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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended DECEMBER 31, 1996.
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to ___________.
COMMISSION FILE NUMBER: 1-11311
LEAR CORPORATION
(Exact name of registrant as specified in its charter)
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DELAWARE 13-3386776
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
21557 TELEGRAPH ROAD, SOUTHFIELD, MI 48086-5008
(Address of principal executive offices) (zip code)
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REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (810) 746-1500
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
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TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
Common Stock, par value $.01 per share New York Stock Exchange
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SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes /X/ No _____
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. /X/
As of March 3, 1997, the aggregate market value of the registrant's Common
Stock, par value $.01 per share, held by non-affiliates of the registrant was
$2,032,218,351. The closing price of the Common Stock on March 3, 1997 as
reported on the New York Stock Exchange was $38 3/8 per share.
As of March 3, 1997, the number of shares outstanding of the registrant's
Common Stock was 65,858,215 shares.
DOCUMENTS INCORPORATED BY REFERENCE
Certain sections of the registrant's Notice of Annual Meeting of Stockholders
and Proxy Statement for its Annual Meeting of Stockholders to be held on May
15, 1997, as described in the Cross-Reference Sheet and a Table of Contents
included herewith, are incorporated by reference into Part III of this Report.
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CROSS REFERENCE SHEET
AND
TABLE OF CONTENTS
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PAGE NUMBER
OR REFERENCE (1)
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PART I
ITEM 1. Business. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ITEM 2. Properties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
ITEM 3. Legal proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
ITEM 4. Submission of matters to a vote of security holders . . . . . . . . . . . . . . . . . . . . . . . . . 15
PART II
ITEM 5. Market for the Company's common stock and related stockholder matters . . . . . . . . . . . . . . . . 16
ITEM 6. Selected financial data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
ITEM 7. Management's discussion and analysis of financial condition and results of operations . . . . . . . . 18
ITEM 8. Consolidated financial statements and supplementary data. . . . . . . . . . . . . . . . . . . . . . . 24
ITEM 9. Changes in and disagreements with accountants on accounting and financial disclosure. . . . . . . . . 50
PART III
ITEM 10. Directors and executive officers of the Company (2) . . . . . . . . . . . . . . . . . . . . . . . . . 51
ITEM 11. Executive compensation (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
ITEM 12. Security ownership of certain beneficial owners and management (4) . . . . . . . . . . . . . . . . . 51
ITEM 13. Certain relationships and related transactions (5). . . . . . . . . . . . . . . . . . . . . . . . . . 51
PART IV
ITEM 14. Exhibits, financial statement schedules, and reports on Form 8-K. . . . . . . . . . . . . . . . . . . 52
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(1) Certain information is incorporated by reference, as indicated below,
from the registrant's Notice of Annual Meeting of Stockholders and
Proxy Statement for its Annual Meeting of Stockholders to be held on
May 15, 1997 (the "Proxy Statement").
(2) Proxy Statement sections entitled "Election of Directors" and
"Management."
(3) Proxy Statement section entitled "Executive Compensation."
(4) Proxy Statement section entitled "Management - Security Ownership of
Certain Beneficial Owners and Management."
(5) Proxy Statement section entitled "Certain Transactions."
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PART I
ITEM 1 - BUSINESS
As used in this Report, unless the context otherwise requires, the
"Company" or "Lear" refers to Lear Corporation and its consolidated
subsidiaries. A significant portion of the Company's operations are conducted
through wholly-owned subsidiaries of Lear Corporation.
BUSINESS OF THE COMPANY
GENERAL
Lear is one of the largest independent suppliers of automotive interior
systems in the estimated $45 billion global automotive interior systems market
and one of the ten largest independent automotive suppliers in the world. The
Company has experienced substantial growth in market presence and profitability
over the last five years as a result of both internal growth and acquisitions.
The Company's sales have grown from approximately $1.4 billion for the year
ended June 30, 1992 to over $6.2 billion for the year ended December 31, 1996,
a compound annual growth rate of 39%. In addition, the Company's operating
income has grown from $56.8 million for the year ended June 30, 1992 to $375.8
million for the year ended December 31, 1996, a compound annual growth rate of
51%. The Company's present customers include 26 original equipment
manufacturers ("OEMs"), the most significant of which are Ford, General Motors,
Fiat, Chrysler, Volvo, Saab, Volkswagen and BMW. As of December 31, 1996, the
Company employed over 43,000 people in 21 countries and operated 148
manufacturing, research and development, product engineering and administration
facilities.
Lear is a leading supplier of automotive interiors with in-house
capabilities in all five principal automotive interior segments: seat systems;
floor and acoustic systems; door panels; headliners; and instrument panels. In
addition, as one of the leading independent global suppliers of interior
systems and components to OEMs, Lear is able to offer its customers design,
engineering and project management support for the entire automotive interior.
Management believes that the ability to offer automotive interior
"one-stop-shopping" provides Lear with a competitive advantage as OEMs continue
to reduce their supplier base and demand improved quality and enhanced
technology. In addition, the Company's broad array of products and process
offerings enable it to provide each customer with products tailored to its
particular needs.
Lear is focused on delivering high quality automotive interior systems
and components to its customers on a global basis. Due to the opportunity for
significant cost savings and improved product quality and consistency, OEMs
have increasingly required their suppliers to manufacture automotive interior
systems and components in multiple geographic markets. In recent years, the
Company has aggressively expanded its operations in Western Europe and emerging
markets in Eastern Europe, South America, South Africa and the Asia/Pacific Rim
region, giving it the capability to provide its products on a global basis to
its OEM customers. For example, in 1996, Lear entered into a joint venture to
supply seat systems in Thailand to a joint venture between Ford and Mazda. In
1996, Lear also entered the Chinese market with a joint venture to supply seat
systems and interior trim components for Isuzu trucks and Ford transit vans to
be manufactured in China. In addition, during 1996 Lear was awarded a contract
to supply seat and interior trim systems in Argentina for Ford's Ranger program
and began production of seat systems for the Palio (Fiat's world car) in
Brazil. Since late 1995, the Company has also entered joint ventures in Brazil
and Argentina and opened facilities in South Africa, India, Indonesia,
Australia and Venezuela. The Company's sales outside the United States and
Canada have grown from $0.4 billion, or 29.7% of the Company's total sales, for
the year ended June 30, 1992 to $2.2 billion, or 35.1% of the Company's total
sales, for the year ended December 31, 1996.
In 1996, Lear was one of the leading independent suppliers to the
estimated $45 billion global automotive interior market, with a 13% market
share, after giving pro forma effect to the acquisition of Masland Corporation
("Masland"). In addition, after giving pro forma effect to the acquisition of
Masland, the Company in 1996 held a leading 37% share of the estimated $7.9
billion North American seat systems market and a 37% share of the estimated
$1.4 billion North American floor and acoustic systems market. In 1996, the
Company was also the leading independent supplier to the estimated $7.2 billion
Western European seat systems market, with a 17% share. The door panel,
headliner and instrument panel segments of the automotive interior market are
highly fragmented, contain no dominant independent supplier and are in the
early stages of the outsourcing and/or consolidation process. The Company
believes that the same competitive pressures that contributed to the rapid
expansion of its seat systems business in North America since 1983 will
continue to encourage automakers in the North American and European markets to
outsource more of their door panel, headliner and instrument panel
requirements.
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The Company is the successor to a seat frame manufacturing business
founded in 1917 that served as a supplier to General Motors and Ford from its
inception. As a result of the expansion of the Company's business from
automotive seat systems to products for a vehicle's complete interior, the
Company changed its name to "Lear Corporation" from "Lear Seating Corporation"
effective May 9, 1996.
BUSINESS STRATEGY
Lear's business objective is to expand its position as one of the
leading independent suppliers of automotive interior systems in the world. Lear
intends to build on its full-service capabilities, strong customer
relationships and worldwide presence to increase its share of the global
automotive interior market. To achieve this objective, the Company will
continue to pursue a strategy based upon the following elements:
- Enhance its Strong Relationships with OEMs. The Company's management
has developed strong relationships with its 26 OEM customers which allow Lear
to identify business opportunities and anticipate customer needs in the early
stages of vehicle design. Management believes that working closely with OEMs in
the early stages of designing and engineering vehicle interior systems gives it
a competitive advantage in securing new business. For each of its major
customers, Lear maintains "Customer Focused Divisions." This organizational
structure consists of several dedicated groups, each of which is focused on
serving the needs of a single customer and supporting that customer's programs
and product development. Each division provides all the interior systems and
components the customer needs, allowing that customer's purchasing agents,
engineers and designers to have a single point of contact. Lear maintains an
excellent reputation with OEMs for timely delivery and customer service and for
providing world class quality at competitive prices. As a result of the
Company's service and performance record, many of the Company's facilities have
won awards from OEMs with which they do business.
- Penetrate Emerging Markets. Geographic expansion will continue to be
an important element of the Company's growth strategy. In 1996, more than
two-thirds of total worldwide vehicle production occurred outside of the United
States and Canada. Emerging markets such as South America and the Asia/Pacific
Rim region present strong growth opportunities as demand for automotive vehicles
is dramatically increasing in these areas. For example, since 1991, sales of
light vehicles in China have increased nearly 500%, while sales in Brazil have
increased over 70%. It is anticipated that population and per capita income in
China, Brazil and other emerging markets will continue to increase. Industry
analysts forecast that these underlying trends will result in continued strong
increases in light vehicle sales in these and other emerging markets. As a
result of Lear's strong customer relationships and worldwide presence,
management believes that the Company is well positioned to expand with OEMs in
emerging markets.
- Capitalize on New Outsourcing Opportunities. Lear's strategy is to
build on its full-service capabilities, strong customer relationships and
worldwide presence to increase its share of the global automotive interior
market. The door panel, headliner and instrument panel segments of the
automotive interior market contain no dominant independent supplier and are in
the early stages of the outsourcing and/or consolidation process. These
segments constituted approximately 20% of the total estimated $45 billion
global automotive interior market in 1996. The Company believes that the same
competitive pressures that contributed to the rapid expansion of its seat
systems business in North America since 1983 will continue to encourage
customers to outsource more of their door panel, headliner and instrument panel
system requirements. In addition, management believes that as the outsourcing
of these systems accelerates and OEMs continue their worldwide expansion and
seek ways to improve vehicle quality and reduce costs, they will increasingly
look to suppliers, such as Lear, to fill the role of "Systems Integrator" to
manage the design, purchasing and supply of the total automotive interior.
Lear's full-service capabilities make it well-positioned to fill this role.
- Invest in Product Technology and Design Capability. Lear has made
substantial investments in product technology and product design capability to
support its products. The Company maintains five technology centers and twenty
customer focused product engineering centers where it designs and develops new
products and conducts extensive product testing. The Company also has
state-of-the art acoustics testing, instrumentation and data analysis
capabilities. Lear's investments in research and development are consumer
driven and customer focused. The Company conducts extensive analysis and
testing of consumer responses to automotive interior styling and innovations.
Because OEMs increasingly view the vehicle interior as a major selling point to
their customers, the focus of Lear's research and development efforts is to
identify new interior features that make vehicles safer, more comfortable and
attractive to consumers. For example, in 1996 Lear developed a One-Step(TM)
door which consolidates all of the door's internal mechanisms including glass,
window regulators and latches, providing customers with a higher quality
door at a lower price as well as a lightweight, adjustable seat with lateral
accelerometers built into them that automatically adjust the side bolsters to
provide passengers additional support during sharp turns. In 1996, the Company
also developed a "Mobile Office" unit, specially designed to fit across the
vehicle's width, that contains customized containers for portable computers,
fax machines, hanging files and other items. The development of these and
similar products has been, and management believes will continue to be, an
important element in the Company's future growth. For automotive vehicles
manufactured in North America, Lear's total content per vehicle has increased
from $94 per vehicle in 1992 to $292 per vehicle in 1996. For automotive
vehicles manufactured in Western Europe, Lear's total content per vehicle has
increased from $19 per vehicle in 1992 to $109 per vehicle in 1996.
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- Utilize Worldwide JIT Facility Network. Beginning in the 1980s, Lear
established facilities, most of which were, and still are, dedicated to a single
customer, that allowed it to receive components from its suppliers on a
just-in-time ("JIT") basis and deliver seat systems to its customers on a
sequential JIT basis. This process minimizes inventories and fixed costs for
both the Company and its customers and enables the Company to deliver products
in as little as 90 minutes notice. In many cases, by carefully managing floor
space and overall efficiency, Lear can move the final assembly and sequencing of
other interior systems and components from centrally located facilities to its
existing JIT facilities. For example, at a facility in Austria, Lear has been
supplying seat systems to Chrysler's GS minivan on a JIT basis. In late 1996,
that same facility began supplying Chrysler with sequenced door panels on a JIT
basis, which should result in significant cost savings to the Company and
Chrysler. Management believes that the efficient utilization of the Company's 62
JIT facilities located around the world is an important aspect of Lear's global
growth strategy and, together with the Company's system integration skills,
provides Lear with a significant competitive advantage in terms of delivering
total interior systems to OEMs.
- Grow Through Strategic Acquisitions. Strategic acquisitions have been,
and management believes will continue to be, an important element in the
Company's growth worldwide and in its efforts to capitalize on the outsourcing
and supplier consolidation trends. These acquisitions strengthen Lear's
relationship with OEMs, complement Lear's existing capabilities and products
and provide growth opportunities in new markets. The Company's recent
acquisitions have expanded its OEM customer base and worldwide presence and
enhanced its relationships with existing customers. The acquisitions of
Borealis Industrier AB ("Borealis"), Masland and Automotive Industries Holding,
Inc. ("AI") also provide the Company with a substantial presence in the
non-seating segments of the automobile and light truck interior market. The
Company believes that these markets hold significant growth potential. In
1996, after giving pro forma effect to the Masland acquisition, the Company's
sales of non-seating systems and components would have been approximately $2.1
billion, or approximately 34% of the Company's total pro forma sales. The
Company will continue to consider strategic acquisitions that enhance its
market position, expand its global presence, increase its product offerings,
improve its technological capabilities or enhance customer relationships.
ACQUISITIONS
To supplement its internal growth and implement its business strategy,
the Company has made several strategic acquisitions since 1990. The following
is a summary of recent major acquisitions:
Borealis Acquisition
In December 1996, the Company acquired all of the issued and
outstanding shares of common stock of Borealis (the "Borealis Acquisition"), a
leading Western European supplier of instrument panels, door panels and other
automotive components. The Borealis Acquisition provided the Company with the
technology to manufacture instrument panels, the only interior system
capability the Company did not previously possess. Borealis also produces door
panels, climate systems, exterior trim and various components for the Western
European automotive, light truck and heavy truck industries. In addition, the
Borealis Acquisition increased the Company's presence in the Western European
market and strengthened its relationships with Volvo, Saab and Scania. The
aggregate purchase price for the Borealis Acquisition was approximately $91.1
million (including the assumption of $18.8 million of Borealis' existing
indebtedness, net of cash and cash equivalents, and the payment of fees and
expenses of $1.5 million in connection with the acquisition).
Masland Acquisition
On July 1, 1996, the Company completed the acquisition of all of the
issued and outstanding shares of common stock of Masland (the "Masland
Acquisition") for an aggregate purchase price of $475.7 million (including the
assumption of $80.7 million of Masland's existing indebtedness, net of cash and
cash equivalents, and the payment of fees and expenses of $10 million in
connection with the acquisition). The Masland Acquisition gave Lear
manufacturing capabilities to produce floor and acoustic systems, which the
Company did not previously have. In 1996, after giving pro forma effect to the
Masland Acquisition, Lear held a 37% share of the estimated $1.4 billion North
American floor and acoustics systems market. As a result of the Masland
Acquisition, Lear also became a major supplier of interior and luggage trim
components and other acoustical products which are designed to minimize noise,
vibration and harshness for passenger cars and light trucks. The Masland
Acquisition also provided Lear with access to leading-edge technology. Its
33,000 square foot Technology Center in Plymouth, Michigan provides full
service acoustics testing, design, product engineering, systems integration and
program management.
AI Acquisition
In August 1995, the Company acquired all of the issued and outstanding
shares of common stock of AI (the "AI Acquisition"), a leading designer and
manufacturer of high quality interior systems and blow molded plastic parts to
automobile and light truck
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manufacturers. Prior to the AI Acquisition, Lear had participated primarily in
the seat system segment of the interior market, which comprises approximately
50% of the total combined worldwide interior market. By providing the Company
with substantial manufacturing capabilities in door panels and headliners, the
AI Acquisition made Lear the largest independent Tier I supplier of automotive
interior systems in the North American and Western European light vehicle
interior market. The aggregate purchase price for the AI Acquisition was $881.3
million (including the assumption of $250.5 million of AI's existing
indebtedness and the payment of fees and expenses of $14.4 million in
connection with the acquisition).
FSB Acquisition
On December 15, 1994, the Company, through its wholly-owned subsidiary,
Lear Seating Italia Holdings, S.r.L., acquired the primary automotive seat
systems supplier to Fiat and certain related businesses (the "Fiat Seat
Business" or the "FSB"). Lear and Fiat also entered into a long- term supply
agreement for Lear to produce all outsourced automotive seat systems for Fiat
and affiliated companies worldwide. The acquisition of the Fiat Seat Business
not only established Lear as the market leader in automotive seat systems in
Europe, but, combined with its leading position in North America, made Lear one
of the largest automotive seat systems manufacturers in the world. In addition,
it gave the Company access to rapidly expanding markets in South America and has
resulted in the formation of new joint ventures which are supplying automotive
seat systems to Fiat or its affiliates in Brazil and Argentina.
NAB Acquisition
On November 1, 1993, Lear significantly strengthened its position in
the North American automotive seating market by purchasing the North American
seat cover and seat systems business (the "NAB") of Ford Motor Company. The NAB
consists of an integrated United States and Mexican operation which produces
seat covers for approximately 80% of Ford's North American vehicle production
(as well as for several independent suppliers) and manufactures seat systems
for certain Ford models. Prior to the NAB Acquisition, the Company outsourced a
significant portion of its seat cover requirements. The expansion of the
Company's seat cover business has provided Lear with better control over the
costs and quality of one of the critical components of a seat system. In
addition, by virtue of the NAB Acquisition, the Company was able to enhance its
relationship with one of its largest OEM customers, entering into a five year
supply agreement with Ford, which expires in November 1998, covering models for
which the NAB had produced seat covers and seat systems at the time of the
acquisition. The Company also assumed during the term of the supply agreement
primary engineering responsibility for a substantial portion of Ford's car
models, providing Lear with greater involvement in the planning and design of
seat systems and related products for future light vehicle models.
Scandinavian Acquisitions
In 1991 and 1992, the Company acquired the seat systems businesses of
Saab in Sweden and Finland and of Volvo in Sweden. In connection with each of
these acquisitions, the Company entered into long-term relationships with the
respective OEMs.
PRODUCTS
Lear's products have evolved from the Company's many years of
manufacturing experience in the automotive seat frame market where it has been
a supplier to General Motors and Ford since its inception in 1917. The seat
frame has structural and safety requirements which make it the basis for
overall seat design and was the logical first step to the Company's emergence
as a dominant supplier of entire seat systems and seat components. With the
acquisitions of Borealis, Masland and AI, the Company has expanded its product
offerings and can now manufacture and supply its customers with floor systems,
headliners, door panels and instrument panels. The Company also produces a
variety of blow molded products and other automotive components such as fluid
reservoirs, fuel tank shields, exterior airdams, front grille assemblies,
engine covers, battery trays/covers and insulators. Lear believes that as OEMs
continue to seek ways to improve vehicle quality while simultaneously reducing
the costs of the various vehicle components, they will increasingly look to
suppliers such as Lear with the capability to test, design, engineer and
deliver products for a complete vehicle interior. In addition, with the
Borealis, Masland and AI acquisitions, the Company believes that it has
significant cross-selling opportunities across its customer base as well as its
vehicle platforms and is well-positioned to expand its position as one of the
leading independent suppliers of automotive interior systems in
the world.
The following is the approximate composition by product category of the
Company's net sales in the year ended December 31, 1996, after giving pro forma
effect to the Masland Acquisition: seat systems, $4.4 billion; floor and
acoustic systems, $0.5 billion; door panels, $0.3 billion; headliners, $0.1
billion; and other component products, $1.2 billion.
- Seat Systems. The seat systems business consists of the manufacture,
assembly and supply of seating requirements for a vehicle or assembly plant.
Seat systems typically represent approximately 50% of the cost of the total
automotive interior. The Company produces seat systems for automobiles and
light trucks that are fully finished and ready to be installed in a vehicle.
Seat systems are
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fully assembled seats, designed to achieve maximum passenger comfort by adding
a wide range of manual and power features such as lumbar supports, cushion and
back bolsters and leg and thigh supports.
As a result of its product technology and product design strengths, the
Company has been a leader in producing convenience features and safety
improvements into its seat designs. For example, in 1996, Lear developed
automatically adjusting seats that provide passengers additional support during
sharp turns. In addition, Lear has recently introduced a newly designed
integrated restraint system that increased occupant comfort and convenience.
Licensed exclusively to Lear, this patented seating concept uses a special
ultra high-strength steel tower, a blow- molded seat back frame and a
split-frame design to improve occupant comfort and convenience. Other recent
product ideas include newly developed fabric seat heaters, a "Sound Seat,"
which has a high output bass speaker built into the back seat, and a
Code-Alarm(TM) integrated seat, which includes a security device that
automatically moves the driver seat back forward against the steering wheel to
deter theft.
Lear's position as a market leader in seat systems is largely
attributable to seating programs on new vehicle models launched in the past five
years. The Company is currently working with customers in the development of a
number of seat systems products to be introduced by automotive manufacturers in
the next six years.
- Floor and Acoustic Systems. Floor systems consist both of carpet and
vinyl products, molded to fit precisely the front and rear passenger
compartments of cars and trucks, and accessory mats. While carpet floors are
used predominately in passenger cars and trucks, vinyl floors, because of their
better wear and washability characteristics, are used primarily in commercial
and fleet vehicles. The Company is the largest independent supplier of vinyl
automotive floor systems in North America, and the only supplier of both carpet
and vinyl automotive floor systems. With the Masland Acquisition, the Company
acquired Maslite(TM), a recently developed material that is 40% lighter than
vinyl, which has replaced vinyl accessory mats on selected applications.
The automotive floor system is multi-purpose. Its performance is based
on the correct selection of materials to achieve an attractive, quiet,
comfortable and durable interior compartment. Automotive carpet requirements
are more stringent than the requirements for carpet used in homes and offices.
For example, automotive carpet must provide higher resistance to fading and
improved resistance to wear despite being lighter in weight than carpet found
in homes and offices. Masland's significant experience has enabled the Company
to meet these specialized needs. Carpet floor systems generally consist of
tufted carpet to which a specifically engineered thermoplastic backcoating has
been added. This backcoating, when heated, enables the Company to mold the
carpet to fit precisely the interior of the vehicle. Additional insulation
materials are added to provide noise, vibration and harshness resistance. Floor
systems are complex products which are based on sophisticated designs and use
specialized design materials to achieve the desired visual, acoustic and heat
management requirements in the automotive interior.
Lear's primary acoustic product, after floor systems, is the dash
insulator. The dash insulator attaches to the vehicle's sheet metal firewall,
separating the passenger compartment from the engine compartment, and is the
primary component for preventing engine noise and heat from entering the
passenger compartment. The Company's ability to produce both the dash insulator
and the floor system enables it to accelerate the design process and supply an
integrated system. The Company believes that OEMs, recognizing the cost and
quality advantages of producing the dash insulator and the floor system as an
integrated system, will increasingly seek suppliers to coordinate the design,
development and manufacture of the entire floor and acoustic system.
In 1996, after giving pro forma effect to the Masland Acquisition, the
Company held a 37% share in the estimated $1.4 billion North American floor and
acoustic systems market. In addition, the Company participates in the European
floor system market through its joint venture with Sommer-Allibert S.A.
- Door Panels. Door panels consist of several component parts that are
attached to a base molded substrate by various methods. Specific components
include vinyl or cloth-covered appliques, armrests, radio speaker grilles, map
pocket compartments and carpet and sound reducing insulation. Upon assembly,
each component must fit precisely, with a minimum of misalignment or gap, and
must match the color of the base substrate. In 1996, Lear introduced the
One-Step(TM) door, an innovative door system concept which consolidates all of
the door's internal mechanisms, including glass, window regulators and latches,
providing customers with a higher quality product at a lower price. Assembly of
the One-Step(TM) door involves combining an injection molded plastic door panel
with all major mechanical components and an interior trim cover, into a single
system which can be shipped to OEMs fully assembled, tested and ready to
install. Management believes that the One-Step(TM) door, while not yet in
production, offers Lear significant opportunities to capture a larger share of
the estimated $8 billion modular door market.
In 1996, among independent suppliers, the Company held a leading 14%
share of the estimated $1.6 billion North American door panel market. Management
believes that this leadership position has been achieved by offering OEMs the
widest variety of manufacturing processes for door
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panel production. In Western Europe, the Company held a small position in the
door panel market. These markets contain no dominant supplier and are just
beginning to experience the outsourcing and consolidation trends that have
characterized the seat systems market since the 1980's. With its global scope,
technological expertise and established customer relationships, Lear believes
that it is well-positioned to benefit from these positive industry dynamics.
- Headliners. The Company designs and manufactures headliners which
consist of the headliner substrate, covering material, visors, overhead
consoles, grab handles, coat hooks, lighting, wiring and insulators. As with
door panels, upon assembly, each component must fit precisely and must match
the color of the base substrate. With its sophisticated design and engineering
capabilities, the Company believes it is able to supply headliners with enhanced
quality and lower costs than OEMs could achieve internally. The Company also
believes that it is one of the most process-diverse suppliers of headliners in
North America.
In 1996, the Company developed retractable sunscreens for shielding the
front windshield and a rotating entertainment center attached to a vehicles
headliner that comes complete with a 5.5 inch color television and video
cassette player. In 1997, Lear introduced an advanced integrated headliner
which incorporates heating, venting and air conditioning ("HVA/C") ducting, an
occupant position detection system, CD changer, trim inflatable tubular
structure side air bags and surround sound speakers into a single integrated
overhead system. The Company believes that these products, while not yet in
production, provide the Company with significant opportunity for growth.
The headliner market is highly fragmented, with no dominant independent
supplier. As OEMs continue to seek ways to improve vehicle quality and
simultaneously reduce costs, the Company believes that headliners will
increasingly be outsourced to suppliers such as Lear, providing the Company
with significant growth opportunities.
- Instrument Panels. The instrument panel is a complex system of foil
coverings, foams, plastics and metals designed to house various components and
act as a safety device for the vehicle occupants. Specific components of the
instrument panel include the HVA/C module, air distribution ducts, air vents,
cross car structure, glove box compartment assemblies, electrical components,
wiring harness, radio system, and passenger airbag units. As the primary
occupant focal point of the vehicle interior, the instrument panel should be
aesthetically pleasing while also acting as the structural carrier of various
components.
Safety issues surrounding air bag technologies are currently a
significant focus of the instrument panel segment. Management believes that
Lear continues to maintain a competitive edge in this area through its research
and development efforts, resulting in breakthroughs such as the introduction of
cost effective, integrated, seamless airbag covers, which increase occupant
safety. Future trends in the instrument panel segment will continue to focus
on safety with the introduction of low-mounted airbags as knee restraint
components.
Cost, weight and part reduction are also key elements in instrument
panel development for the next generation of vehicle programs. Lear's goals
are to meet future OEM requirements by increasing the integration level of
instrument panel components, and incorporating additional safety features on
the primary carrier. Currently, the majority of instrument panel components
are assembled at the assembly plant by the OEM. By utilizing its years of JIT
assembly experience of complex automotive interior systems, management believes
Lear has the ability to capitalize on the OEMs trend of outsourcing of full
instrument panel systems and to increase its share of the worldwide instrument
panel market.
- Component Products. In addition to the interior systems and other
products described above, the Company is able to supply a variety of interior
trim and other automobile components as well as blow molded plastic parts.
Lear produces seat covers for integration into its own seat systems and
for delivery to external customers. The Company's major external customers for
seat covers are other independent seat systems suppliers as well as the OEMs.
The Company is currently producing approximately 80% of the seat covers for
Ford's North American vehicles. The expansion of the Company's seat cover
business has provided the Company with better control over the costs and
quality of one of the critical components of a seat system. Typically, seat
covers comprise approximately 30% of the aggregate cost of a seat system.
Lear produces steel and aluminum seat frames for passenger cars and
light and medium trucks. Seat frames are primarily manufactured using precision
stamped, tubular steel and aluminum components joined together by highly
automated, state-of-the-art welding and assembly techniques. The manufacture
of seat frames must meet strict customer and government specified safety
standards. The Company's seat frames are either delivered to its own plants
where they become part of a completed seat that is sold to the OEM customer, to
customer-operated assembly plants or to other independent seating suppliers for
use in the manufacture of assembled seating systems.
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<PAGE> 9
The Company also produces a variety of interior trim products, such as
pillars, cowl panels, scuff plates, trunk liners, quarter panels and spare tire
covers, as well as blow molded plastic products, such as fluid reservoirs,
vapor canisters and duct systems. In contrast to interior trim products, blow
molded products require little assembly. However, the manufacturing process for
such parts demands considerable expertise in order to consistently produce
high-quality products. Blow molded parts are produced by extruding a shaped
parison or tube of plastic material and then clamping a mold around the
parison. High pressure air is introduced into the tube causing the hot plastic
to take the shape of the surrounding mold. The part is removed from the mold
after cooling and finished by trimming, drilling and other operations.
MANUFACTURING
All of the Company's facilities use JIT manufacturing techniques. Most
of the Company's seating related products and many of the Company's other
interior products are delivered to the OEMs on a JIT basis. The JIT concept,
first broadly utilized by Japanese automobile manufacturers, is the cornerstone
of the Company's manufacturing and supply strategy. This strategy involves many
of the principles of the Japanese system, but was redeveloped for compatibility
with the greater volume requirements and geographic distances of the North
American market. The Company first developed JIT operations in the early 1980s
at its seat frame manufacturing plants in Morristown, Tennessee and Kitchener,
Ontario, Canada. These plants previously operated under traditional
manufacturing practices, resulting in relatively low inventory turnover rates,
significant scrap and rework, a high level of indirect labor costs and long
production set-up times. As a result of JIT manufacturing techniques, the
Company has been able to consolidate plants, increase capacity and
significantly increase inventory turnover, quality and productivity.
The JIT principles first developed at Lear's seat frame plants were
next applied to the Company's growing seat systems business and have now
evolved into sequential parts delivery ("SPD") principles. The Company's
seating plants are typically no more than 30 minutes or 20 miles from its
customers' assembly plants and manufacture seats for delivery to the customers'
facilities in as little as 90 minutes. Orders for the Company's seats are
received on a weekly basis, pursuant to blanket purchase orders for annual
requirements. These orders detail the customers' needs for the ensuing week. In
addition, constant computer and other communication is maintained between
personnel at the Company's plants and personnel at the customers' plants to
keep production current with the customers' demand.
As the Company expands its product line to include total automobile
interiors, it is also expanding its JIT facility network. The Company's
strategy is to leverage its JIT seat system facilities by moving the final
assembly and sequencing of other interior components from its centrally located
facilities to its JIT facilities.
A description of the Company's manufacturing processes for its product
segments is set forth below.
- Seat Systems. Seat assembly techniques fall into two major categories,
traditional assembly methods (in which fabric is affixed to a frame using
Velcro, wire or other material) and more advanced bonding processes. The
Company's principal bonding technique involves its patented SureBond(TM) and
DryBond(TM) processes, techniques in which fabric is affixed to the underlying
foam padding using adhesives. The SureBond(TM) and DryBond(TM) processes have
several major advantages when compared to traditional methods, including design
flexibility, increased quality and lower cost. The SureBond(TM) and DryBond(TM)
processes, unlike alternative bonding processes, result in a more comfortable
seat in which air can circulate freely. The SureBond(TM) and DryBond(TM)
processes, moreover, are reversible, so that seat covers that are improperly
installed can be removed and repositioned properly with minimal materials cost.
In addition, the SureBond(TM) and DryBond(TM) processes are not capital
intensive when compared to competing bonding technologies. Approximately
one-fourth of the Company's seats are manufactured using the SureBond(TM) and
DryBond(TM) processes.
The seat assembly process begins with pulling the requisite components
from inventory. Inventory at each plant is kept at a minimum, with each
component's requirement monitored on a daily basis. This allows the plant to
devote the maximum space to production, but also requires precise forecasts of
the day's output. Seats are assembled in modules, then tested and packaged for
shipment. The Company operates a specially designed trailer fleet that
accommodates the off-loading of vehicle seats at the customer's assembly plant.
The Company obtains steel, aluminum and foam chemicals used in its seat
systems from several producers under various supply arrangements. These
materials are readily available. Leather, fabric and certain purchased
components are generally purchased from various suppliers under contractual
arrangements usually lasting no longer than one year. Some of the purchased
components are obtained through the Company's own customers.
- Floor and Acoustic Systems. The Company produces carpet at its plant in
Carlisle, Pennsylvania. Smaller "focused" factories are dedicated to specific
groups of customers and are strategically located near their production
facilities. This proximity improves
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<PAGE> 10
responsiveness to its customers and speeds product delivery to customer
assembly lines, which is done on a JIT basis. The Company's manufacturing
operations are complemented by its research and development efforts, which have
led to the development of a number of proprietary products, such as their
EcoPlus(TM) recycling process as well as Maslite(TM), a lightweight proprietary
material used in the production of accessory mats.
- Door Panels/Headliners. The Company uses numerous molding, bonding,
trimming and finishing manufacturing processes. The wide variety of
manufacturing processes helps to satisfy customers' different cost and
functionality specifications. The Company's ability and experience in
producing interior products for such a vast array of applications enhances the
Company's ability to provide total interior solutions to OEMs globally. The
Company employs many of the same JIT principles used at the Company's seat
facilities.
The core technologies used in the Company's interior trim systems
include injection molding, low-pressure injection molding, rotational molding
and urethane foaming, compression molding of Wood-Stock(TM) (a proprietary
process that combines polypropylene and wood flour), glass reinforced urethane
and a proprietary headliner process. One element of Lear's strategy is to focus
on more complex, value-added products such as door panels and armrests. Lear
delivers these integrated systems at attractive prices to the customer because
certain services such as design and engineering and sub-assembly are provided
more cost efficiently by the Company. The principal purchased components for
interior trim systems are polyethylene and polypropylene resins which are
generally purchased under long-term agreements and are available from multiple
suppliers. Lear is constantly developing recycling methods for future
environmental requirements and conditions in order to maintain its competitive
edge in this industry.
The combined pressures of cost reduction and fuel economy enhancement
have caused automotive manufacturers to concentrate their efforts on developing
and employing lower cost, lighter materials. As a result, plastic content in
cars and light trucks has grown significantly. Increasingly, automotive
content requires large plastic injection molded assemblies for both the
interior and exterior. Plastics are now commonly used in such nonstructural
components as interior and exterior trim, door panels, instrument panels,
grilles, bumpers, duct systems, taillights and fluid reservoirs. For interior
trim applications, substitution of plastics for other materials is largely
complete, and little growth through substitution is expected. However, further
advances in injection molding technologies are improving the performance and
appearance of parts molded in reinforced thermoplastics.
- Instrument Panels. Lear's in-house process capabilities for producing
instrument panels include injection molding, vacuum forming, and other various
finishing methods. Lear's foil and foam capabilities, whereby molded vinyl is
bonded to a plastic substrate using an expandable foam, are used throughout the
world. Lear's current development concentration is an instrument panel concept
for trucks processed by low pressure injection molding which management
believes will be in production by the beginning of 1998. Lear is constantly
developing recycling methods for future environmental requirements and
conditions in order to maintain its competitive edge in this industry. The
wide variety of available manufacturing processes helps Lear to continue to
meet customer cost and functionality specifications.
CUSTOMERS
Lear serves the worldwide automobile and light truck market, which
produces approximately 50 million vehicles annually. The Company's OEM
customers currently include Ford, General Motors, Fiat, Chrysler, Volvo, Saab,
Opel, Jaguar, Volkswagen, Audi, BMW, Rover, Honda USA, Daimler- Benz,
Mitsubishi, Mazda, Toyota, Subaru, Nissan, Isuzu, Peugeot, Porsche, Renault,
Suzuki, Hyundai and Daewoo. During the year ended December 31, 1996, Ford and
General Motors, the two largest automobile and light truck manufacturers in the
world, accounted for approximately 32% and 30%, respectively, of the Company's
net sales. For additional information regarding customers, foreign and
domestic operations and sales, see Note 18, "Geographic Segment Data," to the
consolidated financial statements of the Company included in this Report.
In the past six years, in the course of retooling and reconfiguring
plants for new models and model changeovers, certain OEMs have eliminated the
production of seat systems and other interior systems and components from
certain of their facilities, thereby committing themselves to purchasing these
items from outside suppliers. During this period, the Company became a
supplier of these products for a significant number of new models, many on a
JIT basis.
The purchase of seat systems and other interior systems and components
from full-service independent suppliers like Lear has allowed the Company's
customers to realize a competitive advantage as a result of (i) a reduction in
labor costs since suppliers like the Company generally enjoy lower direct labor
and benefit rates, (ii) the elimination of working capital and personnel costs
associated with the production of interior systems by the OEM, (iii) a
reduction in net overhead expenses and capital investment due to the
availability of significant floor space for expansion of other OEM
manufacturing operations and (iv) a reduction in transaction costs by utilizing
a limited number of sophisticated system suppliers instead of numerous
individual component suppliers. In addition, the Company offers improved
quality and on- going cost reductions to its customers through continuous,
Company-initiated design
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<PAGE> 11
improvements. The Company believes that such cost reductions will lead OEMs to
outsource an increasing portion of their automotive interior requirements in
the future and provide the Company with significant growth opportunities.
The Company's sales of value-added assemblies and component systems
have increased as a result of the decision by most OEMs to reduce their
internal engineering and design resources. In recent years, the Company has
significantly increased its capacity to provide complete engineering and design
services to support its product line. Because assembled parts such as door
panels, floor and acoustic systems, armrests and consoles need to be designed
at an early stage in the development of new automobiles or model revisions, the
Company is increasingly given the opportunity to participate earlier in the
product planning process. This has resulted in opportunities to add value by
furnishing engineering and design services and managing the sub-assembly
process for the manufacturer, as well as providing the broader range of parts
that are required for the assembly.
Lear maintains "Customer Focused Divisions" for each of the Company's
major customers. This organizational structure consists of several dedicated
groups, each of which is focused on serving the needs of a single customer and
supporting that customer's programs and product development. Each division is
capable of providing whatever interior component the customer needs, providing
that customer's purchasing agents, engineers and designers with a single point
of contact for their total automotive interior needs.
The Company receives blanket purchase orders from its customers that
normally cover annual requirements for products to be supplied for a particular
vehicle model. Such supply relationships typically extend over the life of the
model, which is generally four to seven years, and do not require the purchase
by the customer of any minimum number of products. Although such purchase
orders may be terminated at any time, the Company does not believe that any of
its customers have terminated a material purchase order prior to the end of the
life of a model. The primary risk to the Company is that an OEM will produce
fewer units of a model than anticipated. In order to reduce its reliance on
any one model, the Company produces interior systems and components for a broad
cross-section of both new and more established models.
The Company's sales for the year ended December 31, 1996 were comprised
of the following vehicle categories: 42% light truck; 23% mid-size; 17% compact
and other; 10% luxury/sport; and 8% full-size. The following table presents an
overview of the major vehicle models for which the Company, or its affiliates,
produce seat systems, interior trim products or other components by geographic
region:
<TABLE>
NORTH AMERICA
-------------
<S> <C> <C> <C>
BMW: FORD (CONT): GENERAL MOTORS (CONT): HONDA:
Z3 Ford Explorer Chevrolet Lumina Accord
Z3 Coupe Ford F-Series Chevrolet Malibu Acura CL
Ford Ghia Chevrolet Monte Carlo Civic
CHRYSLER: Ford Mustang Chevrolet S 10 Passport
Chrysler Cirrus Ford Probe Chevrolet Suburban
Chrysler Concorde Ford Ranger Chevrolet Swing MAZDA:
Chrysler LHS Ford Taurus Chevrolet Tahoe MX-6
Chrysler Sebring Ford Thunderbird Chevrolet Venture Pickup
Chrysler Sebring Ford Windstar Geo Prizm 626
Convertible Lincoln Continental GMC Jimmy
Chrysler Town & Country Lincoln Mark VIII GMC Safari
Dodge Avenger Lincoln Town Car GMC Savana MITSUBISHI:
Dodge Caravan Mercury Cougar GMC Sierra Eclipse
Dodge Dakota Mercury Grand Marquis GMC Sonoma Galant
Dodge Intrepid Mercury Mountaineer GMC Suburban
Dodge Neon Mercury Mystique GMC Top-Kick NISSAN:
Dodge Ram Mercury Sable GMC Yukon Altima
Dodge Ram Van Mercury Tracer Oldsmobile Achieva Pick-up
Dodge Ram Wagon Mercury Villager Oldsmobile Aurora Quest
Dodge Ramcharger Sentra
Dodge Stratus Oldsmobile Bravada
Dodge Viper GENERAL MOTORS: Oldsmobile Cutlass SUBARU/ISUZU:
Eagle Talon Buick Century Oldsmobile Cutlass Supreme Isuzu Rodeo
Eagle Vision Buick LeSabre Oldsmobile Silhouette Subaru Legacy
Jeep Cherokee Buick Park Avenue Oldsmobile 88
Jeep Grand Cherokee Buick Regal Pontiac Bonneville TOYOTA:
Jeep Wrangler Buick Riviera Pontiac Firebird Avalon
Plymouth Breeze Buick Skylark Pontiac Grand Am Camry
Plymouth Neon Cadillac Catera Pontiac Grand Prix Corolla
Plymouth Voyager Cadillac DeVille/Concours Pontiac Sunfire Tacoma
Cadillac Eldorado/Seville Pontiac Transport
FORD: Chevrolet Astro Saturn VOLKSWAGEN:
Ford Aerostar Chevrolet Blazer Saturn EV1 Cabrio
Ford Contour Chevrolet C/K Golf
Ford Crown Victoria Chevrolet Camaro GENERAL MOTORS/SUZUKI: GPA Minivan
Ford Econoline Chevrolet Cavalier Geo Metro Jetta
Ford Escort Chevrolet Corvette Geo Tracker
Ford Expedition Chevrolet Express Suzuki Sidekick
Chevrolet Kodiak Suzuki Swift
</TABLE>
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WESTERN EUROPE
--------------
ALFA ROMEO: FIAT (CONT): MERCEDES: ROVER (CONT):
Coupe Ducato C Class 100
Spider Marea E Class 200
145 Panda S Class 400
146 Punto 600
155 OPEL: 800
164 FORD: Astra
Escort Corsa SAAB:
AUDI: Fiesta Omega 900
A3 Mondeo Sintra 9000
A4 Scorpio Vectra
A6 TOYOTA:
A8 HONDA: PORSCHE: Carina
Honda Accord Boxster Corolla
BMW: Honda Civic 911
3 Series VOLKSWAGEN:
5 Series JAGUAR: RENAULT: Golf
XJ Series Cabrio Passat
CHRYSLER: XK8 Transit
Eurostar ROVER: T4-Multivan
LANCIA: Defender Viento
FIAT: Dedra Discovery
Barchetta Delta MGF VOLVO:
Bravo/Brava Kappa Mini Series 800
Coupe Y Range Rover Series 900
Croma
OTHER REGIONS
-------------
<TABLE>
<S> <C> <C> <C>
BMW (SOUTH AFRICA): FIAT (SOUTH AMERICA-CONT): GENERAL MOTORS (S. AMERICA): SEAT (SOUTH AMERICA):
3 Series Tempra Chevrolet C/K Cordoba
Tipo
DAEWOO (POLAND): Uno HYUNDAI (KOREA):
Tico Grandeur VOLVO (THAILAND):
FORD (SOUTH AMERICA): 800 Series
FIAT (POLAND): Ford Ranger OPEL (INDIA): 900 Series
500 Astra
Uno GENERAL MOTORS (AUSTRALIA): VOLKSWAGEN (S. AMERICA):
Berlina PUEGEOT (SOUTH AMERICA): Combi
FIAT (SOUTH AMERICA): Calais 306 Gol
Bravo/Brava Caprice 405 Saveiro
Duna Executive 504
Fiorino Statesman
Palio
Spazio GENERAL MOTORS (INDONESIA):
S-10 Blazer
</TABLE>
Because of the economic benefits inherent in outsourcing to suppliers
such as Lear and the costs associated with reversing a decision to purchase seat
systems and other interior systems and components from an outside supplier, the
Company believes that automotive manufacturers' level of commitment to
purchasing seating and other interior systems and components from outside
suppliers, particularly on a JIT basis, will increase. However, under the
contracts currently in effect in the United States and Canada between each of
General Motors, Ford and Chrysler with the United Auto Workers ("UAW") and the
Canadian Auto Workers ("CAW"), in order for any of such manufacturers to obtain
components from external sources that it currently produces itself, it must
first notify the UAW or the CAW of such intention. If the UAW or the CAW
objects to the proposed outsourcing, some agreement will have to be reached
between the UAW or the CAW and the OEM. Factors that will normally be taken
into account by the UAW, the CAW and the OEM include whether the proposed new
supplier is technologically more advanced than the OEM, whether the new supplier
is unionized, whether cost benefits exist and whether the OEM will be able to
reassign union members whose jobs are being displaced to other jobs within the
same factories. As part of its long-term agreement with General Motors, the
Company operates its Rochester Hills, Michigan, Wentzville, Missouri and
Lordstown, Ohio facilities with General Motors employees and reimburses General
Motors for the wages of such employees on the basis of the Company's employee
wage structure. The Company enters into these arrangements to enhance its
relationship with its customers.
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<PAGE> 13
General Motors experienced work stoppages during 1996, primarily
relating to the outsourcing of automotive components. These work stoppages
halted the production of certain vehicle models and adversely affected the
Company's operations.
The Company's contracts with its major customers generally provide for
an annual productivity price reduction and, in some cases, provide for the
recovery of increases in material and labor costs. Cost reduction through
design changes, increased productivity and similar programs with the Company's
suppliers have generally offset changes in selling prices. The Company's cost
structure is comprised of a high percentage of variable costs. The Company
believes that this structure provides it with additional flexibility during
economic cycles.
MARKETING AND SALES
Lear markets its products by maintaining strong relationships with its
customers fostered during its 80-year history through extensive technical and
product development capabilities, reliable delivery of high quality products,
strong customer service, innovative new products and a competitive cost
structure. Close personal communications with automobile manufacturers are an
integral part of the Company's marketing strategy. Recognizing this, the
Company is organized into seven independent divisions, each with the ability to
focus on its customers and programs and each having complete responsibility for
the product, from design to installation. By moving the decision-making process
closer to the customer, and instilling a philosophy of "cooperative autonomy,"
the Company is more responsive to, and has strengthened its relationships with,
its customers. Automotive manufacturers have increasingly reduced the number of
their suppliers as part of a strategy of purchasing systems rather than
individual components. This process favors suppliers like Lear with established
ties to OEMs and the demonstrated ability to adapt to the new competitive
environment in the automotive industry.
The Company's sales are originated almost entirely by its sales staff.
This marketing effort is augmented by design and manufacturing engineers who
work closely with automotive manufacturers from the preliminary design to the
manufacture and supply of interior systems or components. Manufacturers have
increasingly looked to suppliers like the Company to assume responsibility for
introducing product innovation, shortening the development cycle of new models,
decreasing tooling investment and labor costs, reducing the number of costly
design changes in the early phases of production and improving interior comfort
and functionality. Once the Company is engaged to develop the design for the
interior system or component of a specific vehicle model, it is also generally
engaged to supply these items when the vehicle goes into production. The
Company has devoted substantial resources toward improving its engineering and
technical capabilities and developing technology centers in the United States
and in Europe. The Company has also developed full-scope engineering
capabilities, including all aspects of safety and functional testing, acoustics
testing and comfort assessment. In addition, the Company has established
numerous engineering sites in close proximity to its OEM customers to enhance
customer relationships and design activity. Finally, the Company has
implemented a program of dedicated teams consisting of interior trim and seat
system personnel who are able to meet all of a customer's interior needs. These
teams provide a single interface for Lear's customers and avoid duplication of
sales and engineering efforts.
TECHNOLOGY
The Company conducts advanced product design development at its
technology centers in Southfield, Michigan, Plymouth, Michigan, Ebersberg,
Germany, Middlemarch, England and Turin, Italy and at 20 worldwide product
engineering centers. At these centers, the Company tests its products to
determine compliance with applicable safety standards, the products' quality
and durability, response to environmental conditions and user wear and tear.
The Company also has state-of-the-art acoustics testing, instrumentation and
data analysis capabilities.
The Company has and will continue to dedicate resources to research and
development to maintain its position as a leading developer of technology in
the automotive interior industry. Research and development costs incurred in
connection with the development of new products and manufacturing methods, to
the extent not recoverable from the customer, are charged to selling, general
and administrative expenses as incurred. Such costs amounted to approximately
$70.0 million, $53.3 million and $21.9 million for the years ended December 31,
1996, 1995 and 1994, respectively. Engineering expenses related to current
production are charged to cost of sales as incurred and amounted to $21.4
million, $14.1 million, and $8.9 million for the years ended December 31, 1996,
1995 and 1994, respectively.
In the past, the Company has developed a number of designs for
innovative seat features which it has patented, including ergonomic features
such as adjustable lumbar supports and bolster systems and adjustable thigh
supports. In addition, the Company incorporates many convenience, comfort and
safety features into its seat designs, including storage armrests, rear seat
fold down panels, integrated restraint systems (belt systems integrated into
seats), side impact air bags and child restraint seats. The Company has
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<PAGE> 14
recently invested to further upgrade its CAE and CAD/CAM systems, including
three-dimensional color graphics, customer telecommunications and direct
interface with customer CAD systems.
Lear uses its patented SureBond(TM) process (the patent for which has
approximately 7 years remaining) in bonding seat cover materials to the foam
pads used in certain of its seats. The SureBond(TM) process is used to bond a
pre-shaped cover to the underlying foam to minimize the need for sewing and
achieve new seating shapes, such as concave shapes, which were previously
difficult to manufacture. The Company has recently improved this process
through the development of its patented DryBond(TM) process which allows for
the bonding of vinyl and leather to seat cushions and seat backs.
The Company has virtually all technologies and manufacturing processes
available for interior trim applications. The manufacturing processes include,
among other things, high and low pressure injection molding, vacuum forming,
blow molding, soft foam molding, heat staking, water jet cutting, vibration
welding, ultrasonic welding, and robotic painting. This wide range of
capabilities allows the Company to assist its customers in selecting the
technologies that are the most cost effective for each application. Combined
with its design and engineering capabilities and its state-of-the-art technical
centers, the Company provides comprehensive support to its OEM customers from
product development to production.
The Company owns one of the few proprietary-design dynamometers capable
of precision acoustics testing of front, rear and four-wheel drive vehicles.
Together with its custom-designed reverberation room, computer-controlled data
acquisition and analysis capabilities provide precisely controlled laboratory
testing conditions for sophisticated interior and exterior noise, vibration and
harshness (NVH) testing of parts, materials and systems, including powertrain,
exhaust and suspension components. Through its Interior Trim Division, the
Company also owns a 29% interest in Precision Fabrics Group, Inc., ("PFG"),
which has patented a process to sew and fold an ultralight fabric into airbags
which are 60% lighter than the current airbags used in the automotive industry.
As this new airbag fits into a shirt pocket when folded, it is adaptable to
side restraint systems (door panels and seats) as well as headliners.
The Company holds a number of mechanical and design patents covering
its products and has numerous applications for patents currently pending. In
addition, the Company holds several trademarks relating to various
manufacturing processes. The Company also licenses its technology to a number
of seating manufacturers.
JOINT VENTURES AND MINORITY INTERESTS
The Company currently has 15 joint ventures and minority-owned
affiliates located in 10 countries. The Company pursues attractive joint
ventures in order to facilitate the exchange of technical information, expand
its product offerings, and broaden its customer base. In 1996, the Company
expanded its presence in the Asia/Pacific Rim region with a joint venture with
NHK Spring Co., Ltd. to supply seat systems in Thailand to a joint venture
between Ford and Mazda. In addition, Lear entered a joint venture with
Jiangling Motors Co., Ltd. to supply seat systems and interior trim components
in China for Isuzu trucks and Ford transit vans. In addition, several of the
Company's recent acquisitions, including Masland and AI, have provided the
Company with strategic joint ventures. With the Masland Acquisition, Lear
acquired an interest in PFG, and Sommer Masland (U.K.) Ltd. Sommer Masland
helped to expand Masland's geographical presence in Europe and strengthened its
relationship with several existing customers, including Nissan, Peugeot and
Saab. The AI Acquisition included a 40% interest in Industrias Automotrices
Summa, S.A. de C.V.(Mexico), as well as a 33% interest in Guildford Kast
Plastifol Ltd.(U.K.), both of which produce interior trim parts for
automobiles.
COMPETITION
The Company is one of the leading independent suppliers with
manufacturing capabilities in all five principal automotive interior segments:
seat systems; floor and acoustic systems; door panels; headliners; and
instrument panels. Within each segment, the Company competes with a variety of
independent suppliers and OEM in-house operations. Set forth below is a summary
of the Company's primary independent competitors.
- Seat Systems. Lear is one of the two primary suppliers in the
outsourced North American seat systems market. The Company's main independent
competitor is Johnson Controls, Inc. It also competes, to a lesser extent,
with Magna International, Inc. The Company's major independent competitors in
Western Europe, besides Johnson Controls, Inc., are Bertrand Faure
(headquartered in France) and Keiper Recaro (headquartered in Germany).
- Floor and Acoustic Systems. Lear is the one of the three largest
independent suppliers in the outsourced North American floor and acoustic
systems market. The Company's primary competitors are Collins & Aikman Corp.,
through its Automotive Division and JPS Automotive Products Subsidiary, and the
Magee Carpet Company. The Company's major competitors in Western Europe
include
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<PAGE> 15
H.P. Chemie Pelzer, GmbH, Rieter Automotive, BTR Fatati, Ltd., a division of
Collins & Aikman Corp. and Johann Borgers GmbH and Co.
- Other Interior Systems and Components. The market for outsourced
headliners, door panels and instrument panels is highly fragmented, with no one
dominant supplier in the North American market. The Company's major independent
competitors in these segments in North America include Johnson Controls, Inc.,
Davidson Interior Trim, a division of Textron, Inc., UT Automotive, a
subsidiary of United Technologies, Inc., The Becker Group and a large number of
smaller operations. The Western Europe market for door panels and instrument
panels is similarly fragmented with no dominant supplier. In the Western
Europe market for outsourced headliners there are four primary competitors
including Lear. The principal competitors in the Western Europe market for
door panels, instrument panels and headliners include Sommer Allibert, The
Becker Group, Plastic Omnium, Eurotec Systemteile a subsidiary of Kloeckner
Werke, Johnson Controls, Inc., and Magna International, Inc.
SEASONALITY
Lear's principal operations are directly related to the automotive
industry. Consequently, the Company may experience seasonal fluctuation to the
extent automotive vehicle production slows, such as in the summer months when
plants close for model year changeovers and vacation. Historically, the
Company's sales and operating profit have been the strongest in the second and
fourth calendar quarters. Net sales for the year ended December 31, 1996 by
calendar quarter broke down as follows: first quarter, 22%; second quarter,
26%; third quarter, 24%; and fourth quarter, 28%. See Note 19, "Quarterly
Financial Data," of the notes to the Company's consolidated financial
statements included elsewhere in this Report.
