturing
processes.
Interest expense decreased to $74 million in 1997 from $83 million in 1996
and $87 million in 1995. The decreases in 1997 and 1996 were the result of
lower wholesale note funding requirements and declining interest rates.
Finance service charges on sold receivables were $23 million in 1997, 4%
lower than in 1996 and 21% lower than in 1995.
LIQUIDITY AND CAPITAL RESOURCES
Cash flow is generated from the manufacture and sale of trucks, mid-range
diesel engines and service parts as well as product financing and insurance
coverage provided to Transportation's dealers and retail customers by the
financial services operations.
Historically, funds to finance Transportation's products are obtained from a
combination of commercial paper, short- and long-term bank borrowings, medium-
and long-term debt issues, sales of finance receivables and equity capital.
NFC's current debt ratings have made bank borrowings and sales of finance
receivables the most economic sources of cash. Insurance operations are funded
through internal operations.
Total cash, cash equivalents and marketable securities of the Company
amounted to $965 million at October 31, 1997, $881 million at October 31, 1996
and $1,040 million at October 31, 1995.
Cash provided by operations during 1997 totaled $380 million, primarily from
net income of $150 million, $82 million of noncash deferred income taxes, $59
million of other noncash items, principally depreciation, and a net change in
operating assets and liabilities of $89 million. Income tax expense for 1997
was $92 million, of which $10 million was cash payments to federal and certain
state and local governments, while the remaining $82 million of federal and
other taxes reduced the deferred tax asset.
The net change in operating assets and liabilities of $89 million includes a
$195 million increase in receivables, reflecting continued strong demand for
the Company's products, offset by a $288 million increase in accounts payable
as a result of increased production in the fourth quarter.
31
<PAGE>
Investment programs included a net decrease in marketable securities, as
sales of securities exceeded purchases by $45 million. During 1997, the
purchase of $970 million of retail notes and lease receivables was funded with
$958 million in proceeds from the sale of receivables and principal
collections of $94 million. Other investment activities used $42 million for
an increase in property and equipment leased to others and $172 million to
fund capital expenditures. Capital expenditures included $82 million for
construction of a truck assembly facility in Mexico, $42 million to increase
mid-range diesel engine capacity and additional funds for truck product
improvements.
Financing activities used cash to pay $29 million in dividends on the Series
G Preferred shares, $46 million for principal payments on long-term debt, and
$285 million to reduce notes and debt outstanding under the bank revolving
credit facility and asset-backed and other commercial paper programs offset by
an increase of $209 million in long-term debt.
During 1997 and 1996, NFC supplied 94% of the wholesale financing of new
trucks sold to Transportation's dealers compared with 93% in 1995. NFC's share
of the retail financing of new trucks sold in the United States decreased to
13% in 1997 from 16% in 1996 and 14% in 1995 due to the highly competitive
commercial financing market.
The sale of finance receivables is a significant source of funding for the
financial services operations. During 1997, 1996 and 1995, NFC sold $987
million, $985 million and $740 million, respectively, of retail notes through
Navistar Financial Retail Receivables Corporation ("NFRRC"), a wholly owned
subsidiary. The net proceeds from these sales were used for general working
capital purposes. In November 1997, NFC sold an additional $500 million of
retail notes through NFRRC.
NFRRC has filed registration statements with the SEC which provide for the
issuance of up to $5,000 million of asset-backed securities. At October 31,
1997, the remaining shelf registration available to NFRRC for issuance of
asset-backed securities was $1,473 million. See Note 8 to the Financial
Statements.
NFC has a $925 million contractually committed bank revolving credit
facility and a $400 million asset-backed commercial paper program supported by
a bank liquidity facility which mature in March 2001. NFC also utilizes a $600
million revolving wholesale note trust that provides for the continuous sale
of eligible wholesale notes on a daily basis. The trust is comprised of two
$100 million tranches of investor certificates maturing serially from 1998 to
1999, and two $200 million tranches maturing in 2003 and 2004. At October 31,
1997, the remaining shelf registration available for issuance of investor
certificates was $200 million.
At October 31, 1997, available funding under NFC's amended and restated
credit facility (the "Credit Agreement") and the asset-backed commercial paper
facility (the "ABCP Program") was $532 million and $14 million, respectively,
of which $141 million was used to back short-term debt at October 31, 1997.
The Company finances capital expenditures principally through internally
generated cash. Capital leasing is used to fund selected projects based on
economic and operating factors. The Company had outstanding capital
commitments of $137 million at October 31, 1997 primarily for increased
manufacturing capacity at the Indianapolis engine plant and construction of a
truck assembly facility in Mexico.
The Company has announced plans for approximately $350 million in capital
spending over the next six years for the NGT Program. Capital expenditures for
1998 are expected to be approximately double the current year's level.
Approximately $25 million is to be spent in 1998 for the NGT Program.
Additional capital expenditures are planned for the completion of the truck
assembly facility in Mexico, increased manufacturing capacity at the
Indianapolis engine plant, commencement of truck operations in Brazil and
improvements to existing facilities and products. The Company's investment in
the NGT Program will also include $300 million in development expense over the
next six years, of which approximately $50 million is planned for 1998.
In November 1997, the Company contributed $200 million to the Retiree Health
Care Base Plan Trust and contributed $100 million to the hourly pension plan.
32
<PAGE>
NFC's maximum exposure under all receivable sale recourse provisions at
October 31, 1997 was $246 million; however, management believes that the
allowance for credit losses on sold receivables is adequate.
At October 31, 1997, the Canadian operating subsidiary was contingently
liable for retail customers' contracts and leases financed by a third party.
The Company is subject to maximum recourse of $261 million on retail contracts
and $13 million on retail leases. In addition, as of October 31, 1997, the
Company is contingently liable for approximately $49 million for various
guarantees and buyback programs; however, based on historical loss trends, the
Company's exposure is not considered material.
The Canadian operating subsidiary, NFC and certain other subsidiaries
included in financial services operations are parties to agreements which
result in the restriction of amounts which can be distributed to
Transportation in the form of dividends, loans or advances. At October 31,
1997, the maximum amount of dividends which were available for distribution
under the most restrictive covenants was $62 million.
The Company and Transportation are obligated under certain agreements with
public and private lenders of NFC to maintain the subsidiary's income before
interest expense and income taxes at not less than 125% of its total interest
expense. No income maintenance payments were required for the three years
ended October 31, 1997. See "Business--Certain Arrangements with NFC."
During November 1997, the Company arranged financing for $125 million of
funds denominated in U.S. dollars and Mexican pesos to be used for development
of the Company's Mexican operations.
Management continues to evaluate current and forecasted cash flow as a basis
for financing operating requirements, capital expenditures and anticipated
payments of preferred dividends. Management believes that collections on the
outstanding receivables portfolios as well as funds available from various
funding sources will permit the financial services operations to meet the
financing requirements of the Company's dealers and customers.
ENVIRONMENTAL MATTERS
In the fourth quarter of 1994, Transportation recorded a $20 million charge,
net of $13 million of income taxes, as a loss of discontinued operations
related to environmental liabilities at production facilities of two formerly
owned businesses, Wisconsin Steel and Solar Turbine, Inc. Included in the
charge was an anticipated $11 million payment to the Economic Development
Administration, a division of the U.S. Department of Commerce, in settlement
of commercial and environmental disputes related to the Wisconsin Steel
property. In 1997, the U.S. Department of Justice and Transportation approved
the final consent decree related to the Wisconsin Steel property and the
Company paid $11 million to the Economic Development Administration.
The Company has been named a potentially responsible party ("PRP"), in
conjunction with other parties, in a number of cases arising under an
environmental protection law known as the Superfund law. These cases involve
sites which allegedly have received wastes from current or former Company
locations. Based on information available to the Company, 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 the Company'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. The Company
reviews its accruals on a regular basis and believes that, based on these
calculations, its share of the potential additional costs for the cleanup of
each site will not have a material effect on the Company's financial results.
DERIVATIVE FINANCIAL INSTRUMENTS
As disclosed in Notes 1 and 10 to the Financial Statements, the Company uses
derivative financial instruments to transfer or reduce the risks of foreign
exchange and interest rate volatility, and potentially increase the return on
invested funds. Company policy does not allow the use of derivatives for
speculative purposes.
33
<PAGE>
The Company's manufacturing operations, as conditions warrant, hedge foreign
exchange exposure on the purchase of parts and materials from foreign
countries and its exposure from sales of manufactured products in other
countries. Contracted purchases of commodities for manufacturing may be hedged
up to one year. The manufacturing operations had no foreign exchange exposure
at October 31, 1997.
NFC uses interest rate caps, interest rate swaps and forward interest rate
contracts when needed to convert floating rate funds to fixed and vice versa
to match its asset portfolio. NFC also uses forward interest rate contracts to
manage its exposure to fluctuations in funding costs from the anticipated
securitization and sale of retail notes. During 1997, NFC entered into $500
million of interest rate hedge agreements in anticipation of the November 1997
sale of retail receivables. These hedge agreements were closed in conjunction
with the pricing of the sale, and the loss at October 31, 1997, which was not
material, was deferred and reduced the gain recognized on the sale of
receivables in November 1997.
Both manufacturing operations and NFC purchase collateralized mortgage
obligations that have relatively stable cash flow patterns in relation to
interest rate changes.
YEAR 2000
The Company has made and will make certain investments in its software
systems and applications to ensure that the Company is Year 2000 compliant.
The financial impact to the Company has not been and is not anticipated to be
material to its financial position or results of operations.
NEW ACCOUNTING PRONOUNCEMENTS
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128, "Earnings Per Share." This
statement specifies the computation, presentation and disclosure requirements
for earnings per share and is effective for financial statements issued for
periods ending after December 15, 1997. The standard is not expected to have a
material effect on the Company's net income per common share computation.
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income"
("SFAS 130"), and Statement of Financial Accounting Standards No. 131,
"Disclosures about Segments of an Enterprise and Related Information" ("SFAS
131"). SFAS 130 establishes standards for reporting and display of
comprehensive income and its components. SFAS 131 establishes standards for
reporting information about operating segments, and related disclosures about
products and services, geographic areas and major customers. These statements
are effective for fiscal years beginning after December 15, 1997. These
standards expand or modify disclosures and, accordingly, will have no impact
on the Company's reported financial position, results of operations and cash
flows. The Company is assessing the impact of SFAS 131 on its reported
segments.
In February 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 132, "Employers' Disclosures about
Pensions and Other Postretirement Benefits." This statement revises standards
for disclosures about pension and other postretirement benefit plans and is
effective for fiscal years beginning after December 15, 1997. This standard
expands or modifies disclosure and, accordingly will have no impact on the
Company's reported financial position, results of operations and cash flows.
INCOME TAXES
The Statement of Financial Condition at October 31, 1997 and 1996 includes a
deferred tax asset of $934 million and $1,030 million, respectively, net of
valuation allowances of $309 million related to future tax benefits. The
deferred tax assets are net of valuation allowances since it is more likely
than not that some portion of the deferred tax asset may not be realized in
the future.
The deferred tax asset includes the tax benefits associated with cumulative
tax losses of $1,808 million and temporary differences, which represent the
cumulative expense of $1,413 million recorded in the Statement of Income that
has not been deducted on the Company's tax returns. The valuation allowance at
October 31, 1997 assumes that it is more likely than not that approximately
$815 million of cumulative tax losses will not be realized before their
expiration date. Realization of the net deferred tax asset is dependent on the
generation of approximately $2,500 million of future taxable income, of which
an average of approximately $75 million would
34
<PAGE>
need to be generated annually for the 14-year period 1998 through 2011. The
remaining taxable income, which represents the realization of tax benefits
associated with temporary differences, does not need to be generated until
subsequent to 2011. Until the Company has utilized its significant NOL
carryforwards, the cash payment of federal income taxes will be minimal. See
Note 3 to the Financial Statements.
Extensive analysis is performed to determine the amount of the deferred tax
asset. Such analysis is based on the premise that the Company is and will
continue to be a going concern and that it is more likely than not that
deferred tax benefits will be realized through the generation of future
taxable income. Management reviews all available evidence, both positive and
negative, to assess the long-term earnings potential of the Company using a
number of alternatives to evaluate financial results in economic cycles at
various industry volume conditions based upon the Company's current operating
structure. Other factors considered are the Company's 17-consecutive-year
leadership in the combined market share of Class 5 through 8 trucks and
recognition as a worldwide leading producer of mid-range diesel engines. The
projected availability of taxable income to realize the tax benefit from net
operating loss carryforwards and the reversal of temporary differences before
expiration of these benefits are also considered. The valuation allowance may
be adjusted in the future as a result of changes in business and industry
conditions, operating structure, Company strategies or other significant
transactions. Management believes that, with the combination of available tax
planning strategies and the maintenance of significant market share, earnings
are achievable in order to realize the net deferred tax asset of $934 million.
Reconciliation of the Company's income before income taxes for financial
statement purposes to United States taxable income for the years ended October
31 is as follows:
<TABLE>
<CAPTION>
YEARS ENDED OCTOBER 31,
-------------------------
1997 1996 1995
------- ------- -------
(MILLIONS OF DOLLARS)
<S> <C> <C> <C>
Income before income taxes........................... $ 242 $ 105 $ 262
Exclusion of (income) loss of foreign subsidiaries... (3) 3 (11)
State income taxes................................... (2) (2) (2)
Temporary differences................................ 151 (284) 69
Other................................................ 6 -- (4)
------- ------- -------
Taxable income (loss)............................ $ 394 $ (178) $ 314
======= ======= =======
</TABLE>
The Company contributed approximately $215 million to its hourly and
salaried pension plans in fiscal 1997. The timing of these contributions
allowed for their deduction on the Company's 1996 tax return, which resulted
in a tax loss of $178 million as compared to the $37 million of taxable income
previously reported.
35
<PAGE>
BUSINESS
Navistar, through its wholly owned subsidiary Transportation, operates in
two principal industry segments: manufacturing and financial services.
Manufacturing operations are responsible for the manufacture and marketing of
medium and heavy 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. Based on assets and revenues, manufacturing operations
represent the majority of the Company's business activities. The financial
services operations consist of NFC, its domestic insurance subsidiary and the
Company's foreign finance and insurance subsidiaries. NFC's primary business
is the retail and wholesale financing of products sold by the manufacturing
operations and its dealers within the United States and the providing of
commercial physical damage and liability insurance to the manufacturing
operations' dealers and retail customers and to the general public through an
independent insurance agency system. Industry segment data for 1997, 1996 and
1995 is summarized in Note 14 to the Financial Statements, which is included
elsewhere in this Prospectus.
THE MEDIUM AND HEAVY TRUCK INDUSTRY
The market in which Navistar competes 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 industry retail deliveries in the combined United
States and Canadian markets for the five years ended October 31, in thousands
of units:
<TABLE>
<CAPTION>
YEARS ENDED OCTOBER 31,
-----------------------------
1997 1996 1995 1994 1993
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Class 5, 6 and 7 medium trucks and school buses... 150.6 145.8 151.8 134.2 122.5
Class 8 heavy trucks.............................. 196.8 195.4 228.8 205.4 166.4
----- ----- ----- ----- -----
Total............................................. 347.4 341.2 380.6 339.6 288.9
===== ===== ===== ===== =====
</TABLE>
Source: Monthly data derived from materials produced by the American
Automobile Manufacturers Associations ("AAMA") in the United States and
Canada, and other sources.
The Class 5 through 8 truck market in the United States and Canada 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 competition 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,
utility and distribution.
TRANSPORTATION MARKET SHARE
Transportation delivered 99,500 Class 5 through 8 trucks, including school
buses, in the United States and Canada in fiscal 1997, a 6% increase from the
94,000 units delivered in 1996. Navistar's combined share of the Class 5
through 8 truck market was 28.6% in 1997 and 27.5% in 1996. Transportation has
been the leader in combined market share for Class 5 through 8 trucks,
including school buses, in the United States and Canada in each of its last 17
fiscal years based on data obtained from the AAMA, the United States Motor
Vehicle Manufacturers Association and R.L. Polk & Company.
36
<PAGE>
COMPETITIVE STRENGTHS
The Company believes that its key competitive strengths include the
following:
Leading Market Position. The Company has been the leader in the combined
market share for Class 5 through 8 trucks, including school buses, in the
United States and Canada in each of its last 17 fiscal years. In fiscal 1997,
the Company's combined market share of the Class 5 through 8 truck market was
28.6%, a 1.1 percentage point increase in market share from the previous year.
For each of the last five fiscal years, the Company has been the leader in the
medium truck and school bus markets. In addition, the Company believes that it
is the largest supplier of replacement parts to the heavy and medium truck and
bus aftermarkets.
Commitment to Customer Satisfaction. In order to achieve high customer
satisfaction, the Company maintains the largest retail organization in North
America specializing in medium and heavy trucks. In addition, the Company
operates seven regional parts distribution centers in the United States and
Canada, enabling it to offer 24-hour availability and same day shipment of the
parts most frequently requested by customers. In 1997, Navistar was ranked
number one for the third consecutive year by the annual ATD Attitude Survey,
which evaluates OEMs on quality and performance issues related to products,
parts, policies and service.
Largest Supplier of Mid-Range Diesel Engines. The Company is the leading
supplier of mid-range diesel engines in the 160-300 horsepower range and is
currently the exclusive supplier of diesel engines to Ford for use in its
diesel-powered light trucks and vans. On October 29, 1997, the Company
finalized its agreement with Ford to supply newly-designed, advanced
technology engines through the year 2012 for use in Ford's F-series pickup
trucks and Econoline vans. This 10-year agreement is scheduled to become
effective beginning with model year 2003 and will replace the Company's
current agreement with Ford, which will expire after model year 2002. The
Company has been supplying diesel engines to Ford since 1982.
TRUCK STRATEGY
In fiscal 1997, the Company continued to implement its five-point truck
strategy, which the Company adopted in fiscal 1996 in order 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 17.5% after tax return on equity over
a business cycle. The principal components of this strategy as well as recent
achievements in its implementation include:
. Reduce Product Complexity. The Company 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. In 1997, Transportation
expanded its Diamond Spec(TM) ordering system and completed a successful
pilot program in 11 key markets for its medium trucks. This
standardization of option and chassis groups is expected to lead to
significant operating cost savings from increased manufacturing
efficiency and to 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.
. Focus Manufacturing Facilities. The Company 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. In order to sharpen the Company's focus on serving its
customers and markets, the Company recently announced a reorganization of
its truck group into six distinct businesses. The new organization will
consist of four vehicle centers--heavy truck, severe service truck,
medium truck and school bus, and two business centers--parts and
international. In fiscal 1996, Transportation transferred the production
of its stripped chassis from its Springfield, Ohio facility to its
Conway, Arkansas facility, in order to achieve efficiencies in the
production of medium duty trucks. Similarly, the Company established a
joint venture, SST Truck Company, which will focus on the production of
the
37
<PAGE>
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. The Company believes that each of its
current truck models equals or exceeds those of its competitors in terms
of satisfying its customers' needs. Nevertheless, the Company 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 1997, Navistar's Board of Directors approved funding for the NGT
Program. Pursuant to the NGT Program, the Company expects to invest $350
million in capital and spend $300 million in development costs over the
next six years to develop and manufacture a full line of world-class
medium trucks, school buses and regular conventional heavy trucks, which
will offer enhanced driver comfort, operating efficiency, overall
appearance, quality and performance. The design and development phases of
the NGT Program are currently underway and the Company expects the first
new vehicles to be available in mid-2001, with additional new vehicles to
follow approximately every six months through 2003. In 1997,
Transportation also introduced the International 9100 conventional truck
to replace its 8200 heavy duty regular conventional truck and made
significant improvements to its premium conventional models. Further
model improvements are expected to be introduced for Transportation's
premium conventional heavy duty truck models in fiscal 1998.
. Expand International Operations. The Company believes that there are
significant opportunities to increase sales of both trucks and engines in
Mexico and in other selected export markets. In 1997, the Company
captured approximately 11.5% of the Mexican truck market after
establishing a dealer network and a parts distribution center and
arranging for production at a contract manufacturer in 1996. The
Company's dealer network in Mexico was expanded from 23 to 38 locations
in 1997. The Company is currently constructing an assembly facility
located near Monterrey, Mexico. This medium duty and heavy duty truck
facility is anticipated to cost approximately $167 million and to begin
production by late-1998. Its capacity will be 65 units per shift. The
Company 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. The Company has also recently established a
presence in Brazil by forming a Brazilian subsidiary and signing an
agreement with a Brazilian equipment manufacturer to assemble commercial
trucks. The Company expects that production of its trucks in Brazil will
begin in late 1998.
. Establish Competitive Wage, Benefit and Productivity Levels.
Transportation expects to achieve significant productivity gains as a
result of favorable changes in job classifications, work rules and
training. In August 1997, Transportation's collective bargaining
agreement with the UAW was extended through October 1, 2002. This
contract contains significant changes from the prior agreement, enabling
the Company to better focus its assembly plants, simplify current product
lines, invest in new product development and achieve more competitive
wage, benefit and productivity levels. This new agreement enabled the
Company to reinstate its NGT Program and continue to implement its five-
point truck strategy. In 1996, Transportation signed a new three-year
collective bargaining agreement with the CAW.
PRODUCTS
The following table illustrates the percentage of the Company's
manufacturing sales by class of product based on dollar amount:
<TABLE>
<CAPTION>
YEARS ENDED
OCTOBER 31,
----------------
PRODUCT CLASS 1997 1996 1995
------------- ---- ---- ----
<S> <C> <C> <C>
Class 5, 6 and 7 medium trucks and school buses............ 34% 35% 32%
Class 8 heavy trucks....................................... 37 35 42
Service parts.............................................. 13 14 12
Engines.................................................... 16 16 14
--- --- ---
Total.................................................. 100% 100% 100%
=== === ===
</TABLE>
38
<PAGE>
Transportation manufactures 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 Class 8 heavy trucks generally use diesel engines purchased
from outside suppliers while Class 5, 6 and 7 medium trucks are powered by a
proprietary line of mid-range diesel engines manufactured by Transportation.
Based upon information published by R.L. Polk & Company, diesel-powered Class
5, 6 and 7 medium truck shipments represented 87% of all medium truck
shipments for fiscal year 1997 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. During 1997, the Company announced plans for approximately $350 million
in capital spending and $300 million in development expense over the next six
years for development of its next generation truck.
ENGINE AND FOUNDRY
Transportation builds diesel engines for use in its Class 5, 6 and 7 medium
trucks, school buses, selected Class 8 heavy 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 is the leading supplier of mid-range diesel
engines in the 160-300 horsepower range according to data supplied by Power
Systems Research of Minneapolis, Minnesota.
Transportation has an agreement to supply its 7.3 liter (7.3L)
electronically controlled diesel engine to Ford through the year 2002 for use
in all of Ford's diesel-powered light trucks and vans. Sales of this engine to
Ford currently account for approximately 87% of Transportation's 7.3L sales.
Shipments of engines to all original equipment manufacturers totaled a record
184,000 units in 1997, an increase of 13% from the 163,200 units shipped in
1996. During 1997, Transportation entered into a ten-year agreement, effective
with model year 2003, to supply Ford with a 7.3L replacement product for use
in its diesel-powered light trucks and vans.
SERVICE PARTS
In the United States and Canada, Transportation operates seven regional
parts distribution centers, which allows it to offer 24-hour availability and
same day shipment of the parts most frequently requested by customers. The
Company also operates a parts distribution center in Mexico.
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
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 cycle 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 is not independently determined.
MARKETING AND DISTRIBUTION
Transportation's truck products are distributed in virtually all key markets
in the United States and Canada. Transportation's truck distribution and
service network in these countries was composed of 954, 957 and 958 dealers
and retail outlets at October 31, 1997, 1996 and 1995, respectively. Included
in these totals were 514, 504 and 490 secondary and associate locations at
October 31, 1997, 1996 and 1995, respectively. The Company also has a dealer
network in Mexico composed of 38 and 23 dealer locations at October 31, 1997
and 1996, respectively.
39
<PAGE>
Retail dealer activity is supported by five regional operations in the
United States and general offices in Canada and Mexico. Transportation has a
national account sales group, responsible for 99 major national account
customers. Transportation's network of 16 Used Truck Centers in the United
States provides trade-in support to the Company's dealers and national
accounts group, and markets all makes and models of reconditioned used trucks
to owner-operators and fleet buyers. Trucks, components and service parts are
exported for wholesale and retail sale to more than 70 countries around the
world.
FINANCIAL SERVICES
NFC is a financial services organization that provides wholesale, retail and
lease financing of new and used trucks sold by Transportation and its dealers
in the United States. NFC also finances wholesale accounts and selected retail
accounts receivable of Transportation. Sales of new products (including
trailers) of other manufacturers are also financed regardless of whether
designed or customarily sold for use with Transportation's truck products.
During 1997 and 1996, NFC provided wholesale financing for 94% of the new
truck units sold by Transportation to its dealers and distributors in the
United States and retail and lease financing for 13% and 16%, respectively, of
all new truck units sold or leased by Transportation to retail customers.
NFC's wholly owned domestic insurance subsidiary, Harco National Insurance
Company, provides commercial physical damage and liability insurance coverage
to Transportation's dealers and retail customers, and to the general public
through an independent insurance agency system.
Harbour Assurance Company of Bermuda Limited offers a variety of programs to
the Company, including general liability insurance, ocean cargo coverage for
shipments to and from foreign distributors, and reinsurance coverage for
various Transportation policies.
IMPORTANT SUPPORTING OPERATIONS
Navistar International Corporation Canada has an agreement with a subsidiary
of General Electric Capital Canada, Inc. to provide financing for Canadian
dealers and customers.
RESEARCH AND DEVELOPMENT
Research and development activities, which are directed toward the
introduction of new products and improvements of existing products and
processes used in their manufacture, totaled $92 million, $101 million, and
$91 million for 1997, 1996 and 1995, respectively.
BACKLOG
The backlog of unfilled truck orders (subject to cancellation or return in
certain events) at October 31, 1997, 1996 and 1995 was $2,360 million, $1,254
million and $2,581 million, respectively.
Although the backlog of unfilled orders is one of many indicators of market
demand, other factors such as changes in production rates, available capacity,
new product introductions and competitive pricing actions may affect point-in-
time comparisons.
EMPLOYEES
The Company employed 16,168, 14,187 and 16,079 individuals at October 31,
1997, 1996 and 1995, respectively.
LABOR RELATIONS
At October 31, 1997, the UAW represented 8,079 of the Company's active
employees in the United States, and the CAW represented 2,142 of the Company's
active employees in Canada. Other unions represented 955 of
40
<PAGE>
the Company's active employees in the United States and Canada. The Company
entered into a collective bargaining agreement with the UAW in 1995, which
would have expired on October 1, 1998. During August 1997, the Company's
collective bargaining agreement with the UAW was extended through October 1,
2002. This contract allows the Company to focus its assembly plants, simplify
current product lines, invest in new product development, and achieve more
competitive wage, benefit and productivity levels. In addition, the Company
entered into a collective bargaining agreement with the CAW in 1996, which
expires on October 24, 1999.
PATENTS AND TRADEMARKS
Transportation continuously obtains patents on its inventions and, thus,
owns a significant patent portfolio. Additionally, many of the components
which Transportation purchases for its products are protected by patents that
are owned or controlled by the component manufacturer. Transportation has
licenses under third-party patents relating to its products and their
manufacture, and Transportation grants licenses under its patents. The
royalties paid or received under these licenses are not significant. No
particular patent or group of patents is considered by Transportation to be
essential to its business as a whole.
Like all businesses which offer well-known products or services,
Transportation's primary trademarks are an important part of its worldwide
sales and marketing efforts, and provide instant identification of its
products and services in the marketplace. To support these efforts,
Transportation maintains, or has pending, registrations of its primary
trademarks in those countries in which it does business or expects to do
business.
RAW MATERIALS AND ENERGY SUPPLIES
Transportation purchases raw materials, parts and components from numerous
outside suppliers but relies upon some suppliers for a substantial number of
components for its truck and engine products. A majority of Transportation's
requirements for raw materials and supplies is filled by single-source
suppliers.
The impact of an interruption in supply will 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, the Company'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, the Company
maintains contingent 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 increasing governmental
regulation of their products, especially in the areas of environment and
safety. The Company believes its products comply with all applicable
environmental and safety regulations.
As a diesel engine manufacturer, the Company has incurred research and
tooling costs to redesign its engine product lines to meet the U.S. EPA and
CARB emission standards effective for the 1998 model year. In addition to the
1998 standards, the Company, along with other engine manufacturers, has signed
a voluntary agreement with U.S. EPA and CARB to achieve new reductions in
ozone-causing exhaust emissions by 2004 (the "Statement of Principles"). In
October 1997, as a result of the Statement of Principles, the U.S. EPA issued
a final rule defining heavy-duty emission requirements for the 2004 model
year. The Company will also provide engines that satisfy 1998 Clean Fuel Fleet
Vehicle requirements and must also satisfy California's emission standards in
2002 for engines used in medium-size vehicles (which includes vehicles up to
14,000 lbs. Gross Vehicle Weight Rating). The Company expects that its diesel
engines will be able to meet all of these standards within the required time
frame. For model year 1998, the U.S. EPA has issued conditional certification
of conformance for all electronically-controlled diesel engines while it
investigates whether these engines fully
41
<PAGE>
comply with regulations concerning nitrogen oxide emissions. In particular,
the U.S. EPA is focusing on whether certain electronics strategies used to
maintain fuel economy have an adverse impact on nitrogen oxide emissions.
Navistar believes the diesel engines manufactured by it are in compliance with
all applicable U.S. EPA standards and is cooperating with the U.S. EPA's
investigation. It is possible that the U.S. EPA investigation could result in
some buyers deferring their purchases of trucks pending the outcome of the
investigation, and that future U.S. EPA action could impact the fuel economy
of trucks.
Effective with the 1998 model year, Canada's emission standards mirror those
of the U.S. EPA and require the sale of low-sulfur diesel fuel effective
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.
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 the Company, therefore, works closely with original
equipment manufacturers to develop strategies to reduce engine noise. The
Company is also subject to the National Traffic and Motor Vehicle Safety Act
("Safety Act") and Federal Motor Vehicle Safety Standards ("Safety Standards")
promulgated by the National Highway Traffic Safety Administration. The Company
believes it is in compliance with the Safety Act and the Safety Standards.
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 the Company, Wisconsin
Steel in Chicago, Illinois, and Solar Turbine 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. It is not expected that the costs of compliance with
foreseeable environmental requirements will have a material effect on the
Company's financial position or operating results.
PROPERTIES
In the United States and Canada, Transportation owns and operates eight
manufacturing and assembly operations, which contain approximately nine
million square feet of floor space. Four facilities manufacture and assemble
trucks, two plants manufacture diesel engines and two locations produce gray
iron castings. The Company also manufactures trucks at a facility owned and
operated through a joint venture in the U.S. and is constructing a truck
assembly facility in Mexico. In addition, Transportation owns or leases other
significant properties in the United States and Canada including vehicle and
parts distribution centers, sales offices, an engineering center and its
headquarters in Chicago.
Transportation's principal research and engineering facilities are located
in Fort Wayne, Indiana, and Melrose Park, Illinois. In addition, certain
research is conducted at its manufacturing plants.
All of Transportation's plants are being utilized and have been maintained
adequately, are in good operating condition and are suitable for its current
needs through productive utilization of the facilities. These facilities,
together with planned capital expenditures, are expected to meet
Transportation's manufacturing needs in the foreseeable future.
A majority of the activity of the financial services operations is conducted
from its leased headquarters in Rolling Meadows, Illinois. The financial
services operations also lease six other office locations in the United
States.
LEGAL PROCEEDINGS
The Company and its subsidiaries are subject to various 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 the
Company and its subsidiaries. In the opinion of the Company's management, none
of these proceedings or claims are material to the business or the financial
condition of the Company.
42
<PAGE>
CERTAIN ARRANGEMENTS WITH NFC
Master Intercompany Agreement
The operating relationship between Transportation and NFC is 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"). The
Master Intercompany Agreement requires, among other things, that
Transportation, with limited exceptions, offer NFC all wholesale and retail
notes and installment sales contracts which Transportation acquires in the
regular course of its business from sales of trucks and related equipment to
Transportation's 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 NFC to
Transportation and Transportation's dealers with respect to the sale of
Transportation's products and used goods. NFC in turn has agreed, to the
extent that it is able to finance such purchases, that it will purchase all
such receivables without recourse.
Pursuant to the Master Intercompany Agreement, NFC also purchases
Transportation's wholesale accounts receivable from Transportation's dealers
arising out of Transportation's sales of goods (primarily parts) and services
to such dealers. NFC receives compensation from Transportation in the form of
a floating rate service charge for financing these accounts.
The Master Intercompany Agreement also provides that NFC will purchase
retail accounts receivable from Transportation that arise out of
Transportation's sales to retail customers. NFC receives a floating rate
service charge from Transportation for financing these accounts.
Tax Allocation Agreement
Pursuant to the tax allocation agreement effective October 1, 1981, as
subsequently amended and supplemented (the "Tax Allocation Agreement"), NFC is
required to pay to Transportation an amount equal to the amount NFC and its
subsidiaries would pay with respect to federal corporate income taxes if NFC
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 Amended and Restated Parent's Side Agreement dated as of November 8,
1994, between NIC and Transportation (the "Side Agreement") requires either
Transportation or NIC to hold and own 100% of the outstanding voting stock of
NFC (other than shares held by directors of NFC as qualifying shares). The
Side Agreement also requires Transportation not to permit NFC's consolidated
income before income taxes, interest expense and dividends on preferred stock
to be less than 125% of NFC's consolidated interest expense and dividends on
preferred stock for any period of four fiscal quarters immediately preceding
the date of measurement.
43
<PAGE>
MANAGEMENT
The following table lists the names, ages and all positions held by the
executive officers of the Company as of December 31, 1997:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<C> <C> <S>
John R. Horne........ 59 Chairman, President and Chief Executive
Officer
Donald DeFosset, Jr.. 49 Executive Vice President and President, Truck
Group
Robert C. Lannert.... 57 Executive Vice President and Chief Financial
Officer
Robert A. Boardman... 50 Senior Vice President and General Counsel
Thomas M. Hough...... 52 Vice President and Treasurer
J. Steven Keate...... 41 Vice President and Controller
Steven K. Covey...... 46 Corporate Secretary
</TABLE>
John R. Horne has served as Chairman, President and Chief Executive Officer
of NIC since 1996 and a Director of NIC since 1990. Mr. Horne has also served
as Chairman, President and Chief Executive Officer of Transportation since
1995 and a Director of Transportation since 1987. Prior to this, Mr. Horne
served as President and Chief Executive Officer, 1995-1996, President and
Chief Operating Officer, 1990-1995, Group Vice President and General Manager,
Engine and Foundry, 1990, and Vice President and General Manager, Engine and
Foundry, 1983-1990.
Donald DeFosset, Jr. has served as Executive Vice President of NIC and
President, Truck Group, since 1996. Mr. DeFosset has also served as Executive
Vice President and President, Truck Group of Transportation since 1996. Prior
to this, Mr. DeFosset served as President, Allied Signal Safety Restraints
Systems of Allied Signal Inc., 1993-1996, Group Executive and General Manager,
Allied Signal Turbocharging and Truck Brake Systems, 1992-1993, and Vice
President, Planning and Business Development in 1992 and served as Executive
Vice President, Operations for Mack Trucks, 1989-1992.
Robert C. Lannert has served as Executive Vice President and Chief Financial
Officer of NIC and a Director of NIC since 1990. Mr. Lannert has also served
as Executive Vice President and Chief Financial Officer of Transportation
since 1990 and a Director of Transportation since 1987. Prior to this, Mr.
Lannert served as Vice President and Treasurer, 1987-1990, and Vice President
and Treasurer of Transportation, 1979-1990.
Robert A. Boardman has served as Senior Vice President and General Counsel
of NIC since 1990. Mr. Boardman has also served as Senior Vice President and
General Counsel of Transportation since 1990. Prior to this, Mr. Boardman
served as Vice President of Manville Corporation, 1988-1990, and Corporate
Secretary, 1983-1990.
Thomas M. Hough has served as Vice President and Treasurer of NIC since
1992. Mr. Hough has also served as Vice President and Treasurer of
Transportation since 1992. Prior to this, Mr. Hough served as Assistant
Treasurer of NIC, 1987-1992, and Assistant Treasurer of Transportation, 1987-
1992. Mr. Hough also served as Assistant Controller, Accounting and Financial
Systems, 1987, and Controller of NFC, 1982-1987.
J. Steven Keate has served as Vice President and Controller of NIC since
1995. Mr. Keate has also served as Vice President and Controller of
Transportation since 1995. Prior to this, Mr. Keate served as Vice President
and Controller of General Dynamics Corporation, 1991-1995, and Corporate
Manager, Financial Planning and Analysis, 1989-1991.
Steven K. Covey has served as Corporate Secretary of NIC since 1990. Mr.
Covey has also served as Associate General Counsel of Transportation since
1992. Prior to this, Mr. Covey served as General Attorney, Finance and
Securities of Transportation, 1989-1992, Senior Counsel, Finance and
Securities, 1986-1989, and Senior Attorney, Corporate Operations 1984-1986.
44
<PAGE>
DESCRIPTION OF OTHER FINANCING ARRANGEMENTS
MEXICO CREDIT AGREEMENT
In November 1997, NIC and Navimex entered into a credit agreement (the
"Mexico Credit Agreement") with a group of banks. The commitment of the Mexico
Credit Agreement is $125 million, including $65 million in a U.S. dollar
tranche and the equivalent of $60 million in Mexican pesos for a peso tranche.
The facility is a multiple drawdown term credit facility, the proceeds of
which are to be used for the construction of the Company's new assembly
facility near Monterrey, Mexico. The maturity date of the Mexico Credit
Agreement is December 2002. Borrowings under the Mexico Credit Agreement are
secured by all of the assets of Navimex and are guaranteed by NIC.
All amounts borrowed under the commitment are to be drawn pro-rata between
the U.S. dollar tranche and the peso tranche. With respect to all U.S. dollar
loans, Navimex has elected a fixed interest rate of 6 1/8% plus a margin based
on NIC's long-term credit rating. The interest rate on peso loans is based on
the Interbank Interest Equilibrium Rate calculated by the Banco de Mexico,
plus a margin based on NIC's long-term credit rating.
The Mexico Credit Agreement includes a number of restrictive covenants,
which require NIC to maintain (i) a consolidated net worth (which includes
certain amounts of subordinated indebtedness) of at least $850 million plus
50% of positive net earnings for each fiscal year commencing with fiscal year
1997 plus 50% of the net cash proceeds to NIC of any primary sales of capital
stock, (ii) a cash flow coverage ratio of at least 1.25 to 1, and (iii) a
minimum cash reserve equal to 75% at fiscal year end and 50% at any other time
of the aggregate outstanding amount of all loans under the Mexico Credit
Agreement. In addition, NIC's total consolidated debt to the sum of its total
consolidated debt plus its consolidated net worth may not exceed certain
prescribed ratios.
The Mexico Credit Agreement also limits the amount of investments that NIC
and Navimex can make and the amount of debt each can incur, subject to certain
limited exceptions, and contains a negative pledge which prevents NIC and
Navimex from incurring or suffering to exist liens on its assets, except in
certain limited circumstances. The Mexico Credit Agreement also contains
covenants regarding reporting, insurance, conduct of business, maintenance of
existence and compliance with laws and customary events of default.
NFC BANK CREDIT AGREEMENT
NFC has a $925 million Credit Agreement which matures in March 2001. Under
the terms of the Credit Agreement, NFC may (i) lend up to $100 million to
Transportation, secured by Transportation's service parts and new and used
truck inventories; and (ii) receive up to $50 million of credit in its asset
base calculation for Mexican retail and wholesale receivables funded by NFC.
Amounts outstanding under the Credit Agreement are secured by all the assets
of NFC, including a pledge of all of the stock of each of NFC'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 NFC's long-term credit rating.
The Credit Agreement includes a number of restrictive covenants. For
example, NFC 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, NFC's total consolidated debt to consolidated
tangible net worth may not exceed 7 to 1. NFC may not transfer its accounts
receivable or prepay subordinated debt below $100 million, except in
accordance with the terms contained in the Credit Agreement.
In addition, the Credit Agreement requires NFC to hold all of the
outstanding stock of each of its subsidiaries. The Credit Agreement requires
that NFC perform all of its obligations under the Master Intercompany
Agreement, not consent to amendments or modifications thereof which would be
materially
45
<PAGE>
adverse to NFC (except in certain limited circumstances) and enforce the
Master Intercompany Agreement against Transportation in accordance with its
terms. NFC 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
NFC maintain adequate loan loss reserves and its current dealer guideline
program. The Credit Agreement also contains additional covenants and events of
default that are customary to this type of financing.
SECURITIZATION PROGRAMS
NFC presently utilizes securitizations to fund a substantial portion of its
acquisitions of wholesale notes and retail notes (together with lease
receivables, the "receivables"). NFC relies upon the securitization market,
which provides it with funding at rates offered to companies with investment
grade ratings. NFC anticipates continuing to utilize securitizations to fund
its acquisitions of wholesale notes and retail notes.
Wholesale Notes Securitizations
Since 1990, NFC has securitized its wholesale notes. On a daily basis, NFC
sells all newly arising wholesale notes, except those which are ineligible and
those which exceed a dealer concentration level which is set by NFC (subject
to a contractual maximum), to Navistar Financial Securities Corporation
("NFSC"), a wholly owned special purpose subsidiary of NFC. 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 October 31, 1997, NFSC's retained interest in the
trust constituted $120 million, of which $100 million was subordinated to
claims of investor certificateholders.
Retail Notes Securitizations
Since 1993, NFC has securitized a significant portion of its retail loans.
Approximately twice a year, NFC 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
NFRRC, a wholly owned special purpose subsidiary of NFC. Immediately
thereafter, NFRRC transfers such Property to a trust formed specifically for
such transactions in exchange for either asset-backed notes or certificates
issued by such trust. NFC 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.
As of October 31, 1997, trusts formed by NFRRC have issued an aggregate
principal amount of approximately $3,776 million of asset-backed securities.
Each class of asset-backed securities may have a different interest rate. At
October 31, 1997, asset-backed securities from seven securitized transactions
originated by NFRRC remained outstanding and had a remaining aggregate
principal balance of approximately $1,367 million.
Asset-Backed Commercial Paper Program
NFC and Truck Retail Instalment Paper Corp. ("TRIP"), a wholly owned
subsidiary of NFC, 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. NFC 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 October 31, 1997, the ABCP Trust had outstanding commercial paper of $388
million.
NFC currently uses the ABCP Program to warehouse its retail loans pending a
permanent securitization of such loans as described above. To support the
commercial paper program, NFC has arranged a liquidity facility
46
<PAGE>
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.
SALE-LEASEBACKS
During 1997, NFC entered into sale-leaseback agreements involving vehicles
subject to retail finance and operating leases with end users. The agreements
grant to the purchasers a security interest in the underlying end user leases.
The aggregate value of the leased vehicles was approximately $105 million. NFC
may effect additional sale-leasebacks in the future.
1998 AND 2002 NOTES
NFC's 8 7/8% Senior Subordinated Notes due 1998 (the "1998 Notes") were
issued pursuant to an indenture, dated as of November 15, 1993, between NFC
and First Trust, N.A. (as successor to Continental Bank, National
Association), as Trustee (the "1998 Notes Indenture"). NFC's 9.0% Senior
Subordinated Notes due 2002 (the "2002 Notes" and together with the 1998
Notes, the "NFC Notes") were issued pursuant to an indenture, dated as of May
30, 1997, between NFC and The Fuji Bank & Trust Company, as Trustee (the "2002
Notes Indenture"). The 1998 Notes and the 2002 Notes are each limited to $100
million aggregate principal amount and mature on November 15, 1998 and June 1,
2002, respectively. The NFC Notes are not redeemable by NFC prior to maturity
and are not subject to any mandatory sinking fund payments.
The 1998 Notes Indenture and the 2002 Notes Indenture contain certain
covenants that, among other things, limit the ability of NFC 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, NFC 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 NFC Notes are general obligations of NFC and are subordinated to all
senior indebtedness of NFC (as defined in the 1998 Notes Indenture or the 2002
Notes Indenture, as applicable). The NFC Notes rank pari passu with all senior
subordinated indebtedness of NFC and rank senior to subordinated indebtedness
of NFC. As a result of the restrictive covenants contained in the 1998 Notes
Indenture and the 2002 Notes Indenture and pursuant to the Credit Agreement,
holders of the NFC Notes are secured, subject to the subordination provisions
contained in such Indenture, equally and ratably with the holders of the
Senior Indebtedness of NFC, by a lien on substantially all of the assets of
NFC. Such lien and security interest is subject to release without prior
notice to, or the consent of, the holders of the 1998 Notes or the 2002 Notes
Indenture, as the case may be.
Upon a Change of Control Triggering Event (as defined in the 1998 Notes
Indenture and the 2002 Notes Indenture), NFC will, subject to certain
conditions, make an offer to purchase all outstanding NFC 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 NFC Notes upon a Change of Control Triggering Event.
47
<PAGE>
THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
The Old Notes were originally sold by the Company on February 4, 1998 to the
Initial Purchasers pursuant to the Purchase Agreements. The Initial Purchasers
subsequently placed the Old Notes with (i) qualified institutional buyers in
reliance on Rule 144A under the Securities Act and (ii) qualified buyers
outside the United States in reliance upon Registration S under the Securities
Act. As a condition of the Purchase Agreements, the Company entered into the
Registration Rights Agreements 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 (the "Issue Date") 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 Issue Date 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 Issue Date. 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 20 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 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 surrendered
in exchange therefor or, if no interest has been paid on such Old Note, from
the date of its original issue. 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 (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 Exchange 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
Agreements, each holder accepting the Exchange Offer is required to represent
to the Company in the Letter of Transmittal or Agent's Message 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."
48
<PAGE>
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 not
consummated within 180 days of the Issue Date, 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 two years
after the Issue Date. 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 Statements 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
Agreements 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 its Old Notes included in the Shelf Registration
Statement and to benefit from the provisions set forth in the following
paragraph.
The Registration Rights Agreements provide that (i) the Company will file an
Exchange Offer Registration Statement with the Commission on or prior to 60
days after the Issue Date, (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 Issue Date, (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 the
Exchange Note on or prior to 180 days after the Issue Date 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 Agreements 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
on or prior to the date specified for such consummation, 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 Agreements (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. All Additional Interest will be payable to holders of the
Old Notes in cash on each February 1 and August 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 the original rate per annum.
Holders of Old Notes will be required to make certain representations to the
Company (as described in the Registration Rights Agreements) 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 Agreements in order to have its 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
Agreements does not purport to be complete and is subject to, and is qualified
in its entirety by, all the provisions of the Registration Rights Agreements,
a copy of which is filed as an exhibit to the Exchange Offer Registration
Statement of which this Prospectus is a part.
49
<PAGE>
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
its 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
its 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 Registration Rights
Agreements, 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 Indentures.
As of the date of this Prospectus, $100,000,000 aggregate principal amount
of Old Senior Notes and $250,000,000 aggregate principal amount of Old Senior
Subordinated Notes were outstanding. The Company has fixed the close of
business on March 4, 1998 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 Indentures 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
April 6 1998, 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.
50
<PAGE>
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, in cash, 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 August 1, 1998. 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 February 1
and August 1, commencing on August 1, 1998.
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, 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 an 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, 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.
51
<PAGE>
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.
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 its 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 its 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 Company shall determine. Although the Company
intends to notify holders of defects or irregularities with respect to tenders
of Old Notes, neither the Company, 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.
52
<PAGE>
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) together with the certificate(s)
representing the Old Notes (or a confirmation of book-entry transfer of
such Old 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) such properly completed and executed Letter of Transmittal (of
facsimile thereof), as well as 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 Facility), 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.
53
<PAGE>
CONDITIONS
Notwithstanding any other term of the Exchange Offer, the Company shall not
be required to accept for exchange, or exchange the 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 reasonable 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.
EXCHANGE AGENT
Harris Trust and Savings Bank 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:
By Registered or Certified Mail: By Hand/Overnight Courier:
Harris Trust and Savings Bank Harris Trust and Savings Bank
c/o Harris Trust Company of New York c/o Harris Trust Company of New York
P.O. Box 1010 88 Pine Street, 19th Floor
Wall Street Station New York, NY 10005
New York, NY 10268-1010
Facsimile Transmission Number:
(For Eligible Institutions Only)
(212) 701-7636
Confirm Receipt of Facsimile by Telephone:
(212) 701-7624
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.
54
<PAGE>
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 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
Agreements, 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
55
<PAGE>
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."
56
<PAGE>
DESCRIPTION OF THE NOTES
GENERAL
The Senior Exchange Notes will be issued under the Senior Notes Indenture.
The Senior Subordinated Exchange Notes will be issued under the Senior
Subordinated Notes Indenture. The Exchange Notes are subject to all such
terms, and Holders of Exchange Notes are referred to the Indentures and the
Trust Indenture Act for a statement thereof. 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 and a
different CUSIP Number from the Old Notes, (ii) the Exchange Notes have been
registered under the Securities 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 terminate when the Exchange Offer is consummated. A
copy of the Indentures and the Registration Rights Agreements described below
have been filed as exhibits to the Exchange Offer Registration Statement of
which this Prospectus forms a part.
The following summary of certain provisions of the Indentures and the
Registration Rights Agreements does not purport to be complete and is
qualified in its entirety by reference to the Indentures and the Registration
Rights Agreements, including the definitions therein of certain terms used
below. The definitions of certain terms used in the following summary are set
forth below under "--Certain Definitions" or are otherwise defined in the
Indentures. Any reference to a "Trustee" means the Senior Note Trustee or the
Senior Subordinated Note Trustee, as the context may require. Unless otherwise
specifically indicated, all references in this section to the "Company" are to
NIC and not to any of its subsidiaries. The Old Senior Notes and Senior
Exchange Notes are sometimes collectively referred to herein as the "Senior
Notes," the Old Senior Subordinated Notes and the Senior Subordinated Exchange
Notes are sometimes collectively referred to herein as the "Senior
Subordinated Notes" and the Senior Notes and Senior Subordinated Notes are
sometimes collectively referred to herein as the "Notes."
The Senior Notes are general unsecured obligations of the Company, limited
to $100 million aggregate principal amount, and rank pari passu in right of
payment with all existing and future unsubordinated Indebtedness of the
Company and senior in right of payment to all existing and future subordinated
Indebtedness of the Company. The Senior Notes are effectively subordinated to
all secured Indebtedness of the Company, if any. The Senior Notes mature on
February 1, 2003 and bear interest at the rate per annum of 7%. Interest will
be payable semiannually (to holders of record of Senior Notes at the close of
business on the January 15 or July 15 immediately preceding the interest
payment date) on February 1 and August 1 of each year, respectively,
commencing August 1, 1998. Interest will be computed on the basis of a 360-day
year comprised of twelve 30-day months.
The Senior Subordinated Notes are general unsecured obligations of the
Company, limited to $250 million aggregate principal amount, and are
subordinated in right of payment to all existing and future Senior
Indebtedness of the Company. The Senior Subordinated Notes mature on February
1, 2008 and bear interest at the rate per annum of 8%. Interest will be
payable semiannually (to holders of record of Senior Subordinated Notes at the
close of business on the January 15 or July 15 immediately preceding the
interest payment date) on February 1 and August 1 of each year, respectively,
commencing August 1, 1998. Interest will be computed on the basis of a 360-day
year comprised of twelve 30-day months.
The Notes will not have the benefit of any sinking fund.
OPTIONAL REDEMPTION
On or after February 1, 2003, the Senior Subordinated Notes may be redeemed
at any time, in whole or in part, at the option of the Company, on not less
than 20 days' nor more than 60 days' notice, at the redemption
57
<PAGE>
prices (expressed as percentages of the principal amount) set forth below, if
redeemed during the 12 month period beginning February 1 of the year indicated
below, in each case together with interest accrued to the redemption date:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2003........................................................... 104.00%
2004........................................................... 102.67%
2005........................................................... 101.33%
2006 and thereafter............................................ 100.00%
</TABLE>
In addition, prior to February 1, 2001, the Company may, at its option
redeem up to 35% of the principal amount of the Senior Subordinated Notes
originally issued with the net cash proceeds received by the Company from one
or more public offerings of Common Stock of the Company made after the Issue
Date, at a redemption price (expressed as a percentage of the principal
amount) of 108.0% of the principal amount thereof, plus accrued and unpaid
interest to the date fixed for redemption; provided that at least $162.5
million in aggregate principal amount of the Senior Subordinated Notes remains
outstanding immediately after any such redemption (excluding any Notes owned
by the Company or any of its Affiliates). Notice of redemption pursuant to
this paragraph must be mailed to Holders of Senior Subordinated Notes not
later than 60 days following the consummation of such public offering.
Selection of Senior Subordinated Notes for any redemption shall be made by
the Trustee under the Senior Subordinated Note Indenture in accordance with
the rules of any national securities exchange on which the Senior Subordinated
Notes may be listed or if the Senior Subordinated Notes are not so listed, pro
rata or by lot or in such other manner as the Senior Subordinated Note Trustee
shall deem appropriate and fair. Senior Subordinated Notes in denominations
larger than $1,000 may be redeemed in part but only in integral multiples of
$1,000. Notice of redemption will be mailed at least 20 days but not more than
60 days before the redemption date to each Holder of Senior Subordinated Notes
to be redeemed at his or her registered address. On and after the redemption
date, interest will cease to accrue on Senior Subordinated Notes or portions
thereof called for redemption.