EMPLOYEES
As of December 31, 1996, the Company employed approximately 19,100
persons in the United States and Canada, 15,200 in Mexico and other world
regions and 9,600 in Europe. Of these, about 7,200 were salaried employees and
the balance were paid on an hourly basis. Approximately 30,000 of the Company's
employees are members of unions. The Company has collective bargaining
agreements with several unions including: the UAW; the CAW; the Textile Workers
of Canada; the International Brotherhood of Teamsters, Chauffeurs,
Warehousemen, and Helpers of America; the International Association of
Machinists and Aerospace Workers; and the AFL-CIO. Each of the Company's
unionized facilities in the United States and Canada has a separate contract
with the union which represents the workers employed there, with each such
contract having an expiration date independent of the Company's other labor
contracts. The majority of the Company's European and Mexican employees are
members of industrial trade union organizations and confederations within their
respective countries. The majority of these organizations and confederations
operate under national contracts which are not specific to any one employer.
The Company has experienced some labor disputes at its plants, none of which
has significantly disrupted production or had a materially adverse effect on
its operations. The Company has been able to resolve all such labor disputes
and believes its relations with its employees are generally good.
ENVIRONMENTAL
The Company is subject to various laws, regulations and ordinances
which govern activities such as discharges to the air and water, as well as
handling and disposal practices for solid and hazardous wastes, and which
impose costs and damages associated with spills, disposal or other releases of
hazardous substances. The Company believes that it is in substantial compliance
with such requirements. Management does not believe that it will incur
compliance costs pursuant to such requirements that would have a material
adverse effect on the Company's consolidated financial position or future
results of operations. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations of the Company -- Environmental Matters."
13
<PAGE> 16
ITEM 2 - PROPERTIES
The Company's operations are conducted through 148 facilities, some of
which are used for multiple purposes, including 129 manufacturing facilities,
20 product engineering centers and 5 technology centers, in 21 countries
employing over 43,000 people worldwide. The Company's world headquarters are
located in Southfield, Michigan. The facilities range in size from 5,000
square feet to 1,000,000 square feet.
Management believes substantially all of the Company's property and
equipment is in good condition and that it has sufficient capacity to meet its
current and expected manufacturing needs. The Company has designed many of its
facilities to provide for efficient JIT manufacturing of its products. No
facility is materially underutilized. Of the 148 facilities, 76 are owned and
72 are leased with expiration dates ranging from 1997 through 2005. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations of the Company -- Capital Expenditures."
The following table summarizes the locations of the Company's
facilities:
<TABLE>
<S> <C> <C> <C>
ARGENTINA GERMANY SOUTH AFRICA UNITED STATES (CONTINUED)
Buenos Aires Ebersberg Brits Fremont, OH
Cordoba Eisenach Greencastle, IN
Gustavsburg SPAIN Hammond, IN
AUSTRALIA Munich Pamplona Huron, OH
Adelaide Plattling Janesville, WI
Brooklyn Quakenbruck SWEDEN Kansas City, MO
Rietberg Arendal Lebanon, VA
AUSTRIA Wackersdorf Bengtsfors Lebanon, OH
Koflach Fargelanda Lewistown, PA
INDIA Gnosjo Lorain, OH
BRAZIL Gujarat Goteborg Lordstown, OH
Belo Horizonte Ljungby Louisville, KY
Sao Paolo INDONESIA Tanumshede Luray, VA
Jakarta Tidaholm Madisonville, KY
CANADA Trollhattan Manteca, CA
Ajax ITALY Marlette, MI
Kitchener Bruino THAILAND Marshall, MI
Maple Caivano Bangkok Melvindale, MI
Mississauga Cassino Khorat Mendon, MI
Oakville Grugliasco Mequon, WI
St. Thomas Melfi TURKEY Midland, TX
Whitby Orbassano Bursa Morristown, TN
Woodstock Pozzilli Newark, DE
Termini Imerese UNITED STATES Novi, MI
CHINA Allen Park, MI Pontiac, MI
Wanchai MEXICO Arlington, TX Plymouth, MI
Cuautitlan Atlanta, GA Rochester Hills, MI
ENGLAND Hermosillo Auburn Hills, MI Romulus, MI
Colne Juarez Bowling Green, OH Sheboygan, WI
Coventry Naucalpan Bridgeton, MO Southfield, MI
Dunton Puebla Carlisle, PA Strasburg, VA
Middlemarch Ramos Arizpe Clawson, MI Sidney, OH
Nottingham Saltillo Covington, VA Troy, MI
Tipton Silao Dearborn, MI Warren, MI
Washington Tlahuac Detroit, MI Wentzville, MO
Toluca Duncan, SC West Chicago, IL
FRANCE El Paso, TX Winchester, VA
Meaux POLAND Fair Haven, MI
Paris Myslowice Fenton, MI VENEZUELA
Tychy Frankfort, IN Valencia
</TABLE>
14
<PAGE> 17
ITEM 3 - LEGAL PROCEEDINGS
The Company is involved in certain legal actions and claims arising in
the ordinary course of business. Management of the Company does not believe
that any of the litigation in which the Company is currently engaged, either
individually or in the aggregate, will have a material effect on the Company's
consolidated financial position or future results of operations.
The Company has been identified as a potentially responsible party
("PRP") under the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, as amended ("CERCLA" or "Superfund"), for the cleanup of
contamination from hazardous substances at two Superfund sites where liability
has not been determined. The Company has also been identified as a PRP at
three additional sites. Management believes that the Company is, or may be,
responsible for less than one percent, if any, of total costs at the two
Superfund sites. Expected liability, if any, at the three additional sites is
not material. The Company has set aside reserves which management believes are
adequate to cover any such liabilities. Management believes that such matters
will not result in liabilities that will have a material adverse effect on the
Company's consolidated financial position or future results of operations.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the
fourth quarter of 1996.
15
<PAGE> 18
PART II
ITEM 5 - MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED
STOCKHOLDER MATTERS
The Company's Common Stock is listed on the New York Stock Exchange
under the symbol "LEA." The Transfer Agent and Registrar for the Company's
Common Stock is The Bank of New York, located in New York, New York. On March
3, 1997, there were 284 holders of record of the Company's Common Stock.
To date, the Company has never paid a cash dividend on its Common
Stock. Any payment of dividends in the future is dependent upon the financial
condition, capital requirements, earnings of the Company and other factors.
Also, the Company is subject to certain contractual restrictions on the payment
of dividends. See Note 11, "Long-Term Debt," of the notes to the consolidated
financial statements included in this Report for information concerning such
restrictions.
The following table sets forth the high and low sales prices per share
of Common Stock, as reported by the New York Stock Exchange, for the periods
indicated:
<TABLE>
<CAPTION>
Price Range of
Year Ended December 31, 1996: Common Stock
----------------------------- ------------
High Low
---- ---
<S> <C> <C>
1st Quarter 34 25 1/4
2nd Quarter 39 1/4 27 1/2
3rd Quarter 39 7/8 29 7/8
4th Quarter 38 7/8 31 3/4
<CAPTION>
Price Range of
Year Ended December 31, 1995 Common Stock
---------------------------- ------------
High Low
<S> <C> <C>
1st Quarter 20 7/8 16 5/8
2nd Quarter 24 1/4 17 7/8
3rd Quarter 31 1/8 23
4th Quarter 32 1/2 26 1/4
</TABLE>
16
<PAGE> 19
ITEM 6 - SELECTED FINANCIAL DATA
The following income statement and balance sheet data were derived from
the consolidated financial statements of the Company. The consolidated
financial statements of the Company for the years ended December 31, 1996,
1995, 1994 and 1993, and for the years ended June 30, 1993 and 1992 have been
audited by Arthur Andersen LLP. In February 1994, the Company changed its
fiscal year end from June 30 to December 31 effective December 31, 1993. The
selected financial data below should be read in conjunction with the
consolidated financial statements of the Company and the notes thereto and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations of the Company" included in this Report.
<TABLE>
<CAPTION>
YEAR YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, JUNE 30, JUNE 30,
1996 1995 1994 1993 1993 1992
------------- ------------- ------------ ------------ -------- --------
(DOLLARS IN MILLIONS (1))
<S> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Net sales $ 6,249.1 $ 4,714.4 $ 3,147.5 $ 1,950.3 $ 1,756.5 $ 1,422.7
Gross profit 619.7 403.1 263.6 170.2 152.5 115.6
Selling, general and
administrative expenses 210.3 139.0 82.6 62.7 61.9 50.1
Incentive stock and other
compensation expense (2) -- -- -- 18.0 -- --
Amortization 33.6 19.3 11.4 9.9 9.5 8.7
----------- ----------- ----------- ----------- ----------- -----------
Operating income 375.8 244.8 169.6 79.6 81.1 56.8
Interest expense, net 102.8 75.5 46.7 45.6 47.8 55.2
Other expense, net (3) 19.6 12.0 8.1 9.2 5.4 5.8
----------- ----------- ----------- ----------- ----------- -----------
Income (loss) before income taxes
and extraordinary items 253.4 157.3 114.8 24.8 27.9 (4.2)
Income taxes 101.5 63.1 55.0 26.9 17.8 12.9
----------- ----------- ----------- ---------- ---------- -----------
Income (loss) before
extraordinary items 151.9 94.2 59.8 (2.1) 10.1 (17.1)
Extraordinary items (4) -- 2.6 -- 11.7 -- 5.1
----------- ----------- ---------- ---------- ---------- -----------
Net income (loss) $ 151.9 $ 91.6 $ 59.8 $ (13.8) $ 10.1 $ (22.2)
=========== =========== ========== ========== ========== ===========
Income (loss) per share before
extraordinary items $ 2.38 $ 1.79 $ 1.26 $ (.06) $ .25 $ (.62)
Net income (loss) per share $ 2.38 $ 1.74 $ 1.26 $ (.39) $ .25 $ (.80)
Weighted average shares 63,765,610 52,642,672 47,560,436 35,500,014 40,049,064 27,768,312
outstanding (5)
BALANCE SHEET DATA:
Current assets $ 1,347.4 $ 1,207.2 $ 818.3 $ 433.6 $ 325.2 $ 282.9
Total assets 3,816.8 3,061.3 1,715.1 1,114.3 820.2 799.9
Current liabilities 1,499.3 1,276.0 981.2 505.8 375.0 344.2
Long-term debt 1,054.8 1,038.0 418.7 498.3 321.1 348.3
Common stock subject to limited
redemption rights, net -- -- -- 12.4 3.9 3.5
Stockholders' equity 1,018.7 580.0 213.6 43.2 75.1 49.4
OTHER DATA:
EBITDA (6) $ 518.1 $ 336.8 $ 225.7 $ 122.2 $ 121.8 $ 91.8
Capital expenditures $ 153.8 $ 110.7 $ 103.1 $ 45.9 $ 31.6 $ 27.9
Number of facilities (7) 148 107 79 61 48 45
North American content per
vehicle (8) $ 292 $ 227 $ 169 112 $ 98 $ 94
North American vehicle production
(9) 15.0 14.9 15.2 13.7 13.6 12.2
Western Europe content per
vehicle (10) $ 109 $ 92 $ 44 34 $ 26 $ 19
Western Europe vehicle production
(11) 14.4 13.9 13.2 11.7 12.9 14.1
</TABLE>
- ---------------
(1) Except per share data, weighted average shares outstanding, number of
facilities, North American content per vehicle, North American
vehicle production, Western Europe content per vehicle and Western
Europe vehicle production.
(2) Includes a one-time charge of $18.0 million, of which $14.5 million
is non-cash, for the year ended December 31, 1993 for incentive stock
and other compensation expense.
(3) Consists of foreign currency exchange gain or loss, minority
interests in consolidated subsidiaries, equity in net income of
affiliates, state and local taxes and other expense.
(4) The extraordinary items resulted from the prepayment of debt.
(5) Weighted average shares outstanding is calculated on a fully-diluted
basis.
(6) "EBITDA" is operating income plus depreciation and amortization.
EBITDA does not represent and should not be considered as an
alternative to net income or cash flows from operations as determined
by generally accepted accounting principles.
(7) Includes facilities operated by the Company's less than
majority-owned affiliates and facilities under construction.
(8) "North American content per vehicle" is the Company's net sales in
North America divided by total North American vehicle production.
(9) "North American vehicle production" includes car and light truck
production in the United States, Canada and Mexico estimated from
industry sources.
(10) "Western Europe content per vehicle" is the Company's net sales in
Western Europe divided by total Western Europe vehicle production.
(11) "Western Europe vehicle production" includes car and light truck
production in Austria, Belgium, France, Germany, Italy, Netherlands,
Portugal, Spain, Sweden, and the United Kingdom estimated from
industry sources.
17
<PAGE> 20
MANAGEMENT'S DISCUSSION AND ANALYSIS
Of Financial Condition and Results of Operations
RESULTS OF OPERATIONS
Lear's sales have grown rapidly, both internally and through acquisitions, from
approximately $3.1 billion in the year ended December 31, 1994, to
approximately $6.2 billion in the year ended December 31, 1996. Net Income over
the same period increased from $59.8 million to $151.9 million. The Company's
principal operations are directly affected by worldwide automotive vehicle
production. Automotive production can be affected by factors such as the
country's general economy, labor relation issues, regulatory requirements,
trade agreements, and other factors. Labor relation issues at one of the
Company's major customers had a negative impact on the results of operations of
the Company for the year ended December 31, 1996.
YEAR ENDED DECEMBER 31, 1996 COMPARED WITH YEAR ENDED DECEMBER 31, 1995.
Net sales of $6,249.1 million in the year ended December 31, 1996 represented
the fifteenth consecutive year of record sales and exceeded sales of $4,714.4
million in the year ended December 31, 1995 by $1,534.7 million, or 32.6%. Net
sales in 1996, as compared to the prior year, benefited from the full year
contribution of the acquisition of Automotive Industries Holding, Inc. ("AI")
and the acquisition of Masland Corporation ("Masland") in August 1995 and June
1996, respectively, which collectively accounted for $836.3 million of the
increase. Further contributing to the overall increase in sales was new
business introduced globally within the past year and incremental volume and
content on mature programs.
Gross profit (net sales less cost of sales) and gross margin (gross profit as a
percentage of net sales) improved to $619.7 million and 9.9% in 1996 as
compared to $403.1 million and 8.6% in 1995. Gross profit in 1996 reflects the
contribution of the AI and Masland acquisitions coupled with the benefits
derived from increased revenues from new and ongoing programs. Also
contributing to the increase in gross profit was a decrease in start-up
expenses from $32.1 million in 1995 to $18.0 million in 1996. Partially
offsetting the increase in gross profit was the cumulative impact of the
General Motors work stoppages in the first and fourth quarters of 1996 and
downtime associated with a Chrysler model changeover.
Selling, general and administrative expenses, including research and
development, as a percentage of net sales increased to 3.4% in the year ended
December 31, 1996 as compared to 2.9% a year earlier. In comparison to the
prior year, the increase in actual expenditures in 1996 was due to the
inclusion of Masland and AI operating expenses as well as increased research
and development and administrative support expenses associated with the
expansion of domestic and international business.
Operating income and operating margin (operating income as a percentage of net
sales) were $375.8 million and 6.0% in the year ended December 31, 1996 as
compared to $244.8 million and 5.2% in the previous year. For 1996, operating
income benefited from the incremental operating income generated from
acquisitions along with increased revenue from domestic and foreign automotive
manufacturers on new and mature programs. Partially offsetting the increase in
operating income were design, development and administrative expenses at North
American and European Technical Centers, Chrysler's downtime for model
changeover and the adverse impact of the General Motors work stoppages.
Non-cash depreciation and amortization charges were $142.3 million and $92.0
million for the years ended December 31, 1996 and 1995, respectively.
For the year ended December 31, 1996, interest expense increased by $27.3
million to $102.8 million as compared to the corresponding period in the prior
year. The increase in interest expense was largely the result of interest
incurred on additional debt utilized to finance the Masland and AI
acquisitions.
Other expenses for the current year, which include state and local taxes,
foreign exchange, minority interests in consolidated subsidiaries, equity in
net income of affiliates and other non-operating expenses, increased to $19.6
million in 1996 as compared to $12.0 million in 1995 as the effect of higher
sales volumes on state and local taxes and the provision for minority interests
from the Company's joint ventures more than offset favorable foreign exchange
related to the Company's North American and European operations.
Net income in 1996 was $151.9 million, or $2.38 per share, as compared to $91.6
million, or $1.74 per share in 1995. The increase in net income was due to the
Masland acquisition, a full year of activity from the August 1995 AI
acquisition, new business awarded, cost reduction programs and increased
production levels on existing programs. The provision for income taxes in the
current year was $101.5 million, or an effective tax rate of 40.1%, as compared
to $63.1 million and 40.1% in the previous year. Net income in 1995 reflects an
extraordinary loss of $2.6 million related to the early retirement of debt.
Earnings per share increased in 1996 by 36.8% despite an increase in the
weighted average number of shares outstanding of approximately 11.1 million
shares.
18
<PAGE> 21
The following chart shows net sales and operating income of the Company by
principal geographic area:
GEOGRAPHIC OPERATING RESULTS (in millions)
<TABLE>
<CAPTION>
DEC. 31, Dec. 31, Dec.31,
Year ended 1996 1995 1994
------------------------------------------------------
<S> <C> <C> <C>
NET SALES:
United States and Canada $4,058.0 $3,108.0 $2,378.7
Europe 1,621.8 1,325.4 572.5
Mexico and other 569.3 281.0 196.3
------------------------------------------------------
Net Sales $6,249.1 $4,714.4 $3,147.5
======================================================
OPERATING INCOME:
United States and Canada $ 302.6 $ 204.8 $ 155.6
Europe 49.2 26.5 4.4
Mexico and other 24.0 13.5 9.6
------------------------------------------------------
Operating Income $ 375.8 $ 244.8 $ 169.6
======================================================
</TABLE>
UNITED STATES AND CANADIAN OPERATIONS
Net sales in the United States and Canada were $4,058.0 million and $3,108.0
million in the years ended December 31, 1996 and 1995, respectively. Sales in
1996 benefited from the contribution of $708.4 million in incremental sales
from the AI and Masland acquisitions, new passenger car and truck programs
introduced within the past twelve months and modest vehicle production
increases by domestic automotive manufacturers on carryover programs. Partially
offsetting the increase in sales was the impact of the General Motors work
stoppages and downtime associated with a Chrysler model changeover.
Operating income and operating margin were $302.6 million and 7.5% in 1996 as
compared to $204.8 million and 6.6% in 1995. The increase in operating income
was largely the result of the benefits derived from the acquisitions of AI and
Masland as well as the overall growth in domestic vehicle sales, including
production of new business programs. Partially offsetting the increase in
operating income were reduced utilization at General Motors and Chrysler
facilities and higher engineering and administrative expenses necessary to
support established and new business opportunities.
EUROPEAN OPERATIONS
Net sales in Europe increased by 22.4% to $1,621.8 million in the year ended
December 31, 1996 as compared to $1,325.4 million in the year ended December
31, 1995. Sales in 1996 benefited from increased market demand on existing
passenger car and light truck programs in Italy, Germany and Austria and the
full year contribution of the AI acquisition.
Operating income and operating margin were $49.2 million and 3.0% in 1996 as
compared to $26.5 million and 2.0% in 1995. Operating income in 1996 benefited
from incremental volume on carryover seat and seat component programs, the
contribution of the AI acquisition and improved operating performance at
certain of the Company's facilities in England and Germany.
MEXICO AND OTHER OPERATIONS
Net sales of $569.3 million in 1996 in the Company's remaining geographic
regions, consisting of Mexico, South America, Asia/ Pacific Rim and South
Africa increased by $288.3 million as compared to $281.0 million in the
comparable period in 1995. Sales in the year ended December 31, 1996 benefited
from new business operations in South America, Asia/ Pacific Rim, and South
Africa which accounted for $214.7 million of the increase, higher production
build schedules for General Motors and Chrysler programs in Mexico and sales of
$22.3 million from a Masland operation in Mexico.
Operating income and operating margin were $24.0 million and 4.2% in 1996 as
compared to $13.5 million and 4.8% in 1995. Operating income in 1996 increased
primarily due to the benefits derived from the growth in sales activity,
including the production of new business operations and the acquisition of
Masland. Partially offsetting the increase in operating income were facility
and preproduction costs for recently opened facilities in Argentina, India and
Venezuela.
19
<PAGE> 22
YEAR ENDED DECEMBER 31, 1995 COMPARED WITH YEAR ENDED DECEMBER 31, 1994.
Net sales of $4,714.4 million in the year ended December 31, 1995 increased by
$1,566.9 million or 49.8% over net sales for the year ended December 31, 1994.
Net sales in 1995 benefited from the acquisitions of AI on August 17, 1995 and
the Fiat Seat Business ("FSB") on December 15, 1994, which together accounted
for $795.3 million of the increase. Further contributing to the growth in sales
were incremental volumes on new seating programs in North America and increased
production in Europe.
Gross profit and gross margin were $403.1 million and 8.6% in 1995 as compared
to $263.6 million and 8.4% in 1994. Gross profit in 1995 benefited from the
overall increase in North American and European sales activity, including the
acquisitions of AI and FSB, and production of certain new seat programs in the
United States and Mexico. Partially offsetting the increase in gross profit
were new program start-up expenses of $32.1 million versus $23.1 million in
1994, and costs associated with new business opportunities in Asia/Pacific Rim,
South America and South Africa.
Selling, general and administrative expenses, including research and
development, as a percentage of net sales increased to 2.9% in 1995 as compared
to 2.6% in the previous year. Actual expenditures in 1995 increased in
comparison to the prior year primarily due to the inclusion of AI and FSB
engineering and administrative expenses in 1995. In addition, research and
development costs increased at the United States and European customer focused
technical centers in support of existing and potential business opportunities.
Operating income and operating margin were $244.8 million and 5.2% in the year
ended December 31, 1995 as compared to $169.6 million and 5.4% in the year
ended December 31, 1994. The increase in operating income was primarily due to
increased volumes on new and existing light truck seating programs, improved
performance at the Company's European operations and the incremental operating
income derived from acquisitions. Partially offsetting the increase in
operating income and contributing to the decline in operating margins were
design and development costs associated with the expansion of business and
program start-up expenses for new seat programs. Also contributing to the
decline in operating margin were the increased sales in Europe caused by the
FSB which had lower margins. Non-cash depreciation and amortization charges
were $92.0 million and $56.1 million for the years ended December 31, 1995 and
1994, respectively.
Interest expense in the year ended December 31, 1995 increased in comparison to
the prior year as a result of interest incurred on additional debt utilized to
finance the AI and FSB acquisitions as well as higher interest rates in 1995
under the Company's senior credit facility.
Other expenses in 1995 increased in comparison to the prior year as foreign
exchange losses incurred at the Company's North American and European
operations, along with increased state and local taxes associated with the AI
acquisition, more than offset income derived from joint ventures accounted for
under the equity method.
Net income for the year ended December 31, 1995 was $91.6 million, or $1.74 per
share, as compared to $59.8 million, or $1.26 per share in the year ended
December 31, 1994. The provision for income taxes in 1995 was $63.1 million, or
an effective tax rate of 40.1%, versus $55.0 million and 47.9% for the previous
year. The decrease in rate is largely the result of changes in operating
performance and related income levels among the various tax jurisdictions.
Earnings per share increased in 1995 by 38.1% despite an increase in the number
of shares outstanding and an extraordinary loss of $2.6 million ($.05 per
share) for the early retirement of debt.
UNITED STATES AND CANADIAN OPERATIONS
Net sales in the United States and Canada were $3,108.0 million and $2,378.7
million in the years ended December 31, 1995 and 1994, respectively. Sales in
1995 benefited from new Ford and General Motors passenger car programs, the
contribution of $248.1 million in sales from the AI acquisition and incremental
volume on light truck seating for previously existing programs.
Operating income and operating margin were $204.8 million and 6.6% in 1995 as
compared to $155.6 million and 6.5% in 1994. Operating income in 1995 increased
primarily due to increased volumes at certain of the Company's car and
light-truck seating facilities, the benefits derived from the AI acquisition
and increased productivity and cost reduction programs at existing seat and
seat component facilities. Partially offsetting this increase in operating
margin were engineering and administrative support expenses along with
preproduction costs at new business operations.
EUROPEAN OPERATIONS
Net sales in Europe were $1,325.4 million in the year ended December 31, 1995
and $572.5 million in the year ended December 31, 1994. Sales in 1995 benefited
from $547.2 million in sales from the FSB and AI acquisitions, incremental
volume on existing programs in Sweden and England and favorable exchange rate
fluctuations in Germany and Sweden.
20
<PAGE> 23
Operating income and operating margin were $26.5 million and 2.0% in 1995 as
compared to $4.4 million and 0.8% in 1994. Operating income in 1995 benefited
from incremental volume on mature Scandinavian and German seat programs and the
benefits derived from the FSB and AI acquisitions. Partially offsetting the
increase in operating income were engineering, preproduction and facility costs
associated with the start-up of a new seat program in Germany.
MEXICO AND OTHER OPERATIONS
Net sales of $281.0 million in 1995 in the Company's remaining geographic
regions, consisting of Mexico, Asia/Pacific Rim, South Africa and South America
increased by $84.7 million or 43.1% as compared to $196.3 million in 1994.
Sales in the year ended December 31, 1995 benefited from the overall growth in
Mexican sales activity, including the production of new General Motors and Ford
passenger car and truck seat programs. Further contributing to the increase in
sales was the addition of new business operations in Australia, South Africa,
Brazil and Argentina.
Operating income and operating margin were $13.5 million and 4.8% in the year
ended December 31, 1995 and $9.6 million and 4.9% in the previous year. The
increase in operating income was largely the result of the benefits derived
from increased market demand for new and ongoing seat programs in Mexico.
Partially offsetting the increase in operating income were engineering and
preproduction costs for recently opened manufacturing facilities in
Asia/Pacific Rim, South Africa and South America.
LIQUIDITY AND FINANCIAL CONDITION
The Company's financial position continued to strengthen during 1996. Strong
cash flows combined with the July, 1996 equity offering offset acquisition
costs and resulted in the Company's strongest ever total debt to total
capitalization position, 51.3% at December 31, 1996 compared to 64.7% at
December 31, 1995. In addition, during 1996 Moody's Investors Services
("Moody's") upgraded its rating of the Company's primary debt instruments. The
Company's senior credit agreement was upgraded from Ba2 to Ba1, the Company's
8 1/4% Subordinated Notes due 2002 from B2 to B1 and the Company's 11 1/4%
Senior Subordinated Notes due 2000 from B1 to Ba3. Standard and Poor's
Corporation ("S&P") also upgraded its rating of the credit agreement to BB+
from BB- and of all three subordinated debt issues to BB- from B. The new
9 1/2% Subordinated Notes were assigned a B1 and BB- rating from Moody's and
S&P, respectively.
On July 1, 1996, the Company completed the acquisition of all the issued and
outstanding shares of common stock of Masland Corporation ("Masland") for an
aggregate purchase price of $475.7 million (including the assumption of $80.7
million of Masland's existing net indebtedness and $10.0 million in fees and
expenses). In addition, on December 10, 1996, the Company completed the
acquisition of all the issued and outstanding capital stock of Borealis
Industrier AB for an aggregate purchase price of $91.1 million, including the
assumption of existing net indebtedness and closing costs.
Financing for the Masland acquisition was provided from borrowings under the
Company's then-existing revolving credit facilities (the "Prior Credit
Agreements"), which at the time of the acquisition provided for borrowings in
an aggregate principal amount of up to $1.775 billion. In December 1996, the
Company amended and restated the Prior Credit Agreements (as so amended and
restated, the "Existing Credit Agreement") to (i) reduce rates, (ii)
consolidate them into one agreement, (iii) increase total borrowing
availability to $1.8 billion, (iv) release liens on the Company's real and
personal property, (v) eliminate certain scheduled commitment reductions
existing under the Prior Credit Agreements, (vi) modify certain covenants, and
(vii) provide for additional borrowing options, including multi-currency
borrowing. The Existing Credit Agreement matures on September 30, 2001 and
borrowings thereunder may be used for general corporate purposes.
In July 1996, the Company issued and sold 7.5 million shares of common stock at
$33.50 per share and $200 million aggregate principal amount of its 9 1/2%
Subordinated Notes due 2006. The $438.3 million of net proceeds ($242.8 million
and $195.5 million from the common stock offering and the subordinated notes
offering, respectively) received by the Company were used to repay indebtedness
incurred under the Prior Credit Agreements in connection with the acquisition
of Masland.
As of the end of December, the Company had an aggregate of $1.8 billion
available under the Existing Credit Agreement, of which $481.3 million was
outstanding and $38.5 million was committed under outstanding letters of
credit, resulting in approximately $1.28 billion unused and available. In
addition to debt outstanding under the Existing Credit Agreement, the Company
had an additional $592.1 million of debt outstanding as of December 31, 1996,
including short-term borrowings, primarily consisting of $470.0 million of
subordinated debentures due between 2000 and 2006. The Company's scheduled
principal payments on long-term debt are $8.3, $49.4, $6.6, $130.8 and $483.0
million in 1997, 1998, 1999, 2000 and 2001, respectively.
21
<PAGE> 24
Net cash provided by operating activities increased to $462.6 million during
1996 compared to $132.8 million in 1995. The contributing factors which led to
the favorable variance include the net income increase, from $91.6 million in
1995 to $151.9 million in 1996, the favorable benefit of noncash depreciation
and goodwill amortization charges, which increased by $50.3 million to $142.3
million, primarily as a result of the AI and Masland acquisitions and favorable
working capital changes. Working capital provided a $210.7 million net source
of funds in 1996 compared to a $59.2 million net use in 1995. Total working
capital decreased in 1996 as a result of more aggressive asset management,
resulting in fewer days sales outstanding and improved inventory turns.
Net cash used by investing activities, primarily acquisitions, was $681.7
million and $985.8 million in 1996 and 1995, respectively. The June 1996
Masland acquisition and the December 1996 Borealis acquisition resulted in a
net use of funds of $459.8 and $69.2 million, respectively, while the August
1995 AI acquisition resulted in a net use of cash of $881.3 million. Capital
expenditures increased from $110.7 million in 1995 to $153.8 million in 1996 as
a result of the Masland and AI acquisitions as well as to support future
programs.
As of December 31, 1996 the Company had $26.0 million of cash and cash
equivalents. The Company believes that cash flows from operations and available
credit facilities will be sufficient to meet its debt service obligations,
projected capital expenditures and working capital requirements.
As a result of the continued global expansion, the amount of the Company's
revenues and expenses denominated in currencies other than the U.S. Dollar
continues to increase. The Company closely monitors its exposure to currency
fluctuations and, where cost justified, adopts strategies to reduce this
exposure.
CAPITAL EXPENDITURES
During the year ended December 31, 1996, capital expenditures aggregated
approximately $153.8 million, of which approximately $49.9 million related to
the addition of new facilities and other expenditures for new programs, $22.0
million related to replacement programs, and the remainder was spent for
increased capacity and cost reduction at existing facilities and ongoing
maintenance requirements. For the years ended December 31, 1995 and 1994,
capital expenditures of the Company were $110.7 million and $103.1 million,
respectively. For 1997, the Company anticipates capital expenditures of
approximately $195 million.
ENVIRONMENTAL MATTERS
The Company is subject to local, state, federal and foreign laws, regulations
and ordinances (i) which govern activities or operations that may have adverse
environmental effects and (ii) that impose liability for the costs of cleaning
up certain damages resulting from sites of past spills, disposal or other
releases of hazardous substances. The Company's policy is to comply with all
applicable environmental laws and maintain procedures to ensure compliance.
However, the Company has been, and in the future may become, the subject of
formal or informal enforcement actions or procedures. The Company currently is
engaged in the cleanup of hazardous substances at certain sites owned, leased
or operated by the Company, including soil and groundwater cleanup at its
facility in Mendon, Michigan. Management believes that the Company will not
incur compliance costs or cleanup cost at its facilities with known
contamination that would have a material adverse effect on the Company's
consolidated financial position or future results of operations.
The Company has been identified as a potentially responsible party ("PRP")
under the Comprehensive Environmental Response, Compensation and Liability Act
of 1980, as amended ("CERCLA" or "Superfund"), for the cleanup of contamination
from hazardous substances at two Superfund sites where liability has not been
completely determined. The Company has also been identified as a PRP at three
additional sites. Management believes that the Company is, or may be,
responsible for less than one percent, if any, of the total costs at the two
Superfund sites. Expected liability, if any, at the three additional sites is
not material.
INFLATION AND ACCOUNTING POLICIES
Lear's contracts with its major customers generally provide for an annual
productivity price reduction and provide for the recovery of increases in
material and labor costs in some contracts. Cost reduction through design
changes, increased productivity and similar programs with the Company's
suppliers generally have offset changes in selling prices. The Company's cost
structure is comprised of a high percentage of variable costs. The Company
believes that this structure provides it with additional flexibility during
economic cycles.
During 1995, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards ("SFAS") No. 121, "Recognition of Impairment
of Long-lived Assets", which specifies when and how impairment of virtually all
long-lived assets should be measured and recorded. In general, the statement
requires that whenever circumstances raise doubt about the recoverability
22
<PAGE> 25
of long-lived assets, the Company should analyze the future cash flows
expected from such assets to determine if impairment exists. This statement was
adopted prospectively on January 1, 1996, and no such impairment was
recognized during 1996.
Also during 1995, the FASB issued SFAS No. 123, "Accounting for Stock-Based
Compensation", which was adopted by the Company in 1996 and requires that stock
compensation, including compensation in the form of stock options, be
calculated using a measure of fair value, compared with intrinsic value
required under current accounting principles. The new method may be either
reflected in the financial statements or disclosed in the notes to the
statements. The Company has adopted the statement by disclosing the effects of
the fair value method in Note 16 to its 1996 financial statements included
herein.
"SAFE HARBOR" PROVISIONS
This report contains forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. Investors are cautioned that
any forward-looking statements, including statements regarding the intent,
belief, or current expectations of the Company or its management, are not
guarantees of future performance and involve risks and uncertainties, and that
actual results may differ materially from those in forward-looking statements
as a result of various factors including, but not limited to, (i) general
economic conditions in the markets in which the Company operates, (ii)
fluctuation in worldwide or regional automobile and light truck production,
(iii) labor disputes involving the Company or its significant customers, (iv)
changes in practices and/or policies of the Company's significant customers
toward outsourcing automotive components and systems, and (v) other risks
detailed from time to time in the Company's Securities and Exchange Commission
filings. The Company does not intend to update these forward-looking
statements.
23
<PAGE> 26
ITEM 8 -CONSOLIDATED FINANCIAL STATEMENTS AND
SUPPLEMENTARY DATA
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Public Accountants 25
Consolidated Balance Sheets as of December 31, 1996 and 1995 26
Consolidated Statements of Income for the years ended December 31,
1996, 1995 and 1994 27
Consolidated Statements of Stockholders' Equity for the years ended
December 31, 1996, 1995 and 1994 28
Consolidated Statements of Cash Flows for the years ended
December 31, 1996, 1995 and 1994 29
Notes to Consolidated Financial Statements 30
</TABLE>
24
<PAGE> 27
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Lear Corporation:
We have audited the accompanying consolidated balance sheets of LEAR
CORPORATION AND SUBSIDIARIES ("the Company") as of December 31, 1996 and 1995
and the related consolidated statements of income, stockholders' equity and
cash flows for each of the three years in the period ended December 31, 1996.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of the Company as of December
31, 1996 and 1995 and the results of its operations and its cash flows for each
of the three years in the period ended December 31, 1996, in conformity with
generally accepted accounting principles.
/s/ ARTHUR ANDERSEN LLP
Detroit, Michigan,
February 4, 1997.
25
<PAGE> 28
CONSOLIDATED BALANCE SHEETS
Lear Corporation and Subsidiaries (In millions, except share data)
<TABLE>
<CAPTION>
December 31, 1996 1995
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 26.0 $ 34.1
Accounts receivable, net of reserves of $9.0 in 1996 and $4.0 in 1995 909.6 831.9
Inventories 200.0 196.2
Recoverable customer engineering and tooling 113.9 91.9
Other 97.9 53.1
- ---------------------------------------------------------------------------------------------------------------
Total current assets 1,347.4 1,207.2
- ---------------------------------------------------------------------------------------------------------------
Long-Term Assets:
Property, plant and equipment, net 866.3 642.8
Goodwill, net 1,448.2 1,098.4
Other 154.9 112.9
- ---------------------------------------------------------------------------------------------------------------
Total long-term assets 2,469.4 1,854.1
- ---------------------------------------------------------------------------------------------------------------
$3,816.8 $3,061.3
===============================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Short-term borrowings $ 10.3 $ 16.9
Accounts payable and drafts 960.5 857.0
Accrued liabilities 520.2 392.2
Current portion of long-term debt 8.3 9.9
- ---------------------------------------------------------------------------------------------------------------
Total current liabilities 1,499.3 1,276.0
- ---------------------------------------------------------------------------------------------------------------
Long-Term Liabilities:
Deferred national income taxes 49.6 37.3
Long-term debt 1,054.8 1,038.0
Other 194.4 130.0
- ---------------------------------------------------------------------------------------------------------------
Total long-term liabilities 1,298.8 1,205.3
- ---------------------------------------------------------------------------------------------------------------
Stockholders' Equity:
Common Stock, par value $.01 per share, 150,000,000 shares authorized,
65,586,129 and 56,253,541 shares issued in 1996 and 1995, respectively .7 .6
Additional paid-in capital 834.5 559.1
Notes receivable from sale of common stock (.6) (.9)
Common stock held in treasury, 10,230 shares at cost (.1) (.1)
Retained earnings 194.1 42.2
Minimum pension liability (1.0) (3.5)
Cumulative translation adjustment (8.9) (17.4)
- ---------------------------------------------------------------------------------------------------------------
Total stockholders' equity 1,018.7 580.0
- ---------------------------------------------------------------------------------------------------------------
$3,816.8 $3,061.3
===============================================================================================================
</TABLE>
The accompanying notes are an integral part of these statements.
26
<PAGE> 29
CONSOLIDATED STATEMENTS OF INCOME
Lear Corporation and Subsidiaries (In millions, except per share data)
<TABLE>
<CAPTION>
For the year ended December 31, 1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales $6,249.1 $4,714.4 $3,147.5
Cost of sales 5,629.4 4,311.3 2,883.9
Selling, general and administrative expenses 210.3 139.0 82.6
Amortization of goodwill 33.6 19.3 11.4
- ----------------------------------------------------------------------------------------------------------------
Operating income 375.8 244.8 169.6
Interest expense 102.8 75.5 46.7
Foreign currency exchange (gain) loss .5 8.6 (.3)
Other expense, net 19.1 7.8 8.6
- ----------------------------------------------------------------------------------------------------------------
Income before provision for national income taxes,
minority interests in consolidated subsidiaries,
equity in net income of affiliates and extraordinary item 253.4 152.9 114.6
Provision for national income taxes 101.5 63.1 55.0
Minority interests in consolidated subsidiaries 4.0 (1.7) .5
Equity in net income of affiliates (4.0) (2.7) (.7)
- ----------------------------------------------------------------------------------------------------------------
Income before extraordinary item 151.9 94.2 59.8
Extraordinary loss on early extinguishment of debt - 2.6 -
- ----------------------------------------------------------------------------------------------------------------
Net income $ 151.9 $ 91.6 $ 59.8
================================================================================================================
Net income per share, as adjusted (Note 1);
Income before extraordinary item $ 2.38 $ 1.79 $ 1.26
Extraordinary loss - (.05) -
- ----------------------------------------------------------------------------------------------------------------
Net income per share $ 2.38 $ 1.74 $ 1.26
================================================================================================================
</TABLE>
The accompanying notes are an integral part of these statements.
27
<PAGE> 30
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Lear Corporation and Subsidiaries (In millions, except share data)
<TABLE>
<CAPTION>
For the year ended December 31, 1996 1995 1994
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCK
Balance at beginning of period $ .6 $ .5 $ .4
Sale of common stock (Note 3) .1 .1 .1
- ----------------------------------------------------------------------------------------------------------
Balance at end of period $ .7 $ .6 $ .5
==========================================================================================================
ADDITIONAL PAID-IN CAPITAL
Balance at beginning of period $ 559.1 $ 274.3 $ 156.5
Elimination of common stock subject to redemption - - 13.5
Sale of common stock (Note 3) 242.7 281.4 103.5
Sale of treasury stock (11,220 shares) - - .1
Stock options exercised 6.7 .2 .2
Tax benefit of stock options exercised 17.0 1.3 .5
Conversion of Masland stock options 9.0 - -
Conversion of AI stock options - 1.9 -
- ----------------------------------------------------------------------------------------------------------
Balance at end of period $ 834.5 $ 559.1 $ 274.3
==========================================================================================================
COMMON STOCK WARRANTS
Balance at beginning of period $ - $ - $ 10.0
Exercise of warrants - - (10.0)
- ----------------------------------------------------------------------------------------------------------
Balance at end of period $ - $ - $ -
==========================================================================================================
TREASURY STOCK
Balance at beginning of period $ (.1) $ (.1) $ (10.0)
Purchase of treasury stock (21,450 shares) - - (.1)
Exercise of warrants - - 10.0
- ----------------------------------------------------------------------------------------------------------
Balance at end of period $ (.1) $ (.1) $ (.1)
==========================================================================================================
NOTE RECEIVABLE FROM SALE OF STOCK
Balance at beginning of period $ (.9) $ (1.0) $ -
Elimination of common stock subject to redemption - - (1.1)
Repayment of stockholders' note receivable .3 .1 .1
- ----------------------------------------------------------------------------------------------------------
Balance at end of period $ (.6) $ (.9) $ (1.0)
==========================================================================================================
RETAINED EARNINGS (DEFICIT)
Balance at beginning of period $ 42.2 $ (49.4) $(109.2)
Net income 151.9 91.6 59.8
- ----------------------------------------------------------------------------------------------------------
Balance at end of period $ 194.1 $ 42.2 $ (49.4)
==========================================================================================================
MINIMUM PENSION LIABILITY
Balance at beginning of period $ (3.5) $ (5.8) $ (4.2)
Minimum pension liability adjustment 2.5 2.3 (1.6)
- ----------------------------------------------------------------------------------------------------------
Balance at end of period $ (1.0) $ (3.5) $ (5.8)
==========================================================================================================
CUMULATIVE TRANSLATION ADJUSTMENT
Balance at beginning of period $ (17.4) $ (4.9) $ (.3)
Cumulative translation adjustment 8.5 (12.5) (4.6)
- ----------------------------------------------------------------------------------------------------------
Balance at end of period $ (8.9) $ (17.4) $ (4.9)
==========================================================================================================
TOTAL STOCKHOLDERS' EQUITY $ 1,018.7 $ 580.0 $ 213.6
==========================================================================================================
</TABLE>
The accompanying notes are an integral part of these statements.
28
<PAGE> 31
CONSOLIDATED STATEMENTS OF CASH FLOWS
Lear Corporation and Subsidiaries (In millions)
<TABLE>
<CAPTION>
For the year ended December 31, 1996 1995 1994
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 151.9 $ 91.6 $ 59.8
Adjustments to reconcile net income to net cash provided
by operating activities-
Depreciation and amortization of goodwill 142.3 92.0 56.1
Amortization of deferred financing fees 3.4 2.7 2.4
Deferred national income taxes (1.2) (1.7) (.3)
Post-retirement benefits accrued, net 6.9 6.4 7.3
Extraordinary loss - 2.6 -
Recoverable customer engineering and tooling (30.1) - -
Other, net (21.3) (1.6) -
Net change in working capital items 210.7 (59.2) 30.4
- --------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 462.6 132.8 155.7
- --------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment (153.8) (110.7) (103.1)
Acquisitions (529.0) (881.3) (88.0)
Proceeds from sale of property, plant and equipment 2.0 .3 .5
Other, net (.9) 5.9 (5.0)
- --------------------------------------------------------------------------------------------------------
Net cash used in investing activities (681.7) (985.8) (195.6)
- --------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Long-term revolving credit borrowings, net (Note 11) (211.3) 595.2 (108.8)
Additions to other long-term debt 317.3 8.0 164.0
Reductions in other long-term debt (113.7) (3.5) (137.4)
Short-term borrowings, net (7.5) (72.2) (10.7)
Proceeds from sale of common stock, net 249.5 281.7 103.9
Deferred financing fees (3.1) (9.6) (.7)
Increase (decrease) in drafts (29.5) 42.2 7.5
Other, net (.1) .1 (.2)
- --------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 201.6 841.9 17.6
- --------------------------------------------------------------------------------------------------------
Effect of foreign currency translation 9.4 13.2 (.7)
- --------------------------------------------------------------------------------------------------------
NET CHANGE IN CASH AND CASH EQUIVALENTS (8.1) 2.1 (23.0)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 34.1 32.0 55.0
- --------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 26.0 $ 34.1 $ 32.0
========================================================================================================
CHANGES IN WORKING CAPITAL, NET OF EFFECTS OF ACQUISITIONS:
Accounts receivable, net $ 42.5 $ (156.4) $ (120.4)
Inventories 30.9 (27.4) (31.5)
Accounts payable 52.7 42.6 183.3
Accrued liabilities and other 84.6 82.0 (1.0)
- --------------------------------------------------------------------------------------------------------
$ 210.7 $ (59.2) $ 30.4
========================================================================================================
SUPPLEMENTARY DISCLOSURE:
Cash paid for interest $ 97.0 $ 72.9 $ 35.5
========================================================================================================
Cash paid for income taxes $ 74.3 $ 57.3 $ 44.1
========================================================================================================
</TABLE>
The accompanying notes are an integral part of these statements.
29
<PAGE> 32
Lear Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) BASIS OF PRESENTATION
The consolidated financial statements include the accounts of Lear Corporation,
a Delaware corporation ("Lear"), and its wholly-owned and majority-owned
subsidiaries (collectively "the Company"). Investments in less than
majority-owned businesses are generally accounted for under the equity method
(Note 9).
The Company and its affiliates are involved in the design and manufacture of
interior systems and components for automobiles and light trucks. The Company's
main customers are automotive original equipment manufacturers. The Company
operates facilities worldwide (Note 18). Certain foreign subsidiaries are
consolidated as of November 30.
A 33-for-1 split of the Company's common stock was effective as of the
Company's initial public offering ("IPO") date (Note 3). All references to the
numbers of shares of common stock, stock options, warrants and income per share
in the accompanying consolidated financial statements and notes thereto have
been adjusted to give effect to the split.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
INVENTORIES
Inventories are stated at the lower of cost or market. Cost is determined using
the first-in, first-out method. Finished goods and work-in-process inventories
include material, labor and manufacturing overhead costs. Inventories are
comprised of the following (in millions):
<TABLE>
<CAPTION>
December 31, 1996 1995
-------------------------------
<S> <C> <C>
Raw materials $124.7 $139.4
Work-in-process 25.0 18.0
Finished goods 50.3 38.8
-------------------------------
$200.0 $196.2
===============================
</TABLE>
RECOVERABLE CUSTOMER ENGINEERING AND TOOLING
Costs incurred by the Company for certain engineering and tooling projects for
which customer reimbursement is anticipated are capitalized and classified as
either recoverable customer engineering and tooling or other long-term assets
dependent upon when reimbursement is anticipated. Provisions for losses are
provided at the time the Company anticipates engineering and tooling costs to
exceed anticipated customer reimbursement.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost. Depreciable property is
depreciated over the estimated useful lives of the assets, using principally
the straight-line method as follows:
- -----------------------------------------------------------------------
Buildings and improvements 20 to 25 years
Machinery and equipment 5 to 15 years
- -----------------------------------------------------------------------
A summary of property, plant and equipment is shown below (in millions):
<TABLE>
<CAPTION>
December 31, 1996 1995
- ------------------------------------------------------------------
<S> <C> <C>
Land $ 52.3 $ 45.5
Buildings and improvements 287.6 254.3
Machinery and equipment 805.0 532.2
Construction in progress 31.8 28.4
- ------------------------------------------------------------------
Total property, plant and equipment 1,176.7 860.4
Less accumulated depreciation (310.4) (217.6)
- ------------------------------------------------------------------
Net property, plant and equipment $ 866.3 $ 642.8
==================================================================
</TABLE>
GOODWILL
Goodwill consists of the excess of the purchase price and related acquisition
costs over the fair value of identifiable net assets acquired. Goodwill is
amortized on a straight-line basis over 40 years. Accumulated amortization of
goodwill amounted to $115.1 million and $81.3 million at December 31, 1996 and
1995, respectively.
30
<PAGE> 33
Lear Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
LONG TERM ASSETS
The Company adopted Statement of Financial Accounting Standards No.121,
"Recognition of Impairment of Long-Lived Assets," as of January 1, 1996. In
accordance with this statement, the Company re-evaluates the carrying values of
its long-term assets whenever circumstances arise which call into question the
recoverability of such carrying values. The evaluation takes into account all
future estimated cash flows from the use of assets, with an impairment being
recognized if the evaluation indicates that the future cash flows will not be
greater than the carrying value. No such impairment was recognized in 1996.
RESEARCH AND DEVELOPMENT
Costs incurred in connection with the development of new products and
manufacturing methods to the extent not recoverable from the Company's
customers are charged to selling, general and administrative expenses as
incurred. These costs amounted to $70.0 million, $53.3 million and $21.9
million for the years ended December 31, 1996, 1995 and 1994, respectively.
Engineering expenses related to current production are charged to cost of sales
as incurred and amounted to $21.4 million, $14.1 million and $8.9 million for
the years ended December 31, 1996, 1995 and 1994, respectively.
FOREIGN CURRENCY TRANSLATION
Assets and liabilities of foreign subsidiaries are translated into U.S. dollars
at the exchange rates in effect at the end of the period. Revenue and expense
accounts are translated using an average of exchange rates in effect during the
period. Translation adjustments that arise from translating a foreign
subsidiary's financial statements from the functional currency to U.S. dollars
are reflected as cumulative translation adjustment in the consolidated balance
sheets.
Transaction gains and losses that arise from exchange rate fluctuations on
transactions denominated in a currency other than the functional currency,
except those transactions which operate as a hedge of a foreign currency
investment position, are included in the results of operations as incurred.
INCOME TAXES
The consolidated financial statements reflect the provisions of Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes", for all
periods presented.
Deferred national income taxes represent the effect of cumulative temporary
differences between income and expense items reported for financial statement
and tax purposes, and between the bases of various assets and liabilities for
financial statement and tax purposes. Deferred tax assets are reduced by a
valuation allowance if, based on the weight of evidence, it is deemed more
likely than not that the asset will not be realized.
WEIGHTED AVERAGE SHARES OUTSTANDING
The weighted average number of common shares outstanding for the years ended
December 31, 1996, 1995 and 1994, were as follows:
<TABLE>
1996 1995 1994
--------------------------------------------------------
<S> <C> <C> <C>
Primary shares 63,761,634 52,488,938 47,438,477
Fully-diluted shares 63,765,610 52,642,672 47,560,436
--------------------------------------------------------
</TABLE>
USE OF ESTIMATES
The preparation of the consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities at
the date of the consolidated financial statements and the reported amounts of
revenues and expenses during the reporting period. Although no single asset or
liability subject to estimation is material to the Company's consolidated
financial position, in aggregate such items are material. Generally, assets and
liabilities subject to estimation and judgment include amounts related to
unsettled pricing discussions with customers and suppliers, pension and
post-retirement costs (Notes 13 and 14), plant consolidation and reorganization
reserves, self-insurance accruals, asset valuation reserves, and accruals
related to litigation and environmental remediation costs. Management does not
believe that the ultimate settlement of any such assets or liabilities will
materially affect the Company's financial position or future results of
operations.
31
<PAGE> 34
Lear Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
As of December 31, 1996, the Company had established specific reserves relating
to planned productivity improvement actions. Of these reserves, $15.0 million
represent severance costs and $8.4 million represent business rearrangement
costs which are designed to enhance the Company's efficiency. Also, reserves of
$10.5 million have been established against the book value of certain fixed
assets. These reserves have primarily been established as a result of the
acquisitions discussed in Notes 5, 6, 7 and 8.
RECLASSIFICATIONS
Certain items in prior years' financial statements have been reclassified to
conform with the presentation used in the year ended December 31, 1996.
(3) PUBLIC STOCK OFFERINGS
In July 1996, the Company issued and sold 7,500,000 shares of common stock in a
public offering ("the 1996 offering"). Concurrent with this issuance, 7,500,000
shares were sold by certain stockholders of the Company, including certain
merchant banking partnerships affiliated with Lehman Brothers Holdings, Inc.,
(the "Lehman Funds"). The Company received no proceeds from the sale of these
shares. The Lehman Funds, taken together, are the largest shareholders of the
Company. The Lehman Funds held approximately 16% of the outstanding common
stock of the Company as of December 31, 1996. The total proceeds to the Company
from the stock issuance were $251.3 million. Fees and expenses related to the
1996 offering totaled $8.5 million, including approximately $1.1 million paid
to Lehman Brothers Inc., an affiliate of the Lehman Funds. Net of issuance
costs, the Company received $242.8 million, which was used to repay debt
incurred in connection with the acquisition of Masland (Note 5). See Note 20
for pro forma information.
In September 1995, the Company issued and sold 10,000,000 shares of common
stock in a public offering (the "1995 offering"). The total proceeds to the
Company from the stock issuance were $292.5 million. Concurrent with this
issuance, 11,500,000 shares were sold by certain stockholders of the Company.
The Company received no proceeds from the sale of these shares. Fees and
expenses related to the 1995 offering totaled $11.0 million, including
approximately $1.8 million paid to Lehman Brothers Inc. Net of issuance costs,
the Company received $281.5 million, which was used to repay debt incurred in
connection with the acquisition of AI (Note 7). See Note 20 for pro forma
information.
In April 1994, the Company completed an initial public offering of its common
stock (the "IPO"), pursuant to which the Company sold 7,187,500 shares of its
common stock for total proceeds of approximately $111.4 million. Fees and
expenses related to the IPO totaled $7.8 million, including approximately $.9
million paid to Lehman Brothers Inc. The net proceeds of the offering were used
to reduce outstanding borrowings under the Company's existing senior credit
facility. In the same offering, FIMA Finance Management Inc., ("FIMA") a
wholly-owned subsidiary of EXOR Group S.A. (formerly IFINT S.A.), sold 3,125,000
shares of the Company's common stock in the public market. The Company received
no proceeds from the sale of these shares. See Note 20 for pro forma
information.
(4) SUBORDINATED NOTES OFFERINGS
In July 1996, the Company completed a public offering of $200.0 million
principal amount of its 9 1/2% Subordinated Notes due 2006 (the "9 1/2% Notes").
Interest is payable on the 9 1/2% Notes semi-annually on January 15 and July 15.
Fees and expenses related to the issuance of the 9 1/2% Notes were approximately
$4.5 million. Net of issuance costs, the Company received $195.5 million, which
was used to repay debt incurred in connection with the acquisition of Masland
(Note 5). See Note 20 for pro forma information.
In February 1994, the Company completed a public offering of $145.0 million
principal amount of its 8 1/4% Subordinated Notes due 2002 (the "8 1/4% Notes").
Interest is payable on the 8 1/4% Notes semi-annually on February 1 and August
1. Fees and expenses related to the issuance of the 8 1/4% Notes were
approximately $5.0 million, including underwriting fees of $2.4 million paid to
Lehman Brothers Inc. The net proceeds from the sale of the 8 1/4% Notes were
used to finance the redemption of the Company's 14% Subordinated Debentures due
2000, on March 14, 1994. See Note 20 for pro forma information.
32
<PAGE> 35
Lear Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(5) MASLAND ACQUISITION
On June 27, 1996, the Company, through a wholly owned subsidiary ("PA
Acquisition Corp."), acquired 97% of the issued and outstanding shares of
common stock of Masland Corporation ("Masland") pursuant to an offer to
purchase which was commenced on May 30, 1996. On July 1, 1996, the remaining
issued and outstanding shares of common stock of Masland were acquired and PA
Acquisition Corp. merged with and into Masland, such that Masland became a
wholly-owned subsidiary of the Company. The aggregate purchase price for the
acquisition of Masland (the "Masland Acquisition") was $475.7 million
(including the assumption of $80.7 million of Masland's existing net
indebtedness and $10.0 million in fees and expenses). Funds for the Masland
Acquisition were provided by borrowings under the Credit Agreement and New
Credit Agreement, as described in Note 11.
Masland is a leading supplier of floor and acoustic systems to the North
American automotive market. Masland also is a major supplier of interior
luggage compartment trim components and other acoustical products which are
designed to minimize noise, vibration and harshness for passenger cars and
light trucks.
The Masland Acquisition was accounted for as a purchase, and accordingly, the
assets purchased and liabilities assumed in the acquisition have been reflected
in the accompanying balance sheet as of December 31, 1996. The operating
results of Masland have been included in the consolidated financial statements
of the Company since the date of acquisition. The purchase price, and related
allocation, were as follows (in millions):
<TABLE>
<CAPTION>
---------------------------------------------------
<S> <C>
Consideration paid to stockholders,
net of cash acquired of $16.1 million $ 337.8
Consideration paid to former Masland
stock option holders 22.1
Debt assumed 96.8
Stock options issued to former Masland
option holders 9.0
Estimated fees and expenses 10.0
---------------------------------------------------
Cost of acquisition $ 475.7
===================================================
Property, plant and equipment $ 125.8
Net working capital 33.8
Other assets purchased and liabilities
assumed, net (15.7)
Goodwill 331.8
---------------------------------------------------
Total cost allocation $ 475.7
===================================================
</TABLE>
The purchase price and related allocation may be revised in the next year based
on revisions of preliminary estimates of fair values made at the date of
purchase. Such changes are not expected to be significant. See Note 20 for pro
forma information.
(6) BOREALIS ACQUISITION
On December 10, 1996, the Company acquired all of the issued and outstanding
capital stock of Borealis Industrier, AB ("Borealis") for an aggregate purchase
price of $91.1 million (including the assumption of $18.8 million of Borealis
existing net indebtedness and $1.5 million of fees and expenses). Borealis is a
supplier of instrument panels and other interior components to the European
automotive market. The Borealis acquisition was accounted for as a purchase,
and accordingly, the assets purchased and liabilities assumed have been
reflected at their estimated fair market value in the accompanying balance
sheet as of December 31, 1996. The operations of Borealis from the acquisition
date to December 31, 1996 were not material to the consolidated statement of
income of the Company.
(7) AI ACQUISITION
On August 17, 1995, the Company purchased all of the issued and outstanding
shares of common stock of Automotive Industries Holding, Inc. ("AI") for an
aggregate purchase price of approximately $881.3 million, including the
retirement of $250.5 million of AI's existing indebtedness and $14.4 million in
fees and expenses, including $4.8 million paid to Lehman Brothers Inc. ("the AI
Acquisition"). AI is a leading designer and manufacturer of high quality
33
<PAGE> 36
Lear Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
interior trim systems and blow molded products principally for North American
and European car and light truck manufacturers.
The AI Acquisition was accounted for as a purchase, and accordingly the assets
purchased and liabilities assumed in the acquisition have been reflected in the
accompanying balance sheets. The operating results of AI have been included in
the consolidated financial statements of the Company since the date of
acquisition. The purchase price, and the related allocation, were as follows
(in millions):
<TABLE>
<CAPTION>
------------------------------------------------
<S> <C>
Cash consideration paid to stockholders,
net of cash acquired of $9.1 million $614.5
Stock options issued to former
AI option holders 1.9
Retirement of debt assumed 250.5
Fees and expenses 14.4
------------------------------------------------
Cost of acquisition $881.3
================================================
Property, plant and equipment $264.7
Net non-cash working capital 43.8
Other assets purchased and liabilities
assumed, net (1.7)
Debt assumed (33.9)
Goodwill 608.4
------------------------------------------------
Total cost allocation $881.3
================================================
</TABLE>
See Note 20 for pro forma information.
(8) FSB ACQUISITION
On December 15, 1994, the Company purchased from Gilardini S.p.A., an Italian
corporation, all of the issued and outstanding common stock of Sepi S.p.A., an
Italian corporation, all of the issued and outstanding common stock of Sepi
Poland S.p. Z o.o. and a 35% interest in a Turkish joint venture (collectively,
the "Fiat Seat Business", or "FSB"). The FSB is engaged in the design and
manufacture of automotive seating, with its principal customers being Fiat
S.p.A. and its affiliates ("Fiat"). In connection with this transaction, the
Company and Fiat entered into a long-term supply agreement for certain products
produced by the FSB.
The acquisition was accounted for as a purchase, and accordingly, the results
of operations of the FSB have been included in the consolidated financial
statements of the Company in 1995 and 1996. The operations of FSB from the
acquisition date to December 31, 1994 were not material to the consolidated
statement of income of the Company for the year ended December 31, 1994. The
purchase price, and the related allocation, were as follows (in millions):
<TABLE>
<CAPTION>
-------------------------------------------------------------
<S> <C>
Cash consideration paid to seller,
net of cash acquired of $6.9 million $ 85.3
Deferred purchase price, paid in 1996 12.3
Short-term borrowings from Fiat assumed 66.7
Fees and expenses 4.2
Receivable from seller (1.2)
-------------------------------------------------------------
Cost of acquisition $167.3
=============================================================
Property, plant and equipment $ 72.2
Investment in Industrias Cousin Freres, S.L. (Note 9) 4.9
Employee termination indemnities assumed (17.8)
Net non-cash working capital 9.3
Other assets purchased and liabilities assumed, net (12.5)
Goodwill 111.2
-------------------------------------------------------------
Total cost allocation $167.3
=============================================================
</TABLE>
See Note 20 for pro forma information.
34
<PAGE> 37
Lear Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(9) INVESTMENTS IN AFFILIATES
The investments in affiliates are as follows:
<TABLE>
Percent Beneficial Ownership
as of December 31, 1996 1995 1994
---------------------------------------------------------
<S> <C> <C> <C>
Sommer Masland UK Limited 50% -% -%
Jiangling - Lear, Interior
Systems Co., Ltd. (China) 50 - -
Industrias Cousin Freres, S.L.
(Spain) 50 50 50
Euro Autotech, A.B. 50 - -
SALBI, A.B. 50 - -
Lear Corporation Thailand 49 49 49
Detroit Automotive
Interiors, L.L.C. 49 - -
Interiores Automotrices Summa,
S.A. de C.V. (Mexico) 40 40 -
Markol Otomotiv Yan Sanayi
Ve Ticart (Turkey) 35 35 35
General Seating of America, Inc. 35 35 35
General Seating of Canada, Ltd. 35 35 35
Guildford Kast Plastifol Ltd. (U.K.) 33 33 -
Probel, S.A. (Brazil) 31 31 31
Precision Fabrics Group 29 - -
Pacific Trim Corporation Ltd.
(Thailand) 20 20 20
=========================================================
</TABLE>
All of the above investments in affiliates are accounted for using the equity
method, except Probel, S.A. which is accounted for using the cost method. The
investments in Industrias Cousin Freres, S.L. and Markol Otomotiv Yan
Sanayi Ve Ticart were acquired as part of the FSB acquisition (Note 8). The
investments in Guildford Kast Plastifol Ltd. and Interiores Automotrices Summa,
S.A. de C.V. were acquired as part of the AI Acquisition (Note 7). The
investments in Sommer Masland UK Limited and Precision Fabrics Group were
acquired as part of the Masland Acquisition (Note 5). The investments in Euro
Autotech, A.B. and SALBI, A.B. were acquired as part of the Borealis
acquisition (Note 6).
Summarized group financial information for affiliates accounted for under the
equity method is as follows (Unaudited; in millions):
<TABLE>
<CAPTION>
December 31, 1996 1995
-----------------------------------------
<S> <C> <C>
Balance sheet data:
Current assets $134.1 $57.6
Non-current assets 79.3 42.0
Current liabilities 67.7 35.6
Non-current liabilities 60.9 16.9
=========================================
</TABLE>
<TABLE>
<CAPTION>
Year Ended December 31, 1996 1995 1994
-------------------------------------------------
<S> <C> <C> <C>
Income statement data:
Net sales $471.0 $201.6 $140.4
Gross profit 68.1 37.9 14.1
Income before provision
for income taxes 21.6 14.2 6.0
Net income 17.9 10.0 3.9
=================================================
</TABLE>
The aggregate investment in affiliates was $53.2 million and $20.6 million as
of December 31, 1996 and 1995, respectively. The Company had sales to
affiliates of approximately $22.2 million, $17.6 million and $14.0 million for
the years ended December 31, 1996, 1995 and 1994, respectively. Dividends of
approximately $3.0 million, $1.3 million and $.9 million were received by the
Company for the years ended December 31, 1996, 1995 and 1994, respectively. The
Company has guaranteed certain obligations of its affiliates. The Company's
share of amounts outstanding under guaranteed obligations as of December 31,
1996 amounted to $4.0 million. Management does not believe that the Company
will be required to pay any amounts related to these guarantees.
35
<PAGE> 38
Lear Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(10) SHORT-TERM BORROWINGS
Short-term borrowings are comprised of the following
(in millions):
<TABLE>
<CAPTION>
December 31, 1996 1995
-----------------------------------------------------
<S> <C> <C>
Lines of credit, various $10.3 $ -
Note payable to bank, LIBOR + 3/4% - 11.5
Revolving credit facility, Base + 1 3/4% - 2.8
Note payable to bank, LIBOR + 3% - 2.6
-----------------------------------------------------
$10.3 $16.9
=====================================================
</TABLE>
At December 31, 1996, the Company had lines of credit available with foreign
banks of approximately $66.2 million, subject to certain restrictions imposed
by the Existing Credit Agreement (Note 11). Weighted average interest rates on
the outstanding borrowings at December 31, 1996 and 1995 were 9.4% and 7.4%,
respectively.
(11) LONG-TERM DEBT
Long-term debt is comprised of the following (in millions):
<TABLE>
<CAPTION>
December 31, 1996 1995
----------------------------------------------------
<S> <C> <C>
Credit agreements $ 481.3 $ 717.1
Industrial revenue bonds 22.6 20.9
Other 89.2 39.9
----------------------------------------------------
593.1 777.9
Less - Current portion (8.3) (9.9)
----------------------------------------------------
584.8 768.0
----------------------------------------------------
9 1/2% Subordinated Notes 200.0 -
8 1/4% Subordinated Notes 145.0 145.0
11 1/4% Senior Subordinated Notes 125.0 125.0
----------------------------------------------------
470.0 270.0
----------------------------------------------------
$1,054.8 $1,038.0
====================================================
</TABLE>
In August 1995, the Company entered into a $1.5 billion secured revolving
credit agreement with a syndicate of financial institutions (the "Credit
Agreement"), the purpose of which was to finance the AI Acquisition (Note 7),
to refinance a portion of the existing indebtedness of AI, to refinance the
Company's prior $500 million credit agreement (the "Prior Credit Facility"),
and for general corporate purposes, including acquisitions. See Note 20 for pro
forma information. The accelerated amortization of deferred financing fees
related to the Prior Credit Facility totaled approximately $4.0 million. This
amount, net of the related tax benefit of $1.4 million, has been reflected as
an extraordinary loss in the consolidated statement of income for the year
ended December 31, 1995. Lehman Commercial Paper, Inc., an affiliate of the
Lehman Funds, was a managing agent of the Credit Agreement and received fees of
$.5 million in connection with this transaction.
In June 1996, the Company entered into a second revolving credit agreement with
a syndicate of financial institutions (the "New Credit Agreement") providing
for aggregate borrowings of up to $300 million. The New Credit Agreement
contained substantially identical terms as the Credit Agreement. Following the
Masland Acquisition, the Company borrowed the full amount permitted under the
New Credit Agreement and used the proceeds to repay debt outstanding under the
Credit Agreement.
In December 1996, the Company amended and restated the Credit Agreement and the
New Credit Agreement (as so amended and restated, the "Existing Credit
Agreement") to (i) reduce rates, (ii) consolidate them into one agreement,
(iii) increase total borrowing availability to $1.8 billion, (iv) release liens
on the Company's real and personal property, (v) eliminate certain scheduled
commitment reductions existing under the prior credit agreements, (vi) modify
certain covenants and (vii) provide for additional borrowing options, including
multi-currency borrowing. The Existing Credit Agreement matures on September
30, 2001 and borrowings thereunder may be used for general corporate purposes.
The Existing Credit Agreement is secured by a pledge of the capital stock of
certain of the Company's domestic and foreign subsidiaries, and the Company's
obligations thereunder are guaranteed by certain of its significant domestic
36
<PAGE> 39
Lear Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
subsidiaries. Loans under the Existing Credit Agreement bear interest, at the
election of the Company, at a floating rate equal to (i) the higher of a
specified bank's prime rate and the federal funds rate plus 0.5% or (ii) the
Eurodollar rate plus .275% to .625%, depending on the level of a certain
financial ratio. The Company pays a facility fee on the total $1.8 billion
commitment. Upon closing the Existing Credit Agreement, funds were drawn to
refinance the New Credit Agreement and the Credit Agreement. Lehman Commercial
Paper, Inc., an affiliate of the Lehman Funds, is a participant of the Existing
Credit Agreement.
The Company had available under the Existing Credit Agreement unused long-term
revolving credit commitments of $1.28 billion at December 31, 1996, net of
$38.5 million of outstanding letters of credit. Borrowings on revolving credit
loans were $2,790.8 million, $4,979.5 million and $495.2 million for the years
ended December 31, 1996, 1995, and 1994, respectively. Repayments on revolving
credit loans were $3,027.8 million, $4,384.3 million and $604.0 million for the
years ended December 31, 1996, 1995 and 1994, respectively. At December 31,
1996, interest was being charged at the Eurodollar rate plus .30%,
approximately 5.97% at December 31, 1996, for loans under the Existing Credit
Agreement and the facility fee was .175%.
On July 11, 1996, the Company entered into a $50 million Canadian Dollar
Revolving Term Credit Facility, replacing an existing $25 million Canadian
dollar facility. Borrowings and repayments in 1996 under this facility were
$288.5 million and $262.8 million, respectively. Borrowing under this facility
can be in U.S. and or Canadian dollars, bearing interest, at the election of the
Company, at a floating rate equal to (i) the applicable prime rate or (ii) the
Eurodollar (U.S.) or Bankers Acceptance (Canadian) rate plus .5% to 1.0% based
on specific financial ratios of the Corporation, approximately 3.9% at December
31, 1996.
The Company has several Industrial Revenue Bonds (IRBs). Two of the IRBs are
outstanding at $9.5 million each, are payable in 2024, and bear interest at
variable rates which are reset periodically. As of December 31, 1996, these
IRB's bore interest rates of 3.95% and 3.90%, respectively. The remaining IRBs
amortize annually, mature between 1998 and 2004, and as of December 31, 1996
bore interest of between 2.0% and 2.5%.
Other senior debt at December 31, 1996, is principally made up of amounts
outstanding under the Canadian Dollar Revolving Term Facility, certain capital
leases, and a term loan with a German bank. Other senior debt matures
principally in years 1997 to 2000 and bears interest at rates consistent with
the Company's other debt instruments.
The 8 1/4% Subordinated Notes, due in 2002, require interest payments
semi-annually on February 1 and August 1 and are callable beginning February 1,
1998. The 11 1/4% Senior Subordinated Notes, due in 2000, require interest
payments semi-annually on January 15 and July 15 and are callable beginning
July 15, 1997. The 9 1/2% Subordinated Notes, due 2006, require interest
payments semi-annually on January 15 and July 15 and are callable beginning
July 15, 2001.
The Existing Credit Agreement and indentures relating to the Company's
subordinated debt contain restrictive covenants. The most restrictive of these
covenants are the Existing Credit Agreement's financial covenants related to
maintenance of certain levels of net worth, leverage, and interest coverage.
These agreements also, among other things, restrict the Company's ability to
incur additional indebtedness, declare dividends, create liens, make
investments and advances, sell assets and limit capital expenditures to
specified amounts. The German Term Loan agreement also contains certain
restrictive covenants.
The scheduled maturities of long-term debt at December 31, 1996 for the five
succeeding years are as follows (in millions):
- ------------------------------------------------------------------------------
1997 $ 8.3
- ------------------------------------------------------------------------------
1998 49.4
- ------------------------------------------------------------------------------
1999 6.6
- ------------------------------------------------------------------------------
2000 130.8
- ------------------------------------------------------------------------------
2001 483.0
- ------------------------------------------------------------------------------
37
<PAGE> 40
Lear Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(12) NATIONAL INCOME TAXES
A summary of income before provision for national income taxes and components
of the provision for national income taxes is as follows (in millions):
<TABLE>
<CAPTION>
Year Ended December 31, 1996 1995 1994
- ------------------------------------------------------------------
<S> <C> <C> <C>
Income before provision
for national income taxes,
minority interests in
consolidated subsidiaries,
equity in net income of
affiliates and extraordinary
item:
Domestic $135.7 $ 51.0 $ 56.4
Foreign 117.7 101.9 58.2
------------------------------------------------------------
$253.4 $152.9 $114.6
============================================================
Domestic provision for
national income taxes:
Current provision $ 48.4 $ 31.6 $ 31.2
------------------------------------------------------------
Deferred -
Deferred provision 2.8 (12.2) -
Benefit of previously
unbenefitted net
operating loss
carryforwards - (.4) (2.2)
------------------------------------------------------------
2.8 (12.6) (2.2)
------------------------------------------------------------
Total domestic provision 51.2 19.0 29.0
------------------------------------------------------------
Foreign provision for national
income taxes:
Current provision 51.0 41.2 25.1
------------------------------------------------------------
Deferred -
Deferred provision 6.6 5.3 .9
Benefit of previously
unbenefitted net
operating loss
carryforwards (7.3) (2.4) -
------------------------------------------------------------
(.7) 2.9 .9
------------------------------------------------------------
Total foreign provision 50.3 44.1 26.0
------------------------------------------------------------
Provision for national
income taxes $101.5 $ 63.1 $ 55.0
============================================================
</TABLE>
The differences between tax provisions calculated at the United States Federal
statutory income tax rate of 35% for the years ended December 31, 1996, 1995
and 1994, and the consolidated national income tax provision are summarized as
follows (in millions):
<TABLE>
<CAPTION>
Year Ended December 31, 1996 1995 1994
-------------------------------------------------------------
<S> <C> <C> <C>
Income before provision for
national income taxes,
minority interests in
consolidated subsidiaries,
equity in net income of
affiliates and extraordinary
item multiplied by the
United States Federal
statutory rate $ 88.7 $ 53.5 $ 40.1
Utilization of domestic net
operating loss carryforwards - (.4) (2.2)
Utilization of foreign net
operating loss carryforwards (7.3) (2.4) -
Differences between domestic
and effective foreign tax
rates 1.3 (3.3) 1.3
Operating losses not tax
benefited 15.8 11.4 3.0
Increase (decrease) in
valuation allowance (8.3) (4.2) 3.3
Domestic income taxes
provided on foreign
earnings - 2.6 6.4
Amortization of goodwill 10.4 5.8 3.0
Other, net .9 .1 .1
------------------------------------------------------------
$101.5 $ 63.1 $ 55.0
============================================================
</TABLE>
38
<PAGE> 41
Lear Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Deferred national income taxes represent temporary differences in the
recognition of certain items for income tax and financial reporting purposes.
The components of the net deferred national income tax liability are summarized
as follows (in millions):
<TABLE>
<CAPTION>
December 31, 1996 1995
-----------------------------------------------------------
<S> <C> <C>
Deferred national income tax liabilities:
Long-term asset basis differences $ 54.5 $ 23.9
Taxes provided on unremitted
foreign earnings 15.6 15.6
Retirement benefit plans 3.1 3.1
Capitalized engineering and design 12.0 -
Other 10.3 7.5
-----------------------------------------------------------
$ 95.5 $ 50.1
===========================================================
Deferred national income tax assets:
Tax credit carryforwards $ - $ (3.5)
Tax loss carryforwards (66.4) (53.3)
Retirement benefit plans (24.1) (14.1)
Accruals (32.1) (4.4)
Self -insurance reserves (10.4) (5.3)
Minimum pension liability (2.1) (1.7)
Deferred compensation (3.9) (6.2)
Deferred finance fees (1.2) -
Other (8.7) (5.4)
-----------------------------------------------------------
(148.9) (93.9)
Valuation allowance 61.2 57.4
-----------------------------------------------------------
$(87.7) $ (36.5)
===========================================================
Net deferred national
income tax liability $ 7.8 $ 13.6
===========================================================
</TABLE>
Deferred national income tax assets have been fully offset by a valuation
allowance in certain foreign tax jurisdictions due to a history of operating
losses. The classification of the net deferred national income tax liability is
summarized as follows (in millions):
<TABLE>
<CAPTION>
December 31, 1996 1995
---------------------------------------------------------
<S> <C> <C>
Deferred national income tax assets:
Current $(41.5) $ (13.2)
Long-term (2.9) (15.8)
Deferred national income tax liability:
Current 2.6 5.3
Long-term 49.6 37.3
--------------------------------------------------------
Net deferred national
income tax liability $ 7.8 $ 13.6
========================================================
</TABLE>
Deferred national income taxes and withholding taxes have been provided on
earnings of the Company's Canadian subsidiary to the extent it is anticipated
that the earnings will be remitted in the form of future dividends. Deferred
national income taxes and withholding taxes have not been provided on the
undistributed earnings of the Company's other foreign subsidiaries as such
amounts are considered to be permanently reinvested. The cumulative
undistributed earnings at December 31, 1996 on which the Company had not
provided additional national income taxes and withholding taxes were
approximately $84.7 million.
As of December 31, 1996, the Company had tax loss carryforwards of $178.0
million which relate to certain foreign subsidiaries. Of the total loss
carryforwards, $58.3 million have no expiration and $119.7 million expire in
1997 through 2004.
39
<PAGE> 42
Lear Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(13) RETIREMENT PLANS
The Company has noncontributory defined benefit pension plans covering certain
domestic employees and certain employees in foreign countries. The Company's
salaried plans provide benefits based on a career average earnings formula.
Hourly pension plans provide benefits under flat benefit formulas. The Company
also has contractual arrangements with certain employees which provide for
supplemental retirement benefits. In general, the Company's policy is to fund
these plans based on legal requirements, tax considerations and local
practices.
Components of the Company's pension expense are as
follows (in millions):
<TABLE>
<CAPTION>
Year Ended December 31, 1996 1995 1994
----------------------------------------------------
<S> <C> <C> <C>
Service cost $ 10.6 $ 6.2 $4.3
Interest cost on
projected benefit
obligation 10.6 7.4 6.3
Actual return on assets (13.1) (12.1) (.1)
Net amortization and deferral 8.4 6.9 (4.6)
----------------------------------------------------
Net pension expense $ 16.5 $ 8.4 $ 5.9
====================================================
</TABLE>
The following table sets forth a reconciliation of the funded status of the
Company's defined benefit pension plans to the related amounts recorded in the
consolidated balance sheets (in millions):
<TABLE>
<CAPTION>
DECEMBER 31, 1996 December 31, 1995
-------------------------- --------------------------
PLANS WHOSE PLANS WHOSE Plans Whose Plans Whose
ASSETS EXCEED ABO EXCEEDS Assets Exceed ABO Exceeds
ABO Assets ABO Assets
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Actuarial present value of:
Vested benefit obligation $26.8 $ 93.2 $ 14.4 $ 82.6
Non-vested benefit obligation 3.8 5.1 1.0 5.2
- ------------------------------------------------------------------------------------------------------------
Accumulated benefit obligation (ABO) 30.6 98.3 15.4 87.8
Effects of anticipated future compensation increases 19.4 5.8 2.5 13.7
- ------------------------------------------------------------------------------------------------------------
Projected benefit obligation 50.0 104.1 17.9 101.5
Plan assets at fair value 39.2 68.8 23.1 59.2
- ------------------------------------------------------------------------------------------------------------
Projected benefit obligation in excess of
(less than) plan assets 10.8 35.3 (5.2) 42.3
Unamortized net loss (2.1) (3.2) (.8) (10.6)
Unrecognized prior service cost (.5) (21.6) (.4) (4.3)
Unamortized net asset (obligation) at transition 2.4 (.9) 3.0 (1.2)
Unamortized plan amendment obligation - - - (11.2)
Adjustment required to recognize minimum liability .1 18.2 - 21.4
- ------------------------------------------------------------------------------------------------------------
Accrued pension (asset) liability recorded
in the consolidated balance sheets $10.7 $ 27.8 $ (3.4) $ 36.4
============================================================================================================
</TABLE>
40
<PAGE> 43
Lear Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
The projected benefit obligation for plans whose ABO exceeds assets includes
both foreign and domestic plans. For domestic plans this excess was $18.9
million and $19.7 million as of December 31, 1996 and 1995, respectively. The
actuarial assumptions used in determining pension expense and the funded status
information shown above were as follows:
<TABLE>
<CAPTION>
Year Ended December 31, 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Discount rate:
Domestic plans 7.25-7.5% 7.25-8% 7.5-8%
Foreign plans 7-8% 7-8% 7-8%
- ------------------------------------------------------------------------------------------------------------
Rate of salary progression:
Domestic plans 5-5.8% 5.6% 5%
Foreign plans 3-5% 3-5% 3-5%
- ------------------------------------------------------------------------------------------------------------
Long-term rate of return on assets:
Domestic plans 7.75-9% 7.75-9% 9%
Foreign plans 8% 8% 8%
============================================================================================================
</TABLE>
Plan assets include cash equivalents, common and preferred stock, and
government and corporate debt securities.
Statement of Financial Accounting Standards No. 87, "Employers' Accounting for
Pensions," required the Company to record a minimum liability as of December
31, 1996 and 1995. As of December 31, 1996, the Company recorded a long-term
liability of $18.3 million, an intangible asset of $16.7 million, which is
included with other assets, and a reduction in stockholders' equity of $1.0
million, net of income taxes of $.6 million.
In 1996, one of the Company's defined benefit pension plans increased the
benefit rate and increased the supplemental early retirement benefit. In
addition, the domestic plans decreased the assumed discount rate from 8.0% in
1995 to 7.5% in 1996. The impact of these plan changes was to increase pension
cost and ABO by $1.4 million and $5.0 million, respectively.
The Company also sponsors defined contribution plans and participates in
government sponsored programs in certain foreign countries. Contributions are
determined as a percentage of each covered employee's salary. The Company also
participates in multi-employer pension plans for certain of its hourly
employees and contributes to those plans based on collective bargaining
agreements. The aggregate cost of the defined contribution and multi-employer
pension plans charged to income was $4.7 million, $2.6 million, and $2.1
million for the years ended December 31, 1996, 1995 and 1994, respectively.
(14) POST-RETIREMENT BENEFITS
The Company's post-retirement plans cover a portion of the Company's domestic
employees and Canadian employees. The plans generally provide for the
continuation of medical benefits for all employees who complete 10 years of
service after age 45 and retire from the Company at age 55 or older. The
Company does not fund its post-retirement benefit obligation. Rather, payments
are made as costs are incurred by covered retirees.
On January 1, 1995, the Company adopted Statement of Financial Accounting
Standards No. 106, "Employers' Accounting for Post-retirement Benefits Other
Than Pensions" ("SFAS No. 106") for its foreign plans. This standard requires
that the expected cost of post-retirement benefits be charged to expense during
the years in which the employees render service to the Company. As of January
1, 1995, the Company's Accumulated Post-retirement Benefit Obligation ("APBO")
for its foreign plans was approximately $9.7 million which is being amortized
over approximately 11 years, representing the average remaining service life of
the eligible employees.
41
<PAGE> 44
Lear Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
The Company adopted SFAS 106 for its domestic plans as of July 1, 1993. At that
date, the Company's APBO was approximately $32.0 million. Because the Company
had previously recorded a liability of $6.3 million related to these benefits,
the net transition obligation was $25.7 million and is being amortized over 20
years. The following table sets forth a reconciliation of the funded status of
the accrued post-retirement benefit obligation to the related amounts recorded
in the consolidated financial statements as of December 31, 1996 and 1995 (in
millions):
<TABLE>
<CAPTION>
December 31, 1996 1995
-------------------------------------------------------
<S> <C> <C>
Accumulated Post-retirement
Benefit Obligation:
Retirees $27.2 $ 18.0
Fully eligible active plan participants 8.3 4.8
Other active participants 30.8 29.8
Unrecognized net gain 4.8 4.1
Unrecognized prior service cost (1.4) -
Unamortized transition obligation (28.5) (31.6)
-------------------------------------------------------
Liability recorded in the
consolidated balance sheet $ 41.2 $ 25.1
=======================================================
</TABLE>
Components of the Company's post-retirement benefit expense under SFAS No. 106
were as follows (in millions):
<TABLE>
<CAPTION>
Year Ended December 31, 1996 1995 1994
----------------------------------------------
<S> <C> <C> <C>
Service cost $ 4.2 $3.6 $3.5
Interest cost on APBO 4.0 3.5 2.8
Amortization of unrecognized
net gain (loss) (.5) .4 -
Amortization of unrecognized
prior service cost .2 - -
Amortization of transition
obligation 1.8 1.8 1.3
-----------------------------------------------
Net post-retirement benefit
expense $ 9.7 $9.3 $7.6
===============================================
</TABLE>
For the domestic plans, the APBO was calculated using an assumed discount rate
of 7.5% in the years ended December 31, 1996 and 1995. Domestic post-retirement
benefit expense was calculated using an assumed discount rate of 7.5% in 1996,
8.0% in 1995 and 7.5% in 1994. Domestic health care costs were assumed to
increase 9.6% in 1996, grading down over time to 5.5% in 10 years. For the
foreign plans, 1996 expense and the APBO as of December 31, 1996, were
calculated using an assumed discount rate of 8.0%. Foreign health care costs
were assumed to increase 8.5% per year, grading down over time to 5.5% in 10
years. To illustrate the significance of these assumptions, a rise in the
assumed rate of health care cost increases of 1% each year would increase the
APBO as of December 31, 1996 by $7.9 million and increase the net
post-retirement benefit expense by $1.5 million for the year ended December 31,
1996.
(15) COMMITMENTS AND CONTINGENCIES
The Company is the subject of various lawsuits, claims and environmental
contingencies. In addition, the Company has been identified as a potentially
responsible party under the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended ("CERCLA" or "Superfund"), for the
cleanup of contamination from hazardous substances at two Superfund sites,
and may incur indemnification obligations for cleanup at three additional
sites. In the opinion of management, the expected liability resulting from
these matters is adequately covered by amounts accrued, and will not have a
material adverse effect on the Company's consolidated financial position or
future results of operations.
Approximately 30,000 of the Company's workforce worldwide are subject to
collective bargaining agreements. 26% of the Company's workforce are subject to
collective bargaining agreements which expire within one year. Relationships
with all unions are good and management does not anticipate any difficulties
with respect to the agreements.
42
<PAGE> 45
Lear Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Lease commitments at December 31, 1996 under noncancelable operating leases
with terms exceeding one year are as follows (in millions):
-------------------------------
1997 $ 26.6
1998 22.2
1999 19.1
2000 17.0
2001 16.0
2002 and thereafter 19.4
-------------------------------
Total $120.3
===============================
The Company's operating leases cover principally buildings and transportation
equipment. Rent expense incurred under all operating leases and charged to
operations was $29.8 million, $21.2 million, and $16.5 million for the years
ended December 31, 1996, 1995 and 1994, respectively.
(16) STOCK OPTIONS AND WARRANTS
1988 STOCK OPTION PLAN
At December 31, 1996, 681,351 options granted under stock option agreements
dated September 29, 1988 were issued and outstanding. The options vested over a
three-year period and are currently exercisable at $1.29 per share.
1992 STOCK OPTION PLAN
At December 31, 1996 there were 1,359,681 options issued and outstanding under
the 1992 Stock Option Plan. Pursuant to a plan amendment effective December 31,
1993, all of the options became immediately vested and became exercisable at $5
per share on September 28, 1996.
1994 STOCK OPTION PLAN
Concurrent with the IPO (Note 3), the Company granted 498,750 options which are
exercisable at $15.50 per share beginning three years after the date of grant.
In addition, the Company granted an additional 36,000 options in 1995. The
options vest over a three year period and expire seven years after they become
exercisable. No stock compensation expense was recognized related to these
options as the exercise price was equal to the market price as of the grant
date. As of December 31, 1996, 505,750 options were outstanding.
OPTIONS ISSUED TO FORMER AI OPTION HOLDERS
In connection with the AI Acquisition (Note 7), the Company converted, at the
option holder's discretion, certain AI stock options into options exercisable
for Lear common stock. All of the options converted were fully vested and
exercisable as of the date of acquisition of AI. At December 31, 1996, there
were 11,520 options exercisable at $14.06 per share which expire July 24, 2002,
36,441 options exercisable at $20.41 per share which expire August 5, 2003, and
47,790 options exercisable at $23.12 per share which expire August 7, 2004. The
value of these options as of the date of the AI Acquisition was $1.9 million
and was included in the purchase price of AI.
OPTIONS ISSUED TO FORMER MASLAND OPTION HOLDERS
In connection with the Masland Acquisition (Note 5), the Company converted, at
the option holder's discretion, certain Masland stock options into 517,920
options exercisable for Lear common stock. Of this amount, 110,588 Masland
options were fully vested and exercisable. The remaining 407,332 Masland
options vest and become exercisable in 20% increments on each anniversary from
the date of grant. The average exercise price of these options was $20.51 per
share. At December 31, 1996, there were 512,209 options exercisable at prices
ranging from $11.63 per share to $30.17 per share. These options expire at
various times from March 15, 2002 until April 10, 2006. The value of these
options as of the date of the Masland Acquisition was $9.0 million and was
included in the purchase price of Masland.
43
<PAGE> 46
Lear Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
1996 STOCK OPTION PLAN
Under the 1996 stock option plan, the Company granted 559,000 stock options in
May, 1996, which are exercisable at $33 per share. The options vest three years
after the grant date and expire seven years after they become exercisable. No
compensation expense was recognized related to these options as the exercise
price was equal to the market price as of the grant date. As of December 31,
1996, there were 530,500 options outstanding.
The changes in the number of options outstanding are as follows:
<TABLE>
<CAPTION>
Year Ended December 31, 1996 1995 1994
----------------------------------------------------------
<S> <C> <C> <C>
Options outstanding
at beginning of period 4,476,910 4,425,768 4,045,272
Options granted 1,076,920 265,405 498,750
Options exercised (1,832,588) (165,263) (100,797)
Options revoked (36,000) (49,000) (17,457)
----------------------------------------------------------
Options outstanding
at end of period 3,685,242 4,476,910 4,425,768
==========================================================
</TABLE>
WARRANTS
In 1988, the Company sold warrants exercisable into 3,300,000 shares of common
stock. The warrants, which entitled the holder to receive one share of common
stock for no additional consideration, became exercisable on December 1, 1993.
All warrants were exercised or expired in 1994.
PRO FORMA
At December 31, 1996, the Company had several stock-based compensation plans,
which are described above. The Company applies APB Opinion 25 and related
Interpretations in accounting for its plans. Accordingly, compensation cost was
calculated as the difference between the exercise price of the option and the
market value of the stock at the date the option was granted. If compensation
cost for the Company's stock option plans was determined based on the fair
value at the grant dates consistent with the method prescribed in FASB
statement 123 "Accounting for Stock-Based Compensation", the Company's net
income and earnings per share would have been reduced to the pro forma amounts
indicated below (in millions, except per share information).
<TABLE>
<CAPTION>
Year Ended December 31, 1996 1995
-------------------------------------------------
<S> <C> <C>
Net income - as reported $151.9 $91.6
Net income - pro forma $150.4 $91.6
Net income per share - as reported $ 2.38 $1.74
Net income per share - pro forma $ 2.36 $1.74
=================================================
</TABLE>
The fair value of each option grant is estimated on the date of grant using the
Black-Scholes option pricing model with the following weighted average
assumptions used for grants in 1996 and 1995: risk-free interest rates of 7.5%;
expected dividend yields of 0.0%; expected lives of 10 years; and expected
volatility of 31.5%.
(17) FINANCIAL INSTRUMENTS
The Company hedges certain foreign currency risks through the use of forward
foreign exchange contracts and options. Such contracts are generally deemed as,
and are effective as, hedges of the related transactions. As such, gains and
losses from these contracts are deferred and are recognized on the settlement
date, consistent with the related transactions. The Company and its
subsidiaries had contracted to exchange notional United States Dollar
equivalent principal amounts of $113.1 million as of December 31, 1996 and
$61.4 million as of December 31, 1995. All contracts outstanding as of
December 31, 1996 mature in 1997. The unrealized net losses on such contracts
as of December 31, 1996 was less than $.1 million compared to a deferred gain
of $1.9 million as of December 31, 1995.
The carrying values of the Company's subordinated notes vary from the fair
values of these instruments. The fair values were determined by reference to
market prices of the securities in recent public transactions. As of December
31, 1996, the carrying value of the Company's subordinated notes was $470.0
million compared to an estimated fair value of $485.9 million. As of December
31, 1995, the carrying value of the Company's subordinated notes was $270.0
million
44
<PAGE> 47
Lear Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
compared to an estimated fair value of $275.4 million. The carrying
values of cash, accounts receivable, accounts payable and notes payable
approximate the fair values of these instruments due to the short-term, highly
liquid nature of these instruments. The carrying value of the Company's senior
indebtedness approximates its fair value which was determined based on rates
currently available to the Company for similar borrowings with like maturities.
The Company uses interest rate swap contracts to hedge against interest rate
risks in future periods. As of December 31, 1996, the Company had entered into
five one-year swap contracts with an aggregate notional value of $215.0 million
which became effective and/or go into effect between August 1996 and August
1997. Pursuant to each of the contracts, the Company will make payments
calculated at a fixed rate of between 5.9% and 6.3% of the notional value and
will receive payments calculated at the Eurodollar rate. This effectively fixes
the Company's interest rate on the portion of the indebtedness under the
Existing Credit Agreement covered by the contracts at the fixed rates in the
contracts plus a margin of .275% to .625% during the time the contracts are
effective. The fair value of these contracts as of December 31, 1996, and 1995
was a negative $0.6 million and negative $1.9 million, respectively.
Several of the Company's European subsidiaries factor their accounts receivable
with financial institutions subject to limited recourse provisions and are
charged a discount fee ranging from the current LIBOR rate plus 0.4% to a fixed
rate per annum of 9.6%. The amount of such factored receivables, which is not
included in accounts receivable in the consolidated balance sheet at December
31, 1996 and 1995, was approximately $152.6 million and $64.4 million,
respectively.
(18) GEOGRAPHIC SEGMENT DATA
Worldwide operations are divided into four geographic segments -- United
States, Canada, Europe and Mexico and other. The Mexico and other segment
includes operations in Mexico, South America, South Africa and the Asia/Pacific
Rim. Geographic segment information is as follows (in millions):
<TABLE>
<CAPTION>
Year Ended December 31, 1996 1995 1994
--------------------------------------------------------------
<S> <C> <C> <C>
Net Sales:
United States $ 3,386.6 $ 2,431.8 $ 1,916.5
Canada 893.3 874.5 603.8
Europe 1,627.6 1,328.5 575.5
Mexico and other 610.5 307.4 222.7
Intersegment sales (268.9) (227.8) (171.0)
--------------------------------------------------------------
$ 6,249.1 $ 4,714.4 $ 3,147.5
==============================================================
Operating Income:
United States $ 225.2 $ 152.4 $ 139.8
Canada 77.4 52.4 15.8
Europe 49.2 26.5 4.4
Mexico and other 24.0 13.5 9.6
--------------------------------------------------------------
$ 375.8 $ 244.8 $ 169.6
==============================================================
Identifiable Assets:
United States $ 2,288.3 $ 1,859.6 $ 784.7
Canada 283.9 254.2 249.6
Europe 1,021.2 815.3 595.4
Mexico and other 208.0 116.5 72.5
Unallocated (a) 15.4 15.7 12.9
--------------------------------------------------------------
$ 3,816.8 $ 3,061.3 $ 1,715.1
==============================================================
</TABLE>
(a) Unallocated Identifiable Assets consist of deferred financing fees.
The net assets of foreign subsidiaries were $341.2 million and $326.8 million
at December 31, 1996 and 1995, respectively. The Company's share of foreign net
income was $67.5 million, $58.6 million and $32.2 million for the years ended
December 31, 1996, 1995 and 1994, respectively.
45
<PAGE> 48
Lear Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
A majority of the Company's sales are to automobile manufacturing companies.
The following is a summary of the percentage of net sales to major customers:
<TABLE>
<CAPTION>
Year Ended December 31, 1996 1995 1994
--------------------------------------------
<S> <C> <C> <C>
Ford Motor Company 32% 33% 39%
General Motors Corporation 30 34 36
Fiat S.p.A. 10 10 -
===========================================
</TABLE>
In addition, a significant portion of remaining sales are to the above
automobile manufacturing companies through various other automotive suppliers
or to affiliates of these automobile manufacturing companies.
(19) QUARTERLY FINANCIAL DATA
(Unaudited; in millions, except per share data)
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED
----------------------------------------
MARCH 30, JUNE 29, SEPT. 28, DEC. 31,
1996 1996 1996 1996
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $1,405.8 $1,618.7 $1,505.6 $1,719.0
Gross profit 120.6 166.9 143.7 188.5
Net income 25.8 50.1 24.8 51.2
Net income per share .43 .83 .37 .75
=======================================================================================
</TABLE>
<TABLE>
<CAPTION>
Thirteen Weeks Ended
---------------------------------------
April 1, July 1, Sept. 30, Dec. 31,
1995 1995 1995 1995
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $1,043.5 $1,142.6 $1,080.6 $1,447.7
Gross profit 76.6 94.8 83.3 148.4
Net income before extraordinary item 17.0 28.9 11.1 37.2
Net income 17.0 28.9 8.5 37.2
Net income before extraordinary item per share .34 .58 .22 .62
Net income per share .34 .58 .17 .62
=======================================================================================
</TABLE>
46
<PAGE> 49
Lear Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(20) PRO FORMA FINANCIAL DATA
The following pro forma unaudited financial data is presented to illustrate the
estimated effects of (i) the 1996 offering (Note 3), (ii) the Masland
Acquisition (Note 5), (iii) the refinancing of the Company's Prior Credit
Facility (Note 11), (iv) the AI Acquisition (Note 7) and certain acquisitions
completed by AI prior to the acquisition of AI by Lear, (v) the 1995 offering
(Note 3), (vi) the completion of the New Credit Agreement (Note 11), and (vii)
the issuance of the 9 1/2% Notes (Note 4) as if these transactions had occurred
as of the beginning of each year presented (in millions, except per share
data).
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
--------------------------------------------------
OPERATING
COMPANY MASLAND AND FINANCING PRO
HISTORICAL ACQUISITION ADJUSTMENTS FORMA
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $6,249.1 $263.7 $ (2.0) $6,510.8
Income before extraordinary item 151.9 10.4 (8.4) 153.9
Net income 151.9 10.4 (8.4) 153.9
Income per share before
extraordinary item 2.38 2.27
Net income per share 2.38 2.27
=========================================================================================
</TABLE>
<TABLE>
<CAPTION>
Year Ended December 31, 1995
---------------------------------------------------------------------
Operating
Company AI Masland and Financing Pro
Historical Acquisition Acquisition Adjustments Forma
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net sales $4,714.4 $523.7 $473.2 $(3.3) $5,708.0
Income before extraordinary item 94.2 18.0 17.4 (25.9) 103.7
Net income 91.6 18.0 17.4 (23.3) 103.7
Income per share before
extraordinary item 1.79 1.53
Net income per share 1.74 1.53
============================================================================================================
</TABLE>
The following pro forma unaudited financial data is presented to illustrate the
estimated effects of (i) the 1995 offering (Note 3), (ii) the AI acquisition
(Note 7), (iii) the refinancing of the Company's Prior Credit Facility (Note
11), (iv) certain acquisitions completed by AI prior to the acquisition of AI
by Lear, (v) the FSB Acquisition (Note 8), (vi) the IPO (Note 3) and (vii) the
refinancing of the 14% Subordinated Debentures with the net proceeds from the
issuance of the 81/4% Subordinated Notes (Note 4) as if these transactions had
occurred as of the beginning of each year presented. These pro forma results
give effect to certain adjustments, including certain operations adjustments
consisting principally of management's estimates of the effects of product
pricing adjustments negotiated in connection with the acquisitions, estimated
engineering savings, the estimated effects on interest, depreciation and
goodwill amortization expense and the related income tax effect of these
adjustments (in millions, except per share data).
<TABLE>
<CAPTION>
Year Ended December 31, 1994
-----------------------------------------------------------------------
Operating
Company FSB AI and Financing Pro
Historical Acquisition Acquisition Adjustments Forma
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net sales $ 3,147.5 $ 455.9 $ 752.2 $ - $ 4,355.6
Net income 59.8 (24.2) 39.9 (15.9) 59.6
Net income per share 1.26 1.00
==============================================================================================================
</TABLE>
The pro forma information above does not purport to be indicative of the
results that actually would have been achieved if these transactions had
occurred prior to the years presented, and is not intended to be a projection
of future results or trends.
47
<PAGE> 50
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Lear Corporation:
We have audited in accordance with generally accepted auditing standards,
the consolidated financial statements of LEAR CORPORATION AND SUBSIDIARIES
("the Company") included in this Form 10-K, and have issued our report thereon
dated February 4, 1997. Our audits were made for the purpose of forming an
opinion on those financial statements taken as a whole. The schedule on page
49 is the responsibility of the Company's management and is presented for
purposes of complying with the Securities and Exchange Commission's rules and
is not part of the basic financial statements. This schedule has been
subjected to the auditing procedures applied in the audits of the consolidated
financial statements and, in our opinion, fairly states in all material
respects the financial data required to be set forth therein in relation to the
basic financial statements taken as a whole.
/s/ ARTHUR ANDERSEN LLP
Detroit, Michigan
February 4, 1997.
48
<PAGE> 51
LEAR CORPORATION AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
(IN MILLIONS)
<TABLE>
<CAPTION>
BALANCE AT BALANCE
BEGINNING OTHER END
DESCRIPTION OF PERIOD ADDITIONS RETIREMENTS CHANGES OF PERIOD
- ----------- --------- --------- ----------- ------- ---------
<S> <C> <C> <C> <C> <C>
FOR THE YEAR ENDED DECEMBER 31, 1994:
Valuation of accounts deducted from related assets:
Allowance for doubtful accounts $ .6 $ .6 $ (.1) $ 2.0 $ 3.1
Reserve for unmerchantable inventories 1.9 4.0 (1.7) (.1) 4.1
------ ------ ----- ----- ------
$ 2.5 $ 4.6 $(1.8) $ 1.9 $ 7.2
====== ====== ===== ===== ======
FOR THE YEAR ENDED DECEMBER 31, 1995:
Valuation of accounts deducted from related assets:
Allowance for doubtful accounts $ 3.1 $ .5 $ (.5) $ .9 $ 4.0
Reserve for unmerchantable inventories 4.1 3.2 (2.1) 1.1 6.3
------ ------ ----- ----- ------
$ 7.2 $ 3.7 $(2.6) $ 2.0 $ 10.3
====== ====== ===== ===== ======
FOR THE YEAR ENDED DECEMBER 31, 1996:
Valuation of accounts deducted from related assets:
Allowance for doubtful accounts $ 4.0 $ 3.3 $ (.6) $ 2.3 $ 9.0
Reserve for unmerchantable inventories 6.3 4.6 (1.0) (.6) 9.3
------ ------ ----- ----- ------
$ 10.3 $ 7.9 $(1.6) $ 1.7 $ 18.3
====== ====== ===== ===== ======
</TABLE>
49
<PAGE> 52
ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
There has been no disagreement between the management of the Company and
the Company's accountants on any matter of accounting principles or practices
or financial statement disclosures.
50
<PAGE> 53
PART III
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
Incorporated by reference from the Proxy Statement sections entitled
"Election of Directors," and "Management."
ITEM 11 - EXECUTIVE COMPENSATION
Incorporated by reference from the Proxy Statement sections entitled
"Executive Compensation."
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
Incorporated by reference from the Proxy Statement section entitled
"Management - Security Ownership of Certain Beneficial Owners and Management."
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Incorporated by reference from the Proxy Statement section entitled "Certain
Transactions."
51
<PAGE> 54
PART IV
ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this Form 10-K.
1. Consolidated Financial Statements:
Report of Independent Public Accountants
Consolidated Balance Sheets as of December 31, 1996 and 1995.
Consolidated Statements of Income for the years ended December
31, 1996, 1995 and 1994.
Consolidated Statements of Stockholders' Equity for the years
ended December 31, 1996, 1995 and 1994.
Consolidated Statements of Cash Flows for the years ended
December 31, 1996, 1995 and 1994.
Notes to Consolidated Financial Statements
2. Financial Statements Schedules:
Report of Independent Public Accountants
Schedule II - Valuation and Qualifying Accounts
All other financial statement schedules are omitted because such
schedules are not required or the information required has
been presented in the aforementioned financial statements.
3. The exhibits listed on the "Index to Exhibits" on pages 53
through 54 are filed with this Form 10-K or incorporated by
reference as set forth below.
(b) The following reports on Form 8-K were filed during the quarter ended
December 31, 1996.
None.
(c) The exhibits listed on the "Index to Exhibits" on pages 53 through 54 are
filed with this Form 10-K or incorporated by reference as set forth below.
(d) Additional Financial Statement Schedules.
None.
52
<PAGE> 55
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
- ------ -------
<S> <C>
3.1 - Restated Certificate of Incorporation of the Company (incorporated by reference to Exhibit 3.1 to the Company's Quarterly
Report on Form 10-Q for the quarter ended March 30, 1996).
3.2 - Amended and Restated By-laws of the Company (incorporated by reference to Exhibit 3.4 to Lear's Registration Statement on
Form S-1 (No. 33-52565)).
4.1 - Indenture dated as of July 1, 1996 by and between the Company and the Bank of New York, as trustee, relating to the 9 1/2%
Subordinated Notes due 2006 (incorporated by reference to Exhibit 4.1 to the Company's Quarterly Report on Form 10-Q for
the quarter ended September 28, 1996).
4.2 - Indenture dated as of February 1, 1994 by and between Lear and The First National Bank of Boston, as Trustee, relating to
the 8 1/4% Subordinated Notes (incorporated by reference to Exhibit 4.1 to the Company's Transition Report on Form 10-K
filed on March 31, 1994).
4.3 - Indenture dated as of July 15, 1992 by and between Lear and The Bank of New York, as Trustee, relating to the 11 1/4%
Senior Subordinated Notes (incorporated by reference to Exhibit 4.1 to the Company's Registration Statement on Form S-1
(No. 33-47867)).
10.1 - $1,800,000 Amended and Restated Credit and Guarantee Agreement dated as of December 20, 1996 (the "Credit Agreement")
among the Company, Lear Corporation Canada Ltd., the foreign subsidiary borrowers named therein, the several financial
institutions party thereto (collectively, the "Lenders"), The Chase Manhattan Bank, as general administrative agent for
the Lenders and The Bank of Nova Scotia, as Canadian administrative agent for the Lenders, filed herewith.
10.2 - The Amended and Restated Revolving Term Credit Facility among Lear Corporation Canada Ltd., AII Automotive Industries
Canada, Inc. and The Bank of Nova Scotia dated as of July 11, 1996, filed herewith.
10.3 - Employment Agreement dated March 20, 1995 between the Company and Kenneth L. Way (incorporated by reference to Exhibit
10.9 to the Company's Annual Report on Form 10-K for the year ended December 31, 1994).
10.4 - Employment Agreement dated March 20, 1995 between the Company and Robert E. Rossiter (incorporated by reference to
Exhibit 10.10 to the Company's Annual Report on Form 10-K for the year ended December 31, 1994).
10.5 - Employment Agreement dated March 20, 1995 between the Company and James H. Vandenberghe (incorporated by reference to
Exhibit 10.11 to the Company's Annual Report on Form 10-K for the year ended December 31, 1994).
10.6 - Employment Agreement dated March 20, 1995 between the Company and Terrence E. O'Rourke, filed herewith.
10.7 - Employment Agreement dated March 20, 1995 between the Company and Gerald G. Harris, filed herewith.
10.8 - Stock Option Agreement dated as of September 29, 1988 between the Company and certain management investors (the "Management
Investors") (incorporated by reference to Exhibit 10.6 to the Company's Registration Statement on Form S-1 (No. 33-25256)).
10.9 - Amendment to Stock Option Agreement dated as of March 2, 1995 between the Company and Kenneth L. Way (incorporated by
reference to Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for the quarter ended July 1, 1995).
10.10 - Amendment to Stock Option Agreement dated as of March 2, 1995 between the Company and Robert E. Rossiter (incorporated by
reference to Exhibit 10.3 to the Company's Quarterly Report on Form 10-Q for the quarter ended July 1, 1995).
10.11 - Amendment to Stock Option Agreement dated as of March 2, 1995 between the Company and James H. Vandenberghe (incorporated
by reference to Exhibit 10.4 to the Company's Quarterly Report on Form 10-Q for the quarter ended July 1, 1995).
10.12 - Amendment to Stock Option Agreement dated as of March 2, 1995 between the Company and James A. Hollars (incorporated by
reference to Exhibit 10.6 to the Company's Quarterly Report on Form 10-Q for the quarter ended July 1, 1995).
10.13 - Amendment to Stock Option Agreement dated as of March 2, 1995 between the Company and Randal T. Murphy (incorporated by
reference to Exhibit 10.5 to the Company's Quarterly Report on Form 10-Q for the quarter ended July 1, 1995).
10.14 - Lear's 1992 Stock Option Plan (incorporated by reference to Exhibit 10.7 to the Company's Annual Report on Form 10-K for
the year ended June 30, 1993).
</TABLE>
53
<PAGE> 56
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
- ------ -------
<S> <C>
10.15 - Amendment to Lear's 1992 Stock Option Plan (incorporated by reference to Exhibit 10.26 to the Company's Transition Report
on Form 10-K filed on March 31, 1994).
10.16 - Lear's 1994 Stock Option Plan (incorporated by reference to Exhibit 10.27 to the Company's Transition Report on Form 10-K
filed on March 31, 1994).
10.17 - Lear's 1996 Stock Option Plan (incorporated by reference to Exhibit 4.1 to the Company's Registration Statement on Form
S-8 (No. 333-03383)).
10.18 - Lear's Long-Term Stock Incentive Plan, filed herewith.
10.19 - Masland Holdings, Inc. 1991 Stock Purchase and Option Plan (incorporated by reference to Exhibit 99.4 to the Company's
Current Report on Form 8-K dated June 27, 1996).
10.20 - Masland Corporation 1993 Stock Option Incentive Plan (incorporated by reference to Exhibit 99.5 to the Company's Current
Report on Form 8-K dated June 27, 1995).
10.21 - Lear Corporation Outside Directors Compensation Plan, filed herewith.
10.22 - Lear's Supplemental Executive Retirement Plan, dated as of January 1, 1995 (incorporated by reference to Exhibit 10.28 to
the Company's Annual Report on Form 10-K for the year ended December 31, 1994).
10.23 - Share Purchase Agreement dated as of December 10, 1996, between the Company and Borealis Holding AB, filed herewith.
10.24 - Agreement and Plan of Merger dated as of May 23, 1996, by and among the Company, PA Acquisition Corp. and Masland
Corporation (incorporated by reference to Exhibit 2.1 to the Company's Registration Statement on Form S-3 (No. 333-05809)).
10.25 - Agreement and Plan of Merger dated as of July 16, 1995, among the Company, AIHI Acquisition Corp. and Automotive
Industries Holding, Inc. (incorporated by reference to the Exhibit 2.1 to the Company's Current Report on Form 8-K dated
August 17, 1995).
11.1 - Computation of income (loss) per share, filed herewith.
21.1 - List of subsidiaries of the Company, filed herewith.
23.1 - Consent of independent public accountants, filed herewith.
27.1 - Financial Data Schedule, filed herewith.
</TABLE>
54
<PAGE> 57
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized on March 27, 1997.
Lear Corporation
By: /s/ Kenneth L. Way
--------------------------
Kenneth L. Way
Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of Lear
Corporation and in the capacities indicated on March 27, 1997.