SUBORDINATION OF SENIOR SUBORDINATED NOTES; RANKING
The Company's obligations with respect to the payment of the principal of,
premium, if any, and interest on, and all other obligations in respect of,
each and all of the Senior Subordinated Notes shall be subordinated in right
of payment, to the extent and in the manner provided in the Senior
Subordinated Note Indenture, to the prior payment in full in cash of all
Senior Indebtedness of the Company.
In the event of (i) any insolvency or bankruptcy case or proceeding, (ii)
any receivership, liquidation, dissolution or other winding up of the Company,
whether voluntary or involuntary and whether or not involving insolvency or
bankruptcy or (iii) any assignment for the benefit of the creditors or any
other marshaling of assets and liabilities of the Company, then and in any
such event specified in (i), (ii) or (iii) above, the holders of Senior
Indebtedness shall be entitled to receive payment in full in cash of all
amounts due or to become due on or in respect of all Senior Indebtedness
before the Holders of the Senior Subordinated Notes are entitled to receive
any Note Payment (as defined below), and in any such event any Note Payment to
which the Holders of the Senior Subordinated Notes or the Senior Subordinated
Note Trustee on their behalf would be entitled, but for the subordination
provisions of the Senior Subordinated Note Indenture, shall be made by the
Company or by any receiver, trustee in bankruptcy, liquidating trustee, agent
or other Person making such payment or distribution, directly to the holders
of the Senior Indebtedness (pro rata to such holders on the basis of the
respective amounts of Senior Indebtedness held by such holders) or their
respective trustee, agent or other representative under any agreement or
indenture pursuant to which any such Senior Indebtedness may have been issued,
as their respective interests may appear, to the extent necessary to pay all
such Senior Indebtedness in full, in cash, after giving effect to any
concurrent payment, distribution or provision therefor to or for the holders
of such Senior Indebtedness.
58
<PAGE>
In the event that, notwithstanding the foregoing provision prohibiting such
Note Payment, any Note Payment shall be received by the Senior Subordinated
Note Trustee or any Holder of Senior Subordinated Notes at a time when such
Note Payment is prohibited as described in the preceding paragraph and before
all obligations in respect of Senior Indebtedness are paid in full in cash,
such Note Payment shall be received and held in trust for the benefit of, and
shall be paid over or delivered to, the holders of Senior Indebtedness (pro
rata to such holders on the basis of the respective amounts of Senior
Indebtedness held by such holders) or their respective trustee, agent or other
representative under any agreement or indenture pursuant to which any of such
Senior Indebtedness may have been issued, as their respective interests may
appear, for application to the payment of Senior Indebtedness remaining unpaid
until all such Senior Indebtedness has been paid in full in cash after giving
effect to any concurrent payment, distribution or provision therefor to or for
the account of the holders of such Senior Indebtedness.
No direct or indirect payment, deposit or distribution of any kind or
character, whether in cash, property or securities (including any payment made
to Holders of the Senior Subordinated Notes under the terms of Indebtedness
subordinated to the Senior Subordinated Notes, but excluding any payment or
distribution of Permitted Junior Securities) by or on behalf of the Company of
principal of, premium, if any, or interest on, or any other obligation in
respect of, the Senior Subordinated Notes whether pursuant to the terms of the
Senior Subordinated Notes, upon acceleration, by way of repurchase,
redemption, defeasance or otherwise (all such payments, deposits or
distributions being referred to herein, individually and collectively, as a
"Note Payment"), shall be made if, at the time of such Note Payment, there
exists a default (a "Payment Default") in the payment when due of all or any
portion of the obligations under or in respect of any Designated Senior
Indebtedness, whether at maturity, on account of mandatory redemption or
prepayment, acceleration or otherwise, and such Payment Default shall not have
been cured or waived. In addition, during the continuance of any default or
event of default (other than a Payment Default) with respect to any Designated
Senior Indebtedness pursuant to which the maturity thereof may be accelerated
immediately without the giving of any notice (except such notice as may be
required to effect such acceleration) or the expiration of any applicable
grace periods, no Note Payment may be made by or on behalf of the Company for
a period (a "Payment Blockage Period") commencing upon the receipt by the
Company and the Senior Subordinated Note Trustee of written notice of such
default or event of default from the holder or holders of such Designated
Senior Indebtedness or any trustee, agent or other representative acting on
behalf of the holder or holders of such Designated Senior Indebtedness
specifying an election to effect a Payment Blockage Period (a "Payment
Blockage Notice") and ending 179 days thereafter (or earlier if such Payment
Blockage Period is terminated (i) by written notice to the Senior Subordinated
Note Trustee and the Company from the holder or holders of such Designated
Senior Indebtedness or any trustee, agent or other representative acting on
behalf of the holder or holders of such Designated Senior Indebtedness, (ii)
by discharge or repayment in full in cash of such Designated Senior
Indebtedness or (iii) because the default or event of default giving rise to
such Payment Blockage Notice has been cured, waived or ceased to exist).
Subject to the provisions of the first sentence of this paragraph, the Company
may resume payments on the Senior Subordinated Notes after such Payment
Blockage Period.
Not more than one Payment Blockage Period may be commenced with respect to
the Senior Subordinated Notes during any period of 360 consecutive days,
unless at least 180 consecutive days shall have elapsed during which time no
payment blockage was in effect. No default or event of default that existed or
was continuing on the date of commencement of any Payment Blockage Period with
respect to the Designated Senior Indebtedness initiating such Payment Blockage
Period may be, or be made, the basis for the commencement of any other Payment
Blockage Period by the holder or holders of such Designated Senior
Indebtedness or any trustee, agent or other representative acting on behalf of
the holder or holders of such Designated Senior Indebtedness, whether or not
within a period of 360 consecutive days, unless such default or event of
default has been cured or waived for a period of not less than 90 consecutive
days.
In the event that, notwithstanding the foregoing, any Note Payment shall be
received by the Senior Subordinated Note Trustee or any Holder when such Note
Payment is prohibited by the second preceding paragraph, such payment shall be
held in trust for the benefit of, and shall be paid over or delivered to, the
holders of Designated Senior Indebtedness or any trustee, agent or other
representative under any agreement or
59
<PAGE>
indenture pursuant to which any such Designated Senior Indebtedness may have
been issued, as their respective interests may appear, but only to the extent
that, upon notice from the Senior Subordinated Note Trustee to the holders of
Designated Senior Indebtedness that such prohibited Note Payment has been
made, the holders of the Designated Senior Indebtedness (or their trustee,
agent or other representative) notify the Senior Subordinated Note Trustee in
writing of the amounts then due and owing on the Designated Senior
Indebtedness, if any, and only the amount specified in such notice to the
Senior Subordinated Note Trustee shall be paid to or for the account of the
holders of Designated Senior Indebtedness.
The failure to make any payment or distribution for or on account of the
Senior Subordinated Notes by reason of the provisions of the Senior
Subordinated Note Indenture described under this section will not be construed
as preventing the occurrence of an Event of Default described in clause (a),
(b) or (c) of the first paragraph under "--Events of Default."
If the Company fails to make any payment on the Senior Subordinated 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 Senior Subordinated Note
Indenture and would enable the Holders to accelerate the maturity of the
Senior Subordinated 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 of the Senior Subordinated Notes 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 Senior Subordinated Notes.
At October 31, 1997, on a pro forma basis after giving effect to the Initial
Offerings, the Company would have had approximately $100.0 million of
Indebtedness outstanding which would constitute Senior Indebtedness of the
Company. In addition, the Senior Notes will constitute Senior Indebtedness for
purposes of the Senior Subordinated Note Indenture. Although the Senior
Subordinated Note 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 Senior Subordinated Notes. Moreover, the
Senior Subordinated Note 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 Senior Subordinated Note Indenture.
At October 31, 1997, on a pro forma basis after giving effect to the Initial
Offerings, there would have been no Indebtedness of the Company outstanding
which would rank pari passu with the Senior Subordinated Notes and no
Indebtedness outstanding that would rank subordinated to the Senior
Subordinated 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 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 October 31, 1997, on a pro forma basis after giving effect to the
Initial Offerings, the Subsidiaries of the Company had other liabilities under
generally accepted accounting principles (including trade payables) to third
parties of approximately $4,431 million. Such Indebtedness includes various
obligations not reported in the capitalization of the Company, primarily
current liabilities (other than short-term debt).
60
<PAGE>
CERTAIN COVENANTS
Relating Only to the Senior Notes
APPLICATION OF FALL AWAY COVENANTS. After the Senior Notes have been
assigned an Investment Grade rating by both Rating Agencies, the Company will
no longer be subject to the agreements and covenants contained in "Limitation
on Incurrence of Indebtedness," "Limitation on Certain Asset Dispositions,"
"Limitation on Restricted Payments," "Limitation on Preferred Stock of
Restricted Subsidiaries," "Limitation on Transactions with Affiliates,"
"Limitation on Payment Restrictions Affecting Restricted Subsidiaries,"
clauses (i)(A) and (iii) of the first paragraph of "Limitation on
Sale/Leaseback Transactions" and clause (ii) of the first paragraph of
"Merger, Consolidation, Etc." as therein; provided, such provisions shall no
longer have application for any purpose of the Senior Note Indenture.
LIMITATION ON LIENS. The Company will not, and will not cause or permit any
of its Restricted 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 Indebtedness of the Company that is
permitted by the Senior Note Indenture and that is pari passu with the Senior
Notes; provided, that the Senior Notes are secured on an equal and ratable
basis with such Liens; (ii) Liens granted by the Company on property or assets
of the Company securing Indebtedness of the Company that is permitted by the
Senior Note Indenture and that is subordinated to the Senior Notes, provided
that the Senior Notes are secured by Liens ranking prior to such Liens; (iii)
Permitted Liens; (iv) Liens in respect of Acquired Indebtedness permitted by
the Senior Note 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 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 Restricted
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; (v) Liens granted in connection with any
Qualified Securitization Transaction; (vi) Liens arising from claims of
holders of Indebtedness against funds held in a defeasance trust for the
benefit of such holders; and (vii) Liens on property or assets of the Company
or any Restricted Subsidiary securing Indebtedness permitted by the Senior
Note Indenture not to exceed the greater of (A) $100.0 million and (B) the sum
of (1) 85.0% of the total book value of accounts receivable and (2) 50.0% of
the total book value of inventory, in each case as reflected on the Company's
most recent consolidated financial statements prepared in accordance with
GAAP.
Relating Only to the Senior Subordinated Notes
LIMITATION ON SENIOR SUBORDINATED INDEBTEDNESS. The Company will not
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 and
senior or superior in any right of payment or interest to the Senior
Subordinated Notes 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 (other than indebtedness of the Company that is
subordinated solely to Senior Indebtedness of the Company) unless such
Indebtedness is also by its terms (or by the terms of any agreement governing
such Indebtedness) made expressly subordinate to the Senior Subordinated Notes
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.
LIMITATION ON LIENS. The Company will not, and will not cause or permit any
of its Restricted 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
61
<PAGE>
on property or assets of the Company securing Senior Indebtedness of the
Company that is permitted by the Senior Subordinated Note Indenture; (ii)
Liens granted by the Company on property or assets of the Company securing
Indebtedness of the Company that is permitted by the Senior Subordinated Note
Indenture and that is pari passu with the Senior Subordinated Notes, provided,
that the Senior Subordinated 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
Senior Subordinated Note Indenture and that is subordinated to the Senior
Subordinated Notes, provided that the Senior Subordinated Notes are secured by
Liens ranking prior to such Liens; (iv) Permitted Liens; (v) Liens in respect
of Acquired Indebtedness permitted by the Senior Subordinated Note 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; (vi)
Liens granted in connection with any Qualified Securitization Transaction; and
(vii) Liens arising from claims of holders of Indebtedness against funds held
in a defeasance trust for the benefit of such holders.
Relating to all Notes
LIMITATION ON INCURRENCE OF INDEBTEDNESS. The Indentures provide that the
Company will not, and will not cause or permit any of its Restricted
Subsidiaries to incur, directly or indirectly, any Indebtedness, except:
(i) Indebtedness of the Company, if immediately after giving effect to
the incurrence of such Indebtedness and the receipt and application of the
net proceeds thereof, the Consolidated Cash Flow Ratio of the Company for
the four full fiscal quarters for which quarterly or annual financial
statements are available next preceding the incurrence of such Indebtedness
would be greater than 2.25 to 1.00;
(ii) Indebtedness outstanding on the Issue Date;
(iii) Indebtedness incurred pursuant to the $125.0 million Credit
Agreement dated as of November 26, 1997 among Navistar International
Corporation Mexico, S.A. de C.V., the Company and the lenders listed
therein, as such agreement, in whole or in part, may be amended, renewed,
extended, increased (but only so long as such increase as is permitted
under the terms of the Indenture), substituted, refinanced, restructured,
replaced (including, without limitation, any successive renewals,
extensions, increases, substitutions, refinancings, restructurings,
replacements, supplements, or other modifications of the foregoing);
(iv) Indebtedness owed by the Company to any Wholly-Owned Subsidiary of
the Company or Indebtedness owed by a Subsidiary of the Company to the
Company or a Wholly-Owned Subsidiary of the Company; provided, that, upon
either (I) the transfer or other disposition by such Wholly-Owned
Subsidiary or the Company of any Indebtedness so permitted under this
clause (iv) to a Person other than the Company or another Wholly-Owned
Subsidiary of the Company or (II) the issuance (other than directors'
qualifying shares), sale, transfer or other disposition of shares of
Capital Stock or other ownership interests (including by consolidation or
merger) of such Wholly-Owned Subsidiary to a Person other than the Company
or another such Wholly-Owned Subsidiary of the Company, the provisions of
this clause (iv) shall no longer be applicable to such Indebtedness and
such Indebtedness shall be deemed to have been incurred at the time of any
such issuance, sale. transfer or other disposition, as the case may be;
(v) Indebtedness of the Company or its Restricted Subsidiaries under any
Interest Rate Protection Agreement or Currency Agreement to the extent
entered into to hedge any other Indebtedness permitted under the
Indentures;
(vi) Acquired Indebtedness to the extent the Company could have incurred
such Indebtedness in accordance with clause (i) above on the date such
Indebtedness became Acquired Indebtedness;
(vii) Indebtedness incurred by the Company or any of its Restricted
Subsidiaries constituting reimbursement obligations with respect to letters
of credit issued in the ordinary course of business, including, without
limitation, letters of credit in response to worker's compensation claims
or self-insurance;
62
<PAGE>
(viii) Indebtedness arising from agreements of the Company or a
Restricted Subsidiary of the Company providing for indemnification,
adjustment of purchase price, earn-out or other similar obligations, in
each case, incurred or assumed in connection with the disposition of any
business, assets or a Subsidiary of the Company;
(ix) Obligations in respect of performance and surety bonds and
completion guarantees provided by the Company or any Restricted Subsidiary
of the Company in the ordinary course of business;
(x) Indebtedness consisting of notes issued to employees, officers or
directors in connection with the redemption or repurchase of Capital Stock
held by such Persons in an aggregate amount not in excess of $10.0 million
at any time outstanding;
(xi) Indebtedness consisting of take-or-pay obligations contained in
supply agreements entered into by the Company or its Restricted
Subsidiaries in the ordinary course;
(xii) Guarantees by the Company or any of its Restricted Subsidiaries of
Indebtedness of the Company or any Restricted Subsidiary permitted to be
incurred under another provision of the covenant; provided, that such
Guarantee is incurred at the same time as such other Indebtedness;
(xiii) Indebtedness incurred to renew, extend, refinance or refund
(collectively for purposes of this clause (xiii) to "refund") any
Indebtedness incurred pursuant to clauses (i) or (ii) above; provided, that
(I) such Indebtedness does not exceed the principal amount (or accreted
amount, if less) of Indebtedness so refunded plus the amount of any premium
required to be paid in connection with such refunding pursuant to the terms
of the Indebtedness refunded or the amount of any premium reasonably
determined by the Company as necessary to accomplish such refunding by
means of a tender offer, exchange offer, or privately negotiated
repurchase, plus the expenses of the Company or such Restricted Subsidiary
incurred in connection therewith and (II)(A) in the case of any refunding
of Indebtedness that is pari passu with the Senior Notes or the Senior
Subordinated Notes, as the case may be, such refunding Indebtedness is made
pari passu with or subordinate in right of payment to such Senior Notes or
Senior Subordinated Notes, as the case may be, and, in the case of any
refunding of Indebtedness that is subordinate in right of payment to the
Senior Notes or the Senior Subordinated Notes, as the case may be, such
refunding Indebtedness is subordinate in right of payment to such Senior
Notes or Senior Subordinated Notes, as the case may be, on terms no less
favorable to the Holders than those contained in the Indebtedness being
refunded, (B) in either case, the refunding Indebtedness by its terms, or
by the terms of any agreement or instrument pursuant to which such
Indebtedness is issued does not have an Average Life that is less than the
remaining Average Life of the Indebtedness being refunded and does not
permit redemption or other retirement (including pursuant to any required
offer to purchase to be made by the Company or any of its Restricted
Subsidiaries) of such Indebtedness at the option of the holder thereof
prior to the final stated maturity of the Indebtedness being refunded,
other than a redemption or other retirement at the option of the holder of
such Indebtedness (including pursuant to a required offer to purchase made
by the Company or any of its Restricted Subsidiaries) which is conditioned
upon a change of control of the Company pursuant to provisions
substantially similar to those contained in the Indentures described under
"--Change of Control" below and (C) Indebtedness of a Restricted Subsidiary
may not be incurred to refund any Indebtedness of the Company;
(xiv) Indebtedness of the Company under the Notes and the Exchange Notes;
(xv) the consummation of any Qualified Securitization Transaction;
(xvi) Attributable Indebtedness relating to any Sale/Leaseback
Transaction with respect to the purchase of tooling and related
manufacturing equipment in the ordinary course of business consistent with
past practices; and
(xvii) Indebtedness of the Company or its Restricted Subsidiaries, not
otherwise permitted to be incurred pursuant to clauses (i) through (xvi)
above, which, together with any other outstanding Indebtedness incurred
pursuant to this clause (xvii), has an aggregate principal amount not in
excess of $100.0 million at any time outstanding.
63
<PAGE>
After the Senior Notes have been assigned an Investment Grade rating by both
Rating Agencies, and notwithstanding that the Senior Notes may later cease to
have an Investment Grade rating, the Company will not be subject to the
provisions of this covenant with respect to the Senior Note Indenture;
provided, that no Default has occurred and is continuing at the time the
Senior Notes have been assigned such rating.
LIMITATION ON PREFERRED STOCK OF RESTRICTED SUBSIDIARIES. The Indentures
provide that the Company will not cause or permit any of its Restricted
Subsidiaries to issue any Preferred Stock other than to the Company or to
another Restricted Subsidiary.
After the Senior Notes have been assigned an Investment Grade rating by both
Rating Agencies, and notwithstanding that the Senior Notes may later cease to
have an Investment Grade rating, the Company will not be subject to the
provisions of this covenant with respect to the Senior Note Indenture;
provided, that no Default has occurred and is continuing at the time the
Senior Notes have been assigned such rating.
LIMITATION ON RESTRICTED PAYMENTS. The Indentures provide that the Company
will not, and will not cause or permit any of its Restricted Subsidiaries to
directly or indirectly, (i) declare or pay any dividend, or make any
distribution of any kind or character (whether in cash, property or
securities), in respect of any class of its Capital Stock or to the holders
thereof in their capacity as stockholders, excluding any (x) dividend or
distributions payable solely in shares of its Qualified Capital Stock or in
options, warrants or other rights to acquire its Qualified Capital Stock or
(y) in the case of any Restricted Subsidiary of the Company, dividends or
distributions payable to the Company or a Restricted Subsidiary of the
Company; (ii) purchase, redeem, or otherwise acquire or retire for value
shares of Capital Stock of the Company or a Restricted Subsidiary of the
Company, any securities convertible or exchangeable into shares of Capital
Stock of the Company or a Restricted Subsidiary of the Company or any options,
warrants or rights to purchase or acquire shares of Capital Stock of the
Company or a Restricted Subsidiary of the Company, excluding any such shares
of Capital Stock, options, warrants, rights or securities which are owned by
the Company or a Restricted Subsidiary of the Company; (iii) make any
Investment (other than a Permitted Investment) in, or payment on a guarantee
of any obligation of, any Person; or (iv) redeem, defease, repurchase, retire
or otherwise acquire or retire for value, prior to any scheduled maturity,
repayment or sinking fund payment, Indebtedness which is subordinate in right
of payment to the Senior Notes in the case of the Senior Note Indenture and
the Senior Subordinated Notes in the case of the Senior Subordinated Note
Indenture (each of the transactions described in clauses (i) through (iv)
(other than any exception to any such clause) being a "Restricted Payment") if
at the time thereof:
(1) an Event of Default, or an event that with the passing of time or
giving of notice, or both, would constitute an Event of Default, shall have
occurred and be continuing, or
(2) upon giving effect to such Restricted Payment, the Company could not
incur at least $1.00 of additional Indebtedness pursuant to the terms of
the Indentures described in clause (i) of "--Limitation on Incurrence of
Indebtedness" above, or
(3) upon giving effect to such Restricted Payment, the aggregate of all
Restricted Payments made on or after the Issue Date exceeds the sum
(without duplication) of: (a) 50% of cumulative Consolidated Net Income of
the Company (or, in the case cumulative Consolidated Net Income of the
Company shall be negative, less 100% of such deficit) for the period
(treated as an accounting period) from the Issue Date through the last day
of the Company's most recently ended fiscal quarter for which financial
statements are available, plus (b) 100% of the aggregate net cash proceeds
received after the Issue Date, including the fair market value of readily
marketable securities from the issuance of Qualified Capital Stock of the
Company and warrants, rights or options on Qualified Capital Stock of the
Company (other than in respect of any such issuance to a Subsidiary of the
Company) and the principal amount of Indebtedness of the Company or a
Subsidiary of the Company that has been converted into or exchanged for
Qualified Capital Stock of the Company which Indebtedness was incurred
after the Issue Date; plus (c) in the case of the disposition or repayment
of any Investment constituting a Restricted Payment made after the Issue
Date, an amount equal to the lesser of the return of capital with respect
to such Investment and the cost of such Investment, in either case, less
the cost of the disposition of such Investment; provided, that at the time
any such
64
<PAGE>
Investment is made the Company delivers to the Trustee a resolution of the
Board of Directors of the Company to the effect that, for purposes of this
"--Limitation on Restricted Payments" covenant, such Investment constitutes
a Restricted Payment made after the Issue Date; plus (d) an amount equal to
the sum of (i) the net reduction in Investments in Unrestricted
Subsidiaries resulting from the receipt of dividends, repayments of loans
or advances or other transfers of assets or proceeds from the disposition
of Capital Stock or other distributions or payments, in each case to the
Company or any Restricted Subsidiary from, or with respect to, interests in
Unrestricted Subsidiaries, and (ii) the portion (proportionate to the
Company's equity interest in such Subsidiary) of the fair market value of
the net assets of an Unrestricted Subsidiary at the time such Unrestricted
Subsidiary is designated a Restricted Subsidiary; provided, that the
foregoing sum shall not exceed, in the case of any Unrestricted Subsidiary,
the amount of Investments previously made (and treated as a Restricted
Payment) by the Company or any Restricted Subsidiary in such Unrestricted
Subsidiary subsequent to the Issue Date; plus (e) $25.0 million. For
purposes of determining the amount expended for Restricted Payments under
this clause (3), property other than cash shall be valued at its fair
market value.
Notwithstanding the foregoing, the provisions set forth in the immediately
preceding paragraph will not prohibit (i) any dividend on any class of Capital
Stock of the Company or any of its Restricted Subsidiaries paid within 60 days
after the declaration thereof if, on the date when the dividend was declared,
the Company or any of its Restricted Subsidiaries, as the case may be, could
have paid such dividend in accordance with the provisions of the Indentures,
(ii) the renewal, extension, refunding or refinancing of any Indebtedness
otherwise permitted pursuant to the terms of the Indentures described in
clause (xiii) of "--Limitation on Incurrence of Indebtedness" above, (iii) the
exchange or conversion of any Indebtedness of the Company or any of its
Restricted Subsidiaries for or into Qualified Capital Stock of the Company,
(iv) any Restricted Payments, including loans or other advances made pursuant
to any employee benefit plans (including plans for the benefit of directors)
or employment agreements or other compensation arrangements, in each case as
approved by the Board of Directors of the Company in its good faith judgment,
(v) so long as no Default or Event of Default has occurred and is continuing,
any Investment made with the proceeds of a substantially concurrent sale of
Qualified Capital Stock of the Company; provided, that the proceeds of such
sale of Qualified Capital Stock shall not be (and have not been) included in
clause (3) of the preceding paragraph, (vi) the redemption, repurchase,
retirement or other acquisition of any Capital Stock of the Company in
exchange for or out of the net cash proceeds of the substantially concurrent
sale (other than to a Restricted Subsidiary of the Company) of Qualified
Capital Stock of the Company; provided, that the proceeds of such sale of
Capital Stock shall not be (and have not been) included in clause (3) of the
preceding paragraph, (vii) so long as no Event of Default has occurred and is
continuing, the redemption, repurchase, retirement or other acquisition of any
Subordinated Indebtedness of the Company in exchange for or out of the net
cash proceeds of the substantially concurrent sale (other than to a Subsidiary
of the Company) of Qualified Capital Stock of the Company; provided, that the
proceeds of such sale of Qualified Capital Stock shall not be (and have not
been) included in clause (3) of the preceding paragraph, (viii) in the case of
the Senior Note Indenture only, the purchase of Senior Subordinated Notes
pursuant to an Offer to Purchase required by the covenant described under "--
Limitation on Certain Asset Dispositions" or the covenant described under "--
Change of Control"; provided, that no such purchase shall be permitted until
all Senior Notes validly tendered pursuant to the applicable Offer to Purchase
in respect of the Senior Notes shall have been purchased by the Company, (ix)
the redemption, retirement or repurchase of the Company's outstanding Series G
Convertible Preferred Stock out of the net proceeds of the Offerings, (x)
Investments in Navistar Financial Corporation made pursuant to the Support
Agreement to the extent required by the Support Agreement, (xi) the
declaration and payment of dividends to holders of any class of Preferred
Stock issued after the Issue Date; provided, that at the time of the issuance
of such Preferred Stock, the Company, after giving pro forma effect to such
issuance, would have been able to incur at least $1.00 of additional
Indebtedness pursuant to the terms of the Indentures described in clause (i)
of "--Limitation on Incurrence of Indebtedness" above; (xii) so long as no
Event of Default has occurred and is continuing, any purchase or redemption or
other retirement for value of Capital Stock of the Company required pursuant
to any shareholders agreement, management agreement or employee stock option
agreement in accordance with the provisions of any such arrangement in an
amount not to exceed $10.0 million in the aggregate; (xiii) repurchases of
Capital Stock
65
<PAGE>
deemed to occur upon the exercise of stock options if such Capital Stock
represents a portion of the exercise price thereof; (xiv) payments not to
exceed $500,000 per annum in the aggregate to enable the Company to make
payments to holders of its Capital Stock in lieu of issuance of fractional
shares of its Capital Stock; (xv) so long as no Event of Default has occurred
and is continuing, the repurchase of any shares of Class B Common Stock or
Common Stock held by the Supplemental Trust; (xvi) so long as no Event of
Default has occurred and is continuing, the redemption of any stock purchase
rights under a rights plan in an aggregate amount not to exceed $1.0 million;
and (xvii) so long as no Event of Default has occurred and is continuing,
Investments in Permitted Joint Ventures and designations of Restricted
Subsidiaries as Unrestricted Subsidiaries; provided, that after giving pro
forma effect to such Investment, the Company could incur at least $1.00 of
additional Indebtedness pursuant to the terms of the Indentures described in
clause (i) of "--Limitation on Incurrence of Indebtedness" above. Each
Restricted Payment described in clauses (i), (iv), (x), (xii) and (xv) of the
previous sentence shall be taken into account (and the Restricted Payments
described in the remaining clauses shall not be taken into account) for
purposes of computing the aggregate amount of all Restricted Payments made
pursuant to clause (3) of the preceding paragraph.
After the Senior Notes have been assigned an Investment Grade rating by both
Rating Agencies, and notwithstanding that the Senior Notes may later cease to
have an Investment Grade rating, the Company will not be subject to the
provisions of this covenant with respect to the Senior Note Indenture;
provided, that no Default has occurred and is continuing at the time the
Senior Notes have been assigned such rating.
LIMITATION ON CERTAIN ASSET DISPOSITIONS. The Indentures provide that the
Company will not, and will not cause or permit any of its Restricted
Subsidiaries to, directly or indirectly, make one or more Asset Dispositions
unless: (i) the Company or the Restricted Subsidiary, as the case may be,
receives consideration for such Asset Disposition at least equal to the fair
market value of the assets sold or disposed of (as determined in good faith by
the Company); (ii) not less than 75% of the consideration for the disposition
consists of cash or readily marketable cash equivalents or the assumption of
Indebtedness (other than non-recourse Indebtedness or any Indebtedness
subordinated to the Senior Notes, in the case of the Senior Note Indenture, or
the Senior Subordinated Notes, in the case of the Senior Subordinated Note
Indenture) of the Company or such Restricted Subsidiary or other obligations
relating to such assets (and release of the Company or such Restricted
Subsidiary from all liability on the Indebtedness or other obligations
assumed); and (iii) all Net Available Proceeds, less any amounts invested or
committed to be invested within 360 days of such Asset Disposition in assets
related to the business of the Company (including capital expenditures or the
Capital Stock of another Person (other than the Company or any Person that is
a Restricted Subsidiary of the Company immediately prior to such investment);
provided, that immediately after giving effect to any such investment (and not
prior thereto) such Person shall be a Restricted Subsidiary of the Company),
are applied, on or prior to the 360th day after such Asset Disposition (unless
and to the extent that the Company shall determine to make an Offer to
Purchase), either to (A) the permanent reduction and prepayment of any
Indebtedness of the Company (other than Indebtedness which is expressly
subordinate to the applicable issue of Notes) then outstanding (including a
permanent reduction of commitments in respect thereof) or (B) the permanent
reduction and repayment of any Indebtedness of any Restricted Subsidiary of
the Company then outstanding (including a permanent reduction of commitments
in respect thereof). The 361st day after such Asset Disposition shall be
deemed to be the "Asset Sale Offer Trigger Date," and the amount of Net
Available Proceeds from Asset Dispositions otherwise subject to the preceding
provisions not so applied or as to which the Company has determined not to so
apply shall be referred to as the "Unutilized Net Available Proceeds." Within
fifteen days after the Asset Sale Offer Trigger Date, the Company shall make
an Offer to Purchase the outstanding applicable issue of Notes at a purchase
price in cash equal to 100% of their principal amount plus any accrued and
unpaid interest thereon to the Purchase Date. Notwithstanding the foregoing,
the Company may defer making any Offer to Purchase outstanding Notes until
there are aggregate Unutilized Net Available Proceeds equal to or in excess of
$25.0 million (at which time, the entire Unutilized Net Available Proceeds,
and not just the amount in excess of $25.0 million, shall be applied as
required pursuant to this paragraph). Pending application of the Unutilized
Net Available Proceeds pursuant to this covenant, such Unutilized Net
Available Proceeds shall be invested in Permitted Investments of the types
described in clauses (i), (ii) and (iii) of the definition of "Permitted
Investments."
66
<PAGE>
If any Indebtedness of the Company or any of its Restricted Subsidiaries
ranking pari passu with the Senior Notes or the Senior Subordinated Notes , as
the case may be, requires that prepayment of, or an offer to prepay, such
Indebtedness be made with any Net Available Proceeds, the Company may apply
such Net Available Proceeds pro rata (based on the aggregate principal amount
of the Senior Notes or the Senior Subordinated Notes, as the case may be, then
outstanding and the aggregate principal amount (or accreted value, if less) of
all such other Indebtedness then outstanding) to the making of an Offer to
Purchase the Senior Notes and the Senior Subordinated Notes in accordance with
the foregoing provisions and the prepayment or the offer to prepay such pari
passu Indebtedness. Any remaining Net Available Proceeds following the
completion of the required Offer to Purchase may be used by the Company for
any other purpose (subject to the other provisions of the Indentures) and the
amount of Net Available Proceeds then required to be otherwise applied in
accordance with this covenant shall be reset to zero, subject to any
subsequent Asset Disposition. These provisions will not apply to a transaction
consummated in compliance with the provisions of the Indentures described
under "--Merger, Consolidation, Etc." below.
Notwithstanding the foregoing, the provisions of this covenant shall not
apply to any Sale/Leaseback Transaction with respect to the purchase of
tooling and related manufacturing equipment in the ordinary course of business
consistent with past practices.
In the event that the Company makes an Offer to Purchase the Notes, the
Company shall comply with any applicable securities laws and regulations,
including any applicable requirements of Section 14(e) of, and Rule 14e-1
under, the Exchange Act and any violation of the provisions of the Indentures
relating to such Offer to Purchase occurring as a result of such compliance
shall not be deemed an Event of Default or an event that with the passing of
time or giving of notice, or both, would constitute an Event of Default.
The subordination provisions relating to the Senior Subordinated Notes and
the "Limitation on Restricted Payments" covenant in the Senior Note Indenture
will prohibit the Company from repurchasing any tendered Senior Subordinated
Notes upon an Asset Disposition unless and until all of the tendered Senior
Notes are first repurchased. In addition, the Company's ability to repurchase
Senior Notes and Senior Subordinated Notes may be limited by other then-
existing borrowing agreements of the Company and its Restricted Subsidiaries.
There can be no assurance that the Company will be able to obtain such a
consent or a waiver of such limitations. See "--Subordination of Senior
Subordination Notes; Ranking" and "--Certain Covenants--Relating to all
Notes--Limitation on Restricted Payments".
After the Senior Notes have been assigned an Investment Grade rating by both
Rating Agencies, and notwithstanding that the Senior Notes may later cease to
have an Investment Grade rating, the Company will not be subject to the
provisions of this covenant with respect to the Senior Note Indenture;
provided, that no Default has occurred and is continuing at the time the
Senior Notes have been assigned such rating.
LIMITATION ON SALE/LEASEBACK TRANSACTIONS. The Company shall not, and shall
not cause or permit any Restricted Subsidiary to, enter into any
Sale/Leaseback Transaction with respect to any property unless (i) the Company
or such Restricted Subsidiary would be entitled to (A) incur Indebtedness in
an amount equal to the Attributable Indebtedness with respect to such
Sale/Leaseback Transaction pursuant to clause (i) of "--Limitation on
Incurrence of Indebtedness" and (B) create a Lien on such property securing
such Attributable Indebtedness without securing the Senior Notes pursuant to
"--Relating Only to the Senior Notes--Limitation on Liens" and the Senior
Subordinated Notes pursuant to "--Relating Only to the Senior Subordinated
Notes --Limitation on Liens," (ii) the net proceeds received by the Company or
any Restricted Subsidiary in connection with such Sale/Leaseback Transaction
are at least equal to the fair value (as determined by the Board of Directors)
of such property and (iii) the Company applies the proceeds of such
transaction in compliance with "--Limitation on Certain Asset Dispositions."
Notwithstanding the foregoing, the provisions of this covenant shall not
prohibit the Company or any Restricted Subsidiary from entering into any
Sale/Leaseback Transaction with respect to the purchase of tooling and related
manufacturing equipment in the ordinary course of business consistent with
past practices.
67
<PAGE>
After the Senior Notes have been assigned an Investment Grade rating by both
Rating Agencies, and notwithstanding that the Senior Notes may later cease to
have an Investment Grade rating, the Company will not be subject to the
provisions of this covenant with respect to the Senior Note Indenture;
provided, that no Default has occurred and is continuing at the time the
Senior Notes have been assigned such rating.
LIMITATION ON PAYMENT RESTRICTIONS AFFECTING RESTRICTED SUBSIDIARIES. The
Company will not, and will not cause or permit any of its Restricted
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 Restricted 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 Restricted Subsidiary of the Company, or make
payments on any Indebtedness owed to the Company or to any Restricted
Subsidiary of the Company; (ii) make loans or advances to the Company or to
any Restricted Subsidiary of the Company; or (iii) transfer any of their
respective property or assets to the Company or to any Restricted 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 Restricted Subsidiary of the Company; (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; (D) any agreement in effect on the Issue Date as
any such agreement is in effect on such date; (E) any agreement relating to
any Indebtedness incurred by such Restricted Subsidiary prior to the date on
which such Restricted Subsidiary became a Subsidiary of the Company and
outstanding on such date and not incurred in anticipation or contemplation of
becoming a Subsidiary of the Company, provided, such encumbrance or
restriction shall not apply to any assets of the Company or its Restricted
Subsidiaries other than such Restricted Subsidiary; and (F) the Indentures.
After the Senior Notes have been assigned an Investment Grade rating by both
Rating Agencies, and notwithstanding that the Senior Notes may later cease to
have an Investment Grade rating, the Company will not be subject to the
provisions of this covenant with respect to the Senior Note Indenture;
provided, that no Default has occurred and is continuing at the time the
Senior Notes have been assigned such rating.
LIMITATION ON TRANSACTIONS WITH AFFILIATES. The Company will not, and will
not cause or permit any of its Restricted 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 Restricted Subsidiary of
the Company and that are no less favorable to the Company or such Restricted
Subsidiary of the Company than those that could be obtained in a comparable
arm's length transaction by the Company or such Restricted Subsidiary of the
Company from an unaffiliated party; provided, that if the Company or any
Restricted Subsidiary of the Company enters into an Affiliate Transaction or
series of Affiliate Transactions involving or having an aggregate value of
more than $20.0 million, a majority of the disinterested members of the Board
of Directors of the Company or a committee thereof shall, prior to the
consummation of such Affiliate Transaction, have determined (as evidenced by a
resolution thereof) that such Affiliate Transaction meets the foregoing
standard. The foregoing restrictions shall not apply to (a) any transaction
between Restricted Subsidiaries of the Company, or between the Company and any
Restricted Subsidiary of the Company if such transaction is not otherwise
prohibited by the terms of the Indentures, (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, (d) Qualified Securitization Transactions, (e) reasonable fees and
compensation paid to and advances of expenses to and indemnity provided on
behalf of officers, directors, employees or consultants of the Company or any
Subsidiary as determined in good faith by the Company's Board of Directors or
senior management; (f) any agreement as in effect as of the Issue Date or any
amendment thereto or any transaction contemplated thereby (including pursuant
to any
68
<PAGE>
amendment thereto) or in any replacement agreement thereto so long as any such
management or replacement agreement is not more disadvantageous to the Holders
in any material respect than the original agreement as in effect on the Issue
Date; (g) Restricted Payments permitted by the Indenture; (h) loans or
advances to employees or consultants in the ordinary course of business and
consistent with past practices in an aggregate amount outstanding at any time
not to exceed $10.0 million; (i) joint venture partners or purchasers or
sellers of goods or services, in each case in the ordinary course of business
(including, without limitation, pursuant to joint venture agreements) and
otherwise in compliance with the terms of the Indenture which are fair to the
Company or its Restricted Subsidiaries, in the reasonable determination of the
senior management of the Company, or are on terms at least as favorable as
might reasonably have been obtained at such time from an unaffiliated party;
and (j) any employment or compensation arrangement entered into by the Company
or any of its Restricted Subsidiaries in the ordinary course of business that
is not otherwise prohibited by the Indenture.
After the Senior Notes have been assigned an Investment Grade rating by both
Rating Agencies, and notwithstanding that the Senior Notes may later cease to
have an Investment Grade rating, the Company will not be subject to the
provisions of this covenant with respect to the Senior Note Indenture;
provided, that no Default has occurred and is continuing at the time the
Senior Notes have been assigned such rating.
LIMITATION ON GUARANTEES BY RESTRICTED SUBSIDIARIES. The Company shall not
cause or permit any of its Restricted Subsidiaries, directly or indirectly, to
guarantee the payment of any Indebtedness of the Company unless such
Restricted Subsidiary of the Company simultaneously executes and delivers a
supplemental indenture to each of the Indentures providing for the guarantee
of payment of the Senior Notes and the Senior Subordinated Notes (each a
"Subsidiary Guarantee") by such Restricted Subsidiary of the Company (a
"Subsidiary Guarantor"); provided, any guarantee by a Subsidiary Guarantor of
such other Indebtedness (A) (1) (X) is unsecured or (Y) is secured and (I) in
the case of any such guarantee of Senior Indebtedness of the Company, the
Subsidiary Guarantee with respect to the Senior Subordinated Note Indenture is
secured equally and ratably with any Liens securing such guarantee, subject to
the provisions set forth under "--Subordination of the Senior Subordinated
Notes; Ranking" above, (II) in the case of any such guarantee of Indebtedness
of the Company ranking pari passu with the Senior Notes or the Senior
Subordinated Notes, as the case may be, the relevant Subsidiary Guarantees are
secured equally and ratably with any Liens securing such guarantee and (III)
in the case of any such guarantee of Indebtedness of the Company subordinated
to the Senior Notes or the Senior Subordinated Notes, as the case may be, the
relevant Subsidiary Guarantees are secured on a basis ranking prior to the
Liens securing such guarantee and (2) (X) in the case of any such guarantee of
Indebtedness of the Company subordinated or junior to the Senior Notes or the
Senior Subordinated Notes, as the case may be (whether pursuant to its terms
or by operation of law), such guarantee is subordinated pursuant to a written
agreement to the relevant Subsidiary Guarantees at least to the same extent
and in the same manner as such other Indebtedness is subordinated to the
Senior Notes or the Senior Subordinated Notes, as the case may be, or (Y) (I)
in the case of any such guarantee of Senior Indebtedness of the Company
incurred in accordance with the Senior Subordinated Note Indenture, the
relevant Subsidiary Guarantee with respect to the Senior Subordinated Note
Indenture is subordinated to Guarantor Senior Indebtedness of such Subsidiary
Guarantor to the same extent and in the same manner as the Senior Subordinated
Notes are subordinated to Senior Indebtedness of the Company or (II) the
relevant Subsidiary Guarantees are not subordinated or junior to any
Indebtedness of such Subsidiary Guarantor; and (B) such Subsidiary Guarantor
waives, and agrees 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 it under such Subsidiary Guarantees.
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 Guarantor's guarantees of all other Indebtedness of the Company
(other than a release resulting from payment under such Subsidiary Guarantor'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 Guarantor, or all or substantially all of the assets of
such Subsidiary Guarantor, pursuant to a transaction which is in compliance
with all of the terms of the relevant Indenture.
69
<PAGE>
CHANGE OF CONTROL. Upon the occurrence of a Change of Control (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 commence an Offer to
Purchase (the "Change of Control Offer") all Senior Notes and Senior
Subordinated Notes then outstanding, in each case, at a purchase price equal
to 101% of the principal amount thereof, plus accrued and unpaid interest, if
any, to the Purchase Date. Notice of a Change of Control 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 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 with respect to
the Change of Control purchase feature of the Senior Notes and Senior
Subordinated Notes, but would increase the amount of Indebtedness outstanding
at such time. If a Change of Control 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 Indentures (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 Indentures) 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 subordination provisions relating to the Senior Subordinated Notes and
the "Limitation on Restricted Payments" covenant in the Senior Note Indenture
will prohibit the Company from repurchasing any tendered Senior Subordinated
Notes upon a Change of Control unless and until all of the tendered Senior
Notes are first repurchased. In addition, the Company's ability to repurchase
Senior Notes and Senior Subordinated Notes may be limited by other then-
existing borrowing agreements of the Company and its Subsidiaries. There can
be no assurance that the Company will be able to obtain such a consent or a
waiver of such limitations. See "--Subordination of Senior Subordination
Notes; Ranking" and "--Certain Covenants--Relating to all Notes--Limitation on
Restricted Payments".
If an offer is made to redeem Senior Notes and Senior Subordinated Notes as
a result of a Change of Control, 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 Senior Notes and the Senior
Subordinated Notes may in certain circumstances make more difficult or
discourage a takeover of the Company and, thus, the removal of incumbent
management.
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 Trustees and mail or cause the Trustees to mail to the Holders at
their addresses as set forth in the registers 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
stockholders and any quarterly or other financial reports furnished to its
stockholders generally to be filed with the Trustees and mailed, no later than
the date such materials are mailed or made available to the Company's
stockholders, to the Holders at their addresses as set forth in the registers
of Notes.
70
<PAGE>
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 Restricted Subsidiaries to sell, assign,
transfer, lease, convey or otherwise dispose of) all or substantially all of
the Company's and its Restricted Subsidiaries' assets (determined on a
consolidated basis for the Company and its Restricted 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 Restricted Subsidiaries substantially as an
entirety or in the case of a Plan of Liquidation, or Person to which assets of
the Company and its Restricted Subsidiaries have been transferred (x) shall be
a corporation, limited liability company or partnership 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 each Trustee), executed and delivered
to each 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 Indentures 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) could incur at
least $1.00 of additional Indebtedness pursuant to clause (i) of "--Limitation
on Incurrence of Indebtedness"; (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 (subject, in the case of the Senior Notes, to the applicability of
the covenant described under "Certain Covenants--Relating Only to the Senior
Notes--Application of Fall Away Covenants"); and (iv) the Company or such
Person shall have delivered to the Trustees (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 applicable Indenture and that all
conditions precedent in the applicable 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 the
applicable Indenture. Notwithstanding the foregoing, (x) a Restricted
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 Restricted
Subsidiary of the Company without complying with clause (ii) of the above, (y)
a series of transactions involving the sale of Receivables or interests
therein by 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 and (z) the provisions of
clause (i) above shall not prohibit the Company or any Restricted Subsidiary
from selling, assigning, transferring, leasing, conveying or otherwise
disposing of all or substantially all of its assets to a Permitted Joint
Venture in a transaction entered into in compliance with "Certain Covenants--
Relating to All the Notes--Limitation on Restricted Payments."
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 Restricted
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 Indentures with the
same effect as if such successor had been named as the
71
<PAGE>
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 Indentures
and the Notes.
EVENTS OF DEFAULT
The following are Events of Default under the Indentures:
(a) default in the payment of principal of, or premium, if any, on any
Senior Note or Senior Subordinated Note, as the case may be, when due at
maturity, upon repurchase, upon acceleration or otherwise, including,
without limitation, failure of the Company to repurchase any Senior Note or
Senior Subordinated Note, as the case may be, on the date required
following a Change of Control (whether or not, in the case of the Senior
Subordinated Notes, any such payment is prohibited by the provisions
described under "--Subordination of Senior Subordinated Notes; Ranking"
above); or
(b) default in the payment of any installment of interest on any Senior
Note or Senior Subordinated Note, as the case may be, when due and
continuance of such Default for 30 days or more (whether or not, in the
case of the Senior Subordinated Notes, such payment is prohibited by the
provisions described under "--Subordination of Senior Subordinated Notes;
Ranking" above); or
(c) failure to observe, perform or comply with any of the provisions
described under "Certain Covenants--Relating to all Notes--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 Restricted Subsidiary in the Senior Note Indenture
or the Senior Subordinated Note Indenture, as the case may be, or in the
Notes and failure to remedy such default or breach within a period of 30
days after written notice from the relevant Trustee or the Holders of at
least 25% in aggregate principal amount of the then outstanding Senior
Notes or Senior Subordinated Notes, as the case may be; 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
Restricted 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 $20.0 million 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 $20.0 million, 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
(g) certain events of bankruptcy, insolvency or reorganization involving
the Company or any Material Subsidiary of the Company.
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 Senior Note Trustee or the Senior Subordinated Note Trustee or
the Holders of not less than 25% in aggregate principal amount of the then
outstanding Senior Notes or Senior Subordinated Notes may, and the relevant
Trustee shall upon the request of Holders of not less than 25% in aggregate
principal amount of the Senior Notes or Senior Subordinated Notes then
outstanding, declare the unpaid principal of, premium, if any, and accrued and
unpaid interest on all the Senior Notes or Senior Subordinated Notes, as the
case may be, then outstanding to be due and payable, by a notice in writing to
the Company (and to the relevant 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
72
<PAGE>
anything contained in the relevant Indenture or the Notes to the contrary, but
subject to the provisions limiting payment described in "--Subordination of
Senior Subordinated Notes; 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 Senior Notes and the
Senior Subordinated 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 any Trustee
or any Holder.
No Holder of any Note may enforce either Indenture or the Notes except as
provided in the relevant Indenture. Subject to the provisions of the relevant
Indenture relating to the duties of the Trustee, with respect to each such
Indenture the Trustee is under no obligation to exercise any of its rights or
powers under such Indenture at the request, order or direction of any of the
Holders, unless such Holders have offered to such Trustee reasonable
indemnity. Subject to all provisions of the Indentures and applicable law, the
Holders of a majority in aggregate principal amount of the then outstanding
Senior Notes and Senior Subordinated Notes, as the case may be, have the right
to direct the time, method and place of conducting any proceeding for any
remedy available to the relevant Trustee or exercising any trust or power
conferred on the relevant Trustee. The Trustee may withhold from the relevant
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 Senior Notes or Senior Subordinated Notes, as the case may be,
or that resulted from the failure of the Company to comply with the provisions
of "--Certain Covenants--Relating to all Notes--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 Senior Notes then outstanding by notice to the Senior Note Trustee may
rescind an acceleration of such Senior Notes and its consequences if all
existing Events of Default (other than the nonpayment of principal of and
premium, if any, and interest on the Senior Notes which has become due solely
by virtue of such acceleration) have been cured or waived and if the
rescission would not conflict with any judgment or decree. The Holders of a
majority in aggregate principal amount of the Senior Subordinated Notes then
outstanding by notice to the Senior Subordinated Note Indenture Trustee may
rescind an acceleration of such Senior Subordinated Notes and its consequences
if all existing Events of Default (other than the non-payment of principal of
and premium, if any, and interest on the Senior Subordinated Notes which has
become due solely by virtue of such acceleration) 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.
The Holders of a majority in aggregate principal amount of the Senior Notes
then outstanding may, on behalf of the Holders of all the Senior Notes, waive
any past Default or Event of Default under the Senior Note Indenture and its
consequences, except a Default in the payment of principal of or premium, if
any, or interest on the Senior Notes or in respect of a covenant or provision
of the Senior Note Indenture which cannot be modified or amended without the
consent of all Holders. The Holders of a majority in aggregate principal
amount of the Senior Subordinated Notes then outstanding may on behalf of the
Holders of all the Senior Subordinated Notes, waive any past Default or Event
of Default under the Senior Subordinated Note Indenture and its consequences,
except a Default in the payment of principal of or premium, if any, or
interest on, the Senior Subordinated Notes or in respect of a covenant or
provision of the Senior Subordinated Note Indenture which cannot be modified
or amended without the consent of all Holders.
Under each Indenture, two executive officers of the Company are required to
provide a certificate to the relevant 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 relevant Trustee, may, without the consent of the
Holders, amend, waive or supplement either Indenture and the Notes
73
<PAGE>
issued thereunder for certain specified purposes, including, among other
things, curing ambiguities, defects or inconsistencies, qualifying, or
maintaining the qualification of, the relevant 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 relevant Trustee an opinion of
counsel stating that such change does not adversely affect the rights of any
Holder. Other amendments and modifications of an Indenture and the Notes
issued thereunder may be made by the Company, and the relevant Trustee with
the consent of the Holders of not less than a majority of the aggregate
principal amount of the Notes issued under such Indenture then outstanding;
provided that no such amendment or modification may, without the consent of
the Holder of each outstanding Senior Note or Senior Subordinated Note, as the
case may be, affected thereby: (a) change the maturity of the principal of or
any installment of interest on any such Senior Note or Senior Subordinated
Note or alter the optional redemption or repurchase provisions of any such
Senior Note or Senior Subordinated Note or such Indenture in a manner adverse
to the Holders of such Senior Notes or Senior Subordinated Notes, as the case
may be, (b) reduce the principal amount of (or the premium) of any such Senior
Note or Senior Subordinated Note, as the case may be, (c) reduce the rate of
or extend the time for payment of interest on any such Senior Note or Senior
Subordinated Note, as the case may be, (d) change the place or currency of
payment of principal of (or premium) or interest on any such Senior Note or
Senior Subordinated Note, as the case may be, (e) modify any provisions of
such Indenture relating to the waiver of past defaults (other than to add
sections of such Indenture or such Senior Notes or Senior Subordinated Notes
subject thereto or the right of the Holders of Senior Notes and the Senior
Subordinated Notes, as the case may be, outstanding thereunder to institute
suit for the enforcement of any payment on or with respect to any such Senior
Note or Senior Subordinated Note or the modification and amendment of such
Indenture and such Senior Notes or Senior Subordinated Notes (other than to
add sections of such Indenture or such Notes which may not be amended,
supplemented or waived without the consent of each Holder herein affected),
(f) reduce the percentage of the principal amount of outstanding Senior Notes
and Senior Subordinated Notes, as the case may be, necessary for amendment to
or waiver of compliance with any provision of the applicable Indenture or the
Senior Notes and Senior Subordinated Notes, as the case may be, outstanding
thereunder or for waiver of any Default in respect thereof, (g) waive a
default in the payment of principal of, interest on, or redemption payment
with respect to, such Senior Note or Senior Subordinated Note (except a
rescission of acceleration of the relevant Notes by the Holders thereof as
provided in such Indenture and a waiver of the payment default that resulted
from such acceleration), (h) in the case of the Senior Subordinated Note
Indenture, modify the ranking or priority of the Senior Subordinated Notes or
modify the definition of Senior Indebtedness or amend or modify the
subordination provisions of the Senior Subordinated Note Indenture in any
manner adverse to the Holders of Senior Subordinated Notes, (i) in the case of
the Senior Note Indenture, modify the ranking or priority of the Senior Notes,
or (j) modify the provisions relating to any Offer to Purchase required under
the covenants described under "--Certain Covenants--Relating to all the
Notes--Limitation on Certain Asset Dispositions" or "--Certain Covenants--
Relating to all the Notes--Change of Control" in a manner materially adverse
to the Holders of Senior Notes and Senior Subordinated Notes affected thereby.