/s/ Kenneth L. Way /s/ Roy E. Parrott
---------------------------------- ----------------------
Kenneth L. Way Roy E. Parrott
Chairman of the Board and a Director
Chief Executive Officer
/s/ James H. Vandenberghe /s/ Robert W. Shower
---------------------------------- ----------------------
James H. Vandenberghe Robert W. Shower
Executive Vice President, a Director
Chief Financial Officer
and a Director
/s/ Robert E. Rossiter /s/ David P. Spalding
---------------------------------- ----------------------
Robert E. Rossiter David P. Spalding
President, Chief Operating Officer a Director
and a Director
/s/ James A. Stern
---------------------------------- ----------------------
Gian Andrea Botta James A. Stern
a Director a Director
/s/ Irma B. Elder /s/ Alan H. Washkowitz
---------------------------------- ----------------------
Irma B. Elder Alan H. Washkowitz
a Director a Director
/s/ Larry W. McCurdy
----------------------------------
Larry W. McCurdy
a Director
55
<PAGE> 1
EXHIBIT 10.1
EXECUTION COPY
$1,800,000,000
AMENDED AND RESTATED
CREDIT AND GUARANTEE AGREEMENT
Dated as of December 20, 1996
among
LEAR CORPORATION,
LEAR CORPORATION CANADA LTD.,
THE FOREIGN SUBSIDIARY BORROWERS,
The Lenders Party Hereto,
THE CHASE MANHATTAN BANK,
as General Administrative Agent
and
THE BANK OF NOVA SCOTIA,
as Canadian Administrative Agent
____________________________________
CHASE SECURITIES INC.,
as Arranger
<PAGE> 2
TABLE OF CONTENTS
Page
----
SECTION 1. DEFINITIONS................................................... 1
1.1 Defined Terms................................................. 1
1.2 Other Definitional Provisions................................. 33
SECTION 2. AMOUNT AND TERMS OF U.S. REVOLVING CREDIT
COMMITMENTS.......................................................... 33
2.1 U.S. Revolving Credit Commitments 33
2.2 Repayment of U.S. Revolving Credit Loans;
Evidence of Debt............................................ 34
2.3 Procedure for U.S. Revolving Credit Borrowing................. 35
2.4 Termination or Reduction of U.S. Revolving Credit
Commitments................................................. 35
2.5 Borrowings of U.S. Revolving Credit Loans
and Refunding of Loans...................................... 36
SECTION 3. AMOUNT AND TERMS OF SWING LINE
COMMITMENTS......................................................... 38
3.1 Swing Line Commitments....................................... 38
3.2 Procedure for Swing Line Borrowings;
Interest Rate.............................................. 39
3.3 Repayment of Swing Line Loans; Evidence of Debt.............. 39
3.4 Refunding of Swing Line Borrowings........................... 40
3.5 Participating Interests...................................... 40
SECTION 4. AMOUNT AND TERMS OF CAF ADVANCES............................. 41
4.1 CAF Advances................................................. 41
4.2 Procedure for CAF Advance Borrowing.......................... 41
4.3 CAF Advance Payments......................................... 44
4.4 Evidence of Debt............................................. 44
4.5 Certain Restrictions......................................... 45
SECTION 5. AMOUNT AND TERMS OF THE CANADIAN
COMMITMENTS......................................................... 45
5.1 Canadian Revolving Credit Commitments........................ 45
-i-
<PAGE> 3
Page
----
5.2 Repayment of Canadian Revolving Credit
Loans; Evidence of Debt........................... 46
5.3 Procedure for Canadian Revolving
Credit Borrowing.................................. 47
5.4 Termination or Reduction of Canadian
Revolving Credit Commitments...................... 47
SECTION 6. AMOUNT AND TERMS OF CANADIAN
ACCEPTANCE FACILITY......................................... 47
6.1 Acceptance Commitments............................... 47
6.2 Creation of Acceptances.............................. 48
6.3 Discount of Acceptances.............................. 49
6.4 Stamping Fees........................................ 49
6.5 Acceptance Reimbursement Obligations................. 49
6.6 Converting Canadian Revolving Credit Loans
to Acceptances and Acceptances to Canadian
Revolving Credit Loans............................ 51
6.7 Allocation of Acceptances............................ 52
6.8 Special Provisions Relating to Acceptance Notes...... 52
SECTION 7. AMOUNT AND TERMS OF MULTICURRENCY
COMMITMENT.................................................. 53
7.1 Multicurrency Commitments........................... 53
7.2 Repayment of Multicurrency Loans; Evidence
of Debt........................................... 53
7.3 Procedure for Multicurrency Borrowing............... 54
7.4 Termination or Reduction of Multicurrency
Commitments....................................... 54
SECTION 8. ALTERNATE CURRENCY FACILITIES......................... 54
8.1 Terms of Alternate Currency Facilities.............. 54
8.2 Reporting of Alternate Currency Outstandings. ...... 56
SECTION 9. LETTERS OF CREDIT..................................... 57
9.1 Letters of Credit................................... 57
9.2 Procedure for Issuance of Letters of Credit......... 58
9.3 Participating Interests............................. 58
9.4 Payments............................................ 59
9.5 Further Assurances.................................. 59
-ii-
<PAGE> 4
Page
----
9.6 Obligations Absolute........................... 60
9.7 Letter of Credit Application................... 60
9.8 Purpose of Letters of Credit................... 60
9.9 Currency Adjustments........................... 61
SECTION 10. GENERAL PROVISIONS APPLICABLE TO LOANS................. 61
10.1 Interest Rates and Payment Dates............... 61
10.2 Conversion and Continuation Options............ 62
10.3 Minimum Amounts of Tranches.................... 63
10.4 Optional and Mandatory Prepayments............. 63
10.5 Facility Fees; Other Fees...................... 64
10.6 Computation of Interest and Fees............... 65
10.7 Inability to Determine Interest Rate........... 67
10.8 Pro Rata Treatment and Payments................ 67
10.9 Illegality..................................... 69
10.10 Requirements of Law............................ 70
10.11 Indemnity...................................... 72
10.12 Taxes.......................................... 72
10.13 Assignment of Commitments Under Certain
Circumstances................................ 74
10.14 Use of Proceeds................................ 75
SECTION 11. REPRESENTATIONS AND WARRANTIES......................... 75
11.1 Financial Statements........................... 75
11.2 No Change...................................... 76
11.3 Corporate Existence; Compliance with Law....... 76
11.4 Corporate Power; Authorization; Enforceable
Obligations.................................. 76
11.5 No Legal Bar; Senior Debt...................... 77
11.6 No Material Litigation......................... 77
11.7 No Default..................................... 77
11.8 Ownership of Property; Liens................... 77
11.9 Taxes.......................................... 78
11.10 Securities Law, etc. Compliance................ 78
11.11 ERISA.......................................... 78
11.12 Investment Company Act; Other Regulations...... 79
11.13 Subsidiaries, etc. ............................ 79
11.14 Accuracy and Completeness of Information....... 79
11.15 Security Documents............................. 79
11.16 Patents, Copyrights, Permits and Trademarks.... 79
11.17 Environmental Matters.......................... 80
11.18 RDM Finance.................................... 81
-iii-
<PAGE> 5
Page
----
SECTION 12. CONDITIONS PRECEDENT.......................... 81
12.1 Conditions to Closing Date.................... 81
12.2 Conditions to Each Extension of Credit........ 83
SECTION 13. AFFIRMATIVE COVENANTS......................... 83
13.1 Financial Statements.......................... 84
13.2 Certificates; Other Information............... 84
13.3 Performance of Obligations.................... 85
13.4 Conduct of Business, Maintenance of Existence
and Compliance with Obligations and Laws.... 85
13.5 Maintenance of Property; Insurance............ 85
13.6 Inspection of Property; Books and Records;
Discussions................................. 86
13.7 Notices....................................... 86
13.8 Maintenance of Liens of the Security Documents 87
13.9 Environmental Matters......................... 87
13.10 Security Documents; Guarantee Supplement...... 88
SECTION 14. NEGATIVE COVENANTS............................ 89
14.1 Financial Covenants........................... 89
14.2 Limitation on Indebtedness.................... 90
14.3 Limitation on Liens........................... 91
14.4 Limitation on Guarantee Obligations........... 93
14.5 Limitations on Fundamental Changes............ 93
14.6 Limitation on Sale of Assets.................. 94
14.7 Limitation on Dividends....................... 95
14.8 Limitation on Capital Expenditures............ 96
14.9 Limitation on Investments, Loans and Advances. 96
14.10 Limitation on Optional Payments and
Modification of Debt Instruments............ 98
14.11 Transactions with Affiliates.................. 98
14.12 Corporate Documents........................... 99
14.13 Fiscal Year................................... 99
14.14 Limitation on Restrictions Affecting
Subsidiaries................................ 99
14.15 Special Purpose Subsidiary.................... 99
14.16 Interest Rate Agreements...................... 99
SECTION 15. GUARANTEE..................................... 99
15.1 Guarantee..................................... 99
15.2 No Subrogation................................ 100
-iv-
<PAGE> 6
Page
----
15.3 Amendments, etc. with respect to the
Obligations; Waiver of Rights............. 101
15.4 Guarantee Absolute and Unconditional........ 101
15.5 Reinstatement............................... 102
15.6 Payments.................................... 102
SECTION 16. EVENTS OF DEFAULT........................... 102
SECTION 17. THE ADMINISTRATIVE AGENTS; THE
MANAGING AGENTS, CO-AGENTS AND LEAD
MANAGERS.................................... 106
17.1 Appointment................................. 106
17.2 Delegation of Duties........................ 106
17.3 Exculpatory Provisions...................... 106
17.4 Reliance by Administrative Agent............ 107
17.5 Notice of Default........................... 107
17.6 Non-Reliance on Administrative Agents
and Other Lender.......................... 108
17.7 Indemnification............................. 108
17.8 Administrative Agents in their Individual
Capacity.................................. 108
17.9 Successor Administrative Agents............. 109
17.10 The Managing Agents, Co-Agents and Lead
Managers.................................. 109
SECTION 18. MISCELLANEOUS............................. 109
18.1 Amendments and Waivers...................... 109
18.2 Notices..................................... 112
18.3 No Waiver; Cumulative Remedies.............. 113
18.4 Survival of Representations and Warranties.. 113
18.5 Payment of Expenses and Taxes............... 113
18.6 Successors and Assigns; Participations
and Assignments......................... 114
18.7 Adjustments; Set-Off........................ 117
18.8 Loan Conversion/Participations.............. 118
18.9 Counterparts................................ 119
18.10 Severability................................ 120
18.11 Integration................................. 120
18.12 GOVERNING LAW............................... 120
18.13 Submission to Jurisdiction; Waivers......... 120
18.14 Acknowledgements............................ 121
--v-
<PAGE> 7
Page
----
18.15 WAIVERS OF JURY TRIAL..................... 121
18.16 Power of Attorney......................... 121
18.17 Existing Letters of Credit................ 121
18.18 Release of Collateral..................... 121
18.19 Judgment.................................. 122
18.20 Confidentiality........................... 122
18.21 Effect of Amendment and Restatement of the
Existing Credit Agreements.............. 122
18.22 Conflicts................................. 123
SCHEDULES:
I Commitments; Addresses
II Foreign Subsidiary Borrowers
III Administrative Schedule
IV Security Documents
V Existing Letters of Credit
VI Subsidiaries
VII Hazardous Material
VIII Contractual Obligation Restrictions
EXHIBITS:
A Form of U.S. Revolving Credit Note
B Form of Canadian Revolving Credit Note
C Form of Draft
D Form of Power of Attorney
E Form of Acceptance Note
F Form of CAF Advance Request
G Form of CAF Advance Offer
H Form of CAF Advance Confirmation
I Form of Joinder Agreement
J Form of Alternate Currency Facility Addendum
K Form of Assignment and Acceptance
L Form of Opinion of Winston & Strawn
M Form of Opinion of Tory, Tory, Deslauriers & Binnington
N Matters to be Covered by Foreign Subsidiary Opinion
O Form of Second Amended and Restated Subsidiary Guarantee
P Form of Second Amended and Restated Additional Subsidiary
Guarantee
Q Form of Second Amended and Restated Domestic Pledge
Agreement
R Form of Second Amended and Restated Fair Haven Pledge
Agreement
S Matters to be Covered by Opinion of Counsel to the U.S.
Borrower
T Form of Opinion of Baker & McKenzie Advokatbrya KB
U Form of Opinion of Blake, Cassells & Graydon
-vi-
<PAGE> 8
AMENDED AND RESTATED CREDIT AND GUARANTEE AGREEMENT, dated as of
December 20, 1996, among LEAR CORPORATION, a Delaware corporation (the "U.S.
Borrower"), LEAR CORPORATION CANADA LTD., a company organized under the laws of
the province of Ontario, Canada (the "Canadian Borrower"), each FOREIGN
SUBSIDIARY BORROWER (as hereinafter defined) (together with the U.S. Borrower
and the Canadian Borrower, the "Borrowers"), the Managing Agents named on the
signature pages hereof (the "Managing Agents"), the Co-Agents named on the
signature pages hereof (the "Co-Agents"), the Lead Managers named on the
signature pages hereof (the "Lead Managers"), the several banks and other
financial institutions from time to time parties hereto (the "Lenders") and THE
BANK OF NOVA SCOTIA, a Canadian chartered bank (as hereinafter defined, the
"Canadian Administrative Agent"), and THE CHASE MANHATTAN BANK, a New York
banking corporation (as hereinafter defined, the "General Administrative
Agent"), as administrative agents for the Lenders hereunder.
W I T N E S S E T H :
WHEREAS, the U.S. Borrower is party to (a) the Credit Agreement,
dated as of August 17, 1995, as amended (the "1995 Agreement") with the
several lenders party thereto (the "1995 Lenders"), the Managing Agents,
Co-Agents and Lead Managers identified therein and The Chase Manhattan Bank
(f/k/a Chemical Bank), as the administrative agent for the 1995 Lenders, and
(b) the Credit Agreement, dated as of June 27, 1996 (the "1996 Credit
Agreement"; and together with the 1995 Credit Agreement, the "Existing Credit
Agreements") with the several lenders party thereto (the "1996 Lenders"; and
together with the 1995 Lenders, the "Existing Lenders") and The Chase Manhattan
Bank (f/k/a Chemical Bank), as the administrative agent for the 1996 Lenders;
and
WHEREAS, the U.S. Borrower has requested that the Existing Credit
Agreements be combined and amended and restated;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements contained herein, the parties hereto agree that on the Closing
Date, as provided in subsection 18.21, the Existing Credit Agreements shall be
combined and amended and restated in their entirety as follows:
SECTION 1. DEFINITIONS
1.1 Defined Terms. As used in this Agreement, the following terms
shall have the following meanings:
"ABR Loans": U.S. Revolving Credit Loans or Swing Line Loans, the
rate of interest applicable to which is based upon the Alternate Base
Rate.
"Acceptance": a Draft drawn by the Canadian Borrower and accepted
by a Canadian Lender which is (a) denominated in Canadian Dollars, (b)
for a term of not less
<PAGE> 9
2
than 30 days nor more than 180 days and which matures prior to the
Revolving Credit Termination Date and (c) issuable and payable only in
Canada; provided that to the extent the context shall require, each
Acceptance Note shall be deemed to be an Acceptance.
"Acceptance Note": as defined in subsection 6.8(b).
"Acceptance Purchase Price": in respect of an Acceptance of a
specified maturity, the result (rounded to the nearest whole cent, and
with one-half cent being rounded up) obtained by dividing (a) the face
amount of such Acceptance by (b) the sum of (i) one and (ii) the product
of (A) the Reference Discount Rate for Acceptances of the same maturity
expressed as a decimal and (B) a fraction, the numerator of which is the
term to maturity of such Acceptance and the denominator of which is equal
to 365, where (b) above is rounded to the fifth decimal place and
0.000005 is rounded up to 0.00001.
"Acceptance Reimbursement Obligations": the obligation of the
Canadian Borrower to the Canadian Lenders (a) to reimburse the Canadian
Lenders for maturing Acceptances pursuant to subsection 6.5 and (b) to
make payments in respect of the Acceptance Notes in accordance with the
terms thereof.
"Acceptance Tranche": the collective reference to Acceptances all
of which were created on the same date and have the same maturity date.
"Acceptances to be Converted": as defined in subsection 18.8(a).
"Acquired Indebtedness": Indebtedness of a Person or any of its
Subsidiaries existing at the time such Person becomes a Subsidiary of the
U.S. Borrower or assumed in connection with the acquisition of assets
from such Person and not incurred by such Person in contemplation of such
Person becoming a Subsidiary of the U.S. Borrower or such acquisition,
and any refinancings thereof.
"Additional Subsidiary Guarantee": the Second Amended and Restated
Additional Subsidiary Guarantee made by Lear Operations Corporation and
NAB Corporation in favor of the General Administrative Agent,
substantially in the form of Exhibit P, as the same may be amended,
supplemented or otherwise modified from time to time.
"Adjusted Aggregate Committed Outstandings": with respect to each
Lender, the Aggregate Committed Outstandings of such Lender, plus the
amount of any participating interests purchased by such Lender pursuant
to subsection 18.8, minus the amount of any participating interests sold
by such Lender pursuant to subsection 18.8.
"Adjustment Date": with respect to any fiscal quarter, (a) the
second Business Day following receipt by the General Administrative Agent
of both (i) the financial statements required to be delivered pursuant to
subsection 13.1(a) or (b), as the case may be, for the most recently
completed fiscal period and (ii) the compliance certificate
<PAGE> 10
3
required pursuant to subsection 13.2(b) with respect to such financial
statements or (b) if such compliance certificate and financial statements
have not been delivered in a timely manner, the date upon which such
compliance certificate and financial statements were due; provided,
however, that in the event that the Adjustment Date is determined in
accordance with the provisions of clause (b) of this definition, then the
date which is two Business Days following the date of receipt of the
financial statements and compliance certificate referenced in clause (a)
of this definition also shall be deemed to constitute an Adjustment Date.
"Administrative Agents": the collective reference to the General
Administrative Agent and the Canadian Administrative Agent.
"Administrative Schedule": Schedule III, which contains interest
rate definitions and administrative information in respect of each
Available Foreign Currency.
"Affiliate": of any Person, (a) any other Person (other than a
Wholly Owned Subsidiary of such Person) which, directly or indirectly, is
in control of, is controlled by, or is under common control with, such
Person or (b) any other Person who is a director or executive officer of
(i) such Person, (ii) any Subsidiary of such Person (other than a Wholly
Owned Subsidiary) or (iii) any Person described in clause (a) above. For
purposes of this definition, a Person shall be deemed to be "controlled
by" such other Person if such other Person possesses, directly or
indirectly, power either to (A) vote 10% or more of the securities having
ordinary voting power for the election of directors of such first Person
or (B) direct or cause the direction of the management and policies of
such first Person whether by contract or otherwise.
"Aggregate Alternate Currency Outstandings": as at any date of
determination with respect to any Lender, an amount in the applicable
Alternate Currencies equal to the aggregate unpaid principal amount of
such Lender's Alternate Currency Loans.
"Aggregate Available Canadian Revolving Credit Commitments": as at
any date of determination with respect to all Canadian Lenders, an amount
in Canadian Dollars equal to the Available Canadian Revolving Credit
Commitments of all Canadian Lenders on such date.
"Aggregate Available Multicurrency Commitments": as at any date of
determination with respect to all Multicurrency Lenders, an amount in
U.S. Dollars equal to the Available Multicurrency Commitments of all
Multicurrency Lenders on such date.
"Aggregate Available U.S. Revolving Credit Commitments": as at any
date of determination with respect to all U.S. Lenders, an amount in U.S.
Dollars equal to the Available U.S. Revolving Credit Commitments of all
U.S. Lenders on such date.
"Aggregate Canadian Revolving Credit Outstandings": as at any date
of determination with respect to any Canadian Lender, an amount in
Canadian Dollars equal to the sum of the following, without duplication:
(a) the aggregate unpaid principal
<PAGE> 11
4
amount of such Canadian Lender's Canadian Revolving Credit Loans on
such date, (b) the aggregate undiscounted face amount of all outstanding
Acceptances of such Canadian Lender on such date and (c) the aggregate
unpaid principal amount of such Canadian Lender's Acceptance Notes on
such date.
"Aggregate Committed Outstandings": as at any date of determination
with respect to any Lender, an amount in U.S. Dollars equal to the sum of
(a) the Aggregate U.S. Revolving Credit Outstandings of such Lender, (b)
the U.S. Dollar Equivalent of the Aggregate Canadian Revolving Credit
Outstandings of such Lender and such Lender's Counterpart Lender, (c) the
U.S. Dollar Equivalent of the Aggregate Multicurrency Outstandings of
such Lender and (d) the U.S. Dollar Equivalent of the Aggregate Alternate
Currency Outstandings of such Lender.
"Aggregate Multicurrency Outstandings": as at any date of
determination with respect to any Lender, an amount in the applicable
Available Foreign Currencies equal to the aggregate unpaid principal
amount of such Lender's Multicurrency Loans.
"Aggregate Total Outstandings": as at any date of determination
with respect to any Lender, an amount in U.S. Dollars equal to the sum of
(a) the Aggregate U.S. Outstandings of such Lender, (b) the U.S. Dollar
Equivalent of the Aggregate Canadian Revolving Credit Outstandings of
such Lender and such Lender's Counterpart Lender, (c) the U.S. Dollar
Equivalent of the Aggregate Multicurrency Outstandings of such Lender and
(d) the U.S. Dollar Equivalent of the Aggregate Alternate Currency
Outstandings of such Lender.
"Aggregate U.S. Outstandings": as at any date of determination with
respect to any U.S. Lender, an amount in U.S. Dollars equal to the sum of
(a) the Aggregate U.S. Revolving Credit Outstandings of such Lender on
such date and (b) the aggregate unpaid principal amount of such U.S.
Lender's CAF Advances on such date.
"Aggregate U.S. Revolving Credit Commitments": the aggregate amount
of the U.S. Revolving Credit Commitments of all the Lenders.
"Aggregate U.S. Revolving Credit Outstandings": as at any date of
determination with respect to any U.S. Lender, an amount in U.S. Dollars
equal to the sum of (a) the aggregate unpaid principal amount of such
U.S. Lender's U.S. Revolving Credit Loans on such date, (b) such U.S.
Lender's U.S. Revolving Credit Commitment Percentage of the aggregate
unpaid principal amount of all Swing Line Loans on such date and (c) such
U.S. Lender's U.S. Revolving Credit Commitment Percentage of the
aggregate Letters of Credit Obligations.
"Agreement": this Amended and Restated Credit and Guarantee
Agreement, as the same may be amended, supplemented or otherwise modified
from time to time.
"Agreement Currency": as defined in subsection 18.19(b).
<PAGE> 12
5
"Alternate Base Rate": for any day, a rate per annum (rounded
upwards, if necessary, to the next 1/16 of 1%) equal to the greatest of:
(a) the U.S. Prime Rate in effect on such day; and
(b) the Federal Funds Effective Rate in effect on such day
plus 1/2 of 1%.
If for any reason the General Administrative Agent shall have determined
(which determination shall be conclusive absent manifest error) that it
is unable to ascertain the Federal Funds Effective Rate for any reason,
including the inability or failure of the General Administrative Agent to
obtain sufficient quotations in accordance with the terms thereof, the
Alternate Base Rate shall be determined without regard to clause (b)
above, until the circumstances giving rise to such inability no longer
exist. Any change in the Alternate Base Rate due to a change in the U.S.
Prime Rate or the Federal Funds Effective Rate shall be effective as of
the opening of business on the effective day of such change in the U.S.
Prime Rate or the Federal Funds Effective Rate, respectively.
"Alternate Currency": any currency other than U.S. Dollars which is
freely transferrable and convertible into U.S. Dollars and approved by
the General Administrative Agent.
"Alternate Currency Borrower": each Subsidiary of the U.S. Borrower
organized under the laws of a jurisdiction outside the United States that
the U.S. Borrower designates as an "Alternate Currency Borrower" in an
Alternate Currency Facility Addendum.
"Alternate Currency Facility": any Qualified Credit Facility that
the U.S. Borrower designates as an "Alternate Currency Facility" pursuant
to an Alternate Currency Facility Addendum.
"Alternate Currency Facility Addendum": an Alternate Currency
Facility Addendum received by the General Administrative Agent,
substantially in the form of Exhibit J, and conforming to the
requirements of Section 8.
"Alternate Currency Facility Agent": with respect to each Alternate
Currency Facility, the Alternate Currency Lender acting as agent or
representative for the Alternate Currency Lenders parties thereto (and,
in the case of any Alternate Currency Facility to which only one Lender
is a party, such Lender).
"Alternate Currency Facility Maximum Borrowing Amount": as defined
in subsection 8.1(b).
"Alternate Currency Lender": any Lender (or, if applicable, any
affiliate, branch or agency thereof) party to an Alternate Currency
Facility.
<PAGE> 13
6
"Alternate Currency Lender Maximum Borrowing Amount": as defined in
subsection 8.1(b).
"Alternate Currency Loan": any loan made pursuant to an Alternate
Currency Facility.
"Applicable Margin": at any time, the rate per annum set forth
below opposite the Level of Coverage Ratio most recently determined:
<TABLE>
<CAPTION>
Level of Applicable
Coverage Ratio Margin
-------------- ----------
<S> <C>
Level I:
Coverage Ratio is
less than 4.0 to 1 .625%
Level II:
Coverage Ratio is
equal to or greater than 4.0 to 1
but less than 5.0 to 1 .400%
Level III:
Coverage Ratio is
equal to or greater than 5.0 to 1
but less than 6.0 to 1 .300%
Level IV
Coverage Ratio is
greater than or equal to 6.0 to 1 .275%;
</TABLE>
provided that (a) the Applicable Margin shall be that set forth above
opposite Level III from the Closing Date until the first Adjustment Date
occurring after the Closing Date, (b) the Applicable Margin determined
for any Adjustment Date shall remain in effect until a subsequent
Adjustment Date for which the Coverage Ratio falls within a different
Level, and (c) if the financial statements and related compliance
certificate for any fiscal period are not delivered by the date due
pursuant to subsections 13.1 and 13.2(b), the Applicable Margin shall be
(i) for the first 5 days subsequent to such due date, that in effect on
the day prior to such due date, and (ii) thereafter, that set forth above
opposite Level I, in either case, until the subsequent Adjustment Date;
and provided, further, if Investment Grade Status is attained, the
Applicable Margin will be .250% per annum so long as Investment Grade
Status is maintained.
"Assignee": as defined in subsection 18.6(c).
<PAGE> 14
7
"Available Canadian Revolving Credit Commitment": as at any date of
determination with respect to any Canadian Lender (after giving effect to
the making and payment of any U.S. Revolving Credit Loans required to be
made on such date pursuant to subsection 2.5), an amount in U.S. Dollars
equal to the lesser of (a) the excess, if any, of (i) the amount of such
Canadian Lender's Canadian Revolving Credit Commitment in effect on such
date over (ii) the U.S. Dollar Equivalent of the Aggregate Canadian
Revolving Credit Outstandings of such Canadian Lender on such date and
(b) the excess, if any, of (i) the amount of the U.S. Revolving Credit
Commitment of such Canadian Lender's Counterpart Lender on such date over
(ii) the Aggregate Committed Outstandings of such Canadian Lender's
Counterpart Lender on such date.
"Available Foreign Currencies": Deutsche Marks, Pounds Sterling,
French Francs, Swedish Kroner, Austrian Schillings, Italian Lire and any
other available and freely-convertible non-U.S. Dollar currency selected
by the U.S. Borrower and approved by the General Administrative Agent and
the Majority Multicurrency Lenders in the manner described in subsection
18.1(b).
"Available Multicurrency Commitment": as at any date of
determination with respect to any Multicurrency Lender (after giving
effect to the making and payment of any U.S. Revolving Credit Loans
required to be made on such date pursuant to subsection 2.5), an amount
in U.S. Dollars equal to the lesser of (a) the excess, if any, of (i) the
amount of such Multicurrency Lender's Multicurrency Commitment in effect
on such date over (ii) the U.S. Dollar Equivalent of the Aggregate
Multicurrency Outstandings of such Multicurrency Lender on such date and
(b) the excess, if any, of (i) the amount of such Multicurrency Lender's
U.S. Revolving Credit Commitment in effect on such date over (ii) the
Aggregate Committed Outstandings of such Multicurrency Lender on such
date.
"Available U.S. Revolving Credit Commitment": as at any date of
determination with respect to any U.S. Lender (after giving effect to the
making and payment of any U.S. Revolving Credit Loans required to be made
on such date pursuant to subsection 2.5), an amount in U.S. Dollars equal
to the excess, if any, of (a) the amount of such U.S. Lender's U.S.
Revolving Credit Commitment in effect on such date over (b) the Aggregate
Committed Outstandings of such U.S. Lender on such date.
"Bank Act (Canada)": the Bank Act (Canada), as amended from time to
time.
"Benefitted Lender": as defined in subsection 18.7.
"Board": the Board of Governors of the Federal Reserve System (or
any successor thereto).
"Borrowers": as defined in the preamble hereto.
"Borrowing Date": any Business Day specified in a notice pursuant
to subsection 2.3, 3.2, 4.2, 5.3 or 7.3 as a date on which a Borrower
requests the Lenders to make
<PAGE> 15
8
Loans hereunder or, with respect to a Request for Acceptances, the
date with respect to which the Canadian Borrower has requested the
Canadian Lenders to accept Drafts or, with respect to Alternate Currency
Loans, the date on which an Alternate Currency Borrower requests
Alternate Currency Lenders to make Alternate Currency Loans to such
Alternate Currency Borrower pursuant to the Alternate Currency Facility
to which such Alternate Currency Borrower and Alternate Currency Lenders
are parties.
"Business Day": (a) when such term is used in respect of a day on
which a Loan in an Available Foreign Currency or Alternate Currency is to
be made, a payment is to be made in respect of such Loan, an Exchange
Rate is to be set in respect of such Available Foreign Currency or
Alternate Currency or any other dealing in such Available Foreign
Currency or Alternate Currency is to be carried out pursuant to this
Agreement, such term shall mean a London Banking Day which is also a day
on which banks are open for general banking business in the city which is
the principal financial center of the country of issuance of such
Available Foreign Currency or Alternate Currency, (b) when such term is
used in respect of a day on which a Loan is to be made to the Canadian
Borrower or an Acceptance is to be created, a payment is to be made in
respect of such Loan or Acceptance, an Exchange Rate is to be set in
respect of Canadian Dollars or any other dealing in Canadian Dollars is
to be carried out pursuant to this Agreement, such term shall mean a day
other than a Saturday, Sunday or other day on which commercial banks in
Toronto, Ontario are authorized or required by law to close, (c) when
such term is used to describe a day on which a borrowing, payment or
interest rate determination is to be made in respect of a LIBO Rate CAF
Advance, such day shall be a London Banking Day and (d) when such term is
used in any context in this Agreement (including as described in the
foregoing clauses (a), (b) and (c)), such term shall mean a day which, in
addition to complying with any applicable requirements set forth in the
foregoing clauses (a), (b) and (c), is a day other than a Saturday,
Sunday or other day on which commercial banks in New York City are
authorized or required by law to close.
"CAF Advance": each CAF Advance made pursuant to subsection 4.1.
"CAF Advance Availability Period": the period from and including
the Closing Date to and including the date which is 7 days prior to the
Revolving Credit Termination Date.
"CAF Advance Confirmation": each confirmation by the U.S. Borrower
of its acceptance of CAF Advance Offers, which confirmation shall be
substantially in the form of Exhibit H and shall be delivered to the
General Administrative Agent by facsimile transmission.
"CAF Advance Interest Payment Date": as to each CAF Advance, each
interest payment date specified by the U.S. Borrower for such CAF Advance
in the related CAF Advance Request.
<PAGE> 16
9
"CAF Advance Maturity Date": as to any CAF Advance, the date
specified by the U.S. Borrower pursuant to paragraph 4.2(d)(ii) in its
acceptance of the related CAF Advance Offer.
"CAF Advance Offer": each offer by a Lender to make CAF Advances
pursuant to a CAF Advance Request, which offer shall contain the
information specified in Exhibit G and shall be delivered to the General
Administrative Agent by telephone, immediately confirmed by facsimile
transmission.
"CAF Advance Request": each request by the U.S. Borrower for
Lenders to submit bids to make CAF Advances, which request shall contain
the information in respect of such requested CAF Advances specified in
Exhibit F and shall be delivered to the General Administrative Agent in
writing, by facsimile transmission, or by telephone, immediately
confirmed by facsimile transmission.
"Canadian Administrative Agent": The Bank of Nova Scotia, together
with its affiliates, as administrative agent for the Canadian Lenders
under this Agreement and the other Loan Documents, and any successor
thereto appointed pursuant to subsection 17.9.
"Canadian Base Rate": at any day, the higher of (a) the rate of
interest per annum publicly announced from time to time by the Canadian
Administrative Agent (and in effect on such day) as its reference rate
for U.S. Dollar commercial loans made in Canada, as adjusted
automatically from time to time and without notice to any of the
Borrowers upon change by the Canadian Administrative Agent and (b) the
Federal Funds Effective Rate in effect on such day plus 1/2 of 1%.
"Canadian Base Rate Loans": all Canadian Revolving Credit Loans
denominated in U.S. Dollars, which shall bear interest at a rate based
upon the Canadian Base Rate.
"Canadian Borrower": as defined in the preamble hereto.
"Canadian Dollars" and "C$": dollars in the lawful currency of
Canada.
"Canadian Dollar Equivalent": with respect to an amount denominated
in any currency other than Canadian Dollars, the equivalent in Canadian
Dollars of such amount determined at the Exchange Rate on the date of
determination of such equivalent.
"Canadian Lenders": the Lenders listed in Part B of Schedule I
hereto.
"Canadian Reference Lenders": the collective reference to the
Schedule I Canadian Reference Lenders and the Schedule II Canadian
Reference Lenders.
"Canadian Revolving Credit Commitment": as to any Canadian Lender
at any time, its obligation to make Canadian Revolving Credit Loans to,
and/or create Acceptances and discount on behalf of (or, in lieu thereof,
to make loans pursuant to the Acceptance Notes to), the Canadian
Borrower, in an aggregate amount not to exceed at
<PAGE> 17
10
any one time outstanding the Canadian Dollar Equivalent of the lesser
of (a) the U.S. Dollar amount set forth opposite such Canadian Lender's
name in Schedule I under the heading "Canadian Revolving Credit
Commitment", and (b) the U.S. Revolving Credit Commitment of such
Canadian Lender's Counterpart Lender, in each case as such amount may be
reduced from time to time as provided in subsection 5.4 and the other
applicable provisions hereof.
"Canadian Revolving Credit Commitment Percentage": as to any
Canadian Lender at any time, the percentage which such Canadian Lender's
Canadian Revolving Credit Commitment then constitutes of the aggregate
Canadian Revolving Credit Commitments (or, if the Canadian Revolving
Credit Commitments have terminated or expired, the percentage which (a)
the Aggregate Canadian Revolving Credit Outstandings of such Canadian
Lender at such time constitutes of (b) the Aggregate Canadian Revolving
Credit Outstandings of all Canadian Lenders at such time).
"Canadian Revolving Credit Loan": as defined in subsection 5.1.
"Canadian Revolving Credit Note": as defined in subsection 5.2(e).
"Capital Expenditures": direct or indirect (by way of the
acquisition of securities of a Person or the expenditure of cash or the
incurrence of Indebtedness) expenditures in respect of the purchase or
other acquisition of fixed or capital assets (excluding any such asset
(a) acquired in connection with normal replacement and maintenance
programs and properly charged to current operations, (b) acquired
pursuant to a Financing Lease or (c) acquired in connection with the
acquisition of Special Entities).
"Cash Equivalents": (a) securities issued or unconditionally
guaranteed or insured by the United States Government or the
Canadian Government or any agency or instrumentality thereof having
maturities of not more than twelve months from the date of acquisition,
(b) securities issued or unconditionally guaranteed or insured by any
state of the United States of America or province of Canada or any agency
or instrumentality thereof having maturities of not more than twelve
months from the date of acquisition and having one of the two highest
ratings obtainable from either S&P or Moody's, (c) time deposits,
certificates of deposit and bankers' acceptances having maturities of not
more than twelve months from the date of acquisition, in each case with
any U.S. Lender or Canadian Lender or with any commercial bank organized
under the laws of the United States of America or any state thereof or
the District of Columbia, Japan, Canada or any member of the European
Economic Community or any U.S. branch of a foreign bank having at the
date of acquisition capital and surplus of not less than $100,000,000,
(d) repurchase obligations with a term of not more than seven days for
underlying securities of the types described in clauses (a), (b) and (c)
entered into with any bank meeting the qualifications specified in clause
(c) above, (e) commercial paper issued by the parent corporation of any
U.S. Lender and commercial paper rated, at the time of acquisition, at
least A-1 or the equivalent thereof by S&P or P-1 or the equivalent
thereof by Moody's and in either case maturing within twelve months after
the date of acquisition, (e) deposits maintained with money market funds
having total assets in excess of
<PAGE> 18
11
$300,000,000, (f) demand deposit accounts maintained in the ordinary
course of business with banks or trust companies, in an aggregate amount
not to exceed $2,000,000 at any one time at any one such bank or trust
company, (g) temporary deposits, of amounts received in the ordinary
course of business pending disbursement of such amounts, in demand
deposit accounts in banks outside the United States and (h) deposits in
mutual funds which invest substantially all of their assets in preferred
equities issued by U.S. corporations rated at least AA (or the equivalent
thereof) by S&P.
"CDOR Rate": the rate per annum determined by the Canadian
Administrative Agent by reference to the average rate quoted on the
Reuters Monitor Screen, Page "CDOR" (or such other Page as may replace
such Page on such screen for the purpose of displaying Canadian interbank
bid rates for Canadian Dollar bankers' acceptances with a 90 day term as
of 10:00 a.m. (Toronto time) one Business Day prior to the first day of
such 90 day term. If for any reason the Reuters Monitor Screen rates are
unavailable, CDOR Rate means the rate of interest determined by the
Canadian Administrative Agent which is equal to the arithmetic mean of
the rates quoted by such reference banks as may be specified from time to
time by the Canadian Administrative Agent, after consultation with the
Canadian Borrower, in respect of Canadian Dollar bankers' acceptances
with a 90 day term as of 10:00 a.m. one Business Day prior to the first
day of such 90 day term.
"Chase": The Chase Manhattan Bank, a New York banking corporation.
"Chase Delaware": Chase Manhattan Bank Delaware.
"Closing Date": the date on which all of the conditions precedent
set forth in subsection 12.1 shall have been met or waived and the
initial Loans are made.
"Co-Agents": as defined in the preamble hereto.
"Code": the Internal Revenue Code of 1986, as amended from time to
time.
"Commercial Letters of Credit": as defined in subsection 9.1(a).
"Commitments": the collective reference to the U.S. Revolving
Credit Commitments, the Canadian Revolving Credit Commitments and the
Multicurrency Commitments.
"Committed Outstandings Percentage": on any date with respect to
any Lender, the percentage which the Adjusted Aggregate Committed
Outstandings of such Lender constitutes of the Adjusted Aggregate
Committed Outstandings of all Lenders.
"Commonly Controlled Entity": an entity, whether or not
incorporated, which is under common control with the U.S. Borrower within
the meaning of Section 4001 of ERISA or is part of a group which includes
the U.S. Borrower and which is treated as a single employer under Section
414 of the Code.
<PAGE> 19
12
"Consolidated Assets": at a particular date, all amounts which
would be included under total assets on a consolidated balance sheet of
the U.S. Borrower and its Subsidiaries as at such date, determined in
accordance with GAAP.
"Consolidated Indebtedness": at a particular date, all Indebtedness
of the U.S. Borrower and its Subsidiaries which would be included under
indebtedness on a consolidated balance sheet of the U.S. Borrower and its
Subsidiaries as at such date, determined in accordance with GAAP, less
any cash of the U.S. Borrower and its Subsidiaries as at such date.
"Consolidated Interest Expense": for any fiscal period, the amount
which would, in conformity with GAAP, be set forth opposite the caption
"interest expense" (or any like caption) on a consolidated income
statement of the U.S. Borrower and its Subsidiaries for such period, (a)
excluding therefrom, however, fees payable under subsection 10.5 and any
amortization or write-off of deferred financing fees during such period
and (b) including any interest income during such period.
"Consolidated Net Income": for any fiscal period, the consolidated
net income (or deficit) of the U.S. Borrower and its Subsidiaries for
such period (taken as a cumulative whole), determined in accordance with
GAAP; provided that (a) any provision for post-retirement medical
benefits, to the extent such provision calculated under FAS 106 exceeds
actual cash outlays calculated on the "pay as you go" basis, shall not to
be taken into account, and (b) there shall be excluded (i) the income (or
deficit) of any Person accrued prior to the date it becomes a Subsidiary
or is merged into or consolidated with the U.S. Borrower or any
Subsidiary, (ii) the income (or deficit) of any Person (other than a
Subsidiary) in which the U.S. Borrower or any Subsidiary has an ownership
interest, except to the extent that any such income has been actually
received by the U.S. Borrower or such Subsidiary in the form of dividends
or similar distributions, (iii) the undistributed earnings of any
Subsidiary to the extent that the declaration or payment of dividends or
similar distributions by such Subsidiary is not at the time permitted by
the terms of any Contractual Obligation or Requirement of Law (other than
any Requirement of Law of Germany) applicable to such Subsidiary, and
(iv) in the case of a successor to the U.S. Borrower or any Subsidiary by
consolidation or merger or as a transferee of its assets, any earnings of
the successor corporation prior to such consolidation, merger or transfer
of assets; provided, further that the exclusions in clauses (i) and (iv)
of this definition shall not apply to the mergers or consolidations of
the U.S. Borrower or its Subsidiaries with their respective Subsidiaries.
"Consolidated Net Worth": at a particular date, all amounts which
would be included under shareholders' equity on a consolidated balance
sheet of the U.S. Borrower and its Subsidiaries determined on a
consolidated basis in accordance with GAAP as at such date plus the
amount of any redeemable common stock; provided, however, that any
cumulative adjustments made pursuant to FAS 106 shall not be taken into
account; and provided, further, that any stock option expense and any
amortization of goodwill, deferred financing fees and license fees
(including any write-offs of deferred financing
<PAGE> 20
13
fees, license fees and up to an aggregate of $10,000,000 of goodwill from
October 25, 1993) shall not be taken into account in determining
Consolidated Net Worth.
"Consolidated Operating Profit": for any fiscal period,
Consolidated Net Income for such period excluding (a) extraordinary gains
and losses arising from the sale of material assets and other
extraordinary and/or non-recurring gains and losses, (b) charges,
premiums and expenses associated with the discharge of Indebtedness, (c)
charges relating to FAS 106, (d) license fees (and any write-offs
thereof), (e) stock compensation expense, (f) deferred financing fees
(and any write-offs thereof), (g) write-offs of goodwill, (h) foreign
exchange gains and losses, (i) miscellaneous income and expenses and (j)
miscellaneous gains and losses arising from the sale of assets plus, to
the extent deducted in determining Consolidated Net Income, the excess of
(i) the sum of (A) Consolidated Interest Expense, (B) any expenses for
taxes, (C) depreciation and amortization expense and (D) minority
interests in income of Subsidiaries over (ii) net equity earnings in
Affiliates (excluding Subsidiaries). Consolidated Operating Profit for
any fiscal period shall in any event include the Consolidated Operating
Profit for such fiscal period of any entity acquired by the U.S. Borrower
or any of its Subsidiaries during such period.
"Consolidated Revenues": for any fiscal period, the consolidated
revenues of the U.S. Borrower and its Subsidiaries for such period,
determined in accordance with GAAP.
"Continuing Directors": the directors of the U.S. Borrower on the
Closing Date and each other director, if such other director's nomination
for election to the Board of Directors of the U.S. Borrower is
recommended by a majority of the then Continuing Directors.
"Contractual Obligation": as to any Person, any provision of any
security issued by such Person or of any agreement, instrument or
undertaking to which such Person is a party or by which it or any of its
property is bound.
"Conversion Date": any date on which either (a) an Event of Default
under Section 16(i) has occurred or (b) the Commitments shall have been
terminated prior to the Revolving Credit Termination Date and/or the
Loans shall have been declared immediately due and payable, in either
case pursuant to Section 16.
"Conversion Sharing Percentage": on any date with respect to any
Lender and any Loans or Acceptances, as the case may be, of such Lender
outstanding in any currency other than U.S. Dollars, the percentage of
such Loans or Acceptances, as the case may be, such that, after giving
effect to the conversion of such Loans or Acceptances, as the case may
be, to U.S. Dollars and the purchase and sale by such Lender of
participating interests as contemplated by subsection 18.8, the Committed
Outstandings Percentage of such Lender will equal such Lender's U.S.
Revolving Credit Commitment Percentage on such date (calculated
immediately prior to giving effect to
<PAGE> 21
14
any termination or expiration of the U.S. Revolving Credit Commitments
on the Conversion Date).
"Converted Acceptances: as defined in subsection 18.8(a).
"Converted Loans: as defined in subsection 18.8(a).
"Counterpart Lender": (a) as to any U.S. Lender, the Canadian
Lender (if any) set forth opposite such U.S. Lender's name in Schedule I
under the heading "Counterpart Lender" and (b) as to any Canadian Lender,
the U.S. Lender set forth opposite such Canadian Lender's name in
Schedule I under the heading "Counterpart Lender".
"Coverage Ratio": for any Adjustment Date the ratio of (a)
Consolidated Operating Profit for the four fiscal quarters most recently
ended to (b) Consolidated Interest Expense for the four fiscal quarters
most recently ended.
"CSI": Chase Securities Inc.
"Currency Agreement": any foreign exchange contract, currency swap
agreement, futures contract, option contract, synthetic cap or other
similar agreement or arrangement designed to protect the U.S. Borrower or
any Subsidiary against fluctuations in currency values.
"Currency Agreement Obligations": all obligations of the U.S.
Borrower or any Subsidiary to any financial institution under any one or
more Currency Agreements.
"Default": any of the events specified in Section 16, whether or
not any requirement for the giving of notice, the lapse of time, or both,
or any other condition, has been satisfied.
"Dollars", "U.S. Dollars" and "$": dollars in lawful currency of
the United States of America.
"Domestic Loan Party": each Loan Party that is organized under the
laws of any jurisdiction of the United States.
"Domestic Subsidiary": any Subsidiary other than a Foreign
Subsidiary.
"Draft": a draft substantially in the form of Exhibit C or in such
other form as the Canadian Administrative Agent may from time to time
reasonably request (or to the extent the context shall require, an
Acceptance Note, delivered in lieu of a draft), as the same may be
amended, supplemented or otherwise modified from time to time.
"Environmental Complaint": any complaint, order, citation, notice
or other written communication from any Person with respect to the
existence or alleged existence of a violation of any Environmental Laws
or legal liability resulting from air emissions,
<PAGE> 22
15
water discharges, noise emissions, Hazardous Material or any other
environmental, health or safety matter.
"Environmental Laws": any and all applicable Federal, foreign,
state, provincial, local or municipal laws, rules, orders, regulations,
statutes, ordinances, codes, decrees, requirements of any Governmental
Authority and any and all common law requirements, rules and bases of
liability regulating, relating to or imposing liability or standards of
conduct concerning pollution or protection of the environment or the
Release or threatened Release of Hazardous Materials, as now or hereafter
in effect.
"ERISA": the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"Eurocurrency Liabilities": at any time, the aggregate of the rates
(expressed as a decimal fraction) of any reserve requirements in effect
at such time (including, without limitation, basic, supplemental,
marginal and emergency reserves under any regulations of the Board or
other Governmental Authority having jurisdiction with respect thereto)
dealing with reserve requirements prescribed for eurocurrency funding
(currently referred to as "Eurocurrency Liabilities" in Regulation D of
the Board) maintained by a member bank of the Federal Reserve System.
"Eurocurrency Rate": with respect to each Interest Period
pertaining to a Multicurrency Loan, the Eurocurrency Rate determined for
such Interest Period and the Available Foreign Currency in which such
Multicurrency Loan is denominated in the manner set forth in the
Administrative Schedule.
"Eurodollar Loans": U.S. Revolving Credit Loans the rate of
interest applicable to which is based upon the Eurodollar Rate.
"Eurodollar Rate": with respect to each Interest Period pertaining
to a Eurodollar Loan, the rate per annum equal to the average (rounded
upward to the nearest 1/16th of 1%) of the respective rates notified to
the General Administrative Agent by each of the
U.S. Reference Lenders as the rate at which such U.S. Reference Lender is
offered Dollar deposits at or about 10:00 a.m., New York City time, two
Business Days prior to the beginning of such Interest Period,
(a) in the interbank eurodollar market where the eurodollar
and foreign currency exchange operations in respect of its
Eurodollar Loans then are being conducted,
(b) for delivery on the first day of such Interest Period,
(c) for the number of days contained therein, and
(d) in an amount comparable to the amount of its Eurodollar
Loan to be outstanding during such Interest Period.
<PAGE> 23
16
"Event of Default": any of the events specified in Section 16,
provided that any requirement for the giving of notice, the lapse of
time, or both, or any other condition, has been satisfied.
"Exchange Act": the Securities Exchange Act of 1934, as amended.
"Exchange Rate": with respect to Canadian Dollars on any date, the
Bank of Canada noon spot rate on such date, and with respect to any other
non-U.S. Dollar currency on any date, the rate at which such currency may
be exchanged into U.S. Dollars, as set forth on such date on the relevant
Reuters currency page at or about 11:00 A.M., London time, on such date.
In the event that such rate does not appear on any Reuters currency page,
the "Exchange Rate" with respect to such non-U.S. Dollar currency shall
be determined by reference to such other publicly available service for
displaying exchange rates as may be agreed upon by the General
Administrative Agent and the U.S. Borrower or, in the absence of such
agreement, such "Exchange Rate" shall instead be the General
Administrative Agent's spot rate of exchange in the interbank market
where its foreign currency exchange operations in respect of such
non-U.S. Dollar currency are then being conducted, at or about 10:00
A.M., local time, on such date for the purchase of U.S. Dollars with such
non-U.S. Dollar currency, for delivery two Business Days later; provided,
that if at the time of any such determination, no such spot rate can
reasonably be quoted, the General Administrative Agent may use any
reasonable method as it deems applicable to determine such rate, and such
determination shall be conclusive absent manifest error.
"Existing Credit Agreements": as defined in the recitals hereto.
"Existing Lenders": as defined in the recitals hereto.
"Existing Letters of Credit": as defined in subsection 9.1(b).
"Extension of Credit": as to any Lender, the making of a Loan by
such Lender, the acceptance of a Draft or an Acceptance Note by such
Lender or the issuance of any Letter of Credit. It is expressly
understood and agreed that the following do not constitute Extensions of
Credit for purposes of this Agreement: (a) the conversions and
continuations of U.S. Revolving Credit Loans as or to Eurodollar Loans or
ABR Loans pursuant to subsection 10.2, (b) the substitution of maturing
Acceptances with new Acceptances, (c) the conversion of Acceptances to
Canadian Revolving Credit Loans, (d) the conversion of Canadian Revolving
Credit Loans to Acceptances, (e) the continuation of Multicurrency Loans
for additional Interest Periods and (f) the continuation of Alternate
Currency Loans for additional interest periods.
"Facility Fee Rate": at any time, the rate per annum set forth
below opposite the Level of Coverage Ratio most recently determined:
<PAGE> 24
17
<TABLE>
<CAPTION>
Level of Facility
Coverage Ratio Fee Rate
-------------- --------
<S> <C>
Level I:
Coverage Ratio is
less than 4.0 to 1 0.250%
Level II:
Coverage Ratio is
equal to or greater than 4.0 to 1
but less than 5.0 to 1 0.225%
Level III:
Coverage Ratio is
equal to or greater than 5.0 to 1
but less than 6.0 to 1 0.175%
Level IV:
Coverage Ratio is
greater than or equal to 6.0 to 1 0.150%;
</TABLE>
provided that (a) the Facility Fee Rate shall be that set forth above
opposite Level III from the Closing Date until the first Adjustment Date
occurring after the Closing Date, (b) the Facility Fee Rate determined
for any Adjustment Date shall remain in effect until a subsequent
Adjustment Date for which the Coverage Ratio falls within a different
Level, and (c) if the financial statements and related compliance
certificate for any fiscal period are not delivered by the date due
pursuant to subsections 13.1 and 13.2(b), the Facility Fee Rate shall be
(i) for the first 5 days subsequent to such due date, that in effect on
the day prior to such due date, and (ii) thereafter, that set forth above
opposite Level I, in either case, until the subsequent Adjustment Date;
and provided, further, if Investment Grade Status is attained, the
Facility Fee Rate will be .125% per annum so long as Investment Grade
Status is maintained.
"Federal Funds Effective Rate": for any day, the weighted average
of the rates per annum on overnight federal funds transactions with
members of the Federal Reserve System arranged by federal funds brokers,
as published on the next succeeding Business Day by the Federal Reserve
Bank of New York, or, if such rate is not so published for any day which
is a Business Day, the average of the quotations for the day of such
transactions received by the General Administrative Agent from three
federal funds brokers of recognized standing selected by it.
"Financing Lease": (a) any lease of property, real or personal, the
obligations under which are capitalized on a consolidated balance sheet
of the U.S. Borrower and its Subsidiaries and (b) any other such lease to
the extent that the then present value of the
<PAGE> 25
18
minimum rental commitment thereunder should, in accordance with GAAP, be
capitalized on a balance sheet of the lessee.
"First Lender": as defined in subsection 18.8(c).
"Fixed Rate CAF Advance": any CAF Advance made pursuant to a Fixed
Rate CAF Advance Request.
"Fixed Rate CAF Advance Request": any CAF Advance Request
requesting the Lenders to offer to make CAF Advances at a fixed rate (as
opposed to a rate composed of the LIBO Rate plus (or minus) a margin).
"Foreign Letter of Credit": a Letter of Credit whose beneficiary is
a Person which is directly or indirectly extending credit to a Foreign
Subsidiary.
"Foreign Subsidiaries": each of the Subsidiaries so designated on
Schedule VI and any Subsidiaries organized outside the United States
which are created after the effectiveness hereof.
"Foreign Subsidiary Borrower": each Foreign Subsidiary listed as a
Foreign Subsidiary Borrower in Schedule II as amended from time to time
in accordance with subsection 18.1(b)(i).
"Foreign Subsidiary Opinion": with respect to any Foreign
Subsidiary Borrower, a legal opinion of counsel to such Foreign
Subsidiary Borrower addressed to the Administrative Agents and the
Lenders covering the matters set forth on Exhibit N, with such
assumptions, qualifications and deviations therefrom as the General
Administrative Agent shall approve (such approval not to be unreasonably
withheld).
"Funding Commitment Percentage": as at any date of determination
(after giving effect to the making and payment of any Loans made on such
date pursuant to subsection 2.5), with respect to any U.S. Lender, that
percentage which the Available U.S. Revolving Credit Commitment of such
U.S. Lender then constitutes of the Aggregate Available U.S. Revolving
Credit Commitments.
"GAAP": generally accepted accounting principles in the United
States of America in effect from time to time.
"General Administrative Agent": Chase, together with its
affiliates, as arranger of the Commitments and as general administrative
agent for the Lenders under this Agreement and the other Loan Documents,
and any successor thereto appointed pursuant to subsection 17.9.
"Governmental Authority": any nation or government, any state,
province or other political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory or administrative functions
of or pertaining to government.