No amendment or modification of the Senior Subordinated Indenture or the
Senior Subordinated Notes may adversely affect the rights of the holders of
Senior Indebtedness of the Company unless the holders of such Senior
Indebtedness consent to such amendment or modification.
DEFEASANCE OR COVENANT DEFEASANCE OF INDENTURES
The Company may, at its option and at any time, terminate the obligations of
the Company with respect to either the Senior Notes or the Senior Subordinated
Notes ("defeasance"). Such defeasance means that the Company shall be deemed
to have paid and discharged the entire Indebtedness represented by the
outstanding Notes so defeased, 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 relevant Trustee, and
(iv) the defeasance provisions of the relevant Indenture. In addition, the
Company may, at its option and at any time, elect to terminate its obligations
with respect to
74
<PAGE>
certain covenants that are set forth in the Indentures, 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 so defeased ("covenant defeasance").
In order to exercise either defeasance or covenant defeasance, (i) the
Company must irrevocably deposit with the relevant Trustee, in trust, for the
benefit of the holders of the Notes to be defeased, 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 nationally recognized firm
of independent public accountants, to pay the principal of, premium, if any,
and interest on the outstanding Notes to be defeased 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 to be defeased
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 under the relevant Indenture shall have occurred and be continuing
immediately after giving effect to such deposit; (iv) such defeasance or
covenant defeasance shall not cause the relevant 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 relevant Trustee an opinion of counsel to the effect that (A)
in the case of the Senior Subordinated Notes, 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 Senior Subordinated
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 relevant Trustee an officers'
certificate and an opinion of counsel, each stating that all conditions
precedent under the relevant Indenture to either defeasance or covenant
defeasance, as the case may be, have been complied with. Notwithstanding the
foregoing, the Opinion of Counsel required by clause (ii) above need not be
delivered if at such time all outstanding Senior Notes or Senior Subordinated
Notes, as the case may be, have been irrevocably called for redemption.
SATISFACTION AND DISCHARGE
An 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 issued thereunder, as expressly provided for in such Indenture) as to
all outstanding Notes issued thereunder when (i) either (a) all the Notes
issued thereunder theretofore authenticated and delivered (except lost, stolen
or destroyed Notes issued thereunder which have been replaced or paid and
Notes issued thereunder 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
relevant Trustee for cancellation or (b) all Notes issued thereunder not
theretofore delivered to the relevant Trustee for cancellation have become due
and payable and the Company has irrevocably deposited or caused to be
deposited with the relevant Trustee funds in an amount sufficient to pay and
discharge the entire Indebtedness on the Notes issued thereunder not
theretofore delivered to the relevant Trustee for cancellation, for principal
of, premium, if any, and interest on the Notes issued thereunder to the date
of deposit together with irrevocable instructions from the Company directing
the relevant Trustee to apply such funds to the payment thereof at maturity;
(ii) the Company has paid all other sums payable under such Indenture by the
Company; and (iii) the Company has delivered to the relevant Trustee an
officers' certificate and an opinion of counsel stating that all conditions
precedent under such Indenture relating to the satisfaction and discharge of
such Indenture have been complied with.
GOVERNING LAW
The Indentures and the Notes 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.
75
<PAGE>
THE TRUSTEES
The Indentures will provide that, except during the continuance of an Event
of Default, the Trustees will perform only such duties as are specifically set
forth in the Indentures. During the existence of an Event of Default, the
relevant Trustee will exercise such rights and powers vested in it by such
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 Indentures and the provisions of the TIA contain certain limitations on
the rights of the Trustees, should it become a creditor of the Company, to
obtain payments of claims in certain cases or to realize on certain property
received in respect of any such claim as security or otherwise. Subject to the
TIA, the Trustees will be permitted to engage in other transactions, provided
that if any 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 Exchange Notes will be issued in fully
registered form without interest coupons.
The Global Notes
Each of the Senior Exchange Notes and the Senior Subordinated Exchange Notes
issued in the Exchange Offer will initially be represented by a single,
permanent global Note in definitive, fully registered form without interest
coupons (the "Global Notes"). Upon the issuance of 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 of persons who have accounts with such
Depositary. 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).
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 the Depositary's
applicable procedures.
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 he 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.
76
<PAGE>
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").
Although the Depositary has agreed to the foregoing procedures in order to
facilitate transfers of interests in the Global Notes among participants of
the Depositary it is 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 or its respective participants or indirect participants of
its respective obligations under the rules and procedures governing its
operations.
Certificated Notes
Global Notes may not be transferred as or exchanged for physical
certificates in registered form without coupons (the "Certificated Notes")
except (i) if the Depositary notifies the Company that it is unwilling or
unable to continue to act as depositary with respect to the Global Notes 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, (ii) at any time
if the Company in its sole discretion determines that the Global Notes (in
whole but not in part) should be exchanged for Certificated Notes or (iii) if
the owner of an interest in the Global Notes requests such Certificated Notes,
following an Event of Default under the Indenture, in a writing delivered
through the Depositary to the Trustee.
CERTAIN DEFINITIONS
"Acquired Indebtedness" of any specified Person means Indebtedness of any
other Person and its Restricted Subsidiaries existing at the time such other
Person merged with or into or became a Restricted Subsidiary of such specified
Person or assumed by the specified Person in connection with the acquisition
of assets from such other Person and not incurred by the specified Person in
connection with or in anticipation of (a) such other Person and its Restricted
Subsidiaries being merged with or into or becoming a Restricted 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.
"Asset Disposition" means any sale, transfer or other disposition
(including, without limitation, by merger, consolidation or sale-and-leaseback
transaction) of (i) shares of Capital Stock of a Restricted Subsidiary of the
77
<PAGE>
Company (other than directors' qualifying shares) or (ii) property or assets
of the Company or any of its Restricted Subsidiaries; provided, that an Asset
Disposition shall not include (a) any sale, transfer or other disposition of
shares of Capital Stock, property or assets by a Restricted Subsidiary of the
Company to the Company or to any Restricted Subsidiary of the Company, (b) any
sale, transfer or other disposition of defaulted receivables for collection or
any sale, transfer or other disposition of property or assets in the ordinary
course of business, (c) any isolated sale, transfer or other disposition that
does not (together with all related sales, transfers or dispositions) involve
aggregate consideration in excess of $5.0 million, (d) the grant in the
ordinary course of business of any license of patents, trademarks,
registrations therefor and other similar intellectual property, (e) the
granting of any Lien (or foreclosure thereon) securing Indebtedness to the
extent that such Lien is granted in compliance with "--Certain Covenants--
Relating Only to the Senior Subordinated Notes--Limitation on Liens" above, in
the case of the Senior Subordinated Note Indenture, or "--Certain Covenants--
Relating to the Senior Notes--Limitation on Liens" above, in the case of the
Senior Note Indenture, (f) any sale, transfer or other disposition
constituting a Permitted Investment or Restricted Payment permitted by "--
Certain Covenants--Relating to all the Notes--Limitation on Restricted
Payments" above, (g) any disposition of assets or property in the ordinary
course of business to the extent such property or assets are obsolete, worn-
out or no longer useful in the Company's or any of its Subsidiaries' business,
(h) the sale, lease, conveyance or disposition or other transfer of all or
substantially all of the assets of the Company as permitted under "--Certain
Covenants--Relating to all the Notes--Merger, Consolidation, etc.", (i) sales
of accounts receivable, equipment and related assets (including contract
rights) of the type specified in the definition of "Qualified Securitization
Transaction" to a Securitization Subsidiary for the fair market value thereof,
including cash in an amount at least equal to 90% of the fair market value
thereof as determined in accordance with GAAP, and (j) transfers of accounts
receivable, equipment and related assets (including contract rights) of the
type specified in the definition of "Qualified Securitization Transaction" (or
a fractional undivided interest therein) by a Securitization Subsidiary in a
Qualified Securitization Transaction.
"Asset Sale Offer Trigger Date" has the meaning set forth in "--Certain
Covenants--Relating to all the Notes--Limitation on Certain Asset
Dispositions."
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.
"Attributable Indebtedness" in respect of a Sale/Leaseback Transaction
means, as at the time of determination, the present value (discounted at the
interest rate borne by the Senior Notes with respect to the Senior Note
Indenture and at the interest rate borne by the Senior Subordinated Notes with
respect to the Senior Subordinated Note Indenture, compounded annually) of the
total obligations of the lessee for rental payments during the remaining term
of the lease included in such Sale/Leaseback Transaction (including any period
for which such lease has been extended).
"Average Life" means, as of the date of determination, with respect to any
Indebtedness for borrowed money or Preferred Stock, the quotient obtained by
dividing (i) the sum of the products of the number of years from the date of
determination to the dates of each successive scheduled principal or
liquidation value payments of such Indebtedness or Preferred Stock,
respectively, and the amount of such principal or liquidation value payments,
by (ii) the sum of all such principal or liquidation value payments.
"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.
78
<PAGE>
"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.
"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 securities of the Company representing 35% or
more of the combined voting power of the Company's then outstanding Voting
Stock; (ii) the following individuals cease for any reason to constitute more
than two-thirds of the number of directors then serving on the Board of
Directors of the Company: individuals who, on the Issue Date, 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 the Company) whose appointment or
election by the Board of Directors or nomination for election by the Company's
stockholders was approved (A) by the vote of at least a majority of the
directors then still in office or whose appointment, election or nomination
was previously so approved or recommended or (B) with respect to directors
whose appointment of election to the Board of Directors was made by the
holders of the Company's nonconvertible junior preference stock, series A and
nonconvertible junior preference stock, series B, by the holders of such
preference stock; (iii) the shareholders of the Company shall approve any Plan
of Liquidation (whether or not otherwise in compliance with the provisions of
the Indentures); or (iv) the Company consolidates with or merges with or into
another Person, other than a merger or consolidation of the Company in which
the holders of the Common Stock of the Company outstanding immediately prior
to the consolidation or merger hold, directly or indirectly, at least a
majority of the Common Stock of the surviving corporation immediately after
such consolidation or merger; (v) the Company or any Restricted 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 Restricted Subsidiaries of the Company (determined on a
consolidated basis) to any Person (other than a Permitted Joint Venture in a
transaction entered into in compliance with "Certain Covenants--Relating to
all the Notes--Limitation on Restricted Payments") ; provided, that neither
(x) the merger of a Restricted Subsidiary of the Company into the Company or
into any Restricted 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 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 Restricted
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.
"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 Cash Flow Available For Fixed Charges" of any Person means for
any period the Consolidated Net Income of such Person for such period
increased (to the extent Consolidated Net Income for such period has been
reduced thereby) by the sum of (without duplication) (i) Consolidated Interest
Expense of such Person for such period, plus (ii) Consolidated Tax Expense of
such Person for such period, plus (iii) the consolidated depreciation and
amortization expense included in the income statement of such Person prepared
in accordance with GAAP for such period, plus (iv) any other non-cash charges
to the extent deducted from or
79
<PAGE>
reflected in Consolidated Net Income except for any non-cash charges that
represent accruals of, or reserves for, cash disbursements to be made in any
future accounting period, minus (1) any non-cash items increasing Consolidated
Net Income for such period and (2) all cash payments during such period
relating to non-cash charges that were added back in determining Consolidated
Cash Flow Available For Fixed Charges in any prior period.
"Consolidated Cash Flow Ratio" of any Person means for any period the ratio
of (i) Consolidated Cash Flow Available for Fixed Charges of such Person for
such period to (ii) Consolidated Fixed Charges for such period; provided,
however, that all incurrences and repayments of Indebtedness (including the
incurrence giving rise to such calculation and any repayments in connection
therewith) and all dispositions (including discontinued operations) or
acquisition of assets (other than in the ordinary course of business) made
during or after such period and on or prior to the date of determination shall
be given pro forma effect as if they occurred on the first day of such four-
quarter period. Calculations of pro forma amounts in accordance with this
definition shall be done in accordance with Article 11 of Regulation S-X under
the Securities Act or any successor provision.
"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 Qualified Capital 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). In calculating "Consolidated Fixed Charges"
for purposes of determining the denominator (but not the numerator) of this
"Consolidated Fixed Charge Coverage Ratio," (1) interest on Indebtedness
determined on a fluctuating basis as of the date of determination and which
will continue to be so determined thereafter shall be deemed to have accrued
at a fixed rate per annum equal to the rate of interest on such Indebtedness
in effect on the date of determination; (2) if interest on any Indebtedness
actually incurred on the date of determination may be optionally determined at
an interest rate based upon a factor of a prime or similar rate, a
eurocurrency interbank offered rate or other rates, then the interest rate in
effect on the date of determination will be deemed to have been in effect
during the relevant four-quarter period reference; and (3) notwithstanding the
foregoing, interest on Indebtedness determined on a fluctuating basis, to the
extent such interest is covered by agreements relating to interest swap
agreements, shall be deemed to accrue at the rate per annum resulting after
giving effect to the operation of such agreements.
"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 and its Consolidated Subsidiaries 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; and (e) the interest portion of any deferred payment
obligations for such period.
"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 (other
than a Restricted Subsidiary) shall be included only to the extent of the
amount that has been actually received by the referent Person or a Restricted
Subsidiary of the referent Person in the form of cash dividends or other cash
distributions (other than payments in respect of debt obligations), 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 Restricted Subsidiary of the referent Person or is merged
into or consolidated with the referent Person or any Restricted Subsidiary of
the referent Person; (ii) any restoration to income of any contingency
reserve, except to
80
<PAGE>
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 Restricted
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); (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; and (vii) the net income of
any Restricted Subsidiary of such Person which is subject to restrictions
which prevent or limit the payment of dividends or the making of distributions
to such Person to the extent of such restrictions (regardless of any waiver
thereof).
"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 Restricted Subsidiaries on a consolidated basis exceed
the sum of (a) the total liabilities of such Person and of its Restricted
Subsidiaries on a consolidated basis, plus (b) any redeemable Preferred Stock
of such Person.
"Consolidated Subsidiary" of any Person means a Restricted Subsidiary which
for financial reporting purposes is or, in accordance with GAAP, should be,
accounted for by such Person as a consolidated Subsidiary.
"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),
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.
"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 Restricted Subsidiaries against fluctuations in currency
values to or under which the Company or any of its Restricted 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).
"Designated Senior Indebtedness" means (i) so long as any Indebtedness under
the Senior Notes is outstanding, the Senior Notes, (ii) so long as any
Indebtedness under the Mexico Credit Agreement is outstanding, the guarantee
by the Company under the Mexico Credit Agreement and (iii) so long as
outstanding, any other Senior Indebtedness which has at the time of initial
issuance an aggregate outstanding principal amount in excess of $25.0 million
which has been so designated as Designated Senior Indebtedness by the Board of
Directors of the Company at the time of initial issuance in a resolution
delivered to the Trustee.
"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.
81
<PAGE>
"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 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 keepwell, 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 of Senior Indebtedness (including, without limitation, the Senior
Notes) of the Company incurred in accordance with the Indentures, 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
Restricted 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
Restricted Subsidiaries; and (viii) that portion of any Indebtedness which at
the time of incurrence was incurred in violation of the Senior Subordinated
Note 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," "incurable" 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
Restricted Subsidiary (whether by merger, consolidation, acquisition or
otherwise) of the Company shall be deemed to be incurred or issued, as the
82
<PAGE>
case may be, by such Restricted Subsidiary at the time it becomes a Restricted
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 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 continently 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; (vii) all
obligations under Currency Agreements and Interest Rate Protection Agreements
and (viii) all Attributable Indebtedness in respect of Sale/Leaseback
Transactions entered into by such person. 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 he 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 Restricted Subsidiary against
fluctuations in interest rates to or under which such Person or any Restricted
Subsidiary of such Person is a party or a beneficiary on the Issue Date or
becomes a party or a beneficiary thereafter.
83
<PAGE>
"Investment" by any Person means any direct or indirect (i) loan, advance or
other extension of credit (other than a guarantee) 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) 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
Navistar Financial Corporation and Navistar International Transportation Corp.
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.
For purposes of the definition of "Unrestricted Subsidiary" and the covenant
described under "--Certain Covenants--Relating to all Notes--Limitation on
Restricted Payments," (i) "Investment" shall include the portion
(proportionate to the Company's equity interest in such Subsidiary) of the
fair market value of the net assets of any Subsidiary of the Company at the
time that such Subsidiary is designated an Unrestricted Subsidiary; provided,
that if such designation is made in connection with the acquisition of such
Subsidiary or the assets owned by such Subsidiary, the "Investment" in such
Subsidiary shall be deemed to be the consideration paid in connection with
such acquisition; provided, further, that upon a redesignation of such
Subsidiary as a Restricted Subsidiary, the Company shall be deemed to continue
to have a permanent "Investment" in an Unrestricted Subsidiary in an amount
(if positive) equal to (x) the Company's "Investment" in such Subsidiary at
the time of such redesignation less (y) the portion (proportionate to the
Company's equity interest in such Subsidiary) of the fair market value of the
net assets of such Subsidiary at the time of such redesignation and (ii) any
property transferred to or from an Unrestricted Subsidiary shall be valued at
its fair market value at the time of such transfer, in each case as determined
in good faith by the Board of Directors.
"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 Old Notes are originally issued
under the Indentures.
"Lien" means, with respect to any Person, any mortgage, pledge, lien,
encumbrance, easement, restriction, covenant, right-of-way, charge or adverse
claim affecting tide 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 Restricted 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
Navistar Financial Corporation and Navistar International Transportation Corp.
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.
84
<PAGE>
"Maturity Date" means (i) with respect to the Senior Notes, February 1, 2003
and (ii) with respect to the Senior Subordinated Notes, February 1, 2008.
"Moody's" means Moody's Investors Service, Inc. and its successors.
"Net Available Proceeds" from any Asset Disposition by any Person means cash
or readily marketable cash equivalents received (including by way of sale or
discounting of a note, installment receivable or other receivable, but
excluding any other consideration received in the form of assumption by the
acquirer of Indebtedness or other obligations relating to such properties or
assets or received in any other non-cash form) therefrom by such Person,
including any cash received by way of deferred payment or upon the
monetization or other disposition of any non-cash consideration (including
notes or other securities) received in connection with such Asset Disposition,
net of (i) all legal, title and recording tax expenses, commissions and other
fees and expenses incurred (including, without limitation, fees and expenses
of accountants, brokers, printers and other similar entities) and all federal,
state, foreign and local taxes required to be accrued as a liability as a
consequence of such Asset Disposition, (ii) all payments made by such Person
or its Restricted Subsidiaries on any Indebtedness which is secured by such
assets in accordance with the terms of any Lien upon or with respect to such
assets or which must by the terms of such Lien, or in order to obtain a
necessary consent to such Asset Disposition or by applicable law, be repaid
out of the proceeds from such Asset Disposition, (iii) all payments made with
respect to liabilities associated with the assets which are the subject of the
Asset Disposition, including, without limitation, trade payables and other
accrued liabilities, (iv) appropriate amounts to be provided by such Person or
any Restricted Subsidiary thereof, as the case may be, as a reserve in
accordance with GAAP against any liabilities associated with such assets and
retained by such Person or any Restricted Subsidiary thereof, as the case may
be, after such Asset Disposition, including, without limitation, liabilities
under any indemnification obligations and severance and other employee
termination costs associated with such Asset Disposition, until such time as
such amounts are no longer reserved or such reserve is no longer necessary (at
which time any remaining amounts will become Net Available Proceeds to be
allocated in accordance with the provisions of clause (iii) of the covenant of
the Indentures described under "--Certain Covenants--Relating to all the
Notes--Limitation on Certain Asset Dispositions") and (v) all distributions
and other payments, made to minority interest holders, if any, in Restricted
Subsidiaries of such Person or joint ventures as a result of such Asset
Disposition.
"Offer to Purchase" means a written offer (the "Offer") sent by the Company
by first class mail, postage prepaid, to each Holder at its address appearing
in the register for the Senior Note, or the Senior Subordinated Notes, as the
case may be, on the date of the Offer, offering to purchase up to the
principal amount Senior Notes or the Senior Subordinated Notes, as the case
may be, in such Offer at the purchase price specified in such Offer (as
determined pursuant to the relevant Indenture). Unless otherwise required by
applicable law, the Offer shall specify an expiration date (the "Expiration
Date") of the Offer to Purchase which shall be not less than 30 days nor more
than 60 days after the date of such Offer and a settlement date (the "Purchase
Date") for purchase of such Notes within five Business Days after the
Expiration Date. The Company shall notify the relevant Trustee at least 15
Business Days (or such shorter period as is acceptable to such Trustee) prior
to the mailing of the Offer of the Company's obligation to make an Offer to
Purchase, and the Offer shall be mailed by the Company or, at the Company's
request, by such Trustee in the name and at the expense of the Company. The
Offer shall contain all the information required by applicable law to be
included therein. The Offer shall contain all instructions and materials
necessary to enable such Holders to tender such Notes pursuant to the Offer to
Purchase. The Offer shall also state:
(1) the Section of the Indenture pursuant to which the Offer to Purchase
is being made;
(2) the Expiration Date and the Purchase Date;
(3) the aggregate principal amount of the outstanding Notes offered to be
purchased by the Company pursuant to the Offer to Purchase (including, if
less than 100%, the manner by which such amount has been determined
pursuant to the Section of the Indenture requiring the Offer to Purchase)
(the "Purchase Amount");
(4) the purchase price to be paid by the Company for each $1,000
aggregate principal amount of Notes accepted for payment (as specified
pursuant to the Indenture) (the "Purchase Price");
85
<PAGE>
(5) that the Holder may tender all or any portion of the Notes registered
in the name of such Holder and that any portion of a Note tendered must be
tendered in an integral multiple of $1,000 principal amount;
(6) the place or places where Notes are to be surrendered for tender
pursuant to the Offer to Purchase;
(7) that interest on any Note not tendered or tendered but not purchased
by the Company pursuant to the Offer to Purchase will continue to accrue;
(8) that on the Purchase Date the Purchase Price will become due and
payable upon each Note being accepted for payment pursuant to the Offer to
Purchase and that interest thereon shall cease to accrue on and after the
Purchase Date;
(9) that each Holder electing to tender all or any portion of a Note
pursuant to the Offer to Purchase will be required to surrender such Note
at the place or places specified in the Offer prior to the close of
business on the Expiration Date (such Note being, if the Company or the
Trustee so requires, duly endorsed by, or accompanied by a written
instrument of transfer in form satisfactory to the Company and the Trustee
duly executed by the Holder thereof or his attorney duly authorized in
writing);
(10) that Holders will be entitled to withdraw all or any portion of
Notes tendered if the Company (or its Paving Agent) receives, not later
than the close of business on the fifth Business Day next preceding the
Expiration Date, a telegram, telex, facsimile transmission or letter
setting forth the name of the Holder, the principal amount of the Note the
Holder tendered, the certificate number of the Note the Holder tendered and
a statement that such Holder is withdrawing all or a portion of his tender;
(11) that (a) if Notes in an aggregate principal amount less than or
equal to the Purchase Amount are duly tendered and not withdrawn pursuant
to the Offer to Purchase, the Company shall purchase all such Notes and (b)
if Notes in an aggregate principal amount in excess of the Purchase Amount
are tendered and not withdrawn pursuant to the Offer to Purchase, the
Company shall purchase Notes having an aggregate principal amount equal to
the Purchase Amount on a pro rata basis (with such adjustments as may be
deemed appropriate so that only Notes in denominations of $1,000 or
integral multiples thereof shall be purchased); and
(12) that in the case of any Holder whose Note is purchased only in part,
the Company shall execute, and the Trustee shall authenticate and deliver
to the Holder of such Note without service charge, a new Note or Notes, of
any authorized denomination as requested by such Holder, in all aggregate
principal amount equal to and in exchange for the unpurchased portion of
the Note or Notes so tendered.
An Offer to Purchase shall be governed by and effected in accordance with
the provisions above pertaining to any Offer.
"Permitted Investments" means (i) Investments in marketable, direct
obligations issued or guaranteed by the United States of America, or any
governmental entity or agency or political subdivision thereof (provided, that
the good faith and credit of the United States of America is pledged in
support thereof), maturing within one year of the date of purchase; (ii)
Investments in commercial paper issued by corporations or financial
institutions maturing within 180 days from the date of the original issue
thereof, and rated "P-1" or better by Moody's or "A-1" or better by S&P or an
equivalent rating or better by any other nationally recognized securities
rating agency; (iii) Investments in certificates of deposit issued or
acceptances accepted by or guaranteed by any bank or trust company organized
under the laws of the United States of America or any state thereof or the
District of Columbia, in each case having capital, surplus and undivided
profits totaling more than $500,000,000, maturing within one year of the date
of purchase; (iv) deposits, including interest-bearing deposits, maintained in
the ordinary course of business in banks; (v) any acquisition of the Capital
Stock of any Person; provided, that after giving effect to any such
acquisition such Person shall become a Restricted Subsidiary of the Company;
(vi) trade receivables and prepaid expenses. in each case arising in the
ordinary course of business; provided, that such receivables and prepaid
expenses would be recorded as assets of such Person in accordance with GAAP;
(vii) endorsements for collection or deposit in the ordinary course of
business by such Person of bank drafts and similar negotiable instruments of
such other Person received as payment for ordinary course of business trade
receivables; (viii) any interest swap or hedging obligation with an
unaffiliated Person otherwise permitted by the
86
<PAGE>
Indentures (including, without limitation, any Currency Agreement and any
Interest Rate Protection Agreement otherwise permitted by the Indentures);
(ix) Investments received as consideration for an Asset Disposition in
compliance with the provisions of the Indentures described under "--Certain
Covenants--Relating to all the Notes--Limitation on Certain Asset
Dispositions" above; (x) Investments for which the sole consideration provided
is Qualified Capital Stock of the Company; provided, that the issuance of such
Qualified Capital Stock is not included in the calculation set forth in clause
(3) of the first paragraph of "--Certain Covenants--Relating to all the
Notes--Limitation on Restricted Payments"; (xi) loans and advances to
employees made in the ordinary course of business in an aggregate amount not
to exceed $10.0 million at any one time outstanding; (xii) Investments
outstanding on the Issue Date; (xiii) Investments in the Company or a Wholly
Owned Subsidiary; (xiv) Investments in securities of trade creditors,
suppliers or customers received pursuant to any plan of reorganization or
similar arrangement upon bankruptcy or insolvency of such trade creditor,
supplier or customer; (xv) Investments in any Person after the Issue Date in
an aggregate amount not in excess of $20.0 million at any one time
outstanding; and (xvi) Investments in publicly traded equity or publicly
traded Investment Grade debt obligations issued by a corporation (other than
the Company or an affiliate of the Company) organized under the laws of any
State of the United States of America and subject to the reporting
requirements of Section 13 or 15(d) of the Exchange Act in an aggregate amount
not in excess of $50.0 million at any one time outstanding.
"Permitted Joint Venture" means any Person which is, directly or indirectly,
through its subsidiaries or otherwise, engaged principally in any business in
which the Company is engaged, or a reasonably related business, and the
Capital Stock of which is owned by the Company and one or more Persons other
than the Company or any affiliate of the Company.
"Permitted Junior Securities" means (i) Qualified Stock, (ii) securities of
the Company or any other corporation authorized by an order or decree giving
effect, and stating in such order or decree that effect is given, to the
subordination of such securities to the Senior Indebtedness, and made by a
court of competent jurisdiction in a reorganization proceeding under any
applicable bankruptcy, insolvency or other similar law, or (iii) any
securities of the Company provided for a plan of reorganization or
readjustment that are subordinated in right of payment to all Senior
Indebtedness that may at the time be outstanding to substantially the same
extent as, or to a greater extent than, the Senior Subordinated Notes are
subordinated as provided in the Senior Subordinated Note Indenture.
"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
Restricted 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
87
<PAGE>
thereto and such Lien is created prior to, at the time of or within 180 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 Restricted 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 Restricted 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 Restricted
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 Trustees arising under the Indentures; (n)
any lien existing on property, shares of stock or Indebtedness of a Person at
the time such Person becomes a Restricted Subsidiary of the Company or is
merged with or consolidated into the Company or a Restricted 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 Restricted 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 Restricted Subsidiary of the Company; (p) Liens in
favor of the Company; (q) Liens existing on the Issue Date; (r) Liens in favor
of custom and revenue authorities arising as a matter of law to secure payment
of nondelinquent customs duties in connection with the importation of goods;
(s) Liens encumbering customary initial deposits and margin deposits, and
other Liens incurred in the ordinary course of business that are within the
general parameters customary in the industry, in each case securing
Indebtedness under Interest Rate Protection Agreement; (t) Liens encumbering
deposits made in the ordinary course of business to secure nondelinquent
obligations arising from statutory, regulatory, contractual or warranty
requirements of the Company or its Restricted Subsidiaries for which a reserve
or other appropriate provision, if any, as shall be required by GAAP shall
have been made; and (u) Liens arising out of consignment or similar
arrangements for the sale of goods entered into by the Company or any
Restricted Subsidiary in the ordinary course of business in accordance with
industry practice.
"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 any of the Restricted
Subsidiaries of the Company in connection with or reasonably related to a
transaction or series of transactions in which any of the Restricted
Subsidiaries of the Company 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
88
<PAGE>
(whether such Receivables are then existing or arising in the future) of any
of the Restricted Subsidiaries of the Company, 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.
"Rating Agency" means each of (i) S&P and (ii) Moody's.
"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 any Restricted 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.
"Restricted Subsidiary" means any Subsidiary of the Company that is not an
Unrestricted Subsidiary.
"Sale/Leaseback Transaction" means an arrangement relating to property now
owned or hereafter acquired whereby the Company or a Restricted Subsidiary
transfers such property to a person and the Company or a Restricted Subsidiary
leases it from such Person.
"Securitization Subsidiary" means a 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
Restricted Subsidiary of the Company, (ii) is recourse to or obligates the
Company or any Restricted 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 Restricted Subsidiary of the Company, directly or
indirectly, continently 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 Restricted 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 Restricted 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 Restricted
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" means (a) the Senior Notes, including principal,
premium, if any, and interest on the Senior Notes and all other amounts due on
or in connection with the Senior Notes, and (b) any other Indebtedness
(including principal, premium, if any, and interest on such Indebtedness)
incurred by the Company in accordance with the Senior Subordinated Note
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 (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 (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
89
<PAGE>
subordinated or junior to the Senior Subordinated Notes; (iii) the Senior
Subordinated Notes; (iv) any Indebtedness or any other obligation of the
Company to any of the Company's Restricted 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 Restricted 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 Restricted Subsidiaries; and (viii) that portion
of any Indebtedness which at the time of incurrence is incurred in violation
of the Senior Subordinated Note 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).
"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 Restricted Subsidiaries of such Person or by such Person and one
or more Restricted 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 Restricted Subsidiary of such Person or such Person
and one or more Restricted 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--Relating to all Notes--Limitation on
Guarantees by Restricted Subsidiaries" above.
"Subsidiary Guarantor" means each Restricted Subsidiary of the Company that
becomes a guarantor of the Notes pursuant to "--Certain Covenants--Relating to
all Notes--Limitation on Guarantees by Restricted Subsidiaries" above.
"Support Agreement" means the Amended and Restated Parent's Side Agreement
dated as of November 8, 1994 between the Company and Navistar International
Transportation Corp.
"Tax Allocation Agreement" means the Tax Allocation Agreement among the
Company and its subsidiaries, effective as of October 1, 1981, as it has been
and may be amended and/or supplemented from time to time.
"Unrestricted Subsidiary" means (i) each of Navistar Financial Corporation,
Arrendadora Financiera Navistar S.A. de C.V., Servicios Financieros Navistar
S.A. de C.V., Servicios Financieros NFC, S.A. de C.V., Harbour Assurance
Company of Bermuda Limited, Navistar Acceptance Corporation Limited, the
DealCor Subsidiaries of Transportation that are treated on an equity basis by
the Company on the Issue Date, and their respective Subsidiaries until such
time as it is designated a Restricted Subsidiary pursuant to the second
succeeding sentence, (ii) any Subsidiary of the Company that at the time of
determination shall be designated an Unrestricted Subsidiary by the Board of
Directors in the manner provided below and (iii) any Subsidiary of an
Unrestricted Subsidiary. The Board of Directors may designate any Subsidiary
of the Company (including any newly acquired or newly formed Subsidiary) to be
an Unrestricted Subsidiary unless such Subsidiary or any of its Subsidiaries
owns any Capital Stock of, or holds any Lien on any property of, the Company
or any other
90
<PAGE>
Restricted Subsidiary of the Company; provided, that either (A) the Subsidiary
to be so designated has total assets of $1,000 or less or (B) if such
Subsidiary has assets greater than $1,000, such designation would be permitted
under the covenant described under "--Certain Covenants--Relating to all
Notes--Limitation on Restricted Payments." The Board of Directors may
designate any Unrestricted Subsidiary to be a Restricted Subsidiary; provided,
that immediately after giving effect to such designation (x) if such
Unrestricted Subsidiary at such time has Indebtedness, the Company could incur
$1.00 of additional Indebtedness under clause (i) of the covenant described
under "--Certain Covenants--Relating to all Notes--Limitation on Incurrence of
Indebtedness" and (y) no Default shall have occurred and be continuing. Any
such designation by the Board of Directors shall be evidenced by the Company
to the Trustee by promptly filing with the Trustee a copy of the board
resolution giving effect to such designation and an officers' certificate
certifying that such designation complied with the foregoing provisions.
"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 Restricted
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.
91
<PAGE>
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following is a discussion of certain material United States federal
income tax consequences of the acquisition, ownership and disposition of the
Notes. Unless otherwise stated, this discussion is limited to the tax
consequences to those persons who are original beneficial owners of the Notes
and who hold such Notes as capital assets ("Holders"). This discussion does
not address specific tax consequences that may be relevant to particular
persons (including, for example, financial institutions, broker-dealers,
insurance companies, tax-exempt organizations, estates, trusts, and persons in
special situations, such as those who hold Notes as part of a straddle, hedge,
conversion transaction, or other integrated investment). This discussion also
does not address the tax consequences to Non-U.S. Holders (as defined below)
that are subject to U.S. federal income tax on a net basis on income realized
with respect to a Note because such income is effectively connected with the
conduct of a U.S. trade or business. This discussion does not address the tax
consequences to persons that have a functional currency other than the U.S.
dollar. In addition, this discussion does not address U.S. federal alternative
minimum tax consequences or any aspect of state, local or foreign taxation.
This discussion is based upon the Internal Revenue Code of 1986, as amended
(the "Code"), the Treasury Department regulations promulgated thereunder, and
administrative and judicial interpretations thereof, all as of the date hereof
and all of which are subject to change, possibly on a retroactive basis.
HOLDERS OF THE NOTES ARE URGED TO CONSULT THEIR TAX ADVISORS CONCERNING THE
UNITED STATES FEDERAL INCOME TAX CONSEQUENCES TO THEM OF ACQUIRING, OWNING AND
DISPOSING OF THE NOTES, AS WELL AS THE APPLICATION OF STATE, LOCAL AND FOREIGN
INCOME AND OTHER TAX LAWS.
U.S. FEDERAL INCOME TAXATION OF U.S. HOLDERS
Payments of Interest
In general, interest on a Note will be taxable to a beneficial owner who or
which is, (i) a citizen or resident of the United States; (ii) a corporation
created or organized under the laws of the United States or any State thereof
(including the District of Columbia); or (iii) a person otherwise subject to
U.S. federal income taxation on its worldwide income (a "U.S. Holder") as
ordinary income at the time it is (actually or constructively) received or
accrued, depending on such holder's method of accounting for U.S. federal
income tax purposes.
Disposition of Notes
Upon the sale, exchange, redemption, retirement at maturity or other
disposition of a Note, a U.S. Holder generally will recognize taxable gain or
loss equal to the difference between (i) the sum of cash plus the fair market
value of all other property received on such disposition (except to the extent
such cash or property is attributable to accrued but unpaid interest, which
will be taxable as ordinary income); and (ii) such holder's adjusted tax basis
in the Note. A U.S. Holder's adjusted tax basis in a Note generally will equal
the cost of the Note to such holder, less any principal payments received by
such holder.
Gain or loss recognized on the disposition of a Note generally will be
capital gain or loss. The net amount of such capital gain recognized by an
individual U.S. Holder will be subject to tax at a maximum rate of (i) 28%, if
the Note is held for more than 12 months but not more than 18 months, and (ii)
20%, if the Note is held for more than 18 months.
Exchange Offer
The exchange of Old Notes for Exchange Notes pursuant to the Exchange Offer
will not be treated as an "exchange" for U.S. federal income tax purposes
because the Exchange Notes will not be considered to differ materially in kind
or extent from the Old Notes. As a result, there will be no U.S. federal
income tax consequences to beneficial owners exchanging the Old Notes for the
Exchange Notes pursuant to the Exchange
92
<PAGE>
Offer. The Company is obligated to pay additional interest to the beneficial
owners of Old Notes under certain circumstances. The Company believes that any
such payments of interest should be treated as subject to an "incidental
contingency" for purposes of the original issue discount rules because the
potential amount of any such interest payments, if required to be made, is
expected to be insignificant relative to the total expected amount of
remaining payments on the Old Notes, and accordingly, if such interest
payments are required to be made, such interest should be taxable to
beneficial owners in the manner described under "Certain Federal Income Tax
Considerations--U.S. Federal Income Taxation of U.S. Holders--Payments of
Interest." It is possible, however, that the Internal Revenue Service ("IRS")
may take a different position, in which case the timing and amount of such
income may be different.
U.S. FEDERAL INCOME TAXATION OF NON-U.S. HOLDERS
Under present U.S. federal income tax law and subject to the discussion of
backup withholding below:
(i) payments of principal and interest on the Notes by the Company or any
agent of the Company to any beneficial owner of a Note that is not a U.S.
Holder (a "Non-U.S. Holder") generally will not be subject to U.S. federal
withholding tax, provided that in the case of interest (a) (1) the Non-U.S.
Holder does not actually or constructively own 10 percent or more of the
total combined voting power of all classes of stock of the Company entitled
to vote, (2) the Non-U.S. Holder is not a controlled foreign corporation
that is related to the Company through stock ownership, (3) the Non-U.S.
Holder is not a bank described in Section 881(c)(3)(A) of the Code, and (4)
either (A) the beneficial owner of the Notes certifies to the Company or
its agent on IRS Form W-8 (or a suitable substitute form), under penalties
of perjury, that it is not a "U.S. person" (as defined in the Code) and
provides its name and address, or (B) a securities clearing organization,
bank or other financial institution that holds customers' securities in the
ordinary course of its trade or business (a "financial institution") and
holds the Notes on behalf of the beneficial owner who certifies to the
Company or its agent under penalties of perjury that such statement has
been received from the beneficial owner by it or by a financial institution
between it and the beneficial owner and furnishes the payor with a copy
thereof (the "Portfolio Interest Exemption") or (b) the Non-U.S. Holder is
entitled to the benefits of an income tax treaty under which interest on
the Notes is exempt from U.S. federal withholding tax and provides a
properly executed IRS Form 1001 claiming the exemption (a "Treaty
Exemption");
(ii) a Non-U.S. Holder generally will not be subject to U.S. federal
withholding tax on gain realized on the sale, exchange or other disposition
of a Note unless (a) the Non-U.S. Holder is an individual who is present in
the United States for a period or periods aggregating 183 or more days in
the taxable year of the disposition and certain other conditions are met or
(b) the Non-U.S. Holder is subject to tax pursuant to the provisions of
U.S. tax law applicable to certain U.S. expatriates; and
(iii) the exchange of Notes for Exchange Notes pursuant to the Exchange
Offer will not be treated as an "exchange" for U.S. federal income tax
purposes because the Exchange Notes will not be considered to differ
materially in kind or extent from the Notes. As a result, there will be no
U.S. federal income tax consequences to beneficial owners exchanging the
Notes for the Exchange Notes pursuant to the Exchange Offer.
The United States Treasury Department recently adopted final regulations
governing federal withholding taxes, information reporting and backup
withholding rules ("Final Regulations") which are generally effective for
payments after December 31, 1998, subject to certain transition rules.
In general, the Final Regulations continue to require that Form W-8 be
furnished to establish eligibility for the Portfolio Interest Exemption;
however, Form W-8 may in some circumstances require additional information not
required on current Form W-8.
The Final Regulations generally require Non-U.S. Holders to execute Form W-
8, rather than Form 1001, to establish eligibility for a Treaty Exemption. For
any periods during which the Notes are not "actively traded," a
93
<PAGE>
Non-U.S. Holder may be required, in order to claim a Treaty Exemption, to (a)
furnish a valid United States federal taxpayer identification number and (b)
furnish proof of the holder's foreign residency (by furnishing an Internal
Revenue Service certification based on (i) a certification from the
appropriate tax official in the foreign country, or (ii) appropriate
documentary evidence).
Under the Final Regulations, certification on Form W-8 for purposes of the
Portfolio Interest Exemption or a Treaty Exemption will generally remain valid
for 3 years, at which time a new Form W-8 may be required to be executed. In
certain cases, the Final Regulations provide alternative forms of
documentation for purposes of the Portfolio Interest Exemption or a Treaty
Exemption, for example, where the Notes are held by certain foreign
partnerships or certain foreign intermediaries.
EACH NON-U.S. HOLDER SHOULD CONSULT THE HOLDER'S TAX ADVISOR AS TO THE
APPLICATION OF THE FINAL REGULATIONS AND THE PROCEDURES THEREUNDER FOR
ESTABLISHING FOREIGN STATUS FOR PURPOSES OF THE PORTFOLIO INTEREST EXEMPTION
OR A TREATY EXEMPTION.
INFORMATION REPORTING AND BACKUP WITHHOLDING
For each calendar year in which the Notes are outstanding, the Company is
required to provide the IRS with certain information, including the beneficial
owner's name, address and taxpayer identification number, the aggregate amount
of interest paid to that beneficial owner during the calendar year and the
amount of tax withheld, if any. This obligation, however, does not apply with
respect to certain payments to U.S. Holders, including corporations, tax-
exempt organizations, qualified pension and profit sharing, trusts and
individual retirement accounts, provided that such holders establish
entitlement to an exemption.
In the event that a U.S. Holder subject to the reporting requirements
described above fails to supply its correct taxpayer identification number in
the manner required by applicable law or underreports its tax liability, the
Company, its agents or paying agents or a broker may be required to "backup"
withhold at a rate of 31% with respect to payments in respect of interest,
principal (and premium, if any) and gross proceeds from dispositions of Notes.
This backup withholding is not an additional tax and may be credited against
the U.S. Holder's U.S. federal income tax liability, provided that the
required information is furnished to the IRS.
Under current Treasury regulations, backup withholding and information
reporting will not apply to payments made by the Company or any agent thereof
(in its capacity as such) to a Non-U.S. Holder of a Note if such holder has
provided the required certification that it is not a U.S. person as set forth
in clause (a)(4) in paragraph (i) under "Certain Federal Income Tax
Considerations--U.S. Federal Income Taxation of Non-U.S. Holders," or has
otherwise established an exemption (provided that neither the Company nor its
agent has actual knowledge that the holder is a U.S. person or that the
conditions of any exemption are not in fact satisfied).
Payment of the proceeds from the sale of a Note to or through a foreign
office of a broker will not be subject to information reporting or backup
withholding. However, if such broker is a U.S. person, a controlled foreign
corporation for U.S. federal income tax purposes or a foreign person 50
percent or more of whose gross income from all sources for the three-year
period ending with the close of its taxable year preceding the payment was
effectively connected with a U.S. trade or business, information reporting may
apply to such payments. Payment of the proceeds from a sale of a Note to or
through the U.S. office of a broker will be subject to information reporting
and backup withholding unless the holder or beneficial owner certifies as to
its taxpayer identification number or otherwise establishes an exemption from
information reporting and backup withholding.
Under the Final Regulations (described above under "Certain Federal Income
Tax Consequences--U.S. Federal Income Taxation of Non-U.S. Holders"),
generally effective for payments after December 31, 1998, information
reporting and backup withholding will not be required if the Non-U.S. Holder
has (i) furnished documentation establishing eligibility for the Portfolio
Interest Exemption or a Treaty Exemption (provided that, in the case of a sale
of a Note by an individual, Form W-8 (or any substitute) includes a
certification that the individual has not been, and does not intend to be,
present in the United States for 183 days or more days for the
94
<PAGE>
relevant period) or (ii) otherwise establishes an exemption. Certain
additional rules may apply where the Notes are held through a custodian,
nominee, broker, foreign partnership or foreign intermediary.
EACH NON-U.S. HOLDER SHOULD CONSULT THE HOLDER'S TAX ADVISOR AS TO THE
APPLICATION OF THE FINAL REGULATIONS AND THE PROCEDURES THEREUNDER FOR
ESTABLISHING FOREIGN STATUS FOR PURPOSES OF INFORMATION REPORTING AND BACKUP
WITHHOLDING.
95
<PAGE>
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 receive notice from such Participating Broker-
Dealer within 30 days after the consummation of the Exchange Offer of his
status as a Participating Broker-Dealer).
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 (subject to receiving
notice as set forth above), the Company will promptly send additional copies
of this Prospectus and any amendment or supplement to this Prospectus to any
Participating Broker-Dealer that requests such documents in the Letter of
Transmittal.
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 to seek the admission thereof to trading in the
National Association of Securities Dealers Automated Quotation System. 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 Statements. 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.
LEGAL MATTERS
Certain legal matters with regard to the validity of the Exchange Notes will
be passed upon for the Company by Kirkland & Ellis (a partnership including
professional corporations), Chicago, Illinois.
96
<PAGE>
EXPERTS
The consolidated financial statements of Navistar International Corporation
as of October 31, 1997 and 1996 and for each of the three years in the period
ended October 31, 1997, included in this Prospectus and the related financial
statement schedule incorporated by reference from the Company's Annual Report
on Form 10-K for the year ended October 31, 1997 have been audited by Deloitte
& Touche LLP, independent auditors, as stated in their reports appearing
herein and incorporated by reference in the registration statement, and are
included in reliance upon the reports of such firm given their authority as
experts in accounting and auditing.
97
<PAGE>
- -------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED 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. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO EXCHANGE ANY OF THE
SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UN-
LAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION. 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 IN-
FORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF OR
THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE SUCH DATE.
------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Forward-Looking Statements................................................ 4
Statistical and Market Data............................................... 4
Available Information..................................................... 4
Information Incorporated by Reference..................................... 5
Prospectus Summary........................................................ 6
Risk Factors.............................................................. 20
Use of Proceeds........................................................... 25
Capitalization............................................................ 26
Selected Consolidated Financial and Operating Data........................ 27
Management's Discussion and Analysis of Results of Operations and
Financial Condition...................................................... 29
Business.................................................................. 36
Management................................................................ 44
Description of Other Financing Arrangements............................... 45
The Exchange Offer........................................................ 48
Description of the Notes.................................................. 57
Certain Federal Income Tax Considerations................................. 92
Plan of Distribution...................................................... 96
Legal Matters............................................................. 96
Experts................................................................... 97
Index to Financial Statements............................................. F-1
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NAVISTAR INTERNATIONAL
CORPORATION
OFFER TO EXCHANGE ITS SERIES B 7% SENIOR NOTES DUE 2003 FOR ANY AND ALL OF ITS
OUTSTANDING 7% SENIOR NOTES DUE 2003 AND TO EXCHANGE ITS SERIES B 8% SENIOR
SUBORDINATED NOTES DUE 2008 FOR ANY AND ALL OF ITS OUTSTANDING 8% SENIOR
SUBORDINATED NOTES DUE 2008
-----------------
PROSPECTUS
-----------------
MARCH 5, 1998
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Registrant is incorporated under the laws of the State of Delaware.
Section 145 of the General Corporation Law of the State of Delaware provides
that a Delaware corporation may indemnify any persons who are, or are
threatened to be made, parties to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of such corporation), by reason of
the fact that such person is or was an officer, director, employee or agent of
such corporation, or is or was serving at the request of such corporation as a
director, officer, employee or agent of another corporation or enterprise. The
indemnity may include expenses (including attorneys' fees), judgments, fines
and amounts paid in settlement actually and reasonably incurred by such person
in connection with such action, suit or proceedings, provided such person
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the corporation's best interests and, with respect to any criminal
action or proceedings, had no reasonable cause to believe that his conduct was
illegal. A Delaware corporation may also indemnify any persons who are, or are
threatened to be made, a party to any threatened, pending or completed action
or suit by or in the right of the corporation by reason of the fact that such
person was a director, officer, employee or agent of such corporation, or is
or was serving at the request of such corporation as a director, officer,
employee or agent of another corporation or enterprise. The indemnity may
include expenses (including attorneys' fees) actually and reasonably incurred
by such person in connection with the defense or settlement of such action or
suit, provided such person acted in good faith and in a manner he reasonably
believed to be in or not opposed to the corporation's best interests except
that no indemnification is permitted without judicial approval if the officer
or director is adjudged to be liable to the corporation. To the extent that an
officer or director is successful on the merits or otherwise in the defense of
any action referred to above, the corporation must indemnify him against the
expenses which such officer or director has actually and reasonably incurred
in connection with such defense.
Under Article Ninth of the Registrant's Restated Certificate of
Incorporation and Article XII of its By-Laws, as amended, the Registrant shall
indemnify any person who was or is made a party or is threatened to be made
party to or is otherwise involved in any action, suit or proceedings, whether
civil, criminal, administrative or investigative, by reason of the fact that
he or she is or was a director or officer of the Registrant (including any
predecessor corporation of the Registrant), or is or was serving at the
request of the Registrant as a director, officer, employee or agent of another
corporation or of a partnership, joint venture, trust or other enterprise,
including service with respect to employee benefit plans, against all
expenses, liability and loss (including attorneys' fees, judgments, fines,
ERISA excise taxes or penalties and amounts paid in settlement) reasonably
incurred or suffered by such person in connection therewith to the fullest
extent authorized by the General Corporation Law of the State of Delaware.
Such right of indemnification shall be a contract right and shall not be
exclusive of any other right which such directors, officers or representatives
may have or hereafter acquire under any statute, the Registrant's Restated
Certificate of Incorporation, the Registrant's By-Laws, agreement, vote of
stockholders or disinterested directors or otherwise.
In addition, Section 102 of the General Corporation Law of the State of
Delaware allows a corporation to eliminate the personal liability of a
director of a corporation to the corporation or to any of its stockholders for
monetary damages for a breach of fiduciary duty as a director, except in the
case where the director (i) breaches his duty of loyalty, (ii) fails to act in
good faith, engages in intentional misconduct or knowingly violates a law,
(iii) authorized the payment of a dividend or approves a stock repurchase in
violation of the General Corporation Law of the State of Delaware or (iv)
obtains an improper personal benefit. Article Eighth of the Registrant's
Restated Certificate of Incorporation includes a provision which eliminates
directors' personal liability to the full extent permitted under the General
Corporation Law of the State of Delaware.
The Registrant maintains a policy of directors and officers liability
insurance covering certain liabilities incurred by its directors and officers
in connection with the performance of their duties.
II-1
<PAGE>
ITEM 21. EXHIBITS.
The following exhibits are filed pursuant to Item 601 of Regulation S-K:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S> <C>
4.1 Indenture, dated as of February 4, 1998, by and between
the Company and Harris Trust and Savings Bank, as Trustee,
pursuant to which the Series B 7% Senior Notes due 2003
will be issued.
4.2 Form of Series B 7% Senior Notes due 2003 (included in Ex-
hibit 4.1).
4.3 Indenture, dated as of February 4, 1998, by and between
the Company and Harris Trust and Savings Bank, as Trustee,
pursuant to which the Series B 8% Senior Subordinated
Notes due 2008 will be issued.
4.4 Form of Series B 8% Senior Subordinated Notes due 2008
(included in Exhibit 4.3).
4.5 Purchase Agreement, dated as of January 30, 1998, by and
among the Company and J.P. Morgan Securities Inc., Credit
Suisse First Boston Corporation and Chase Securities Inc.,
as Initial Purchasers of the Senior Notes.
4.6 Registration Rights Agreement, dated as of February 4,
1998, by and among the Company and J.P. Morgan Securities
Inc., Credit Suisse First Boston Corporation and Chase Se-
curities Inc., as Initial Purchasers of the Senior Notes.
4.7 Purchase Agreement, dated as of January 30, 1998, by and
among the Company and J.P. Morgan Securities Inc., Credit
Suisse First Boston Corporation, Chase Securities Inc.,
BancAmerica Robertson Stephens and NationsBanc Montgomery
Securities L.L.C., as Initial Purchasers of the Senior
Subordinated Notes.
4.8 Registration Rights Agreement, dated as of May 30, 1997,
by and among the Company and J.P. Morgan Securities Inc.,
Credit Suisse First Boston Corporation, Chase Securities
Inc., BankAmerica Robertson Stephens and NationsBanc Mont-
gomery Securities L.L.C., as Initial Purchasers of the Se-
nior Subordinated Notes.
5.1 Opinion of Kirkland & Ellis regarding legality of securi-
ties being registered.
12.1 Statement regarding computation of ratios.
23.1 Consent of Deloitte & Touche LLP.
23.2 Consent of Kirkland & Ellis--included in Exhibit 5.1.
24.1 Powers of Attorney.
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>
ITEM 22. UNDERTAKINGS.
(a) 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 Section10(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;
II-2
<PAGE>
(iii) To include any material information with respect ot the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement;
provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the
Commission by the registrant pursuant to Section 13 or Section 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference in the
registration statement.
(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 that time shall 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.
(b) 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 the initial bona fide offering
thereof.
(c) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing 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 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 director, 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 and will be governed by the final adjudication of such issue.
(d) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11, or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through
the date of responding to the request.
(e) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-3
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS PRE-EFFECTIVE AMENDMENT NO. 1 TO REGISTRATION STATEMENT
TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN
THE CITY OF CHICAGO, ILLINOIS, AS OF MARCH 5, 1998.
Navistar International Corporation
/s/ Robert C. Lannert
By: _________________________________
Robert C. Lannert
Executive Vice President and
Chief Financial Officer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS PRE-
EFFECTIVE AMENDMENT NO. 1 TO REGISTRATION STATEMENT HAS BEEN SIGNED BY THE
FOLLOWING PERSONS IN THE CAPACITIES AND AS OF THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
* Chairman, President and March 5, 1998
____________________________________ Chief Executive Officer and
John R. Horne Director (Principal
Executive Officer)
/s/ Robert C. Lannert Executive Vice President and March 5, 1998
____________________________________ Chief Financial Officer and
Robert C. Lannert Director(Principal
Financial Officer)
* Vice President and March 5, 1998
____________________________________ Controller (Principal
J. Steven Keate Accounting Officer)
* Director March 5, 1998
____________________________________
William F. Andrews
Director March 5, 1998
____________________________________
Andrew F. Brimmer
* Director March 5, 1998
____________________________________
John D. Correnti
* Director March 5, 1998
____________________________________
William C. Craig
* Director March 5, 1998
____________________________________
Jerry E. Dempsey
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
* Director March 5, 1998
____________________________________
John F. Fielder
* Director March 5, 1998
____________________________________
John T. Grigsby, Jr.
* Director March 5, 1998
____________________________________
Mary Garst
* Director March 5, 1998
____________________________________
Michael N. Hammes
* Director March 5, 1998
____________________________________
Allen J. Krowe
* Director March 5, 1998
____________________________________
Walter J. Laskowski
* Director March 5, 1998
____________________________________
William F. Patient
</TABLE>
*The undersigned, by signing his name hereto, does hereby execute this
Registration Statement on behalf of the above-named officers and/or
directors of the Registrant pursuant to Powers of Attorneys being
concurrently filed with the Commission.
/s/ Robert C. Lannert
__________________________________________
Robert C. Lannert, Attorney-in-Fact
II-5
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S> <C>
4.1 Indenture, dated as of February 4, 1998, by and between the
Company and Harris Trust and Savings Bank, as Trustee, pursu-
ant to which the Series B 7% Senior Notes due 2003 will be is-
sued.
4.2 Form of Series B 7% Senior Notes due 2003 (included in Exhibit
4.1).
4.3 Indenture, dated as of February 4, 1998, by and between the
Company and Harris Trust and Savings Bank, as Trustee, pursu-
ant to which the Series B 8% Senior Subordinated Notes due
2008 will be issued.
4.4 Form of Series B 8% Senior Subordinated Notes due 2008 (in-
cluded in Exhibit 4.3).
4.5 Purchase Agreement, dated as of January 30, 1998, by and among
the Company and J.P. Morgan Securities Inc., Credit Suisse
First Boston Corporation and Chase Securities Inc., as Initial
Purchasers of the Senior Notes.
4.6 Registration Rights Agreement, dated as of February 4, 1998,
by and among the Company and J.P. Morgan Securities Inc.,
Credit Suisse First Boston Corporation and Chase Securities
Inc., as Initial Purchasers of the Senior Notes.
4.7 Purchase Agreement, dated as of January 30, 1998, by and among
the Company and J.P. Morgan Securities Inc., Credit Suisse
First Boston Corporation, Chase Securities Inc., BancAmerica
Robertson Stephens and NationsBanc Montgomery Securities
L.L.C., as Initial Purchasers of the Senior Subordinated
Notes.
4.8 Registration Rights Agreement, dated as of May 30, 1997, by
and among the Company and J.P. Morgan Securities Inc., Credit
Suisse First Boston Corporation, Chase Securities Inc.,
BankAmerica Robertson Stephens and NationsBanc Montgomery Se-
curities L.L.C., as Initial Purchasers of the Senior Subordi-
nated Notes.
5.1 Opinion of Kirkland & Ellis regarding legality of securities
being registered.
12.1 Statement regarding computation of ratios.
23.1 Consent of Deloitte & Touche LLP.
23.2 Consent of Kirkland & Ellis--included in Exhibit 5.1.
24.1 Powers of Attorney.
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>
II-6
<PAGE>
EXHIBIT 4.1
================================================================================
NAVISTAR INTERNATIONAL CORPORATION,
as Issuer
and
HARRIS TRUST AND SAVINGS BANK,
as Trustee
____________________
INDENTURE
Dated as of February 4, 1998
____________________
$100,000,000
7% Senior Notes due 2003
================================================================================
<PAGE>
CROSS-REFERENCE TABLE
---------------------
<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)......................................... N.A.
(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
(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)............................................ 9.3
(a)(1)(A)...................................... 6.5
(a)(1)(B)...................................... 6.4
(a)(2)......................................... N.A.
(b)............................................ 6.6; 6.7, 9.4
(c)............................................ 9.4
(S)317(a)(1)......................................... 6.8
(a)(2)......................................... 6.9
(b)............................................ 2.4
(S)318(a)............................................ 10.1
(c)............................................ 10.1
</TABLE>
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
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.1 Definitions................................................. 1
SECTION 1.2 Incorporation by Reference of Trust Indenture Act........... 26
SECTION 1.3 Rules of Construction....................................... 27
ARTICLE II
THE SECURITIES
SECTION 2.1 Form and Dating............................................. 28
SECTION 2.2 Execution and Authentication................................ 29
SECTION 2.3 Registrar and Paying Agent.................................. 30
SECTION 2.4 Paying Agent To Hold Money in Trust......................... 31
SECTION 2.5 Securityholder Lists........................................ 31
SECTION 2.6 Transfer and Exchange....................................... 31
SECTION 2.7 Replacement Securities...................................... 41
SECTION 2.8 Temporary Securities........................................ 42
SECTION 2.9 Cancellation................................................ 42
SECTION 2.10 Defaulted Interest.......................................... 43
SECTION 2.11 CUSIP or CINS Number........................................ 44
SECTION 2.12 Payments of Interest........................................ 44
ARTICLE III
[RESERVED]
ARTICLE IV
COVENANTS
SECTION 4.1 Payment of Securities....................................... 45
SECTION 4.2 Maintenance of Office or Agency............................. 45
SECTION 4.3 Corporate Existence......................................... 46
SECTION 4.4 Payment of Taxes and Other Claims........................... 46
</TABLE>
-i-
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 4.5 Maintenance of Properties; Insurance; Books and Records;
Compliance with Law...................................... 47
SECTION 4.6 Compliance Certificates.................................... 47
SECTION 4.7 Reports.................................................... 48
SECTION 4.8 Application of Fall Away Covenants......................... 49
SECTION 4.9 Limitation on Incurrence of Indebtedness................... 49
SECTION 4.10 Waiver of Stay, Extension or Usury Laws.................... 52
SECTION 4.11 Change of Control.......................................... 52
SECTION 4.12 Limitation on Transactions with Affiliates................. 54
SECTION 4.13 Limitation on Liens........................................ 55
SECTION 4.14 Limitation on Payment Restrictions Affecting Restricted
Subsidiaries............................................. 56
SECTION 4.15 Limitation on Guarantees by Restricted Subsidiaries........ 57
SECTION 4.16 [Reserved]................................................. 58
SECTION 4.17 Limitation on Preferred Stock of Restricted Subsidiaries... 58
SECTION 4.18 Limitation on Restricted Payments.......................... 58
SECTION 4.19 Limitation on Certain Asset Dispositions................... 61
SECTION 4.20 Limitation on Sale/Leaseback Transactions.................. 63
ARTICLE V
SUCCESSOR CORPORATION
SECTION 5.1 Merger, Consolidation, Etc................................. 64
SECTION 5.2 Successor Entity Substituted............................... 65
ARTICLE VI
DEFAULT AND REMEDIES
SECTION 6.1 Events of Default.......................................... 66
SECTION 6.2 Acceleration............................................... 68
SECTION 6.3 Other Remedies............................................. 68
SECTION 6.4 Waiver of Past Default..................................... 69
SECTION 6.5 Control by Majority........................................ 69
SECTION 6.6 Limitation on Suits........................................ 69
SECTION 6.7 Rights of Holders To Receive Payment....................... 70
SECTION 6.8 Collection Suit by Trustee................................. 70
SECTION 6.9 Trustee May File Proofs of Claim........................... 70
SECTION 6.10 Priorities................................................. 71
SECTION 6.11 Undertaking for Costs...................................... 71
</TABLE>
-ii-
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 6.12 Rights and Remedies Cumulative............................. 72
SECTION 6.13 Delay or Omission Not Waiver............................... 72
SECTION 6.14 Restoration of Rights and Remedies......................... 72
ARTICLE VII
TRUSTEE
SECTION 7.1 Duties of Trustee.......................................... 72
SECTION 7.2 Rights of Trustee.......................................... 74
SECTION 7.3 Individual Rights of Trustee............................... 75
SECTION 7.4 Trustee's Disclaimer....................................... 75
SECTION 7.5 Notice of Defaults......................................... 75
SECTION 7.6 Reports by Trustee to Holders.............................. 76
SECTION 7.7 Compensation and Indemnity................................. 76
SECTION 7.8 Replacement of Trustee..................................... 77
SECTION 7.9 Successor Trustee by Merger, Etc........................... 78
SECTION 7.10 Eligibility; Disqualification.............................. 78
SECTION 7.11 Preferential Collection of Claims Against Company.......... 79
ARTICLE VIII
SATISFACTION AND DISCHARGE OF INDENTURE
SECTION 8.1 Termination of the Company's Obligations................... 79
SECTION 8.2 Legal Defeasance and Covenant Defeasance................... 80
SECTION 8.3 Application of Trust Money................................. 84
SECTION 8.4 Repayment to Company or Subsidiary Guarantors.............. 85
SECTION 8.5 Reinstatement.............................................. 85
ARTICLE IX
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.1 Without Consent of Holders................................. 86
SECTION 9.2 With Consent of Holders.................................... 86
SECTION 9.3 Compliance with Trust Indenture Act........................ 88
SECTION 9.4 Revocation and Effect of Consents.......................... 88
SECTION 9.5 Notation on or Exchange of Securities...................... 89
SECTION 9.6 Trustee To Sign Amendments, Etc............................ 89
</TABLE>
-iii-
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE X
MISCELLANEOUS
SECTION 10.1 Trust Indenture Act Controls.............................. 89
SECTION 10.2 Notices................................................... 90
SECTION 10.3 Communications by Holders with Other Holders.............. 91
SECTION 10.4 Certificate and Opinion of Counsel as to Conditions
Precedent............................................... 91
SECTION 10.5 Statements Required in Certificate and Opinion of Counsel. 91
SECTION 10.6 Rules by Trustee, Paying Agent, Registrar................. 92
SECTION 10.7 Legal Holidays............................................ 92
SECTION 10.8 Governing Law............................................. 92
SECTION 10.9 No Recourse Against Others................................ 92
SECTION 10.10 Successors................................................ 93
SECTION 10.11 Counterparts.............................................. 93
SECTION 10.12 Severability.............................................. 93
SECTION 10.13 Table of Contents, Headings, Etc.......................... 93
SECTION 10.14 No Adverse Interpretation of Other Agreements............. 93
SECTION 10.15 Benefits of Indenture..................................... 93
SECTION 10.16 Independence of Covenants................................. 94
ARTICLE XI
GUARANTEE OF SECURITIES
SECTION 11.1 Subsidiary Guarantee...................................... 1
SECTION 11.2 Execution and Delivery of Subsidiary Guarantee............ 3
SECTION 11.3 Additional Subsidiary Guarantors.......................... 3
SECTION 11.4 Release of a Subsidiary Guarantor......................... 4
SECTION 11.5 Waiver of Subrogation..................................... 4
SECTION 11.6 Agreement to Subordinate.................................. 5
SECTION 11.7 Subrogation............................................... 8
SECTION 11.8 Relative Rights........................................... 8
SECTION 11.9 Trustee to Effectuate Subordination....................... 9
SECTION 11.10 Trustee Not Fiduciary for Holders of Guarantor Senior
Indebtedness............................................ 9
SECTION 11.11 Notice By Subsidiary Guarantor............................ 9
SECTION 11.12 Rights of Trustee......................................... 10
SECTION 11.13 Subsidiary Guarantor May Not Impair Subordination......... 10
</TABLE>
-iv-
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 11.14 Rights of Paying Agent................................... 10
SIGNATURES.............................................................. S-1
</TABLE>
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
-v-
<PAGE>
INDENTURE dated as of February 4, 1998, between NAVISTAR INTERNATIONAL
CORPORATION, a Delaware corporation, as Issuer (the "Company"), and HARRIS TRUST
AND SAVINGS BANK, an Illinois banking corporation, as Trustee (the "Trustee").
The Company has duly authorized the execution and delivery of this
Indenture to provide for the issuance of the 7% Senior Notes due February 1,
2003 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 Restricted Subsidiaries existing at the time such other
Person merged with or into or became a Restricted Subsidiary of such specified
Person or assumed by the specified Person in connection with the acquisition of
assets from such other Person and not incurred by the specified Person in
connection with or in anticipation of (a) such other Person and its Restricted
Subsidiaries being merged with or into or becoming a Restricted 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.
"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.
<PAGE>
-2-
"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.
"Asset Disposition" means any sale, transfer or other disposition
(including, without limitation, by merger, consolidation or sale-and-leaseback
transaction) of (i) shares of Capital Stock of a Restricted Subsidiary of the
Company (other than directors' qualifying shares) or (ii) property or assets of
the Company or any of its Restricted Subsidiaries; provided, that an Asset
Disposition shall not include (a) any sale, transfer or other disposition of
shares of Capital Stock, property or assets by a Restricted Subsidiary of the
Company to the Company or to any Restricted Subsidiary of the Company, (b) any
sale, transfer or other disposition of defaulted receivables for collection or
any sale, transfer or other disposition of property or assets in the ordinary
course of business, (c) any isolated sale, transfer or other disposition that
does not (together with all related sales, transfers or dispositions) involve
aggregate consideration in excess of $5.0 million, (d) the grant in the ordinary
course of business of any license of patents, trademarks, registrations therefor
and other similar intellectual property, (e) the granting of any Lien (or
foreclosure thereon) securing Indebtedness to the extent that such Lien is
granted in compliance with Section 4.13, (f) any sale, transfer or other
disposition constituting a Permitted Investment or Restricted Payment permitted
by Section 4.18, (g) any disposition of assets or property in the ordinary
course of business to the extent such property or assets are obsolete, worn-out
or no longer useful in the Company's or any of its Subsidiaries' business, (h)
the sale, lease, conveyance or disposition or other transfer of all or
substantially all of the assets of the Company as permitted under Article V, (i)
sales of accounts receivable, equipment and related assets (including contract
rights) of the type specified in the definition of "Qualified Securitization
Transaction" to a Securitization Subsidiary for the fair market value thereof,
including cash in an amount at least equal to 90% of the fair market value
thereof as determined in accordance with GAAP, and (j) transfers of accounts
receivable, equipment and related assets (including contract rights) of the type
specified in the definition of "Qualified Securitization Transaction" (or a
fractional undivided interest therein) by a Securitization Subsidiary in a
Qualified Securitization Transaction.
"Asset Sale Offer Trigger Date" has the meaning set forth in Section
4.19.
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
<PAGE>
-3-
spouse of such Person, or any relative of such spouse, who has the same home as
such Person.
"Attributable Indebtedness" in respect of a Sale/Leaseback Transaction
means, as at the time of determination, the present value (discounted at the
interest rate borne by the Senior Notes with respect to the Senior Note
Indenture and at the interest rate borne by the Senior Subordinated Notes with
respect to the Senior Subordinated Note Indenture, compounded annually) of the
total obligations of the lessee for rental payments during the remaining term of
the lease included in such Sale/Leaseback Transaction (including any period for
which such lease has been extended).
"Average Life" means, as of the date of determination, with respect to
any Indebtedness for borrowed money or Preferred Stock, the quotient obtained by
dividing (i) the sum of the products of the number of years from the date of
determination to the dates of each successive scheduled principal or liquidation
value payments of such Indebtedness or Preferred Stock, respectively, and the
amount of such principal or liquidation value payments, by (ii) the sum of all
such principal or liquidation value payments.
"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.
"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.
"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 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
<PAGE>
-4-
amount due under such lease prior to the first date upon which such lease may be
terminated by the lessee without penalty.
"Cedel" means Cedel Bank, societe anonyme.
"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 securities of the Company representing 35% or
more of the combined voting power of the Company's then outstanding Voting
Stock; (ii) the following individuals cease for any reason to constitute more
than two-thirds of the number of directors then serving on the Board of
Directors of the Company: individuals who, on the Issue Date, 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 the Company) whose appointment or election by the Board
of Directors or nomination for election by the Company's stockholders was
approved (A) by the vote of at least a majority of the directors then still in
office or whose appointment, election or nomination was previously so approved
or recommended or (B) with respect to directors whose appointment of election to
the Board of Directors was made by the holders of the Company's nonconvertible
junior preference stock, series A and nonconvertible junior preference stock,
series B, by the holders of such preference stock; (iii) the shareholders 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, other than a merger or
consolidation of the Company in which the holders of the Common Stock of the
Company outstanding immediately prior to the consolidation or merger hold,
directly or indirectly, at least a majority of the Common Stock of the surviving
corporation immediately after such consolidation or merger; (v) the Company or
any Restricted 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 Restricted Subsidiaries of the Company (determined
on a consolidated basis) to any Person (other than a Permitted Joint Venture in
a transaction entered into in compliance with Section 4.18); provided, that
neither (x) the merger of a Restricted Subsidiary of the Company into the
Company or into any Restricted 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 a Securitization Subsidiary in connection with a
Qualified Securitization Transaction, shall be deemed to be a Change of Control.
<PAGE>
-5-
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 Restricted
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 Date" has the meaning provided in Section 4.11.
"Change of Control Offer" has the meaning provided in Section 4.11.
"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 Cash Flow Available For Fixed Charges" of any Person
means for any period the Consolidated Net Income of such Person for such period
increased (to the extent Consolidated Net Income for such period has been
reduced thereby) by the sum of (without duplication) (i) Consolidated Interest
Expense of such Person for such period, plus (ii) Consolidated Tax Expense of
such Person for such period, plus (iii) the consolidated depreciation and
amortization expense included in the income statement of such Person prepared in
accordance with GAAP for such period, plus (iv) any other non-cash charges to
the extent deducted from or reflected in Consolidated Net Income except for any
non-cash charges that represent accruals of, or reserves for, cash disbursements
to be made in any future accounting period, minus (1) any non-cash items
increasing Consolidated Net Income for such period and (2) all cash payments
during such period relating to non-cash charges that were added back in
determining Consolidated Cash Flow Available For Fixed Charges in any prior
period.
<PAGE>
-6-
"Consolidated Cash Flow Ratio" of any Person means for any period the
ratio of (i) Consolidated Cash Flow Available for Fixed Charges of such Person
for such period to (ii) Consolidated Fixed Charges for such period; provided,
however, that all incurrences and repayments of Indebtedness (including the
incurrence giving rise to such calculation and any repayments in connection
therewith) and all dispositions (including discontinued operations) or
acquisition of assets (other than in the ordinary course of business) made
during or after such period and on or prior to the date of determination shall
be given pro forma effect as if they occurred on the first day of such four-
quarter period. Calculations of pro forma amounts in accordance with this
definition shall be done in accordance with Article 11 of Regulation S-X under
the Securities Act or any successor provision.
"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 Qualified Capital 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). In calculating "Consolidated Fixed Charges" for
purposes of determining the denominator (but not the numerator) of this
"Consolidated Fixed Charge Coverage Ratio," (1) interest on Indebtedness
determined on a fluctuating basis as of the date of determination and which will
continue to be so determined thereafter shall be deemed to have accrued at a
fixed rate per annum equal to the rate of interest on such Indebtedness in
effect on the date of determination; (2) if interest on any Indebtedness
actually incurred on the date of determination may be optionally determined at
an interest rate based upon a factor of a prime or similar rate, a eurocurrency
interbank offered rate or other rates, then the interest rate in effect on the
date of determination will be deemed to have been in effect during the relevant
four-quarter period reference; and (3) notwithstanding the foregoing, interest
on Indebtedness determined on a fluctuating basis, to the extent such interest
is covered by agreements relating to interest swap agreements, shall be deemed
to accrue at the rate per annum resulting after giving effect to the operation
of such agreements.
"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 and its Consolidated Subsidiaries 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
<PAGE>
-7-
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; and (e) the interest portion of any deferred
payment obligations for such period.
"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 (other than Restricted Subsidiaries) shall be included only to the extent
of the amount that has been actually received by the referent Person or a
Restricted Subsidiary of the referent Person in the form of cash dividends or
other cash distributions (other than payments in respect of debt obligations),
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 Restricted Subsidiary of the referent Person or is merged into
or consolidated with the referent Person or any Restricted 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 Restricted 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); (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; and (vii) the net income of any Restricted Subsidiary of
such Person which is subject to restrictions which prevent or limit the payment
of dividends or the making of distributions to such Person to the extent of such
restrictions (regardless of any waiver thereof).
"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 Restricted Subsidiaries on a consolidated basis
exceed the sum of (a) the
<PAGE>
-8-
total liabilities of such Person and of its Restricted Subsidiaries on a
consolidated basis, plus (b) any redeemable Preferred Stock of such Person.
"Consolidated Subsidiary" of any Person means a Restricted Subsidiary
which for financial reporting purposes is or, in accordance with GAAP, should
be, accounted for by such Person as a consolidated Subsidiary.
"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) 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.
"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 Restricted Subsidiaries against fluctuations in currency
values to or under which the Company or any of its Restricted Subsidiaries is a
party or a 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).
<PAGE>
-9-
"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.
"Exchange Securities" has the meaning given such term in the
Registration Rights Agreement.
"Exchange Senior Subordinated Notes" means the securities issuable by
the Company in exchange for the Senior Subordinated Notes pursuant to the Senior
Subordinated Note Registration Rights Agreement.
"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 keepwell, 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
<PAGE>
-10-
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 of Senior Indebtedness (including, without limitation, the
Senior Notes) 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 Restricted 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
Restricted Subsidiaries; and (viii) that portion of any Indebtedness which at
the time of incurrence was incurred in violation of the Senior Subordinated Note
Indenture.
"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
<PAGE>
-11-
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
Restricted 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 Restricted Subsidiary at the time it becomes a Restricted
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
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 continently 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 be-
<PAGE>
-12-
ing equal to the greater of its voluntary or involuntary liquidation preference
and its maximum fixed repurchase price, but excluding accrued dividends if any;
(vii) all obligations under Currency Agreements and Interest Rate Protection
Agreements and (viii) all Attributable Indebtedness in respect of Sale/Leaseback
Transactions entered into by such person. 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 he
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.
"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)(vii) and
(viii) or which would have accrued but for any such event.
"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
<PAGE>
-13-
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 Restricted Subsidiary against fluctuations in interest
rates to or under which such Person or any Restricted 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 (other than a guarantee) 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) 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
Navistar Financial Corporation and Navistar International Transportation Corp.
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.
For purposes of the definition of "Unrestricted Subsidiary" and
Section 4.18," (i) "Investment" shall include the portion (proportionate to the
Company's equity interest in such Subsidiary) of the fair market value of the
net assets of any Subsidiary of the Company at the time that such Subsidiary is
designated an Unrestricted Subsidiary; provided, that if such designation is
made in connection with the acquisition of such Subsidiary or the assets owned
by such Subsidiary, the "Investment" in such Subsidiary shall be deemed to be
the consideration paid in connection with such acquisition; provided, further,
that upon a redesignation of such Subsidiary as a Restricted Subsidiary, the
Company shall be deemed to continue to have a permanent "Investment" in an
Unrestricted Subsidiary in an amount (if positive) equal to (x) the Company's
"Investment" in such Subsidiary at the time of such redesignation less (y) the
portion (proportionate to the Company's equity interest in such Subsidiary) of
the fair market value of the net assets of such Subsidiary at the time of such
redesignation and (ii) any property transferred to or from an Unrestricted
Subsidiary shall be valued at its fair market value at the time of such
transfer, in each case as determined in good faith by the Board of Directors.
"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.
<PAGE>
-14-
"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 Restricted 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 Navistar Financial Corporation 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 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 February 1, 2003.
"Moody's" means Moody's Investors Service, Inc. and its successors.
"Net Available Proceeds" from any Asset Disposition by any Person
means cash or readily marketable cash equivalents received (including by way of
sale or discounting of a note, installment receivable or other receivable, but
excluding any other consideration received in the form of assumption by the
acquirer of Indebtedness or other obligations relating to such properties or
assets or received in any other non-cash form) therefrom by such Person,
including any cash received by way of deferred payment or upon the moneti-
<PAGE>
-15-
zation or other disposition of any non-cash consideration (including notes or
other securities) received in connection with such Asset Disposition, net of (i)
all legal, title and recording tax expenses, commissions and other fees and
expenses incurred (including, without limitation, fees and expenses of
accountants, brokers, printers and other similar entities) and all federal,
state, foreign and local taxes required to be accrued as a liability as a
consequence of such Asset Disposition, (ii) all payments made by such Person or
its Restricted Subsidiaries on any Indebtedness which is secured by such assets
in accordance with the terms of any Lien upon or with respect to such assets or
which must by the terms of such Lien, or in order to obtain a necessary consent
to such Asset Disposition or by applicable law, be repaid out of the proceeds
from such Asset Disposition, (iii) all payments made with respect to liabilities
associated with the assets which are the subject of the Asset Disposition,
including, without limitation, trade payables and other accrued liabilities,
(iv) appropriate amounts to be provided by such Person or any Restricted
Subsidiary thereof, as the case may be, as a reserve in accordance with GAAP
against any liabilities associated with such assets and retained by such Person
or any Restricted Subsidiary thereof, as the case may be, after such Asset
Disposition, including, without limitation, liabilities under any
indemnification obligations and severance and other employee termination costs
associated with such Asset Disposition, until such time as such amounts are no
longer reserved or such reserve is no longer necessary (at which time any
remaining amounts will become Net Available Proceeds to be allocated in
accordance with the provisions of clause (iii) of Section 4.19) and (v) all
distributions and other payments, made to minority interest holders, if any, in
Restricted Subsidiaries of such Person or joint ventures as a result of such
Asset Disposition.
"Offer to Purchase" means a written offer (the "Offer") sent by the
Company by first class mail, postage prepaid, to each Holder at its address
appearing in the register for the Securities on the date of the Offer, offering
to purchase up to the principal amount Securities in such Offer at the purchase
price specified in such Offer (as determined pursuant to this Indenture). Unless
otherwise required by applicable law, the Offer shall specify an expiration date
(the "Expiration Date") of the Offer to Purchase which shall be not less than 30
days nor more than 60 days after the date of such Offer and a settlement date
(the "Purchase Date") for purchase of such Securities within five Business Days
after the Expiration Date. The Company shall notify the Trustee at least 15
Business Days (or such shorter period as is acceptable to the Trustee) prior to
the mailing of the Offer of the Company's obligation to make an Offer to
Purchase, and the Offer shall be mailed by the Company or, at the Company's
request, by the Trustee in the name and at the expense of the Company. The Offer
shall contain all the information required by applicable law to be included
therein. The Offer shall contain all instructions and materials necessary to
enable such Holders to tender such Notes pursuant to the Offer to Purchase. The
Offer shall also state:
<PAGE>
-16-
(i) the Section of the Indenture pursuant to which the Offer to
Purchase is being made;
(ii) the Expiration Date and the Purchase Date;
(iii) the aggregate principal amount of the outstanding Securities
offered to be purchased by the Company pursuant to the Offer to Purchase
(including, if less than 100%, the manner by which such amount has been
determined pursuant to the Section of the Indenture requiring the Offer to
Purchase) (the "Purchase Amount");
(iv) the purchase price to be paid by the Company for each $1,000
aggregate principal amount of Securities accepted for payment (as specified
pursuant to this Indenture) (the "Purchase Price");
(v) that the Holder may tender all or any portion of the Notes
registered in the name of such Holder and that any portion of a Securities
tendered must be tendered in an integral multiple of $1,000 principal
amount;
(vi) the place or places where Securities are to be surrendered for
tender pursuant to the Offer to Purchase;
(vii) that interest on any Securities not tendered or tendered but not
purchased by the Company pursuant to the Offer to Purchase will continue to
accrue;
(viii) that on the Purchase Date the Purchase Price will become due and
payable upon each Security being accepted for payment pursuant to the Offer
to Purchase and that interest thereon shall cease to accrue on and after
the Purchase Date;
(ix) that each Holder electing to tender all or any portion of a
Security pursuant to the Offer to Purchase will be required to surrender
such Note at the place or places specified in the Offer prior to the close
of business on the Expiration Date (such Security being, if the Company or
the Trustee so requires, duly endorsed by, or accompanied by a written
instrument of transfer in form satisfactory to the Company and the Trustee
duly executed by the Holder thereof or his attorney duly authorized in
writing);
(x) that Holders will be entitled to withdraw all or any portion of
Securities tendered if the Company (or its Paying Agent) receives, not
later than the close of business on the fifth Business Day next preceding
the Expiration Date, a telegram, telex, facsimile transmission or letter
setting forth the name of the Holder, the principal amount of the Security
the Holder tendered, the certificate number of the
<PAGE>
-17-
Security the Holder tendered and a statement that such Holder is
withdrawing all or a portion of his tender;
(xi) that (a) if Securities in an aggregate principal amount less
than or equal to the Purchase Amount are duly tendered and not withdrawn
pursuant to the Offer to Purchase, the Company shall purchase all such
Securities and (b) if Securities in an aggregate principal amount in excess
of the Purchase Amount are tendered and not withdrawn pursuant to the Offer
to Purchase, the Company shall purchase Securities having an aggregate
principal amount equal to the Purchase Amount on a pro rata basis (with
such adjustments as may be deemed appropriate so that only Securities in
denominations of $1,000 or integral multiples thereof shall be purchased);
and
(xii) that in the case of any Holder whose Security is purchased only
in part, the Company shall execute, and the Trustee shall authenticate and
deliver to the Holder of such Security without service charge, a new
Security or Securities, of any authorized denomination as requested by such
Holder, in all aggregate principal amount equal to and in exchange for the
unpurchased portion of the Security or Securities so tendered.
An Offer to Purchase shall be governed by and effected in accordance
with the provisions above pertaining to any Offer.
"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.
"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 Investments" means (i) Investments in marketable, direct
obligations issued or guaranteed by the United States of America, or any
governmental entity or
<PAGE>
-18-
agency or political subdivision thereof (provided, that the good faith and
credit of the United States of America is pledged in support thereof), maturing
within one year of the date of purchase; (ii) Investments in commercial paper
issued by corporations or financial institutions maturing within 180 days from
the date of the original issue thereof, and rated "P-1" or better by Moody's or
"A-1" or better by S&P or an equivalent rating or better by any other nationally
recognized securities rating agency; (iii) Investments in certificates of
deposit issued or acceptances accepted by or guaranteed by any bank or trust
company organized under the laws of the United States of America or any state
thereof or the District of Columbia, in each case having capital, surplus and
undivided profits totaling more than $500,000,000, maturing within one year of
the date of purchase; (iv) deposits, including interest-bearing deposits,
maintained in the ordinary course of business in banks; (v) any acquisition of
the Capital Stock of any Person; provided, that after giving effect to any such
acquisition such Person shall become a Restricted Subsidiary of the Company;
(vi) trade receivables and prepaid expenses. in each case arising in the
ordinary course of business; provided, that such receivables and prepaid
expenses would be recorded as assets of such Person in accordance with GAAP;
(vii) endorsements for collection or deposit in the ordinary course of business
by such Person of bank drafts and similar negotiable instruments of such other
Person received as payment for ordinary course of business trade receivables;
(viii) any interest swap or hedging obligation with an unaffiliated Person
otherwise permitted by the Indentures (including, without limitation, any
Currency Agreement and any Interest Rate Protection Agreement otherwise
permitted by this Indenture); (ix) Investments received as consideration for an
Asset Disposition in compliance with the provisions of Section 4.19; (x)
Investments for which the sole consideration provided is Qualified Capital Stock
of the Company; provided, that the issuance of such Qualified Capital Stock is
not included in the calculation set forth in clause (3) of the first paragraph
of Section 4.18; (xi) loans and advances to employees made in the ordinary
course of business in an aggregate amount not to exceed $10.0 million at any one
time outstanding; (xii) Investments outstanding on the Issue Date; (xiii)
Investments in the Company or a Wholly Owned Subsidiary; (xiv) Investments in
securities of trade creditors, suppliers or customers received pursuant to any
plan of reorganization or similar arrangement upon bankruptcy or insolvency of
such trade creditor, supplier or customer; (xv) Investments in any Person after
the Issue Date in an aggregate amount not in excess of $20.0 million at any one
time outstanding; and (xvi) Investments in publicly traded equity or publicly
traded Investment Grade debt obligations issued by a corporation (other than the
Company or an affiliate of the Company) organized under the laws of any State of
the United States of America and subject to the reporting requirements of
Section 13 or 15(d) of the Exchange Act in an aggregate amount not in excess of
$50.0 million at any one time outstanding.
"Permitted Joint Venture" means any Person which is, directly or
indirectly, through its subsidiaries or otherwise, engaged principally in any
business in which the
<PAGE>
-19-
Company is engaged, or a reasonably related business, and the Capital Stock of
which is owned by the Company and one or more Persons other than the Company or
any affiliate 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 Restricted 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 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 180 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
Restricted 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 Restricted 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 Com-
<PAGE>
-20-
mercial Code financing statements regarding leases; (k) Liens arising from the
rendering of a final judgment or order against the Company or any Restricted
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 Restricted Subsidiary of the Company or is merged
with or consolidated into the Company or a Restricted 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
Restricted 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 Restricted Subsidiary of the Company; (p) Liens in favor of the Company;
(q) Liens existing on the Issue Date; (r) Liens in favor of custom and revenue
authorities arising as a matter of law to secure payment of nondelinquent
customs duties in connection with the importation of goods; (s) Liens
encumbering customary initial deposits and margin deposits, and other Liens
incurred in the ordinary course of business that are within the general
parameters customary in the industry, in each case securing Indebtedness under
Interest Rate Protection Agreement; (t) Liens encumbering deposits made in the
ordinary course of business to secure nondelinquent obligations arising from
statutory, regulatory, contractual or warranty requirements of the Company or
its Restricted Subsidiaries for which a reserve or other appropriate provision,
if any, as shall be required by GAAP shall have been made; and (u) Liens arising
out of consignment or similar arrangements for the sale of goods entered into by
the Company or any Restricted Subsidiary in the ordinary course of business in
accordance with industry practice.
"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.
"principal" of a debt security means the principal amount of the
security plus, when appropriate, the premium, if any, on the security.
<PAGE>
-21-
"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 any of the Restricted
Subsidiaries of the Company in connection with or reasonably related to a
transaction or series of transactions in which any of the Restricted
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
any of the Restricted Subsidiaries of the Company, 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.
"QIB" means a "qualified institutional buyer" as defined in Rule 144A.
"Rating Agency" means each of (i) S&P and (ii) Moody's.
"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 any Restricted 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.
<PAGE>
-22-
"Registration Rights Agreement" means the Registration Rights
Agreement dated the date hereof among the Company, the J.P. Morgan Securities
Inc., Credit Suisse First Boston Corporation and Chase Securities 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.
"Restricted Subsidiary" means any Subsidiary of the Company that is
not an Unrestricted Subsidiary.
"Rule 144" shall have the meaning set forth in the Registration Rights
Agreement.
"Rule 144A" shall have the meaning set forth in the Registration
Rights Agreement.
"Sale/Leaseback Transaction" means an arrangement relating to property
now owned or hereafter acquired whereby the Company or a Restricted Subsidiary
transfers such property to a person and the Company or a Restricted Subsidiary
leases it from such Person.
"SEC" means the Securities and Exchange Commission.
"Securities" means any series of the 7% Senior Notes due 2003 issued,
authenticated and delivered under this Indenture, as amended or supplemented
from time to time pursuant to the terms of this Indenture, including the
Exchange Securities and Private Exchange Securities.
"Securities Act" means the Securities Act of 1933, as amended.
"Securitization Subsidiary" means a 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
<PAGE>
-23-
the Company or any Restricted Subsidiary of the Company, (ii) is recourse to or
obligates the Company or any Restricted 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 Restricted Subsidiary of the Company,
directly or indirectly, continently 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 Restricted 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 Restricted 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 Restricted 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" means (a) the Securities, including principal,
premium, if any, and interest on the Securities and all other amounts due on or
in connection with the Securities, and (b) any other Indebtedness (including
principal, premium, if any, and interest on such Indebtedness) incurred by the
Company in accordance with the Senior Subordinated Note 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 (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 (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 Senior
Subordinated Notes; (iii) the Senior Subordinated Notes; (iv) any Indebtedness
or any other obligation of the Company to any of the Company's Restricted
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 Restricted
Subsidiaries (including pursuant to the Tax Allocation Agreement); (vi) to the
<PAGE>
-24-
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 Restricted Subsidiaries; and
(viii) that portion of any Indebtedness which at the time of incurrence is
incurred in violation of the Senior Subordinated Note Indenture.
"Senior Subordinated Notes" means the 8% Senior Subordinated Notes due
2008, issued, authenticated and delivered under the Senior Subordinated Note
Indenture, as amended or supplemented from time to time pursuant to its terms.
"Senior Subordinated Note Indenture" means the Senior Subordinated
Note Indenture, dated February 4, 1998, relating to the Senior Subordinated
Notes.
"Senior Subordinated Note Registration Rights Agreement" means the
Registration Rights Agreement dated February 4, 1998 with respect to the Senior
Subordinated Notes among the Company and the parties named therein.
"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).
"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 Restricted Subsidiaries of such Person or by such Person and one or
more Restricted Subsidiaries of such Person or (b) any other Person (other than
a trust formed in connection
<PAGE>
-25-
with a Qualified Securitization Transaction) in which such Person, a Restricted
Subsidiary of such Person or such Person and one or more Restricted 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 Restricted Subsidiary of the Company
that becomes a guarantor of the Securities pursuant to Section 4.15.
"Supply Agreement" means the Amended and Restated Parent's Side
Agreement dated as of November 8, 1994 between the Company and Transportation.
"Tax Allocation Agreement" means the Tax Allocation Agreement among
the Company 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 a Subsidiary 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.
"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.
<PAGE>
-26-
"Unrestricted Subsidiary" means (i) each of Navistar Financial
Corporation, Arrendadora Financiera Navistar S.A. de C.V., Servicios Financieros
Navistar S.A. de C.V., Servicios Financieros NFC, S.A. de C.V., Harbour
Assurance Company of Bermuda Limited, Navistar Acceptance Corporation Limited,
the DealCor Subsidiaries of Transportation that are treated on an equity basis
by the Company on the Issue Date, and their respective Subsidiaries until such
time as it is designated a Restricted Subsidiary pursuant to the second
succeeding sentence, (ii) any Subsidiary of the Company that at the time of
determination shall be designated an Unrestricted Subsidiary by the Board of
Directors in the manner provided below and (iii) any Subsidiary of an
Unrestricted Subsidiary. The Board of Directors may designate any Subsidiary of
the Company (including any newly acquired or newly formed Subsidiary) to be an
Unrestricted Subsidiary unless such Subsidiary or any of its Subsidiaries owns
any Capital Stock of, or holds any Lien on any property of, the Company or any
other Restricted Subsidiary of the Company; provided, that either (A) the
Subsidiary to be so designated has total assets of $1,000 or less or (B) if such
Subsidiary has assets greater than $1,000, such designation would be permitted
under Section 4.18. The Board of Directors may designate any Unrestricted
Subsidiary to be a Restricted Subsidiary; provided, that immediately after
giving effect to such designation (x) if such Unrestricted Subsidiary at such
time has Indebtedness, the Company could incur $1.00 of additional Indebtedness
under clause (i) of Section 4.9 and (y) no Default shall have occurred and be
continuing. Any such designation by the Board of Directors shall be evidenced by
the Company to the Trustee by promptly filing with the Trustee a copy of the
board resolution giving effect to such designation and an officers' certificate
certifying that such designation complied with the foregoing provisions.
"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
Restricted 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:
<PAGE>
-27-
(a) "Commission" means the SEC;
(b) "indenture securities" means the Securities;
(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 basis consistent
with the most recent audited consolidated financial statements of the
Company.
<PAGE>
-28-
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
increase 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,
<PAGE>
-29-
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 Securities 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 issued substantially in the form
of Exhibit A hereto, in certificated form and in the names of the purchasers
thereof (or their nominees), duly executed by the Company and authenticated by
the Trustee as hereinafter provided shall be referred to herein as the "Physical
Securities." Except as provided in Section 2.6(a) owners of beneficial
interests in the Global Securities will not be entitled to receive 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.
<PAGE>
-30-
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 Notes for issue on the
Issue Date in the aggregate principal amount of $100,000,000, (ii) Private
Exchange Securities from time to 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 in
writing 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.
<PAGE>
-31-
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, (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-
<PAGE>
-32-
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 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).
<PAGE>
-33-
(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 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 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
<PAGE>
-34-
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 Securities 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 Security 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,
pro-
<PAGE>
-35-
vided 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 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;
<PAGE>
-36-
(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 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 transferor must deliver a
certificate in the form of Exhibit D hereto, including the
certifications in item 3(a) thereof; or
<PAGE>
-37-
(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 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.
<PAGE>
-38-
(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
Restricted 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:
"THIS NOTE (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A
TRANSACTION EXEMPT FROM REGISTRATION UNDER THE UNITED STATES
SECURITIES ACT OF 1933 (THE "SECURITIES ACT"), AND THIS NOTE MAY
NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF
SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH
PURCHASER OF THIS NOTE IS HEREBY NOTIFIED THAT THE SELLER OF THIS
NOTE MAY BE RELYING ON THE EXEMPTION
<PAGE>
-39-
FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED
BY RULE 144A THEREUNDER."
"THE HOLDER OF THIS NOTE AGREES FOR THE BENEFIT OF THE
COMPANY THAT (A) THIS NOTE MAY BE OFFERED, RESOLD, PLEDGED OR
OTHERWISE TRANSFERRED ONLY (I) INSIDE THE UNITED STATES TO A
PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED
INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES
ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (II)
OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN
ACCORDANCE WITH RULE 904 UNDER THE SECURITIES ACT, (III) PURSUANT
TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT
PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE) OR (IV) PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT,
IN EACH OF CASES (I) THROUGH (IV) IN ACCORDANCE WITH ANY
APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES, AND
(B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO,
NOTIFY ANY PURCHASER OF THIS NOTE FROM IT OF THE RESALE
RESTRICTIONS REFERRED TO 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 DEPOSITARY OR A NOMINEE
OF SUCH SUCCESSOR DEPOSITARY. 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
<PAGE>
-40-
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 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
Indenture, as the Global Securities or Physical Securities surrendered upon
such registration of transfer or exchange.
<PAGE>
-41-
(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.
Notwithstanding anything herein to the contrary, as to any
certification or certificate delivered to the Registrar pursuant to this Section
2.6, the Registrar's duties shall be limited to confirming that any such
certification or certificate delivered to it is in the form of Exhibit D or E
attached hereto. The Registrar shall not be responsible for confirming the
truth or accuracy of any representations made in any such certification or
certificate.
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 Security, 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
<PAGE>
-42-
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
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
<PAGE>
-43-
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 date
for the payment of such Defaulted Interest (herein called a "Special Record
Date"), 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 re-
<PAGE>
-44-
quired 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.
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 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
<PAGE>
-45-
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 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.
<PAGE>
-46-
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 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.
<PAGE>
-47-
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 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 Company during the preceding Fiscal Year has been made under
the supervision of the signing Officers with a
<PAGE>
-48-
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)(v), an Officers' Certificate specifying 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 will file with the
Commission and, within 15 days after it files them with the Commission, file
with the Trustees and mail or cause the Trustees to mail to the Holders at their
addresses as set forth in the register of the Securities 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 stockholders and any
quarterly or other financial reports furnished to its stockholders generally to
be filed with
<PAGE>
-49-
the Trustee and mailed, no later than the date such materials are mailed or made
available to the Company's stockholders, to the Holders at their addresses as
set forth in the register of Securities.
SECTION 4.8 Application of Fall Away Covenants
After the Securities have been assigned an Investment Grade rating by
both Rating Agencies, the Company will no longer be subject to Sections 4.9,
4.12, 4.14, 4.17, 4.18, 4.19, clauses (i)(A) and (iii) of the first paragraph of
Section 4.20 and clause (ii) of Section 5.1; provided, such provisions shall no
longer have application for any purpose of this Indenture.
SECTION 4.9 Limitation on Incurrence of Indebtedness.
The Company will not, and the Company will not cause or permit any of
its Restricted Subsidiaries to incur, directly or indirectly, any Indebtedness,
except:
(i) Indebtedness of the Company, if immediately after giving
effect to the incurrence of such Indebtedness and the receipt and
application of the net proceeds thereof, the Consolidated Cash Flow Ratio
of the Company for the four full fiscal quarters for which quarterly or
annual financial statements are available next preceding the incurrence of
such Indebtedness would be greater than 2.25 to 1.00;
(ii) Indebtedness outstanding on the Issue Date;
(iii) Indebtedness incurred pursuant to the $125.0 million Credit
Agreement dated as of November 26, 1997 among Navistar International
Corporation Mexico, S.A. de C.V., the Company and the lenders listed
therein, as such agreement, in whole or in part, may be amended, renewed,
extended, increased (but only so long as such increase as is permitted
under the terms of the Indenture), substituted, refinanced, restructured,
replaced (including, without limitation, any successive renewals,
extensions, increases, substitutions, refinancings, restructurings,
replacements, supplements, or other modifications of the foregoing);
(iv) Indebtedness owed by the Company to any Wholly-Owned
Subsidiary of the Company or Indebtedness owed by a Subsidiary of the
Company to the Company or a Wholly-Owned Subsidiary of the Company;
provided, that, upon either (I) the transfer or other disposition by such
Wholly-Owned Subsidiary or the Company of any Indebtedness so permitted
under this clause (iv) to a Person other than the Company or another
Wholly-Owned Subsidiary of the Company or (II) the issuance (other than
directors' qualifying shares), sale, transfer or other disposition of
shares
<PAGE>
-50-
of Capital Stock or other ownership interests (including by consolidation
or merger) of such Wholly-Owned Subsidiary to a Person other than the
Company or another such Wholly-Owned Subsidiary of the Company, the
provisions of this clause (iv) shall no longer be applicable to such
Indebtedness and such Indebtedness shall be deemed to have been incurred at
the time of any such issuance, sale, transfer or other disposition, as the
case may be;
(v) Indebtedness of the Company or its Restricted Subsidiaries
under any Interest Rate Protection Agreement or Currency Agreement to the
extent entered into to hedge any other Indebtedness permitted under this
Indenture;
(vi) Acquired Indebtedness to the extent the Company could have
incurred such Indebtedness in accordance with clause (i) above on the date
such Indebtedness became Acquired Indebtedness;
(vii) Indebtedness incurred by the Company or any of its
Restricted Subsidiaries constituting reimbursement obligations with respect
to letters of credit issued in the ordinary course of business, including,
without limitation, letters of credit in response to worker's compensation
claims or self-insurance;
(viii) Indebtedness arising from agreements of the Company or a
Restricted Subsidiary of the Company providing for indemnification,
adjustment of purchase price, earn-out or other similar obligations, in
each case, incurred or assumed in connection with the disposition of any
business, assets or a Subsidiary of the Company;
(ix) Obligations in respect of performance and surety bonds and
completion guarantees provided by the Company or any Restricted Subsidiary
of the Company in the ordinary course of business;
(x) Indebtedness consisting of notes issued to employees, officers
or directors in connection with the redemption or repurchase of Capital
Stock held by such Persons in an aggregate amount not in excess of $10.0
million at any time outstanding;
(xi) Indebtedness consisting of take-or-pay obligations contained
in supply agreements entered into by the Company or its Restricted
Subsidiaries in the ordinary course;
(xii) Guarantees by the Company or any of its Restricted
Subsidiaries of Indebtedness of the Company or any Restricted Subsidiary
permitted to be incurred under
<PAGE>
-51-
another provision of the covenant; provided, that such Guarantee is
incurred at the same time as such other Indebtedness;
(xiii) Indebtedness incurred to renew, extend, refinance or refund
(collectively for purposes of this clause (xiii) to "refund") any
Indebtedness incurred pursuant to clauses (i) or (ii) above; provided, that
(I) such Indebtedness does not exceed the principal amount (or accreted
amount, if less) of Indebtedness so refunded plus the amount of any premium
required to be paid in connection with such refunding pursuant to the terms
of the Indebtedness refunded or the amount of any premium reasonably
determined by the Company as necessary to accomplish such refunding by
means of a tender offer, exchange offer, or privately negotiated
repurchase, plus the expenses of the Company or such Restricted Subsidiary
incurred in connection therewith and (II)(A) in the case of any refunding
of Indebtedness that is pari passu with the Securities, such refunding
Indebtedness is made pari passu with or subordinate in right of payment to
the Securities and, in the case of any refunding of Indebtedness that is
subordinate in right of payment to the Securities, such refunding
Indebtedness is subordinate in right of payment to the Securities on terms
no less favorable to the Holders than those contained in the Indebtedness
being refunded, (B) in either case, the refunding Indebtedness by its
terms, or by the terms of any agreement or instrument pursuant to which
such Indebtedness is issued does not have an Average Life that is less than
the remaining Average Life of the Indebtedness being refunded and does not
permit redemption or other retirement (including pursuant to any required
offer to purchase to be made by the Company or any of its Restricted
Subsidiaries) of such Indebtedness at the option of the holder thereof
prior to the final stated maturity of the Indebtedness being refunded,
other than a redemption or other retirement at the option of the holder of
such Indebtedness (including pursuant to a required offer to purchase made
by the Company or any of its Restricted Subsidiaries) which is conditioned
upon a change of control of the Company pursuant to provisions
substantially similar to those contained in Section 4.11 and (C)
Indebtedness of a Restricted Subsidiary may not be incurred to refund any
Indebtedness of the Company;
(xiv) Indebtedness of the Company under the Securities and the
Senior Subordinated Notes and the Exchange Senior Subordinated Notes;
(xv) the consummation of any Qualified Securitization Transaction;
(xvi) Attributable Indebtedness relating to any Sale/Leaseback
Transaction with respect to the purchase of tooling and related
manufacturing equipment in the ordinary course of business consistent with
past practices; and
<PAGE>
-52-
(xvii) Indebtedness of the Company or its Restricted Subsidiaries,
not otherwise permitted to be incurred pursuant to clauses (i) through
(xvi) above, which, together with any other outstanding Indebtedness
incurred pursuant to this clause (xvii), has an aggregate principal amount
not in excess of $100.0 million at any time outstanding.
After the Securities have been assigned an Investment Grade rating by
both Rating Agencies, and notwithstanding that the Securities may later cease to
have an Investment Grade rating, the Company will not be subject to the
provisions of this Section 4.9; provided, that no Default has occurred and is
continuing at the time the Securities have been assigned such rating.
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 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 (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 commence an Offer to Purchase
(the "Change of Control Offer") all Securities then outstanding, in each case,
at a purchase price equal to 101% of the principal amount thereof, plus accrued
and unpaid interest, if any, to the Purchase Date.