<PAGE> 26
19
"Guarantee Obligation": as to any Person, any obligation of such
Person guaranteeing or in effect guaranteeing any Indebtedness, leases,
dividends or other obligations (the "primary obligations") of any other
Person (the "primary obligor") in any manner, whether directly or
indirectly, including, without limitation, any obligation of such Person,
whether or not contingent (a) to purchase any such primary obligation or
any property constituting direct or indirect security therefor, (b) to
advance or supply funds (i) for the purchase or payment of any such
primary obligation or (ii) to maintain working capital or equity capital
of the primary obligor or otherwise to maintain the net worth or solvency
of the primary obligor, (c) to purchase property, securities or services
primarily for the purpose of assuring the owner of any such primary
obligation of the ability of the primary obligor to make payment of such
primary obligation or (d) otherwise to assure or hold harmless the owner
of any such primary obligation against loss in respect thereof; provided,
however, that the term Guarantee Obligation shall not include
endorsements of instruments for deposit or collection in the ordinary
course of business. The amount of any Guarantee Obligation shall be
deemed to be an amount equal to the value as of any date of determination
of the stated or determinable amount of the primary obligation in respect
of which such Guarantee Obligation is made (unless such Guarantee
Obligation shall be expressly limited to a lesser amount, in which case
such lesser amount shall apply) or, if not stated or determinable, the
value as of any date of determination of the maximum reasonably
anticipated liability in respect thereof as determined by such Person in
good faith.
"Guarantor Supplement": a supplement to the Subsidiary Guarantee,
substantially in the form of Annex A to the Subsidiary Guarantee, whereby
a Subsidiary of the U.S. Borrower becomes a "Guarantor" under the
Subsidiary Guarantee.
"Hazardous Materials": any solid wastes, toxic or hazardous
substances, materials or wastes, defined, listed, classified or regulated
as such in or under any Environmental Laws, including, without
limitation, asbestos, petroleum or petroleum products (including
gasoline, crude oil or any fraction thereof), polychlorinated biphenyls,
and urea-formaldehyde insulation, and any other substance the presence of
which may give rise to liability under any Environmental Law.
"Indebtedness": of a Person, at a particular date, the sum (without
duplication) at such date of (a) indebtedness for borrowed money or for
the deferred purchase price of property or services in respect of which
such Person is liable as obligor, (b) indebtedness secured by any Lien on
any property or asset owned or held by such Person regardless of whether
the indebtedness secured thereby shall have been assumed by or is a
primary liability of such Person, (c) obligations of such Person under
Financing Leases, (d) the face amount of all letters of credit issued for
the account of such person and, without duplication, the unreimbursed
amount of all drafts drawn thereunder and (e) obligations (in the nature
of principal or interest) of such Person in respect of acceptances or
similar obligations issued or created for the account of such Person; but
excluding (i) trade and other accounts payable in the ordinary course of
business in accordance with customary trade terms and which are not
overdue for more than 120 days or, if overdue for more
<PAGE> 27
20
than 120 days, as to which a dispute exists and adequate reserves in
conformity with GAAP have been established on the books of such Person,
(ii) deferred compensation obligations to employees and (iii) any
obligations otherwise constituting Indebtedness the payment of which such
Person has provided for pursuant to the terms of such Indebtedness or any
agreement or instrument pursuant to which such Indebtedness was incurred,
by the irrevocable deposit in trust of an amount of funds or a principal
amount of securities, which deposit is sufficient, either by itself or
taking into account the accrual of interest thereon, to pay the principal
of and interest on such obligations when due.
"Industrial Revenue Bonds": industrial revenue bonds issued for the
benefit of the U.S. Borrower or its Subsidiaries and in respect of which
the U.S. Borrower or its Subsidiaries will be the source of repayment,
provided that such financings (including, without limitation, the
indenture related thereto) shall be in form and substance reasonably
satisfactory to the Issuing Lender that issues a Letter of Credit backing
such Industrial Revenue Bonds.
"Insolvency": with respect to any Multiemployer Plan, the condition
that such Plan is insolvent within the meaning of Section 4245 of ERISA.
"Insolvent": pertaining to a condition of Insolvency.
"Interest Payment Date": (a) as to any ABR Loan and any Prime Rate
Loan, the last day of each March, June, September and December to occur
while such Loan is outstanding, (b) as to any Eurodollar Loan or
Multicurrency Loan having an Interest Period of three months or less, the
last day of such Interest Period and (c) as to any Eurodollar Loan or
Multicurrency Loan having an Interest Period longer than three months,
(i) each day which is three months, or a whole multiple thereof, after
the first day of such Interest Period and (ii) the last day of such
Interest Period.
"Interest Period": with respect to any Eurodollar Loan or
Multicurrency Loan:
(a) initially, the period commencing on the borrowing or conversion
date, as the case may be, with respect to such Eurodollar Loan or
Multicurrency Loan and ending one, two, three or six months thereafter,
and if deposits in the relevant currency for such longer Interest Periods
are available to all relevant Lenders (as determined by such Lenders),
nine or twelve months thereafter, as selected by the relevant Borrower in
its notice of borrowing or notice of conversion, as the case may be,
given with respect thereto; and
(b) thereafter, each period commencing on the last day of the next
preceding Interest Period applicable to such Eurodollar Loan or
Multicurrency Loan and ending one, two, three or six months thereafter,
and if deposits in the relevant currency for such longer Interest Periods
are available to all relevant Lenders (as determined by such Lenders),
nine or twelve months thereafter, as selected by the relevant Borrower by
irrevocable notice to the General Administrative Agent not less than
three Business Days prior to the last day of the then current Interest
Period with respect thereto;
<PAGE> 28
21
provided that all of the foregoing provisions relating to Interest
Periods are subject to the following:
(i) if any Interest Period pertaining to a Eurodollar Loan or
Multicurrency Loan would otherwise end on a day that is not a
Business Day, such Interest Period shall be extended to the next
succeeding Business Day unless the result of such extension would
be to carry such Interest Period into another calendar month in
which event such Interest Period shall end on the immediately
preceding Business Day;
(ii) any Interest Period applicable to a Eurodollar Loan or
Multicurrency Loan that would otherwise extend beyond the Revolving
Credit Termination Date shall end on the Revolving Credit
Termination Date; and
(iii) any Interest Period pertaining to a Eurodollar Loan or
Multicurrency Loan that begins on the last Business Day of a
calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest
Period) shall end on the last Business Day of a calendar month.
"Interest Rate Agreement": any interest rate protection agreement,
interest rate swap or other interest rate hedge arrangement (other than
any interest rate cap or other similar agreement or arrangement pursuant
to which the U.S. Borrower has no credit exposure), to or under which the
U.S. Borrower or any of its Subsidiaries is a party or a beneficiary.
"Interest Rate Agreement Obligations": all obligations of the U.S.
Borrower or any Subsidiary to any financial institution under any one or
more Interest Rate Agreements.
"Investment Grade Status": shall exist at any time when the actual
or implied rating of the U.S. Borrower's senior long-term unsecured debt
is at or above BBB- from S&P and Baa3 from Moody's; if either of S&P or
Moody's shall change its system of classifications after the date of this
Agreement, Investment Grade Status shall exist at any time when the
actual or implied rating of the U.S. Borrower's senior long-term
unsecured debt is at or above the new rating which most closely
corresponds to the above-specified level under the previous rating
system.
"Issuing Lender": Chase (or Chase Delaware), in its capacity as
issuer of the Letters of Credit and any other U.S. Lender which the U.S.
Borrower, the General Administrative Agent and the Majority U.S. Lenders
shall have approved, in its capacity as issuer of the Letters of Credit.
"Judgment Currency": as defined in subsection 18.19(b).
"Lead Managers": as defined in the preamble hereto.
<PAGE> 29
22
"Lear Italia": the collective reference to each direct Foreign
Subsidiary, organized under the laws of Italy, of the U.S. Borrower or
any Subsidiary party to the Subsidiary Guarantee.
"Lenders": as defined in the preamble hereto, provided that no
Person shall become a "Lender" hereunder after the Closing Date without
compliance with subsection 18.6(c).
"Letter of Credit Applications": (a) in the case of Standby Letters
of Credit, a letter of credit application for a Standby Letter of Credit
on the standard form of the applicable Issuing Lender for standby letters
of credit, and (b) in the case of Commercial Letters of Credit, a letter
of credit application for a Commercial Letter of Credit on the standard
form of the applicable Issuing Lender for commercial letters of credit.
"Letter of Credit Obligations": at any particular time, all
liabilities of the U.S. Borrower and any Subsidiary with respect to
Letters of Credit, whether or not any such liability is contingent,
including (without duplication) the sum of (a) the aggregate undrawn face
amount of all Letters of Credit then outstanding plus (b) the aggregate
amount of all unpaid Reimbursement Obligations and Subsidiary
Reimbursement Obligations.
"Letter of Credit Participation Certificate": a participation
certificate in the form customarily used by the Issuing Lender for such
purpose at the time such certificate is issued.
"Letters of Credit": as defined in subsection 9.1(a).
"LIBO Rate": in respect of any LIBO Rate CAF Advance, the London
interbank offered rate for deposits in Dollars for the period commencing
on the date of such CAF Advance and ending on the CAF Advance Maturity
Date with respect thereto which appears on Telerate Page 3750 as of 11:00
A.M., London time, two Business Days prior to the beginning of such
period.
"LIBO Rate CAF Advance": any CAF Advance made pursuant to a LIBO
Rate CAF Advance Request.
"LIBO Rate CAF Advance Request": any CAF Advance Request requesting
the Lenders to offer to make CAF Advances at an interest rate equal to
the LIBO Rate plus (or minus) a margin.
"Lien": any mortgage, pledge, hypothecation, assignment, deposit
arrangement, encumbrance, lien (statutory or other), or preference,
priority or other security agreement or preferential arrangement of any
kind or nature whatsoever (including, without limitation, any conditional
sale or other title retention agreement or any Financing Lease having
substantially the same economic effect as any of the foregoing).
<PAGE> 30
23
"Loan Documents": the collective reference to this Agreement, any
Notes, the Drafts, the Acceptances, the Acceptance Notes, any documents
or instruments evidencing or governing any Alternate Currency Facility
and the Security Documents.
"Loan Parties": the collective reference to the Borrowers, each
guarantor or grantor party to any Security Document and each issuer of
pledged stock under each Pledge Agreement.
"Loans": the collective reference to the Revolving Credit Loans,
the Swing Line Loans, the CAF Advances, the Multicurrency Loans and the
Alternate Currency Loans.
"Loans to be Converted": as defined in subsection 18.8(a).
"London Banking Day": any day on which banks in London are open for
general banking business, including dealings in foreign currency and
exchange.
"Majority Canadian Lenders": at any time, Canadian Lenders whose
Canadian Revolving Credit Commitment Percentages aggregate more than 50%.
"Majority Lenders": (a) at any time prior to the termination of the
Revolving Credit Commitments, the Majority U.S. Lenders; and (b) at any
time after the termination of the Revolving Credit Commitments, Lenders
whose Aggregate Total Outstandings aggregate more than 50% of the
Aggregate Total Outstandings of all Lenders; provided that for purposes
of this definition the Aggregate Total Outstandings of each Lender shall
be adjusted up or down so as to give effect to any participations
purchased or sold pursuant to subsection 18.8.
"Majority Multicurrency Lenders": at any time, Multicurrency
Lenders whose Multicurrency Commitment Percentages aggregate more than
50%.
"Majority U.S. Lenders": at any time, U.S. Lenders whose U.S.
Revolving Credit Commitment Percentages aggregate more than 50%.
"Managing Agents": as defined in the preamble hereto.
"Material Subsidiary": each Loan Party and any other Subsidiary
which (a) for the most recent fiscal year of the U.S. Borrower accounted
for more than 10% of Consolidated Revenues or (b) as of the end of such
fiscal year, was the owner of more than 10% of Consolidated Assets, all
as shown on the consolidated financial statements of the U.S. Borrower
for such fiscal year.
"Moody's": Moody's Investors Service, Inc. or any successor
thereto.
"Multicurrency Commitment": as to any Multicurrency Lender at any
time, its obligation to make Multicurrency Loans to the U.S. Borrower or
Foreign Subsidiary Borrowers in an aggregate amount in Available Foreign
Currencies of which the U.S.
<PAGE> 31
24
Dollar Equivalent does not exceed at any time outstanding the lesser of
(a) the amount set forth opposite such Multicurrency Lender's name in
Schedule I under the heading "Multicurrency Commitment", and (b) the U.S.
Revolving Credit Commitment of such Multicurrency Lender, in each case as
such amount may be reduced from time to time as provided in subsection
7.4 and the other applicable provisions hereof.
"Multicurrency Commitment Percentage": as to any Multicurrency
Lender at any time, the percentage which such Multicurrency Lender's
Multicurrency Commitment then constitutes of the aggregate Multicurrency
Commitments (or, if the Multicurrency Commitments have terminated or
expired, the percentage which (a) the U.S. Dollar Equivalent of the
Aggregate Multicurrency Outstandings of such Multicurrency Lender at such
time constitutes of (b) the U.S. Dollar Equivalent of the Aggregate
Multicurrency Outstandings of all Multicurrency Lenders at such time).
"Multicurrency Lender": each Lender having an amount greater than
zero set forth opposite such Lender's name in Schedule I under the
heading "Multicurrency Commitment."
"Multicurrency Loans": as defined in subsection 7.1.
"Multiemployer Plan": a Plan which is a multiemployer plan as
defined in Section 4001(a)(3) of ERISA.
"Net Proceeds": shall mean the gross proceeds received by the U.S.
Borrower or any Subsidiary from a sale or other disposition of any asset
of the U.S. Borrower or such Subsidiary less (a) all reasonable fees,
commissions and other out-of-pocket expenses incurred by the U.S.
Borrower or such Subsidiary in connection therewith, (b) Federal, state,
local and foreign taxes assessed in connection therewith and (c) the
principal amount, accrued interest and any related prepayment fees of any
Indebtedness (other than the Loans) which is secured by any such asset
and which is required to be repaid in connection with the sale thereof.
"9 1/2% Subordinated Note Indenture": the Indenture dated as of
July 1, 1996, between the U.S. Borrower and The Bank of New York, as
trustee, as the same may be amended, supplemented or otherwise modified
from time to time in accordance with subsection 14.10.
"9 1/2% Subordinated Notes": the 9 1/2% Subordinated Notes of the
U.S. Borrower due 2006, issued pursuant to the 9 1/2% Subordinated Note
Indenture.
"1995 Agreement": as defined in the recitals hereto.
"1995 Lenders": as defined in the recitals hereto.
"1996 Agreement": as defined in the recitals hereto.
<PAGE> 32
25
"1996 Lenders": as defined in the recitals hereto.
"Non-Canadian Lender": each U.S. Lender which is not a U.S. Common
Lender.
"Non-Multicurrency Lender": each U.S. Lender which is not a
Multicurrency Lender.
"Notes": the collective reference to the U.S. Revolving Credit
Notes and the Canadian Revolving Credit Notes.
"Notice of Alternate Currency Outstandings": with respect to each
Alternate Currency Facility Agent, a notice from such Alternate Currency
Facility Agent containing the information, delivered to the Person, in
the manner and by the time, specified for a Notice of Alternate Currency
Outstandings in the Administrative Schedule.
"Notice of Multicurrency Loan Borrowing": with respect to a
Multicurrency Loan, a notice from the Borrower (or the U.S. Borrower on
its behalf) in respect of such Loan, containing the information in
respect of such Loan and delivered to the Person, in the manner and by
the time, specified for a Notice of Multicurrency Loan Borrowing in
respect of the currency of such Loan in the Administrative Schedule.
"Notice of Multicurrency Loan Continuation": with respect to a
Multicurrency Loan, a notice from the Borrower (or the U.S. Borrower on
its behalf) in respect of such Loan, containing the information in
respect of such Loan and delivered to the Person, in the manner and by
the time, specified for a Notice of Multicurrency Loan Continuation in
respect of the currency of such Loan in the Administrative Schedule.
"Obligations": collectively, the unpaid principal of and interest
on the Loans, the Reimbursement Obligations, the Subsidiary Reimbursement
Obligations, Interest Rate Agreement Obligations to any Lender, Currency
Agreement Obligations to any Lender and all other obligations and
liabilities (including, with respect to the Canadian Borrower, Acceptance
Reimbursement Obligations) of (a) the U.S. Borrower under or in
connection with this Agreement (including, without limitation, the
obligations under Section 15 hereof) and the other Loan Documents, (b)
the Canadian Borrower under this Agreement and the other Loan Documents,
(c) each Foreign Subsidiary Borrower under this Agreement and the other
Loan Documents and (d) each Alternate Currency Borrower under any
Alternate Currency Facility to which it is a party and under this Loan
Agreement and the other Loan Documents (including, without limitation,
interest accruing at the then applicable rate provided in this Agreement
or any other applicable Loan Document after the maturity of the Loans and
interest accruing at the then applicable rate provided in this Agreement
or any other applicable Loan Document after the filing of any petition in
bankruptcy, or the commencement of any insolvency, reorganization or like
proceeding, relating to the U.S. Borrower, whether or not a claim for
post-filing or post-petition interest is allowed in such proceeding),
whether direct or indirect, absolute or contingent, due or to become due,
or now existing or hereafter
<PAGE> 33
26
incurred, which may arise under, out of, or in connection with, this
Agreement, the Notes, the Acceptances, the Acceptance Notes, the Letters
of Credit, the Letter of Credit Applications, the other Loan Documents or
any other document made, delivered or given in connection therewith, in
each case whether on account of principal, interest, reimbursement
obligations, fees, indemnities, costs, expenses or otherwise (including,
without limitation, all fees and disbursements of counsel to the
Administrative Agents or to the Lenders that are required to be paid by
any Borrower pursuant to the terms of this Agreement or any other Loan
Document).
"Other Lender": as defined in subsection 18.8(c).
"Participants": as defined in subsection 18.6(b).
"Participating Interest": with respect to any Letter of Credit (A)
in the case of the Issuing Lender with respect thereto, its interest in
such Letter of Credit and any Letter of Credit Application relating
thereto after giving effect to the granting of any participating
interests therein pursuant hereto and (b) in the case of each
Participating Lender, its undivided participating interest in such Letter
of Credit and any Letter of Credit Application relating thereto.
"Participating Lender": any U.S. Lender (other than the Issuing
Lender) with respect to its Participating Interest in a Letter of Credit.
"PBGC": the Pension Benefit Guaranty Corporation established
pursuant to Subtitle A of Title IV of ERISA.
"Person": an individual, partnership, corporation, business trust,
joint stock company, trust, unincorporated association, joint venture,
Governmental Authority or other entity of whatever nature.
"Plan": at a particular time, any employee benefit plan which is
covered by ERISA and in respect of which the U.S. Borrower or a Commonly
Controlled Entity is (or, if such plan were terminated at such time,
would under Section 4069 of ERISA be deemed to be) an "employer" as
defined in Section 3(5) of ERISA.
"Pledge Agreements": the collective reference to the Pledge
Agreements listed in Schedule IV and each other pledge agreement or
similar agreement that may be delivered to the General Administrative
Agent as collateral security for any or all of the Obligations of the
U.S. Borrower, in each case as such Pledge Agreements or similar
agreements may be amended, supplemented or otherwise modified from time
to time.
"Pledged Stock": as defined in each of the Pledge Agreements.
"Powers of Attorney": as defined in subsection 6.2(b).
<PAGE> 34
27
"Prime Rate": at any day, the greater on such day of (a) the rate
per annum announced by the Canadian Administrative Agent from time to
time (and in effect on such day) as its prime rate for Canadian Dollar
commercial loans made in Canada, as adjusted automatically from time to
time and without notice to any of the Borrowers upon change by the
Canadian Administrative Agent, and (b) 1% above the CDOR Rate from time
to time (and in effect on such day), as advised by the Canadian
Administrative Agent to the Canadian Borrower from time to time pursuant
hereto. The Prime Rate is not intended to be the lowest rate of interest
charged by the Canadian Administrative Agent in connection with
extensions of credit in Canadian Dollars to debtors.
"Prime Rate Loans": all Canadian Revolving Credit Loans denominated
in Canadian Dollars, which shall bear interest at a rate based upon the
Prime Rate.
"Property": each parcel of real property owned or operated by the
U.S. Borrower and its Subsidiaries.
"Proprietary Rights": as defined in subsection 11.16.
"Qualified Credit Facility": a credit facility (a) providing for
one or more Alternate Currency Lenders to make loans denominated in an
Alternate Currency to one or more Alternate Currency Borrowers, (b)
providing for such loans to bear interest at a rate or rates determined
by the U.S. Borrower and such Alternate Currency Lender or Alternate
Currency Lenders and (c) otherwise conforming to the requirements of
Section 8.
"Quotation Day": in respect of the determination of the
Eurocurrency Rate for any Interest Period for Multicurrency Loans in any
Available Foreign Currency, the day on which quotations would ordinarily
be given by prime banks in the London interbank market (or, if such
Available Foreign Currency is Sterling, in the Paris interbank market)
for deposits in such Available Foreign Currency for delivery on the first
day of such Interest Period; provided, that if quotations would
ordinarily be given on more than one date, the Quotation Day for such
Interest Period shall be the last of such dates. On the date hereof, the
Quotation Day in respect of any Interest Period for any Available Foreign
Currency is customarily the last London Banking Day prior to the
beginning of such Interest Period which is (a) at least two London
Banking Days prior to the beginning of such Interest Period and (b) a day
on which banks are open for general banking business in the city which is
the principal financial center of the country of issue of such Available
Foreign Currency (and, in the case of Sterling, in Paris).
"Receivable Financing Transaction": any transaction or series of
transactions involving a sale for cash of accounts receivable, without
recourse based upon the collectibility of the receivables sold, by the
U.S. Borrower or any of its Subsidiaries to a Special Purpose Subsidiary
and a subsequent sale or pledge of such accounts receivable (or an
interest therein) by such Special Purpose Subsidiary, in each case
without any guarantee by the U.S. Borrower or any of its Subsidiaries
(other than the Special Purpose Subsidiary).
<PAGE> 35
28
"Reference Discount Rate": on any date with respect to each Draft
requested to be accepted by a Canadian Lender, (a) if such Canadian
Lender is a Schedule I Canadian Lender, the arithmetic average of the
discount rates (expressed as a percentage calculated on the basis of a
year of 365 days) quoted by the Toronto offices of each of the Schedule I
Canadian Reference Lenders, at 10:00 A.M. (Toronto time) on the Borrowing
Date as the discount rate at which each such Schedule I Canadian
Reference Lender would, in the normal course of its business, purchase on
such date Acceptances having an aggregate face amount and term to
maturity as designated by the Canadian Borrower pursuant to Section 6.2
and (b) if such Canadian Lender is a Schedule II Canadian Lender, the
arithmetic average of the discount rates (expressed as a percentage
calculated on the basis of a year of 365 days) quoted by the Toronto
offices of each of the Schedule II Canadian Reference Lenders, at 10:00
A.M. (Toronto time) on the Borrowing Date as the discount rate at which
each such Schedule II Canadian Reference Lender would, in the normal
course of its business, purchase on such date Acceptances having an
aggregate face amount and term to maturity as designated by the Canadian
Borrower pursuant to subsection 6.2. The Canadian Administrative Agent
shall advise the Canadian Borrower and the Canadian Lenders, either in
writing or verbally, by 11:00 A.M. (Toronto time) on the Borrowing Date
as to the applicable Reference Discount Rate and corresponding
Acceptance Purchase Price in respect of Acceptances having the maturities
selected by the Canadian Borrower for such Borrowing Date.
Notwithstanding the foregoing, the Canadian Borrower, the Canadian
Administrative Agent and the Canadian Lenders, may agree upon alternative
methods of determining the Reference Discount Rate from time to time.
"Register": as defined in subsection 18.6(d).
"Reimbursement Obligation": the obligation of the U.S. Borrower to
reimburse the Issuing Lender in accordance with the terms of this
Agreement and the related Letter of Credit Application for any payment
made by the Issuing Lender under any Letter of Credit.
"Release" means any spilling, leaking, pumping, pouring, emitting,
emptying, discharging, escaping, leaking, dumping, disposing, spreading,
depositing or dispersing of any Hazardous Materials in, unto or onto the
environment.
"Reorganization": with respect to any Multiemployer Plan, the
condition that such plan is in reorganization within the meaning of
Section 4241 of ERISA.
"Reportable Event": any of the events set forth in Section 4043(c)
of ERISA, other than those events as to which the thirty day notice
period is waived under any of subsections .13, .14, .16, .18, .19 or .20
of PBGC Reg. Section 4043 or any successor regulation thereto.
"Requested Acceptances": as defined in subsection 2.5(a).
"Requested Alternate Currency Loans": as defined in subsection
2.5(c).
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29
"Requested Canadian Revolving Credit Loans": as defined in
subsection 2.5(a).
"Requested Multicurrency Loans": as defined in subsection 2.5(b).
"Request for Acceptances": as defined in subsection 6.2(a).
"Requirement of Law": as to (a) any Person, the certificate of
incorporation and by-laws or the partnership or limited partnership
agreement or other organizational or governing documents of such Person,
and any law, treaty, rule or regulation or determination of an arbitrator
or a court or other Governmental Authority, in each case applicable to or
binding upon such Person or any of its property or to which such Person
or any of its property is subject, and (b) any property, any law, treaty,
rule, regulation, requirement, judgment, decree or determination of any
Governmental Authority applicable to or binding upon such property or to
which such property is subject, including, without limitation, any
Environmental Laws.
"Responsible Officer": with respect to any Loan Party, the chief
executive officer, the president, the chief financial officer, any vice
president, the treasurer or the assistant treasurer of such Loan Party.
"Revolving Credit Commitment Period": the period from and including
the Closing Date to but not including the Revolving Credit Termination
Date, or such earlier date on which the Revolving Credit Commitments
shall terminate as provided herein.
"Revolving Credit Commitments": the collective reference to the
U.S. Revolving Credit Commitments and the Canadian Revolving Credit
Commitments.
"Revolving Credit Loans": the collective reference to the U.S.
Revolving Credit Loans and the Canadian Revolving Credit Loans; each,
individually, a "Revolving Credit Loan".
"Revolving Credit Termination Date": September 30, 2001.
"Schedule I Canadian Lender": each Canadian Lender listed on
Schedule I to the Bank Act (Canada).
"Schedule I Canadian Reference Lenders": The Bank of Nova Scotia,
Bank of Montreal, Canadian Imperial Bank of Commerce and Royal Bank of
Canada.
"Schedule II Canadian Lender": each Canadian Lender which is not a
Schedule I Canadian Lender.
"Schedule II Canadian Reference Lenders": one or more Schedule II
Canadian Lenders selected by the U.S. Borrower with the consent of all
the Schedule II Canadian Lenders.
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30
"Securities Act": the Securities Act of 1933, as amended.
"Security Documents": the collective reference to the Pledge
Agreements, the Subsidiary Guarantee, the Additional Subsidiary Guarantee
and each other guarantee, security document or similar agreement that may
be delivered to the General Administrative Agent as collateral security
for any or all of the Obligations, in each case as amended, supplemented
or otherwise modified from time to time.
"Senior Subordinated Note Indenture": the Indenture, dated as of
July 15, 1992, between the U.S. Borrower and The Bank of New York, as
trustee, as the same may be amended, supplemented or otherwise modified
from time to time in accordance with subsection 14.10.
"Senior Subordinated Notes": the 11 1/4% Senior Subordinated Notes
of the U.S. Borrower due 2000, issued pursuant to the Senior Subordinated
Note Indenture.
"Single Employer Plan": any Plan which is covered by Title IV of
ERISA, but which is not a Multiemployer Plan.
"S&P": Standard & Poor's Ratings Group or any successor thereto.
"Special Affiliate": any Affiliate of the U.S. Borrower (a) as to
which the U.S. Borrower holds, directly or indirectly, (i) power to vote
20% or more of the securities having ordinary voting power for the
election of directors of such Affiliate or (ii) a 20% ownership interest
in such Affiliate and (b) which is engaged in business of the same or
related general type as now being conducted by the U.S. Borrower and its
Subsidiaries.
"Special Entity": any Person which is engaged in business of the
same or related general type as now being conducted by the U.S. Borrower
and its Subsidiaries.
"Special Purpose Subsidiary": any Wholly Owned Subsidiary of the
U.S. Borrower created by the U.S. Borrower for the sole purpose of
facilitating a Receivable Financing Transaction.
"Standby Letters of Credit": as defined in subsection 9.1(a).
"Subordinated Debt": any obligations (for principal, interest or
otherwise) evidenced by or arising under or in respect of the
Subordinated Notes, the Subordinated Note Indenture, the 9 1/2%
Subordinated Notes, the 9 1/2% Note Indenture, the Senior Subordinated
Notes and the Senior Subordinated Note Indenture and any other covenant,
instrument or agreement of subordinated Indebtedness issued or entered
into pursuant to subsection 14.10.
"Subordinated Note Indenture": the Indenture, dated as of February
1, 1994, between the U.S. Borrower and State Street Bank and Trust
Company (as successor to The First National Bank of Boston), as trustee,
as the same may be amended,
<PAGE> 38
31
supplemented or otherwise modified from time to time in accordance with
subsection 14.10.
"Subordinated Notes": the 8-1/4% Subordinated Notes of the U.S.
Borrower due 2002, issued pursuant to the Subordinated Note Indenture.
"Subsidiary": as to any Person, a corporation, partnership or other
entity of which shares of stock or other ownership interests having
ordinary voting power (other than stock or such other ownership interests
having such power only by reason of the happening of a contingency) to
elect a majority of the board of directors or other managers of such
corporation, partnership or other entity are at the time owned, or the
management of which is otherwise controlled, directly or indirectly,
through one or more intermediaries, or both, by such Person (exclusive of
any Affiliate in which such Person has a minority ownership interest).
Unless otherwise qualified, all references to a "Subsidiary" or to
"Subsidiaries" in this Agreement shall refer to a Subsidiary or
Subsidiaries of the U.S. Borrower.
"Subsidiary Guarantee": the Second Amended and Restated Subsidiary
Guarantee, dated as of the date hereof, made by certain Subsidiaries of
the U.S. Borrower in favor of the General Administrative Agent,
substantially in the form of Exhibit O, as the same may be amended,
supplemented or otherwise modified from time to time.
"Subsidiary Reimbursement Obligation": the obligation of any
Subsidiary to reimburse the Issuing Lender in accordance with the terms
of this Agreement and the related Letter of Credit Application for any
payment made by the Issuing Lender under any Letter of Credit.
"Swing Line Commitment": as to the Swing Line Lender, in its
capacity as a Swing Line Lender, its obligation to make Swing Line Loans
to the U.S. Borrower in an aggregate principal amount not to exceed, at
any one time outstanding $100,000,000.
"Swing Line Lender": Chase, in its capacity as provider of the
Swing Line Loans.
"Swing Line Loans" and "Swing Line Loan": as defined in subsection
3.1.
"Tax Act": the Income Tax Act (Canada), as amended from time to
time.
"Taxes": as defined in subsection 10.12(a).
"Tranche": the collective reference to Eurodollar Loans or
Multicurrency Loans the then current Interest Periods with respect to all
of which begin on the same date and end on the same later date (whether
or not such Loans shall originally have been made on the same day).
"Transferee": as defined in subsection 18.6(f).
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32
"Type": as to any U.S. Revolving Credit Loan, its nature as an ABR
Loan or a Eurodollar Loan, and as to any Canadian Revolving Credit Loan,
its nature as a Canadian Base Rate Loan or a Prime Rate Loan.
"U.S. Borrower": as defined in the preamble hereto.
"U.S. Common Lender": each U.S. Lender which has a Counterpart
Lender.
"U.S. Dollar Equivalent": with respect to an amount denominated in
any currency other than U.S. Dollars, the equivalent in U.S. Dollars of
such amount determined at the Exchange Rate on the date of determination
of such equivalent. In making any determination of the U.S. Dollar
Equivalent for purposes of calculating the amount of Loans to be borrowed
from, or the face amount of Acceptances to be created by, the respective
Lenders on any Borrowing Date, the General Administrative Agent or the
Canadian Administrative Agent, as the case may be, shall use the relevant
Exchange Rate in effect on the date on which the interest rate for such
Loans or the Acceptance Purchase Price for such Acceptances, as the case
may be, is determined pursuant to the provisions of this Agreement and
the other Loan Documents.
"U.S. Lenders": the Lenders listed in Part A of Schedule I hereto.
"U.S. Prime Rate": the rate of interest per annum publicly
announced from time to time by the General Administrative Agent as its
prime rate in effect at its principal office in New York City. The U.S.
Prime Rate is not intended to be the lowest rate of interest charged by
the General Administrative Agent in connection with extensions of credit
to borrowers.
"U.S. Reference Lenders": Chase and The Bank of Nova Scotia.
"U.S. Revolving Credit Commitment": as to any U.S. Lender at any
time, its obligation to make U.S. Revolving Credit Loans to, and/or
participate in Swing Line Loans made to and Letters of Credit issued for
the account of, the U.S. Borrower and its Subsidiaries in an aggregate
amount not to exceed at any time outstanding the U.S. Dollar amount set
forth opposite such U.S. Lender's name in Schedule I under the heading
"U.S. Revolving Credit Commitment", as such amount may be reduced from
time to time pursuant to subsection 2.4 and the other applicable
provisions hereof.
"U.S. Revolving Credit Commitment Percentage": as to any U.S.
Lender at any time, the percentage which such U.S. Lender's U.S.
Revolving Credit Commitment then constitutes of the aggregate U.S.
Revolving Credit Commitments of all U.S. Lenders (or, if the U.S.
Revolving Credit Commitments have terminated or expired, the percentage
which (a) the Aggregate U.S. Revolving Credit Outstandings of such U.S.
Lender at such time then constitutes of (b) the Aggregate U.S. Revolving
Credit Outstandings of all U.S. Lenders at such time).
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"U.S. Revolving Credit Lender": each U.S. Lender having an amount
greater than zero set forth under the heading "U.S. Revolving Credit
Commitment" opposite its name on Schedule I.
"U.S. Revolving Credit Loan": as defined in subsection 2.1.
"U.S. Revolving Credit Note": as defined in subsection 2.2(e).
"Wholly Owned Subsidiary": as to any Person, a corporation,
partnership or other entity of which (a) 100% of the common capital stock
or other ownership interests of such corporation, partnership or other
entity or (b) more than 95% of the common capital stock or other
ownership interests of such corporation, partnership or other entity
where the portion of the common capital stock or other ownership
interests not held by such Person is held by other Persons to satisfy
applicable legal requirements, is owned, directly or indirectly, by such
Person; provided, however, that so long as the U.S. Borrower owns,
directly or indirectly, more than 95% of the capital stock of Lear
Italia, Lear Italia shall be deemed a Wholly Owned Subsidiary of the U.S.
Borrower.
1.2 Other Definitional Provisions. (a) Unless otherwise specified
therein, all terms defined in this Agreement shall have the defined meanings
when used in the Notes, the other Loan Documents or any certificate or other
document made or delivered pursuant hereto.
(b) As used herein and in the Notes and any other Loan Document,
and any certificate or other document made or delivered pursuant hereto or
thereto, accounting terms relating to the U.S. Borrower and its Subsidiaries
not defined in subsection 1.1 and accounting terms partly defined in subsection
1.1, to the extent not defined, shall have the respective meanings given to
them under GAAP.
(c) The words "hereof", "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement, and Section,
subsection, Schedule and Exhibit references are to this Agreement unless
otherwise specified.
(d) The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.
SECTION 2. AMOUNT AND TERMS OF U.S. REVOLVING CREDIT
COMMITMENTS
2.1 U.S. Revolving Credit Commitments. (a) Subject to the terms
and conditions hereof, each U.S. Lender severally agrees to make revolving
credit loans (each, a "U.S. Revolving Credit Loan") in U.S. Dollars to
the U.S. Borrower from time to time during the Revolving Credit Commitment
Period so long as after giving effect thereto (i) the Available U.S. Revolving
Credit Commitment of each U.S. Lender is greater than or equal to zero and (ii)
the Aggregate Total Outstandings of all Lenders do not exceed the Aggregate
U.S. Revolving Credit
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34
Commitments. During the Revolving Credit Commitment Period the U.S. Borrower
may use the U.S. Revolving Credit Commitments by borrowing, prepaying the U.S.
Revolving Credit Loans in whole or in part, and reborrowing, all in accordance
with the terms and conditions hereof.
(b) The U.S. Revolving Credit Loans may from time to time be (i)
Eurodollar Loans, (ii) ABR Loans or (iii) a combination thereof, as determined
by the U.S. Borrower and notified to the General Administrative Agent in
accordance with subsections 2.3 and 10.2, provided that no U.S. Revolving
Credit Loan shall be made as a Eurodollar Loan after the day that is one month
prior to the Revolving Credit Termination Date.
2.2 Repayment of U.S. Revolving Credit Loans; Evidence of Debt.
(a) The U.S. Borrower hereby unconditionally promises to pay to the
General Administrative Agent for the account of each U.S. Lender the then
unpaid principal amount of each U.S. Revolving Credit Loan of such U.S. Lender
(whether made before or after the termination or expiration of the U.S.
Revolving Credit Commitments) on the Revolving Credit Termination Date and on
such other date(s) and in such other amounts as may be required from time to
time pursuant to this Agreement. The U.S. Borrower hereby further agrees to
pay interest on the unpaid principal amount of the U.S. Revolving Credit Loans
from time to time outstanding until payment thereof in full at the rates per
annum, and on the dates, set forth in subsection 10.1.
(b) Each U.S. Lender shall maintain in accordance with its usual
practice an account or accounts evidencing indebtedness of the U.S. Borrower
to such U.S. Lender resulting from each U.S. Revolving Credit Loan of such U.S.
Lender from time to time, including the amounts of principal and interest
payable thereon and paid to such U.S. Lender from time to time under this
Agreement.
(c) The General Administrative Agent (together with the Canadian
Administrative Agent) shall maintain the Register pursuant to subsection
18.6(d), and a subaccount therein for each U.S. Lender, in which shall be
recorded (i) the date and amount of each U.S. Revolving Credit Loan made
hereunder, the Type thereof and each Interest Period applicable thereto, (ii)
the date of each continuation thereof pursuant to subsection 10.2, (iii) the
date of each conversion of all or a portion thereof to another Type pursuant to
subsection 10.2, (iv) the date and amount of any principal or interest due and
payable or to become due and payable from the U.S. Borrower to each U.S. Lender
hereunder in respect of the U.S. Revolving Credit Loans and (v) both the date
and amount of any sum received by the General Administrative Agent hereunder
from the U.S. Borrower in respect of the U.S. Revolving Credit Loans and each
U.S. Lender's share thereof.
(d) The entries made in the Register and the accounts of each U.S.
Lender maintained pursuant to subsection 2.2(b) shall, to the extent permitted
by applicable law, be prima facie evidence of the existence and amounts of
the obligations of the U.S. Borrower therein recorded; provided, however, that
the failure of any U.S. Lender or the Administrative Agents to maintain the
Register or any such account, or any error therein, shall not in any manner
affect the obligations of the U.S. Borrower to repay (with applicable interest)
the U.S. Revolving Credit Loans made to the U.S. Borrower by such U.S. Lender
in accordance with the terms of this Agreement.
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(e) The U.S. Borrower agrees that, upon the request to the General
Administrative Agent by any U.S. Lender, the U.S. Borrower will execute and
deliver to such U.S. Lender a promissory note of the U.S. Borrower evidencing
the Revolving Credit Loans of such U.S. Lender, substantially in the form of
Exhibit A with appropriate insertions as to date and principal amount (each, a
"U.S. Revolving Credit Note"); provided, that the delivery of such U.S.
Revolving Credit Notes shall not be a condition precedent to the Closing Date.
2.3 Procedure for U.S. Revolving Credit Borrowing. The U.S.
Borrower may borrow under the U.S. Revolving Credit Commitments during the
Revolving Credit Commitment Period on any Business Day, provided that
the U.S. Borrower shall give the General Administrative Agent irrevocable
notice (which notice must be received by the General Administrative Agent prior
to 12:00 Noon, New York City time, at least (a) three Business Days prior to
the requested Borrowing Date, if all or any part of the requested U.S.
Revolving Credit Loans are to be initially Eurodollar Loans, or (b) one
Business Day prior to the requested Borrowing Date, otherwise), specifying in
each case (i) the amount to be borrowed, (ii) the requested Borrowing Date,
(iii) whether the borrowing is to be of Eurodollar Loans, ABR Loans or a
combination thereof and (iv) if the borrowing is to be entirely or partly of
Eurodollar Loans, the amount of such Type of Loan and the length of the initial
Interest Period therefor. Each borrowing under the U.S. Revolving Credit
Commitments (other than a borrowing under subsection 2.5, subsection 3.4 or to
pay a like amount of Reimbursement Obligations or Subsidiary Reimbursement
Obligations) shall be in an amount equal to (A) in the case of ABR Loans,
except any ABR Loan made pursuant to subsection 3.4, $10,000,000 or a whole
multiple of $1,000,000 in excess thereof (or, if the then Aggregate Available
U.S. Revolving Credit Commitments are less than $10,000,000, such lesser
amount) and (B) in the case of Eurodollar Loans, $10,000,000 or a whole
multiple of $1,000,000 in excess thereof. Upon receipt of any such notice from
the U.S. Borrower, the General Administrative Agent shall promptly notify each
U.S. Lender and the Canadian Administrative Agent thereof. Not later than
12:00 Noon, New York City time, on each requested Borrowing Date each U.S.
Lender shall make an amount equal to its Funding Commitment Percentage of the
principal amount of the U.S. Revolving Credit Loans requested to be made on
such Borrowing Date available to the General Administrative Agent at its office
specified in subsection 18.2 in U.S. Dollars and in immediately available
funds. Except as otherwise provided in subsection 2.5 or 3.4, the General
Administrative Agent shall on such date credit the account of the U.S. Borrower
on the books of such office with the aggregate of the amounts made available to
the General Administrative Agent by the U.S. Lenders and in like funds as
received by the General Administrative Agent.
2.4 Termination or Reduction of U.S. Revolving Credit Commitments.
The U.S. Borrower shall have the right, upon not less than five Business Days'
notice to the General Administrative Agent, to terminate the U.S.
Revolving Credit Commitments or, from time to time, to reduce the amount of the
U.S. Revolving Credit Commitments; provided that no such termination or
reduction shall be permitted if, after giving effect thereto and to any
prepayments of the Loans made on the effective date thereof, the Available U.S.
Revolving Credit Commitment or Available Multicurrency Commitment of any U.S.
Lender, or the Available Canadian Revolving Credit Commitment of any Canadian
Lender, would not be greater than or equal to zero. Any such reduction shall
be in an amount equal to $2,500,000 or a whole multiple
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36
of $500,000 in excess thereof and shall reduce permanently the U.S. Revolving
Credit Commitments then in effect.
2.5 Borrowings of U.S. Revolving Credit Loans and Refunding of Loans.
(a) If on any Borrowing Date on which the Canadian Borrower has requested the
Canadian Lenders to make Canadian Revolving Credit Loans (the "Requested
Canadian Revolving Credit Loans") or to create Acceptances (the "Requested
Acceptances"), (i) the sum of (A) the principal amount of the Requested
Canadian Revolving Credit Loans to be made by any Canadian Lender and (B) the
aggregate undiscounted face amount of the Requested Acceptances to be created
by such Canadian Lender exceeds the Available Canadian Revolving Credit
Commitment of such Canadian Lender on such Borrowing Date (before giving effect
to the making and payment of any Loans required to be made pursuant to this
subsection 2.5 on such Borrowing Date) and (ii) the U.S. Dollar Equivalent of
the amount of such excess is less than or equal to the aggregate Available U.S.
Revolving Credit Commitments of all Non-Canadian Lenders (before giving effect
to the making and payment of any Loans pursuant to this subsection 2.5 on such
Borrowing Date), each Non-Canadian Lender shall make a U.S. Revolving Credit
Loan to the U.S. Borrower on such Borrowing Date, and the proceeds of such U.S.
Revolving Credit Loans shall be simultaneously applied to repay outstanding
U.S. Revolving Credit Loans, Multicurrency Loans and/or Alternate Currency
Loans of the U.S. Common Lenders (as directed by the U.S. Borrower) in each
case in amounts such that, after giving effect to (1) such borrowings and
repayments and (2) the borrowing from the Canadian Lenders of the Requested
Canadian Revolving Credit Loans or the creation by the Canadian Lenders of the
Requested Acceptances, the Committed Outstandings Percentage of each U.S.
Lender will equal (as nearly as possible) its U.S. Revolving Credit Commitment
Percentage. To effect such borrowings and repayments, (x) not later than 12:00
Noon, New York City time, on such Borrowing Date, the proceeds of such U.S.
Revolving Credit Loans shall be made available by each Non-Canadian Lender to
the General Administrative Agent at its office specified in subsection 18.2 in
U.S. Dollars and in immediately available funds and the General Administrative
Agent shall apply the proceeds of such U.S. Revolving Credit Loans toward
repayment of outstanding U.S. Revolving Credit Loans, Multicurrency Loans
and/or Alternate Currency Loans of the U.S. Common Lenders (as directed by the
U.S. Borrower) and (y) concurrently with the repayment of such Loans on such
Borrowing Date, (I) the Canadian Lenders shall, in accordance with the
applicable provisions hereof, make the Requested Canadian Revolving Credit
Loans (or create the Requested Acceptances) in an aggregate amount equal to the
amount so requested by the Canadian Borrower (but not in any event greater than
the Aggregate Available Canadian Revolving Credit Commitments after giving
effect to the making of such repayment of any Loans on such Borrowing Date) and
(II) the relevant Borrower shall pay to the General Administrative Agent for
the account of the Lenders whose Loans to such Borrower are repaid on such
Borrowing Date pursuant to this subsection 2.5 all interest accrued on the
amounts repaid to the date of repayment, together with any amounts payable
pursuant to subsection 10.11 in connection with such repayment.
(b) If on any Borrowing Date on which a Borrower has requested the
Multicurrency Lenders to make Multicurrency Loans (the "Requested Multicurrency
Loans"), (i) the principal amount of the Requested Multicurrency Loans to be
made by any Multicurrency Lender exceeds the Available Multicurrency Commitment
of such Multicurrency Lender on such
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37
Borrowing Date (before giving effect to the making and payment of any Loans
required to be made pursuant to this subsection 2.5 on such Borrowing Date) and
(ii) the U.S. Dollar Equivalent of the amount of such excess is less than or
equal to the aggregate Available U.S. Revolving Credit Commitments of all
Non-Multicurrency Lenders (before giving effect to the making and payment of
any Loans pursuant to this subsection 2.5 on such Borrowing Date), each
Non-Multicurrency Lender shall make a U.S. Revolving Credit Loan to the U.S.
Borrower on such Borrowing Date, and the proceeds of such U.S. Revolving Credit
Loans shall be simultaneously applied to repay outstanding U.S. Revolving
Credit Loans, Canadian Revolving Credit Loans, Multicurrency Loans and/or
Alternate Currency Loans of the Multicurrency Lenders or their Counterpart
Lenders (as directed by the U.S. Borrower) in each case in amounts such that,
after giving effect to (1) such borrowings and repayments and (2) the borrowing
from the Multicurrency Lenders of the Requested Multicurrency Loans, the
Committed Outstandings Percentage of each U.S. Lender will equal (as nearly as
possible) its U.S. Revolving Credit Commitment Percentage. To effect such
borrowings and repayments, (x) not later than 12:00 Noon, New York City time,
on such Borrowing Date, the proceeds of such U.S. Revolving Credit Loans shall
be made available by each Non-Multicurrency Lender to the General
Administrative Agent at its office specified in subsection 18.2 in U.S. Dollars
and in immediately available funds and the General Administrative Agent shall
apply the proceeds of such U.S. Revolving Credit Loans toward repayment of
outstanding U.S. Revolving Credit Loans, Canadian Revolving Credit Loans,
Multicurrency Loans and/or Alternate Currency Loans of the Multicurrency
Lenders or their Counterpart Lenders (as directed by the U.S. Borrower) and (y)
concurrently with the repayment of such Loans on such Borrowing Date, (I) the
Multicurrency Lenders shall, in accordance with the applicable provisions
hereof, make the Requested Multicurrency Loans in an aggregate amount equal to
the amount so requested by such Borrower (but not in any event greater than the
Aggregate Available Multicurrency Commitments after giving effect to the making
of such repayment of any Loans on such Borrowing Date) and (II) the relevant
Borrower shall pay to the General Administrative Agent for the account of the
Lenders whose Loans to such Borrower are repaid on such Borrowing Date pursuant
to this subsection 2.5 all interest accrued on the amounts repaid to the date
of repayment, together with any amounts payable pursuant to subsection 10.11 in
connection with such repayment.
(c) If on any Borrowing Date on which an Alternate Currency Borrower has
requested Alternate Currency Lenders to make Alternate Currency Loans (the
"Requested Alternate Currency Loans") under an Alternate Currency Facility to
which such Alternate Currency Borrower and Alternate Currency Lenders are
parties (i) the aggregate principal amount of the Requested Alternate Currency
Loans exceeds the aggregate unused portions of the commitments of such
Alternate Currency Lenders under such Alternate Currency Facility on such
Borrowing Date (before giving effect to the making and payment of any U.S.
Revolving Credit Loans required to be made pursuant to this subsection 2.5 on
such Borrowing Date), (ii) after giving effect to the Requested Alternate
Currency Loans, the U.S. Dollar Equivalent of the aggregate outstanding
principal amount of Alternate Currency Loans of such Alternate Currency
Borrower will be less than or equal to the aggregate commitments of such
Alternate Currency Lenders under such Alternate Currency Facility and (iii) the
U.S. Dollar Equivalent of the amount of the excess described in clause (i)
above is less than or equal to the Aggregate Available U.S. Revolving Credit
Commitments of all U.S. Lenders other than such Alternate
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Currency Lenders (before giving effect to the making and payment of any U.S.
Revolving Credit Loans pursuant to this subsection 2.5 on such Borrowing Date),
each such other U.S. Lender shall make a U.S. Revolving Credit Loan to the U.S.
Borrower on such Borrowing Date, and the proceeds of such U.S. Revolving Credit
Loans shall be simultaneously applied to repay outstanding U.S. Revolving
Credit Loans, Canadian Revolving Credit Loans, Multicurrency Loans and/or
Alternate Currency Loans of such Alternate Currency Lenders or their
Counterpart Lenders (as directed by the U.S. Borrower) in each case in amounts
such that, after giving effect to (1) such borrowings and repayments and (2)
the borrowing from such Alternate Currency Lenders of the Requested Alternate
Currency Loans, the Committed Outstandings Percentage of each U.S. Lender will
equal (as nearly as possible) its U.S. Revolving Credit Commitment Percentage.
To effect such borrowings and repayments, (x) not later than 12:00 Noon, New
York City time, on such Borrowing Date, the proceeds of such U.S. Revolving
Credit Loans shall be made available by each such other Lender to the General
Administrative Agent at its office specified in subsection 18.2 in U.S. Dollars
and in immediately available funds and the General Administrative Agent shall
apply the proceeds of such U.S. Revolving Credit Loans toward repayment of
outstanding U.S. Revolving Credit Loans, Canadian Revolving Credit Loans,
Multicurrency Loans and/or Alternate Currency Loans of such Alternate Currency
Lenders or their Counterpart Lenders (as directed by the U.S. Borrower) and (y)
concurrently with the repayment of such Loans on such Borrowing Date, (I) such
Alternate Currency Lenders shall, in accordance with the applicable provisions
hereof, make the Requested Alternate Currency Loans in an aggregate amount
equal to the amount so requested by such Alternate Currency Borrower and (II)
the relevant Borrower shall pay to the General Administrative Agent for the
account of the Lenders whose Loans to such Borrower are repaid on such
Borrowing Date pursuant to this subsection 2.5 all interest accrued on the
amounts repaid to the date of repayment, together with any amounts payable
pursuant to subsection 10.11 in connection with such repayment.
(d) If any borrowing of U.S. Revolving Credit Loans is required pursuant
to this subsection 2.5, the U.S. Borrower shall notify the General
Administrative Agent in the manner provided for U.S. Revolving Credit Loans in
subsection 2.3, except that the minimum borrowing amounts and threshold
multiples in excess thereof applicable to ABR Loans set forth in subsection 2.3
shall not be applicable to the extent that such minimum borrowing amounts
exceed the amounts of U.S. Revolving Credit Loans required to be made pursuant
to this subsection 2.5.
SECTION 3. AMOUNT AND TERMS OF SWING LINE
COMMITMENTS
3.1 Swing Line Commitments. Subject to the terms and conditions
hereof, the Swing Line Lender agrees to make swing line loans (individually, a
"Swing Line Loan"; collectively, the "Swing Line Loans") in U.S. Dollars to the
U.S. Borrower from time to time during the Revolving Credit Commitment Period
in an aggregate principal amount at any one time outstanding not to exceed
$100,000,000, so long as after giving effect thereto (i) the Available U.S.
Revolving Credit Commitment of each U.S. Lender is greater than or equal to
zero and (ii) the Aggregate Total Outstandings of all Lenders do not exceed the
Aggregate U.S.
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Revolving Credit Commitments. Amounts borrowed by the U.S. Borrower under
this Section 3 may be repaid and, during the Revolving Credit Commitment
Period, reborrowed.
3.2 Procedure for Swing Line Borrowings; Interest Rate. (a) The U.S.
Borrower shall give the Swing Line Lender irrevocable notice (which notice must
be received by such Swing Line Lender prior to 12:00 P.M., New York City time
on the requested Borrowing Date) specifying the amount of the requested Swing
Line Loan, which shall be in an aggregate principal amount of not less than
$100,000 or a whole multiple of $100,000 in excess thereof. The proceeds of
the Swing Line Loan will be made available by the Swing Line Lender to the U.S.
Borrower at the office of the Swing Line Lender by crediting the account of the
U.S. Borrower at such office with such proceeds in U.S. Dollars.
(b) All Swing Line Loans shall be ABR Loans. Any such ABR Loan may
not be converted into a Eurodollar Loan.
3.3 Repayment of Swing Line Loans; Evidence of Debt. (a) The U.S.
Borrower hereby unconditionally promises to pay to the Swing Line Lender the
then unpaid principal amount of the Swing Line Loans on the Revolving Credit
Termination Date and on such other dates and in such other amounts as may be
required from time to time pursuant to this Agreement. The U.S. Borrower
hereby further agrees to pay interest on the unpaid principal amount of the
Swing Line Loans from time to time outstanding until payment thereof in full
at the rates per annum, and on the dates, set forth in subsection 10.1.
(b) The Swing Line Lender shall maintain in accordance with its usual
practice an account or accounts evidencing indebtedness of the U.S. Borrower
resulting from each Swing Line Loan made by it from time to time, including the
amounts of principal and interest payable thereon and paid from time to time
under this Agreement.
(c) The General Administrative Agent (together with the Canadian
Administrative Agent) shall maintain the Register pursuant to subsection
18.6(d), and a subaccount therein for the Swing Line Lender, in which shall be
recorded (i) the date and amount of each Swing Line Loan made hereunder, (ii)
the amount of each U.S. Lender's participating interest in such Swing Line
Loans, (iii) the date and amount of any principal or interest due and
payable or to become due and payable from the U.S. Borrower hereunder in
respect of the Swing Line Loans and (iv) both the date and amount of any sum
received by the General Administrative Agent hereunder from the U.S. Borrower
in respect of the Swing Line Loans, each U.S. Lender's participating interest
therein (if any) and the amount thereof payable to the Swing Line Lender.
(d) The entries made in the Register and the accounts of the Swing Line
Lender maintained pursuant to this subsection 3.3 shall, to the extent
permitted by applicable law, be prima facie evidence of the existence and
amounts of the obligations of the U.S. Borrower therein recorded; provided,
however, that the failure of the Swing Line Lender or the Administrative Agents
to maintain the Register or any such account, or any error therein, shall not
in any manner affect the obligation of the U.S. Borrower to repay (with
applicable interest)
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the Swing Line Loans made to the U.S. Borrower by the Swing Line Lender in
accordance with the terms of this Agreement.
3.4 Refunding of Swing Line Borrowings. (a) The Swing Line Lender,
at any time in its sole and absolute discretion may, on behalf of the U.S.
Borrower (which hereby irrevocably directs and authorizes the Swing Line Lender
to act on its behalf), request each U.S. Lender, including Chase, to make a
U.S. Revolving Credit Loan (which shall be an ABR Loan) in an amount equal to
such U.S. Lender's Funding Commitment Percentage of the principal amount of the
Swing Line Loans (the "Refunded Swing Line Loans") outstanding on the date such
notice is given; provided that the provisions of this subsection shall not
affect the U.S. Borrower's obligations to repay Swing Line Loans in accordance
with the provisions of subsections 3.3 and 10.4(d) and (g). Unless the U.S.