Notice of a Change of Control 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 Purchase 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:
<PAGE>
-53-
(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 Purchase Date;
(c) that any Security not tendered for payment will continue to
accrue interest in accordance with the terms thereof;
(d) that any Security accepted for payment pursuant to the Change of
Control Offer shall cease to accrue interest after the Purchase 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 Purchase 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 Purchase 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 Purchase 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 accepted 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
<PAGE>
-54-
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 Purchase 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, and will not cause or permit any of its
Restricted 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 Restricted
Subsidiary of the Company and that are no less favorable to the Company or such
Restricted Subsidiary of the Company than those that could be obtained in a
comparable arm's-length transaction by the Company or such Restricted Subsidiary
of the Company from an unaffiliated party; provided, that if the Company or any
Restricted Subsidiary of the Company enters into an Affiliate Transaction or
series of Affiliate Transactions involving or having an aggregate value of more
than $20.0 million, a majority of the disinterested members of the Board of
Directors of the Company or a committee thereof shall, prior to the consummation
of such Affiliate Transaction, have determined (as evidenced by a resolution
thereof) that such Affiliate Transaction meets the foregoing standard. The
foregoing restrictions shall not apply to (a) any transaction between Restricted
Subsidiaries of the Company, or between the Company and any Restricted
Subsidiary of the Company if such transaction is not otherwise prohibited by the
terms of the Indentures, (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, (d) Qualified
Securitization Transactions, (e) reasonable fees and compensation paid to and
advances of expenses to and indemnity provided on behalf of officers, directors,
employees or consultants of the Company or any Subsidiary as determined in good
faith by the Com-
<PAGE>
-55-
pany's Board of Directors or senior management; (f) any agreement as in effect
as of the Issue Date or any amendment thereto or any transaction contemplated
thereby (including pursuant to any amendment thereto) or in any replacement
agreement thereto so long as any such management or replacement agreement is not
more disadvantageous to the Holders in any material respect than the original
agreement as in effect on the Issue Date; (g) Restricted Payments permitted by
this Indenture; (h) loans or advances to employees or consultants in the
ordinary course of business and consistent with past practices in an aggregate
amount outstanding at any time not to exceed $10.0 million; (i) joint venture
partners or purchasers or sellers of goods or services, in each case in the
ordinary course of business (including, without limitation, pursuant to joint
venture agreements) and otherwise in compliance with the terms of this Indenture
which are fair to the Company or its Restricted Subsidiaries, in the reasonable
determination of the senior management of the Company, or are on terms at least
as favorable as might reasonably have been obtained at such time from an
unaffiliated party; and (j) any employment or compensation arrangement entered
into by the Company or any of its Restricted Subsidiaries in the ordinary course
of business that is not otherwise prohibited by the Indenture.
After the Securities have been assigned an Investment Grade rating by
both Rating Agencies, and notwithstanding that the Securities may later cease to
have an Investment Grade rating, the Company will not be subject to the
provisions of this Section 4.12; provided, that no Default has occurred and is
continuing at the time the Securities have been assigned such rating.
SECTION 4.13 Limitation on Liens.
The Company will not, and will not cause or permit any of its
Restricted 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 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; (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
subordinated to the Securities, provided that the Securities are secured by
Liens ranking prior to such Liens; (iii) Permitted Liens; (iv) 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 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
<PAGE>
-56-
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 Restricted 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; (v) Liens granted in
connection with any Qualified Securitization Transaction; (vi) Liens arising
from claims of holders of Indebtedness against funds held in a defeasance trust
for the benefit of such holders; and (vii) Liens on property or assets of the
Company or any Restricted Subsidiary securing Indebtedness permitted by this
Indenture not to exceed the greater of (A) $100.0 million and (B) the sum of (1)
85.0% of the total book value of accounts receivable and (2) 50.0% of the total
book value of inventory, in each case as reflected on the Company's most recent
consolidated financial statements prepared in accordance with GAAP.
SECTION 4.14 Limitation on Payment Restrictions Affecting Restricted
Subsidiaries.
The Company will not, and will not cause or permit any of its
Restricted 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 Restricted 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 Restricted Subsidiary of the Company, or make
payments on any Indebtedness owed to the Company or to any Restricted Subsidiary
of the Company; (ii) make loans or advances to the Company or to any Restricted
Subsidiary of the Company; or (iii) transfer any of their respective property or
assets to the Company or to any Restricted 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 Restricted
Subsidiary of the Company; (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; (D)
any agreement in effect on the Issue Date as any such agreement is in effect on
such date; (E) any agreement relating to any Indebtedness incurred by such
Restricted Subsidiary prior to the date on which such Restricted Subsidiary
became a Subsidiary of the Company and outstanding on such date and not incurred
in anticipation or contemplation of becoming a Subsidiary of the Company,
provided, such encumbrance or restriction shall not apply to any assets of the
Company or its Restricted Subsidiaries other than such Restricted Subsidiary;
and (F) the Indentures.
<PAGE>
-57-
After the Securities have been assigned an Investment Grade rating by
both Rating Agencies, and notwithstanding that the Securities may later cease to
have an Investment Grade rating, the Company will not be subject to the
provisions of this Section 4.14; provided, that no Default has occurred and is
continuing at the time the Securities have been assigned such rating.
SECTION 4.15 Limitation on Guarantees by Restricted Subsidiaries.
The Company shall not cause or permit any of its Restricted
Subsidiaries, directly or indirectly, to guarantee the payment of any
Indebtedness of the Company unless such Restricted 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 (a "Subsidiary Guarantee") by such
Restricted Subsidiary of the Company (a "Subsidiary Guarantor"); provided, any
guarantee by a Subsidiary Guarantor of such other Indebtedness (A) (1) (X) is
unsecured or (Y) is secured and (I) in the case of any such guarantee of
Indebtedness of the Company ranking pari passu with the Securities, the
Subsidiary Guarantee is secured equally and ratably with any Liens securing such
guarantee and (II) in the case of any such guarantee of Indebtedness of the
Company subordinated to the Securities, the Subsidiary Guarantee is secured on a
basis ranking prior to the Liens securing such guarantee and (2) (X) in the case
of any such guarantee of Indebtedness of the Company subordinated or junior to
the Securities (whether pursuant to its terms or by operation of law), such
guarantee is subordinated pursuant to a written agreement to the Subsidiary
Guarantee at least to the same extent and in the same manner as such other
Indebtedness is subordinated to the Securities, or (Y) the Subsidiary Guarantee
is not subordinated or junior to any Indebtedness of such Subsidiary Guarantor;
and (B) such Subsidiary Guarantor waives, and agrees 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 it under
such Subsidiary Guarantees. 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 Guarantor's guarantees of all other
Indebtedness of the Company (other than a release resulting from payment under
such Subsidiary Guarantor'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 Guarantor, or all or substantially all of
the assets of such Subsidiary Guarantor, pursuant to a transaction which is in
compliance with all of the terms of this Indenture.
The supplemental indenture shall supplement this Indenture by, among
other things, creating an additional Article XI applicable to such Subsidiary
Guarantor and any other Subsidiary Guarantors in the form set forth in Exhibit B
hereto and, in connection
<PAGE>
-58-
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 XI 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 11.4 of Exhibit B
hereto.
SECTION 4.16 [Reserved]
SECTION 4.17 Limitation on Preferred Stock of Restricted
Subsidiaries.
The Indentures will provide that the Company will not cause or permit
any of its Restricted Subsidiaries to issue any Preferred Stock other than to
the Company or to another Restricted Subsidiary.
After the Securities have been assigned an Investment Grade rating by
both Rating Agencies, and notwithstanding that the Securities may later cease to
have an Investment Grade rating, the Company will not be subject to the
provisions of this Section 4.17; provided, that no Default has occurred and is
continuing at the time the Securities have been assigned such rating.
SECTION 4.18 Limitation on Restricted Payments.
The Company will not, and will not cause or permit any of its
Restricted Subsidiaries to directly or indirectly, (i) declare or pay any
dividend, or make any distribution of any kind or character (whether in cash,
property or securities), in respect of any class of its Capital Stock or to the
holders thereof in their capacity as stockholders, excluding any (x) dividend or
distributions payable solely in shares of its Qualified Capital Stock or in
options, warrants or other rights to acquire its Qualified Capital Stock or (y)
in the case of any Restricted Subsidiary of the Company, dividends or
distributions payable to the Company or a Restricted Subsidiary of the Company;
(ii) purchase, redeem, or otherwise acquire or retire for value shares of
Capital Stock of the Company or a Restricted Subsidiary of the Company, any
securities convertible or exchangeable into shares of Capital Stock of the
Company or a Restricted Subsidiary of the Company or any options, warrants or
rights to purchase or acquire shares of Capital Stock of the Company or a
Restricted Subsidiary of the Company, excluding any such shares of Capital
Stock, options, warrants, rights or securities which are owned by the Company or
a Restricted Subsidiary of the Company; (iii) make any Investment (other than a
Permitted Investment) in, or payment on a guarantee of any obligation of, any
Person; or (iv) redeem, defease, repurchase, retire or
<PAGE>
-59-
otherwise acquire or retire for value, prior to any scheduled maturity,
repayment or sinking fund payment, Indebtedness which is subordinate in right of
payment to the Securities (each of the transactions described in clauses (i)
through (iv) (other than any exception to any such clause) being a "Restricted
Payment") if at the time thereof:
(1) an Event of Default, or an event that with the passing of time or
giving of notice, or both, would constitute an Event of Default, shall have
occurred and be continuing, or
(2) upon giving effect to such Restricted Payment, the Company could
not incur at least $1.00 of additional Indebtedness pursuant to the terms
of this Indenture described in clause (i) of Section 4.9, or
(3) upon giving effect to such Restricted Payment, the aggregate of
all Restricted Payments made on or after the Issue Date exceeds the sum
(without duplication) of: (a) 50% of cumulative Consolidated Net Income of
the Company (or, in the case cumulative Consolidated Net Income of the
Company shall be negative, less 100% of such deficit) for the period
(treated as an accounting period) from the Issue Date through the last day
of the Company's most recently ended fiscal quarter for which financial
statements are available, plus (b) 100% of the aggregate net cash proceeds
received after the Issue Date, including the fair market value of readily
marketable securities from the issuance of Qualified Capital Stock of the
Company and warrants, rights or options on Qualified Capital Stock of the
Company (other than in respect of any such issuance to a Subsidiary of the
Company) and the principal amount of Indebtedness of the Company or a
Subsidiary of the Company that has been converted into or exchanged for
Qualified Capital Stock of the Company which Indebtedness was incurred
after the Issue Date; plus (c) in the case of the disposition or repayment
of any Investment constituting a Restricted Payment made after the Issue
Date, an amount equal to the lesser of the return of capital with respect
to such Investment and the cost of such Investment, in either case, less
the cost of the disposition of such Investment; provided, that at the time
any such Investment is made the Company delivers to the Trustee a
resolution of the Board of Directors of the Company to the effect that, for
purposes of this Section 4.18, such Investment constitutes a Restricted
Payment made after the Issue Date; plus (d) an amount equal to the sum of
(i) the net reduction in Investments in Unrestricted Subsidiaries resulting
from the receipt of dividends, repayments of loans or advances or other
transfers of assets or proceeds from the disposition of Capital Stock or
other distributions or payments, in each case to the Company or any
Restricted Subsidiary from, or with respect to, interests in Unrestricted
Subsidiaries, and (ii) the portion (proportionate to the Company's equity
interest in such Subsidiary) of the fair market value of the net assets of
an Unrestricted Subsidiary at the time such Unrestricted Subsidiary is
designated a
<PAGE>
-60-
Restricted Subsidiary; provided, that the foregoing sum shall not exceed,
in the case of any Unrestricted Subsidiary, the amount of Investments
previously made (and treated as a Restricted Payment) by the Company or any
Restricted Subsidiary in such Unrestricted Subsidiary subsequent to the
Issue Date; plus (e) $25.0 million. For purposes of determining the amount
expended for Restricted Payments under this clause (3), property other than
cash shall be valued at its fair market value.
Notwithstanding the foregoing, the provisions set forth in the
immediately preceding paragraph will not prohibit (i) any dividend on any class
of Capital Stock of the Company or any of its Restricted Subsidiaries paid
within 60 days after the declaration thereof if, on the date when the dividend
was declared, the Company or any of its Restricted Subsidiaries, as the case may
be, could have paid such dividend in accordance with the provisions of this
Indenture, (ii) the renewal, extension, refunding or refinancing of any
Indebtedness otherwise permitted pursuant to the terms of this Indenture
described in clause (xiii) of Section 4.9, (iii) the exchange or conversion of
any Indebtedness of the Company or any of its Restricted Subsidiaries for or
into Qualified Capital Stock of the Company, (iv) any Restricted Payments,
including loans or other advances made pursuant to any employee benefit plans
(including plans for the benefit of directors) or employment agreements or other
compensation arrangements, in each case as approved by the Board of Directors of
the Company in its good faith judgment, (v) so long as no Default or Event of
Default has occurred and is continuing, any Investment made with the proceeds of
a substantially concurrent sale of Qualified Capital Stock of the Company;
provided, that the proceeds of such sale of Qualified Capital Stock shall not be
(and have not been) included in clause (3) of the preceding paragraph, (vi) the
redemption, repurchase, retirement or other acquisition of any Capital Stock of
the Company in exchange for or out of the net cash proceeds of the substantially
concurrent sale (other than to a Restricted Subsidiary of the Company) of
Qualified Capital Stock of the Company; provided, that the proceeds of such sale
of Capital Stock shall not be (and have not been) included in clause (3) of the
preceding paragraph, (vii) so long as no Event of Default has occurred and is
continuing, the redemption, repurchase, retirement or other acquisition of any
Subordinated Indebtedness of the Company in exchange for or out of the net cash
proceeds of the substantially concurrent sale (other than to a Subsidiary of the
Company) of Qualified Capital Stock of the Company; provided, that the proceeds
of such sale of Qualified Capital Stock shall not be (and have not been)
included in clause (3) of the preceding paragraph, (viii) the purchase of Senior
Subordinated Notes pursuant to an Offer to Purchase required by Section 4.19 or
Section 4.11 of the Senior Subordinated Note Indenture; provided, that no such
purchase shall be permitted until all Securities validly tendered pursuant to
the applicable Offer to Purchase in respect of the Securities shall have been
purchased by the Company, (ix) the redemption, retirement or repurchase of the
Company's outstanding Series G Convertible Preferred Stock out of the net
proceeds of the Offerings, (x) Investments in Navistar Financial Corporation
made
<PAGE>
-61-
pursuant to the Support Agreement to the extent required by the Support
Agreement, (xi) the declaration and payment of dividends to holders of any class
of Preferred Stock issued after the Issue Date; provided, that at the time of
the issuance of such Preferred Stock, the Company, after giving pro forma effect
to such issuance, would have been able to incur at least $1.00 of additional
Indebtedness pursuant to the terms of the Indentures described in clause (i) of
Section 4.9; (xii) so long as no Event of Default has occurred and is
continuing, any purchase or redemption or other retirement for value of Capital
Stock of the Company required pursuant to any shareholders agreement, management
agreement or employee stock option agreement in accordance with the provisions
of any such arrangement in an amount not to exceed $10.0 million in the
aggregate; (xiii) repurchases of Capital Stock deemed to occur upon the exercise
of stock options if such Capital Stock represents a portion of the exercise
price thereof; (xiv) payments not to exceed $500,000 per annum in the aggregate
to enable the Company to make payments to holders of its Capital Stock in lieu
of issuance of fractional shares of its Capital Stock; (xv) so long as no Event
of Default has occurred and is continuing, the repurchase of any shares of Class
B Common Stock or Common Stock held by the Supplemental Trust; (xvi) so long as
no Event of Default has occurred and is continuing, the redemption of any stock
purchase rights under a rights plan in an aggregate amount not to exceed $1.0
million; and (xvii) so long as no Event of Default has occurred and is
continuing, Investments in Permitted Joint Ventures and designations of
Restricted Subsidiaries as Unrestricted Subsidiaries; provided, that after
giving pro forma effect to such Investment, the Company could incur at least
$1.00 of additional Indebtedness pursuant to the terms of this Indenture
described in clause (i) of Section 4.9. Each Restricted Payment described in
clauses (i), (iv), (x), (xii) and (xv) of the previous sentence shall be taken
into account (and the Restricted Payments described in the remaining clauses
shall not be taken into account) for purposes of computing the aggregate amount
of all Restricted Payments made pursuant to clause (3) of the preceding
paragraph.
After the Securities have been assigned an Investment Grade rating by
both Rating Agencies, and notwithstanding that the Securities may later cease to
have an Investment Grade rating, the Company will not be subject to the
provisions of this Section 4.18; provided, that no Default has occurred and is
continuing at the time the Securities have been assigned such rating.
SECTION 4.19 Limitation on Certain Asset Dispositions.
The Company will not, and will not cause or permit any of its
Restricted Subsidiaries to, directly or indirectly, make one or more Asset
Dispositions unless: (i) the Company or the Restricted Subsidiary, as the case
may be, receives consideration for such Asset Disposition at least equal to the
fair market value of the assets sold or disposed of (as determined in good faith
by the Company); (ii) not less than 75% of the consideration for the disposition
consists of cash or readily marketable cash equivalents or the assumption of
<PAGE>
-62-
Indebtedness (other than non-recourse Indebtedness or any Indebtedness
subordinated to the Securities) of the Company or such Restricted Subsidiary or
other obligations relating to such assets (and release of the Company or such
Restricted Subsidiary from all liability on the Indebtedness or other
obligations assumed); and (iii) all Net Available Proceeds, less any amounts
invested or committed to be invested within 360 days of such Asset Disposition
in assets related to the business of the Company (including capital expenditures
or the Capital Stock of another Person (other than the Company or any Person
that is a Restricted Subsidiary of the Company immediately prior to such
investment); provided, that immediately after giving effect to any such
investment (and not prior thereto) such Person shall be a Restricted Subsidiary
of the Company), are applied, on or prior to the 360th day after such Asset
Disposition (unless and to the extent that the Company shall determine to make
an Offer to Purchase), either to (A) the permanent reduction and prepayment of
any Indebtedness of the Company (other than Indebtedness which is expressly
subordinate to the applicable issue of Notes) then outstanding (including a
permanent reduction of commitments in respect thereof) or (B) the permanent
reduction and repayment of any Indebtedness of any Restricted Subsidiary of the
Company then outstanding (including a permanent reduction of commitments in
respect thereof). The 361st day after such Asset Disposition shall be deemed to
be the "Asset Sale Offer Trigger Date," and the amount of Net Available Proceeds
from Asset Dispositions otherwise subject to the preceding provisions not so
applied or as to which the Company has determined not to so apply shall be
referred to as the "Unutilized Net Available Proceeds." Within fifteen days
after the Asset Sale Offer Trigger Date, the Company shall make an Offer to
Purchase the outstanding applicable issue of Securities at a purchase price in
cash equal to 100% of their principal amount plus any accrued and unpaid
interest thereon to the Purchase Date. Notwithstanding the foregoing, the
Company may defer making any Offer to Purchase outstanding Securities until
there are aggregate Unutilized Net Available Proceeds equal to or in excess of
$25.0 million (at which time, the entire Unutilized Net Available Proceeds, and
not just the amount in excess of $25.0 million, shall be applied as required
pursuant to this paragraph). Pending application of the Unutilized Net
Available Proceeds pursuant to this covenant, such Unutilized Net Available
Proceeds shall be invested in Permitted Investments of the types described in
clauses (i), (ii) and (iii) of the definition of "Permitted Investments."
If any Indebtedness of the Company or any of its Restricted
Subsidiaries ranking pari passu with the Securities requires that prepayment of,
or an offer to prepay, such Indebtedness be made with any Net Available
Proceeds, the Company may apply such Net Available Proceeds pro rata (based on
the aggregate principal amount of the Securities then outstanding and the
aggregate principal amount (or accreted value, if less) of all such other
Indebtedness then outstanding) to the making of an Offer to Purchase the
Securities in accordance with the foregoing provisions and the prepayment or the
offer to prepay such pari passu Indebtedness. Any remaining Net Available
Proceeds following the completion
<PAGE>
-63-
of the required Offer to Purchase may be used by the Company for any other
purpose (subject to the other provisions of the Indentures) and the amount of
Net Available Proceeds then required to be otherwise applied in accordance with
this covenant shall be reset to zero, subject to any subsequent Asset
Disposition. These provisions will not apply to a transaction consummated in
compliance with Article V.
Notwithstanding the foregoing, the provisions of this covenant shall
not apply to any Sale/Leaseback Transaction with respect to the purchase of
tooling and related manufacturing equipment in the ordinary course of business
consistent with past practices.
In the event that the Company makes an Offer to Purchase the
Securities, the Company shall comply with any applicable securities laws and
regulations, including any applicable requirements of Section 14(e) of, and Rule
14e-1 under, the Exchange Act and any violation of the provisions of this
Indenture relating to such Offer to Purchase occurring as a result of such
compliance shall not be deemed an Event of Default or an event that with the
passing of time or giving of notice, or both, would constitute an Event of
Default.
After the Securities have been assigned an Investment Grade rating by
both Rating Agencies, and notwithstanding that the Securities may later cease to
have an Investment Grade rating, the Company will not be subject to the
provisions of this Section 4.19; provided, that no Default has occurred and is
continuing at the time the Securities have been assigned such rating.
SECTION 4.20 Limitation on Sale/Leaseback Transactions.
The Company shall not, and shall not cause or permit any Restricted
Subsidiary to, enter into any Sale/Leaseback Transaction with respect to any
property unless (i) the Company or such Restricted Subsidiary would be entitled
to (A) incur Indebtedness in an amount equal to the Attributable Indebtedness
with respect to such Sale/Leaseback Transaction pursuant to clause (i) of
Section 4.9 and (B) create a Lien on such property securing such Attributable
Indebtedness without securing the Securities pursuant to Section 4.13 and (ii)
the net proceeds received by the Company or any Restricted Subsidiary in
connection with such Sale/Leaseback Transaction are at least equal to the fair
value (as determined by the Board of Directors) of such property and (iii) the
Company applies the proceeds of such transaction in compliance with Section
4.19. Notwithstanding the foregoing, the provisions of this covenant shall not
prohibit the Company or any Restricted Subsidiary from entering into any
Sale/Leaseback Transaction with respect to the purchase of tooling and related
manufacturing equipment in the ordinary course of business consistent with past
practices.
<PAGE>
-64-
After the Securities have been assigned an Investment Grade rating by
both Rating Agencies, and notwithstanding that the Securities may later cease to
have an Investment Grade rating, the Company will not be subject to the
provisions of this Section 4.20; provided, that no Default has occurred and is
continuing at the time the Securities have been assigned such rating.
ARTICLE V
SUCCESSOR CORPORATION
SECTION 5.1 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 Restricted Subsidiaries to sell, assign, transfer, lease, convey or
otherwise dispose of) all or substantially all of the Company's and its
Restricted Subsidiaries' assets (determined on a consolidated basis for the
Company and its Restricted 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 Restricted Subsidiaries substantially as an entirety or in the
case of a Plan of Liquidation, or Person to which assets of the Company and its
Restricted Subsidiaries have been transferred (x) shall be a corporation,
limited liability company or partnership 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 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) could incur at least $1.00 of additional Indebtedness pursuant to
clause (i) of Section 4.9; (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
<PAGE>
-65-
continuing (subject, in the case of the Securities, to the applicability of
Section 4.8 herein); and (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 and that
all conditions precedent under 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.
Notwithstanding the foregoing, (x) a Restricted 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 Restricted Subsidiary of the Company without complying with
clause (ii) of the above, (y) a series of transactions involving the sale of
Receivables or interests therein by 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 and (z) the
provisions of clause (i) above shall not prohibit the Company or any Restricted
Subsidiary from selling, assigning, transferring, leasing, conveying or
otherwise disposing of all or substantially all of its assets to a Permitted
Joint Venture in a transaction entered into in compliance with Section 4.18.
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 Restricted
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 this 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 this Indenture and the Securities.
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 suc-
<PAGE>
-66-
cessor 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 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) The following are "Events of Default" under this Indenture:
(i) default 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; or
(ii) default in the payment of any installment of interest on the
Securities when due and continuance of such Default for 30 days or more; or
(iii) failure to observe, perform or comply with any of the
provisions described in Section 5.1; or
(iv) default (other than a default set forth in clauses (i), (ii)
and (iii) above) in the performance of, or breach of, any other covenant or
warranty of the Company or of any Restricted Subsidiary in this Indenture
or in the Securities 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
Securities; or
(v) 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
Restricted 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
<PAGE>
-67-
the principal amount of any other such Indebtedness the maturity of which
has been so accelerated, aggregates $20.0 million or more and such
acceleration has not been rescinded or annulled or such Indebtedness
discharged in full within 30 days; or
(vi) 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 $20.0 million, 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
(vii) 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
(viii) 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.
<PAGE>
-68-
(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 clauses (vii) or (viii) of Section 6.1(a)) 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 clauses (vii) or (viii) of Section 6.1(a) 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, 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.
<PAGE>
-69-
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 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
(provided, however, that subject to Section 7.1, the Trustee shall have no duty
or obligation to ascertain whether or not such direction is unduly prejudicial
to such 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;
<PAGE>
-70-
(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;
(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 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
<PAGE>
-71-
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 pay out such money in the following order:
First: to the Trustee for all costs and expenses of collection and for all
other amounts due under Section 7.7;
Second: 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: 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.
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.
<PAGE>
-72-
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 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:
<PAGE>
-73-
(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 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 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.
<PAGE>
-74-
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.
(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) Before the Trustee acts or refrains from acting, it 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.
(f) The Trustee shall not be required to give any bond or surety in
respect of the performance of its powers and duties hereunder.
<PAGE>
-75-
(g) The permissive rights of the Trustee to do things enumerated in
this Indenture shall not be construed as a duty.
(h) The Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction
of any of the Securityholders unless such Securityholders shall have
offered to the Trustee security or indemnity reasonable to it against the
costs, expenses and liabilities that might be incurred by it in compliance
with such request or direction.
(i) Except for (i) a default under Sections 6.1(a)(i) or (ii) hereof,
or (ii) any other event of which the Trustee has "actual knowledge" and
which event, with the giving of notice or the passage of time or both,
would constitute an Event of Default under this Indenture, the Trustee
shall not be deemed to have notice of any default or Event of Default
unless specifically notified in writing of such event by the Company or the
Holders of not less than 25% in aggregate principal amount of the
Securities then outstanding; as used herein, the term "actual knowledge"
means the actual fact or statement of knowing, without any duty to make any
investigation with regard thereto.
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 shall not be responsible for and makes no representation
as to the validity or adequacy of this Indenture or the Securities, it shall not
be accountable for the Company's use of the proceeds from the Securities or for
the use or application of any money received by any Paying Agent other than the
Trustee, and it shall not be responsible for any statement of the Company in
this Indenture or any other document in connection with the sale of the
Securities, 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
<PAGE>
-76-
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 interest 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 Trustee'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.
How-
<PAGE>
-77-
ever, 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 or negligence.
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.
Such lien shall survive the satisfaction and discharge of this Indenture.
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)(vii) or (viii) 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
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.
<PAGE>
-78-
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.
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.
<PAGE>
-79-
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 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 Securities, 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 oc-
<PAGE>
-80-
cur 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 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 and 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 (c)
below 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
<PAGE>
-81-
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 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, 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 in Sections
4.5 through 4.9, 4.11 through 4.20 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 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) (iv), but, except as
specified above, the remainder of this Indenture and such Securities shall be
unaffected thereby.
(d) The following shall be the conditions to application of either
paragraph (b) or paragraph (c) above to the outstanding Securities:
<PAGE>
-82-
(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)(vii) or (viii) is concerned, at any time during the period ending on
the 91st day after the date of such deposit (it being understood 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 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;
<PAGE>
-83-
(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 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
<PAGE>
-84-
(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) 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.
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.
<PAGE>
-85-
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.
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.
<PAGE>
-86-
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;
(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 4.15 and Article XI;
(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
<PAGE>
-87-
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 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; 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 11.4 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 Control Offer in the event of a Change of
Control or waive any default in the performance thereof or modify any of
the provisions or definitions with respect to such offers.
<PAGE>
-88-
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. Notwithstanding 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.
<PAGE>
-89-
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.
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.
<PAGE>
-90-
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:
(a) if to the Company:
Navistar International Corporation
455 North Cityfront Plaza Drive
Chicago, Illinois 60611
Attention: General Counsel
Telecopier Number: (312) 836-2000
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:
Harris Trust and Savings Bank
311 West Monroe, 12th Floor
Chicago, Illinois 60606
Attention: Indenture Trust Division/D.G. Donovan
Telecopier Number: (312) 461-3525
The Company or the Trustee by notice to the other may designate
additional or different addresses for subsequent notices or communications.
<PAGE>
-91-
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.
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).
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:
<PAGE>
-92-
(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.
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
<PAGE>
-93-
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.
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.
<PAGE>
-94-
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>
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed as of the date first written above.
NAVISTAR INTERNATIONAL
CORPORATION,
as Issuer
By:/s/ Thomas M. Hough
----------------------------
Name: Thomas M. Hough
Title: VICE PRESIDENT & TREASURER
HARRIS TRUST AND SAVINGS BANK,
as Trustee
By:/s/ J. BARTOLINI
----------------------------
Name: J. BARTOLINI
Title: VICE PRESIDENT
<PAGE>
Exhibit A
(FORM OF FACE OF SECURITY)
No. [ ] $ [ ]
CUSIP No.
7% SENIOR NOTE DUE 2003
NAVISTAR INTERNATIONAL CORPORATION promises to pay
to [ ] or registered assigns the
principal sum of[ ] Dollars on
February 1, 2003.
Interest Payment Dates: February 1, August 1 and at maturity
Record Dates: January 15, July 15 and 15 days prior to maturity
By:____________________________
Authorized Signature
By:____________________________
Authorized Signature
Dated: February 4, 1998
Certificate of Authentication
This is one of the 7% Senior Notes due 2003 referred to in the within-
mentioned indenture.
HARRIS TRUST AND SAVINGS BANK, as Trustee
By:____________________________
Authorized Signature
A-1
<PAGE>
(FORM OF REVERSE OF SECURITY)
-----------------------------
7% SENIOR NOTE DUE 2003
1. Interest. NAVISTAR INTERNATIONAL 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 7% 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 February 4, 1998 through but excluding the date on which interest is
paid. Interest shall be payable in arrears on February 1, August 1 and at the
stated maturity (each an "Interest Payment Date"), commencing August 1, 1998.
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 7% 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 January 15 or July 15 next
preceding the relevant Interest Payment Date. Holders must surrender Securities
to the 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, HARRIS TRUST AND SAVINGS
BANK (the "Trustee") will act as Paying Agent and Registrar. The Company may
change any Paying Agent, Registrar 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 February 4, 1998 (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
A-2
<PAGE>
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 Restricted
Subsidiaries; transactions by the Company and its Restricted Subsidiaries with
certain Affiliates; the granting of Liens by the Company or any of its
Restricted Subsidiaries; certain guarantees issued by Restricted 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. Sections 4.11 and 4.19 of the Indenture
provide upon the occurrence of a Change of Control and after certain Asset
Disposition, and subject to further limitations contained therein, the Company
shall make an offer to purchase certain amount of 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, 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.
A-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)(vii) or
(viii) of the Indenture 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)(vii) or (viii)
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. 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).
13. 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.
14. 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, 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-4
<PAGE>
15. 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.
16. Authentication. This Security shall not be valid until the
Trustee signs the certificate of authentication on the other side of this
Security.
17. 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).
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.
The Company will furnish to any Securityholder upon written request
and without charge a copy of the Indenture. Requests may be made to:
Navistar International Corporation
455 North Cityfront Plaza Drive
Chicago, Illinois 60611
Telephone: (312) 836-2000
Telecopy: (312) 836-3982
Attention: General Counsel
A-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 all or any part of this Security purchased by the
Company pursuant to Section 4.11 or 4.19 of the Indenture, check the appropriate
Box:
[ ] Section 4.11 [ ] Section 4.19
If you wish to have a portion of this Security purchased by the
Company pursuant to Section 4.11 or 4.19 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 XI
GUARANTEE OF SECURITIES
SECTION 11.1 Subsidiary Guarantee.
Subject to the provisions of this Article XI, 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.
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 pro-
B-1
<PAGE>
ceeding 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 XI, 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 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
B-2
<PAGE>
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) result in the
obligations of each Subsidiary Guarantor under the Subsidiary Guarantees not
constituting such fraudulent transfer or conveyance.
SECTION 11.2 Execution and Delivery of Subsidiary Guarantee.
To further evidence the Subsidiary Guarantee set forth in Section
11.1, 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 11.1 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 11.3 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, 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).
B-3
<PAGE>
SECTION 11.4 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 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 XI 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 11.4. Any Subsidiary Guarantor not so released or the entity
surviving such Subsidiary Guarantor, as applicable, will remain or be liable
under its Subsidiary Guarantee as provided in this Article XI.
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 XI.
Except as set forth in Articles IV and V and this Section 11.4,
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 11.5 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
B-4
<PAGE>
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
forthwith be paid to the Trustee for the 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
11.5 is knowingly made in contemplation of such benefits.
SECTION 11.6 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
B-5
<PAGE>
the Subsidiary 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 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
B-6
<PAGE>
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 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
B-7
<PAGE>
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 Indebtedness 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 11.7 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 XI 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 XI
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 11.8 Relative Rights.
Nothing contained in this Article XI 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 Guarantor 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 XI 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 XI, the Trustee and the holders of the Securities
shall be entitled to rely
B-8
<PAGE>
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 XI.
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 XI.
SECTION 11.9 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 XI and appoints the Trustee his attorney-in-fact for any and all such
purposes.
SECTION 11.10 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 XI or otherwise.
SECTION 11.11 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 7.1 and 7.5 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,
B-9
<PAGE>
the Securityholders, the holders of any Guarantor Senior Indebtedness or the
representative of any such holders.
SECTION 11.12 Rights of Trustee.
The Trustee shall be entitled to all the rights set forth in this
Article XI 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.
SECTION 11.13 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 11.14 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 XI in addition to or in place of the Trustee, provided
that Sections 11.11 and 11.12 shall not apply to such Subsidiary Guarantor if it
acts as Paying Agent.
B-10
<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 XI of the Indenture and this
Subsidiary Guarantee. This Subsidiary Guarantee will become effective in
accordance with Article XI 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 XI 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.
This Subsidiary Guarantee is subject to release upon the terms set
forth in the Indenture.
[NAME OF GUARANTOR]
By:______________________
Name:
Title:
<PAGE>
EXHIBIT D
FORM OF CERTIFICATE OF TRANSFER
Navistar International Corporation
455 North Cityfront Plaza Drive
Chicago, Illinois 60611
Attention:
[Name and Address of Registrar]
Re: 7% Senior Notes due 2003
Reference is hereby made to the Indenture, dated as of February 4,
1998 (the "Indenture"), between Navistar International Corporation (the
"Issuer") and Harris Trust and Savings Bank, 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 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
D-1
<PAGE>
(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 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
D-2
<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 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-3
<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-4
<PAGE>
EXHIBIT E
FORM OF CERTIFICATE OF EXCHANGE
Navistar International Corporation
455 North Cityfront Plaza Drive
Chicago, Illinois 60611
Attention:
[Name and Address of Registrar]
Re: 7% Senior Notes due 2003
(CUSIP _______________)
Reference is hereby made to the Indenture, dated as of February 4,
1998 (the "Indenture"), between Navistar International Corporation (the
"Issuer") and Harris Trust and Savings Bank, 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 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.
E-1
<PAGE>
(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] o 144A Global Security, o Regulation S Global Security, 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.
E-2
<PAGE>
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 4.3
================================================================================
NAVISTAR INTERNATIONAL CORPORATION,
as Issuer
and
HARRIS TRUST AND SAVINGS BANK,
as Trustee
_____________________
INDENTURE
Dated as of February 4, 1998
____________________
$250,000,000
8% Senior Subordinated Notes due 2008
================================================================================
<PAGE>
CROSS-REFERENCE TABLE
---------------------
<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)............................................. N.A.
(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)................................................ 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)............................................. 9.3
(a)(1)(A).......................................... 6.5
(a)(1)(B).......................................... 6.4
(a)(2)............................................. N.A.
(b)................................................ 6.6, 6.7, 9.4
(c)................................................ 9.4
(S)317(a)(1).......................................... 6.8
(a)(2)............................................. 6.9
(b)................................................ 2.4
(S)318(a)............................................. 10.1
(c)................................................ 10.1
</TABLE>
_______________
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
<TABLE>
<CAPTION>
Page
----
ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE
<S> <C>
SECTION 1.1 Definitions.................................................. 1
SECTION 1.2 Incorporation by Reference of Trust Indenture Act............ 27
SECTION 1.3 Rules of Construction........................................ 27
ARTICLE II
THE SECURITIES
SECTION 2.1 Form and Dating.............................................. 28
SECTION 2.2 Execution and Authentication................................. 30
SECTION 2.3 Registrar and Paying Agent................................... 30
SECTION 2.4 Paying Agent To Hold Money in Trust.......................... 31
SECTION 2.5 Securityholder Lists......................................... 31
SECTION 2.6 Transfer and Exchange........................................ 32
SECTION 2.7 Replacement Securities....................................... 42
SECTION 2.8 Temporary Securities......................................... 42
SECTION 2.9 Cancellation................................................. 43
SECTION 2.10 Defaulted Interest........................................... 43
SECTION 2.11 CUSIP or CINS Number......................................... 44
SECTION 2.12 Payments of Interest......................................... 44
ARTICLE III
REDEMPTION
SECTION 3.1 Notices to Trustee........................................... 45
SECTION 3.2 Selection of Securities To Be Redeemed....................... 46
SECTION 3.3 Notice of Redemption......................................... 46
SECTION 3.4 Effect of Notice of Redemption............................... 47
SECTION 3.5 Deposit of Redemption Price.................................. 47
SECTION 3.6 Securities Redeemed In Part.................................. 47
</TABLE>
-i-
<PAGE>
<TABLE>
<CAPTION>
Page
----
ARTICLE IV
COVENANTS
<S> <C>
SECTION 4.1 Payment of Securities........................................ 48
SECTION 4.2 Maintenance of Office or Agency.............................. 48
SECTION 4.3 Corporate Existence.......................................... 49
SECTION 4.4 Payment of Taxes and Other Claims............................ 49
SECTION 4.5 Maintenance of Properties; Insurance; Books and Records;
Compliance with Law........................................ 49
SECTION 4.6 Compliance Certificates...................................... 50
SECTION 4.7 Reports...................................................... 51
SECTION 4.8 [Reserved]................................................... 51
SECTION 4.9 Limitation on Incurrence of Indebtedness..................... 51
SECTION 4.10 Waiver of Stay, Extension or Usury Laws...................... 54
SECTION 4.11 Change of Control............................................ 55
SECTION 4.12 Limitation on Transactions with Affiliates................... 56
SECTION 4.13 Limitation on Liens.......................................... 58
SECTION 4.14 Limitation on Payment Restrictions Affecting Restricted
Subsidiaries............................................... 58
SECTION 4.15 Limitation on Guarantees by Restricted Subsidiaries.......... 59
SECTION 4.16 Limitation on Senior Subordinated Indebtedness............... 60
SECTION 4.17 Limitation on Preferred Stock of Restricted Subsidiaries..... 61
SECTION 4.18 Limitation on Restricted Payments............................ 61
SECTION 4.19 Limitation on Certain Asset Dispositions..................... 64
SECTION 4.20 Limitation on Sale/Leaseback Transactions.................... 65
ARTICLE V
SUCCESSOR CORPORATION
SECTION 5.1 Merger, Consolidation, Etc................................... 66
SECTION 5.2 Successor Entity Substituted................................. 68
ARTICLE VI
DEFAULT AND REMEDIES
SECTION 6.1 Events of Default............................................ 68
SECTION 6.2 Acceleration................................................. 70
SECTION 6.3 Other Remedies............................................... 70
</TABLE>
-ii-
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 6.4 Waiver of Past Default....................................... 71
SECTION 6.5 Control by Majority.......................................... 71
SECTION 6.6 Limitation on Suits.......................................... 71
SECTION 6.7 Rights of Holders To Receive Payment......................... 72
SECTION 6.8 Collection Suit by Trustee................................... 72
SECTION 6.9 Trustee May File Proofs of Claim............................. 72
SECTION 6.10 Priorities................................................... 73
SECTION 6.11 Undertaking for Costs........................................ 73
SECTION 6.12 Rights and Remedies Cumulative............................... 74
SECTION 6.13 Delay or Omission Not Waiver................................. 74
SECTION 6.14 Restoration of Rights and Remedies........................... 74
ARTICLE VII
TRUSTEE
SECTION 7.1 Duties of Trustee............................................ 74
SECTION 7.2 Rights of Trustee............................................ 76
SECTION 7.3 Individual Rights of Trustee................................. 77
SECTION 7.4 Trustee's Disclaimer......................................... 77
SECTION 7.5 Notice of Defaults........................................... 77
SECTION 7.6 Reports by Trustee to Holders................................ 78
SECTION 7.7 Compensation and Indemnity................................... 78
SECTION 7.8 Replacement of Trustee....................................... 79
SECTION 7.9 Successor Trustee by Merger, Etc............................. 80
SECTION 7.10 Eligibility; Disqualification................................ 80
SECTION 7.11 Preferential Collection of Claims Against Company............ 81
ARTICLE VIII
SATISFACTION AND DISCHARGE OF INDENTURE
SECTION 8.1 Termination of the Company's Obligations..................... 81
SECTION 8.2 Legal Defeasance and Covenant Defeasance..................... 82
SECTION 8.3 Application of Trust Money................................... 86
SECTION 8.4 Repayment to Company or Subsidiary Guarantors................ 87
SECTION 8.5 Reinstatement................................................ 87
ARTICLE IX
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.1 Without Consent of Holders................................... 88
</TABLE>
-iii-
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 9.2 With Consent of Holders...................................... 88
SECTION 9.3 Compliance with Trust Indenture Act.......................... 90
SECTION 9.4 Revocation and Effect of Consents............................ 90
SECTION 9.5 Notation on or Exchange of Securities........................ 91
SECTION 9.6 Trustee To Sign Amendments, Etc.............................. 91
ARTICLE X
MISCELLANEOUS
SECTION 10.1 Trust Indenture Act Controls................................. 91
SECTION 10.2 Notices...................................................... 92
SECTION 10.3 Communications by Holders with Other Holders................. 93
SECTION 10.4 Certificate and Opinion of Counsel as to Conditions Precedent. 93
SECTION 10.5 Statements Required in Certificate and Opinion of Counsel.... 93
SECTION 10.6 Rules by Trustee, Paying Agent, Registrar.................... 94
SECTION 10.7 Legal Holidays............................................... 94
SECTION 10.8 GOVERNING LAW................................................ 94
SECTION 10.9 No Recourse Against Others................................... 94
SECTION 10.10 Successors................................................... 95
SECTION 10.11 Counterparts................................................. 95
SECTION 10.12 Severability................................................. 95
SECTION 10.13 Table of Contents, Headings, Etc............................. 95
SECTION 10.14 No Adverse Interpretation of Other Agreements................ 95
SECTION 10.15 Benefits of Indenture........................................ 95
SECTION 10.16 Independence of Covenants.................................... 96
ARTICLE XI
SUBORDINATION OF SECURITIES
SECTION 11.1 Agreement to Subordinate..................................... 96
SECTION 11.2 Subrogation.................................................. 99
SECTION 11.3 Relative Rights.............................................. 100
SECTION 11.4 Trustee To Effectuate Subordination.......................... 100
SECTION 11.5 Trustee Not Fiduciary for Holders of Senior Indebtedness of
the Company................................................ 101
SECTION 11.6 Notice by Company............................................ 101
SECTION 11.7 Rights of Trustee............................................ 101
SECTION 11.8 Company May Not Impair Subordination......................... 101
</TABLE>
-iv-
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 11.9 Rights of Paying Agent....................................... 101
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>
-v-
<PAGE>
INDENTURE dated as of February 4, 1998, between NAVISTAR INTERNATIONAL
CORPORATION, a Delaware corporation, as Issuer (the "Company"), and HARRIS TRUST
AND SAVINGS BANK, an Illinois banking corporation, as Trustee (the "Trustee").
The Company has duly authorized the execution and delivery of this
Indenture to provide for the issuance of the 8% Senior Subordinated Notes due
February 1, 2008 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 Restricted Subsidiaries existing at the time such other
Person merged with or into or became a Restricted Subsidiary of such specified
Person or assumed by the specified Person in connection with the acquisition of
assets from such other Person and not incurred by the specified Person in
connection with or in anticipation of (a) such other Person and its Restricted
Subsidiaries being merged with or into or becoming a Restricted 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.
"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.
<PAGE>
-2-
"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.
"Asset Disposition" means any sale, transfer or other disposition
(including, without limitation, by merger, consolidation or sale-and-leaseback
transaction) of (i) shares of Capital Stock of a Restricted Subsidiary of the
Company (other than directors' qualifying shares) or (ii) property or assets of
the Company or any of its Restricted Subsidiaries; provided that an Asset
Disposition shall not include (a) any sale, transfer or other disposition of
shares of Capital Stock, property or assets by a Restricted Subsidiary of the
Company to the Company or to any Restricted Subsidiary of the Company, (b) any
sale, transfer or other disposition of defaulted receivables for collection or
any sale, transfer or other disposition of property or assets in the ordinary
course of business, (c) any isolated sale, transfer or other disposition that
does not (together with all related sales, transfers or dispositions) involve
aggregate consideration in excess of $5.0 million, (d) the grant in the ordinary
course of business of any license of patents, trademarks, registrations therefor
and other similar intellectual property, (e) the granting of any Lien (or
foreclosure thereon) securing Indebtedness to the extent that such Lien is
granted in compliance with Section 4.13, (f) any sale, transfer or other
disposition constituting a Permitted Investment or Restricted Payment permitted
by Section 4.18, (g) any disposition of assets or property in the ordinary
course of business to the extent such property or assets are obsolete, worn-out
or no longer useful in the Company's or any of its Subsidiaries' business, (h)
the sale, lease, conveyance or disposition or other transfer of all or
substantially all of the assets of the Company as permitted under Article V, (i)
sales of accounts receivable, equipment and related assets (including contract
rights) of the type specified in the definition of "Qualified Securitization
Transaction" to a Securitization Subsidiary for the fair market value thereof,
including cash in an amount at least equal to 90% of the fair market value
thereof as determined in accordance with GAAP, and (j) transfers of accounts
receivable, equipment and related assets (including contract rights) of the type
specified in the definition of "Qualified Securitization Transaction" (or a
fractional undivided interest therein) by a Securitization Subsidiary in a
Qualified Securitization Transaction.
"Asset Sale Offer Trigger Date" has the meaning set forth in Section
4.19.
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
<PAGE>
-3-
spouse of such Person, or any relative of such spouse, who has the same home as
such Person.
"Attributable Indebtedness" in respect of a Sale/Leaseback Transaction
means, as at the time of determination, the present value (discounted at the
interest rate borne by the Senior Notes with respect to the Senior Note
Indenture and at the interest rate borne by the Senior Subordinated Notes with
respect to the Senior Subordinated Note Indenture, compounded annually) of the
total obligations of the lessee for rental payments during the remaining term of
the lease included in such Sale/Leaseback Transaction (including any period for
which such lease has been extended).
"Average Life" means, as of the date of determination, with respect to
any Indebtedness for borrowed money or Preferred Stock, the quotient obtained by
dividing (i) the sum of the products of the number of years from the date of
determination to the dates of each successive scheduled principal or liquidation
value payments of such Indebtedness or Preferred Stock, respectively, and the
amount of such principal or liquidation value payments, by (ii) the sum of all
such principal or liquidation value payments.
"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.
"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.
"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 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
<PAGE>
-4-
amount due under such lease prior to the first date upon which such lease may be
terminated by the lessee without penalty.
"Cedel" means Cedel Bank, societe anonyme.
"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 securities of the Company
representing 35% or more of the combined voting power of the Company's then
outstanding Voting Stock; (ii) the following individuals cease for any reason to
constitute more than two-thirds of the number of directors then serving on the
Board of Directors of the Company: individuals who, on the Issue Date,
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 the Company) whose
appointment or election by the Board of Directors or nomination for election by
the Company's stockholders was approved (A) by the vote of at least a majority
of the directors then still in office or whose appointment, election or
nomination was previously so approved or recommended or (B) with respect to
directors whose appointment of election to the Board of Directors was made by
the holders of the Company's nonconvertible junior preference stock, series A
and nonconvertible junior preference stock, series B, by the holders of such
preference stock; (iii) the shareholders 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, other than a merger or consolidation of the Company in which the
holders of the Common Stock of the Company outstanding immediately prior to the
consolidation or merger hold, directly or indirectly, at least a majority of the
Common Stock of the surviving corporation immediately after such consolidation
or merger; (v) the Company or any Restricted 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 Restricted Subsidiaries of
the Company (determined on a consolidated basis) to any Person (other than a
Permitted Joint Venture in a transaction entered into in compliance with Section
4.18); provided that neither (x) the merger of a Restricted Subsidiary of the
Company into the Company or into any Restricted 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 a Securitization Subsidiary in
connection with a Qualified Securitization Transaction, shall be deemed to be a
Change of Control.
<PAGE>
-5-
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 Restricted
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 Date" has the meaning provided in Section 4.11.
"Change of Control Offer" has the meaning provided in Section 4.11.
"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 Cash Flow Available For Fixed Charges" of any Person
means for any period the Consolidated Net Income of such Person for such period
increased (to the extent Consolidated Net Income for such period has been
reduced thereby) by the sum of (without duplication) (i) Consolidated Interest
Expense of such Person for such period, plus (ii) Consolidated Tax Expense of
such Person for such period, plus (iii) the consolidated depreciation and
amortization expense included in the income statement of such Person prepared in
accordance with GAAP for such period, plus (iv) any other non-cash charges to
the extent deducted from or reflected in Consolidated Net Income except for any
non-cash charges that represent accruals of, or reserves for, cash disbursements
to be made in any future accounting period, minus (1) any non-cash items
increasing Consolidated Net Income for such period and (2) all cash payments
during such period relating to non-cash charges that were added back in
determining Consolidated Cash Flow Available For Fixed Charges in any prior
period.
<PAGE>
-6-
"Consolidated Cash Flow Ratio" of any Person means for any period the
ratio of (i) Consolidated Cash Flow Available for Fixed Charges of such Person
for such period to (ii) Consolidated Fixed Charges for such period; provided,
however, that all incurrences and repayments of Indebtedness (including the
incurrence giving rise to such calculation and any repayments in connection
therewith) and all dispositions (including discontinued operations) or
acquisition of assets (other than in the ordinary course of business) made
during or after such period and on or prior to the date of determination shall
be given pro forma effect as if they occurred on the first day of such four-
quarter period. Calculations of pro forma amounts in accordance with this
definition shall be done in accordance with Article 11 of Regulation S-X under
the Securities Act or any successor provision.
"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 Qualified Capital 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). In calculating "Consolidated Fixed Charges"
for purposes of determining the denominator (but not the numerator) of this
"Consolidated Fixed Charge Coverage Ratio," (1) interest on Indebtedness
determined on a fluctuating basis as of the date of determination and which will
continue to be so determined thereafter shall be deemed to have accrued at a
fixed rate per annum equal to the rate of interest on such Indebtedness in
effect on the date of determination; (2) if interest on any Indebtedness
actually incurred on the date of determination may be optionally determined at
an interest rate based upon a factor of a prime or similar rate, a eurocurrency
interbank offered rate or other rates, then the interest rate in effect on the
date of determination will be deemed to have been in effect during the relevant
four-quarter period reference; and (3) notwithstanding the foregoing, interest
on Indebtedness determined on a fluctuating basis, to the extent such interest
is covered by agreements relating to interest swap agreements, shall be deemed
to accrue at the rate per annum resulting after giving effect to the operation
of such agreements.
"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 and its Consolidated Subsidiaries 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
<PAGE>
-7-
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; and (e) the interest portion of any deferred
payment obligations for such period.
"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 (other than a Restricted Subsidiary) 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 other cash
distributions (other than payments in respect of debt obligations); 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 Restricted Subsidiary of the referent Person or is merged into or
consolidated with the referent Person or any Restricted 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 Restricted 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); (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; and (vii) the net income of any Restricted Subsidiary of
such Person which is subject to restrictions which prevent or limit the payment
of dividends or the making of distributions to such Person to the extent of such
restrictions (regardless of any waiver thereof).
"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 Restricted Subsidiaries on a consolidated basis
exceed the sum of (a) the total liabilities of such Person and of its Restricted
Subsidiaries on a consolidated basis, plus (b) any redeemable Preferred Stock of
such Person.
<PAGE>
-8-
"Consolidated Subsidiary" of any Person means a Restricted Subsidiary
which for financial reporting purposes is or, in accordance with GAAP, should
be, accounted for by such Person as a consolidated Subsidiary.
"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) 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.
"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 Restricted Subsidiaries against fluctuations in currency
values to or under which the Company or any of its Restricted Subsidiaries is a
party or a 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.
"Designated Senior Indebtedness" means (i) so long as any Indebtedness
under the Senior Notes is outstanding, the Senior Notes, (ii) so long as any
Indebtedness under the Mexico Credit Agreement is outstanding, the guarantee of
the Company under the Mexico Credit Agreement and (iii) so long as outstanding,
any other Senior Indebtedness which has at the time of initial issuance an
aggregate outstanding principal amount in excess of $25.0 million which has been
so designated as Designated Senior Indebtedness by the Board of Directors of the
Company at the time of initial issuance in a resolution delivered to the
Trustee.
"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.
<PAGE>
-9-
"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.
"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.
"Exchange Securities" has the meaning given such term in the
Registration Rights Agreement.
"Exchange Senior Notes" means the securities issuable by the Company
in exchange for the Senior Notes pursuant to the Senior Notes Registration
Rights Agreement.
"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 keepwell, to purchase assets, goods, securities or serv-
<PAGE>
-10-
ices, 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 of Senior Indebtedness (including, without limitation, the
Senior Notes) 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 Restricted 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
Restricted Subsidiaries; and (viii) that portion of any Indebtedness which at
the time of incurrence was incurred in violation of this Indenture.
"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
<PAGE>
-11-
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 Restricted 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 Restricted Subsidiary at
the time it becomes a Restricted 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
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, di-
<PAGE>
-12-
rectly 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 continently 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; (vii) all obligations under
Currency Agreements and Interest Rate Protection Agreements and (viii) all
Attributable Indebtedness in respect of Sale/Leaseback Transactions entered into
by such person. 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.
"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 Notes" means the Securities containing a Securities Act
Legend.
"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)(vii) and
(viii) or which would have accrued but for any such event.
"Interest Payment Date," when used with respect to any Security, means
the stated maturity of an installment of interest specified in such Security.
<PAGE>
-13-
"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 Restricted Subsidiary against
fluctuations in interest rates to or under which such Person or any Restricted
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 (other than a guarantee) 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) 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
Navistar Financial Corporation and Navistar International Transportation Corp.
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.
For purposes of the definition of "Unrestricted Subsidiary" and
Section 4.18, (i) "Investment" shall include the portion (proportionate to the
Company's equity interest in such Subsidiary) of the fair market value of the
net assets of any Subsidiary of the Company at the time that such Subsidiary is
designated an Unrestricted Subsidiary; provided that if such designation is made
in connection with the acquisition of such Subsidiary or the assets owned by
such Subsidiary, the "Investment" in such Subsidiary shall be deemed to be the
consideration paid in connection with such acquisition; provided, further, that
upon a redesignation of such Subsidiary as a Restricted Subsidiary, the Company
shall be deemed to continue to have a permanent "Investment" in an Unrestricted
Subsidiary in an amount (if positive) equal to (x) the Company's "Investment" in
such Subsidiary at the time of such redesignation less (y) the portion
(proportionate to the Company's equity interest in such Subsidiary) of the fair
market value of the net assets of such Subsidiary at the time of such
redesignation and (ii) any property transferred to or from an Unrestricted
Subsidiary shall
<PAGE>
-14-
be valued at its fair market value at the time of such transfer, in each case as
determined in good faith by the Board of Directors.
"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 Restricted 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 Navistar Financial Corporation 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 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 February 1, 2008.
<PAGE>
-15-
"Mexico Credit Agreement" means the credit agreement dated November
26, 1997 among Navistar International Corporation Mexico, S.A. de C.V., the
Company and the agents and lenders named therein as amended or supplemented.
"Moody's" means Moody's Investors Service, Inc. and its successors.
"Net Available Proceeds" from any Asset Disposition by any Person
means cash or readily marketable cash equivalents received (including by way of
sale or discounting of a note, installment receivable or other receivable, but
excluding any other consideration received in the form of assumption by the
acquirer of Indebtedness or other obligations relating to such properties or
assets or received in any other non-cash form) therefrom by such Person,
including any cash received by way of deferred payment or upon the monetization
or other disposition of any non-cash consideration (including notes or other
securities) received in connection with such Asset Disposition, net of (i) all
legal, title and recording tax expenses, commissions and other fees and expenses
incurred (including, without limitation, fees and expenses of accountants,
brokers, printers and other similar entities) and all federal, state, foreign
and local taxes required to be accrued as a liability as a consequence of such
Asset Disposition, (ii) all payments made by such Person or its Restricted
Subsidiaries on any Indebtedness which is secured by such assets in accordance
with the terms of any Lien upon or with respect to such assets or which must by
the terms of such Lien, or in order to obtain a necessary consent to such Asset
Disposition or by applicable law, be repaid out of the proceeds from such Asset
Disposition, (iii) all payments made with respect to liabilities associated with
the assets which are the subject of the Asset Disposition, including, without
limitation, trade payables and other accrued liabilities, (iv) appropriate
amounts to be provided by such Person or any Restricted Subsidiary thereof, as
the case may be, as a reserve in accordance with GAAP against any liabilities
associated with such assets and retained by such Person or any Restricted
Subsidiary thereof, as the case may be, after such Asset Disposition, including,
without limitation, liabilities under any indemnification obligations and
severance and other employee termination costs associated with such Asset
Disposition, until such time as such amounts are no longer reserved or such
reserve is no longer necessary (at which time any remaining amounts will become
Net Available Proceeds to be allocated in accordance with the provisions of
clause (iii) of Section 4.19) and (v) all distributions and other payments, made
to minority interest holders, if any, in Restricted Subsidiaries of such Person
or joint ventures as a result of such Asset Disposition.
"Offer to Purchase" means a written offer (the "Offer") sent by the
Company by first class mail, postage prepaid, to each Holder at its address
appearing in the register for the Securities on the date of the Offer, offering
to purchase up to the principal amount of Securities in such Offer at the
purchase price specified in such Offer (as determined pursuant to the relevant
Indenture). Unless otherwise required by applicable law, the Offer
<PAGE>
-16-
shall specify an expiration date (the "Expiration Date") of the Offer to
Purchase which shall be not less than 30 days nor more than 60 days after the
date of such Offer and a settlement date (the "Purchase Date") for purchase of
such Securities within five Business Days after the Expiration Date. The Company
shall notify the Trustee at least 15 Business Days (or such shorter period as is
acceptable to the Trustee) prior to the mailing of the Offer of the Company's
obligation to make an Offer to Purchase, and the Offer shall be mailed by the
Company or, at the Company's request, by the Trustee in the name and at the
expense of the Company. The Offer shall contain all the information required by
applicable law to be included therein. The Offer shall contain all instructions
and materials necessary to enable such Holders to tender such Securities
pursuant to the Offer to Purchase. The Offer shall also state:
(i) the Section of the Indenture pursuant to which the Offer to
Purchase is being made;
(ii) the Expiration Date and the Purchase Date;
(iii) the aggregate principal amount of the outstanding Securities
offered to be purchased by the Company pursuant to the Offer to Purchase
(including, if less than 100%, the manner by which such amount has been
determined pursuant to the Section of this Indenture requiring the Offer to
Purchase) (the "Purchase Amount");
(iv) the purchase price to be paid by the Company for each $1,000
aggregate principal amount of Securities accepted for payment (as specified
pursuant to this Indenture) (the "Purchase Price");
(v) that the Holder may tender all or any portion of the Notes
registered in the name of such Holder and that any portion of a Security
tendered must be tendered in an integral multiple of $1,000 principal
amount;
(vi) the place or places where Securities are to be surrendered for
tender pursuant to the Offer to Purchase;
(vii) that interest on any Security not tendered or tendered but not
purchased by the Company pursuant to the Offer to Purchase will continue to
accrue;
(viii) that on the Purchase Date the Purchase Price will become due
and payable upon each Security being accepted for payment pursuant to the
Offer to Purchase and that interest thereon shall cease to accrue on and
after the Purchase Date;
<PAGE>
-17-
(ix) that each Holder electing to tender all or any portion of a
Security pursuant to the Offer to Purchase will be required to surrender
such Security at the place or places specified in the Offer prior to the
close of business on the Expiration Date (such Security being, if the
Company or the Trustee so requires, duly endorsed by, or accompanied by a
written instrument of transfer in form satisfactory to the Company and the
Trustee duly executed by the Holder thereof or his attorney duly authorized
in writing);
(x) that Holders will be entitled to withdraw all or any portion of
Securities tendered if the Company (or its Paying Agent) receives, not
later than the close of business on the fifth Business Day next preceding
the Expiration Date, a telegram, telex, facsimile transmission or letter
setting forth the name of the Holder, the principal amount of the Note the
Holder tendered, the certificate number of the Security the Holder tendered
and a statement that such Holder is withdrawing all or a portion of his
tender;
(xi) that (a) if Notes in an aggregate principal amount less than or
equal to the Purchase Amount are duly tendered and not withdrawn pursuant
to the Offer to Purchase, the Company shall purchase all such Notes and (b)
if Notes in an aggregate principal amount in excess of the Purchase Amount
are tendered and not withdrawn pursuant to the Offer to Purchase, the
Company shall purchase Notes having an aggregate principal amount equal to
the Purchase Amount on a pro rata basis (with such adjustments as may be
deemed appropriate so that only Notes in denominations of $1,000 or
integral multiples thereof shall be purchased); and
(xii) that in the case of any Holder whose Note is purchased only in
part, the Company shall execute, and the Trustee shall authenticate and
deliver to the Holder of such Note without service charge, a new Note or
Notes, of any authorized denomination as requested by such Holder, in an
aggregate principal amount equal to and in exchange for the unpurchased
portion of the Note or Notes so tendered.
An Offer to Purchase shall be governed by and effected in accordance
with the provisions above pertaining to any Offer.
"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.
<PAGE>
-18-
"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.
"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 Investments" means (i) Investments in marketable, direct
obligations issued or guaranteed by the United States of America, or any
governmental entity or agency or political subdivision thereof (provided that
the good faith and credit of the United States of America is pledged in support
thereof), maturing within one year of the date of purchase; (ii) Investments in
commercial paper issued by corporations or financial institutions maturing
within 180 days from the date of the original issue thereof, and rated "P-1" or
better by Moody's or "A-1" or better by S&P or an equivalent rating or better by
any other nationally recognized securities rating agency; (iii) Investments in
certificates of deposit issued or acceptances accepted by or guaranteed by any
bank or trust company organized under the laws of the United States of America
or any state thereof or the District of Columbia, in each case having capital,
surplus and undivided profits totaling more than $500,000,000, maturing within
one year of the date of purchase; (iv) deposits, including interest-bearing
deposits, maintained in the ordinary course of business in banks; (v) any
acquisition of the Capital Stock of any Person; provided that after giving
effect to any such acquisition such Person shall become a Restricted Subsidiary
of the Company; (vi) trade receivables and prepaid expenses, in each case
arising in the ordinary course of business; provided that such receivables and
prepaid expenses would be recorded as assets of such Person in accordance with
GAAP; (vii) endorsements for collection or deposit in the ordinary course of
business by such Person of bank drafts and similar negotiable instruments of
such other Person received as payment for ordinary course of business trade
receivables; (viii) any interest swap or hedging obligation with an unaffiliated
Person otherwise permitted by this Indenture (including, without limitation, any
Currency Agreement and any Interest Rate Protection Agreement otherwise
permitted by this Indenture); (ix) Investments received as consideration for an
Asset Disposition in compliance with the provisions of Section 4.19; (x)
Investments for which the sole consideration provided is Qualified Capital Stock
of the Company; provided that the issuance of such Qualified Capital Stock is
not included in the calculation set forth in clause (3) of the first paragraph
of Section 4.18; (xi) loans and advances to employees made in the ordinary
course of business in an aggregate amount not to exceed $10.0 million at any one
time outstanding; (xii) Investments outstanding on the Issue Date; (xiii)
Investments in the Company or a Wholly Owned Subsidiary; (xiv) Investments in
securities of trade creditors, suppliers or customers received pursuant to any
plan of reorganization or similar arrangement upon bankruptcy or insolvency
<PAGE>
-19-
of such trade creditor, supplier or customer; (xv) Investments in any Person
after the Issue Date in an aggregate amount not in excess of $20.0 million at
any one time outstanding; and (xvi) Investments in publicly traded equity or
publicly traded Investment Grade debt obligations issued by a corporation (other
than the Company or an affiliate of the Company) organized under the laws of any
State of the United States of America and subject to the reporting requirements
of Section 13 or 15(d) of the Exchange Act in an aggregate amount not in excess
of $50.0 million at any one time outstanding.
"Permitted Joint Venture" means any Person which is, directly or
indirectly, through its subsidiaries or otherwise, engaged principally in any
business in which the Company is engaged, or a reasonably related business, and
the Capital Stock of which is owned by the Company and one or more Persons other
than the Company or any affiliate of the Company.
"Permitted Junior Securities" means (i) Qualified Stock, (ii)
securities of the Company or any other corporation authorized by an order or
decree giving effect, and stating in such order or decree that effect is given,
to the subordination of such securities to the Senior Indebtedness, and made by
a court of competent jurisdiction in a reorganization proceeding under any
applicable bankruptcy, insolvency or other similar law, or (iii) any securities
of the Company provided for a plan of reorganization or readjustment that are
subordinated in right of payment to all Senior Indebtedness that may at the time
be outstanding to substantially the same extent as, or to a greater extent than,
the Securities are subordinated as provided in this Indenture.
"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
<PAGE>
-20-
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 Restricted 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 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 180 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 Restricted 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 Restricted 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 Restricted
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 Restricted Subsidiary of the Company or is merged
with or consolidated into the Company or a Restricted 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
Restricted 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 Restricted Subsidiary of the Company; (p) Liens in favor of the Company;
(q) Liens existing on the Issue Date; (r) Liens in favor of custom and revenue
authorities arising as a matter of law to secure payment of nondelinquent
customs duties in connection with the importation of goods; (s) Liens
encumbering customary initial deposits and margin deposits, and other Liens
incurred in the ordinary course of business that are within the general
parameters customary in the industry, in each case securing Indebtedness under
Interest Rate Protection Agreement; (t) Liens encumbering deposits made in the
ordinary course of business to secure nondelinquent obligations arising from
statutory, regulatory, contractual or warranty requirements of the Company or
its Restricted Subsidiaries for
<PAGE>
-21-
which a reserve or other appropriate provision, if any, as shall be required by
GAAP shall have been made; and (u) Liens arising out of consignment or similar
arrangements for the sale of goods entered into by the Company or any Restricted
Subsidiary in the ordinary course of business in accordance with industry
practice.
"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.
"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 any of the Restricted
Subsidiaries of the Company in connection with or reasonably related to a
transaction or series of transactions in which any of the Restricted
Subsidiaries of the Company 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 any of the Restricted Subsidiaries of the Company, and any
assets related thereto
<PAGE>
-22-
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.
"QIB" means a "qualified institutional buyer" as defined in Rule 144A.
"Rating Agency" means each of (i) S&P and (ii) Moody's.
"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 any Restricted 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, J.P. Morgan Securities Inc.,
Credit Suisse First Boston Corporation, Chase Securities Inc., BancAmerica
Robertson Stephens and NationsBanc Montgomery Securities LLC.
"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.
"Restricted Subsidiary" means any Subsidiary of the Company that is
not an Unrestricted Subsidiary.
"Rule 144" shall have the meaning set forth in the Registration Rights
Agreement.
<PAGE>
-23-
"Rule 144A" shall have the meaning set forth in the Registration
Rights Agreement.
"Sale/Leaseback Transaction" means an arrangement relating to property
now owned or hereafter acquired whereby the Company or a Restricted Subsidiary
transfers such property to a person and the Company or a Restricted Subsidiary
leases it from such Person.
"SEC" means the Securities and Exchange Commission.
"Securities" means any series of the 8% Senior Subordinated Notes due
2008 issued, authenticated and delivered under this Indenture, as amended or
supplemented from time to time pursuant to the terms of this Indenture,
including the Exchange Securities and Private Exchange Securities.
"Securities Act" means the Securities Act of 1933, as amended.
"Securitization Subsidiary" means a 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
Restricted Subsidiary of the Company, (ii) is recourse to or obligates the
Company or any Restricted 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 Restricted Subsidiary of the Company, directly or
indirectly, continently 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 Restricted 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 Restricted 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 Restricted 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
<PAGE>
-24-
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) the Senior Notes,
including principal, premium, if any, and interest on the Senior Notes and all
other amounts due on or in connection with the Senior Notes, and (b) any other
Indebtedness (including principal, premium, if any, and interest on such
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 (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 (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 Restricted 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 Restricted 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
Restricted Subsidiaries; and (viii) that portion of any Indebtedness which at
the time of incurrence is incurred in violation of this Indenture.
"Senior Note Indenture" means the Senior Note Indenture, dated
February 4, 1998, relating to the Senior Notes.
"Senior Notes" means the 7% Senior Notes due 2003 issued,
authenticated and delivered under the Senior Note Indenture, as amended or
supplemented from time to time pursuant to its terms.
"Senior Notes Registration Rights Agreement" means the Registration
Rights Agreement dated February 4, 1998 with respect to the Senior Notes among
the Company and the parties named therein.
<PAGE>
-25-
"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).
"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 Restricted Subsidiaries of such Person or by such Person and one or
more Restricted 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 Restricted Subsidiary of such Person or such Person and one
or more Restricted 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 Restricted Subsidiary of the Company
that becomes a guarantor of the Securities pursuant to Section 4.15.
"Supply Agreement" means the Amended and Restated Parent's Side
Agreement dated as of November 8, 1994 between the Company and Transportation.
"Tax Allocation Agreement" means the Tax Allocation Agreement among
the Company and its subsidiaries, effective as of October 1, 1981, as it has
been and may be amended and/or supplemented from time to time.
"Transportation" means Navistar International Transportation Corp., a
Delaware corporation and a subsidiary of the Company.
"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.
<PAGE>
-26-
"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.
"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.
"Unrestricted Subsidiary" means (i) each of Navistar Financial
Corporation, Arrendadora Financiera Navistar S.A. de C.V., Servicios Financieros
Navistar S.A. de C.V., Servicios Financieros NFC, S.A. de C.V., Harbour
Assurance Company of Bermuda Limited, Navistar Acceptance Corporation Limited,
the DealCor Subsidiaries of Transportation that are treated on an equity basis
by the Company on the Issue Date, and their respective Subsidiaries until such
time as it is designated a Restricted Subsidiary pursuant to the second
succeeding sentence, (ii) any Subsidiary of the Company that at the time of
determination shall be designated an Unrestricted Subsidiary by the Board of
Directors in the manner provided below and (iii) any Subsidiary of an
Unrestricted Subsidiary. The Board of Directors may designate any Subsidiary of
the Company (including any newly acquired or newly formed Subsidiary) to be an
Unrestricted Subsidiary unless such Subsidiary or any of its Subsidiaries owns
any Capital Stock of, or holds any Lien on any property of, the Company or any
other Restricted Subsidiary of the Company; provided that either (A) the
Subsidiary to be so designated has total assets of $1,000 or less or (B) if such
Subsidiary has assets greater than $1,000, such designation would be permitted
under Section 4.18. The Board of Directors may designate any Unrestricted
Subsidiary to be a Restricted Subsidiary; provided that immediately after giving
effect to such designation (x) if such Unrestricted Subsidiary at such time has
Indebtedness, the Company could incur $1.00 of additional Indebtedness under
clause (i) of Section 4.9 and (y) no Default shall have occurred and be
continuing. Any such designation by the Board of Directors shall be evidenced
by the Company to the Trustee by promptly filing with the Trustee a copy of the
board resolu-
<PAGE>
-27-
tion giving effect to such designation and an officers' certificate certifying
that such designation complied with the foregoing provisions.
"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
Restricted 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;
(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;
<PAGE>
-28-
(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 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.
<PAGE>
-29-
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
increase or decrease in the principal amount of outstanding Notes 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 issued substantially in the form
of Exhibit A hereto, in certificated form and in the names of the purchasers
thereof (or their nominees), duly executed by the Company and authenticated by
the Trustee as hereinafter provided shall be referred to herein as the "Physical
Securities." Except as provided in Section 2.6(a) owners of beneficial
interests in the Global Securities will not be entitled to receive Physical
Securities.
<PAGE>
-30-
(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 $250,000,000, (ii) Private
Exchange Securities from time to 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 $250,000,000 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
<PAGE>
-31-
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 in
writing 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.
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.
<PAGE>
-32-
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, (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 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
<PAGE>
-33-
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 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
<PAGE>
-34-
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 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 Secu
<PAGE>
-35-
rities 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 Security
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 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.
<PAGE>
-36-
(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 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,
<PAGE>
-37-
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 transferor 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
<PAGE>
-38-
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.
(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
Restricted 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 authent-
<PAGE>
-39-
icate 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:
THIS NOTE (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A
TRANSACTION EXEMPT FROM REGISTRATION UNDER THE UNITED STATES
SECURITIES ACT OF 1933 (THE "SECURITIES ACT"), AND THIS NOTE MAY
NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF
SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH
PURCHASER OF THIS NOTE IS HEREBY NOTIFIED THAT THE SELLER OF THIS
NOTE MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF
SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER.
THE HOLDER OF THIS NOTE AGREES FOR THE BENEFIT OF THE COMPANY
THAT (A) THIS NOTE MAY BE OFFERED, RESOLD, PLEDGED OR OTHERWISE
TRANSFERRED, ONLY (I) INSIDE THE UNITED STATES TO A PERSON WHOM
THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER
(AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (II) OUTSIDE
THE UNITED STATES IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH
RULE 904 UNDER THE SECURITIES ACT, (III) PURSUANT TO AN EXEMPTION
FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144
THEREUNDER (IF AVAILABLE) OR (IV) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT IN EACH OF CASES
(I) THROUGH (IV) IN ACCORDANCE WITH ANY APPLICABLE SECURITIES
LAWS OF ANY STATE OF THE UNITED STATES, AND (B) THE HOLDER WILL,
AND EACH SUBSEQUENT HOLDER IS REQUIRED TO NOTIFY ANY PURCHASER OF
THIS NOTE FROM IT OF THE RESALE RESTRICTIONS REFERRED TO IN (A)
ABOVE.
<PAGE>
-40-
(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 DEPOSITARY OR A NOMINEE
OF SUCH SUCCESSOR DEPOSITARY. 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 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.
<PAGE>
-41-
(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 Indenture, 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.
Notwithstanding anything herein to the contrary, as to any
certification or certificate delivered to the Registrar pursuant to this Section
2.6, the Registrar's duties shall be limited to confirming that any such
certification or certificate delivered to it is in the form of Exhibit D or E
attached hereto. The Registrar shall not be responsible for confirming the
truth or accuracy of any representations made in any such certification or
certificate.
<PAGE>
-42-
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 Security, 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.
<PAGE>
-43-
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
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 date
for the payment of such Defaulted Interest (herein called a "Special Record
Date"), 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
<PAGE>
-44-
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.
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
<PAGE>
-45-
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 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
REDEMPTION
SECTION 3.1 Notices to Trustee.
If the Company elects to redeem Securities pursuant to paragraph 5 of
the Securities, they shall notify the Trustee in writing of the redemption date,
the principal amount of Securities to be redeemed and the paragraph of the
Securities pursuant to which the redemption will occur. The Company shall give
each notice to the Trustee provided for in this Section not less than 20 not
more than 60 days before the redemption date unless the Trustee consents to a
shorter period. Such notice shall be accompanied by an Officers' Certificate
from the Company to the effect that such redemption will comply with the
provisions herein.
<PAGE>
-46-
SECTION 3.2 Selection of Securities To Be Redeemed.
If fewer than all the Securities are to be redeemed, the Trustee shall
select the Securities to be redeemed pro rata or by lot or by a method that
complies with applicable legal and securities exchange requirements, if any, and
that the Trustee considers fair and appropriate and in accordance with methods
generally used at the time of selection by fiduciaries in similar circumstances.
The Trustee shall make the selection from outstanding Securities not previously
called for redemption. The Trustee may select for redemption portions of the
principal of Securities that have denominations larger than $1,000. Securities
and portions of them the Trustee selects shall be in amounts of $1,000 or a
whole multiple of $1,000. Provisions of this Indenture that apply to Securities
called for redemption also apply to portions of Securities called for
redemption. The Trustee shall notify the Company promptly of the Securities or
portions of Securities to be redeemed. In the event the Company is required to
make an offer to repurchase Securities pursuant to Sections or and the
amount available for such offer is not evenly divisible by $1,000, the Trustee
shall promptly refund to the Company any remaining funds, which in no event will
exceed $1,000.
SECTION 3.3 Notice of Redemption.
At least 20 days but not more than 60 days before a date for
redemption of Securities, the Company shall mail a notice of redemption by
first-class mail to the registered address appearing in the Security Register of
each Holder of Securities to be redeemed. The notice shall identify the
Securities (including CUSIP numbers, if any) to be redeemed and shall state:
(1) the redemption date;
(2) the redemption price;
(3) the name and address of the Paying Agent;
(4) that Securities called for redemption must be surrendered to
the Paying Agent to collect the redemption price;
(5) if fewer than all the outstanding Securities are to be
redeemed, the identification and principal amounts of the particular
Securities to be redeemed;
(6) that, unless the Company defaults in making such redemption
payment, interest on Securities (or portion thereof) called for redemption
ceases to accrue on and after the redemption date;
<PAGE>
-47-
(7) the paragraph of the Securities pursuant to which the
Securities called for redemption are being redeemed;
(8) the CUSIP number, if any, printed on the Securities being
redeemed; and
(9) that no representation is made as to the correctness or
accuracy of the CUSIP number, if any, listed in such notice or printed on
the Securities.
At the Company's request, the Trustee shall give the notice of
redemption in the Company's name and at the Company's expense. In such event,
the Company shall provide the Trustee with the information required by this
Section.
SECTION 3.4 Effect of Notice of Redemption.
Once notice of redemption is mailed, Securities called for redemption
become due and payable on the redemption date and at the redemption price stated
in the notice. Upon surrender to the Paying Agent, such Securities shall be
paid at the redemption price stated in the notice, plus accrued interest to the
redemption date. Such notice if mailed in the manner herein provided shall be
conclusively presumed to have been given, whether or not the Holder receives
such notice. Failure to give notice or any defect in the notice to any Holder
shall not affect the validity of the notice to any other Holder. On and after
the redemption date, interest will cease to accrue on Securities or portions
thereof called for redemption.
SECTION 3.5 Deposit of Redemption Price.
Prior to 11:00 a.m. (New York City time) on the redemption date, the
Company shall deposit with the Trustee or Paying Agent (or, if the Company or a
Subsidiary is the Paying Agent, shall segregate and hold in trust) money
sufficient to pay the redemption price of and accrued interest (if any) on all
Securities or portions thereof to be redeemed on that date other than Securities
or portions of Securities called for redemption which have been delivered by the
Company to the Trustee for cancellation.
SECTION 3.6 Securities Redeemed In Part.
Upon surrender of a Security that is redeemed in part (with, if the
Company or the Trustee so requires, due endorsement by, or a written instrument
of transfer in form satisfactory to the Company and the Trustee duly executed
by, the Holder thereof or his attorney duly authorized in writing), the Company
shall execute, and the Trustee shall authenticate and deliver to the Holder of
such Security without service charge, a new Security or Securities of any
authorized denomination as requested by such Holder, in aggregate
<PAGE>
-48-
principal amount equal to and in exchange for the unredeemed portion of the
principal of the Security so surrendered.
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 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.
<PAGE>
-49-
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 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 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
discontinu-
<PAGE>
-50-
ance 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 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 independ-
<PAGE>
-51-
ent 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)(v), an Officers' Certificate specifying 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 will file with the
Commission and, within 15 days after it files them with the Commission, file
with the Trustees and mail or cause the Trustees to mail to the Holders at their
addresses as set forth in the register of the Securities, 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 stockholders and any
quarterly or other financial reports furnished to its stockholders 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 stockholders, to the Holders at their
addresses as set forth in the register of Securities.
SECTION 4.8 [RESERVED].
SECTION 4.9 Limitation on Incurrence of Indebtedness.
The Company will not, and will not cause or permit any of its
Restricted Subsidiaries to incur, directly or indirectly, any Indebtedness,
except:
<PAGE>
-52-
(i) Indebtedness of the Company, if immediately after giving effect
to the incurrence of such Indebtedness and the receipt and application of
the net proceeds thereof, the Consolidated Cash Flow Ratio of the Company
for the four full fiscal quarters for which quarterly or annual financial
statements are available next preceding the incurrence of such Indebtedness
would be greater than 2.25 to 1.00;
(ii) Indebtedness outstanding on the Issue Date;
(iii) Indebtedness incurred pursuant to the $125.0 million Credit
Agreement dated as of November 26, 1997 among Navistar International
Corporation Mexico, S.A. de C.V., the Company and the lenders listed
therein, as such agreement, in whole or in part, may be amended, renewed,
extended, increased (but only so long as such increase as is permitted
under the terms of this Indenture), substituted, refinanced, restructured,
replaced (including, without limitation, any successive renewals,
extensions, increases, substitutions, refinancings, restructurings,
replacements, supplements, or other modifications of the foregoing);
(iv) Indebtedness owed by the Company to any Wholly-Owned
Subsidiary of the Company or Indebtedness owed by a Subsidiary of the
Company to the Company or a Wholly-Owned Subsidiary of the Company;
provided, that, upon either (I) the transfer or other disposition by such
Wholly-Owned Subsidiary or the Company of any Indebtedness so permitted
under this clause (iv) to a Person other than the Company or another
Wholly-Owned Subsidiary of the Company or (II) the issuance (other than
directors' qualifying shares), sale, transfer or other disposition of
shares of Capital Stock or other ownership interests (including by
consolidation or merger) of such Wholly-Owned Subsidiary to a Person other
than the Company or another such Wholly-Owned Subsidiary of the Company,
the provisions of this clause (iv) shall no longer be applicable to such
Indebtedness and such Indebtedness shall be deemed to have been incurred at
the time of any such issuance, sale, transfer or other disposition, as the
case may be;
(v) Indebtedness of the Company or its Restricted Subsidiaries
under any Interest Rate Protection Agreement or Currency Agreement to the
extent entered into to hedge any other Indebtedness permitted under this
Indenture;
(vi) Acquired Indebtedness to the extent the Company could have
incurred such Indebtedness in accordance with clause (i) above on the date
such Indebtedness became Acquired Indebtedness;
(vii) Indebtedness incurred by the Company or any of its Restricted
Subsidiaries constituting reimbursement obligations with respect to letters
of credit is-
<PAGE>
-53-
sued in the ordinary course of business, including, without limitation,
letters of credit in response to worker's compensation claims or self-
insurance;
(viii) Indebtedness arising from agreements of the Company or a
Restricted Subsidiary of the Company providing for indemnification,
adjustment of purchase price, earn-out or other similar obligations, in
each case, incurred or assumed in connection with the disposition of any
business, assets or a Subsidiary of the Company;
(ix) Obligations in respect of performance and surety bonds and
completion guarantees provided by the Company or any Restricted Subsidiary
of the Company in the ordinary course of business;
(x) Indebtedness consisting of notes issued to employees, officers
or directors in connection with the redemption or repurchase of Capital
Stock held by such Persons in an aggregate amount not in excess of $10.0
million at any time outstanding;
(xi) Indebtedness consisting of take-or-pay obligations contained
in supply agreements entered into by the Company or its Restricted
Subsidiaries in the ordinary course;
(xii) Guarantees by the Company or any of its Restricted
Subsidiaries of Indebtedness of the Company or any Restricted Subsidiary
permitted to be incurred under another provision of the covenant; provided,
that such Guarantee is incurred at the same time as such other
Indebtedness;
(xiii) Indebtedness incurred to renew, extend, refinance or refund
(collectively for purposes of this clause (xiii) to "refund") any
Indebtedness incurred pursuant to clauses (i) or (ii) above; provided that
(I) such Indebtedness does not exceed the principal amount (or accreted
amount, if less) of Indebtedness so refunded plus the amount of any premium
required to be paid in connection with such refunding pursuant to the terms
of the Indebtedness refunded or the amount of any premium reasonably
determined by the Company as necessary to accomplish such refunding by
means of a tender offer, exchange offer, or privately negotiated
repurchase, plus the expenses of the Company or such Restricted Subsidiary
incurred in connection therewith and (II)(A) in the case of any refunding
of Indebtedness that is pari passuwith the Securities, such refunding
Indebtedness is made pari passu with or subordinate in right of payment to
such Securities and, in the case of any refunding of Indebtedness that is
subordinate in right of payment to the Securities, such refunding
Indebtedness is subordinate in right of payment to such Securities, on
terms
<PAGE>
-54-
no less favorable to the Holders than those contained in the Indebtedness
being refunded, (B) in either case, the refunding Indebtedness by its
terms, or by the terms of any agreement or instrument pursuant to which
such Indebtedness is issued does not have an Average Life that is less than
the remaining Average Life of the Indebtedness being refunded and does not
permit redemption or other retirement (including pursuant to any required
offer to purchase to be made by the Company or any of its Restricted
Subsidiaries) of such Indebtedness at the option of the holder thereof
prior to the final stated maturity of the Indebtedness being refunded,
other than a redemption or other retirement at the option of the holder of
such Indebtedness (including pursuant to a required offer to purchase made
by the Company or any of its Restricted Subsidiaries) which is conditioned
upon a change of control of the Company pursuant to provisions
substantially similar to those contained in Section 4.11 and (C)
Indebtedness of a Restricted Subsidiary may not be incurred to refund any
Indebtedness of the Company;
(xiv) Indebtedness of the Company under the Securities and the
Senior Notes and the Exchange Notes;
(xv) the consummation of any Qualified Securitization Transaction;
(xvi) Attributable Indebtedness relating to any Sale/Leaseback
Transaction with respect to the purchase of tooling and related
manufacturing equipment in the ordinary course of business consistent with
past practices; and
(xvii) Indebtedness of the Company or its Restricted Subsidiaries,
not otherwise permitted to be incurred pursuant to clauses (i) through
(xvi) above, which, together with any other outstanding Indebtedness
incurred pursuant to this clause (xvii), has an aggregate principal amount
not in excess of $100.0 million at any time outstanding.
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
<PAGE>
-55-
benefit or advantage of any such law, and covenants that it will not hinder,
delay or impede the execution of any power herein granted to the Trustee, but
will suffer and permit the execution of every such power as though no such law
had been enacted.
SECTION 4.11 Change of Control.
Upon the occurrence of a Change of Control (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 commence an Offer to Purchase
(the "Change of Control Offer") all Securities at a purchase price equal to 101%
of the principal amount thereof, plus accrued and unpaid interest, if any, to
the Purchase Date.
Notice of a Change of Control 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 Purchase 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 Purchase Date;
(c) that any Security not tendered for payment will continue to accrue
interest in accordance with the terms thereof;
(d) that any Security accepted for payment pursuant to the Change of
Control Offer shall cease to accrue interest after the Purchase 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 Purchase 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 Purchase Date, a facsimile transmission (confirmed by
overnight delivery of the
<PAGE>
-56-
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 Purchase 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 accepted 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 Purchase 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, and will not cause or permit any of its
Restricted 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
<PAGE>
-57-
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 Restricted Subsidiary of the Company and
that are no less favorable to the Company or such Restricted Subsidiary of the
Company than those that could be obtained in a comparable arm's length
transaction by the Company or such Restricted Subsidiary of the Company from an
unaffiliated party; provided that if the Company or any Restricted Subsidiary of
the Company enters into an Affiliate Transaction or series of Affiliate
Transactions involving or having an aggregate value of more than $20.0 million,
a majority of the disinterested members of the Board of Directors of the Company
or a committee thereof shall, prior to the consummation of such Affiliate
Transaction, have determined (as evidenced by a resolution thereof) that such
Affiliate Transaction meets the foregoing standard. The foregoing restrictions
shall not apply to (a) any transaction between Restricted Subsidiaries of the
Company, or between the Company and any Restricted 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, (d) Qualified Securitization Transactions, (e)
reasonable fees and compensation paid to and advances of expenses to and
indemnity provided on behalf of officers, directors, employees or consultants of
the Company or any Subsidiary as determined in good faith by the Company's Board
of Directors or senior management; (f) any agreement as in effect as of the
Issue Date or any amendment thereto or any transaction contemplated thereby
(including pursuant to any amendment thereto) or in any replacement agreement
thereto so long as any such management or replacement agreement is not more
disadvantageous to the Holders in any material respect than the original
agreement as in effect on the Issue Date; (g) Restricted Payments permitted by
this Indenture; (h) loans or advances to employees or consultants in the
ordinary course of business and consistent with past practices in an aggregate
amount outstanding at any time not to exceed $10.0 million; (i) joint venture
partners or purchasers or sellers of goods or services, in each case in the
ordinary course of business (including, without limitation, pursuant to joint
venture agreements) and otherwise in compliance with the terms of this Indenture
which are fair to the Company or its Restricted Subsidiaries, in the reasonable
determination of the senior management of the Company, or are on terms at least
as favorable as might reasonably have been obtained at such time from an
unaffiliated party; and (j) any employment or compensation arrangement entered
into by the Company or any of its Restricted Subsidiaries in the ordinary course
of business that is not otherwise prohibited by this Indenture.
<PAGE>
-58-
SECTION 4.13 Limitation on Liens.
The Company will not, and will not cause or permit any of its
Restricted 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; (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) Permitted Liens; (v) 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; (vi) Liens granted in connection with any Qualified
Securitization Transaction; and (vii) Liens arising from claims of holders of
Indebtedness against funds held in a defeasance trust for the benefit of such
holders.
SECTION 4.14 Limitation on Payment Restrictions Affecting Restricted
Subsidiaries.
The Company will not, and will not cause or permit any of its
Restricted 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 Restricted 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 Restricted Subsidiary of the Company, or make
payments on any Indebtedness owed to the Company or to any Restricted Subsidiary
of the Company; (ii) make loans or advances to the Company or to any Restricted
Subsidiary of the Company; or (iii) transfer any of their respective property or
assets to the Company or to any Restricted Subsidiary of the Company, except for
such encumbrances or restrictions
<PAGE>
-59-
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 Restricted Subsidiary of the Company; (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; (D) any agreement in effect on the Issue Date as any
such agreement is in effect on such date; (E) any agreement relating to any
Indebtedness incurred by such Restricted Subsidiary prior to the date on which
such Restricted Subsidiary became a Subsidiary of the Company and outstanding on
such date and not incurred in anticipation or contemplation of becoming a
Subsidiary of the Company; provided such encumbrance or restriction shall not
apply to any assets of the Company or its Restricted Subsidiaries other than
such Restricted Subsidiary; and (F) this Indenture.
SECTION 4.15 Limitation on Guarantees by Restricted Subsidiaries.
The Company shall not cause or permit any of its Restricted
Subsidiaries, directly or indirectly, to guarantee the payment of any
Indebtedness of the Company unless such Restricted 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 (a "Subsidiary Guarantee") by such
Restricted Subsidiary of the Company (a "Subsidiary Guarantor"); provided any
guarantee by a Subsidiary Guarantor of such other Indebtedness (A) (1) (X) is
unsecured or (Y) is secured and (I) in the case of any such guarantee of Senior
Indebtedness of the Company, the Subsidiary Guarantee is secured equally and
ratably with any Liens securing such guarantee, subject to the provisions of
Article XI, (II) in the case of any such guarantee of Indebtedness of the
Company ranking pari passu with the Securities, the Subsidiary Guarantee is
secured equally and ratably with any Liens securing such guarantee, and (III) in
the case of any such guarantee of Indebtedness of the Company subordinated to
the Securities, the Subsidiary Guarantee is secured on a basis ranking prior to
the Liens securing such guarantee and (2) (X) in the case of any such guarantee
of Indebtedness of the Company subordinated or junior to the Securities (whether
pursuant to its terms or by operation of law), such guarantee is subordinated
pursuant to a written agreement to the Subsidiary Guarantee at least to the same
extent and in the same manner as such other Indebtedness is subordinated to the
Securities, or (Y) (I) in the case of any such guarantee of Senior Indebtedness
of the Company incurred in accordance with this Indenture, the Subsidiary
Guarantee is subordinated to Guarantor Senior Indebtedness of such Subsidiary
Guarantor to the same extent and in the same manner as the Securities are
subordinated to Senior Indebtedness of the Company or (II) the Subsidiary
Guarantee is not subordinated or junior to any
<PAGE>
-60-
Indebtedness of such Subsidiary Guarantor; and (B) such Subsidiary Guarantor
waives, and agrees 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 it under such Subsidiary Guarantees.
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
Guarantor's guarantees of all other Indebtedness of the Company (other than a
release resulting from payment under such Subsidiary Guarantor'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
Guarantor, or all or substantially all of the assets of such Subsidiary
Guarantor, pursuant to a transaction which is in compliance with all of the
terms of the relevant Indenture.
The supplemental 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 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 and senior or superior in any right of payment or
interest to the Securities 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 (other than Indebtedness of the Company that is
subordinated solely to Senior Indebtedness of the Company) unless such
Indebtedness is also by its terms (or by the terms of any agreement governing
such Indebtedness) made expressly subordinate to the Securities 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.
<PAGE>
-61-
SECTION 4.17 Limitation on Preferred Stock of Restricted
Subsidiaries.
The Company will not cause or permit any of its Restricted
Subsidiaries to issue any Preferred Stock other than to the Company or to
another Restricted Subsidiary.
SECTION 4.18 Limitation on Restricted Payments.
The Company will not, and will not cause or permit any of its
Restricted Subsidiaries to, directly or indirectly, (i) declare or pay any
dividend, or make any distribution of any kind or character (whether in cash,
property or securities), in respect of any class of its Capital Stock or to the
holders thereof in their capacity as stockholders, excluding any (x) dividend or
distributions payable solely in shares of its Qualified Capital Stock or in
options, warrants or other rights to acquire its Qualified Capital Stock or (y)
in the case of any Restricted Subsidiary of the Company, dividends or
distributions payable to the Company or a Restricted Subsidiary of the Company;
(ii) purchase, redeem, or otherwise acquire or retire for value shares of
Capital Stock of the Company or a Restricted Subsidiary of the Company, any
securities convertible or exchangeable into shares of Capital Stock of the
Company or a Restricted Subsidiary of the Company or any options, warrants or
rights to purchase or acquire shares of Capital Stock of the Company or a
Restricted Subsidiary of the Company, excluding any such shares of Capital
Stock, options, warrants, rights or securities which are owned by the Company or
a Restricted Subsidiary of the Company; (iii) make any Investment (other than a
Permitted Investment) in, or payment on a guarantee of any obligation of, any
Person; or (iv) redeem, defease, repurchase, retire or otherwise acquire or
retire for value, prior to any scheduled maturity, repayment or sinking fund
payment, Indebtedness which is subordinate in right of payment to the Securities
(each of the transactions described in clauses (i) through (iv) (other than any
exception to any such clause) being a "Restricted Payment") if at the time
thereof:
(1) an Event of Default, or an event that with the passing of time
or giving of notice, or both, would constitute an Event of Default, shall
have occurred and be continuing, or
(2) upon giving effect to such Restricted Payment, the Company
could not incur at least $1.00 of additional Indebtedness pursuant to the
terms of this Indenture described in clause (i) of Section 4.9, or
(3) upon giving effect to such Restricted Payment, the aggregate of
all Restricted Payments made on or after the Issue Date exceeds the sum
(without duplication) of: (a) 50% of cumulative Consolidated Net Income of
the Company (or, in the case cumulative Consolidated Net Income of the
Company shall be negative,
<PAGE>
-62-
less 100% of such deficit) for the period (treated as an accounting period)
from the Issue Date through the last day of the Company's most recently
ended fiscal quarter for which financial statements are available, plus (b)
100% of the aggregate net cash proceeds received after the Issue Date,
including the fair market value of readily marketable securities from the
issuance of Qualified Capital Stock of the Company and warrants, rights or
options on Qualified Capital Stock of the Company (other than in respect of
any such issuance to a Subsidiary of the Company) and the principal amount
of Indebtedness of the Company or a Subsidiary of the Company that has been
converted into or exchanged for Qualified Capital Stock of the Company
which Indebtedness was incurred after the Issue Date; plus (c) in the case
of the disposition or repayment of any Investment constituting a Restricted
Payment made after the Issue Date, an amount equal to the lesser of the
return of capital with respect to such Investment and the cost of such
Investment, in either case, less the cost of the disposition of such
Investment; provided that at the time any such Investment is made the
Company delivers to the Trustee a resolution of the Board of Directors of
the Company to the effect that, for purposes of this Section 4.18 covenant,
such Investment constitutes a Restricted Payment made after the Issue Date;
plus (d) an amount equal to the sum of (i) the net reduction in Investments
in Unrestricted Subsidiaries resulting from the receipt of dividends,
repayments of loans or advances or other transfers of assets or proceeds
from the disposition of Capital Stock or other distributions or payments,
in each case to the Company or any Restricted Subsidiary from, or with
respect to, interests in Unrestricted Subsidiaries, and (ii) the portion
(proportionate to the Company's equity interest in such Subsidiary) of the
fair market value of the net assets of an Unrestricted Subsidiary at the
time such Unrestricted Subsidiary is designated a Restricted Subsidiary;
provided that the foregoing sum shall not exceed, in the case of any
Unrestricted Subsidiary, the amount of Investments previously made (and
treated as a Restricted Payment) by the Company or any Restricted
Subsidiary in such Unrestricted Subsidiary subsequent to the Issue Date;
plus (e) $25.0 million. For purposes of determining the amount expended for
Restricted Payments under this clause (3), property other than cash shall
be valued at its fair market value.
Notwithstanding the foregoing, the provisions set forth in the
immediately preceding paragraph will not prohibit (i) any dividend on any class
of Capital Stock of the Company or any of its Restricted Subsidiaries paid
within 60 days after the declaration thereof if, on the date when the dividend
was declared, the Company or any of its Restricted Subsidiaries, as the case may
be, could have paid such dividend in accordance with the provisions of this
Indenture, (ii) the renewal, extension, refunding or refinancing of any
Indebtedness otherwise permitted pursuant to the terms of this Indenture
described in clause (xiii) of Section 4.9, (iii) the exchange or conversion of
any Indebtedness of the Company
<PAGE>
-63-
or any of its Restricted Subsidiaries for or into Qualified Capital Stock of the
Company, (iv) any Restricted Payments, including loans or other advances made
pursuant to any employee benefit plans (including plans for the benefit of
directors) or employment agreements or other compensation arrangements, in each
case as approved by the Board of Directors of the Company in its good faith
judgment, (v) so long as no Default or Event of Default has occurred and is
continuing, any Investment made with the proceeds of a substantially concurrent
sale of Qualified Capital Stock of the Company; provided that the proceeds of
such sale of Qualified Capital Stock shall not be (and have not been) included
in clause (3) of the preceding paragraph, (vi) the redemption, repurchase,
retirement or other acquisition of any Capital Stock of the Company in exchange
for or out of the net cash proceeds of the substantially concurrent sale (other
than to a Restricted Subsidiary of the Company) of Qualified Capital Stock of
the Company; provided that the proceeds of such sale of Capital Stock shall not
be (and have not been) included in clause (3) of the preceding paragraph, (vii)
so long as no Event of Default has occurred and is continuing, the redemption,
repurchase, retirement or other acquisition of any Subordinated Indebtedness of
the Company in exchange for or out of the net cash proceeds of the substantially
concurrent sale (other than to a Subsidiary of the Company) of Qualified Capital
Stock of the Company; provided that the proceeds of such sale of Qualified
Capital Stock shall not be (and have not been) included in clause (3) of the
preceding paragraph, (viii) the redemption, retirement or repurchase of the
Company's outstanding Series G Convertible Preferred Stock out of the net
proceeds of the Offerings, (ix) Investments in Navistar Financial Corporation
made pursuant to the Support Agreement to the extent required by the Support
Agreement, (x) the declaration and payment of dividends to holders of any class
of Preferred Stock issued after the Issue Date; provided that at the time of the
issuance of such Preferred Stock, the Company, after giving pro forma effect to
such issuance, would have been able to incur at least $1.00 of additional
Indebtedness pursuant to the terms of this Indenture described in clause (i) of
Section 4.9; (xi) so long as no Event of Default has occurred and is continuing,
any purchase or redemption or other retirement for value of Capital Stock of the
Company required pursuant to any shareholders agreement, management agreement or
employee stock option agreement in accordance with the provisions of any such
arrangement in an amount not to exceed $10.0 million in the aggregate; (xii)
repurchases of Capital Stock deemed to occur upon the exercise of stock options
if such Capital Stock represents a portion of the exercise price thereof; (xiii)
payments not to exceed $500,000 per annum in the aggregate to enable the Company
to make payments to holders of its Capital Stock in lieu of issuance of
fractional shares of its Capital Stock; (xiv) so long as no Event of Default has
occurred and is continuing, the repurchase of any shares of Class B Common Stock
or Common Stock held by the Supplemental Trust; (xv) so long as no Event of
Default has occurred and is continuing, the redemption of any stock purchase
rights under a rights plan in an aggregate amount not to exceed $1.0 million;
and (xvi) so long as no Event of Default has occurred and is continuing,
Investments in Permitted Joint Ventures and designations of Restricted
<PAGE>
-64-
Subsidiaries as Unrestricted Subsidiaries; provided that, after giving pro forma
effect to such Investment, the Company could incur at least $1.00 of additional
Indebtedness pursuant to the terms of this Indenture described in clause (i) of
Section 4.9. Each Restricted Payment described in clauses (i), (iv), (ix),
(xiii) and (xiv) of the previous sentence shall be taken into account (and the
Restricted Payments described in the remaining clauses shall not be taken into
account) for purposes of computing the aggregate amount of all Restricted
Payments made pursuant to clause (3) of the preceding paragraph.
SECTION 4.19 Limitation on Certain Asset Dispositions.
The Company will not, and will not cause or permit any of its
Restricted Subsidiaries to, directly or indirectly, make one or more Asset
Dispositions unless: (i) the Company or the Restricted Subsidiary, as the case
may be, receives consideration for such Asset Disposition at least equal to the
fair market value of the assets sold or disposed of (as determined in good faith
by the Company); (ii) not less than 75% of the consideration for the disposition
consists of cash or readily marketable cash equivalents or the assumption of
Indebtedness (other than non-recourse Indebtedness or any Indebtedness
subordinated to the Securities) of the Company or such Restricted Subsidiary or
other obligations relating to such assets (and release of the Company or such
Restricted Subsidiary from all liability on the Indebtedness or other
obligations assumed); and (iii) all Net Available Proceeds, less any amounts
invested or committed to be invested within 360 days of such Asset Disposition
in assets related to the business of the Company (including capital expenditures
or the Capital Stock of another Person (other than the Company or any Person
that is a Restricted Subsidiary of the Company immediately prior to such
investment); provided that immediately after giving effect to any such
investment (and not prior thereto) such Person shall be a Restricted Subsidiary
of the Company), are applied, on or prior to the 360th day after such Asset
Disposition (unless and to the extent that the Company shall determine to make
an Offer to Purchase), either to (A) the permanent reduction and prepayment of
any Indebtedness of the Company (other than Indebtedness which is expressly
subordinate to the applicable issue of Notes) then outstanding (including a
permanent reduction of commitments in respect thereof) or (B) the permanent
reduction and repayment of any Indebtedness of any Restricted Subsidiary of the
Company then outstanding (including a permanent reduction of commitments in
respect thereof). The 361st day after such Asset Disposition shall be deemed to
be the "Asset Sale Offer Trigger Date," and the amount of Net Available Proceeds
from Asset Dispositions otherwise subject to the preceding provisions not so
applied or as to which the Company has determined not to so apply shall be
referred to as the "Unutilized Net Available Proceeds." Within fifteen days
after the Asset Sale Offer Trigger Date, the Company shall make an Offer to
Purchase the outstanding applicable issue of Securities at a purchase price in
cash equal to 100% of their principal amount plus any accrued and unpaid
interest thereon to the Purchase Date. Notwithstanding the foregoing, the
<PAGE>
-65-
Company may defer making any Offer to Purchase outstanding Securities until
there are aggregate Unutilized Net Available Proceeds equal to or in excess of
$25.0 million (at which time, the entire Unutilized Net Available Proceeds, and
not just the amount in excess of $25.0 million, shall be applied as required
pursuant to this paragraph). Pending application of the Unutilized Net
Available Proceeds pursuant to this covenant, such Unutilized Net Available
Proceeds shall be invested in Permitted Investments of the types described in
clauses (i), (ii) and (iii) of the definition of "Permitted Investments."
If any Indebtedness of the Company or any of its Restricted
Subsidiaries ranking pari passu with the Securities requires that prepayment of,
or an offer to prepay, such Indebtedness be made with any Net Available
Proceeds, the Company may apply such Net Available Proceeds pro rata (based on
the aggregate principal amount of the Securities then outstanding and the
aggregate principal amount (or accreted value, if less) of all such other
Indebtedness then outstanding) to the making of an Offer to Purchase the
Securities in accordance with the foregoing provisions and the prepayment or the
offer to prepay such pari passu Indebtedness. Any remaining Net Available
Proceeds following the completion of the required Offer to Purchase may be used
by the Company for any other purpose (subject to the other provisions of this
Indenture) and the amount of Net Available Proceeds then required to be
otherwise applied in accordance with this covenant shall be reset to zero,
subject to any subsequent Asset Disposition. These provisions will not apply to
a transaction consummated in compliance with Article V.
Notwithstanding the foregoing, the provisions of this covenant shall
not apply to any Sale/Leaseback Transaction with respect to the purchase of
tooling and related manufacturing equipment in the ordinary course of business
consistent with past practices.
In the event that the Company makes an Offer to Purchase the
Securities, the Company shall comply with any applicable securities laws and
regulations, including any applicable requirements of Section 14(e) of, and Rule
14e-1 under, the Exchange Act and any violation of the provisions of this
Indenture relating to such Offer to Purchase occurring as a result of such
compliance shall not be deemed an Event of Default or an event that with the
passing of time or giving of notice, or both, would constitute an Event of
Default.
SECTION 4.20 Limitation on Sale/Leaseback Transactions.
The Company shall not, and shall not cause or permit any Restricted
Subsidiary to, enter into any Sale/Leaseback Transaction with respect to any
property unless (i) the Company or such Restricted Subsidiary would be entitled
to (A) incur Indebtedness in an amount equal to the Attributable Indebtedness
with respect to such Sale/Leaseback Transaction pursuant to clause (i) of
Section 4.9 and (B) create a Lien on such property securing such Attributable
Indebtedness without securing the Securities pursuant to Section
<PAGE>
-66-
4.13, (ii) the net proceeds received by the Company or any Restricted Subsidiary
in connection with such Sale/Leaseback Transaction are at least equal to the
fair value (as determined by the Board of Directors) of such property and (iii)
the Company applies the proceeds of such transaction in compliance with Section
4.19. Notwithstanding the foregoing, the provisions of this covenant shall not
prohibit the Company or any Restricted Subsidiary from entering into any
Sale/Leaseback Transaction with respect to the purchase of tooling and related
manufacturing equipment in the ordinary course of business consistent with past
practices.