Revolving Credit Commitments shall have expired or terminated (in which event
the procedures of subsection 3.5 shall apply), each U.S. Lender will make the
proceeds of the U.S. Revolving Credit Loan made by it pursuant to the
immediately preceding sentence available to the General Administrative Agent at
the office of the General Administrative Agent specified in subsection 18.2
prior to 12:00 Noon, New York City time, in funds immediately available on the
Business Day next succeeding the date such notice is given. The proceeds of
such U.S. Revolving Credit Loans shall be immediately made available by the
General Administrative Agent to the Swing Line Lender for application to the
payment in full of the Refunded Swing Line Loans. Upon any request by the
Swing Line Lender to the U.S. Lenders pursuant to this subsection 3.4, the
General Administrative Agent shall promptly give notice to the U.S. Borrower of
such request.
3.5 Participating Interests. (a) If the U.S. Revolving Credit
Commitments shall expire or terminate at any time while Swing Line Loans are
outstanding, at the request of the Swing Line Lender in its sole discretion,
either (i) each U.S. Lender (including Chase) shall, notwithstanding the
expiration or termination of the U.S. Revolving Credit Commitments, make a U.S.
Revolving Credit Loan (which shall be an ABR Loan) or (ii) each U.S. Lender
(other than Chase) shall purchase an undivided participating interest in the
Swing Line Loans of the Swing Line Lender, in either case in an amount equal
to such U.S. Lender's Funding Commitment Percentage (determined on the date of,
and immediately prior to, expiration or termination of the U.S. Revolving Credit
Commitments) of the aggregate principal amount of such Swing Line Loans. Each
U.S. Lender will make the proceeds of any U.S. Revolving Credit Loan
made by it pursuant to the immediately preceding sentence available to the
General Administrative Agent for the account of the Swing Line Lender at the
office of the General Administrative Agent specified in subsection 18.2 prior
to 12:00 Noon, New York City time, in funds immediately available on the
Business Day next succeeding the date of the request by the Swing Line Lender.
The proceeds of such U.S. Revolving Credit Loans shall be immediately applied
to repay the Swing Line Loans outstanding on the date of termination or
expiration of the U.S. Revolving Credit Commitments. In the event that any of
the U.S. Lenders purchase undivided participating interests pursuant to the
first sentence of this subsection 3.5(a), each U.S. Lender shall immediately
transfer to the Swing Line Lender, in immediately available funds, the amount
of its participation in the Swing Line Loans of the Swing Line Lender and upon
receipt thereof the Swing Line Lender will deliver to any such U.S. Lender that
so requests a confirmation of such U.S. Lender's undivided participating
interest in the Swing Line Loans of the Swing Line Lender dated the date of
receipt of such funds and in such amount.
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(b) Whenever, at any time after the Swing Line Lender has received
payment from any U.S. Lender in respect of such U.S. Lender's participating
interest in a Swing Line Loan of the Swing Line Lender, the Swing Line Lender
receives any payment on account thereof, the Swing Line Lender will distribute
to such U.S. Lender its participating interest in such amount (appropriately
adjusted, in the case of interest payments, to reflect the period of time
during which such U.S. Lender's participating interest was outstanding and
funded); provided, however, that in the event that any such payment received
by the Swing Line Lender is required to be returned, such U.S. Lender will
return to the Swing Line Lender any portion thereof previously distributed by
the Swing Line Lender to it.
SECTION 4. AMOUNT AND TERMS OF CAF ADVANCES
4.1 CAF Advances. Subject to the terms and conditions of this
Agreement, the U.S. Borrower may borrow CAF Advances in U.S. Dollars from
time to time on any Business Day during the CAF Advance Availability Period.
CAF Advances may be borrowed in amounts such that the Aggregate Total
Outstandings of all Lenders at any time shall not exceed the Aggregate U.S.
Revolving Credit Commitments at such time. Within the limits and on the
conditions hereinafter set forth with respect to CAF Advances, the U.S.
Borrower from time to time may borrow, repay and reborrow CAF Advances.
4.2 Procedure for CAF Advance Borrowing. (a) The U.S. Borrower shall
request CAF Advances by delivering a CAF Advance Request to the General
Administrative Agent, not later than 12:00 Noon, New York City time, four
Business Days prior to the proposed Borrowing Date (in the case of a LIBO Rate
CAF Advance Request), and not later than 10:00 A.M., New York City time one
Business Day prior to the proposed Borrowing Date (in the case of a Fixed Rate
CAF Advance Request). Each CAF Advance Request in respect of any Borrowing
Date may solicit bids for CAF Advances on such Borrowing Date in an
aggregate principal amount of $5,000,000 or an integral multiple of $1,000,000
in excess thereof and having not more than five alternative CAF Advance
Maturity Dates. The CAF Advance Maturity Date for each CAF Advance shall be
the date set forth therefor in the relevant CAF Advance Request, which date
shall be (i) not less than 7 days nor more than 360 days after the Borrowing
Date therefor, in the case of a Fixed Rate CAF Advance, (ii) one, two, three,
six, nine or twelve months after the Borrowing Date therefor, in the case of a
LIBO CAF Advance and (iii) not later than the Revolving Credit Termination
Date, in the case of any CAF Advance. The General Administrative Agent shall
notify each Lender promptly by facsimile transmission of the contents of each
CAF Advance Request received by the General Administrative Agent.
(b) In the case of a LIBO Rate CAF Advance Request, upon receipt of
notice from the General Administrative Agent of the contents of such CAF
Advance Request, each Lender may elect, in its sole discretion, to offer
irrevocably to make one or more CAF Advances at the applicable LIBO Rate plus
(or minus) a margin determined by such Lender in its sole discretion for each
such CAF Advance. Any such irrevocable offer shall be made by delivering a CAF
Advance Offer to the General Administrative Agent, before 10:30 A.M., New York
City time, on the day that is three Business Days before the proposed Borrowing
Date, setting forth:
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(i) the maximum amount of CAF Advances for each CAF Advance Maturity
Date and the aggregate maximum amount of CAF Advances for all CAF Advance
Maturity Dates which such Lender would be willing to make (which amounts
may, subject to subsection 4.1, exceed such Lender's U.S. Revolving
Credit Commitment); and
(ii) the margin above or below the applicable LIBO Rate at which
such Lender is willing to make each such CAF Advance.
The General Administrative Agent shall advise the U.S. Borrower before 11:00
A.M., New York City time, on the date which is three Business Days before the
proposed Borrowing Date of the contents of each such CAF Advance Offer received
by it. If the General Administrative Agent, in its capacity as a Lender, shall
elect, in its sole discretion, to make any such CAF Advance Offer, it shall
advise the U.S. Borrower of the contents of its CAF Advance Offer before 10:15
A.M., New York City time, on the date which is three Business Days before the
proposed Borrowing Date.
(c) In the case of a Fixed Rate CAF Advance Request, upon receipt of
notice from the General Administrative Agent of the contents of such CAF
Advance Request, each Lender may elect, in its sole discretion, to offer
irrevocably to make one or more CAF Advances at a rate of interest determined
by such Lender in its sole discretion for each such CAF Advance. Any such
irrevocable offer shall be made by delivering a CAF Advance Offer to the
General Administrative Agent before 9:30 A.M., New York City time, on the
proposed Borrowing Date, setting forth:
(i) the maximum amount of CAF Advances for each CAF Advance Maturity
Date, and the aggregate maximum amount of CAF Advances for all CAF
Advance Maturity Dates, which such Lender would be willing to make (which
amounts may, subject to subsection 4.1, exceed such Lender's U.S.
Revolving Credit Commitment); and
(ii) the rate of interest at which such Lender is willing to make
each such CAF Advance.
The General Administrative Agent shall advise the U.S. Borrower before 10:00
A.M., New York City time, on the proposed Borrowing Date of the contents of
each such CAF Advance Offer received by it. If the General Administrative
Agent, in its capacity as a Lender, shall elect, in its sole discretion, to
make any such CAF Advance Offer, it shall advise the U.S. Borrower of the
contents of its CAF Advance Offer before 9:15 A.M., New York City time, on the
proposed Borrowing Date.
(d) Before 11:30 A.M., New York City time, three Business Days
before the proposed Borrowing Date (in the case of CAF Advances requested by a
LIBO Rate CAF Advance Request) and before 10:30 A.M., New York City time, on
the proposed Borrowing Date (in the case of CAF Advances requested by a Fixed
Rate CAF Advance Request), the U.S. Borrower, in its absolute discretion, shall:
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(i) cancel such CAF Advance Request by giving the General
Administrative Agent telephone notice to that effect, or
(ii) by giving telephone notice to the General
Administrative Agent (immediately confirmed by delivery to the General
Administrative Agent of a CAF Advance Confirmation by facsimile
transmission) (A) subject to the provisions of subsection 4.2(e), accept
one or more of the offers made by any Lender or Lenders pursuant to
subsection 4.2(b) or subsection 4.2(c), as the case may be, and (B)
reject any remaining offers made by Lenders pursuant to subsection 4.2(b)
or subsection 4.2(c), as the case may be.
(e) The U.S. Borrower's acceptance of CAF Advances in response to
any CAF Advance Offers shall be subject to the following limitations:
(i) the amount of CAF Advances accepted for each CAF Advance
Maturity Date specified by any Lender in its CAF Advance Offer shall not
exceed the maximum amount for such CAF Advance Maturity Date specified in
such CAF Advance Offer;
(ii) the aggregate amount of CAF Advances accepted for all CAF
Advance Maturity Dates specified by any Lender in its CAF Advance Offer
shall not exceed the aggregate maximum amount specified in such CAF
Advance Offer for all such CAF Advance Maturity Dates;
(iii) the U.S. Borrower may not accept offers for CAF Advances for
any CAF Advance Maturity Date in an aggregate principal amount in excess
of the maximum principal amount requested in the related CAF Advance
Request; and
(iv) if the U.S. Borrower accepts any of such offers, it must
accept offers based solely upon pricing for each relevant CAF Advance
Maturity Date and upon no other criteria whatsoever, and if two or more
Lenders submit offers for any CAF Advance Maturity Date at identical
pricing and the U.S. Borrower accepts any of such offers but does not
wish to (or, by reason of the limitations set forth in subsection 4.1,
cannot) borrow the total amount offered by such Lenders with such
identical pricing, the U.S. Borrower shall accept offers from all of
such Lenders in amounts allocated among them pro rata according to the
amounts offered by such Lenders (with appropriate rounding, in the sole
discretion of the U.S. Borrower, to assure that each accepted CAF
Advance is an integral multiple of $1,000,000); provided that if the
number of Lenders that submit offers for any CAF Advance Maturity Date
at identical pricing is such that, after the U.S. Borrower accepts such
offers pro rata in accordance with the foregoing provisions of this
paragraph, the CAF Advance to be made by any such Lender would be less
than $5,000,000 principal amount, the number of such Lenders shall be
reduced by the General Administrative Agent by lot until the CAF
Advances to be made by each such remaining Lender would be in a principal
amount of $5,000,000 or an integral multiple of $1,000,000 in excess
thereof.
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(f) If the U.S. Borrower notifies the General Administrative Agent
that a CAF Advance Request is cancelled pursuant to subsection 4.2(d)(i), the
General Administrative Agent shall give prompt telephone notice thereof to the
Lenders. If the U.S. Borrower fails to notify the General Administrative Agent
of its cancellation or acceptance of CAF Advance Offers by the times specified
in subsection 4.2(d), the corresponding CAF Advance Request shall be deemed
cancelled.
(g) If the U.S. Borrower accepts pursuant to subsection 4.2(d)(ii)
one or more of the offers made by any Lender or Lenders, the General
Administrative Agent promptly shall notify each Lender which has made such an
offer of (i) the aggregate amount of such CAF Advances to be made on the
applicable Borrowing Date for each CAF Advance Maturity Date and (ii) the
acceptance or rejection of any offers to make such CAF Advances made by such
Lender. Before 12:00 Noon, New York City time, on the Borrowing Date specified
in the applicable CAF Advance Request, each Lender whose CAF Advance Offer has
been accepted shall make available to the General Administrative Agent at its
office set forth in subsection 18.2 the amount of CAF Advances to be made by
such Lender, in immediately available funds. The General Administrative Agent
will make such funds available to the U.S. Borrower as soon as practicable on
such date at such office of the General Administrative Agent. As soon as
practicable after each Borrowing Date, the General Administrative Agent shall
notify each Lender of the aggregate amount of CAF Advances advanced on such
Borrowing Date and the respective CAF Advance Maturity Dates thereof.
4.3 CAF Advance Payments. (a) The U.S. Borrower shall pay to the
General Administrative Agent, for the account of each Lender which has made a
CAF Advance, on the applicable CAF Advance Maturity Date the then unpaid
principal amount of such CAF Advance. The U.S. Borrower shall not have the
right to prepay any principal amount of any CAF Advance without the consent of
the Lender to which such CAF Advance is owed.
(b) The U.S. Borrower shall pay interest on the unpaid principal
amount of each CAF Advance from the Borrowing Date to the applicable CAF
Advance Maturity Date at the rate of interest specified in the CAF Advance
Offer accepted by the U.S. Borrower in connection with such CAF Advance
(calculated on the basis of a 360-day year for actual days elapsed), payable on
each applicable CAF Advance Interest Payment Date.
(c) If any principal of, or interest on, any CAF Advance shall not
be paid when due (whether at the stated maturity, by acceleration or
otherwise), such CAF Advance shall, without limiting any rights of any
Lender under this Agreement, bear interest from the date on which such payment
was due at a rate per annum which is 2% above the rate which would otherwise be
applicable to such CAF Advance until the stated CAF Advance Maturity Date of
such CAF Advance, and for each day thereafter at a rate per annum which is 2%
above the ABR, in each case until paid in full (as well after as before
judgment). Interest accruing pursuant to this paragraph (c) shall be payable
from time to time on demand.
4.4 Evidence of Debt. (a) The U.S. Borrower unconditionally
promises to pay to the General Administrative Agent, for the account of each
Lender that makes a CAF Advance, on the CAF Advance Maturity Date with
respect thereto, the principal amount of such CAF
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Advance. The U.S. Borrower further unconditionally promises to pay interest
on each such CAF Advance for the period from and including the Borrowing Date
of such CAF Advance on the unpaid principal amount thereof from time to time
outstanding at the applicable rate per annum determined as provided in, and
payable as specified in, subsection 4.3(b).
(b) Each Lender shall maintain in accordance with its usual practice
appropriate records evidencing indebtedness of the U.S. Borrower to such Lender
resulting from each CAF Advance of such Lender from time to time, including the
amounts of principal and interest payable and paid to such Lender from time to
time in respect of such CAF Advance.
(c) The General Administrative Agent shall maintain the Register
pursuant to subsection 18.6(d), and a subaccount therein for each Lender, in
which shall be recorded (i) the date and amount of each CAF Advance made by
such Lender, the CAF Advance Maturity Date thereof, the interest rate
applicable thereto and each CAF Advance Interest Payment Date applicable
thereto, and (ii) the date and amount of any sum received by the General
Administrative Agent hereunder from the U.S. Borrower on account of such CAF
Advance.
(d) The entries made in the Register and the records of each Lender
maintained pursuant to this subsection 4.4 shall, to the extent permitted by
applicable law, be prima facie evidence of the existence and amounts of the
obligations of the U.S. Borrower therein recorded; provided, however,
that the failure of any Lender or the General Administrative Agent to maintain
the Register or any such record, or any error therein, shall not in any manner
affect the obligation of the U.S. Borrower to repay (with applicable interest)
the CAF Advances made by such Lender in accordance with the terms of this
Agreement.
4.5 Certain Restrictions. A CAF Advance Request may request offers
for CAF Advances to be made on not more than one Borrowing Date and to mature
on not more than five CAF Advance Maturity Dates. No CAF Advance Request may be
submitted earlier than five Business Days after submission of any other CAF
Advance Request.
SECTION 5. AMOUNT AND TERMS OF THE CANADIAN
COMMITMENTS
5.1 Canadian Revolving Credit Commitments. Subject to the terms and
conditions hereof, each Canadian Lender severally agrees to make revolving
credit loans (each, a "Canadian Revolving Credit Loan") to the Canadian
Borrower in Canadian Dollars or in U.S. Dollars from time to time during the
Revolving Credit Commitment Period so long as after giving effect thereto (i)
the Available Canadian Revolving Credit Commitment of each Canadian Lender is
greater than or equal to zero and (ii) the Aggregate Total Outstandings of all
Lenders do not exceed the Aggregate U.S. Revolving Credit Commitments. During
the Revolving Credit Commitment Period, the Canadian Borrower may use the
Canadian Revolving Credit Commitments by borrowing, repaying the Canadian
Revolving Credit Loans in whole or in part, and reborrowing, all in accordance
with the terms and conditions hereof. The Canadian Revolving Credit Loans
denominated in Canadian Dollars shall be Prime Rate Loans, and the
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Canadian Revolving Credit Loans denominated in U.S. Dollars shall be Canadian
Base Rate Loans.
5.2 Repayment of Canadian Revolving Credit Loans; Evidence of Debt.
(a) The Canadian Borrower hereby unconditionally promises to pay to the Canadian
Administrative Agent for the account of each Canadian Lender the then unpaid
principal amount of each Canadian Revolving Credit Loan of such Canadian Lender
(whether made before or after the termination or expiration of the Canadian
Revolving Credit Commitments) on the Revolving Credit Termination Date and on
such other date(s) and in such other amounts as may be required from time to
time pursuant to this Agreement. The Canadian Borrower hereby further agrees
to pay interest on the unpaid principal amount of the Canadian Revolving Credit
Loans from time to time outstanding until payment thereof in full at the rates
per annum, and on the dates, set forth in subsection 10.1.
(b) Each Canadian Lender shall maintain in accordance with its usual
practice an account or accounts evidencing indebtedness of the Canadian
Borrower to such Canadian Lender resulting from each Canadian Revolving Credit
Loan of such Canadian Lender from time to time, including the amounts of
principal and interest payable thereon and paid to such Canadian Lender from
time to time under this Agreement.
(c) The Canadian Administrative Agent (together with the General
Administrative Agent) shall maintain the Register pursuant to subsection
18.6(d), and a subaccount therein for each Canadian Lender, in which shall be
recorded (i) the date and amount of each Canadian Revolving Credit Loan made
hereunder, (ii) the date and amount of any principal or interest due and
payable or to become due and payable from the Canadian Borrower to each
Canadian Lender hereunder in respect of the Canadian Revolving Credit Loans and
(iii) both the date and amount of any sum received by the Canadian
Administrative Agent hereunder from the Canadian Borrower in respect of the
Canadian Revolving Credit Loans and each Canadian Lender's share thereof.
(d) The entries made in the Register and the accounts of each
Canadian Lender maintained pursuant to subsection 5.2(b) shall, to the
extent permitted by applicable law, be prima facie evidence of the existence
and amounts of the obligations of the Canadian Borrower therein recorded;
provided, however, that the failure of any Canadian Lender or the General
Administrative Agents to maintain the Register or any such account, or any
error therein, shall not in any manner affect the obligation of the Canadian
Borrower to repay (with applicable interest) the Canadian Revolving Credit
Loans made to the Canadian Borrower by such Canadian Lender in accordance with
the terms of this Agreement.
(e) The Canadian Borrower agrees that, upon the request to the
Canadian Administrative Agent by any Canadian Lender, it will execute and
deliver to such Canadian Lender a promissory note of the Canadian Borrower
evidencing the Canadian Revolving Credit Loans of such Canadian Lender,
substantially in the form of Exhibit B with appropriate insertions as to date
and principal amount (each, a "Canadian Revolving Credit Note"); provided, that
the delivery of such Canadian Revolving Credit Notes shall not be a condition
precedent to the Closing Date.
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5.3 Procedure for Canadian Revolving Credit Borrowing. The Canadian
Borrower may borrow under the Canadian Revolving Credit Commitments during the
Revolving Credit Commitment Period on any Business Day, provided that the
Canadian Borrower shall give the Canadian Administrative Agent irrevocable
notice (which notice must be received by the Canadian Administrative Agent
prior to 12:00 Noon, Toronto time, at least one Business Day prior to the
requested Borrowing Date), specifying (i) the amount to be borrowed and (ii)
the requested Borrowing Date. Each borrowing in Canadian Dollars under the
Canadian Revolving Credit Commitments shall be in an amount equal to
C$5,000,000 or a whole multiple of C$1,000,000 in excess thereof, and each
borrowing in U.S. Dollars under the Canadian Revolving Credit Commitments shall
be in an amount equal to $5,000,000 or a whole multiple of $1,000,000 in excess
thereof (or, in each case, if the then Aggregate Available Canadian Revolving
Credit Commitments are less than C$5,000,000 or $5,000,000, as the case may be,
such lesser amount). Upon receipt of any such notice from the Canadian
Borrower, the Canadian Administrative Agent shall promptly notify the General
Administrative Agent and each Canadian Lender thereof. Not later than 12:00
Noon, Toronto time, on each requested Borrowing Date each Canadian Lender
shall make an amount equal to its Canadian Revolving Credit Commitment
Percentage of the principal amount of Canadian Revolving Credit Loans requested
to be made on such Borrowing Date available to the Canadian Administrative
Agent at its office specified in subsection 18.2 in Canadian Dollars or U.S.
Dollars, as the case may be, and in immediately available funds. The Canadian
Administrative Agent shall on such date credit the account of the Canadian
Borrower on the books of such office with the aggregate of the amounts made
available to the Canadian Administrative Agent by the Canadian Lenders and in
like funds as received by the Canadian Administrative Agent.
5.4 Termination or Reduction of Canadian Revolving Credit
Commitments. The U.S. Borrower shall have the right, upon not less than three
Business Days' notice to the Canadian Administrative Agent, to terminate the
Canadian Revolving Credit Commitments or, from time to time, to reduce
the amount of the Canadian Revolving Credit Commitments; provided that no such
termination or reduction shall be permitted (i) unless the U.S. Borrower elects
to terminate or reduce the U.S. Revolving Credit Commitments of the U.S. Common
Lenders by an amount equal to the U.S. Dollar Equivalent of the aggregate
Canadian Revolving Credit Commitments of all Canadian Lenders being reduced or
terminated or (ii) if, after giving effect thereto and to any prepayments of
the Loans made on the effective date thereof, the Available Canadian Revolving
Credit Commitment of any Canadian Lender would be less than zero. Any such
reduction shall be in an amount equal to C$5,000,000 or a whole multiple of
C$1,000,000 in excess thereof and shall reduce permanently the Canadian
Revolving Credit Commitments then in effect.
SECTION 6. AMOUNT AND TERMS OF CANADIAN
ACCEPTANCE FACILITY
6.1 Acceptance Commitments. (a) Subject to the terms and conditions
hereof, each Canadian Lender severally agrees to create Acceptances for the
Canadian Borrower on any Business Day during the Revolving Credit Commitment
Period by accepting Drafts drawn by the Canadian Borrower so long as after
giving effect to such acceptance, (i) the Available Canadian
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Revolving Credit Commitment of such Canadian Lender would be greater than or
equal to zero and (ii) the Aggregate Total Outstandings of all Lenders do not
exceed the Aggregate U.S. Revolving Credit Commitments.
(b) The Canadian Borrower may utilize the Canadian Revolving Credit
Commitments in the manner contemplated by this Section 6 by authorizing each
Canadian Lender in the manner provided for in subsection 6.2(b) to draw Drafts
on such Canadian Lender and having such Drafts accepted pursuant to subsection
6.2, paying its obligations with respect thereto pursuant to subsection 6.5,
and again, from time to time, authorizing Drafts to be drawn on the Canadian
Lenders and having them presented for acceptance, all in accordance with the
terms and conditions of this Section 6.
(c) For the purposes of this Agreement, all Acceptances shall be
considered a utilization of the Canadian Revolving Credit Commitments in an
amount equal to the undiscounted face amount of such Acceptance.
6.2 Creation of Acceptances. (a) The Canadian Borrower may request
the creation of Acceptances hereunder by submitting to the Canadian
Administrative Agent at its office specified in subsection 18.2 prior to 11:00
A.M., Toronto time, two Business Days prior to the requested Borrowing Date,
(i) a request for acceptances (each, a "Request for Acceptances") completed in
a manner and in form and substance reasonably satisfactory to the Canadian
Administrative Agent and specifying, among other things, the Borrowing Date,
maturity and face amount of the Drafts to be accepted and discounted, (ii) to
the extent not theretofore supplied to each Canadian Lender, a sufficient
number of Drafts to be drawn on the Canadian Lenders, to be appropriately
completed in accordance with subsection 6.2(d) and (iii) such other
certificates, documents and other papers and information as the Canadian
Administrative Agent may reasonably request. Upon receipt of any such Request
for Acceptances, the Canadian Administrative Agent shall promptly notify each
Canadian Lender and the General Administrative Agent of its receipt thereof.
(b) The Canadian Borrower hereby agrees that it shall deliver to the
Canadian Administrative Agent on or prior to the Closing Date, Powers of
Attorney substantially in the form annexed hereto as Exhibit D (the "Powers of
Attorney") authorizing each Canadian Lender to draw Drafts on such Canadian
Lender on behalf of the Canadian Borrower and to complete such Drafts in
accordance with the Requests for Acceptances submitted from time to time
pursuant to subsection 6.2(a).
(c) Each Request for Acceptances made by or on behalf of the Canadian
Borrower hereunder shall contain a request for Acceptances denominated in
Canadian Dollars and having an aggregate undiscounted face amount equal to
C$5,000,000 or a whole multiple of C$1,000,000 in excess thereof. Each
Acceptance shall be dated the Borrowing Date specified in the Request for
Acceptances with respect thereto and shall be stated to mature on a Business
Day which is not less than 30 days and not more than 180 days after the date
thereof (and, in any event, prior to the Revolving Credit Termination Date).
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(d) Not later than 12:00 Noon, Toronto time, on the Borrowing Date
specified in the relevant Request for Acceptances, and upon fulfillment of the
applicable conditions set forth in subsection 12.2, each Canadian Lender will,
in accordance with such Request for Acceptances, (i) sign each Draft on behalf
of the Canadian Borrower pursuant to the Power of Attorney, (ii) complete the
date, amount and maturity of each Draft to be accepted, (iii) accept such
Drafts and give notice to the Canadian Administrative Agent of such acceptance
and (iv) upon such acceptance, purchase such Acceptances to the extent
contemplated by subsection 6.3.
6.3 Discount of Acceptances. (a) Each Canadian Lender hereby
severally agrees, on the terms and subject to the conditions set forth in
this Agreement, to purchase Acceptances created by it on the Borrowing Date
with respect thereto at the applicable Reference Discount Rate by making
available to the Canadian Borrower an amount in immediately available funds
equal to the Acceptance Purchase Price in respect thereof, and to notify the
Canadian Administrative Agent that such Draft has been accepted, discounted and
purchased by such accepting Canadian Lender.
(b) In the event that the Canadian Borrower has made a Request for
Acceptances, then (i) prior to 11:00 A.M., Toronto time, on the Borrowing Date
with respect thereto, the Canadian Administrative Agent will notify the General
Administrative Agent, the Canadian Borrower and the Canadian Lenders of the
applicable Reference Discount Rate for such Acceptances and the corresponding
Acceptance Purchase Price and (ii) each Canadian Lender shall make the
Acceptance Purchase Price for such Acceptances discounted by it available to
the Canadian Administrative Agent, for the account of the Canadian Borrower, at
the office of the Canadian Administrative Agent specified in subsection 18.2
prior to 12:00 Noon, Toronto time, on the Borrowing Date, in Canadian Dollars
and in funds immediately available to the Canadian Administrative Agent. Such
borrowing will then be made available to the Canadian Borrower by the Canadian
Administrative Agent crediting the account of the Canadian Borrower on the
books of such office with the aggregate of the amounts made available to the
Canadian Administrative Agent by the Canadian Lenders and in like funds as
received by the Canadian Administrative Agent.
(c) Acceptances purchased by any Canadian Lender may be held by it
for its own account until maturity or sold by it at any time prior thereto in
the relevant market therefor in Canada in such Canadian Lender's sole
discretion. The doctrine of merger shall not apply with respect to any
Acceptance held by a Lender at maturity.
6.4 Stamping Fees. On the Borrowing Date with respect to each
Acceptance, the Canadian Borrower shall pay to the Canadian Administrative
Agent, for the account of the Canadian Lenders, a stamping fee at a rate per
annum equal to the Applicable Margin in effect on such Borrowing Date for
Eurodollar Loans, computed for the period from and including the Borrowing Date
with respect to such Acceptance to but not including the maturity of such
Acceptance, on the basis of a 365-day year, of the undiscounted face amount of
such Acceptance.
6.5 Acceptance Reimbursement Obligations. (a) The Canadian
Borrower hereby unconditionally agrees to pay to the Canadian Administrative
Agent for the account of each
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Canadian Lender, on the maturity date (whether at stated maturity, by
acceleration or otherwise) for each Acceptance created by such Canadian Lender
for the account of the Canadian Borrower, the aggregate undiscounted face
amount of each such then-maturing Acceptance.
(b) The obligation of the Canadian Borrower to reimburse the Canadian
Lenders for then-maturing Acceptances may be satisfied by the Canadian Borrower
by:
(i) paying to the Canadian Administrative Agent, for the account
of the Canadian Lenders, an amount in Canadian Dollars and in
immediately available funds equal to the aggregate undiscounted face
amount of all Acceptances created for the account of the Canadian
Borrower hereunder which are then maturing by 12:00 Noon, Toronto time,
on such maturity date; provided that the Canadian Borrower shall have
given not less than one Business Day's prior notice to the Canadian
Administrative Agent (which shall promptly notify each Canadian Lender
thereof) of its intent to reimburse the Canadian Lenders in the manner
contemplated by this clause (i);
(ii) having new Drafts accepted and discounted by the Canadian
Lenders in the manner contemplated by subsections 6.2 and 6.3 in
substitution for the then-maturing Acceptances; provided that (A) the
Canadian Borrower shall have delivered to the Canadian Administrative
Agent (which shall promptly provide a copy thereof to each Canadian
Lender) a duly completed Request for Acceptances not later than 2:00
P.M., Toronto time, one Business Day prior to such maturity date,
together with the documents, instruments, certificates and other papers
and information contemplated by subsections 6.2(a)(ii) and 6.2(a)(iii),
(B) if any Default or Event of Default has occurred and is then
continuing, the Request for Acceptances shall be deemed to be a request
for a Canadian Revolving Credit Loan in an amount equal to the
undiscounted face amount of the Acceptances requested, (C) each Canadian
Lender shall retain the Acceptance Purchase Price for the Acceptance
created by it and apply such Acceptance Purchase Price to the Acceptance
Reimbursement Obligations of the Canadian Borrower in respect of the
maturing Acceptance created by such Canadian Lender, (D) if the
Acceptance Purchase Price so retained by such Canadian Lender is less
than the undiscounted face amount of the then-maturing Acceptance, the
Canadian Borrower shall have made arrangements reasonably satisfactory to
such Canadian Lender for payment of such deficiency and (E) if the
Acceptance Purchase Price so retained by the Canadian Lender is greater
than the undiscounted face amount of the then-maturing Acceptance, the
Canadian Lender shall make such excess available to the Canadian
Administrative Agent, which in turn shall make such excess available to
the Canadian Borrower, all in accordance with subsection 6.3(b); or
(iii) to the extent that the Canadian Borrower has not given to
the Canadian Administrative Agent a notice contemplated by clause
(i) or (ii) above, then the Canadian Borrower shall be deemed to have
requested a borrowing pursuant to subsection 5.1 of Canadian Revolving
Credit Loans in an aggregate principal amount equal to the undiscounted
face amount of such then-maturing Acceptance. The Borrowing Date with
respect to such borrowing shall be the maturity date for such Acceptance.
Except to the extent that any of the events contemplated by paragraph (i)
of Section 16 with respect to
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the Canadian Borrower has occurred and is then continuing, each
Canadian Lender shall be obligated to make the Canadian Revolving Credit
Loan contemplated by this subsection 6.5(b)(iii) regardless of whether
the conditions precedent to borrowing set forth in this Agreement are
then satisfied. The proceeds of any Canadian Revolving Credit Loans made
pursuant to this subsection 6.5(b)(iii) shall be retained by the
Canadian Lenders and applied by them to the Acceptance Reimbursement
Obligations of the Canadian Borrower in respect of the then-maturing
Acceptance.
(c) The unpaid amount of any such Acceptance Reimbursement
Obligations shall be treated as a Canadian Revolving Credit Loan for the
purposes hereof and interest shall accrue on the amount of any such unpaid
Acceptance Reimbursement Obligation from the date such amount becomes due until
paid in full at a fluctuating rate per annum equal to the rate which would then
be payable on Canadian Revolving Credit Loans. Such interest shall be payable
by the Canadian Borrower on demand by the Canadian Administrative Agent.
(d) In no event shall the Canadian Borrower claim from any
Canadian Lender any grace period with respect to the payment at maturity of any
Acceptances created by such Canadian Lender pursuant to this Agreement.
6.6 Converting Canadian Revolving Credit Loans to Acceptances and
Acceptances to Canadian Revolving Credit Loans. (a) Subject to subsection
6.6(b), the Canadian Borrower may at any time and from time to time request
that any then outstanding Canadian Revolving Credit Loan denominated in
Canadian Dollars be converted into an Acceptance by delivering to the Canadian
Administrative Agent (which shall promptly notify the General Administrative
Agent and each Canadian Lender of its receipt thereof) a Request for
Acceptances, together with a statement that the Acceptances so requested are to
be created pursuant to this subsection 6.6(a), such notice to be given not
later than one Business Day prior to the requested conversion date.
(b) In the event that the Canadian Administrative Agent receives
such a Request for Acceptances and the accompanying statement described in
subsection 6.6(a), then the Canadian Borrower shall pay on the requested
Borrowing Date to the Canadian Administrative Agent, for the account of the
Canadian Lenders, the principal amount of the then outstanding Canadian
Revolving Credit Loans being so converted, and each Canadian Lender shall
accept and discount the Canadian Borrower's Draft having an aggregate face
amount at least equal to the principal amount of the Canadian Revolving Credit
Loans of such Canadian Lender which are then being repaid; it being understood
and agreed that for the purposes of this subsection 6.6(b), such payment by the
Canadian Borrower of such outstanding Canadian Revolving Credit Loans may be
from the proceeds of such discounted Drafts, provided that, (i) following the
occurrence and during the continuance of a Default or an Event of Default, no
Acceptances may be created and (ii) no Acceptance which is permitted to be
created hereunder shall have a maturity that extends beyond the Revolving
Credit Termination Date.
(c) The creation of Acceptances pursuant to this subsection 6.6
shall not be subject to the satisfaction of the conditions precedent to
borrowing set forth in this Agreement.
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(d) The Canadian Borrower may elect from time to time to convert
outstanding Acceptances to Canadian Revolving Credit Loans denominated in
Canadian Dollars by giving the Canadian Administrative Agent at least one
Business Day's irrevocable notice of such election prior to the maturity of
such Acceptances; provided that any such conversion of Acceptances may only be
made on the maturity thereof.
6.7 Allocation of Acceptances. The Canadian Borrower hereby
agrees that each Request for Acceptances, reimbursement of Acceptances and
conversion of Canadian Revolving Credit Loans to Acceptances shall be made in
a manner so that any such Request for Acceptances, reimbursement or conversion
shall apply ratably to all Canadian Lenders in accordance with their respective
Canadian Revolving Credit Commitment Percentages. In the event that the
aggregate undiscounted face amount of Acceptances requested by the Canadian
Borrower to be created by all Canadian Lenders hereunder pursuant to any
Request for Acceptances is an amount which, if divided ratably among the
Canadian Lenders in accordance with their respective Canadian Revolving Credit
Commitment Percentages, would not result in each Canadian Lender accepting a
Draft which has an undiscounted face amount equal to C$100,000 or a whole
multiple of C$100,000 in excess thereof, then, notwithstanding any provision in
this subsection 6.7 to the contrary, the Canadian Administrative Agent is
authorized by the Canadian Borrower and the Canadian Lenders to allocate among
the Canadian Lenders the Acceptances to be issued in such manner and amounts as
the Canadian Administrative Agent may, in its sole discretion, acting
reasonably, consider necessary, rounding up or down, so as to ensure that no
Canadian Lender is required to accept a Draft for a fraction of $100,000 and,
in such event, the Canadian Lenders' ratable share with respect to such
Acceptances shall be adjusted accordingly.
6.8 Special Provisions Relating to Acceptance Notes. (a) The
Canadian Borrower and each Canadian Lender hereby acknowledge and agree that
from time to time certain Canadian Lenders which are not Canadian
chartered banks or which are Schedule II Canadian Lenders may not be authorized
to or may, as a matter of general corporate policy, elect not to accept Drafts,
and the Canadian Borrower and each Canadian Lender agree that any such Canadian
Lender may purchase Acceptance Notes of the Canadian Borrower in accordance
with the provisions of subsection 6.8(b) in lieu of creating Acceptances for
its account.
(b) In the event that any Canadian Lender described in
subsection 6.8(a) above is unable to, or elects as a matter of general
corporate policy not to, create Acceptances hereunder, such Canadian Lender
shall not create Acceptances hereunder, but rather, if the Canadian Borrower
requests the creation of such Acceptances, the Canadian Borrower shall deliver
to such Canadian Lender non-interest bearing promissory notes (each, an
"Acceptance Note") of the Canadian Borrower, substantially in the form of
Exhibit E, having the same maturity as the Acceptances to be created and in an
aggregate principal amount equal to the undiscounted face amount of such
Acceptances. Each such Canadian Lender hereby agrees to purchase Acceptance
Notes from the Canadian Borrower at a purchase price equal to the Acceptance
Purchase Price which would have been applicable if a Draft in the same
aggregate face amount as the principal amount of its Acceptance Notes and of
the same maturity had been accepted by it (less any stamping fee which would
have been paid pursuant to subsection 5.4 if such Lender had created
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an Acceptance) and such Acceptance Notes shall be governed by the provisions of
this Section 6 as if they were Acceptances.
SECTION 7. AMOUNT AND TERMS OF MULTICURRENCY
COMMITMENT
7.1 Multicurrency Commitments. Subject to the terms and conditions
hereof, each Multicurrency Lender severally agrees to make revolving credit
loans (each, a "Multicurrency Loan") in any Available Foreign Currency to the
U.S. Borrower or any Foreign Subsidiary Borrower from time to time during the
Revolving Credit Commitment Period so long as after giving effect thereto (a)
the Available Multicurrency Commitment of such Multicurrency Lender is greater
than or equal to zero, (b) the aggregate outstanding principal amount of
Multicurrency Loans does not exceed an amount of which the U.S. Dollar
Equivalent is $500,000,000 and (c) the Aggregate Total Outstandings of all
Lenders do not exceed the Aggregate U.S. Revolving Credit Commitments. During
the Revolving Credit Commitment Period, the U.S. Borrower and Foreign
Subsidiary Borrowers may use the Multicurrency Commitments by borrowing,
repaying the Multicurrency Loans in whole or in part, and reborrowing, all in
accordance with the terms and conditions hereof.
7.2 Repayment of Multicurrency Loans; Evidence of Debt. (a) Each
of the U.S. Borrower and each Foreign Subsidiary Borrower hereby
unconditionally promises to pay to the General Administrative Agent for the
account of each Multicurrency Lender the then unpaid principal amount of each
Multicurrency Loan of such Multicurrency Lender to such Borrower on the
Revolving Credit Termination Date and on such other date(s) and in such other
amounts as may be required from time to time pursuant to this Agreement. Each
of the U.S. Borrower and each Foreign Subsidiary Borrower hereby further agrees
to pay interest on the unpaid principal amount of the Multicurrency Loans
advanced to it and from time to time outstanding until payment thereof in full
at the rates per annum, and on the dates, set forth in subsection 10.1.
(b) Each Multicurrency Lender shall maintain in accordance with its
usual practice an account or accounts evidencing indebtedness of each
Borrower to such Multicurrency Lender resulting from each Multicurrency Loan of
such Multicurrency Lender from time to time, including the amounts of principal
and interest payable thereon and paid to such Multicurrency Lender from time to
time under this Agreement.
(c) The General Administrative Agent shall maintain the Register
pursuant to subsection 18.6(d), and a subaccount therein for each Multicurrency
Lender, in which shall be recorded (i) the date and amount of each
Multicurrency Loan made hereunder, (ii) the date and amount of any principal or
interest due and payable or to become due and payable from each Borrower to
each Multicurrency Lender hereunder in respect of the Multicurrency Loans and
(iii) both the date and amount of any sum received by the General
Administrative Agent hereunder from each Borrower in respect of the
Multicurrency Loans and each Multicurrency Lender's share thereof.
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(d) The entries made in the Register and the accounts of each
Multicurrency Lender maintained pursuant to subsection 7.2(b) shall, to the
extent permitted by applicable law, be prima facie evidence of the existence
and amounts of the obligations of each Borrower therein recorded; provided,
however, that the failure of any Multicurrency Lender or the General
Administrative Agent to maintain the Register or any such account, or any error
therein, shall not in any manner affect the obligation of such Borrower to
repay (with applicable interest) the Multicurrency Loans made to such Borrower
by such Multicurrency Lender in accordance with the terms of this Agreement.
7.3 Procedure for Multicurrency Borrowing. The U.S. Borrower or any
Foreign Subsidiary Borrower may request the Multicurrency Lenders to make
Multicurrency Loans during the Revolving Credit Commitment Period on any
Business Day by delivering a Notice of Multicurrency Loan Borrowing. Each
borrowing under the Multicurrency Commitments shall be in an amount in an
Available Foreign Currency of which the U.S. Dollar Equivalent is equal to at
least $10,000,000 (or, if the then Aggregate Available Multicurrency
Commitments are less than $10,000,000, such lesser amount). Upon receipt of
any such Notice of Multicurrency Borrowing from any Borrower, the General
Administrative Agent shall promptly notify each Multicurrency Lender thereof.
Not later than the funding time for the relevant Available Foreign Currency set
forth in the Administrative Schedule each Multicurrency Lender shall make an
amount equal to its Multicurrency Commitment Percentage of the principal amount
of Multicurrency Loans requested to be made on such Borrowing Date available to
the General Administrative Agent at the funding office for the relevant
Available Foreign Currency set forth in the Administrative Schedule in the
relevant Available Foreign Currency and in immediately available funds. The
amounts made available by each Multicurrency Lender will then be made available
on such Borrowing Date to the relevant Borrower at the funding office for the
relevant Available Foreign Currency set forth in the Administrative Schedule
and in like funds as received by the General Administrative Agent.
7.4 Termination or Reduction of Multicurrency Commitments. The U.S.
Borrower shall have the right, upon not less than three Business Days' notice
to the General Administrative Agent, to terminate the Multicurrency Commitments
or, from time to time, to reduce the amount of the Multicurrency Commitments;
provided that no such termination or reduction shall be permitted if, after
giving effect thereto and to any prepayments of the Loans made on the effective
date thereof, the Available Multicurrency Commitment of any Multicurrency
Lender would be less than zero. Any such reduction shall be in an amount equal
to $10,000,000 or a whole multiple of $1,000,000 in excess thereof and shall
reduce permanently the Multicurrency Commitments then in effect.
SECTION 8. ALTERNATE CURRENCY FACILITIES
8.1 Terms of Alternate Currency Facilities. (a) Subject to the
provisions of this Section 8, the U.S. Borrower may in its discretion from time
to time designate any Subsidiary of the U.S. Borrower organized under the laws
of any jurisdiction outside the United States as an "Alternate Currency
Borrower" and any Qualified Credit Facility to which such Alternate Currency
Borrower and any one or more Alternate Currency Lenders is a party as an
"Alternate
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Currency Facility", with the consent of each such Alternate Currency
Lender in its sole discretion, by delivering an Alternate Currency Facility
Addendum to the General Administrative Agent and the Lenders (through the
General Administrative Agent) executed by the U.S. Borrower, each such
Alternate Currency Borrower (or the U.S. Borrower on its behalf) and each such
Alternate Currency Lender, provided, that on the effective date of such
designation no Event of Default shall have occurred and be continuing.
Concurrently with the delivery of an Alternate Currency Facility Addendum, the
U.S. Borrower or the relevant Alternate Currency Borrower shall furnish to the
General Administrative Agent copies of all documentation executed and delivered
by any Alternate Currency Borrower in connection therewith, together with, if
applicable, an English translation thereof. Except as otherwise provided in
this Section 8 or in the definition of "Qualified Credit Facility" in
subsection 1.1, the terms and conditions of each Alternate Currency Facility
shall be determined by mutual agreement of the relevant Alternate Currency
Borrower(s) and Alternate Currency Lender(s). The documentation governing each
Alternate Currency Facility shall (i) contain an express acknowledgement that
such Alternate Currency Facility shall be subject to the provisions of this
Section 8 and (ii) if more than one Alternate Currency Lender is a party
thereto, designate an Alternate Currency Facility Agent for such Alternate
Currency Facility. Each of the U.S. Borrower and, by agreeing to any Alternate
Currency Facility designation as contemplated hereby, each relevant Alternate
Currency Lender (if any) party thereto which is an affiliate, branch or agency
of a Lender, acknowledges and agrees that each reference in this Agreement to
any "Lender" shall, to the extent applicable, be deemed to be a reference to
such Alternate Currency Lender. In the event of any inconsistency between the
terms of this Agreement and the terms of any Alternate Currency Facility, the
terms of this Agreement shall prevail.
(b) The documentation governing each Alternate Currency Facility
shall set forth (i) the maximum amount (expressed in U.S. Dollars) available to
be borrowed from all Alternate Currency Lenders under such Alternate
Currency Facility (as the same may be modified from time to time, an "Alternate
Currency Facility Maximum Borrowing Amount") and (ii) with respect to each
Alternate Currency Lender party to such Alternate Currency Facility, the
maximum amount (expressed in U.S. Dollars) available to be borrowed from such
Alternate Currency Lender thereunder (as the same may be modified from time to
time, an "Alternate Currency Lender Maximum Borrowing Amount").
(c) Except as otherwise required by applicable law, in no event shall
the Alternate Currency Lenders party to an Alternate Currency Facility have the
right to accelerate the Alternate Currency Loans outstanding thereunder, or to
terminate their commitments (if any) to make such Alternate Currency Loans
prior to the earlier of the stated termination date in respect thereof or the
Revolving Credit Termination Date, except, in each case, in connection with an
acceleration of the Loans or a termination of the Commitments pursuant to
Section 16, provided, that nothing in this paragraph (c) shall be deemed to
require any Alternate Currency Lender to make an Alternate Currency Loan if the
applicable conditions precedent to the making of such Alternate Currency Loan
set forth in the documentation governing the relevant Alternate Currency
Facility have not been satisfied. No Alternate Currency Loan may be made under
an Alternate Currency Facility if (i) the conditions precedent in subsection
12.2 are not satisfied on the date such Alternate Currency Loan is requested to
be made or (ii) after giving effect to the making of such Alternate Currency
Loan and the simultaneous application of the proceeds
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thereof, the Aggregate Total Outstandings of all Lenders at any time exceeds
the Aggregate U.S. Revolving Credit Commitments.
(d) The relevant Alternate Currency Borrower(s) shall furnish to the
General Administrative Agent copies of any amendment, supplement or other
modification (including any change in commitment amounts or in the Alternate
Currency Lenders participating in any Alternate Currency Facility) to the terms
of any Alternate Currency Facility promptly after the effectiveness thereof
(together with, if applicable, an English translation thereof). If any such
amendment, supplement or other modification to an Alternate Currency Facility
shall (i) add an Alternate Currency Lender thereunder or (ii) change the
Alternate Currency Facility Maximum Borrowing Amount or any Alternate Currency
Lender Maximum Borrowing Amount with respect thereto, the U.S. Borrower shall
promptly furnish an appropriately revised Alternate Currency Facility Addendum,
executed by the U.S. Borrower, the relevant Alternate Currency Borrower(s) (or
the U.S. Borrower on its behalf) and the affected Alternate Currency Lenders
(or any agent acting on their behalf), to the General Administrative Agent and
the Lenders (through the General Administrative Agent).
(e) The U.S. Borrower may terminate its designation of a facility as
an Alternate Currency Facility, with the consent of each Alternate Currency
Lender party thereto at the time of such redesignation in its sole discretion,
by written notice to the General Administrative Agent, which notice shall be
executed by the U.S. Borrower, the relevant Alternate Currency Borrower(s) (or
the U.S. Borrower on its behalf) and each Alternate Currency Lender party to
such Alternate Currency Facility (or any agent acting on their behalf). Once
notice of such termination is received by the General Administrative Agent,
such Alternate Currency Facility and the loans and other obligations
outstanding thereunder shall immediately cease to be subject to the terms of
this Agreement.
(f) At no time shall the aggregate Alternate Currency Facility Maximum
Borrowing Amount of all Alternative Currency Facilities exceed $250,000,000.
8.2 Reporting of Alternate Currency Outstandings. (a) On the date
of the making of any Alternate Currency Loan having a fixed maturity of 30 or
more days to an Alternate Currency Borrower and on the last Business Day of
each month on which an Alternate Currency Borrower has any outstanding
Alternate Currency Loans, the Alternate Currency Facility Agent for such
Alternate Currency Facility shall deliver to the General Administrative Agent a
Notice of Alternate Currency Outstandings. The General Administrative Agent
will, at the request of any Alternate Currency Facility Agent, advise such
Alternate Currency Facility Agent of the Exchange Rate used by the General
Administrative Agent in calculating the U.S. Dollar Equivalent of Alternate
Currency Loans under the related Alternate Currency Facility on any date.
(b) For purposes of any calculation under this Agreement in which the
amount of the Aggregate Alternate Currency Outstandings of any Lender is a
component, the General Administrative Agent shall make such calculation on the
basis of the Notices of Alternate Currency Outstandings received by it at least
two Business Days prior to the date of such calculation.
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SECTION 9. LETTERS OF CREDIT
9.1 Letters of Credit. (a) Subject to the terms and conditions of
this Agreement, Chase Delaware, as Issuing Lender, agrees, and any other
Issuing Lender may, as agreed between the U.S. Borrower and such Issuing
Lender, agree, on behalf of the U.S. Lenders, and in reliance on the agreement
of the Lenders set forth in subsection 9.3, to issue for the account of the
U.S. Borrower (or in connection with any Foreign Letter of Credit, for the
joint and several accounts of the U.S. Borrower and such applicable Foreign
Subsidiary) letters of credit in an aggregate face amount not to exceed at any
time outstanding an amount of which the U.S. Dollar Equivalent is $250,000,000,
as follows:
(i) standby letters of credit (collectively, the "Standby
Letters of Credit") in the form of either (A) in the case of standby
letters of credit to be used for the purposes described in subsection
9.8(a) or (c), the Issuing Lender's standard standby letter of credit or
(B) in the case of standby letters of credit to be used for the purposes
described in subsection 9.8(b), a letter of credit reasonably
satisfactory to the Issuing Lender, and in either case, in favor of such
beneficiaries as the U.S. Borrower shall specify from time to time (which
shall be reasonably satisfactory to the Issuing Lender); and
(ii) commercial letters of credit in the form of the Issuing
Lender's standard commercial letters of credit ("Commercial Letters of
Credit") in favor of sellers of goods or services to the U.S. Borrower,
its Subsidiaries or joint ventures that are Special Entities (the Standby
Letters of Credit and Commercial Letters of Credit being referred to
collectively as the "Letters of Credit");
provided that on the date of the issuance of any Letter of Credit, and after
giving effect to such issuance, (i) the Available U.S. Revolving Credit
Commitment of each U.S. Lender is greater than or equal to zero and (ii) the
Aggregate Total Outstandings of all Lenders do not exceed the Aggregate U.S.
Revolving Credit Commitments at such time. Each Standby Letter of Credit shall
(i) have an expiry date no later than (A) with respect to any Standby Letter of
Credit to be used for the purposes described in subsection 9.8(a) or (c), one
year from the date of issuance thereof or, if earlier, the Revolving Credit
Termination Date or (B) with respect to any Standby Letter of Credit to be used
for the purposes described in subsection 9.8(b), the Revolving Credit
Termination Date, (ii) be denominated in Dollars or another freely-convertible
currency acceptable to the Issuing Lender and (iii) be in a minimum face amount
of which the U.S. Dollar Equivalent is a minimum of $500,000 determined at the
time of issuance. Each Commercial Letter of Credit shall (i) provide for the
payment of sight drafts when presented for honor thereunder, or of time drafts,
in each case in accordance with the terms thereof and when accompanied by the
documents described or when such documents are presented, as the case may be,
(ii) be denominated in Dollars or another freely-convertible currency
acceptable to the Issuing Lender and (iii) have an expiry date no later than
six months from the date of issuance thereof or, if earlier, five Business Days
prior to the Revolving Credit Termination Date.
(b) Pursuant to the 1995 Agreement, Chase, as Issuing Lender, has
issued the Letters of Credit described in Schedule V (the "Existing Letters of
Credit"). From and after the
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Closing Date, the Existing Letters of Credit
shall for all purposes be deemed to be Letters of Credit outstanding under this
Agreement.
9.2 Procedure for Issuance of Letters of Credit. The U.S. Borrower
may from time to time request, upon at least three Business Days' notice, Chase
Delaware, as Issuing Lender, to issue a Letter of Credit by delivering to such
Issuing Lender at its address specified in subsection 18.2 a Letter of Credit
Application, completed to the satisfaction of such Issuing Lender, together
with such other certificates, documents and other papers and information as
such Issuing Lender may reasonably request. Upon receipt of any Letter of
Credit Application from the U.S. Borrower, or, in the case of a Foreign Letter
of Credit, from the U.S. Borrower and the Foreign Subsidiary that is an account
party on such Letter of Credit, such Issuing Lender will promptly, but in no
event later than five Business Days following receipt of such Letter of Credit
Application, notify each U.S. Lender thereof. Upon receipt of any Letter of
Credit Application, Chase Delaware, as Issuing Lender, will process such Letter
of Credit Application, and the other certificates, documents and other papers
delivered in connection therewith, in accordance with its customary procedures
and shall promptly issue such Letter of Credit (but in no event earlier than
three Business Days after receipt by such Issuing Lender of the Letter of
Credit Application relating thereto) by issuing the original of such Letter of
Credit to the beneficiary thereof and by furnishing a copy thereof to the
U.S. Borrower and the Participating Lenders. In addition, the U.S. Borrower
may from time to time agree with Issuing Lenders other than Chase Delaware upon
procedures for issuance by such Issuing Lenders of Letters of Credit and cause
Letters of Credit to be issued by following such procedures. Such procedures
shall be reasonably satisfactory to the General Administrative Agent. Prior
to the issuance of any Letter of Credit, the Issuing Lender will confirm with
the General Administrative Agent that the issuance of such Letter of Credit is
permitted pursuant to Section 9 and subsection 12.2. Additionally, each
Issuing Lender and the U.S. Borrower shall inform the General Administrative
Agent of any modifications made to outstanding Letters of Credit, of any
payments made with respect to such Letters of Credit, and of any other
information regarding such Letters of Credit as may be reasonably requested by
the General Administrative Agent, in each case pursuant to procedures
established by the General Administrative Agent.
9.3 Participating Interests. In the case of each Existing Letter of
Credit, effective on the Closing Date, and in the case of each Letter of Credit
issued in accordance with the terms hereof on or after the Closing Date,
effective as of the date of the issuance thereof, the Issuing Lender in respect
of such Letter of Credit agrees to allot, and does allot, to each other U.S.
Lender, and each such U.S. Lender severally and irrevocably agrees to take and
does take, a Participating Interest in such Letter of Credit and the related
Letter of Credit Application in a percentage equal to such U.S. Lender's U.S.
Revolving Credit Commitment Percentage. On the date that any Purchasing Lender
becomes a party to this Agreement in accordance with subsection 18.6,
Participating Interests in any outstanding Letter of Credit held by the U.S.
Lender from which such Purchasing Lender acquired its interest hereunder shall
be proportionately reallotted between such Purchasing Lender and such
transferor U.S. Lender. Each Participating Lender hereby agrees that its
obligation to participate in each Letter of Credit issued in accordance with
the terms hereof and to pay or to reimburse the Issuing Lender in respect of
such Letter of Credit for its participating share of the drafts drawn
thereunder shall be irrevocable and unconditional; provided that no
Participating Lender shall be liable for the
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payment of any amount under subsection 9.4(b) resulting solely from such
Issuing Lender's gross negligence or willful misconduct.
9.4 Payments. (a) The U.S. Borrower agrees (and in the case of a
Foreign Letter of Credit, the Foreign Subsidiary for whose account such Letter
of Credit was issued shall also agree, jointly and severally) (i) to reimburse
the General Administrative Agent for the account of the relevant Issuing
Lender, forthwith upon its demand and otherwise in accordance with the terms of
the Letter of Credit Application, if any, relating thereto, for any payment
made by such Issuing Lender under any Letter of Credit issued by such Issuing
Lender for its account and (ii) to pay to the General Administrative Agent for
the account of such Issuing Lender, interest on any unreimbursed portion of any
such payment from the date of such payment until reimbursement in full thereof
at a fluctuating rate per annum equal to the rate then borne by ABR Loans
pursuant to subsection 10.1(b) plus 2%.
(b) In the event that an Issuing Lender makes a payment under any
Letter of Credit and is not reimbursed in full therefor, forthwith upon demand
of such Issuing Lender, and otherwise in accordance with the terms hereof or of
the Letter of Credit Application, if any, relating to such Letter of Credit,
such Issuing Lender will promptly through the General Administrative
Agent notify each Participating Lender that acquired its Participating Interest
in such Letter of Credit from such Issuing Lender. No later than the close of
business on the date such notice is given (if such notice is received by such
Participating Lender by 12:00 Noon, otherwise no later than 12:00 Noon of the
immediately following Business Day), each such Participating Lender will
transfer to the General Administrative Agent, for the account of such Issuing
Lender, in immediately available funds, an amount equal to such Participating
Lender's pro rata share of the unreimbursed portion of such payment. Upon its
receipt from such Participating Lender of such amount, such Issuing Lender
will, if so requested by such Participating Lender, complete, execute and
deliver to such Participating Lender a Letter of Credit Participation
Certificate dated the date of such receipt and in such amount.
(c) Whenever, at any time, after an Issuing Lender has made payment
under a Letter of Credit and has received from any Participating Lender such
Participating Lender's pro rata share of the unreimbursed portion of such
payment, such Issuing Lender receives any reimbursement on account of such
unreimbursed portion or any payment of interest on account thereof, such
Issuing Lender will distribute to the General Administrative Agent, for the
account of such Participating Lender, its pro rata share thereof; provided,
however, that in the event that the receipt by such Issuing Lender of such
reimbursement or such payment of interest (as the case may be) is required to
be returned, such Participating Lender will promptly return to the General
Administrative Agent, for the account of such Issuing Lender, any portion
thereof previously distributed by such Issuing Lender to it.
9.5 Further Assurances. (a) The U.S. Borrower hereby agrees, from
time to time, to do and perform any and all acts and to execute any and all
further instruments reasonably requested by an Issuing Lender more fully to
effect the purposes of this Agreement and the issuance of the Letters of Credit
hereunder.
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(b) It is understood that in connection with Letters of Credit issued
for the purposes described in subsection 9.8(b) it may be customary for
the Issuing Lender in respect of such Letter of Credit to obtain an opinion of
its counsel relating to such Letter of Credit, and each Issuing Lender that
issues such a Letter of Credit agrees to cooperate with the U.S. Borrower in
obtaining such customary opinion, which opinion shall be at the U.S. Borrower's
expense unless otherwise agreed to by such Issuing Lender.
9.6 Obligations Absolute. The payment obligations of the U.S.
Borrower under subsection 9.4 shall be unconditional and irrevocable and shall
be paid strictly in accordance with the terms of this Agreement under all
circumstances, including, without limitation, under the following
circumstances:
(a) the existence of any claim, set-off, defense or other right
which the U.S. Borrower may have at any time against any beneficiary, or
any transferee, of any Letter of Credit (or any Persons for whom any such
beneficiary or any such transferee may be acting), any Issuing Lender or
any Participating Lender, or any other Person, whether in connection
with this Agreement, the transactions contemplated herein, or any
unrelated transaction;
(b) any statement or any other document presented under any Letter
of Credit opened for its account proving to be forged, fraudulent,
invalid or insufficient in any respect or any statement therein being
untrue or inaccurate in any respect, except under circumstances involving
the gross negligence or willful misconduct of the Issuing Lender; or
(c) payment by an Issuing Lender under any Letter of Credit against
presentation of a draft or certificate which does not comply with the
terms of such Letter of Credit, except payment resulting solely from the
gross negligence or willful misconduct of such Issuing Lender; or
(d) any other circumstances or happening whatsoever, whether or not
similar to any of the foregoing, except circumstances or happenings
resulting from the gross negligence or willful misconduct of such Issuing
Lender.
9.7 Letter of Credit Application. To the extent not inconsistent
with the terms of this Agreement (in which case the provisions of this
Agreement shall prevail), provisions of any Letter of Credit Application
related to any Letter of Credit are supplemental to, and not in derogation of,
any rights and remedies of the Issuing Lenders and the Participating Lenders
under this Section 9 and applicable law. The U.S. Borrower acknowledges and
agrees that all rights of the Issuing Lender under any Letter of Credit
Application shall inure to the benefit of each Participating Lender to the
extent of its Participating Interest as fully as if such Participating Lender
was a party to such Letter of Credit Application.
9.8 Purpose of Letters of Credit. Each Standby Letter of Credit
shall be used by the U.S. Borrower solely (a) to provide credit support for
borrowings by the U.S. Borrower, its Subsidiaries or joint ventures which
are Special Entities, (b) to pay or secure the payment of the
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principal amount of, and accrued interest on, and other obligations with
respect to, Industrial Revenue Bonds in accordance with the provisions of the
indenture related thereto, or (c) for other working capital purposes of the
U.S. Borrower and Subsidiaries in the ordinary course of business. Each
Commercial Letter of Credit will be used by the U.S. Borrower and Subsidiaries
solely to provide the primary means of payment in connection with the purchase
of goods or services by the U.S. Borrower and Subsidiaries in the ordinary
course of business.
9.9 Currency Adjustments. (a) Notwithstanding anything to the
contrary contained in this Agreement, for purposes of calculating any fee in
respect of any Letter of Credit in respect of any Business Day, the
General Administrative Agent shall convert the amount available to be drawn
under any Letter of Credit denominated in a currency other than U.S. Dollars
into an amount of U.S. Dollars based upon the Exchange Rate.
(b) Notwithstanding anything to the contrary contained in this Section 9,
prior to demanding any reimbursement from the Participating Lenders pursuant to
subsection 9.4(b) in respect of any Letter of Credit denominated in a currency
other than U.S. Dollars, the Issuing Lender shall convert the relevant
Borrower's obligation under subsection 9.4 to reimburse the Issuing Lender in
such currency into an obligation to reimburse the Issuing Lender in U.S.
Dollars. The U.S. Dollar amount of the reimbursement obligation of the
relevant Borrower and the Participating Lenders shall be computed by the
Issuing Lender based upon the Exchange Rate in effect for the day on which such
conversion occurs.
SECTION 10. GENERAL PROVISIONS APPLICABLE TO LOANS
10.1 Interest Rates and Payment Dates. (a) Each Eurodollar Loan
shall bear interest for each day during each Interest Period with respect
thereto at a rate per annum equal to the Eurodollar Rate determined for such
Interest Period plus the Applicable Margin in effect for such day.
(b) Each ABR Loan shall bear interest for each day on which it is
outstanding at a rate per annum equal to the Alternate Base Rate for such day.
(c) Each Prime Rate Loan shall bear interest for each day on which
it is outstanding at a rate per annum equal to the Prime Rate for such day.
(d) Each Canadian Base Rate Loan shall bear interest for each day on
which it is outstanding at a rate per annum equal to the Canadian Base Rate for
such day.
(e) Each Multicurrency Loan shall bear interest for each day during
each Interest Period with respect thereto at a rate per annum equal to the
Eurocurrency Rate determined for such Interest Period plus the Applicable
Margin in effect for such day.
(f) If all or a portion of (i) the principal amount of any Loan,
(ii) any interest payable thereon or (iii) any fee or other amount payable
hereunder shall not be paid when due (whether at the stated maturity, by
acceleration or otherwise), such overdue amount shall bear
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interest at a rate per annum equal to the rate that would otherwise be
applicable thereto pursuant to the foregoing provisions of this subsection
plus 2%.
(g) Interest shall be payable in arrears on each Interest Payment
Date, provided that interest accruing pursuant to paragraph (f) of this
subsection shall be payable from time to time on demand.
10.2 Conversion and Continuation Options. (a) The U.S. Borrower
may elect from time to time to convert outstanding Eurodollar Loans (in whole
or in part) to ABR Loans by giving the General Administrative Agent at least
one Business Day's prior irrevocable notice of such election, provided that
any such conversion of Eurodollar Loans may only be made on the last day of an
Interest Period with respect thereto unless the U.S. Borrower shall agree to
pay the costs associated therewith as set forth in subsection 10.11(d). The
U.S. Borrower may elect from time to time to convert outstanding ABR Loans made
to it (other than Swing Line Loans) (in whole or in part) to Eurodollar Loans
by giving the General Administrative Agent at least three Business Days' prior
irrevocable notice of such election. Any such notice of conversion to
Eurodollar Loans shall specify the length of the initial Interest Period or
Interest Periods therefor. Upon receipt of any such notice the General
Administrative Agent shall promptly notify each U.S. Lender thereof. All or
any part of outstanding Eurodollar Loans and ABR Loans may be converted as
provided herein, provided that (i) no ABR Loan may be converted into a
Eurodollar Loan when any Default or Event of Default has occurred and is
continuing and the General Administrative Agent or the Majority U.S. Lenders
have determined that such conversion is not appropriate, (ii) any such
conversion may only be made if, after giving effect thereto, subsection 10.3
shall not have been violated, (iii) no ABR Loan may be converted into a
Eurodollar Loan after the date that is one month prior to the Revolving Credit
Termination Date and (iv) Swing Line Loans may not be converted to Eurodollar
Loans.
(b) Any Eurodollar Loans may be continued as such upon the
expiration of the then current Interest Period with respect thereto by the
U.S. Borrower giving notice to the General Administrative Agent of the length
of the next Interest Period to be applicable to such Loans determined in
accordance with the applicable provisions of the term "Interest Period" set
forth in subsection 1.1, provided that no Eurodollar Loan may be continued as
such (i) when any Default or Event of Default has occurred and is continuing
and the General Administrative Agent or the Majority U.S. Lenders have
determined that such continuation is not appropriate, (ii) if, after giving
effect thereto, subsection 10.3 would be contravened or (iii) after the date
that is one month prior to the Revolving Credit Termination Date, and provided,
further, that if the U.S. Borrower shall fail to give such notice or if such
continuation is not permitted pursuant to the preceding proviso such Eurodollar
Loans shall be automatically converted to ABR Loans on the last day of such
then expiring Interest Period.
(c) Any Multicurrency Loans may be continued as such upon the
expiration of the then current Interest Period with respect thereto by the
U.S. Borrower or the relevant Foreign Subsidiary Borrower giving a Notice of
Multicurrency Loan Continuation, provided, that if the relevant Foreign
Subsidiary Borrower shall fail to give such Notice of Multicurrency Loan
Continuation, such Multicurrency Loans shall automatically be continued for an
Interest Period of one month.
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10.3 Minimum Amounts of Tranches. (a) All borrowings, conversions
and continuations of U.S. Revolving Credit Loans and Multicurrency Loans
hereunder and all selections of Interest Periods hereunder shall be in such
amounts and be made pursuant to such elections so that, after giving effect
thereto, (i) the aggregate principal amount of the Eurodollar Loans comprising
each Tranche shall be equal to $10,000,000 or a whole multiple of $1,000,000 in
excess thereof, (ii) the aggregate principal amount of the Multicurrency Loans
comprising each Tranche shall be in an amount of which the U.S. Dollar
Equivalent is at least $2,500,000 (determined at the time of borrowing or
continuation) and (iii) there shall not be more than 25 Tranches at any one
time outstanding.
(b) All Acceptances created hereunder, all conversions and
continuations thereof and all selections of maturity dates with respect
thereto shall be made pursuant to such elections so that, after giving effect
thereto, there shall be no more than 10 Acceptance Tranches at any one time
outstanding.
10.4 Optional and Mandatory Prepayments. (a) The U.S. Borrower
may at any time and from time to time prepay U.S. Revolving Credit Loans
and/or Swing Line Loans, in whole or in part without premium or penalty upon at
least three Business Days' irrevocable notice to the General Administrative
Agent (in the case of Eurodollar Loans) and at least one Business Day's
irrevocable notice to the General Administrative Agent (in the case of U.S.
Revolving Credit Loans that are ABR Loans) specifying the date and amount of
prepayment and whether the prepayment of U.S. Revolving Credit Loans is of
Eurodollar Loans, ABR Loans or a combination thereof, and, if a combination
thereof, the amount allocable to each. Upon the receipt of any such notice the
General Administrative Agent shall promptly notify each U.S. Lender thereof.
If any such notice is given, the amount specified in such notice shall be due
and payable on the date specified therein. Partial prepayments of the U.S.
Revolving Credit Loans shall be in an aggregate principal amount of $10,000,000
or a whole multiple of $1,000,000 in excess thereof. Partial prepayments of
the Swing Line Loans shall be in aggregate principal amount of $100,000 or a
whole multiple of $100,000 in excess thereof.
(b) The Canadian Borrower may at any time and from time to time
prepay, without premium or penalty, the Canadian Revolving Credit Loans, in
whole or in part, upon at least one Business Day's irrevocable notice to
the Canadian Administrative Agent specifying the date and amount of prepayment.
Upon the receipt of any such notice, the Canadian Administrative Agent shall
promptly notify each Canadian Lender thereof. If any such notice is given, the
amount specified in such notice shall be due and payable on the date specified
therein. Partial prepayments of Canadian Revolving Credit Loans shall be in an
aggregate principal amount of C$5,000,000 or a whole multiple of C$1,000,000 in
excess thereof (in the case of Canadian Revolving Credit Loans denominated in
Canadian Dollars) or U.S.$5,000,000 or a whole multiple of US$1,000,000 in
excess thereof (in the case of Canadian Revolving Credit Loans denominated in
U.S. Dollars.
(c) The U.S. Borrower and Foreign Subsidiary Borrowers may at any
time and from time to time prepay, without premium or penalty, the
Multicurrency Loans, in whole or in part, upon at least three Business Days'
irrevocable notice to the General Administrative Agent specifying the date
and amount of prepayment. Upon the receipt of any such notice, the General
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Administrative Agent shall promptly notify each Multicurrency Lender thereof.
If any such notice is given, the amount specified in such notice shall be due
and payable on the date specified therein. Partial prepayments of
Multicurrency Loans shall be in an aggregate principal amount of which the U.S.
Dollar Equivalent is at least $10,000,000 or a whole multiple of $1,000,000 in
excess thereof.
(d) If, at any time during the Revolving Credit Commitment
Period, for any reason the Aggregate Total Outstandings of all Lenders exceed
the Aggregate U.S. Revolving Credit Commitments then in effect by more than 5%,
or the Aggregate Committed Outstandings of any Lender exceeds the Revolving
Credit Commitment of such Lender then in effect by more than 5%, (i) the U.S.
Borrower shall, upon learning thereof or upon the request of the General
Administrative Agent, immediately prepay the Swing Line Loans and the U.S.
Revolving Credit Loans and/or (ii) the Canadian Borrower shall, upon learning
thereof or upon the request of the General Administrative Agent, immediately
prepay the Canadian Revolving Credit Loans and/or (iii) the Foreign Subsidiary
Borrowers shall, upon learning thereof or upon the request of the General
Administrative Agent, immediately prepay the Multicurrency Loans and/or (iv)
the Alternate Currency Borrower shall, upon learning thereof or upon the
request of the General Administrative Agent, immediately prepay Alternate
Currency Loans, in an aggregate principal amount at least sufficient to reduce
any such excess to 0%; provided, however, that nothing in this subsection shall
be construed as requiring the Canadian Borrower to so prepay in amounts (i)
that would be in violation of, and its obligations to so prepay are subject to,
the restrictions on financial assistance set out in the Business Corporations
Act (Ontario) or (ii) outstanding by way of Acceptances; and, provided,
further, that the preceding proviso shall not be construed in any way as
limiting or derogating from the obligations of the Borrowers (other than the
Canadian Borrower) set out in this subsection.
(e) Each prepayment of Loans pursuant to this subsection 10.4 shall be
accompanied by accrued and unpaid interest on the amount prepaid to the date of
prepayment and any amounts payable under subsection 10.11 in connection with
such prepayment.
(f) Notwithstanding the foregoing, mandatory prepayments of Revolving
Credit Loans, Multicurrency Loans or Alternate Currency Loans that would
otherwise be required pursuant to this subsection 10.4 solely as a result of
fluctuations in Exchange Rates from time to time shall only be required to be
made pursuant to this subsection 10.4 on the last Business Day of each month on
the basis of the Exchange Rate in effect on such Business Day.
(g) The U.S. Borrower shall prepay all Swing Line Loans then
outstanding simultaneously with each borrowing of U.S. Revolving Credit Loans.
10.5 Facility Fees; Other Fees. (a) The U.S. Borrower agrees to
pay to the General Administrative Agent for the account of each U.S.
Lender, a facility fee for the period from and including the Closing Date to
but excluding the Revolving Credit Termination Date (or such earlier date on
which the Revolving Credit Commitments shall terminate as provided herein);
each such facility fee shall be computed at the Facility Fee Rate on the amount
of the U.S. Revolving Credit Commitment of such U.S. Lender during the period
for which payment is made, payable quarterly in arrears on the last day of each
March, June, September and December
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and on the Revolving Credit Termination Date or such earlier date on which the
U.S. Revolving Credit Commitments shall terminate as provided herein,
commencing on the first such date to occur after the date hereof. Each
U.S. Common Lender and its Counterpart Lender may elect, upon notice to the
U.S. Borrowers and the Administrative Agents, to have all or a portion of the
facility fees owed to such U.S. Common Lender by the U.S. Borrower paid by the
Canadian Borrower in Canadian Dollars directly to the Canadian Administrative
Agent for the account of such U.S. Common Lender's Counterpart Lender. Each
U.S. Common Lender and its Counterpart Lender may make such election no more
often than once in any year. If any such election is made, amounts otherwise
due in U.S. Dollars in respect of facility fees shall be converted to Canadian
Dollars at the then Exchange Rate on the date which is one Business Day prior
to the date such amount is due.
(b) The U.S. Borrower shall pay (without duplication of any other fee
payable under this subsection 10.5) to Chase and CSI, for their respective
accounts, all fees separately agreed to by the U.S. Borrower and Chase or CSI,
as the case may be.
(c) The Canadian Borrower shall (without duplication of any other
fee payable under this subsection 10.5) pay to the Canadian Administrative
Agent all fees separately agreed to by the Canadian Borrower and the Canadian
Administrative Agent.
(d) The U.S. Borrower shall (without duplication of any other fee
payable under this subsection 10.5) pay to the General Administrative Agent all
fees separately agreed to by the U.S. Borrower and the General Administrative
Agent.
(e) In lieu of any letter of credit commissions and fees provided
for in any Letter of Credit Application (other than any standard
issuance, amendment and negotiation fees), the U.S. Borrower will pay the
General Administrative Agent, (i) for the account of the Issuing Lender, a
non-refundable fronting fee equal to 0.125% per annum and (ii) for the account
of the U.S. Lenders, a non-refundable Letter of Credit fee equal to the
Applicable Margin less 0.125%, in each case on the amount available to be drawn
under such Letter of Credit. Such fee shall be payable quarterly in arrears on
the last Business Day of each calendar quarter, and shall be calculated on the
average daily amount available to be drawn under the Letters of Credit.
(f) The U.S. Borrower agrees to pay the Issuing Lender for its own
account its customary administration, amendment, transfer and negotiation fees
charged by the Issuing Lender in connection with its issuance and
administration of Letters of Credit.
10.6 Computation of Interest and Fees. (a) Interest based on the
Eurodollar Rate or the Eurocurrency Rate shall be calculated on the
basis of a 360-day year for the actual days elapsed; and facility fees and
interest (other than interest based upon the Eurodollar Rate or the
Eurocurrency Rate) shall be calculated on the basis of a 365- (or 366-, as the
case may be) day year for the actual days elapsed. The General Administrative
Agent shall as soon as practicable notify the U.S. Borrower and the U.S.
Lenders of each determination of a Eurodollar Rate or a Eurocurrency Rate. Any
change in the interest rate on a Loan resulting from a change in the Alternate
Base Rate or a change in the Prime Rate shall become effective as of the
opening of business on the day on which such change becomes effective. The
General Administrative
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Agent shall as soon as practicable notify the U.S. Borrower and the Lenders of
the effective date and the amount of each such change in the Alternate Base
Rate, and the Canadian Administrative Agent shall as soon as practicable notify
the U.S. Borrower and Canadian Borrower and the Canadian Lenders of each such
change in the Prime Rate and the Canadian Base Rate. For purposes of the
Interest Act (Canada), whenever any interest under this Agreement is calculated
based on a period which is less than a year (the "Lesser Period"), the interest
rate determined pursuant to such calculation, when expressed as an annual rate,
is equivalent to (i) the applicable rate based on such Lesser Period, (ii)
multiplied by the actual number of days in the calendar year in which the
period for which such interest is payable ends, and (iii) divided by the number
of days in such Lesser Period. The rates of interest specified in this
Agreement are nominal rates and all interest payments and computations are to
be made without allowance or deduction for deemed reinvestment of interest.
(b) Each determination of an interest rate by the General Administrative
Agent or the Canadian Administrative Agent, as the case may be, pursuant to any
provision of this Agreement shall be conclusive and binding on the Borrowers
and the Lenders in the absence of manifest error. Each Administrative Agent
shall, at the request of a Borrower, deliver to such Borrower a statement
showing in reasonable detail the calculations used by such Administrative Agent
in determining any interest rate pursuant to subsection 10.1(a).
(c)(i) If any U.S. Reference Lender shall for any reason no longer have a
U.S. Revolving Credit Commitment or any U.S. Revolving Credit Loans, such U.S.
Reference Lender shall thereupon cease to be a U.S. Reference Lender, and if,
as a result, there shall only be one U.S. Reference Lender remaining, the
General Administrative Agent, with the consent of the U.S. Borrower (after
consultation with U.S. Lenders) shall, by notice to the U.S. Borrower and the
U.S. Lenders, designate another U.S. Lender as a U.S. Reference Lender so that
there shall at all times be at least two U.S. Reference Lenders.
(ii) If any Canadian Reference Lender shall for any reason no longer have a
Canadian Revolving Credit Commitment or any Canadian Revolving Credit Loans,
such Canadian Reference Lender shall thereupon cease to be a Canadian Reference
Lender, and if, as a result, there shall only be one Schedule I Canadian
Reference Lender or Schedule II Canadian Reference Lender (as the case may be)
remaining, the Canadian Administrative Agent, with the consent of the Canadian
Borrower (after consultation with the Schedule I Canadian Lenders or the
Schedule II Canadian Lenders, as applicable) shall, by notice to the Canadian
Borrower and the Canadian Lenders, designate another Schedule I Canadian Lender
or Schedule II Canadian Lender, as applicable, as a Schedule I Canadian
Reference Lender or a Schedule II Canadian Reference Lender, as applicable, so
that there shall at all times be at least two Schedule I Canadian Reference
Lenders and two Schedule II Canadian Reference Lenders.
(d) Each U.S. and Canadian Reference Lender shall use its best efforts to
furnish quotations of rates to the applicable Administrative Agent as
contemplated hereby. If any of the U.S. or Canadian Reference Lenders shall be
unable or shall otherwise fail to supply such rates to the applicable
Administrative Agent upon its request, the rate of interest shall, subject to
the provisions of subsection 10.7, be determined on the basis of the quotations
of the remaining U.S. or Canadian Reference Lenders or Reference Lender, as
applicable.
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10.7 Inability to Determine Interest Rate. If prior to the first
day of any Interest Period:
(a) the General Administrative Agent shall have determined (which
determination shall be conclusive and binding upon the Borrowers) that,
by reason of circumstances affecting the relevant market, adequate and
reasonable means do not exist for ascertaining the Eurodollar Rate or the
Eurocurrency Rate, as the case may be, for such Interest Period, or
(b) the General Administrative Agent has received notice from the
Majority U.S. Lenders that the Eurodollar Rate or Eurocurrency Rate, as
the case may be, determined or to be determined for such Interest Period
will not adequately and fairly reflect the cost to such U.S. Lenders of
making or maintaining their Eurodollar Loans or Multicurrency Loans, as
the case may be, during such Interest Period,
the General Administrative Agent shall give telecopy or telephonic notice
thereof to the U.S. Borrower and the U.S. Lenders as soon as practicable
thereafter. Until such time as the Eurodollar Rate or the Eurocurrency Rate,
as the case may be, can be determined by the General Administrative Agent in
the manner specified in the definitions of such terms in subsection 1.1, no
further Eurodollar Loans or Multicurrency Loans (with respect to the Available
Currency for which the Eurocurrency Rate cannot be determined only) shall be
continued as such at the end of the then current Interest Periods or (other
than any Eurodollar Loans or Multicurrency Loans previously requested and with
respect to which the Eurodollar Rate or Eurocurrency Rate, as the case may be,
was determined) shall be made, nor shall the U.S. Borrower have the right to
convert ABR Loans into Eurodollar Loans.
10.8 Pro Rata Treatment and Payments. (a) (i) Except as provided in
subsections 2.5 and 18.21, each borrowing of U.S. Revolving Credit Loans by the
U.S. Borrower from the U.S. Lenders hereunder shall be made pro rata according
to the Funding Commitment Percentages of the U.S. Lenders in effect on the date
of such borrowing. Each payment by the U.S. Borrower on account of any
facility fee hereunder shall be allocated by the General Administrative Agent
among the U.S. Lenders in accordance with the respective amounts which such
U.S. Lenders are entitled to receive pursuant to subsection 10.5(a). Any
reduction of the U.S. Revolving Credit Commitments of the U.S. Lenders shall be
allocated by the General Administrative Agent among the U.S. Lenders pro rata
according to the U.S. Revolving Credit Commitment Percentages of the U.S.
Lenders. Except as provided in subsection 2.5 or subsection 10.4(d), each
payment (other than any optional prepayment) by the U.S. Borrower on account of
principal of or interest on the U.S. Revolving Credit Loans or the CAF Advances
shall be allocated by the General Administrative Agent pro rata according to
the respective principal amounts thereof then due and owing to each U.S.
Lender. Each optional prepayment by the U.S. Borrower on account of principal
of or interest on the U.S. Revolving Credit Loans shall be allocated by the
General Administrative Agent pro rata according to the respective outstanding
principal amounts thereof. All payments (including prepayments) to be made by
the U.S. Borrower hereunder (other than with respect to Multicurrency Loans),
whether on account of principal, interest, fees or otherwise, shall be made
without set-off or counterclaim and shall be made prior to 12:00 Noon, New York
City time, on the due date thereof to the General
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Administrative Agent, for the account of the U.S. Lenders, at the General
Administrative Agent's office specified in subsection 18.2, in Dollars and in
immediately available funds. The General Administrative Agent shall distribute
such payments to the U.S. Lenders entitled to receive the same promptly upon
receipt in like funds as received.
(ii) Each borrowing of Canadian Revolving Credit Loans by the Canadian
Borrower from the Canadian Lenders hereunder shall be made, and any reduction
of the Canadian Revolving Credit Commitments of the Canadian Lenders shall be
allocated by the Canadian Administrative Agent, pro rata according to the
Canadian Revolving Credit Commitment Percentages of the Canadian Lenders.
Except as provided in subsection 10.4(d), each payment (other than any optional
prepayment) by the Canadian Borrower on account of principal of or interest on
the Canadian Revolving Credit Loans shall be allocated by the Canadian
Administrative Agent pro rata according to the respective principal amounts of
the Canadian Revolving Credit Loans then due and owing to each Canadian Lender.
Each optional prepayment by the Canadian Borrower on account of principal of
or interest on the Canadian Revolving Credit Loans shall be allocated by the
Canadian Administrative Agent pro rata according to the respective outstanding
principal amounts thereof. All payments (including prepayments) to be made by
the Canadian Borrower hereunder, whether on account of principal, interest,
fees or otherwise, shall be made without set-off or counterclaim and shall be
made prior to 12:00 Noon, Toronto time, on the due date thereof to the Canadian
Administrative Agent, for the account of the Canadian Lenders, at the Canadian
Administrative Agent's office specified in subsection 18.2, in Canadian Dollars
and in immediately available funds. The Canadian Administrative Agent shall
distribute such payments to the Canadian Lenders entitled to receive the same
promptly upon receipt in like funds as received.
(iii) Each borrowing of Multicurrency Loans by the U.S. Borrower or
any Foreign Subsidiary Borrower shall be made, and any reduction of the
Multicurrency Commitments shall be allocated by the General Administrative
Agent, pro rata according to the Multicurrency Commitment Percentages of the
Multicurrency Lenders. Except as provided in subsection 10.4(d), each payment
(including each prepayment) by the U.S. Borrower or a Foreign Subsidiary
Borrower on account of principal of and interest on Multicurrency Loans shall
be allocated by the General Administrative Agent pro rata according to the
respective principal amounts of the Multicurrency Loans then due and owing by
such Foreign Subsidiary Borrower to each Multicurrency Lender. All payments
(including prepayments) to be made by a Borrower hereunder in respect of
Multicurrency Loans, whether on account of principal, interest, fees or
otherwise, shall be made without set-off or counterclaim and shall be made at
or before the payment time for the currency of such Multicurrency Loan set
forth in the Administrative Schedule, on the due date thereof to the General
Administrative Agent, for the account of the Multicurrency Lenders, at the
payment office for the currency of such Multicurrency Loan set forth in the
Administrative Schedule, in the currency of such Multicurrency Loan and in
immediately available funds. The General Administrative Agent shall distribute
such payments to the Multicurrency Lenders entitled to receive the same
promptly upon receipt in like funds as received.
(iv) If any payment hereunder (other than payments on the Eurodollar
Loans, the Multicurrency Loans and the Acceptances) becomes due and payable on
a day other than a
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Business Day, the maturity of such payment shall be extended to the next
succeeding Business Day, and, with respect to payments of principal, interest
thereon shall be payable at the then applicable rate during such extension. If
any payment on a Eurodollar Loan or a Multicurrency Loan becomes due and
payable on a day other than a Business Day, the maturity of such payment shall
be extended to the next succeeding Business Day (and, with respect to payments
of principal, interest thereon shall be payable at the then applicable rate
during such extension) unless the result of such extension would be to extend
such payment into another calendar month, in which event such payment shall be
made on the immediately preceding Business Day. Acceptances may only mature on
a Business Day.
(b) Unless the applicable Administrative Agent shall have been
notified in writing by any Lender prior to a Borrowing Date that such
Lender will not make the amount that would constitute its share of such
borrowing available to such Administrative Agent, such Administrative Agent may
assume that such Lender is making such amount available to such Administrative
Agent, and such Administrative Agent may, in reliance upon such assumption,
make available to the applicable Borrower a corresponding amount. If such
amount is not made available to such Administrative Agent by the required time
on the Borrowing Date therefor, such Lender shall pay to such Administrative
Agent, on demand, such amount with interest thereon at a rate per annum equal
to (i) the daily average Federal Funds Effective Rate (in the case of a
borrowing of U.S. Revolving Credit Loans or CAF Advances), (ii) the Canadian
Administrative Agent's reasonable estimate of its average daily cost of funds
(in the case of a borrowing of Canadian Revolving Credit Loans or Acceptances)
and (iii) the General Administrative Agent's reasonable estimate of its average
daily cost of funds (in the case of a borrowing of Multicurrency Loans), in
each case for the period until such Lender makes such amount immediately
available to such Administrative Agent. A certificate of such Administrative
Agent submitted to any Lender with respect to any amounts owing under this
subsection shall be conclusive in the absence of manifest error. If such
Lender's share of such borrowing is not made available to such Administrative
Agent by such Lender within three Business Days of such Borrowing Date, the
applicable Borrower shall repay such Lender's share of such borrowing (together
with interest thereon from the date such amount was made available to such
Borrower (i) at the rate per annum applicable to ABR Loans hereunder (in the
case of amounts made available to the U.S. Borrower and amounts made available
in U.S. Dollars to the Canadian Borrower), (ii) at the rate per annum
applicable to Prime Rate Loans hereunder (in the case of amounts made available
in Canadian Dollars to the Canadian Borrower) and (iii) the General
Administrative Agent's reasonable estimate of its average daily cost of funds
plus the Applicable Margin applicable to Multicurrency Loans (in the case of a
borrowing of Multicurrency Loans)) to such Administrative Agent not later than
three Business Days after receipt of written notice from such Administrative
Agent specifying such Lender's share of such borrowing that was not made
available to such Administrative Agent. Nothing contained in this subsection
10.8(b) shall prejudice any claims otherwise available to any Borrower against
any Lender as a result of such Lender's failure to make its share of any
borrowing available to an Administrative Agent for the account of a Borrower.
10.9 Illegality. (i) Notwithstanding any other provision herein,
if the adoption of or any change in any Requirement of Law or in the
interpretation or application thereof shall make it unlawful for any
Lender to make or maintain Eurodollar Loans or Multicurrency Loans
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as contemplated by this Agreement, (a) the commitment of such Lender hereunder
to make Eurodollar Loans or Multicurrency Loans, continue Eurodollar Loans or
Multicurrency Loans as such and convert ABR Loans to Eurodollar Loans shall
forthwith be cancelled until such time as it shall no longer be unlawful for
such Lender to make or maintain the affected Loans, (b) such Lender's Loans
then outstanding as Eurodollar Loans, if any, shall be converted automatically
to ABR Loans on the respective last days of the then current Interest Periods
with respect to such Eurodollar Loans or within such earlier period as may be
required by law and (c) such Lender's Multicurrency Loans shall be prepaid on
the last day of the then current Interest Period with respect thereto. If any
such conversion of a Eurodollar Loan occurs on a day which is not the last day
of the then current Interest Period Interest Period with respect thereto, the
U.S. Borrower shall pay to such Lender such amounts, if any, as may be required
pursuant to subsection 10.11.
(ii) Notwithstanding any other provision herein, if the adoption of
or any change in any Requirement of Law or in the interpretation or application
thereof shall make it unlawful for any Canadian Lender to create or maintain
Acceptances as contemplated by this Agreement, (a) the commitment of such
Canadian Lender hereunder to accept Drafts, purchase Acceptances, continue
Acceptances as such and convert Canadian Revolving Credit Loans to Acceptances
shall forthwith be cancelled until such time as it shall no longer be unlawful
for such Canadian Lender to create or maintain Acceptances and (b) such
Canadian Lender's then outstanding Acceptances, if any, shall be converted
automatically to Prime Rate Loans on the respective maturities thereof or
within such earlier period as may be permitted and required by law.
(iii) Notwithstanding any other provision herein, if the adoption of
or any change in any Requirement of Law or in the interpretation or application
thereof shall make it unlawful for any Canadian Lender to make or maintain
Canadian Base Rate Loans, (a) the commitment of such Canadian Lender hereunder
to make Canadian Base Rate Loans shall forthwith be cancelled until such time
as it shall no longer be unlawful for such Canadian Lender to make or maintain
Canadian Base Rate Loans and (b) such Canadian Lender's then outstanding
Canadian Base Rate Loans, if any, shall be converted automatically to Canadian
Dollars and Prime Rate Loans on the respective maturities thereof or within
such earlier period as may be permitted and required by law.
10.10 Requirements of Law. (a) In the event that any Requirement
of Law (or any change therein or in the interpretation or application thereof)
or compliance by any Lender with any request or directive (whether or not having
the force of law) from any central bank or other Governmental Authority:
(i) does or shall subject any Lender to any tax of any kind
whatsoever with respect to this Agreement, any Note, any Acceptance
created by it, any Letter of Credit issued or participated in by it or
any Loans made by it, or change the basis of taxation of payments to such
Lender of principal, fees, interest or any other amount payable
hereunder (except for taxes covered by subsection 10.12 and changes in
the rate of tax on the overall net income of such Lender);
(ii) does or shall impose, modify or hold applicable any
reserve, special deposit, compulsory loan or similar requirement against
assets held by, or deposits or
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other liabilities in or for the account of, advances or loans by, or
other credit extended by, or any other acquisition of funds by, any
office of such Lender which are not otherwise included in the
determination of the Eurodollar Rate or Eurocurrency Rate, including,
without limitation, the imposition of any reserves with respect to
Eurocurrency Liabilities under Regulation D of the Board; or
(iii) does or shall impose on such Lender any other condition;
and the result of any of the foregoing is to increase the cost to such Lender,
by any amount which such Lender deems to be material, of making, renewing or
maintaining advances or extensions of credit or to reduce any amount receivable
hereunder, in each case in respect of its Loans, its Acceptances or its
Participating Interests, then, in any such case, the applicable Borrower shall
promptly pay such Lender, upon receipt of its demand setting forth in
reasonable detail, any additional amounts necessary to compensate such Lender
for such additional cost or reduced amount receivable, such additional amounts
together with interest on each such amount from the date two Business Days
after the date demanded until payment in full thereof at the ABR. A
certificate as to any additional amounts payable pursuant to the foregoing
sentence submitted by such Lender, through the General Administrative Agent, to
the applicable Borrower shall be conclusive in the absence of manifest error.
This covenant shall survive the termination of this Agreement and payment of
all amounts outstanding hereunder.
(b) In the event that any Lender shall have determined that the
adoption of any law, rule, regulation or guideline regarding capital adequacy
(or any change therein or in the interpretation or application thereof) or
compliance by any Lender or any corporation controlling such Lender with any
request or directive regarding capital adequacy (whether or not having the
force of law) from any central bank or Governmental Authority, including,
without limitation, the issuance of any final rule, regulation or guideline,
does or shall have the effect of reducing the rate of return on such Lender's
or such corporation's capital as a consequence of its obligations hereunder to
a level below that which such Lender or such corporation could have achieved
but for such adoption, change or compliance (taking into consideration such
Lender's or such corporation's policies with respect to capital adequacy) by an
amount deemed by such Lender to be material, then from time to time, after
submission by such Lender to the U.S. Borrower (with a copy to the
Administrative Agent) of a written request therefor, the U.S. Borrower shall
promptly pay to such Lender such additional amount or amounts as will
compensate such Lender for such reduction.
(c) If the obligation of any Lender to make Eurodollar Loans or
Multicurrency Loans has been suspended pursuant to subsection 10.7 or 10.9 for
more than three consecutive months or any Lender has demanded compensation
under subsection 10.10(a) or 10.10(b), the U.S. Borrower shall have the right
to substitute a financial institution or financial institutions (which may be
one or more of the Lenders) reasonably satisfactory to the General
Administrative Agent by causing such financial institution or financial
institutions to purchase the rights (by paying to such Lender the principal
amount of its outstanding Loans together with accrued interest thereon and all
other amounts accrued for its account or owed to it hereunder and executing an
Assignment and Acceptance) and to assume the obligations of such Lender under
the Loan Documents. Upon such purchase and assumption by such substituted
financial
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institution or financial institutions, the obligations of such Lender
hereunder shall be discharged; provided such Lender shall retain its rights
hereunder with respect to periods prior to such substitution including, without
limitation, its rights to compensation under this subsection 10.10.
10.11 Indemnity. Each Borrower agrees to indemnify each Lender and
to hold each Lender harmless from any loss or expense which such Lender may
sustain or incur as a consequence of (a) default by such Borrower in
payment when due of the principal amount of or interest on any Loans of such
Lender, (b) default by such Borrower in making a borrowing or conversion after
the Borrower has given a notice of borrowing or a notice of conversion in
accordance with this Agreement, (c) default by such Borrower in making any
prepayment after such Borrower has given a notice in accordance with this
Agreement, (d) the making of a prepayment of a Eurodollar Loan or Multicurrency
Loan on a day which is not the last day of an Interest Period with respect
thereto, or (e) the prepayment of an Acceptance or an Acceptance Note on a day
which is not the maturity date thereof, including, without limitation, in each
case, any such loss or expense arising from the reemployment of funds obtained
by it to maintain its Eurodollar Loans or Multicurrency Loans hereunder or from
fees payable to terminate the deposits from which such funds were obtained. A
certificate as to any such loss or expense submitted by such Lender shall be
conclusive, absent manifest error. This covenant shall survive termination of
this Agreement and payment of all amounts outstanding hereunder.
10.12 Taxes. (a) All payments made by any Borrower under this
Agreement shall be made free and clear of, and without reduction or
withholding for or on account of, any present or future income, stamp or other
taxes, levies, imposts, duties, charges, fees, deductions or withholdings, now
or hereafter imposed, levied, collected, withheld or assessed by any
Governmental Authority excluding, in the case of each Administrative Agent and
each Lender, income or franchise taxes imposed on such Administrative Agent or
such Lender by the jurisdiction under the laws of which such Administrative
Agent or such Lender is organized or any political subdivision or taxing
authority thereof or therein or by any jurisdiction in which such Lender's
lending office is located or any political subdivision or taxing authority
thereof or therein or as a result of a connection between such Lender and any
jurisdiction other than a connection resulting solely from entering into this
Agreement (all such non-excluded taxes, levies, imposts, deductions, charges or
withholdings being thereinafter called "Taxes"). Subject to the provisions of
subsection 10.12(d), if any Taxes are required to be withheld from any amounts
payable by such Borrower to any Administrative Agent or any Lender hereunder or
under the Notes, the amounts so payable to such Administrative Agent or such
Lender shall be increased to the extent necessary to yield to such
Administrative Agent or such Lender (after payment of all Taxes) interest or
any such other amounts payable hereunder at the rates or in the amounts
specified in this Agreement and the Notes. Whenever any Taxes are paid by any
Borrower with respect to payments made in connection with this Agreement, as
promptly as possible thereafter, such Borrower shall send to the applicable
Administrative Agent for its own account or for the account of such Lender, as
the case may be, a certified copy of an original official receipt received by
such Borrower showing payment thereof. Subject to the provisions of subsection
10.12(d), if any Borrower fails to pay any Taxes when due to the appropriate
taxing authority or fails to remit to the applicable Administrative Agent the
required receipts or other required documentary evidence, such Borrower shall
indemnify such Administrative Agent
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and the Lenders for any incremental taxes, interest or penalties that may
become payable by such Administrative Agent or any Lenders as a result of any
such failure.
(b) Each U.S. Lender that is not incorporated or organized under the
laws of the United States of America or a state thereof agrees that, prior to
the first date any payment is due to be made to it hereunder or under any
Note, it will deliver to the U.S. Borrower and the General Administrative Agent
(i) two valid, duly completed copies of United States Internal Revenue Service
Form 1001 or 4224 or successor applicable form, as the case may be, certifying
in each case that such Lender is entitled to receive payments by the U.S.
Borrower under this Agreement and the Notes payable to it, without deduction or
withholding of any United States federal income taxes, and (ii) a valid, duly
completed Internal Revenue Service Form W-8 or W-9 or successor applicable
form, as the case may be, to establish an exemption from United States backup
withholding tax. Each Lender which delivers to the U.S. Borrower and the
General Administrative Agent a Form 1001 or 4224 and Form W-8 or W-9 pursuant
to the next preceding sentence further undertakes to deliver to the U.S.
Borrower and the General Administrative Agent two further copies of the said
Form 1001 or 4224 and Form W-8 or W-9, or successor applicable forms, or other
manner or certification, as the case may be, on or before the date that any
such form expires or becomes obsolete or otherwise is required to be
resubmitted as a condition to obtaining an exemption from withholding tax, or
after the occurrence of any event requiring a change in the most recent form
previously delivered by it to the U.S. Borrower, and such extensions or
renewals thereof as may reasonably be requested by the U.S. Borrower,
certifying in the case of a Form 1001 or 4224 that such Lender is entitled to
receive payments by the U.S. Borrower under this Agreement without deduction or
withholding of any United States federal income taxes, unless any change in
treaty, law or regulation or official interpretation thereof has occurred prior
to the date on which any such delivery would otherwise be required which
renders all such forms inapplicable or which would prevent such Lender from
duly completing and delivering any such letter or form with respect to it and
such Lender advises the U.S. Borrower that it is not capable of receiving
payments without any deduction or withholding of United States federal income
tax, and in the case of a Form W-8 or W-9, establishing an exemption from
United States backup withholding tax.
(c) Each Lender shall, upon request by a Foreign Subsidiary Borrower
(or the U.S. Borrower on its behalf), within a reasonable period of time after
such request, deliver to the Foreign Subsidiary Borrower or the applicable
governmental or taxing authority, as the case may be, any form or certificate
required in order that any payment by the Foreign Subsidiary Borrower under
this Agreement or any Notes to such Lender may be made free and clear of, and
without deduction or withholding for or on account of any Taxes (or to allow
any such deduction or withholding to be at a reduced rate) imposed on such
payment under the laws of the jurisdiction under which such Foreign Subsidiary
Borrower is incorporated or organized, provided that such Lender is legally
entitled to complete, execute and deliver such form or certificate and in such
Lender's reasonable judgment such completion, execution or submission would not
materially prejudice the legal position of such Lender.
(d) Neither the U.S. Borrower nor any other Borrower shall be
required to pay any additional amounts to the General Administrative Agent or
any Lender (or Transferee except to the extent such Transferee's
transferor was entitled, at the time of transfer, to receive
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additional amounts from the U.S. Borrower) in respect of Taxes pursuant
to subsection 10.12(a) if (i) the obligation to pay such additional amounts
would not have arisen but for a failure by the General Administrative Agent or
such Lender (or Transferee) to comply with the requirements of subsection
10.12(b) or (c) (or in the case of a Transferee, the requirements of subsection
18.6(h)).
(e) Each Multicurrency Lender that is not incorporated or organized
under the laws of the jurisdiction under which a Foreign Subsidiary Borrower is
incorporated or organized shall, upon request by such Foreign Subsidiary
Borrower, within a reasonable period of time after such request, deliver to
such Foreign Subsidiary Borrower or the applicable governmental or taxing
authority, as the case may be, any form or certificate required in order that
any payment by such Foreign Subsidiary Borrower under this Agreement to such
Lender may be made free and clear of, and without deduction or withholding for
or on account of any Taxes (or to allow any such deduction or withholding to be
at a reduced rate) imposed on such payment under the laws of the jurisdiction
under which such Foreign Subsidiary Borrower is incorporated or organized,
provided that such Multicurrency Lender is legally entitled to complete,
execute and deliver such form or certificate and in such Lender's reasonable
judgment such completion, execution or submission would not materially
prejudice the legal position of such Multicurrency Lender.
(f) The Canadian Borrower shall not be requested to pay any additional
amounts pursuant to this subsection 10.12 to any Canadian Lender in respect of
any time after which such Canadian Lender has ceased to maintain its status as
a resident of Canada for the purposes of the Tax Act.
(g) Each Lender agrees to use reasonable efforts (including
reasonable efforts to change its lending office) to avoid or to minimize any
amounts which might otherwise be payable pursuant to this subsection
10.12; provided, however, that such efforts shall not impose on such Lender any
additional costs or legal or regulatory burdens deemed by such Lender in its
reasonable judgment to be material.
(h) The agreements in subsection 10.12(a) shall survive the
termination of this Agreement and the payment of the Notes and all other
amounts payable hereunder until the expiration of the applicable statute of
limitations for such taxes.
10.13 Assignment of Commitments Under Certain Circumstances. (a)
In the event that any Lender shall have delivered a notice or certificate
pursuant to subsection 10.10 or any Borrower has been required to pay any Taxes
in respect of any Lender pursuant to subsection 10.12, the U.S. Borrower shall
have the right, at its own expense, upon notice to such Lender and the General
Administrative Agent, to require such Lender to transfer and assign without
recourse (in accordance with and subject to the restrictions contained in
subsection 18.6) all its interests, rights and obligations under this
Agreement to another bank or financial institution identified by the U.S.
Borrower and reasonably acceptable to the General Administrative Agent (subject
to the restrictions contained in subsection 18.6) which shall assume such
obligations; provided that (i) no such assignment shall conflict with any law,
rule or regulation or order of any Governmental Authority and (ii) the Borrower
or the assignee, as the
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case may be, shall pay to the transferor Lender in immediately available funds
on the date of such assignment the principal of and interest accrued to the
date of payment on the Loans made by it hereunder and all other amounts accrued
for its account or owed to it hereunder, including, without limitation, amounts
payable pursuant to subsection 10.10 and any amounts that would be payable
under Subsection 10.11 if such amount were a prepayment made in the amount and
on the date of such assignment.
(b) In the event that any Multicurrency Lender (including a
Transferee) does not, for any reason, deliver all forms and certificates
required to permit all payments by all Foreign Subsidiary Borrowers
hereunder to be made free and clear of, and without deduction or withholding
for or on account of, any Taxes, the U.S. Borrower may, so long as no Event of
Default has occurred and is continuing, require such Multicurrency Lender, upon
five Business Days' prior written notice from the U.S. Borrower, to assign the
entire then outstanding principal amount of the Multicurrency Loans owing to
such Multicurrency Lender and the entire Multicurrency Commitment of such
Multicurrency Lender to one or more Lenders selected by the U.S. Borrower
which, after giving effect to such assignment, will have a U.S. Revolving
Credit Commitment in excess of its Multicurrency Commitment. In the case of
any such assignment to another Lender, such assignee Lender shall assign to
such assignor Multicurrency Lender a principal amount of outstanding U.S.
Revolving Credit Loans owing to such assignee Lender equal to the lesser of (i)
the U.S. Dollar Equivalent of the amount of Multicurrency Loans assigned to
such assignee Lender and (ii) the aggregate outstanding principal amount of
U.S. Revolving Credit Loans owing to such assignee Lender. Any such
assignments pursuant to the two precedent sentences shall be effected in
accordance with subsection 18.6(c) and, as a condition to such assignment,
simultaneously with such assignment, the U.S. Borrower shall pay or cause to be
paid all amounts due to the assignor Multicurrency Lender and the assignee
Lender hereunder on the effective date of such assignments.
10.14 Use of Proceeds. The proceeds of the Loans shall be used for
general corporate purposes of the U.S. Borrower and its Subsidiaries, including
acquisitions permitted hereunder.
SECTION 11. REPRESENTATIONS AND WARRANTIES
To induce the Lenders to enter into this Agreement and to make the
Loans, and to induce the Issuing Lender to issue Letters of Credit, each
Borrower hereby represents and warrants to each Administrative Agent and to
each Lender that:
11.1 Financial Statements. The audited consolidated balance sheets
of the U.S. Borrower as of December 31, 1995 and the related statements of
income and cash flow for the fiscal year ending on such date, heretofore
furnished to the General Administrative Agent and the Lenders and certified by
a Responsible Officer of the U.S. Borrower are complete and correct in all
material respects and fairly present the financial condition of the U.S.
Borrower on such date in conformity with GAAP applied on a consistent basis
(subject to normal year-end adjustments). All liabilities, direct and
contingent, of the U.S. Borrower on such date required to be disclosed pursuant
to GAAP are disclosed in such financial statements.
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11.2 No Change. There has been no material adverse change in the
business, operations, assets or financial or other condition of the U.S.
Borrower and its Subsidiaries taken as a whole from that reflected on the
financial statements dated December 31, 1995 referred to in subsection 11.1.
11.3 Corporate Existence; Compliance with Law. The U.S. Borrower and
each of its Material Subsidiaries (a) is duly organized, validly existing and
in good standing (or the functional equivalent thereof in the case of Foreign
Subsidiaries) under the laws of the jurisdiction of its organization, (b) has
the corporate power and authority, and the legal right, to own and operate its
property, to lease the property it operates as lessee and to conduct the
business in which it is currently engaged, (c) is duly qualified as a foreign
corporation and in good standing (or the functional equivalent thereof in the
case of Foreign Subsidiaries) under the laws of each jurisdiction where its
ownership, lease or operation of property or the conduct of its business
requires such qualification except where the failure to be so qualified and in
good standing would not, individually or in the aggregate, have a material
adverse effect on the business, operations, property or financial or other
condition of the U.S. Borrower and its Subsidiaries taken as a whole and would
not adversely affect the ability of any Loan Party to perform its respective
obligations under the Loan Documents to which it is a party and (d) is in
compliance with all Requirements of Law, except to the extent that the failure
to comply therewith would not reasonably be expected to have, individually or
in the aggregate, a material adverse effect on the business, operations, assets
or financial or other condition of the U.S. Borrower and its Subsidiaries taken
as a whole and would not reasonably be expected to adversely affect the ability
of any Loan Party to perform its obligations under the Loan Documents to which
it is a party.
11.4 Corporate Power; Authorization; Enforceable Obligations. (a)
Each Loan Party has the corporate power and authority, and the legal right, to
execute, deliver and perform each of the Loan Documents to which it is a party
or to which this Agreement requires it to become a party. The U.S.
Borrower has the corporate power and authority to borrow hereunder and has
taken all necessary corporate action to authorize the borrowings on the terms
and conditions of this Agreement and the U.S. Revolving Credit Notes. The
Canadian Borrower has the corporate power and authority to borrow hereunder and
has taken all necessary corporate action to authorize the borrowings on the
terms and conditions of this Agreement and the Canadian Revolving Credit Notes.
Each Loan Party has taken all necessary corporate action to authorize the
execution, delivery and performance of each of the Loan Documents to which it
is a party or to which this Agreement requires it to become a party.
(b) No consent or authorization of, filing with or other act by or in
respect of any Person (including, without limitation, any Governmental
Authority) is required in connection with the borrowings hereunder or with the
execution, delivery, performance, validity or enforceability of the Loan
Documents or the consummation of any of the transactions contemplated hereby or
thereby, except for consents, authorizations, or filings which have been
obtained and are in full force and effect.
(c) This Agreement and each other Loan Document to which any Loan
Party is a party has been, and each other Loan Document to be executed by a
Loan Party hereunder will be,
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duly executed and delivered on behalf of such Loan Party. This Agreement and
each other Loan Document to which any Loan Party is a party constitutes, and
each other Loan Document to be executed by a Loan Party hereunder will
constitute, a legal, valid and binding obligation of such Loan Party
enforceable against such Loan Party in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally and by general equitable principles (whether
enforcement is sought by proceedings in equity or at law).
11.5 No Legal Bar; Senior Debt. The execution, delivery and
performance by each Loan Party of the Loan Documents to which it is a party,
the borrowings hereunder and the use of the proceeds thereof, (a) will not
violate any Requirement of Law or any Contractual Obligation of the U.S.
Borrower or any other Loan Party (including, without limitation, the Senior
Subordinated Note Indenture, the 9 1/2% Note Indenture and the Subordinated
Note Indenture) except for violations of Requirements of Law and Contractual
Obligations (other than such Indentures) which, individually or in the
aggregate will not have a material adverse effect on the business, operations,
property or financial or other condition of the U.S. Borrower and its
Subsidiaries taken as a whole and will not adversely affect the ability of any
Loan Party to perform its obligations under any of the Loan Documents to which
it is a party and (b) will not result in, or require, the creation or
imposition of any Lien (other than the Liens created by the Security Documents)
on any of its or their respective properties or revenues pursuant to any
Requirement of Law or Contractual Obligation. The Obligations of the U.S.
Borrower constitute "Senior Indebtedness" benefitting from the subordination
provisions contained in the Subordinated Debt, except to the extent that such
Obligations are owed to an Affiliate of the U.S. Borrower.