ARTICLE V
SUCCESSOR CORPORATION
SECTION 5.1 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 Restricted Subsidiaries to sell, assign, transfer, lease, convey or
otherwise dispose of) all or substantially all of the Company's and its
Restricted Subsidiaries' assets (determined on a consolidated basis for the
Company and its Restricted 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 Restricted Subsidiaries substantially as an entirety or in the
case of a Plan of Liquidation, or Person to which assets of the Company and its
Restricted Subsidiaries have been transferred (x) shall be a corporation,
limited liability company or partnership 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 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) could incur at least $1.00 of additional Indebtedness pursuant to
clause (i) of Section 4.9; (iii) immediately before and after giving effect to
such transaction and the
<PAGE>
-67-
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; and (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 and that all conditions precedent under 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. Notwithstanding the foregoing, (x) a
Restricted 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 Restricted Subsidiary
of the Company without complying with clause (ii) of the above, (y) a series of
transactions involving the sale of Receivables or interests therein by 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 and (z) the provisions of clause (i) above shall not
prohibit the Company or any Restricted Subsidiary from selling, assigning,
transferring, leasing, conveying or otherwise disposing of all or substantially
all of its assets to a Permitted Joint Venture in a transaction entered into in
compliance with Section 4.18.
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 Restricted
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 this 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 this Indenture and the Securities.
<PAGE>
-68-
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 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) The following are "Events of Default" under this Indenture:
(i) default 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, whether or not any such payment is prohibited by the provisions of
Article XI; or
(ii) default 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) failure to observe, perform or comply with any of the
provisions described in Section 5.1; or
(iv) default (other than a default set forth in clauses (i), (ii)
and (iii) above) in the performance of, or breach of, any other covenant or
warranty of the Company or of any Restricted Subsidiary in this Indenture
or in the Securities 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
Securities; or
<PAGE>
-69-
(v) 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
Restricted 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 $20.0 million or more and such acceleration has not
been rescinded or annulled or such Indebtedness discharged in full within
30 days; or
(vi) 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 $20.0 million, 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
(vii) 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
(viii)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
<PAGE>
-70-
(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 specified in
clauses (vii) and (viii) of Section 6.1(a) 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 Securities then outstanding may,
and the Trustee shall upon the request of Holders of not less than 25% in
aggregate principal amount of the Securities then outstanding, declare the
unpaid principal of, premium, if any, and accrued and unpaid interest on all the
Securities 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 this
Indenture or the Securities to the contrary, but subject to the provisions
limiting payment described in Article XI. If an Event of Default specified in
clauses (vii) and (viii) of Section 6.1(a) involving the Company occurs, all
unpaid principal of, and premium, if any, and accrued and unpaid interest on the
Senior Notes and the Securities 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.
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.
<PAGE>
-71-
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 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
(provided, however, that subject to Section 7.1, the Trustee shall have no duty
or obligation to ascertain whether or not such direction is unduly prejudicial
to such 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;
<PAGE>
-72-
(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;
(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 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
<PAGE>
-73-
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 all costs and expenses of collection and for all
other 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.
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.
<PAGE>
-74-
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 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:
<PAGE>
-75-
(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 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 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.
<PAGE>
-76-
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.
(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) Before the Trustee acts or refrains from acting, it 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.
(f) The Trustee shall not be required to give any bond or surety in
respect of the performance of its powers and duties hereunder.
<PAGE>
-77-
(g) The permissive rights of the Trustee to do things enumerated in
this Indenture shall not be construed as a duty.
(h) The Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction
of any of the Securityholders unless such Securityholders shall have
offered to the Trustee security or indemnity reasonable to it against the
costs, expenses and liabilities that might be incurred by it in compliance
with such request or direction.
(i) Except for (i) default under Section 6.1(a)(i) or (ii) hereof, or
(ii) any other event of which the Trustee has "actual knowledge" and which
event, with the giving of notice or the passage of time or both, would
constitute an Event of Default under this Indenture, the Trustee shall not
be deemed to have notice of any default or Event of Default unless
specifically notified in writing of such event by the Company or the
Holders of not less than 25% in aggregate principal amount of the
Securities then outstanding; as used herein, the term "actual knowledge"
means the actual fact or statement of knowing, without any duty to make any
investigation with regard thereto.
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 shall not be responsible for and 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 or
for the use or application of any money received by any Paying Agent other than
the Trustee, and it shall not be responsible for any statement of the Company in
this Indenture or any other document in connection with the sale of the
Securities, 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
<PAGE>
-78-
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 interest 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 Trustee'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.
How-
<PAGE>
-79-
ever, 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 or negligence.
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.
Such lien shall survive the satisfaction and discharge of this Indenture.
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)(vii) or (viii) 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
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.
<PAGE>
-80-
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.
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.
<PAGE>
-81-
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 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 Securities, 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
<PAGE>
-82-
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 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 and 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 (c)
below 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
<PAGE>
-83-
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, 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 4.20 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)(iv), but, except as specified above, the remainder of this Indenture and
such Securities shall be unaffected thereby.
(d) The following shall be the conditions to application of either
paragraph (b) or paragraph (c) above to the outstanding Securities:
<PAGE>
-84-
(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)(vii) or (viii) is concerned, at any time during the period ending on
the 91st day after the date of such deposit (it being understood 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, 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;
<PAGE>
-85-
(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 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
<PAGE>
-86-
(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) 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.
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.
<PAGE>
-87-
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.
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.
<PAGE>
-88-
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;
(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 4.15 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
<PAGE>
-89-
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 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; 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 Control Offer in the event of a Change of
Control or waive any default in the performance thereof or modify any of
the provisions or definitions with respect to such offers.
<PAGE>
-90-
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. Notwithstanding 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.
<PAGE>
-91-
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.
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.
<PAGE>
-92-
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:
(a) if to the Company:
Navistar International Corporation
455 North Cityfront Plaza Drive
Chicago, Illinois 60611
Attention: General Counsel
Telecopier Number: (312) 836-2000
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:
Harris Trust and Savings Bank
311 West Monroe, 12th Fl.
Chicago, Illinois 60606
Attention: Indenture Trust Division/D.G. Donovan
Telecopier Number: (312) 461-3525
The Company or the Trustee by notice to the other may designate
additional or different addresses for subsequent notices or communications.
<PAGE>
-93-
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.
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).
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:
<PAGE>
-94-
(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.
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
<PAGE>
-95-
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.
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.
<PAGE>
-96-
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.
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.
In the event of (i) any insolvency or bankruptcy case or proceeding,
(ii) any receivership, liquidation, dissolution or other winding up of the
Company, whether voluntary or involuntary and whether or not involving
insolvency or bankruptcy or (iii) any assignment for the benefit of the
creditors or any other marshaling of assets and liabilities of the Company, then
and in any such event specified in (i), (ii) or (iii) above, the holders of
Senior Indebtedness shall be entitled to receive payment in full in cash of all
amounts due or to become due on or in respect of all Senior Indebtedness before
the Holders of the Securities are entitled to receive any Note Payment (as
defined below), and in any such event any Note Payment to which the Holders of
the Securities or the Trustee on their behalf would be entitled, but for the
subordination provisions of this Indenture, shall be made by the Company or by
any receiver, trustee in bankruptcy, liquidating trustee, agent or other Person
making such payment or distribution, directly to the holders of the Senior
Indebtedness (pro rata to such holders on the basis of the respective amounts of
Senior Indebtedness held by such holders) or their respective trustee, agent or
other representative under any
<PAGE>
-97-
agreement or indenture pursuant to which any such Senior Indebtedness may have
been issued, as their respective interests may appear, to the extent necessary
to pay all such Senior Indebtedness in full, in cash, after giving effect to any
concurrent payment, distribution or provision therefor to or for the holders of
such Senior Indebtedness.
In the event that, notwithstanding the foregoing provision prohibiting
such Note Payment, any Note Payment shall be received by the Trustee or any
Holder of Securities at a time when such Note Payment is prohibited as described
in the preceding paragraph and before all obligations in respect of Senior
Indebtedness are paid in full in cash, such Note Payment shall be received and
held in trust for the benefit of, and shall be paid over or delivered to, the
holders of Senior Indebtedness (pro rata to such holders on the basis of the
respective amounts of Senior Indebtedness held by such holders) or their
respective trustee, agent or other representative under any agreement or
indenture pursuant to which any of such Senior Indebtedness may have been
issued, as their respective interests may appear, for application to the payment
of Senior Indebtedness remaining unpaid until all such Senior Indebtedness has
been paid in full in cash after giving effect to any concurrent payment,
distribution or provision therefor to or for the account of the holders of such
Senior Indebtedness.
No direct or indirect payment, deposit or distribution of any kind or
character, whether in cash, property or securities (including any payment made
to Holders of the Securities under the terms of Indebtedness subordinated to the
Securities, but excluding any payment or distribution of Permitted Junior
Securities) by or on behalf of the Company of principal of, premium, if any, or
interest on, or any other obligation in respect of, the Securities whether
pursuant to the terms of the Securities, upon acceleration, by way of
repurchase, redemption, defeasance or otherwise (all such payments, deposits or
distributions being referred to herein, individually and collectively, as a
"Note Payment"), shall be made if, at the time of such Note Payment, there
exists a default (a "Payment Default") in the payment when due of all or any
portion of the obligations under or in respect of any Designated Senior
Indebtedness, whether at maturity, on account of mandatory redemption or
prepayment, acceleration or otherwise, and such Payment Default shall not have
been cured or waived. In addition, during the continuance of any default or
event of default (other than a Payment Default) with respect to any Designated
Senior Indebtedness pursuant to which the maturity thereof may be accelerated
immediately without the giving of any notice (except such notice as may be
required to effect such acceleration) or the expiration of any applicable grace
periods, no Note Payment may be made by or on behalf of the Company for a period
(a "Payment Blockage Period") commencing upon the receipt by the Company and the
Trustee of written notice of such default or event of default from the holder or
holders of such Designated Senior Indebtedness or any trustee, agent or other
representative acting on behalf of the holder or holders of such Designated
Senior Indebtedness specifying
<PAGE>
-98-
an election to effect a Payment Blockage Period (a "Payment Blockage Notice")
and ending 179 days thereafter (or earlier if such Payment Blockage Period is
terminated (i) by written notice to the Trustee and the Company from the holder
or holders of such Designated Senior Indebtedness or any trustee, agent or other
representative acting on behalf of the holder or holders of such Designated
Senior Indebtedness, (ii) by discharge or repayment in full in cash of such
Designated Senior Indebtedness or (iii) because the default or event of default
giving rise to such Payment Blockage Notice has been cured, waived or ceased to
exist). Subject to the provisions of the first sentence of this paragraph, the
Company may resume payments on the Securities after such Payment Blockage
Period.
Not more than one Payment Blockage Period may be commenced with
respect to the Securities during any period of 360 consecutive days, unless at
least 180 consecutive days shall have elapsed during which time no payment
blockage was in effect. No default or event of default that existed or was
continuing on the date of commencement of any Payment Blockage Period with
respect to the Designated Senior Indebtedness initiating such Payment Blockage
Period may be, or be made, the basis for the commencement of any other Payment
Blockage Period by the holder or holders of such Designated Senior Indebtedness
or any trustee, agent or other representative acting on behalf of the holder or
holders of such Designated Senior Indebtedness, whether or not within a period
of 360 consecutive days, unless such default or event of default has been cured
or waived for a period of not less than 90 consecutive days.
In the event that, notwithstanding the foregoing, any Note Payment
shall be received by the Trustee or any Holder when such Note Payment is
prohibited by the second preceding paragraph, such payment shall be held in
trust for the benefit of, and shall be paid over or delivered to, the holders of
Designated Senior Indebtedness or any trustee, agent or other representative
under any agreement or indenture pursuant to which any such Designated Senior
Indebtedness may have been issued, as their respective interests may appear, but
only to the extent that, upon notice from the Trustee to the holders of
Designated Senior Indebtedness that such prohibited Note Payment has been made,
the holders of the Designated Senior Indebtedness (or their trustee, agent or
other representative) notify the Trustee in writing of the amounts then due and
owing on the Designated Senior Indebtedness, if any, and only the amount
specified in such notice to the Trustee shall be paid to or for the account of
the holders of Designated Senior Indebtedness.
The failure to make any payment or distribution for or on account of
the Securities by reason of the provisions of this Indenture described under
this section will not be construed as preventing the occurrence of an Event of
Default described in clause (i), (ii) or (iii) of Section 6.1(a).
<PAGE>
-99-
If the Company fails to make any payment on the Securities 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 this Indenture and would enable the Holders to accelerate
the maturity of the Securities. See Section 6.1.
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 of the Securities 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 Securities.
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 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.
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 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.
<PAGE>
-100-
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 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.
<PAGE>
-101-
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 7.1 and 7.5 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 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 ex-
<PAGE>
-102-
tending 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 an original, but all such counterparts
shall together constitute but one and the same instrument.
<PAGE>
S-1
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
NAVISTAR INTERNATIONAL CORPORATION
By: /s/ Thomas M. Hough
-----------------------------------------------
Name: Thomas M. Hough
Title: Vice President & Treasurer
HARRIS TRUST AND SAVINGS BANKS,
as Trustee
By: /s/ J. Bartolini
-----------------------------------------------
Name: J. Bartolini
Title: Vice President
<PAGE>
Exhibit A
(FORM OF FACE OF SECURITY)
No. [_] $ [_]
CUSIP No.
8% SENIOR SUBORDINATED NOTE DUE 2008
NAVISTAR INTERNATIONAL CORPORATION promises to pay
to [ ] or registered assigns the
principal sum of[ ] Dollars on
February 1, 2008.
Interest Payment Dates: February 1, August 1 and at maturity
Record Dates: January 15, July 15 and 15 days prior to maturity
By:____________________________
Authorized Signature
By:____________________________
Authorized Signature
Dated: February 4, 1998
Certificate of Authentication
This is one of the 8% Senior Subordinated Notes due 2008 referred to
in the within-mentioned indenture.
HARRIS TRUST AND SAVINGS BANK,
as Trustee
By:____________________________
Authorized Signatory
A-1
<PAGE>
(FORM OF REVERSE OF SECURITY)
8% SENIOR SUBORDINATED NOTE DUE 2008
1. Interest. NAVISTAR INTERNATIONAL 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 8% 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 February 4, 1998 through but excluding the date on which interest is
paid. Interest shall be payable in arrears on February 1, August 1 and at the
stated maturity (each an "Interest Payment Date"), commencing August 1, 1998.
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 8% 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 January 15 or July 15 next
preceding the relevant Interest Payment Date. Holders must surrender Securities
to the 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, HARRIS TRUST AND SAVINGS
--------------------------
BANK (the "Trustee") will act as Paying Agent and Registrar. The Company may
change any Paying Agent, Registrar 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 February 4, 1998 (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
A-2
<PAGE>
amount to $250,000,000. The Indenture limits, among other things, the incurrence
of certain Indebtedness by the Company and its Restricted Subsidiaries;
transactions by the Company and its Restricted Subsidiaries with certain
Affiliates; the granting of Liens by the Company or any of its Restricted
Subsidiaries; certain guarantees issued by Restricted 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. Optional Redemption. Except as set forth in the next paragraph,
-------------------
the Securities may not be redeemed prior to February 1, 2003. On or after
February 1, 2003, the Securities may be redeemed at any time, in whole or in
part, at the option of the Company, on not less than 20 days' nor more than 60
days' notice, at the redemption prices (expressed as percentages of the
principal amount) set forth below, if redeemed during the 12 month period
beginning February 1 of the year indicated below, in each case together with
interest accrued to the redemption date:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
<S> <C>
2003...................................... 104.000%
2004...................................... 102.670%
2005...................................... 101.333%
2006 and thereafter....................... 100.000%
</TABLE>
In addition, prior to February 1, 2001, the Company may, at its option
redeem up to 35% of the principal amount of the Securities originally issued
with the net cash proceeds received by the Company from one or more public
offerings of Common Stock of the Company made after the Issue Date, at a
redemption price (expressed as a percentage of the principal amount) of 108% of
the principal amount thereof, plus accrued and unpaid interest to the date fixed
for redemption; provided that at least $162.5 million in aggregate principal
amount of the Securities remains outstanding immediately after any such
redemption (excluding any Notes owned by the Company or any of its Affiliates).
Notice of redemption pursuant to this paragraph must be mailed to Holders of
Senior Subordinated Notes not later than 60 days following the consummation of
such public offering.
Selection of Securities for any redemption shall be made by the
Trustee under the Indenture in accordance with the rules of any national
securities exchange on which the Securities may be listed or if the Securities
are not so listed, pro rata or by lot or in such other manner as the Trustee
shall deem appropriate and fair.
On and after the redemption date, interest will cease to accrue on
Securities or portions thereof called for redemption.
A-3
<PAGE>
6. Notice of Redemption. Notice of redemption will be mailed by
--------------------
first-class mail at least 20 days but not more than 60 days before the
redemption date to each Holder of Securities to be redeemed at his registered
address. Securities in denominations larger than $1,000 may be redeemed in part
but only in whole multiples of $1,000. If money sufficient to pay the
redemption price of and accrued interest on all Securities (or portions thereof)
to be redeemed on the redemption date is deposited with the Paying Agent on or
before the redemption date and certain other conditions are satisfied, on and
after such date interest ceases to accrue on such Securities (or such portions
thereof) called for redemption. If a notice or communication is sent in the
manner provided in the Indenture, it is duly given, whether or not the addressee
receives it. Failure to send a notice or communication to a Securityholder or
any defect in it shall not affect its sufficiency with respect to other
Securityholders.
7. Offers to Purchase. Sections 4.11 and 4.19 of the Indenture
------------------
provide upon the occurrence of a Change of Control and after certain Asset
Dispositions, and subject to further limitations contained therein, the Company
shall make an offer to purchase certain amounts of the Securities in accordance
with the procedures set forth in the Indenture.
8. 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.
9. Persons Deemed Owners. The registered holder of a Security may be
---------------------
treated as the owner of it for all purposes.
10. 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.
11. 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
A-4
<PAGE>
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.
12. 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).
13. 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.
14. 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)(vii) or
(viii) of the Indenture 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)(vii) or (viii)
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.
15. 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.
A-5
<PAGE>
16. 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, 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.
17. 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.
18. Authentication. This Security shall not be valid until the
--------------
Trustee signs the certificate of authentication on the other side of this
Security.
19. 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).
20. 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.
21. 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.
The Company will furnish to any Securityholder upon written request
and without charge a copy of the Indenture. Requests may be made to:
A-6
<PAGE>
Navistar International Corporation
455 North Cityfront Plaza Drive
Chicago, Illinois 60611
Telephone: (312) 836-2000
Telecopy: (312) 836-3982
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 or 4.19 of the Indenture, check the appropriate Box:
[_] Section 4.11 [_] Section 4.19
If you wish to have a portion of this Security purchased by the
Company pursuant to Section 4.11 or 4.19 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.
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 cove-
B-1
<PAGE>
nants 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 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
B-2
<PAGE>
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) result 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, 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).
B-3
<PAGE>
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 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 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.
B-4
<PAGE>
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 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
B-5
<PAGE>
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
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 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
B-6
<PAGE>
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 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 sub-
B-7
<PAGE>
clauses (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 Indebtedness 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 Guarantor 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
B-8
<PAGE>
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 appoints 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 pay-
B-9
<PAGE>
ment of moneys to or by the Trustee pursuant to this Article. Subject to the
provisions of Sections 7.1 and 7.5 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.
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.
B-10
<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 XI of the Indenture and this
Subsidiary Guarantee. This Subsidiary Guarantee will become effective in
accordance with Article XI 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 XI 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.
This Subsidiary Guarantee is subject to release upon the terms set
forth in the Indenture.
[NAME OF GUARANTOR]
By:______________________
Name:
Title:
<PAGE>
EXHIBIT D
FORM OF CERTIFICATE OF TRANSFER
Navistar International Corporation
455 North Cityfront Plaza Drive
Chicago, Illinois 60611
Attention:
[Name and Address of Registrar]
Re: 8% Senior Subordinated Notes due 2008
Reference is hereby made to the Indenture, dated as of February 4,
1998 (the "Indenture"), between Navistar International Corporation (the
"Issuer") and Harris Trust and Savings Bank, 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 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 fur-
D-1
<PAGE>
ther 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 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 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 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 re-
D-2
<PAGE>
strictions 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-3
<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) [_] Interest 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-4
<PAGE>
EXHIBIT E
FORM OF CERTIFICATE OF EXCHANGE
Navistar International Corporation
455 North Cityfront Plaza Drive
Chicago, Illinois 60611
Attention:
[Name and Address of Registrar]
Re: 8% Senior Subordinated Notes due 2008
(CUSIP _______________)
Reference is hereby made to the Indenture, dated as of February 4,
1998 (the "Indenture"), between Navistar International Corporation (the
"Issuer") and Harris Trust and Savings Bank, 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 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
E-1
<PAGE>
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] o 144A Global Security, o Regulation S Global Security, 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-2
<PAGE>
EXHIBIT 4.5
NAVISTAR INTERNATIONAL CORPORATION
$100,000,000
7% Senior Notes due 2003
Purchase Agreement
January 30, 1998
J.P. MORGAN SECURITIES INC.
CREDIT SUISSE FIRST BOSTON CORPORATION
CHASE SECURITIES INC.
c/o J.P. Morgan Securities Inc.
60 Wall Street
New York, New York 10260-0060
Ladies and Gentlemen:
Navistar International Corporation, a Delaware corporation (the "Company"),
proposes to issue and sell to J.P. Morgan Securities Inc., Credit Suisse First
Boston Corporation and Chase Securities Inc. (the "Initial Purchasers")
$100,000,000 aggregate principal amount of its 7% Senior Notes due 2003 (the
"Securities"). The Securities will be issued pursuant to the provisions of an
Indenture to be dated as of February 4, 1998 (the "Indenture") by and between
the Company and Harris Trust and Savings Bank 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 February 4, 1998 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
<PAGE>
-2-
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 amount of Securities set forth
opposite such Initial Purchaser's name in Schedule I hereto at a price equal to
98.5429% of their principal amount (the "Purchase Price") plus accrued interest,
if any, from February 4, 1998.
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 or (2) 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 at a bank reasonably acceptable to the Initial
Purchasers no later than noon the Business Day (as defined below) prior to the
Closing Date (as defined below), on February 4, 1998 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 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
Notes"), with any transfer taxes
<PAGE>
-3-
payable in connection with the transfer to the Initial Purchasers of the
Securities duly paid by the Company. The Global 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 January 22, 1998 (the
"Preliminary Offering Memorandum") and an offering memorandum, dated
January 30, 1998 (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 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 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 unaudited financial statements of the Company, except as
otherwise stated therein; and Deloitte & Touche LLP, 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; all of the
outstanding capital stock of each Subsidiary of the Com-
<PAGE>
-4-
pany 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 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 not reasonably be
expected to 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
<PAGE>
-5-
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;
(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
<PAGE>
-6-
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 reasonably be expected to have a
Material Adverse Effect;
(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,
<PAGE>
-7-
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 reasonably be expected to 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
reasonably be expected to have a Material Adverse Effect or that could
reasonably be expected 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; 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 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
<PAGE>
-8-
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 reasonably be expected to 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 reasonably be
expected to 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 reasonably be expected to 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; and
(u) the Securities satisfy the requirements set forth in Rule
144A(d)(3) under the Securities Act.
5. The Company covenants and agrees with each Initial Purchaser as
follows:
<PAGE>
-9-
(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 object;
(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
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;
<PAGE>
-10-
(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
except as otherwise contemplated by the Offering Memorandum;
(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 trading in the PORTALSM Market ("PORTAL") of
the Nasdaq Stock Market, Inc.;
(h) to furnish to the registered holders of the Securities within a
reasonable period of time after such information is filed with the
Commission 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 such information is filed with the
Commission with respect to 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 Closing Date, 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 reasonable 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, 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 and the Registration Rights Agreement,
including mailing and
<PAGE>
-11-
shipping, as herein provided, (v) payable to rating agencies in connection
with the rating of the Securities and (vi) qualifying the Securities for
trading in PORTAL;
(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);
(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;
(o) during the period of two years after the Closing Date, the
Company will, upon request, furnish to each of the Initial Purchasers and
any holder of Securities a copy of the restrictions on transfer applicable
to the Securities; and
(p) during the period of two years after the Closing Date, the
Company will not be or become an open-end investment company, unit
investment trust or face-amount certificate company that is or is required
to be registered under Section 8 of the Investment Company Act.
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,
<PAGE>
-12-
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 accorded 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 Robert Boardman, 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
<PAGE>
-13-
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
each jurisdiction in which it owns or leases properties, or conducts
business, so as to require such qualification, except where the
failure to be in good standing would not reasonably be expected to
have a Material Adverse Effect;
(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 corporation for the transaction of
business and is in good standing in each jurisdiction in which it owns
or leases properties, or conducts business, so as to require such
qualification, except where the failure to be in good standing would
not reasonably be expected to have a Material Adverse Effect;
(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 and 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 after
reasonable investigation, threatened against or affecting the Company
or any of the Subsidiaries that could reasonably be expected to have a
Material Adverse Effect or that could reasonably be expected to have a
material adverse effect on the consummation of the transactions
contemplated in, or the fulfillment of the terms of, this
<PAGE>
-14-
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 after reasonable
investigation, 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; and
(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 material properties or assets of
the Company or of any Subsidiary under, (A) any material contract,
indenture, mortgage, deed of trust, loan agreement note, lease,
partnership agreement or other agreement or instrument known to such
counsel after reasonable investigation 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 known to such counsel after reasonable
investigation except, with respect to clauses (A) and (B), any breach
or violation that would not reasonably be expected to have a Material
Adverse Effect.
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
<PAGE>
-15-
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 the Executive Vice President - Chief Financial
Officer, 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, 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;
(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; and
(l) on or prior to the Closing Date the Company shall have furnished
to the Initial Purchasers a duly executed waiver and amendment to the
Mexico Credit Agreement (as defined in the Offering Memorandum) in form and
substance satisfactory to them.
<PAGE>
-16-
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 reasonable 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 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 fourth paragraph on
page 2 of the Offering Memorandum and the first, third, fifth, eighth and ninth
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
<PAGE>
-17-
(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 Person, of such Indemnified Person from all
liability on claims that are the subject matter of such proceeding.
<PAGE>
-18-
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
<PAGE>
-19-
guilty of such fraudulent misrepresentation. The Initial Purchasers' obligations
to contribute 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 Ini-
<PAGE>
-20-
tial 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 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
455 North Cityfront Plaza Drive, Chicago, Illinois 60611; Attention: Vice
President and Treasurer (facsimile (312) 836-2573) with a copy to the Company's
General Counsel at the same address.
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.
<PAGE>
S-1
If the foregoing is in accordance with your understanding, please sign and
return four counterparts hereof.
Very truly yours,
NAVISTAR INTERNATIONAL
CORPORATION
By: /s/ Thomas M. Hough
------------------------
Name: Thomas M. Hough
Title: Vice President & Treasurer
Accepted: January 30, 1998
J.P. MORGAN SECURITIES INC.
CREDIT SUISSE FIRST BOSTON CORPORATION
CHASE SECURITIES INC.
By: J.P. Morgan Securities Inc.
By: /s/ Douglas A. Cruikshank
--------------------------------
Name: Douglas A. Cruikshank
Title: Vice President
<PAGE>
ANNEX I
(A) In addition to offers pursuant to clause (B)(1) 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 clause (B)(1) 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 severally represents and agrees that
(i) it has not offered or sold and prior to the date six months after the date
of issue of the Securities will not offer or sell any Securities to persons in
the United Kingdom except to persons whose ordinary activities involve them in
acquiring, holding, managing or disposing of investments (as principal or agent)
for the purposes of their business or otherwise in circumstances which have not
resulted and will not result in an offer to the public in the United Kingdom
within the meaning of the Public Offers of Securities Regulations 1995, (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 or passed
on and will only issue or pass on in the United Kingdom any
<PAGE>
AI-2
document received by it in connection with the issue 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 1996 or is a person to
whom such 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 (other than an announcement of
the consummation of the offer and sale of the Securities) 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 (other than the Offering
Memorandum).
<PAGE>
ANNEX II
[Form of Registration Rights Agreement]
<PAGE>
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.......................... $ 40,000,000
Credit Suisse First Boston Corporation 40,000,000
Chase Securities Inc................................ 20,000,000
------------
Total.......................................... $100,000,000
</TABLE>
<PAGE>
EXHIBIT 4.6
-----------
REGISTRATION RIGHTS AGREEMENT
Dated as of February 4, 1998
among
NAVISTAR INTERNATIONAL CORPORATION
and
J.P. MORGAN SECURITIES INC.,
CREDIT SUISSE FIRST BOSTON CORPORATION
and
CHASE SECURITIES INC.
<PAGE>
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "Agreement") is dated as of
February 4, 1998, by and among NAVISTAR INTERNATIONAL CORPORATION, a Delaware
corporation (the "Company"), and J.P. MORGAN SECURITIES INC., CREDIT SUISSE
FIRST BOSTON CORPORATION and CHASE SECURITIES INC. (collectively, the "Initial
Purchasers").
This Agreement is entered into in connection with the Purchase
Agreement, dated as of January 30, 1998, 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
7% Senior Notes due 2003 (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 Date.
-----------------
Effectiveness Date: The 150th day after the Closing Date.
------------------
Effectiveness Period: See Section 3(a).
--------------------
Event Date: See Section 4(b).
----------
<PAGE>
-2-
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 February 4, 1998, between the
---------
Company and Harris Trust and Savings Bank, 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.
-----
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).
----------------
<PAGE>
-3-
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,
(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.
<PAGE>
-4-
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).
------------
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 20
<PAGE>
-5-
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 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 (and the Company's 8% Senior
Subordinated Notes due 2008) 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 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.
<PAGE>
-6-
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 Securities") (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
<PAGE>
-7-
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 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 S-3 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 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
<PAGE>
-8-
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 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):
<PAGE>
-9-
(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
(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,
<PAGE>
-10-
notwithstanding any provision to the contrary, so long as any Registrable
Security is 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 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
--------
<PAGE>
-11-
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 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
<PAGE>
-12-
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 Registration 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 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.
<PAGE>
-13-
(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.
(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 Pe-
<PAGE>
-14-
riod, 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 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 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
<PAGE>
-15-
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 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 Nasdaq Stock Market's National Market 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
incor-
<PAGE>
-16-
porated 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 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 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
<PAGE>
-17-
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 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
<PAGE>
-18-
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) The Company will use its best efforts to (i) if the Registrable
Securities have been rated prior to the initial sale of such Registrable
Securities, confirm such ratings will apply to the Registrable Securities
covered by a Registration Statement or (ii) if the Registrable Securities
were not previously rated, cause the Registrable Securities covered by a
Registration Statement to be rated with the appropriate rating agencies, if
so requested by Holders of a majority in aggregate principal amount of the
Registrable Securities covered by such Registration Statement, or by the
managing underwriters, if any.
(v) Use its reasonable best efforts to take all other steps necessary
to effect the registration of the 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
<PAGE>
-19-
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 Registration 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)
reasonable fees and disbursements of counsel for the Company and fees and
disbursements of special counsel for the sellers of Registrable Securities
(subject to the provisions of Section 6(b)),
<PAGE>
-20-
(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 except for those of its
officers and directors in attending roadshow presentations..
(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 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
<PAGE>
-21-
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, if required by law.
Each Participant will be required to agree, severally and not jointly,
to indemnify and hold harmless the Company, 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
<PAGE>
-22-
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 local 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 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 refer-
<PAGE>
-23-
ence 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 Securities 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.
<PAGE>
-24-
9. Underwritten Registrations
--------------------------
Nothing in this Agreement shall be interpreted so as to obligate the
Company to participate in an underwritten offering of Registrable Securities
covered by any Shelf Registration. The Company's decision as to whether to
cooperate with a proposed underwritten offering shall be at its sole discretion.
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 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.
<PAGE>
-25-
(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.
(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 455 North Cityfront Plaza Drive, Chicago,
Illinois, 60611, Attention: Vice President and Treasurer and General
Counsel; with a copy to Kirkland & Ellis, 200 East Randolph Drive, Chicago,
Illinois, 60601, Attention: Michael H. Kerr.
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 timely delivered to a next-day air courier; and when receipt is
acknowledged by the addressee, if telecopied.
<PAGE>
-26-
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.
(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 exe-
<PAGE>
-27-
cuted 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 INTERNATIONAL CORPORATION
By: /s/ Thomas M. Hough
---------------------------------------
Name: Thomas M. Hough
Title: Vice President & Treasurer
J.P. MORGAN SECURITIES INC.
CREDIT SUISSE FIRST BOSTON CORPORATION
CHASE SECURITIES INC.
By: J.P. Morgan Securities Inc.
By: /s/ Douglas A. Cruikshank
---------------------------------------
Name: Douglas A. Cruikshank
Title: Vice President
By: Credit Suisse First Boston Corporation
By: /s/ Thomas W. S. Groves
---------------------------------------
Name: Thomas W. S. Groves
Title: Vice President
<PAGE>
EXHIBIT 4.7
NAVISTAR INTERNATIONAL CORPORATION
$250,000,000
8% Senior Subordinated Notes due 2008
Purchase Agreement
January 30, 1998
J.P. MORGAN SECURITIES INC.
CREDIT SUISSE FIRST BOSTON CORPORATION
CHASE SECURITIES INC.
BANCAMERICA ROBERTSON STEPHENS
NATIONSBANC MONTGOMERY SECURITIES LLC
c/o J.P. Morgan Securities Inc.
60 Wall Street
New York, New York 10260-0060
Ladies and Gentlemen:
Navistar International Corporation, a Delaware corporation (the "Company"),
proposes to issue and sell to J.P. Morgan Securities Inc., Credit Suisse First
Boston Corporation, Chase Securities Inc., BancAmerica Robertson Stephens and
NationsBanc Montgomery Securities LLC (the "Initial Purchasers") $250,000,000
aggregate principal amount of its 8% Senior Subordinated Notes due 2008 (the
"Securities"). The Securities will be issued pursuant to the provisions of an
Indenture to be dated as of February 4, 1998 (the "Indenture") by and between
the Company and Harris Trust and Savings Bank, 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 February 4, 1998 among the Company and the Initial
Purchasers (the "Registration Rights Agreement").
<PAGE>
-2-
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 amount of
Securities set forth opposite such Initial Purchaser's name in Schedule I hereto
at a price equal to 97.4200% of their principal amount (the "Purchase Price")
plus accrued interest, if any, from February 4, 1998.
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, or (2) 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 at a bank reasonably acceptable to the Initial
Purchasers no later than noon the Business Day (as defined below) prior to the
Closing Date (as defined below), on February 4, 1998, 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.
<PAGE>
-3-
Payment for the Securities 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
Notes"), with any transfer taxes payable in connection with the transfer to the
Initial Purchasers of the Securities duly paid by the Company. The Global 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 January 22, 1998 (the
"Preliminary Offering Memorandum") and an offering memorandum, dated
January 30, 1998 (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 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 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 unaudited financial statements of the Company, except as
otherwise stated therein; and Deloitte & Touche LLP, 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
<PAGE>
-4-
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; 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 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 not reasonably be
expected to 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;
<PAGE>
-5-
(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;
(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
<PAGE>
-6-
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 reasonably be expected to have a
Material Adverse Effect;
(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 Secu-
<PAGE>
-7-
rities 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 reasonably be expected to 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
reasonably be expected to have a Material Adverse Effect or that could
reasonably be expected 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; 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
<PAGE>
-8-
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
reasonably be expected to 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 reasonably be expected to
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 reasonably be expected to 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; and
<PAGE>
-9-
(u) the Securities satisfy the requirements set forth in Rule
144A(d)(3) under the Securities Act.
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 object;
(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
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;
<PAGE>
-10-
(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
except as otherwise contemplated by the Offering Memorandum;
(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 trading in the PORTALSM Market ("PORTAL") of
the Nasdaq Stock Market, Inc.;
(h) to furnish to the registered holders of the Securities within a
reasonable period of time after such information is filed with the
Commission 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 such information is filed with the
Commission with respect to 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 Closing Date, 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 reasonable 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, amendments and supplements thereto), (iii) incurred in
connection with the
<PAGE>
-11-
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 and the Registration Rights Agreement, including mailing and
shipping, as herein provided, (v) payable to rating agencies in connection
with the rating of the Securities; and (vi) qualifying the Securities for
trading in PORTAL;
(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);
(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;
(o) during the period of two years after the Closing Date, the
Company will, upon request, furnish to each of the Initial Purchasers and
any holder of Securities a copy of the restrictions on transfer applicable
to the Securities; and
(p) during the period of two years after the Closing Date, the
Company will not be or become an open-end investment company, unit
investment trust or face-amount certificate company that is or is required
to be registered under Section 8 of the Investment Company Act.
<PAGE>
-12-
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 accorded 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.
<PAGE>
-13-
(f) the Initial Purchasers shall have received on the Closing Date a
signed opinion of Robert Boardman, 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
each jurisdiction in which it owns or leases properties, or conducts
business, so as to require such qualification, except where the
failure to be in good standing would not reasonably be expected to
have a Material Adverse Effect;
(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 corporation for the transaction of
business and is in good standing in each jurisdiction in which it owns
or leases properties, or conducts business, so as to require such
qualification, except where the failure to be in good standing would
not reasonably be expected to have a Material Adverse Effect;
(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 and are fully
paid and non-assessable;
<PAGE>
-14-
(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 after
reasonable investigation, threatened against or affecting the Company
or any of the Subsidiaries that could reasonably be expected to have a
Material Adverse Effect or that could reasonably be expected 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; 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 after reasonable
investigation, 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; and
(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 material properties or assets of
the Company or of any Subsidiary under, (A) any material contract,
indenture, mortgage, deed of trust, loan agreement note, lease,
partnership agreement or other agreement or instrument known to such
counsel after reasonable investigation 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 known to such counsel after reasonable
investigation except, with respect to clauses (A) and (B), any breach
or violation that would not reasonably be expected to have a Material
Adverse Effect.
<PAGE>
-15-
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 the Executive Vice President - Chief Financial
Officer, 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, 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;
<PAGE>
-16-
(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; and
(l) on or prior to the Closing Date the Company shall have furnished
to the Initial Purchasers a duly executed waiver and amendment to the
Mexico Credit Agreement (as defined in the Offering Memorandum) in form and
substance satisfactory to them.
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 reasonable 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 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
<PAGE>
-17-
the Offering Memorandum is the information in the last paragraph of the cover
page of the Offering Memorandum, the fourth paragraph on page 2 of the Offering
Memorandum and the first, third, fifth, eighth and ninth 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 Indem-
<PAGE>
-18-
nified 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 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
<PAGE>
-19-
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 contribute 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.
<PAGE>
-20-
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 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
455 North Cityfront Plaza Drive, Chicago, Illinois 60611; Attention: Vice
President and Treasurer (facsimile (312) 836-2573) with a copy to the Company's
General Counsel at the same address.
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.
<PAGE>
S-1
If the foregoing is in accordance with your understanding, please sign and
return four counterparts hereof.
Very truly yours,
NAVISTAR INTERNATIONAL
CORPORATION
By: /s/ Thomas M. Hough
-----------------------------
Name: Thomas M. Hough
Title: Vice President & Treasurer
Accepted: January 30, 1998
J.P. MORGAN SECURITIES INC.
CREDIT SUISSE FIRST BOSTON CORPORATION
CHASE SECURITIES INC.
BANCAMERICA ROBERTSON STEPHENS
NATIONSBANC MONTGOMERY SECURITIES LLC
By: J.P. Morgan Securities Inc.
By: /s/ Douglas A. Cruikshank
-----------------------------
Name: Douglas A. Cruikshank
Title: VP
<PAGE>
ANNEX I
(A) In addition to offers pursuant to clause (B)(1) 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 clause (B)(1) 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 severally represents and agrees that (i)
it has not offered or sold and prior to the date six months after the date of
issue of the Securities will not offer or sell any Securities to persons in the
United Kingdom except to persons whose ordinary activities involve them in
acquiring, holding, managing or disposing of investments (as principal or agent)
for the purposes of their business or otherwise in circumstances which have not
resulted and will not result in an offer to the public in the United Kingdom
within the meaning of the Public Offers of Securities Regulations 1995, (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 or passed
on and will only issue or pass on in the United Kingdom any
<PAGE>
AI-2
document received by it in connection with the issue 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 1996 or is a person to whom
such 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 (other than an announcement of
the consummation of the offer and sale of the Securities) 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 (other than the Offering
Memorandum).
<PAGE>
ANNEX II
[Form of Registration Rights Agreement]
<PAGE>
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.......................... $ 87,375,000
Credit Suisse First Boston Corporation.............. 87,375,000
Chase Securities Inc................................ 50,000,000
BancAmerica Robertson Stephens...................... 12,625,000
NationsBanc Montgomery Securities LLC............... 12,625,000
------------
Total.......................................... $250,000,000
</TABLE>
<PAGE>
EXHIBIT 4.8
REGISTRATION RIGHTS AGREEMENT
Dated as of February 4, 1998
among
NAVISTAR INTERNATIONAL CORPORATION
and
J.P. MORGAN SECURITIES INC.,
CREDIT SUISSE FIRST BOSTON CORPORATION,
CHASE SECURITIES INC.,
BANCAMERICA ROBERTSON STEPHENS
and
NATIONSBANC MONTGOMERY SECURITIES LLC
<PAGE>
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "Agreement") is dated as of
February 4, 1998, by and among NAVISTAR INTERNATIONAL CORPORATION, a Delaware
corporation (the "Company"), and J.P. MORGAN SECURITIES INC., CREDIT SUISSE
FIRST BOSTON CORPORATION, CHASE SECURITIES INC., BANCAMERICA ROBERTSON STEPHENS
and NATIONSBANC MONTGOMERY SECURITIES LLC (collectively, the "Initial
Purchasers").
This Agreement is entered into in connection with the Purchase
Agreement, dated as of January 30, 1998, among the Company and the Initial
Purchasers (the "Purchase Agreement") relating to the sale by the Company to the
Initial Purchasers, severally, of $250,000,000 aggregate principal amount of its
8% Senior Subordinated Notes due 2008 (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 Date.
-----------------
Effectiveness Date: The 150th day after the Closing Date.
------------------
Effectiveness Period: See Section 3(a).
--------------------
Event Date: See Section 4(b).
----------
<PAGE>
-2-
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 February 4, 1998, between the
---------
Company and Harris Trust and Savings Bank, 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.
-----
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).
----------------
<PAGE>
-3-
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,
(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.
<PAGE>
-4-
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).
------------
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 20
<PAGE>
-5-
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 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 (and the Company's 7% Senior Notes due
2003) 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 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.
<PAGE>
-6-
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 Securities") (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
<PAGE>
-7-
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 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 S-3 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 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
<PAGE>
-8-
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 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):
<PAGE>
-9-
(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
(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,
<PAGE>
-10-
notwithstanding any provision to the contrary, so long as any Registrable
Security is 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 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
--------
<PAGE>
-11-
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 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
<PAGE>
-12-
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 Registration 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 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.
<PAGE>
-13-
(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.
(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 Pe-
<PAGE>
-14-
riod, 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 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 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
<PAGE>
-15-
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 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 Nasdaq Stock Market's National Market if
similar securities of the Company are so authorized.
(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 Nasdaq Stock Market's National Market 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
incor-
<PAGE>
-16-
porated 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 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 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
<PAGE>
-17-
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 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
<PAGE>
-18-
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) The Company will use its best efforts to (i) if the Registrable
Securities have been rated prior to the initial sale of such Registrable
Securities, confirm such ratings will apply to the Registrable Securities
covered by a Registration Statement or (ii) if the Registrable Securities
were not previously rated, cause the Registrable Securities covered by a
Registration Statement to be rated with the appropriate rating agencies, if
so requested by Holders of a majority in aggregate principal amount of the
Registrable Securities covered by such Registration Statement, or by the
managing underwriters, if any.
(v) Use its reasonable best efforts to take all other steps necessary
to effect the registration of the 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
<PAGE>
-19-
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 Registration 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)
reasonable fees and disbursements of counsel for the Company and fees and
disbursements of special counsel for the sellers of Registrable Securities
(subject to the provisions of Section 6(b)),
<PAGE>
-20-
(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 except for those of its
officers and directors in attending roadshow presentations.
(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 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
<PAGE>
-21-
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, if required by law.
Each Participant will be required to agree, severally and not jointly,
to indemnify and hold harmless the Company, 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
<PAGE>
-22-
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 local 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 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 refer-
<PAGE>
-23-
ence 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 Securities 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.
<PAGE>
-24-
9. Underwritten Registrations
--------------------------
Nothing in this Agreement shall be interpreted so as to obligate the
Company to participate in an underwritten offering of the Registrable Securities
covered by any Shelf Registration. The Company's decision as to whether to
cooperate with a proposed underwritten offering shall be at its sole discretion.
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 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.
<PAGE>
-25-
(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.
(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 455 North Cityfront Plaza Drive, Chicago,
Illinois, 60611, Attention: Vice President and Treasurer and General
Counsel; with a copy to Kirkland & Ellis, 200 East Randolph Drive, Chicago,
Illinois, 60601, Attention: Michael H. Kerr.
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 timely delivered to a next-day air courier; and when receipt is
acknowledged by the addressee, if telecopied.
<PAGE>
-26-
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.
(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 ex
<PAGE>
-27-
ecuted 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 INTERNATIONAL CORPORATION
By: /s/ Thomas M. Hough
-----------------------------------------------
Name: Thomas M. Hough
Title: Vice President & Treasurer
J.P. MORGAN SECURITIES INC.
CREDIT SUISSE FIRST BOSTON CORPORATION
CHASE SECURITIES INC.
BANCAMERICA ROBERTSON STEPHENS
NATIONSBANC MONTGOMERY SECURITIES, INC.
By: J.P. Morgan Securities Inc.
By: /s/ Douglas A. Cruikshank
-----------------------------------------------
Name: Douglas A. Cruikshank
Title: Vice President
By: Credit Suisse First Boston Corporation
By: /s/ Thomas W. S. Groves
-----------------------------------------------
Name: Thomas W. S. Groves
Title: Vice President
<PAGE>
KIRKLAND & ELLIS
PARTNERSHIPS INCLUDING PROFESSIONAL CORPORATIONS
200 East Randolph Drive
Chicago, Illinois 60601
To Call Writer Direct: 312 861-2000 Facsimile:
312 861-2000 312 861-2200
Exhibit 5.1
March 5, 1998
Navistar International Corporation
455 North Cityfront Plaza
Chicago, Illinois 60611
Re: Series B 7% Senior Notes due 2003
Series B 8% Senior Subordinated Notes due 2008
----------------------------------------------
Ladies and Gentlemen:
We are acting as special counsel to Navistar International Corporation, a
Delaware corporation (the "Company"), in connection with the proposed
registration by the Company of up to $100,000,000 in aggregate principal amount
of the Company's Series B 7% Senior Notes due 2003 (the "Senior Exchange Notes")
and up to $250,000,000 in aggregate principal amount of the Company's Series B
8% Senior Subordinated Notes due 2008 (the "Senior Subordinated Exchange Notes"
and together with the Senior Exchange Notes, the "Exchange Notes"), pursuant to
a Registration Statement on Form S-4, filed with the Securities and Exchange
Commission (the "Commission") on February 27, 1998 under the Securities Act of
1933, as amended (the "Securities Act") (such Registration Statement, as amended
or supplemented, is hereinafter referred to as the "Registration Statement"),
for the purpose of effecting an exchange offer (the "Exchange Offer") for the
Company's 7% Senior Notes due 2003 and 8% Senior Subordinated Notes due 2008
(collectively, the "Old Notes"). The Senior Exchange Notes are to be issued
pursuant to an Indenture (the "Senior Notes Indenture"), dated as of January 30,
1998, among the Company and Harris Trust and Savings Bank, as Trustee, and the
Senior Subordinated Exchange Notes are to be issued pursuant to an Indenture
(the "Senior Subordinated Notes Indenture" and together with the Senior Notes
Indenture, the "Indentures") among the Company and Harris Trust and Saving
Banks, as Trustee.
In that connection, we have examined originals, or copies certified or
otherwise identified to our satisfaction, of such documents, corporate records
and other instruments as we have deemed necessary for the purposes of this
opinion, including (i) the corporate and organizational documents of the
Company, (ii) minutes and records of the corporate proceedings of the Company
with respect to the issuance of the Exchange Notes, (iii) the Registration
Statement and exhibits thereto and (iv) the Registration Rights Agreements, each
date February 4, 1998, among the Company and the respective Initial Purchasers
of the Old Notes as set forth therein.
London Los Angeles New York Washington D.C.
<PAGE>
KIRKLAND & ELLIS
Navistar International Corporation
March 5, 1998
Page 2
For purposes of this opinion, we have assumed the authenticity of all
documents submitted to us as originals, the conformity to the originals of all
documents submitted to us as copies and the authenticity of the originals of all
documents submitted to us as copies. We have also assumed the genuineness of the
signatures of persons signing all documents in connection with which this
opinion is rendered, the authority of such persons signing on behalf of the
parties thereto other than the Company and the due authorization, execution and
delivery of all documents by the parties thereto other than the Company. As to
any facts material to the opinions expressed herein which we have not
independently established or verified, we have relied upon statements and
representations of officers and other representatives of the Company and others.
Based upon and subject to the foregoing qualifications, assumptions and
limitations and the further limitations set forth below, we are of the opinion
that:
(1) The Company is a corporation existing and in good standing under the
General Corporation Law of the State of Delaware.
(2) The sale and issuance of the Exchange Notes has been validly
authorized by the Company.
(3) When, as and if (i) the Registration Statement shall have become
effective pursuant to the provisions of the Securities Act, (ii) the
Indentures shall have been qualified pursuant to the provisions of the
Trust Indenture Act of 1939, as amended, (iii) the Old Notes shall
have been validly tendered to the Company, (iv) the Exchange Notes
shall have been issued in the form and containing the terms described
in the Registration Statement, the Indentures, the resolutions of the
Company's Board of Directors (or authorized committee thereof)
authorizing the foregoing and any legally required consents,
approvals, authorizations and other order of the Commission and any
other regulatory authorities to be obtained, and (v) the Exchange
Notes have been authenticated by the respective Trustee, the Exchange
Notes when issued pursuant to the Exchange Offer will be legally
issued, fully paid and nonassessable and will constitute valid and
binding obligations of the Company.
Our opinions expressed above are subject to the qualifications that we
express no opinion as to the applicability of, compliance with, or effect of (i)
any bankruptcy, insolvency, reorganization, fraudulent transfer, fraudulent
conveyance, moratorium or other similar law affecting the enforcement of
creditors' rights generally, (ii) general principles of equity (regardless of
whether
<PAGE>
KIRKLAND & ELLIS
Navistar International Corporation
March 5, 1998
Page 3
enforcement is considered in a proceeding in equity or at law), (iii) public
policy considerations which may limit the rights of parties to obtain certain
remedies and (iv) any laws except the laws of the State of New York and the
General Corporation Law of the State of Delaware. We advise you that issues
addressed by this letter may be governed in whole or in part by other laws, but
we express no opinion as to whether any relevant difference exists between the
laws upon which our opinions are based and any other laws which may actually
govern. For purposes of the opinion in paragraph 1, we have relied exclusively
upon certificates issued by the Delaware Secretary of State and such opinions
are not intended to provide any conclusion or assurance beyond that conveyed by
such certificates. We have assumed without investigation that there has been no
relevant change or development between the respective dates of such certificates
and the date of this letter.
We hereby consent to the filing of this opinion as Exhibit 5.1 to the
Registration Statement. We also consent to the reference to our firm under the
heading "Legal Matters" in the Registration Statement. In giving this consent,
we do not thereby admit that we are in the category of persons whose consent is
required under Section 7 of the Securities Act of the rules and regulations of
the Commission.
We do not find it necessary for the purposes of this opinion, and
accordingly we do not purport to cover herein, the application of the securities
or "Blue Sky" laws of the various states to the issuance of the Exchange Notes.
This opinion is limited to the specific issues addressed herein, and no
opinion may be inferred or implied beyond that expressly stated herein. We
assume no obligation to revise or supplement this opinion should the present
laws of the State of New York or the General Corporation Law of the State of
Delaware be changed by legislative action, judicial decision or otherwise.
This opinion is furnished to you in connection with the filing of the
Registration Statement, and is not to be used, circulated, quoted or otherwise
relied upon for any other purposes.
Yours very truly,
/s/ KIRKLAND & ELLIS
--------------------
KIRKLAND & ELLIS
<PAGE>
Exhibit 12.1
Navistar International Corporation
Computation of Ratio of Earnings to Fixed Charges
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
(in million of dollars, except ratio data)
<S> <C> <C> <C> <C> <C>
Earnings
- --------
Earnings from continuing operations
before income taxes $242 $105 $262 $158 ($441)
Fixed Charges against earnings 89 98 105 91 105
------------------------------------------
Earnings before fixed charges $331 $203 $367 $249 ($336)
==========================================
Fixed Charges
- -------------
Interest Expense $74 $83 $87 $75 $91
Debt Expense Amortization 2 4 4 4 3
33% of rent expense 13 11 14 12 11
------------------------------------------
Total Fixed Charges $89 $98 $105 $91 $105
==========================================
Ratio 3.7x 2.1x 3.5x 2.7x a)
==========================================
Rent Expense $40 $35 $42 $38 $35
==========================================
</TABLE>
a) Earnings were insufficient to cover fixed charges by approximately $441
million in fiscal 1993.
<TABLE>
<CAPTION>
Computation of Pro Forma Ratio of Earnings to Fixed Charges
For the Year Ended October 31, 1997
<S> <C>
Total earnings before fixed charges,
as above $331
====
Total fixed charges, as above $89
Pro forma net increase in
interest expense 20
----
Pro forma fixed charges $109
====
Pro forma ratio of earnings to
fixed charges 3.0x
=====
</TABLE>
Page 1
<PAGE>
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of Navistar
International Corporation on Form S-4 of our report dated December 15, 1997,
appearing in the Prospectus, which is part of this Registration Statement, and
of our report also dated December 15, 1997 relating to the financial statement
schedule incorporated by reference in this Registration Statement.
We also consent to the reference to us under the heading "Experts" in such
Prospectus.
Deloitte & Touche LLP
Chicago, Illinois
March 5, 1998
<PAGE>
EXHIBIT 24.1
NAVISTAR INTERNATIONAL CORPORATION
POWER OF ATTORNEY
REGISTRATION STATEMENT ON FORM S-4
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned officers and
directors of the Navistar International Corporation ( the "Company "), hereby
appoint John R. Horne, Robert C. Lannert, Robert A. Boardman and J. Steven
Keate, and each of them, as attorneys-in-fact for the undersigned and for each
of them (with full power of substitution and resubstitution), for and in the
name, place and stead of each of undersigned officers and directors of the
Company, to sign and file with the Securities and Exchange Commission under
the Securities Act of 1933, a Registration Statement on Form S-4 (the
"Registration Statement"), for the purpose of registering the Company's offer
to exchange its Series B 7% Senior Notes due 2003 for all its outstanding 7%
Senior Notes due 2003 and its Series B 8% Senior Subordinated Notes due 2008
for all of its outstanding 8% Senior Subordinated Notes due 2008, and any and
all amendments, supplements and exhibits to any such Registration Statement,
including post-effective amendments, and any and all documents required to be
filed with any state securities regulating board or commission pertaining to
such Registration Statement or securities covered thereby, hereby granting
unto said attorneys-in-fact, and each of them, full power and authority to do
and perform each and every act and thing necessary or desirable to be done in
order to effectuate the same as fully and to all intents and purposes as each
of the undersigned might or could do if personally present, hereby ratifying
and confirming all that said attorneys-in-fact and agents, or any of them, or
any of their substitutes, may do or cause to be done by virtue hereof.
SIGNATURE TITLE DATE
/s/ John R. Horne Chairman, President and Chief
Executive Officer and Director
(Principal Executive Officer)
February 27,
- ------------------------------------- 1998
JOHN R. HORNE
Executive Vice President and
Chief Financial Officer and
Director (Principal Financial
Officer)
February ,
- ------------------------------------- 1998
- -------------------------------------
ROBERT C. LANNERT
/s/ J. Steven Keate Vice President and Controller
(Principal Accounting Officer)
February 27,
- ------------------------------------- 1988
J. STEVEN KEATE
/s/ William F. Andrews Director February 26,
- ------------------------------------- 1998
WILLIAM F. ANDREWS
/s/ Andrew F. Brimmer Director February 24,
- ------------------------------------- 1998
ANDREW F. BRIMMER
/s/ John D. Correnti Director February 25,
- ------------------------------------- 1998
JOHN D. CORRENTI
<PAGE>
SIGNATURE TITLE DATE
/s/ William C. Craig Director February 25,
- ------------------------------------- 1998
WILLIAM C. CRAIG
/s/ Jerry E. Dempsey Director February 25,
- ------------------------------------- 1998
JERRY E. DEMPSEY
/s/ John F. Fiedler Director February 27,
- ------------------------------------- 1998
JOHN F. FIEDLER
/s/ John T. Grigsby, Jr. Director February 24,
- ------------------------------------- 1998
JOHN T. GRIGSBY, JR.
/s/ Mary Garst Director February 24,
- ------------------------------------- 1998
MARY GARST
/s/ Michael N. Hammes Director February 24,
- ------------------------------------- 1998
MICHAEL N. HAMMES
/s/ Allen J. Krowe Director February 25,
- ------------------------------------- 1998
ALLEN J. KROWE
/s/ Walter J. Laskowski Director February 25,
- ------------------------------------- 1998
WALTER J. LASKOWSKI
/s/ William F. Patient Director February 27,
- ------------------------------------- 1998
WILLIAM F. PATIENT
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM T-1
Statement of Eligibility
Under the Trust Indenture Act of 1939
of a Corporation Designated to Act as
Trustee
Check if an Application to Determine
Eligibility of a Trustee Pursuant to Section
305(b)(2) _______________
HARRIS TRUST AND SAVINGS BANK
(Name of Trustee)
Illinois 23-1614034
(I.R.S. Employer
(State of Incorporation) Identification No.)
111 West Monroe Street, Chicago, Illinois 60603
(Address of principal executive offices)
Daniel G. Donovan, Harris Trust and Savings Bank,
111 West Monroe Street, Chicago, Illinois, 60603
312-461-2908
(Name, address and telephone number for agent for service)
NAVISTAR INTERNATIONAL CORPORATION
(Name of Obligor)
Delaware 36-2992650
(I.R.S. Employer
(State of Incorporation) Identification No.)
455 North Cityfront Plaza Drive
Chicago, Illinois 60611
(Address of principal executive offices)
7% Senior Notes, Due 2003 and
8% Senior Subordinated Notes, Due 2008
(Title of indenture securities)
<PAGE>
1. GENERAL INFORMATION. Furnish the following information as to the Trustee:
(a) Name and address of each examining or supervising authority to which
it is subject.
Commissioner of Banks and Trust Companies, State of Illinois,
Springfield, Illinois; Chicago Clearing House Association, 164 West
Jackson Boulevard, Chicago, Illinois; Federal Deposit Insurance
Corporation, Washington, D.C.; The Board of Governors of the Federal
Reserve System, Washington, D.C.
(b) Whether it is authorized to exercise corporate trust powers.
Harris Trust and Savings Bank is authorized to exercise corporate
trust powers.
2. AFFILIATIONS WITH OBLIGOR. If the Obligor is an affiliate of the Trustee,
describe each such
affiliation.
The Obligor is not an affiliate of the Trustee.
3. thru 15.
NO RESPONSE NECESSARY
16. LIST OF EXHIBITS.
1. A copy of the articles of association of the Trustee as now in effect
which includes the authority of the trustee to commence business and to
exercise corporate trust powers.
A copy of the Certificate of Merger dated April 1, 1972 between Harris
Trust and Savings Bank, HTS Bank and Harris Bankcorp, Inc. which
constitutes the articles of association of the Trustee as now in effect
and includes the authority of the Trustee to commence business and to
exercise corporate trust powers was filed in connection with the
Registration Statement of Louisville Gas and Electric Company, File No.
2-44295, and is incorporated herein by reference.
2. A copy of the existing by-laws of the Trustee.
A copy of the existing by-laws of the Trustee was filed in connection
with the Registration Statement of Commercial Federal Corporation, File
No. 333-20711, and is incorporated herein by reference.
3. The consents of the Trustee required by Section 321(b) of the Act.
(included as Exhibit A on page 2 of this statement)
4. A copy of the latest report of condition of the Trustee published
pursuant to law or the requirements of its supervising or examining
authority.
(included as Exhibit B on page 3 of this statement)
<PAGE>
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, the Trustee,
HARRIS TRUST AND SAVINGS BANK, a corporation organized and existing under the
laws of the State of Illinois, has duly caused this statement of eligibility to
be signed on its behalf by the undersigned, thereunto duly authorized, all in
the City of Chicago, and State of Illinois, on the 4th day of March 1998.
Harris Trust and Savings Bank
By: /s/ DGDonovan
----------------------------
D. G. Donovan
Assistant Vice President
EXHIBIT A
The consents of the Trustee required by Section 321(b) of the Act.
Harris Trust and Savings Bank, as the Trustee herein named, hereby consents that
reports of examinations of said trustee by Federal and State authorities may be
furnished by such authorities to the Securities and Exchange Commission upon
request therefor.
Harris Trust and Savings Bank
By: /s/ DGDonovan
----------------------------
D.G. Donovan
Assistant Vice President
2
<PAGE>
EXHIBIT B
Attached is a true and correct copy of the statement of condition of Harris
Trust and Savings Bank as of December 31, 1997, as published in accordance with
a call made by the State Banking Authority and by the Federal Reserve Bank of
the Seventh Reserve District.
[LOGO] HARRIS BANK
Harris Trust and Savings Bank
111 West Monroe Street
Chicago, Illinois 60603
of Chicago, Illinois, And Foreign and Domestic Subsidiaries, at the close of
business on December 31, 1997, a state banking institution organized and
operating under the banking laws of this State and a member of the Federal
Reserve System. Published in accordance with a call made by the Commissioner of
Banks and Trust Companies of the State of Illinois and by the Federal Reserve
Bank of this District.
Bank's Transit Number 71000288
<TABLE>
<CAPTION>
THOUSANDS
ASSETS OF DOLLARS
<S> <C> <C>
Cash and balances due from depository institutions:
Non-interest bearing balances and currency and coin..................... $ 1,252,381
Interest bearing balances............................................... $ 598,062
Securities:....................................................................
a. Held-to-maturity securities $ 0
b. Available-for-sale securities $ 3,879,399
Federal funds sold and securities purchased under agreements to resell i $ 71,725
Loans and lease financing receivables:
Loans and leases, net of unearned income................................ $ 8,813,821
LESS: Allowance for loan and lease losses.............................. $ 99,678
------------------
Loans and leases, net of unearned income, allowance, and reserve
(item 4.a minus 4.b).................................................... $ 8,714,143
Assets held in trading accounts................................................ $ 136,538
Premises and fixed assets (including capitalized leases)....................... $ 221,312
Other real estate owned........................................................ $ 642
Investments in unconsolidated subsidiaries and associated companies............ $ 103
Customer's liability to this bank on acceptances outstanding................... $ 46,480
Intangible assets.............................................................. $ 279,897
Other assets................................................................... $ 653,101
-------------------------
TOTAL ASSETS $15,853,783
=========================
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
LIABILITIES
Deposits:
<S> <C> <C>
In domestic offices.......................................................... $ 8,926,635
Non-interest bearing.................................................... $3,692,891
Interest bearing........................................................ $5,233,744
In foreign offices, Edge and Agreement subsidiaries, and IBF's............... $ 1,763,669
Non-interest bearing.................................................... $ 22,211
Interest bearing........................................................ $1,741,458
Federal funds purchased and securities sold under agreements to repurchase in
domestic offices of the bank and of its Edge and Agreement subsidiaries, and
in IBF's:
Federal funds purchased.& securites sold under agreements to repurchase...... $ 2,693,600
Trading Liabilities 82,861
Other borrowed money:..........................................................
a. With remaining maturity of one year or less $ 601,799
b. With remaining maturity of more than one year $ 0
Bank's liability on acceptances executed and outstanding $ 46,480
Subordinated notes and debentures.............................................. $ 325,000
Other liabilities.............................................................. $ 134,309
-------------------------
TOTAL LIABILITIES $14,574,353
=========================
EQUITY CAPITAL
Common stock................................................................... $ 100,000
Surplus........................................................................ $ 601,026
a. Undivided profits and capital reserves..................................... $ 573,416
b. Net unrealized holding gains (losses) on available-for-sale securities $ 4,988
-------------------------
TOTAL EQUITY CAPITAL $ 1,279,430
-------------------------
Total liabilities, limited-life preferred stock, and equity capital............ $15,853,783
=========================
</TABLE>
I, Pamela Piarowski, Vice President of the above-named bank, do hereby
declare that this Report of Condition has been prepared in conformance with the
instructions issued by the Board of Governors of the Federal Reserve System and
is true to the best of my knowledge and belief.
PAMELA PIAROWSKI
1/30/98
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us and, to the best of our
knowledge and belief, has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and the
Commissioner of Banks and Trust Companies of the State of Illinois and is true
and correct.
EDWARD W. LYMAN,
ALAN G. McNALLY,
RICHARD E. TERRY
Directors.
4
<PAGE>
LETTER OF TRANSMITTAL
TO TENDER FOR EXCHANGE
7% SENIOR NOTES DUE 2003 OR
8% SENIOR SUBORDINATED NOTES DUE 2008
OF
NAVISTAR INTERNATIONAL CORPORATION
Pursuant to the Prospectus, dated March 5, 1998
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK
CITY TIME, ON APRIL 6, 1998 UNLESS EXTENDED (THE "EXPIRATION DATE").
PLEASE READ CAREFULLY THE ATTACHED INSTRUCTIONS
If you desire to accept the Exchange Offer, this Letter of Transmittal should
be completed, signed, and submitted to the Exchange Agent:
HARRIS TRUST AND SAVINGS BANK
By Registered or By Hand/Overnight Facsimile Transmission
Certified Mail: Delivery: Number:
Harris Trust and Savings Harris Trust and Savings (for Eligible
Bank Bank Institutions Only)
c/o Harris Trust Company c/o Harris Trust Company (212) 701-7636
of New York of New York Confirm Receipt of
P.O. Box 1010 88 Pine Street Facsimile by Telephone:
Wall Street Station 19th Floor (212) 701-7624
New York, NY 10268-1010 New York, NY 10005
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS, OR TRANSMISSION VIA
FACSIMILE TO A NUMBER, OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A
VALID DELIVERY.
FOR ANY QUESTIONS REGARDING THIS LETTER OF TRANSMITTAL OR FOR ANY ADDITIONAL
INFORMATION, YOU MAY CONTACT THE EXCHANGE AGENT.
The undersigned hereby acknowledges receipt of the Prospectus, dated March
5, 1998 (as it may be supplemented and amended from time to time, the
"Prospectus") of Navistar International Corporation, a Delaware corporation
(the "Company"), and this Letter of Transmittal (the "Letter of Transmittal"),
that together constitute the Company's offer to exchange (the "Exchange
Offer"): (i) $1,000 principal amount of its Series B 7% Senior Notes due 2003
(the "Senior Exchange Notes"), which will have been registered under the
Securities Act of 1933, as amended (the "Securities Act"), for each $1,000
principal amount of its outstanding 7% Senior Notes due 2003 (the "Old Senior
Notes"); and (ii) $1,000 principal amount of its Series B 8% Senior
Subordinated Notes due 2008 (the "Senior Subordinated Exchange Notes" and,
together with the Senior Exchange Notes, the "Exchange Notes"), which will
have been registered under the Securities Act, for each $1,000 principal
amount of its outstanding 8% Senior Subordinated Notes due 2008 (the "Old
Senior Subordinated Notes" and, together with the Old Senior Notes, the "Old
Notes"). Capitalized terms used but not defined herein have the meanings
ascribed to them in the Prospectus.
The undersigned hereby tenders the Old Notes described in Box 1 below (the
"Tendered Notes") pursuant to the terms and conditions described in the
Prospectus and this Letter of Transmittal. The undersigned is the registered
owner of all the Tendered Notes and the undersigned represents that it has
received from each beneficial owner of the Tendered Notes ("Beneficial
Owners") a duly completed and executed form of "Instruction to Registered
Holder and/or Book-Entry Transfer Facility Participant from Beneficial Owner"
accompanying this Letter of Transmittal, instructing the undersigned to take
the action described in this Letter of Transmittal.
<PAGE>
Subject to, and effective upon, the acceptance for exchange of the Tendered
Notes, the undersigned hereby exchanges, assigns and transfers to, or upon the
order of, the Company all right, title, and interest in, to and under the
Tendered Notes.
Please issue the Exchange Notes exchanged for Tendered Notes in the name(s)
of the undersigned. Similarly, unless otherwise indicated under "SPECIAL
DELIVERY INSTRUCTIONS" below (see Box 3), please send or cause to be sent the
certificates for the Exchange Notes (and accompanying documents, as
appropriate) to the undersigned at the address shown below in Box 1.
The undersigned hereby irrevocably constitutes and appoints the Exchange
Agent as the true and lawful agent and attorney in fact of the undersigned
with respect to the Tendered Notes, with full power of substitution (such
power of attorney being deemed to be an irrevocable power coupled with an
interest), to (i) deliver the Tendered Notes to the Company or cause ownership
of the Tendered Notes to be transferred to, or upon the order of, the Company,
on the books of the registrar for the Old Notes and deliver all accompanying
evidences of transfer and authenticity to, or upon the order of, the Company
upon receipt by the Exchange Agent, as the undersigned's agent, of the
Exchange Notes to which the undersigned is entitled upon acceptance by the
Company of the Tendered Notes pursuant to the Exchange Offer, and (ii) receive
all benefits and otherwise exercise all rights of beneficial ownership of the
Tendered Notes, all in accordance with the terms of the Exchange Offer.
The undersigned understands that tenders of the Old Notes pursuant to the
procedures described under the caption "The Exchange Offer" in the Prospectus
and in the instructions hereto will constitute a binding agreement between the
undersigned and the Company upon the terms and subject to the conditions of
the Exchange Offer, subject only to withdrawal of such tenders on the terms
set forth in the Prospectus under the caption "The Exchange Offer--Withdrawal
of Tenders." All authority herein conferred or agreed to be conferred shall
survive the death or incapacity of the undersigned and any Beneficial
Owner(s), and every obligation of the undersigned or any Beneficial Owner(s)
hereunder shall be binding upon the heirs, representatives, successors, and
assigns of the undersigned and such Beneficial Owner(s).
The undersigned hereby represents and warrants that the undersigned has full
power and authority to tender, exchange, assign, and transfer the Tendered
Notes and that the Company will acquire good and unencumbered title thereto,
free and clear of all liens, restrictions, charges, encumbrances, and adverse
claims when the Tendered Notes are acquired by the Company as contemplated
herein. The undersigned and each Beneficial Owner will, upon request, execute
and deliver any additional documents reasonably requested by the Company or
the Exchange Agent as necessary or desirable to complete and give effect to
the transactions contemplated hereby.
The undersigned hereby represents and warrants that the information set
forth in Box 2 is true and correct.
By accepting the Exchange Offer, the undersigned hereby represents and
warrants that (i) the Exchange Notes to be acquired by the undersigned and any
Beneficial Owner(s) in connection with the Exchange Offer are being acquired
by the undersigned and any Beneficial Owner(s) in the ordinary course of
business of the undersigned and any Beneficial Owner(s), (ii) the undersigned
and each Beneficial Owner are not participating, do not intend to participate,
and have no arrangement or understanding with any person to participate, in
the distribution of the Exchange Notes, (iii) except as otherwise disclosed in
writing herewith, neither the undersigned nor any Beneficial Owner is an
"affiliate," as defined in Rule 405 under the Securities Act, of the Company,
and (iv) the undersigned and each Beneficial Owner acknowledge and agree that
any person participating in the Exchange Offer with the intention or for the
purpose of distributing the Exchange Notes must comply with the registration
and prospectus delivery requirements of the Securities Act, in connection with
a secondary resale of the Exchange Notes acquired by such person and cannot
rely on the position of the Staff of the Securities and Exchange Commission
(the "Commission") set forth in the no-action letters that are discussed in
the section of the Prospectus entitled "The Exchange Offer." In addition, by
accepting the Exchange Offer, the undersigned hereby (i) represents and
warrants that, if the undersigned or any Beneficial Owner of the Old
2
<PAGE>
Notes is a Participating Broker-Dealer, such Participating Broker-Dealer
acquired the Old Notes for its own account as a result of market-making
activities or other trading activities and 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 (ii)
acknowledges that, by receiving Exchange Notes for its own account in exchange
for the Old Notes, where such Old Notes were acquired as a result of market-
making activities or other trading activities, such Participating Broker-
Dealer will deliver a prospectus meeting the requirements of the Securities
Act in connection with any resale of such Exchange Notes.
Holders of the Old Notes that are tendering by book-entry transfer to the
Exchange Agent's account at DTC can execute the tender through the DTC
Automated Tender Offer Program ("ATOP"), for which the transaction will be
eligible. DTC participants that are accepting the Exchange Offer must transmit
their acceptance to DTC, which will verify the acceptance and execute a book-
entry delivery to the Exchange Agent's DTC account. DTC will then send an
Agent's Message to the Exchange Agent for its acceptance. DTC participants may
also accept the Exchange Offer prior to the Expiration Date by submitting a
Notice of Guaranteed Delivery or Agent's Message relating thereto as described
herein under Instruction 2, "Guaranteed Delivery Procedures."
[_]CHECK HERE IF TENDERED NOTES ARE BEING DELIVERED HEREWITH.
[_]CHECK HERE IF TENDERED NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY PREVIOUSLY DELIVERED TO THE EXCHANGE AGENT AND COMPLETE
"USE OF GUARANTEED DELIVERY" BELOW (Box 4).
[_]CHECK HERE IF TENDERED NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE BOOK-ENTRY
TRANSFER FACILITY AND COMPLETE "USE OF BOOK-ENTRY TRANSFER" BELOW (Box 5).
PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL
CAREFULLY BEFORE COMPLETING THE BOXES
BOX 1
DESCRIPTION OF THE OLD NOTES TENDERED
(Attach additional signed pages, if necessary)
- ------------------------------------------------------------------
Name(s) and
Address(es) of
Registered
Note
Holder(s),
exactly as
name(s)
appear(s) on
Note Aggregate
Certificate(s) Certificate Principal Amount Aggregate
(Please fill Number(s) of the Represented by Principal Amount
in, if blank) Old Notes* Certificate(s) Tendered**
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
TOTAL
- -------------------------------------------------------------------------------
* Need not be completed by persons tendering by book-entry transfer.
** The minimum permitted tender is $1,000 in principal amount of the Old
Notes. All other tenders must be in integral multiples of $1,000 of
principal amount. Unless otherwise indicated in this column, the
principal amount of all Old Note Certificates identified in this Box 1 or
delivered to the Exchange Agent herewith shall be deemed tendered. See
Instruction 4.
3
<PAGE>
BOX 2
BENEFICIAL OWNER(S)
- --------------------------------------------------------------------------------
STATE OF PRINCIPAL RESIDENCE OF EACH PRINCIPAL AMOUNT OF TENDERED NOTES
BENEFICIAL OWNER OF TENDERED NOTES HELD FOR ACCOUNT OF BENEFICIAL OWNER
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
BOX 3
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 5, 6 AND 7)
TO BE COMPLETED ONLY IF EXCHANGE NOTES EXCHANGED FOR THE OLD NOTES AND
UNTENDERED NOTES ARE TO BE SENT TO SOMEONE OTHER THAN THE UNDERSIGNED, OR
TO THE UNDERSIGNED AT AN ADDRESS OTHER THAN THAT SHOWN ABOVE.
Mail Exchange Note(s) and any untendered the Old Notes to:
Name(s):
---------------------------------------------------------------------------
(please print)
Address:
---------------------------------------------------------------------------
---------------------------------------------------------------------------
---------------------------------------------------------------------------
(include Zip Code)
Tax Identification or Social Security No.:
4
<PAGE>
BOX 4
USE OF GUARANTEED DELIVERY
(SEE INSTRUCTION 2)
TO BE COMPLETED ONLY IF THE OLD NOTES ARE BEING TENDERED BY MEANS OF A
NOTICE OF GUARANTEED DELIVERY.
Name(s) of Registered Holder(s): __________________________________________
Window Ticket No. (if any): _______________________________________________
Date of Execution of Notice of Guaranteed Delivery: _______________________
Name of Institution that Guaranteed Delivery: _____________________________
If Delivered by Book-Entry Transfer: ______________________________________
Account Number with DTC: __________________________________________________
Transaction Code Number: __________________________________________________
BOX 5
USE OF BOOK-ENTRY TRANSFER
(SEE INSTRUCTION 1)
TO BE COMPLETED ONLY IF DELIVERY OF TENDERED NOTES IS TO BE MADE BY BOOK-
ENTRY TRANSFER.
Name of Tendering Institution: ____________________________________________
Account Number: ___________________________________________________________
Transaction Code Number: __________________________________________________
5
<PAGE>
BOX 6
TENDERING HOLDER SIGNATURE
(SEE INSTRUCTIONS 1 AND 5)
IN ADDITION, COMPLETE SUBSTITUTE FORM W-9
- --------------------------------------------------------------------------------
X ___________________________________ Signature Guarantee
(If required by Instruction 5)
X ___________________________________
(Signature of Registered Holder(s) Authorized Signature
or Authorized Signatory)
X ___________________________________
Note: The above lines must be signed
by the registered holder(s) of the
Old Notes as their name(s) appear(s)
on the Old Notes or by persons(s)
authorized to become registered
holder(s) (evidence of such
authorization must be transmitted
with this Letter of Transmittal). If
signature is by a trustee, executor,
administrator, guardian, attorney-
in-fact, officer, or other person
acting in a fiduciary or
representative capacity, such person
must set forth his or her full title
below. See Instruction 5.
Name: _______________________________
(please print)
Title: ______________________________
Name of Firm: _______________________
(Must be an Eligible
Institution as
defined in Instruction 2)
Address: ____________________________
-------------------------------
-------------------------------
Name(s): ____________________________ (Zip Code)
Capacity: ___________________________ Area Code and
Telephone Number: ___________________
Street Address: _____________________
Dated: ______________________________
--------------------------
(Zip Code)
Area Code and
Telephone Number: ___________________
Tax Identification or
Social Security Number: _____________
BOX 7
BROKER-DEALER STATUS
- --------------------------------------------------------------------------------
[_] Check this box if the Beneficial Owner of the Old Notes is a
Participating Broker-Dealer and such Participating Broker-Dealer
acquired the Old Notes for its own account as a result of market-
making activities or other trading activities. IF THIS BOX IS
CHECKED, REGARDLESS OF WHETHER YOU ARE TENDERING BY BOOK-ENTRY
TRANSFER THROUGH ATOP, AN EXECUTED COPY OF THIS LETTER OF TRANSMITTAL
MUST BE RECEIVED WITHIN THIRTY DAYS AFTER THE EXPIRATION DATE BY
NAVISTAR INTERNATIONAL CORPORATION, ATTENTION ROBERT J. PERNA,
FACSIMILE (312) 836-3982.
6
<PAGE>
PAYORS' NAME: HARRIS TRUST & SAVINGS BANK
- --------------------------------------------------------------------------------
Name (if joint names, list first and circle the name of
the person or entity whose number you enter in Part 1
below. See instructions if your name has changed.)
-------------------------------------------------------------
Address
SUBSTITUTE -------------------------------------------------------------
City, State and ZIP Code
FORM W-9 -------------------------------------------------------------
List account number(s) here (optional)
-------------------------------------------------------------
DEPARTMENT OF PART 1--PLEASE PROVIDE YOUR TAXPAYER Social
THE TREASURY IDENTIFICATION NUMBER ("TIN") IN THE BOX Security
AT RIGHT AND CERTIFY BY SIGNING AND DATING Number
BELOW or TIN
INTERNAL REVENUE -------------------------------------------------------------
SERVICE
PART 2--Check the box if you are NOT subject to backup
withholding under the provisions of section 3406(a)(1)(C)
of the Internal Revenue Code because (1) you have not
been notified that you are subject to backup withholding
as a result of failure to report all interest or
dividends or (2) the Internal Revenue Service has
notified you that you are no longer subject to backup
withholding. [_]
- --------------------------------------------------------------------------------
PART 3--
CERTIFICATION--UNDER THE PENALTIES OF
PERJURY, I CERTIFY THAT THE INFORMATION
PROVIDED ON THIS FORM IS TRUE, CORRECT AND
COMPLETE.
AWAITING
TIN [_]
SIGNATURE DATE
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE EXCHANGE OFFER. PLEASE
REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
7
<PAGE>
NAVISTAR INTERNATIONAL CORPORATION
INSTRUCTIONS TO LETTER OF TRANSMITTAL
FORMING PART OF THE TERMS AND CONDITIONS
OF THE EXCHANGE OFFER
1. DELIVERY OF THIS LETTER OF TRANSMITTAL AND THE OLD NOTES. This Letter of
Transmittal is to be completed by registered Holders of the Old Notes if
certificates representing such Old Notes are to be forwarded herewith pursuant
to the procedures set forth in the Prospectus under "The Exchange Offer--
Procedures for Tendering," unless delivery of such certificates is to be made
by book-entry transfer to the Exchange Agent's account maintained by DTC
through ATOP. For a holder to properly tender the Old Notes pursuant to the
Exchange Offer, a properly completed and duly executed copy of this Letter of
Transmittal, including Substitute Form W-9, and any other documents required
by this Letter of Transmittal must be received by the Exchange Agent at its
address set forth herein, and either (i) certificates for Tendered Notes must
be received by the Exchange Agent at its address set forth herein, or (ii)
such Tendered Notes must be transferred pursuant to the procedures for book-
entry transfer described in the Prospectus under the caption "The Exchange
Offer--Procedures for Tendering" (and a confirmation of such transfer received
by the Exchange Agent), in each case prior to 5:00 p.m., New York City time,
on the Expiration Date. The method of delivery of certificates for Tendered
Notes, this Letter of Transmittal and all other required documents to the
Exchange Agent is at the election and risk of the tendering holder and the
delivery will be deemed made only when actually received by the Exchange
Agent. If delivery is by mail, registered mail with return receipt requested,
properly insured, is recommended. Instead of delivery by mail, it is
recommended that the Holder use an overnight or hand delivery service. In all
cases, sufficient time should be allowed to assure timely delivery. No Letter
of Transmittal or Tendered Notes should be sent to the Company. Neither the
Company nor the Exchange Agent is under any obligation to notify any tendering
holder of the Company's acceptance of Tendered Notes prior to the closing of
the Exchange Offer.
2. GUARANTEED DELIVERY PROCEDURES. If a registered Holder desires to tender
the Old Notes pursuant to the Exchange Offer and (a) certificates representing
such Tendered Notes are not immediately available, (b) time will not permit
such Holder's Letter of Transmittal, certificates representing such Tendered
Notes and all other required documents to reach the Exchange Agent on or prior
to the Expiration Date, or (c) the procedures for book-entry transfer cannot
be completed on or prior to the Expiration Date, such Holder may nevertheless
tender such Tendered Notes with the effect that such tender will be deemed to
have been received on or prior to the Expiration Date if the procedures set
forth below and in the Statement under "The Exchange Offer--Guaranteed
Delivery Procedures" (including the completion of Box 4 above) are followed.
Pursuant to such procedures, (i) the tender must be made by or through an
Eligible Institution (as defined), (ii) a properly completed and duly executed
Notice of Guaranteed Delivery, substantially in the form provided by the
Company herewith, or an Agent's Message with respect to a guaranteed delivery
that is accepted by the Company, must be received by the Exchange Agent on or
prior to the Expiration Date, and (iii) the certificates for the Tendered
Notes, in proper form for transfer (or a Book-Entry Confirmation of the
transfer of such Tendered Notes to the Exchange Agent's account at DTC as
described in the Prospectus), together with a Letter of Transmittal (or
manually signed facsimile thereof) properly completed and duly executed, with
any required signature guarantees and any other documents required by the
Letter of Transmittal or a properly transmitted Agent's Message, must be
received by the Exchange Agent within three New York Stock Exchange trading
days after the date of execution of the Notice of Guaranteed Delivery. Any
holder who wishes to tender the Old Notes pursuant to the guaranteed delivery
procedures described above must ensure that the Exchange Agent receives the
Notice of Guaranteed Delivery relating to such Tendered Notes prior to 5:00
p.m., New York City time, on the Expiration Date. Failure to complete the
guaranteed delivery procedures outlined above will not, of itself, affect the
validity or effect a revocation of any Letter of Transmittal form properly
completed and executed by an Eligible Holder who attempted to use the
guaranteed delivery process.
8
<PAGE>
3. BENEFICIAL OWNER INSTRUCTIONS TO REGISTERED HOLDERS. Only a holder in
whose name Tendered Notes are registered on the books of the registrar (or the
legal representative or attorney-in-fact of such registered holder) may
execute and deliver this Letter of Transmittal. Any Beneficial Owner of
Tendered Notes who is not the registered holder must arrange promptly with the
registered holder to execute and deliver this Letter of Transmittal on his or
her behalf through the execution and delivery to the registered holder of the
"Instructions to Registered Holder and/or Book-Entry Transfer Facility
Participant from Beneficial Owner" form accompanying this Letter of
Transmittal.
4. PARTIAL TENDERS. Tenders of the Old Notes will be accepted only in
integral multiples of $1,000 in principal amount. If less than the entire
principal amount of the Old Notes held by the holder is tendered, the
tendering holder should fill in the principal amount tendered in the column
labeled "Aggregate Principal Amount Tendered" of the box entitled "Description
of the Old Notes Tendered" (see Box 1) above. The entire principal amount of
the Old Notes delivered to the Exchange Agent will be deemed to have been
tendered unless otherwise indicated. If the entire principal amount of all the
Old Notes held by the holder is not tendered, then the Old Notes for the
principal amount of the Old Notes not tendered and Exchange Notes issued in
exchange for any Old Notes tendered and accepted will be sent to the Holder at
his or her registered address, unless a different address is provided in the
appropriate box on this Letter of Transmittal, as soon as practicable
following the Expiration Date.
5. SIGNATURES ON THE LETTER OF TRANSMITTAL; BOND POWERS AND ENDORSEMENTS;
GUARANTEE OF SIGNATURES. If this Letter of Transmittal is signed by the
registered holder(s) of the Tendered Notes, the signature must correspond with
the name(s) as written on the face of the Tendered Notes without alteration,
enlargement or any change whatsoever.
If any of the Tendered Notes are owned of record by two or more joint
owners, all such owners must sign this Letter of Transmittal. If any Tendered
Notes are held in different names, it will be necessary to complete, sign and
submit as many separate copies of the Letter of Transmittal as there are
different names in which Tendered Notes are held.
If this Letter of Transmittal is signed by the registered holder(s) of
Tendered Notes, and Exchange Notes issued in exchange therefor are to be
issued (and any untendered principal amount of Old Notes is to be reissued) in
the name of the registered holder(s), then such registered holder(s) need not
and should not endorse any Tendered Notes, nor provide a separate bond power.
In any other case, such registered holder(s) must either properly endorse the
Tendered Notes or transmit a properly completed separate bond power with this
Letter of Transmittal, with the signature(s) on the endorsement or bond power
guaranteed by a Medallion Signature Guarantor (as defined below).
If this Letter of Transmittal is signed by a person other than the
registered holder(s) of any Tendered Notes, such Tendered Notes must be
endorsed or accompanied by appropriate bond powers, in each case, signed as
the name(s) of the registered holder(s) appear(s) on the Tendered Notes, with
the signature(s) on the endorsement or bond power guaranteed by a Medallion
Signature Guarantor.
If this Letter of Transmittal or any Tendered Notes or bond powers are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations, or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing and, unless waived by
the Company, evidence satisfactory to the Company of their authority to so act
must be submitted with this Letter of Transmittal.
Signatures on this Letter of Transmittal must be guaranteed by a recognized
participant in the Securities Transfer Agents Medallion Program, the New York
Stock Exchange Medallion Signature Program or the Stock Exchange Medallion
Program (each a "Medallion Signature Guarantor"), unless the Tendered Notes
are tendered (i) by a registered Holder of Tendered Notes (or by a participant
in DTC whose name appears on a security position listing as the owner of such
Tendered Notes) who has not completed Box 3 ("Special Delivery
9
<PAGE>
Instructions") on this Letter of Transmittal, or (ii) for the account of a
member firm of a registered national securities exchange, a member of the
National Association of Securities Dealers, Inc. ("NASD") or a commercial bank
or trust company having an office or correspondent in the United States (each
of the foregoing being referred to as an "Eligible Institution"). If the
Tendered Notes are registered in the name of a person other than the signor of
the Letter of Transmittal or if the Old Notes not tendered are to be returned
to a person other than the registered Holder, then the signature on this
Letter of Transmittal accompanying the Tendered Notes must be guaranteed by a
Medallion Signature Guarantor as described above. Beneficial owners whose Old
Notes are registered in the name of a broker, dealer, commercial bank, trust
company or other nominee must contact such broker, dealer, commercial bank,
trust company or other nominee if they desire to tender such Old Notes.
6. SPECIAL DELIVERY INSTRUCTIONS. Tendering holders should indicate in Box 3
the name and address to which the Exchange Notes and/or substitute the Old
Notes for principal amounts not tendered or not accepted for exchange are to
be sent, if different from the name and address of the person signing this
Letter of Transmittal. In the case of issuance in a different name, the
taxpayer identification or social security number of the person named must
also be indicated.
7. TRANSFER TAXES. The Company will pay all transfer taxes, if any,
applicable to the exchange of Tendered Notes pursuant to the Exchange Offer.
If, however, a transfer tax is imposed for any reason other than the transfer
and exchange of Tendered Notes pursuant to the Exchange Offer, then the amount
of any such transfer taxes (whether imposed on the registered holder or on any
other person) will be payable by the tendering holder. If satisfactory
evidence of payment of such taxes or exemption therefrom is not submitted with
this Letter of Transmittal, the amount of such transfer taxes will be billed
directly to such tendering holder.
Except as provided in this Instruction 7, it will not be necessary for
transfer tax stamps to be affixed to the Tendered Notes listed in this Letter
of Transmittal.
8. TAX IDENTIFICATION NUMBER. Federal income tax law requires that the
holder(s) of any Tendered Notes which are accepted for exchange must provide
the Exchange Agent (as payor) with its correct taxpayer identification number
("TIN"), which, in the case of a holder who is an individual, is his or her
social security number. If the Exchange Agent is not provided with the correct
TIN, the Holder may be subject to backup withholding and a $50 penalty imposed
by the Internal Revenue Service. (If withholding results in an over-payment of
taxes, a refund may be obtained.) Certain holders (including, among others,
all corporations and certain foreign individuals) are not subject to these
backup withholding and reporting requirements. See the enclosed "Guidelines
for Certification of Taxpayer Identification Number on Substitute Form W-9"
for additional instructions.
To prevent backup withholding, each holder of Tendered Notes must provide
such holder's correct TIN by completing the Substitute Form W-9 set forth
herein, certifying that the TIN provided is correct (or that such holder is
awaiting a TIN), and that (i) the holder has not been notified by the Internal
Revenue Service that such holder is subject to backup withholding as a result
of failure to report all interest or dividends or (ii) if previously so
notified, the Internal Revenue Service has notified the holder that such
holder is no longer subject to backup withholding. If the Tendered Notes are
registered in more than one name or are not in the name of the actual owner,
consult the "Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9" for information on which TIN to report.
The Company reserves the right in its sole discretion to take whatever steps
are necessary to comply with the Company's obligation regarding backup
withholding.
9. VALIDITY OF TENDERS. All questions as to the validity, form, eligibility
(including time of receipt), acceptance and withdrawal of Tendered Notes will
be determined by the Company in its sole discretion, which determination will
be final and binding. The Company reserves the right to reject any and all Old
Notes not validly tendered or any Old Notes the Company's acceptance of which
would, in the opinion of the Company or its counsel, be unlawful. The Company
also reserves the right to waive any conditions of the Exchange Offer or
10
<PAGE>
defects or irregularities in tenders of the Old Notes as to any ineligibility
of any holder who seeks to tender the Old Notes in the Exchange Offer. The
interpretation of the terms and conditions of the Exchange Offer (including
this Letter of Transmittal and the instructions hereto) by the Company shall
be final and binding on all parties. Unless waived, any defects or
irregularities in connection with tenders of the Old Notes must be cured
within such time as the Company shall determine. Neither the Company, the
Exchange Agent nor any other person shall be under any duty to give
notification of defects or irregularities with respect to tenders of the Old
Notes, nor shall any of them incur any liability for failure to give such
notification. Tenders of the 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
this Letter of Transmittal, as soon as practicable following the Expiration
Date.
10. WAIVER OF CONDITIONS. The Company reserves the absolute right to amend,
waive or modify any of the conditions in the Exchange Offer in the case of any
Tendered Notes.
11. NO CONDITIONAL TENDER. No alternative, conditional, irregular, or
contingent tender of the Old Notes or transmittal of this Letter of
Transmittal will be accepted.
12. MUTILATED, LOST, STOLEN OR DESTROYED OLD NOTES. Any tendering Holder
whose Old Notes have been mutilated, lost, stolen or destroyed should contact
the Exchange Agent at the address indicated herein for further instructions.
13. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and requests for
assistance and requests for additional copies of the Prospectus or this Letter
of Transmittal may be directed to the Exchange Agent at the address indicated
herein. Holders may also contact their broker, dealer, commercial bank, trust
company or other nominee for assistance concerning the Exchange Offer.
14. ACCEPTANCE OF TENDERED NOTES AND ISSUANCE OF EXCHANGE NOTES; RETURN OF
THE OLD NOTES. Subject to the terms and conditions of the Exchange Offer, the
Company will accept for exchange all validly tendered Old Notes as soon as
practicable after the Expiration Date and will issue Exchange Notes therefor
as soon as practicable thereafter. For purposes of the Exchange Offer, the
Company shall be deemed to have accepted Tendered Notes when, as and if the
Company has given written or oral notice (immediately followed in writing)
thereof to the Exchange Agent. If any Tendered Notes are not exchanged
pursuant to the Exchange Offer for any reason, such unexchanged Old Notes will
be returned, without expense, to the undersigned at the address shown in Box 1
or at a different address as may be indicated herein under "Special Delivery
Instructions" (Box 3).
15. WITHDRAWAL. Tenders may be withdrawn only pursuant to the procedures set
forth in the Prospectus under the caption "The Exchange Offer--Withdrawal of
Tenders."
11
<PAGE>
NOTICE OF GUARANTEED DELIVERY
IN RESPECT OF
7% SENIOR NOTES DUE 2003 OR
8% SENIOR SUBORDINATED NOTES DUE 2008
OF
NAVISTAR INTERNATIONAL CORPORATION
PURSUANT TO THE PROSPECTUS DATED MARCH 5, 1998
The Exchange Agent for the Exchange Offer is:
HARRIS TRUST AND SAVINGS BANK
<TABLE>
<S> <C> <C>
By Registered or Certified Mail: By Hand/Overnight Delivery: Facsimile Transmission Number:
Harris Trust and Savings Bank Harris Trust and Savings Bank (for Eligible Institutions Only)
c/o Harris Trust Company of New York c/o Harris Trust Company of New York (212) 701-7636
P.O. Box 1010 88 Pine Street Confirm Receipt of Facsimile by
Wall Street Station 19th Floor Telephone:
New York, NY 10268-1010 New York, NY 10005 (212) 701-7624
</TABLE>
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS, OR
TRANSMISSION VIA FACSIMILE TO A NUMBER, OTHER THAN AS SET FORTH ABOVE WILL NOT
CONSTITUTE VALID DELIVERY.
As set forth in the Prospectus, dated March 5, 1998 (as it may be
supplemented and amended from time to time, the "Prospectus") of Navistar
International Corporation (the "Company") under "The Exchange Offer--
Guaranteed Delivery Procedures," and in the Instructions to the related Letter
of Transmittal (the "Letter of Transmittal"), this form, or one substantially
equivalent hereto, or an Agent's Message relating to the guaranteed delivery
procedures, must be used to accept the Company's offer to exchange (the
"Exchange Offer"): (i) its Series B 7% Senior Notes due 2003 (the "Senior
Exchange Notes"), which will have been registered under the Securities Act of
1933, as amended (the "Securities Act"), for its outstanding 7% Senior Notes
due 2003 (the "Old Senior Notes"); or (ii) its Series B 8% Senior Subordinated
Notes due 2008 (the "Senior Subordinated Exchange Notes" and, together with
the Senior Exchange Notes, the "Exchange Notes"), which will have been
registered under the Securities Act, for its outstanding 8% Senior
Subordinated Notes due 2008 (the "Old Senior Subordinated Notes" and, together
with the Old Senior Notes, the "Old Notes"), if time will not permit the
Letter of Transmittal, certificates representing the Old Notes, or other
documents to reach the Exchange Agent, or the procedures for book-entry
transfer cannot be completed, on or prior to the Expiration Date (as defined).
This form must be delivered by an Eligible Institution (as defined herein)
by mail or hand delivery or transmitted via facsimile to the Exchange Agent as
set forth above. If a signature on the Letter of Transmittal is required to be
guaranteed by a Medallion Signature Guarantor under the instructions thereto,
such signature guarantee must appear in the applicable space provided in the
Letter of Transmittal. This form is not to be used to guarantee signatures.
Questions and requests for assistance and requests for additional copies of
the Prospectus may be directed to the Exchange Agent at the address above.
Holders may also contact their broker, dealer, commercial bank, trust company,
or other nominee for assistance concerning the Exchange Offer.
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW
YORK CITY TIME, ON APRIL 6, 1998, UNLESS EXTENDED (THE "EXPIRATION DATE").
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tender(s) to the Company, upon the terms and subject
to the conditions set forth in the Prospectus and the related Letter of
Transmittal (receipt of which is hereby acknowledged), the principal amount of
the Old Notes specified below pursuant to the guaranteed delivery procedures
set forth in the Prospectus under "The Exchange Offer--Guaranteed Delivery
Procedures" and in Instruction 2 to the Letter of Transmittal. The undersigned
hereby authorizes the Exchange Agent to deliver this Notice of Guaranteed
Delivery to the Company with respect to the Old Notes tendered pursuant to the
Exchange Offer.
The undersigned understands that the Old Notes will be exchanged only after
timely receipt by the Exchange Agent of (i) such Old Notes, or a Book-Entry
Confirmation of the transfer of such Old Notes into the Exchange Agent's
account at the Book-Entry Transfer Facility, and (ii) a Letter of Transmittal
(or a manually signed facsimile thereof) properly completed and duly executed,
with any signature guarantees and any other documents required by the Letter
of Transmittal or an Agent's Message within three New York Stock Exchange,
Inc. trading days after the execution hereof. The undersigned also understands
that the method of delivery of this Notice of Guaranteed Delivery and any
other required documents to the Exchange Agent is at the election and sole
risk of the holder, and the delivery will be deemed made only when actually
received by the Exchange Agent.
The undersigned understands that tenders of the Old Notes will be accepted
only in principal amounts equal to $1,000 or integral multiples thereof. The
undersigned also understands that tenders of the Old Notes may be withdrawn at
any time prior to the Expiration Date.
All authority conferred or agreed to be conferred by this Notice of
Guaranteed Delivery shall not be affected by, and shall survive, the death or
incapacity of the undersigned, and every obligation of the undersigned under
this Notice of Guaranteed Delivery shall be binding upon the heirs, executors,
administrators, trustees in bankruptcy, personal and legal representatives,
successors and assigns of the undersigned.
All capitalized terms used herein but not defined herein shall have the
meanings ascribed to them in the Prospectus.
-2-
<PAGE>
PLEASE SIGN AND COMPLETE
Signature(s) of Registered Holder(s) Date: _______________________________
or
Authorized Signatory: _______________ Address: ____________________________
------------------------------------- -------------------------------------
------------------------------------- Area Code and Telephone No. _________
Name(s) of Registered Holder(s): ____ If the Old Notes will be delivered
by book-entry transfer, check book-
entry transfer facility below:
-------------------------------------
------------------------------------- [_] The Depository Trust Company
Principal Amount of the Old Notes Depository
Tendered: ___________________________ Account No. _________________________
-------------------------------------
Certificate No.(s) of the Old Notes
(if available) ______________________
This Notice of Guaranteed Delivery must be signed by the holder(s) exactly
as their name(s) appear(s) on certificate(s) for the Old Notes or on a
security position listing as the owner of the Old Notes, or by person(s)
authorized to become Holder(s) by endorsements and documents transmitted
with this Notice of Guaranteed Delivery without alteration, enlargement or
any change whatsoever. If signature is by a trustee, executor,
administrator, guardian, attorney-in-fact, officer or other person acting
in a fiduciary or representative capacity, such person must provide the
following information.
Please print name(s) and address(es)
Name(s): __________________________________________________________________
---------------------------------------------------------------------------
Capacity: _________________________________________________________________
Address(es): ______________________________________________________________
---------------------------------------------------------------------------
DO NOT SEND THE OLD NOTES WITH THIS FORM. THE OLD NOTES SHOULD BE SENT TO
THE EXCHANGE AGENT TOGETHER WITH A PROPERLY COMPLETED AND DULY EXECUTED LETTER
OF TRANSMITTAL.
-3-
<PAGE>
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a member of the Securities Transfer Agents Medallion
Program, the Stock Exchange Medallion Program or the New York Stock
Exchange, Inc. Medallion Signature Program (each, an "Eligible
Institution"), hereby (i) represents that the above-named persons are
deemed to own the Old Notes tendered hereby within the meaning of Rule
14e-4 promulgated under the Securities Exchange Act of 1934, as amended
("Rule 14e-4"), (ii) represents that such tender of the Old Notes complies
with Rule 14e-4 and (iii) guarantees that the Old Notes tendered hereby
are in proper form for transfer (pursuant to the procedures set forth in
the Prospectus under "The Exchange Offer--Guaranteed Delivery
Procedures"), and that the Exchange Agent will receive (a) such Old Notes,
or a Book-Entry Confirmation of the transfer of such Old Notes into the
Exchange Agent's account at the Book-Entry Transfer Facility, and (b) a
properly completed and duly executed Letter of Transmittal or facsimile
thereof (or Agent's Message) with any required signature guarantees and
any other documents required by the Letter of Transmittal within three New
York Stock Exchange, Inc. trading days after the date of execution hereof.
The Eligible Institution that completes this form must communicate the
guarantee to the Exchange Agent and must deliver the Letter of Transmittal
and the Old Notes to the Exchange Agent within the time period shown
herein. Failure to do so could result in a financial loss to such Eligible
Institution.
Name of Firm: _____________________________________________________________
Authorized Signature: _____________________________________________________
Title: ____________________________________________________________________
Address: __________________________________________________________________
---------------------------------------------------------------------------
(Zip Code)
Area Code and Telephone Number: ___________________________________________
Dated: ________________________, 1998
4
<PAGE>
INSTRUCTIONS TO REGISTERED HOLDER AND/OR
BOOK-ENTRY TRANSFER FACILITY PARTICIPANT FROM BENEFICIAL OWNER
OF
NAVISTAR INTERNATIONAL CORPORATION
7% SENIOR NOTES DUE 2003 OR
8% SENIOR SUBORDINATED NOTES DUE 2008
To Registered Holder and/or Participant of the Book-Entry Transfer Facility:
The undersigned hereby acknowledges receipt of the Prospectus, dated March
5, 1998 (as the same may be amended or supplemented from time to time, the
"Prospectus") of Navistar International Corporation, a Delaware corporation
(the "Company"), and the accompanying Letter of Transmittal (the "Letter of
Transmittal"), that together constitute the Company's exchange offer (the
"Exchange Offer"). Capitalized terms used but not defined herein have the
meanings ascribed to them in the Prospectus.
This will instruct you, the registered holder and/or book-entry transfer
facility participant, as to action to be taken by you relating to the Exchange
Offer with respect to the 7% Senior Notes due 2003 or 8% Senior Subordinated
Notes due 2008 (collectively, the "Old Notes") held by you for the account of
the undersigned.
The aggregate face amount of the Old Notes held by you for the account of
the undersigned is (FILL IN AMOUNT):
$ of the 7% Senior Notes due 2003 or
$ of the 8% Senior Subordinated Notes due 2008
With respect to the Exchange Offer, the undersigned hereby instructs you
(CHECK APPROPRIATE BOX):
[_]To TENDER the following the Old Notes held by you for the account of the
undersigned (INSERT PRINCIPAL AMOUNT OF THE OLD NOTES TO BE TENDERED, IF
ANY): 7% Senior Notes due 2003--$
8% Senior Subordinated Notes
due 2008--$
[_]NOT TO TENDER any Old Notes held by you for the account of the
undersigned
If the undersigned instruct you to tender the Old Notes held by you for the
account of the undersigned, it is understood that you are authorized (a) to
make, on behalf of the undersigned (and the undersigned, by its signature
below, hereby makes to you), the representation and warranties contained in
the Letter of Transmittal that are to be made with respect to the undersigned
as a beneficial owner, including but not limited to the representations that
(i) the undersigned's principal residence is in the state of (FILL IN STATE)
, (ii) the undersigned is acquiring the Exchange Notes in the ordinary
course of business of the undersigned, (iii) the undersigned is not
participating, does not participate, and has no arrangement or understanding
with any person to participate in the distribution of the Exchange Notes, (iv)
the undersigned acknowledges that any person participating in the Exchange
Offer for the purpose of distributing the Exchange Notes must comply with the
registration and prospectus delivery requirements of the Securities Act of
1933, as amended (the "Act"), in connection with a secondary resale
transaction of the Exchange Notes acquired by such person and cannot rely on
the position of the Staff of the Securities and Exchange Commission set forth
in no-action letters that are discussed in the section of the Prospectus
entitled "The Exchange Offer--Resale of the Exchange Notes," and (v) the
undersigned is not an "affiliate," as defined in Rule 405 under the Act, of
the Company; (b) to agree, on behalf of the undersigned, as set forth in the
Letter of Transmittal; and (c) to take such other action as necessary under
the Prospectus or the Letter of Transmittal to effect the valid tender of such
Old Notes.
[_]Check this box if the Beneficial Owner of the Old Notes is a
Participating Broker-Dealer and such Participating Broker-Dealer
acquired the Old Notes for its own account as a result of market-making
activities or other trading activities. IF THIS BOX IS CHECKED, A COPY
OF THESE INSTRUCTIONS MUST BE RECEIVED WITHIN THIRTY DAYS AFTER THE
EXPIRATION DATE BY NAVISTAR INTERNATIONAL CORPORATION, ATTENTION ROBERT
J. PERNA, FACSIMILE (312) 836-3982.