11.6 No Material Litigation. No litigation, investigation or
proceeding of or before any arbitrator or Governmental Authority is pending or,
to the knowledge of the U.S. Borrower, overtly threatened by or against the
U.S. Borrower or any of its Subsidiaries or against any of its or their
respective properties or revenues (a) with respect to any Loan Document or any
of the transactions contemplated hereby or thereby, (b) which would reasonably
be expected to have a material adverse effect on the business, operations,
property or financial or other condition of the U.S. Borrower and its
Subsidiaries taken as a whole or (c) which would be reasonably expected to
adversely affect the ability of any Loan Party to perform its obligations under
any of the Loan Documents to which it is a party.
11.7 No Default. Neither the U.S. Borrower nor any of its
Subsidiaries is in default under or with respect to any Contractual
Obligation or any order, award or decree of any Governmental Authority or
arbitrator binding upon it or any of its properties in any respect which would
have a material adverse effect on the business, operations, property or
financial or other condition of the U.S. Borrower and its Subsidiaries taken as
a whole or which would adversely affect the ability of any Loan Party to
perform its obligations under any of the Loan Documents to which it is a party.
No Default or Event of Default has occurred and is continuing.
11.8 Ownership of Property; Liens. The U.S. Borrower and each of its
Material Subsidiaries has good record and marketable title in fee simple to, or
a valid and subsisting
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leasehold interest in all its material real property, and good title to all
its other property, and none of such property is subject to any Lien, except
as permitted in subsection 14.3.
11.9 Taxes. (a) The U.S. Borrower and each of its Material
Subsidiaries has filed or caused to be filed all tax returns which to the
knowledge of the U.S. Borrower are required to be filed and has paid all
taxes shown to be due and payable on said returns or on any assessments made
against it or any of its property and all other taxes, fees or other charges
imposed on it or any of its property by any Governmental Authority (other than
those which, in the aggregate, are not substantial in amount or those the
amount or validity of which are currently being contested in good faith by
appropriate proceedings and with respect to which reserves in conformity with
GAAP have been provided on the books of the U.S. Borrower or its Subsidiaries,
as the case may be and except insofar as the failure to make such filings or
payments would not reasonably be expected to have a material adverse effect on
the business, operations, property or financial condition of the U.S. Borrower
and its Subsidiaries taken as a whole); and (b) no tax lien (other than a Lien
permitted in subsection 14.3) has been filed and, to the knowledge of the U.S.
Borrower, no claim is being asserted with respect to any such tax, fee or other
charge.
11.10 Securities Law, etc. Compliance. All transactions
contemplated by this Agreement and the other Loan Documents comply in all
material respects with all applicable laws and any rules and regulations
thereunder, including takeover, disclosure and other federal, state and
foreign securities law and Regulations G, T, U and X of the Federal Reserve
Board.
11.11 ERISA. As to each Plan other than a Multiemployer Plan,
neither a Reportable Event nor an "accumulated funding deficiency" (within the
meaning of Section 412 of the Code or Section 302 of ERISA) has occurred
during the five-year period prior to the date on which this representation is
made or deemed made with respect to any Plan, and each Plan has complied in all
material respects with the applicable provisions of ERISA and the Code. No
termination of a Single Employer Plan has occurred and no Lien under the Code
or ERISA in favor of PBGC or a Single Employer Plan has arisen during the
five-year period prior to the date as of which this representation is deemed
made. The present value of all accrued benefits under each Single Employer
Plan maintained by the U.S. Borrower or any Commonly Controlled Entity (based
on those assumptions used to fund the Plans) did not, as of the last annual
valuation date prior to the date on which this representation is made or deemed
made, exceed the value of the assets of such Plan allocable to such accrued
benefits, either individually or in the aggregate with all other Single
Employer Plans under which such accrued benefits exceed such assets, by more
than $25,000,000. Neither the U.S. Borrower nor any Commonly Controlled Entity
has had a complete or partial withdrawal from any Multiemployer Plan during the
five year period prior to the date as of which this representation is made or
deemed made, and neither the U.S. Borrower nor any Commonly Controlled Entity
would become subject to liability under ERISA in the aggregate which exceeds
$25,000,000 if the U.S. Borrower or any such Commonly Controlled Entity were to
withdraw completely from all Multiemployer Plans as of the valuation date most
closely preceding the date hereof, and no such withdrawal is likely to occur.
No such Multiemployer Plan is in Reorganization or Insolvent. The present
value (determined using actuarial and other assumptions which are reasonable in
respect of the benefits provided and the employees participating) of the
liability of the U.S. Borrower and each Commonly Controlled Entity for post
retirement benefits to be provided to their current and former employees under
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Plans which are welfare benefit plans (as defined in Section 3(1) of ERISA)
does not, in the aggregate, exceed the assets under all such Plans allocable to
such benefits by an amount in excess of $145,000,000.
11.12 Investment Company Act; Other Regulations. The U.S. Borrower
is not an "investment company" within the meaning of the Investment Company
Act of 1940, as amended. The U.S. Borrower is not subject to regulation
under any federal or state statute or regulation which limits its ability to
incur Indebtedness.
11.13 Subsidiaries, etc. The only Subsidiaries of the U.S. Borrower
as of the Closing Date are those listed on Schedule VI. The U.S. Borrower
owns, as of the Closing Date, the percentage of the issued and outstanding
capital stock or other evidences of the ownership of each Subsidiary, listed
on Schedule VI as set forth on such Schedule. Except as disclosed on Schedule
VI, no such Subsidiary has issued any securities convertible into shares of its
capital stock (or other evidence of ownership) or any options, warrants or
other rights, to acquire such shares or securities convertible into such shares
(or other evidence of ownership), and the outstanding stock and securities (or
other evidence of ownership) of such Subsidiaries are owned by the U.S.
Borrower and its Subsidiaries free and clear of all Liens, warrants, options
or rights of others of any kind whatsoever except for Liens permitted by
subsection 14.3.
11.14 Accuracy and Completeness of Information. All information,
reports and other papers and data with respect to the U.S. Borrower or this
Agreement or any transaction contemplated hereby furnished to the Lenders by
the U.S. Borrower or on behalf of the U.S. Borrower, were, at the time the same
were so furnished, complete and correct in all material respects, or have been
subsequently supplemented by other information, reports or other papers or
data, to the extent necessary to give the Lenders a true and accurate knowledge
of the subject matter in all material respects. All projections with respect
to the U.S. Borrower and its Subsidiaries, so furnished by the U.S. Borrower,
as supplemented, were prepared and presented in good faith by the U.S.
Borrower, it being recognized by the Lenders that such projections as to future
events are not to be viewed as facts and that actual results during the period
or periods covered by any such projections may differ materially from the
projected results. No document furnished or statement made in writing to the
Lenders by the U.S. Borrower in connection with the negotiation, preparation or
execution of this Agreement contains any untrue statement of a material fact,
or, to the knowledge of the U.S. Borrower after due inquiry, omits to state any
such material fact necessary in order to make the statements contained therein
not misleading, in either case which has not been corrected, supplemented or
remedied by subsequent documents furnished or statements made in writing to the
Lenders.
11.15 Security Documents. Each Pledge Agreement is effective to
create in favor of the General Administrative Agent, for the ratable benefit
of the Lenders, a legal, valid and enforceable security interest in the pledged
assets described therein. Such Pledge Agreement constitutes a fully perfected
first Lien on, and security interest in, all right, title and interest of the
Loan Party thereto in the pledged assets described therein.
11.16 Patents, Copyrights, Permits and Trademarks. Each of the U.S.
Borrower and its Subsidiaries owns, or has a valid license or sub-license in,
all domestic and foreign letters
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patent, patents, patent applications, patent and know-how licenses, inventions,
technology, permits, trademark registrations and applications, trademarks,
trade names, trade secrets, service marks, copyrights, product designs,
applications, formulae, processes and the industrial property rights
("Proprietary Rights") used in the operation of its businesses in the manner in
which they are currently being conducted and which are material to the
business, operations, assets or financial or other condition of the U.S.
Borrower and its Subsidiaries taken as a whole. Neither the U.S. Borrower nor
any of its Subsidiaries is aware of any existing or threatened infringement or
misappropriation of any Proprietary Rights of others by the U.S. Borrower or
any of its Subsidiaries or of any Proprietary Rights of the U.S. Borrower or
any of its Subsidiaries by others which is material to the business operations,
assets or financial or other condition of the U.S. Borrower and its
Subsidiaries taken as a whole.
11.17 Environmental Matters. Except as disclosed in Schedule VII,
and other than such exceptions to any of the following that would not
reasonably be expected to give rise to a material adverse effect on the
business, operations, property or financial condition of the U.S. Borrower and
its Subsidiaries taken as a whole:
(a) To the best knowledge of the U.S. Borrower and its
Subsidiaries, after reasonable investigation, the Properties do not
contain, and have not previously contained, any Hazardous Materials in
amounts or concentrations or under such conditions which (A) constitute a
violation of, or (B) could reasonably give rise to any liability under
any applicable Environmental Laws.
(b) To the best knowledge of the U.S. Borrower and its
Subsidiaries, after reasonable investigation, the Properties and all
operations at the Properties are in compliance, and have been in
compliance for the time period that each of the Properties has been owned
by the U.S. Borrower or its Subsidiaries, with all Environmental Laws,
and there is no contamination at, on or under the Properties, or
violation of any Environmental Laws with respect to the Properties which
could interfere with the continued operation of the Properties or impair
the fair saleable value thereof. Neither the U.S. Borrower nor any
Subsidiary has knowingly assumed any liability, by contract or otherwise,
of any person under any Environmental Laws.
(c) Neither the U.S. Borrower nor any of its Subsidiaries has
received any Environmental Complaint with regard to any of the Properties
or the operations of the U.S. Borrower or any of its Subsidiaries, nor
does the U.S. Borrower or any of its Subsidiaries have knowledge or
reason to believe that any such notice will be received or is being
threatened.
(d) To the best knowledge of the U.S. Borrower and its
Subsidiaries, based on the U.S. Borrower's and the Subsidiaries'
customary practice of contracting only with licensed haulers for removal
of Hazardous Materials from the Properties only to facilities authorized
to receive such Hazardous Materials, Hazardous Materials have not been
transported or disposed of from the Properties in violation of, or in a
manner or to a location which could reasonably give rise to liability
under, Environmental Laws, nor have any Hazardous Materials been
generated, treated, stored or disposed of at, on or
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under any of the Properties in violation of, or in a manner that could
reasonably give rise to liability under any Environmental Laws.
(e) No judicial proceedings or governmental or administrative
action is pending, or, to the knowledge of the U.S. Borrower and its
Subsidiaries, threatened, under any Environmental Law to which the U.S.
Borrower and its Subsidiaries are or will be named as a party with
respect to the Properties, nor are there any consent decrees or other
decrees, consent orders, administrative orders or other orders, or other
administrative or judicial requirements outstanding under any
Environmental Law with respect to the Properties.
(f) To the best knowledge of the U.S. Borrower and its
Subsidiaries after reasonable investigation, there has been no release
or threat of release of Hazardous Materials at or from the Properties, or
arising from or related to the operations of the U.S. Borrower or its
Subsidiaries in connection with the Properties in violation of or in
amounts or in a manner that could reasonably give rise to liability under
any Environmental Laws.
11.18 RDM Finance. On the Closing Date, RDM Finance will have no
material assets (and in any event will no longer hold a participating interest
in loans made to Lear Italia).
SECTION 12. CONDITIONS PRECEDENT
12.1 Conditions to Closing Date. The Closing Date shall occur on
the date of satisfaction of the following conditions precedent:
(a) Agreement. The General Administrative Agent shall have received
a counterpart of this Agreement for each Lender, duly executed by a
Responsible Officer of each Borrower.
(b) Guarantees. The General Administrative Agent shall have
received the Subsidiary Guarantee and the Additional Subsidiary Guarantee
duly executed by each guarantor party thereto.
(c) Pledge Agreements. The General Administrative Agent shall have
received each of the Pledge Agreements duly executed by each pledgor
party thereto.
(d) Pledged Stock; Stock Powers. The General Administrative Agent
shall have received the certificates representing the shares pledged
pursuant to each of the Pledge Agreements, together with an undated stock
power for each such certificate executed in blank by a duly authorized
officer of the pledgor thereof.
(e) Perfection Actions. The General Administrative Agent shall have
received evidence in form and substance satisfactory to it that all
filings, recordings, registrations and other actions necessary or, in the
opinion of the General Administrative Agent,
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desirable to perfect the Liens created by the Security Documents shall
have been completed.
(f) Consents. The General Administrative Agent shall have received,
and made available to each Lender, true and correct copies (in each case
certified as to authenticity on such date by a duly authorized officer of
the U.S. Borrower) of all documents and instruments, including all
consents, authorizations and filings, required under any Requirement of
Law or by Contractual Obligation of the U.S. Borrower or any of its
Subsidiaries, in connection with the execution, delivery, performance,
validity and enforceability of this Agreement and the other Loan
Documents, and such consents, authorizations and filings shall be
satisfactory in form and substance to the Lenders and be in full force
and effect.
(g) Incumbency Certificates. The General Administrative Agent shall
have received, with a copy for each Lender, a certificate of the
Secretary or Assistant Secretary of each Domestic Loan Party and the
Canadian Borrower, dated the Closing Date, as to the incumbency and
signature of their respective officers executing each Loan Document to be
entered into on the Closing Date to which it is a party, together with
satisfactory evidence of the incumbency of such Secretary or Assistant
Secretary.
(h) Corporate Proceedings. The General Administrative Agent shall
have received, with a copy for each Lender, a copy of the resolutions in
form and substance satisfactory to the General Administrative Agent, of
the Board of Directors (or the executive committee thereof) of each
Domestic Loan Party and the Canadian Borrower authorizing (i) the
execution, delivery and performance of each Loan Document to be entered
into on the Closing Date to which it is a party, and (ii) the granting by
it of the pledge and security interests, if any, granted by it pursuant
to such Loan Document, certified by their respective Secretary or an
Assistant Secretary as of the Closing Date, which certificate shall state
that the resolutions thereby certified have not been amended, modified,
revoked or rescinded as of the date of such certificate.
(i) Fees. The General Administrative Agent shall have received all
fees required to be paid to the General Administrative Agent and/or the
Lenders pursuant to Section 10.5 and/or any other written agreement on or
prior to the Closing Date.
(j) Legal Opinion of Counsel to U.S. Borrower. The General
Administrative Agent shall have received, with a copy for each Lender, an
opinion, dated the Closing Date, of Winston & Strawn, special counsel to
the U.S. Borrower and its Subsidiaries and in substantially the form of
Exhibit L and covering such other matters incident to the transactions
contemplated hereby as the Lenders may reasonably require.
(k) Legal Opinions of Foreign Counsel. The General Administrative
Agent shall have received or waived as a condition precedent, with a copy
for each Lender, an opinion of Tory, Tory, Deslauriers & Binnington,
Canadian counsel to the U.S. Borrower and the Canadian Borrower, in
substantially the form of Exhibit M and covering such
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other matters incident to the transactions contemplated hereby as the
General Administrative Agent may reasonably require.
(l) Subordinated Debt Documents. The General Administrative Agent
shall have received, with a copy for each Lender, a certified true copy
of the outstanding Subordinated Debt indentures of the U.S. Borrower.
(m) Existing Credit Agreements. The General Administrative Agent
shall have received evidence that all amounts payable to Lenders under
the Existing Credit Agreements shall have been paid (other than the
principal amount of, and accrued interest on, loans outstanding
thereunder owing to Lenders thereunder that are also Lenders hereunder,
which loans shall become Loans hereunder on the Closing Date).
12.2 Conditions to Each Extension of Credit. The agreement of each
Lender to make any Extension of Credit requested to be made by it on any date
(including, without limitation, the Closing Date), is subject to the
satisfaction of the following conditions precedent as of the date such
Extension of Credit is requested to be made:
(a) Representations and Warranties. Each of the representations and
warranties made by each of the Loan Parties in or pursuant to the Loan
Documents shall be true and correct in all material respects on and as of
such date as if made on and as of such date (except that any
representation or warranty which by its terms is made as of a specified
date shall be true and correct in all material respects as of such
specified date).
(b) No Default. No Default or Event of Default shall have occurred
and be continuing on such date or after giving effect to the Extension of
Credit requested to be made on such date.
(c) Foreign Subsidiary Opinion. If such requested Extension of
Credit is the initial Multicurrency Loan to be made to any Foreign
Subsidiary Borrower, the General Administrative Agent shall have received
(with a copy for each Lender) a Foreign Subsidiary Opinion in respect of
such Foreign Subsidiary Borrower.
Each Extension of Credit made to a Borrower hereunder shall constitute a
representation and warranty by such Borrower as of the date of such Extension
of Credit that the conditions contained in this subsection 12.2 have been
satisfied.
SECTION 13. AFFIRMATIVE COVENANTS
The U.S. Borrower hereby agrees that, so long as the Commitments (or
any of them) remain in effect, any Loan, Acceptance Reimbursement Obligation,
Acceptance Note, Reimbursement Obligation or Subsidiary Reimbursement
Obligation remains outstanding and unpaid or any other amount is owing to any
Lender or either Administrative Agent hereunder or under any other Loan
Document, the U.S. Borrower shall and shall cause each of its Subsidiaries to:
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13.1 Financial Statements. Furnish to each Lender:
(a) as soon as available, but in any event within 95 days after the
end of each fiscal year of the U.S. Borrower, a copy of the audited
consolidated balance sheet of the U.S. Borrower and its consolidated
Subsidiaries as at the end of such year and the related consolidated
statements of income and cash flows for such year, setting forth in each
case in comparative form the figures for the previous year, reported on
without a "going concern" or like qualification or exception, or
qualification arising out of the scope of the audit, by independent
certified public accountants of nationally recognized standing;
(b) as soon as available, but in any event not later than 50 days
after the end of each of the first three quarterly periods of each fiscal
year of the U.S. Borrower, the unaudited consolidated balance sheet of
the U.S. Borrower and its consolidated Subsidiaries as at the end of each
such quarter and the related unaudited consolidated statements of income
and cash flows of the U.S. Borrower and its consolidated Subsidiaries for
such quarter and the portion of the fiscal year through such date,
setting forth in each case in comparative form the figures for the
corresponding quarterly period of the previous year, certified by a
Responsible Officer (subject to normal year-end audit adjustments).
The U.S. Borrower covenants and agrees that all such financial statements shall
be complete and correct in all material respects and shall be prepared in
reasonable detail and in accordance with GAAP (subject, in the case of interim
statements, to normal year-end adjustments and to the fact that such financial
statements may be abbreviated and may omit footnotes or contain incomplete
footnotes) applied consistently throughout the periods reflected therein
(except as approved by such accountants or officer, as the case may be, and
disclosed therein).
13.2 Certificates; Other Information. Furnish to each Lender:
(a) concurrently with the delivery of the financial statements
referred to in subsection 13.1(a), a certificate of the independent
certified public accountants reporting on such financial statements
stating that in making the examination necessary therefor no knowledge
was obtained of any Default or Event of Default, except as specified in
such certificate;
(b) concurrently with the delivery of the financial statements
referred to in subsection 13.1(a) and (b), a certificate of a Responsible
Officer of the U.S. Borrower (i) stating that such Responsible Officer
has obtained no knowledge of any Default or Event of Default except as
specified in such certificate, (ii) stating, to the best of such
Responsible Officer's knowledge, that all such financial statements are
complete and correct in all material respects (subject, in the case of
interim statements, to normal year-end audit adjustments) and have been
prepared in reasonable detail and in accordance with GAAP applied
consistently throughout the periods reflected therein (except as
disclosed therein) and (iii) showing in detail the calculations
supporting such statements in respect of subsection 14.1;
<PAGE> 92
85
(c) promptly upon receipt thereof, copies of all final reports
submitted to the U.S. Borrower by independent certified public
accountants in connection with each annual, interim or special audit of
the books of the U.S. Borrower made by such accountants, including,
without limitation, any management letter commenting on the U.S.
Borrower's internal controls submitted by such accountants to management
in connection with their annual audit;
(d) promptly after the same are sent, copies of all financial
statements and reports which the U.S. Borrower sends to its public equity
holders, and within five days after the same are filed, copies of all
financial statements and reports which the U.S. Borrower may make to, or
file with, the Securities and Exchange Commission or any successor or
analogous Governmental Authority; and
(e) promptly, subject to reasonable confidentiality requirements,
such additional financial and other information as any Lender may from
time to time reasonably request.
13.3 Performance of Obligations. Perform in all material respects
all of its obligations under the terms of each material mortgage, indenture,
security agreement and other debt instrument by which it is bound or to
which it is a party and pay, discharge or otherwise satisfy at or before
maturity or before they become delinquent, as the case may be, all its material
obligations of whatever nature, except when the amount or validity thereof is
currently being contested in good faith by appropriate proceedings and reserves
in conformity with GAAP with respect thereto have been provided for on the
books of the U.S. Borrower or its Subsidiaries, as the case may be.
13.4 Conduct of Business, Maintenance of Existence and Compliance with
Obligations and Laws. Continue to engage in business of the same general type
as now conducted by it and preserve, renew and keep in full force and effect
its corporate existence and take all reasonable action to maintain all rights,
privileges and franchises necessary or desirable in the normal conduct of its
business except as otherwise permitted pursuant to subsection 14.5 and except
if the Board of Directors of the U.S. Borrower shall determine in good faith
that the preservation or maintenance thereof is no longer desirable in the
conduct of the business of the U.S. Borrower and its Subsidiaries; comply with
all Contractual Obligations and Requirements of Law except to the extent that
failure to comply therewith would not reasonably be expected to have,
individually or in the aggregate, a material adverse effect on the business,
operations, property or financial or other condition of the U.S. Borrower and
its Subsidiaries taken as a whole and would not reasonably be expected to
adversely affect the ability of the U.S. Borrower or any of its Subsidiaries to
perform their respective obligations under any of the Loan Documents to which
they are a party.
13.5 Maintenance of Property; Insurance. Keep each Property and all
other property useful and necessary in its business in good working order and
condition; maintain with financially sound and reputable insurance companies
insurance coverage as is reasonable for the business activities of the U.S.
Borrower and its Subsidiaries; and furnish to the General Administrative Agent,
upon written request, full information as to the insurance carried.
<PAGE> 93
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13.6 Inspection of Property; Books and Records; Discussions. Keep
proper books of records and account in which full, true and correct entries in
conformity with GAAP and all Requirements of Law shall be made of all dealings
and transactions in relation to its business and activities; and permit
representatives of any Lender (subject to reasonable confidentiality
requirements) to visit and inspect any of its properties and examine and make
abstracts from any of its books and records upon reasonable notice and at any
reasonable time and as often as may reasonably be desired, and to discuss the
business, operations, properties and financial and other condition of the U.S.
Borrower and its Subsidiaries with officers and employees of the U.S. Borrower
and its Subsidiaries and, provided the U.S. Borrower is given an opportunity to
participate, with its independent certified public accountants.
13.7 Notices. Promptly give notice to the General Administrative
Agent and each Lender:
(a) of the occurrence of any Default or Event of Default;
(b) of any (i) default or event of default under any Contractual
Obligation of the U.S. Borrower or any of its Subsidiaries or (ii)
litigation, investigation or proceeding which may exist at any time
between the U.S. Borrower or any of its Subsidiaries and any Governmental
Authority, which in the case of either clause (i) or (ii) above, would
reasonably be expected to have a material adverse effect on the business,
operations, property or financial condition of the U.S. Borrower and its
Subsidiaries taken as a whole or would reasonably be expected to
adversely affect the ability of the U.S. Borrower or any of its
Subsidiaries to perform their respective obligations under any of the
Loan Documents to which they are a party;
(c) of any litigation or proceeding affecting the U.S. Borrower or
any of its Subsidiaries in which the then reasonably anticipated exposure
of the U.S. Borrower and its Subsidiaries is $10,000,000 or more and not
covered by insurance, or in which injunctive or similar relief is sought
which is then reasonably anticipated to have an adverse economic effect
on the U.S. Borrower and its Subsidiaries of $10,000,000 or more;
(d) of the following events, as soon as possible and in any event
within 30 days after the U.S. Borrower knows or has reason to know
thereof: (i) the occurrence or expected occurrence of any Reportable
Event with respect to any Single Employer Plan, a failure to make any
required contribution to any Single Employer Plan, unless such failure is
cured within such 30 days or does not involve an amount in excess of
$1,000,000, any Lien under the Code or ERISA in favor of the PBGC or a
Single Employer Plan, or any withdrawal from, or the termination,
Reorganization or Insolvency of any Multiemployer Plan or (ii) the
institution of proceedings or the taking of any other action by the PBGC
or the U.S. Borrower or any Commonly Controlled Entity or any
Multiemployer Plan with respect to the withdrawal from, or the
termination, Reorganization or Insolvency of, any Single Employer or
Multiemployer Plan, where, in connection with any of the events described
in clauses (i) or (ii), the resulting liability would reasonably be
expected to cause a material adverse change in the business, assets,
<PAGE> 94
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operations or financial condition of the U.S. Borrower and its
Subsidiaries taken as a whole;
(e) of any Environmental Complaint which would reasonably be
expected to have a material adverse effect on the business, operations,
property or financial condition of the U.S. Borrower and its
Subsidiaries, taken as a whole, and any notice from any Person of (i) the
occurrence of any release, spill or discharge of any Hazardous Material
that is reportable under any Environmental Law, (ii) the commencement of
any clean up pursuant to or in accordance with any Environmental Law of
any Hazardous Material at, on, under or within the Property or any part
thereof or (iii) any other condition, circumstance, occurrence or event,
any of which would reasonably be expected to have a material adverse
effect on the business, operations, property or financial condition of
the U.S. Borrower and its Subsidiaries, taken as a whole, under any
Environmental Law;
(f) of (i) the incurrence of any Lien (other than Liens permitted
pursuant to subsection 14.3) on, or claim asserted against any of the
collateral security in the Security Documents or (ii) the occurrence of
any other event which could reasonably be expected to have a material
adverse effect on the aggregate value of the collateral under any
Security Document; and
(g) of a material adverse change in the business, operations,
property or financial or other condition of the U.S. Borrower and its
Subsidiaries taken as a whole.
Each notice pursuant to this subsection 13.7 shall be accompanied by a
statement of a Responsible Officer of the U.S. Borrower setting forth details
of the occurrence referred to therein and stating what action the U.S. Borrower
proposes to take with respect thereto.
13.8 Maintenance of Liens of the Security Documents. Promptly, upon
the reasonable request of any Lender, at the U.S. Borrower's expense, execute,
acknowledge and deliver, or cause the execution, acknowledgement and delivery
of, and thereafter register, file or record, or cause to be registered, filed
or recorded, in an appropriate governmental office, any document or instrument
supplemental to or confirmatory of the Security Documents or otherwise deemed
by the General Administrative Agent necessary or desirable for the continued
validity, perfection and priority of the Liens on the collateral covered
thereby.
13.9 Environmental Matters. (a) Comply in all material respects
with, and use all reasonable efforts to ensure compliance in all material
respects by all tenants and subtenants, if any, with, all Environmental Laws
and all requirements existing thereunder and obtain and comply in all material
respects with and maintain, and use all reasonable efforts to ensure that all
tenants and subtenants obtain, comply in all material respects with and
maintain, any and all licenses, approvals, notifications, registrations or
permits required by Environmental Laws.
(b) Promptly comply in all material respects with all lawful orders
and directives of all Governmental Authorities regarding Environmental Laws,
other than such orders and directives as to which an appeal has been taken in
good faith and the pendency of any and all
<PAGE> 95
88
such appeals does not materially and adversely affect the U.S. Borrower or any
Subsidiary or the operations of the U.S. Borrower or any Subsidiary.
(c) Defend, indemnify and hold harmless the General Administrative
Agent and the Lenders and their Affiliates, and their respective employees,
agents, officers and directors, from and against any claims, demands,
penalties, fines, liabilities, settlements, damages, costs and expenses of
whatever kind or nature known or unknown, contingent or otherwise, arising out
of, or in any way relating to the violation of, noncompliance with or liability
under any Environmental Laws applicable to the U.S. Borrower or its
Subsidiaries or the Properties, or any orders, requirements or demands of
Governmental Authorities related thereto, including, without limitation,
attorney's and consultant's fees, investigation and laboratory fees, response
costs, court costs and litigation expenses, except to the extent that any of
the foregoing arise solely out of the gross negligence or willful misconduct of
the party seeking indemnification therefor. This indemnity shall continue in
full force and effect regardless of the termination of this Agreement.
13.10 Security Documents; Guarantee Supplement. (a) Promptly at the
request of the Majority Lenders (and in any event no later than 45 days after
the date of such request), at its own expense, (i) pledge 65% of the
capital stock of Lear Italia to the General Administrative Agent, for the
ratable benefit of the Lenders, pursuant to a pledge agreement in form and
substance satisfactory to the General Administrative Agent, and (ii) cause the
General Administrative Agent to receive, with a counterpart for each Lender, a
legal opinion of Italian counsel acceptable to the General Administrative Agent
covering such matters in respect of such pledge agreement as the General
Administrative Agent shall reasonably request.
(b) As soon as possible and in no event later than 45 days after the
delivery of any financial statements under subsection 13.1(a) or (b), cause (i)
all of the capital stock owned directly or indirectly by the U.S. Borrower of
each of the U.S. Borrower's direct or indirect Domestic Subsidiaries which on
the date of such financial statements constituted at least 10% of Consolidated
Assets or for the twelve month period ended on the date of such financial
statements represented at least 10% of Consolidated Revenues to be pledged to
the General Administrative Agent, for the ratable benefit of the Lenders,
pursuant to a pledge agreement in form and substance satisfactory to the
General Administrative Agent, (ii) 65% of the capital stock (or such lesser
amount as may be owned by the U.S. Borrower) of each of the U.S. Borrower's
direct Foreign Subsidiaries which on the date of such financial statements
constituted at least 10% of Consolidated Assets or for the twelve month period
ended on the date of such financial statements represented at least 10% of
Consolidated Revenues to be pledged to the General Administrative Agent, for
the ratable benefit of the Lenders, pursuant to a pledge agreement in form and
substance satisfactory to the General Administrative Agent, and (iii) the
General Administrative Agent to receive, with a counterpart for each Lender,
legal opinions of counsel to the U.S. Borrower acceptable to the General
Administrative Agent covering such matters in respect of such pledges as the
General Administrative Agent shall reasonably request.
(c) As soon as possible and in no event later than 45 days after the
delivery of any financial statements under subsection 13(a) or (b), cause (i)
each of the U.S. Borrower's direct and indirect Domestic Subsidiaries which on
the date of such financial statements constituted 10% of Consolidated Assets or
for the twelve month period ended on the date of such
<PAGE> 96
89
financial statements represented at least 10% of Consolidated Revenues to
execute and deliver a Guarantee Supplement to the General Administrative
Agent and (ii) the General Administrative Agent to receive, with a counterpart
for each Lender, opinions of counsel to the U.S. Borrower, in form and
substance satisfactory to the General Administrative Agent, covering the
matters expressed in Exhibit S.
SECTION 14. NEGATIVE COVENANTS
The U.S. Borrower hereby agrees that, so long as the Commitments (or
any of them) remain in effect, any Loan, Acceptance Reimbursement Obligation,
Acceptance Note, Reimbursement Obligation or Subsidiary Reimbursement
Obligation remains outstanding and unpaid or any other amount is owing to any
Lender or either Administrative Agent hereunder or under any other Loan
Document, the U.S. Borrower shall not, and shall not permit any of its
Subsidiaries to, directly or indirectly:
14.1 Financial Covenants.
(a) Consolidated Net Worth. Permit Consolidated Net Worth to be
less than $675,000,000 on the last day of any fiscal quarter.
(b) Interest Coverage. Permit the ratio of (i) Consolidated Operating
Profit for any four consecutive fiscal quarters ending during any period set
forth below to (ii) Consolidated Interest Expense for such four consecutive
fiscal quarters, to be less than the ratio set forth opposite such period
below:
<TABLE>
<CAPTION>
Period Ratio
------- -----
<S> <C>
The first day of the third fiscal quarter of 1996 through the last
day of the fourth fiscal quarter of 1996 3.00 to 1
The first day of the first fiscal quarter of 1997 and thereafter 3.50 to 1
</TABLE>
(c) Leverage Ratio. Permit the ratio of (i) Consolidated
Indebtedness at the end of any fiscal quarter ending during any period set forth
below to (ii) Consolidated Operating Profit for the four consecutive fiscal
quarters then ended to be greater than the ratio set forth opposite such period
below:
<TABLE>
<CAPTION>
Period Ratio
----------------------- ---------
<S> <C>
Closing Date - 12/31/97 4.50 to 1
1/1/98 - 12/31/98 4.00 to 1
1/1/99 - thereafter 3.75 to 1
</TABLE>
<PAGE> 97
90
14.2 Limitation on Indebtedness. Permit any Subsidiary to create,
incur, assume or suffer to exist any Indebtedness, except:
(a) Indebtedness in respect of the Extensions of Credit and other
obligations arising under this Agreement and, without duplication,
Indebtedness of any Subsidiary backed by Letters of Credit issued under
this Agreement;
(b) Indebtedness under the Subsidiary Guarantee and the Additional
Subsidiary Guarantee;
(c) Indebtedness in respect of Interest Rate Agreement Obligations
and Currency Agreement Obligations entered into to protect against
fluctuations in interest rates or exchange rates and not for speculative
reasons;
(d) Indebtedness incurred by a Special Purpose Subsidiary in
connection with a Receivable Financing Transaction;
(e) Acquired Indebtedness, and any refinancings thereof;
(f) Indebtedness incurred by Foreign Subsidiaries; provided that the
aggregate amount of such Indebtedness which is guaranteed by the U.S.
Borrower or any of its Domestic Subsidiaries (including Indebtedness in
respect of the Extensions of Credit) shall not exceed an amount equal to
15% of Consolidated Assets (as of the end of the fiscal quarter of the
U.S. Borrower most recently ended prior to the date of determination
under this clause (f));
(g) Indebtedness in respect of Financing Leases; provided that the
aggregate amount of Indebtedness incurred under this clause (g) shall not
exceed $25,000,000 at any time outstanding;
(h) Indebtedness in respect of documentary letters of credit (other
than Letters of Credit under this Agreement) in an aggregate face amount
not exceeding $50,000,000;
(i) Indebtedness in respect of letters of credit (other than Letters
of Credit under this Agreement and Letters of Credit permitted under
subsection 14.2(h)) in an aggregate face amount not exceeding
$80,000,000; provided that such letters of credit are used solely to (i)
provide credit support in respect of leased property or (ii) provide
credit support for the benefit of Foreign Subsidiaries;
(j) Indebtedness incurred to finance the purchase price of property
in an aggregate amount not exceeding $25,000,000 at any one time
outstanding;
(k) intercompany Indebtedness permitted by subsection 14.9; and
<PAGE> 98
91
(l) additional Indebtedness of Domestic Subsidiaries not otherwise
permitted by paragraphs (a) through (k) above; provided that the
aggregate amount of such Indebtedness does not exceed $100,000,000 at any
one time outstanding.
14.3 Limitation on Liens. Create, incur, assume or suffer to exist
any Lien upon any of its property, assets or revenues, whether now owned or
hereafter acquired, except for:
(a) Liens for taxes not yet due or which are being contested in good
faith by appropriate proceedings; provided that adequate reserves with
respect thereto are maintained on the books of the U.S. Borrower or its
Subsidiaries, as the case may be, in conformity with GAAP (or, in the
case of Foreign Subsidiaries, generally accepted accounting principles in
effect from time to time in their respective jurisdictions of
organization);
(b) carriers', warehousemen's, mechanics', materialmen's,
repairmen's, suppliers or other like Liens arising in the ordinary course
of business relating to obligations not overdue for a period of more than
60 days or which are bonded or being contested in good faith by
appropriate proceedings;
(c) pledges or deposits in connection with workers' compensation,
unemployment insurance and other social security legislation, including
any Lien securing letters of credit issued in the ordinary course of
business in connection therewith and deposits securing liabilities to
insurance carriers under insurance and self-insurance programs;
(d) Liens (other than any Lien imposed by ERISA) incurred on
deposits to secure the performance of bids, trade contracts (other than
for borrowed money), leases, statutory obligations, surety and appeal
bonds, performance bonds, utility payments and other obligations of a
like nature incurred in the ordinary course of business;
(e) easements, rights-of-way, restrictions and other similar
encumbrances incurred which, in the aggregate, are not substantial in
amount and which do not in any case materially detract from the value of
the property subject thereto or materially interfere with the ordinary
conduct of the business of the U.S. Borrower or such Subsidiary;
(f) Liens in favor of the General Administrative Agent and the
Lenders created pursuant to the Security Documents and Liens securing
Reimbursement Obligations and Subsidiary Reimbursement Obligations;
(g) Liens (including, without limitation, Liens incurred in
connection with Financing Leases, operating leases and sale-leaseback
transactions) securing Indebtedness of the U.S. Borrower and its
Subsidiaries permitted by subsection 14.2(j) incurred to finance the
acquisition of property; provided that (i) such Liens shall be created
substantially simultaneously with the purchase of such property, (ii)
such Liens do not at any time encumber any property other than the
property financed by such Indebtedness, (iii) the amount of Indebtedness
secured thereby is not increased and (iv)
<PAGE> 99
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the principal amount of Indebtedness secured by any such Lien shall at
no time exceed 100% of the purchase price of such property;
(h) Liens securing the Indebtedness permitted by subsection 14.2(f)
and (i) and Liens securing obligations with respect to government grants,
provided that such Liens permitted by this subsection 14.3(h) do not at
any time encumber any property located in the United States except for,
in the case of Indebtedness permitted by subsection 14.2(i), Liens that
encumber leasehold interests supported by such Indebtedness;
(i) Liens securing Indebtedness permitted by subsection 14.2(c) and
any other Indebtedness in respect of Interest Rate Agreement Obligations
or Currency Agreement Obligations of the U.S. Borrower entered into to
protect against fluctuations in interest rates or exchange rates and not
for speculative reasons, provided that such Liens run in favor of a
Lender;
(j) attachment, judgment or other similar Liens arising in
connection with court or arbitration proceedings fully covered by
insurance or involving individually or in the aggregate, no more than
$25,000,000 at any one time, provided that the same are discharged, or
that execution or enforcement thereof is stayed pending appeal, within 60
days or, in the case of any stay of execution or enforcement pending
appeal, within such lesser time during which such appeal may be taken;
(k) Liens securing reimbursement obligations with respect to
documentary letters of credit permitted hereunder which encumber
documents and other property relating to such letters of credit;
(l) Liens securing Acquired Indebtedness permitted by subsection
14.2, provided that (i) such Liens existed at the time such corporation
became a Subsidiary or such assets were acquired and were not created in
anticipation thereof, (ii) any such Lien does not by its terms cover any
property or assets after the time such corporation became or becomes a
Subsidiary or such assets were acquired which were not covered
immediately prior thereto (and improvements and attachments thereto) and
(iii) any such Lien does not by its terms secure any Indebtedness other
than Indebtedness existing immediately prior to the time such corporation
became or becomes a Subsidiary or such assets were acquired;
(m) Liens securing Indebtedness of Domestic Subsidiaries permitted
under subsection 14.2(l); provided that such Indebtedness being so
secured does not exceed $50,000,000 at any one time outstanding;
(n) Liens securing obligations (other than obligations representing
Indebtedness for borrowed money) under operating, reciprocal easement or
similar agreements entered into in the ordinary course of business;
(o) statutory Liens and rights of offset arising in the ordinary
course of business of the U.S. Borrower and its Subsidiaries;
<PAGE> 100
93
(p) Liens in connection with leases or subleases granted to others
and the interest or title of a lessor or sublessor (other than the U.S.
Borrower or any Subsidiary of the U.S. Borrower) under any lease;
(q) Liens arising in connection with Industrial Development Bonds or
other industrial development, pollution control or other tax favored
financing transactions, provided that such liens do not at any time
encumber any property, other than the property financed by such
transaction and other property, assets or revenues related to the
property so financed on which Liens are customarily granted in connection
with such transactions (in each case, together with improvements and
attachments thereto);
(r) Liens on receivables subject to a Receivable Financing
Transaction; and
(s) extensions, renewals and replacements of any Lien described in
subsections 14.3(a) through (r) above, provided that the principal amount
of the Indebtedness secured thereby is not increased and such extension
or renewal is limited to the property so encumbered (and improvements or
attachments thereto).
14.4 Limitation on Guarantee Obligations. Create, incur, assume or
suffer to exist any Guarantee Obligation except:
(a) Guarantee Obligations of the U.S. Borrower under this Agreement
and of the Domestic Subsidiaries under the Subsidiary Guarantee and the
Additional Subsidiary Guarantee;
(b) Guarantee Obligations in respect of obligations of Domestic
Subsidiaries permitted to be incurred pursuant to subsection 14.2;
(c) Guarantee Obligations in respect of obligations of Foreign
Subsidiaries permitted to be incurred pursuant to subsection 14.2(f);
(d) Guarantee Obligations in respect of obligations of the U.S.
Borrower and Special Affiliates in an aggregate principal amount not to
exceed $60,000,000; and
(e) other Guarantee Obligations in respect of obligations not
exceeding $10,000,000.
14.5 Limitations on Fundamental Changes. Unless expressly
permitted under this Agreement, enter into any merger, consolidation or
amalgamation, or liquidate, wind up or dissolve itself (or suffer any
liquidation or dissolution), or convey, sell, lease, assign, transfer or
otherwise dispose of, all or substantially all of its property, business or
assets, or make any material change in its present method of conducting
business, except:
(a) any Subsidiary of the U.S. Borrower may be merged or
consolidated with or into the U.S. Borrower (provided that the U.S.
Borrower shall be the continuing or surviving corporation) or with or
into any one or more Wholly Owned Subsidiaries of the
<PAGE> 101
94
U.S. Borrower that are Domestic Subsidiaries (provided that a Wholly
Owned Subsidiary shall be the continuing or surviving corporation);
(b) any Foreign Subsidiary may be merged or consolidated with or
into any one or more Wholly Owned Subsidiaries that are Foreign
Subsidiaries (provided that a Wholly Owned Subsidiary shall be the
continuing or surviving corporation);
(c) any Subsidiary may sell, lease, transfer or otherwise dispose of
any or all of its assets (upon voluntary liquidation or otherwise) to the
U.S. Borrower or any Wholly Owned Subsidiary of the U.S. Borrower that is
a Domestic Subsidiary;
(d) any Foreign Subsidiary may sell, lease, transfer or otherwise
dispose of any or all of its assets (upon voluntary liquidation or
otherwise) to a Wholly Owned Subsidiary; and
(e) any Subsidiary of the U.S. Borrower which is not a Material
Subsidiary and is not a party to the Subsidiary Guarantee or the
Additional Subsidiary Guarantee may be merged, consolidated or
amalgamated with or into any Person, or may sell, lease, transfer or
otherwise dispose of any or all of its assets (upon voluntary liquidation
or otherwise) to any Person or may liquidate, wind up or dissolve itself
(or suffer any liquidation or dissolution).
Notwithstanding any provision contained in paragraphs (a) and (c) of
this subsection, no Subsidiary of the U.S. Borrower may (i) be merged or
consolidated with or into either Lear Operations Corporation or NAB Corporation
or any Subsidiary thereof or (ii) sell, lease, transfer or otherwise dispose of
any or all of its assets (upon voluntary liquidation or otherwise) to either
Lear Operations Corporation or NAB Corporation or any Subsidiary thereof
unless, in each case, (A) the Additional Subsidiary Guarantee shall have been
amended in writing to remove the limitation on such transferee's liability
thereunder contained in clause (ii) of paragraph 2(b) of the Additional
Subsidiary Guarantee or (B) the General Administrative Agent shall have
received a certificate of a Responsible Officer of the U.S. Borrower in form
and substance satisfactory to the General Administrative Agent describing such
sale, lease, transfer or other disposition and certifying the fair market value
of the assets to be so sold, leased, transferred or otherwise disposed. Upon
the General Administrative Agent's approval of the certificate described in
clause (B) of the preceding sentence, the limitation on the transferee's
liability under clause (ii) of paragraph 2(b) of the Additional Subsidiary
Guarantee shall automatically increase by an amount equal to the fair market
value of the assets described in such certificate. For purposes of the
preceding two sentences, if the transferee is a Subsidiary of either Lear
Operations Corporation or NAB Corporation, the term transferee in such two
sentences shall refer to either Lear Operations Corporation or NAB Corporation,
whichever is the parent of such Subsidiary.
14.6 Limitation on Sale of Assets. Convey, sell, lease, assign,
transfer or otherwise dispose of, any of its property, business or assets
(including, without limitation, receivables and leasehold interests) whether
now owned or hereafter acquired, or, in the case of any Subsidiary, issue or
sell any shares of such Subsidiary's capital stock to any Person other
<PAGE> 102
95
than the U.S. Borrower or any Wholly Owned Subsidiary (or to qualify directors
if required by applicable law or similar de minimis issuances of capital stock
to comply with Requirements of Law), except:
(a) the sale or other disposition of obsolete or worn out property
or other property not necessary for operations disposed of in the
ordinary course of business; provided that (i) the Net Proceeds of each
such transaction are applied to obtain a replacement item or items of
property within 120 days of the disposition thereof or (ii) the fair
market value of any property not replaced pursuant to clause (i) above
shall not exceed $10,000,000 in the aggregate in any one fiscal year of
the U.S. Borrower;
(b) the sale of inventory or Cash Equivalents in the ordinary course
of business;
(c) the sale of any property in connection with any sale and
leaseback transaction;
(d) the sale by any Foreign Subsidiary of its accounts receivable;
provided that the terms of each such sale are satisfactory in form and
substance to the General Administrative Agent;
(e) the sale by any Domestic Subsidiary of its accounts receivable;
provided that the terms of each such sale are satisfactory in form and
substance to the General Administrative Agent;
(f) any sale or other disposition permitted under subsections 14.5
or 14.9;
(g) any operating lease entered into in the ordinary course of
business;
(h) any assignments or licenses of intellectual property in the
ordinary course of business;
(i) any sale, contribution or transfer to a Special Purpose
Subsidiary in connection with a Receivable Financing Transaction; and
(j) any sale or other disposition of assets if (A) after giving
effect thereto and the application of the proceeds therefrom, no Default
or Event of Default is in existence and (B) if such sale or other
disposition had occurred on the first day of the period of four full
final quarters most recently ended prior to the date of such sale or
other disposition, the U.S. Borrower would have been in compliance with
subsection 14.1 during such period of four full fiscal quarters.
14.7 Limitation on Dividends. Declare or pay any dividend on, or
make any payment on account of, or set apart assets for a sinking or other
analogous fund for, the purchase, redemption, defeasance, retirement or other
acquisition of, any shares of any class of capital stock of the U.S. Borrower
or any warrants or options to purchase any such Stock, whether now or hereafter
outstanding, or make any other distribution in respect thereof, either directly
or
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indirectly, whether in cash or property or in obligations of the U.S. Borrower
or any Subsidiary, except for (a) (i) payment by the U.S. Borrower of amounts
then owing to management personnel of the U.S. Borrower pursuant to the terms
of their respective employment contracts or under any employee benefit plan,
(ii) mandatory purchases by the U.S. Borrower of its common stock from
management personnel pursuant to the terms of their respective employment
agreements or any employee benefit plan, (iii) additional repurchases by the
U.S. Borrower of its common stock from management personnel, and other officers
or employees of the U.S. Borrower or any Subsidiary in an amount not to exceed
$35,000,000 in the aggregate and (iv) the purchase, redemption or retirement of
any shares of any capital stock of the U.S. Borrower or options to purchase
capital stock of the U.S. Borrower in connection with the exercise of
outstanding stock options, (b) if no Default or Event of Default has occurred
and is continuing (or would occur and be continuing after giving effect
thereto) when any such dividend is declared by the Board of Directors of the
U.S. Borrower, cash dividends on the U.S. Borrower's capital stock not to
exceed in any fiscal quarter (the "Payment Quarter") an amount equal to the
greater of (i) $25,000,000 and (A) 50% of Consolidated Net Income of the U.S.
Borrower and its consolidated Subsidiaries for the period of four consecutive
fiscal quarters ended immediately prior to the Payment Quarter (such period of
four quarters being the "Calculation Period" in respect of such payment
Quarter), less (B) the cash amount of all dividends paid and redemptions made
by the U.S. Borrower during such Calculation Period in respect of capital
stock, but only to the extent permitted by the terms of the Subordinated Debt
and (c) dividends or distributions in the form of additional shares of such
capital stock or in options, warrants or other rights to purchase capital
stock.
14.8 Limitation on Capital Expenditures. Until such time as
Investment Grade Status has been attained and for as long as it is maintained,
make or commit to make any Capital Expenditures during any fiscal year
exceeding, in the aggregate for the U.S. Borrower and its Subsidiaries,
$250,000,000 per fiscal year; provided that any amount permitted to be expended
pursuant to this subsection 14.8 which is not expended in any fiscal year may
be carried over for expenditure in any subsequent fiscal year, and provided,
further, that any available amount permitted to be expended pursuant to this
subsection 14.8 for any subsequent fiscal year may be carried back for
expenditure in any fiscal year.
14.9 Limitation on Investments, Loans and Advances. Make or suffer
to exist any advance, loan, extension of credit or capital contribution to, or
purchase any stock, bonds, notes, debentures or other securities of or any
assets constituting a business unit of, or make any other investment in, any
Person, or acquire any interest in any Person, except:
(a) extensions of trade credit in the ordinary course of business;
(b) investments in Cash Equivalents;
(c) investments by Foreign Subsidiaries in high quality investments
of a type similar to Cash Equivalents made outside of the United States
of America;
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(d) capital contributions and equity investments made prior to the
date hereof in any Subsidiary or Special Entity and any recapitalization
thereof not increasing the amounts thereof;
(e) (i) loans, advances, and extensions of credit by any Subsidiary
to the U.S. Borrower and (ii) loans, advances, extensions of credit,
capital contributions and other investments by the U.S. Borrower or any
Subsidiary to or in any other Domestic Subsidiary or Foreign Subsidiary
that is organized under the laws of any country that is a member of the
Organization for Economic Cooperation and Development either on the date
hereof or on the date of any such loan, advance, extension of credit,
capital contribution or other investment;
(f) any Foreign Subsidiary may make advances, loans, extensions of
credit, capital contributions and other investments to any other Foreign
Subsidiary or any Domestic Subsidiary;
(g) any Wholly Owned Subsidiary which is a Domestic Subsidiary may
make advances, loans, extensions of credit, capital contributions and
other investments to or in any other Wholly Owned Subsidiary which is a
Domestic Subsidiary;
(h) the purchase by the U.S. Borrower or any Subsidiary of
participating interests in loans to Foreign Subsidiaries; provided that
the amount of each such participating interest does not exceed the amount
which the U.S. Borrower or such Subsidiary would otherwise be permitted
to lend or contribute to such Foreign Subsidiaries pursuant to this
subsection 14.9;
(i) the U.S. Borrower and its Subsidiaries may acquire any Special
Entities or the assets constituting a business unit of any Person that
would be a Special Entity, provided that the aggregate purchase price of
such acquisitions after the date hereof does not exceed $400,000,000
(less, in the case such Special Entities that become Subsidiaries of the
U.S. Borrower, the aggregate amount of Indebtedness of such Special
Entities at the time such Special Entities are acquired) per fiscal year;
and provided, further, that up to $100,000,000 of such permitted amount
which is not expended in any fiscal year may be carried over for such
acquisitions in any subsequent fiscal year; and provided, still further,
that no more than $150,000,000 per fiscal year of any such permitted
amount may be expended to acquire stock or other evidence of beneficial
ownership of Special Entities that do not become Subsidiaries of the U.S.
Borrower;
(j) advances to employees in the ordinary course of business for
travel, relocation and related expenses;
(k) investments received in connection with the bankruptcy or
reorganization of suppliers, customers and other Persons having
obligations in favor of the U.S. Borrower or any Subsidiary in settlement
of delinquent obligations of, and other disputes with, customers,
suppliers and such other Persons arising in the ordinary course of
business;
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(l) advances, loans, extensions of credit or other investments held
by a Person at the time it becomes a Subsidiary of the U.S. Borrower in
connection with an acquisition permitted hereunder; provided, that such
advances, loans, extensions of credit or other investments have not been
made in anticipation of such acquisition; and
(m) other investments, advances, loans, extensions of credit and
capital contributions by the U.S. Borrower and its Subsidiaries not
exceeding $125,000,000 in the aggregate at any one time outstanding.
14.10 Limitation on Optional Payments and Modification of Debt
Instruments. (a) Prepay, purchase, redeem, retire, defease or otherwise
acquire, or make any payment on account of any principal of, interest on, or
premium payable in connection with the prepayment, redemption or retirement of
any outstanding Subordinated Debt, except that the U.S. Borrower may prepay,
purchase or redeem Subordinated Debt with the proceeds of the issuance of other
subordinated Indebtedness of the U.S. Borrower or capital stock of the U.S.
Borrower; provided that, in the case of the issuance of subordinated
Indebtedness, either (i) the principal terms of such other subordinated
Indebtedness are no more restrictive, taken as a whole, to the U.S. Borrower
and its Subsidiaries than the principal terms of the Subordinated Debt being
repaid, purchased or redeemed or (ii) the terms and conditions of the other
subordinated Indebtedness are reasonably satisfactory to the General
Administrative Agent; provided, further, that, notwithstanding any provision
contained in this subsection 14.10, if no Default or Event of Default has
occurred and is continuing or would occur and be continuing as a result of the
following, the Subordinated Debt may be prepaid at any time without restriction
or (b) without the consent of the General Administrative Agent, amend, modify
or change, or consent or agree to any amendment, modification or change to any
of the terms of any Subordinated Debt (except that without the consent of the
General Administrative Agent or any Lender, the terms of the Subordinated Debt
may be amended, modified or changed if such amendment, modification or change
would extend the maturity or reduce the amount of any payment of principal
thereof, would reduce the rate or extend the date for payment of interest
thereon, would eliminate covenants (other than covenants with respect to
subordination to Indebtedness under this Agreement) or defaults in such
Subordinated Debt or would make such covenants or defaults less restrictive or
make any other change that would not require the consent of the holders of such
Subordinated Debt).
14.11 Transactions with Affiliates. Enter into any transaction,
including, without limitation, any purchase, sale, lease or exchange of
property or the rendering of any service, with any Affiliate unless such
transactions are otherwise permitted under this Agreement, or such transactions
are in the ordinary course of the U.S. Borrower's or such Subsidiary's business
and are upon fair and reasonable terms no less favorable to the U.S. Borrower
or such Subsidiary, as the case may be, than it would obtain in a comparable
arm's length transaction with a Person not an Affiliate; provided, however,
that the U.S. Borrower may engage Lehman Brothers Inc., The Cypress Group, LLC
or any Affiliate of Lehman Brothers Inc. or The Cypress Group, LLC as financial
advisor, underwriter, broker, dealer-manager or finder in connection with any
transaction at the then customary market rates for similar services.
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14.12 Corporate Documents. Amend its Certificate of Incorporation or
By-Laws, each as in effect on the Closing Date, if such amendment would
reasonably be expected to impair the ability of the U.S. Borrower and the
Subsidiaries to perform their respective obligations under the Loan Documents
to which they are a party.
14.13 Fiscal Year. Permit the fiscal year of the U.S. Borrower to end
on a day other than December 31.
14.14 Limitation on Restrictions Affecting Subsidiaries. Enter into
any agreement with any Person other than the Lenders pursuant hereto which
prohibits or limits the ability of any Subsidiary to (a) pay dividends or make
other distributions or pay any Indebtedness owed to the U.S. Borrower or any
Subsidiary, (b) make loans or advances to the U.S. Borrower or any Subsidiary
or (c) transfer any of its properties or assets to the U.S. Borrower or any
Subsidiary, except (i) prohibitions or restrictions under applicable law, (ii)
agreements and instruments governing or evidencing secured Indebtedness
otherwise permitted to be incurred under this Agreement that limits the right
of the borrower to (A) dispose of the assets securing such Indebtedness or (B)
in the case of any Foreign Subsidiary, to make dividends or distributions,
(iii) customary non-assignment provisions of any lease governing a leasehold
interest of any Subsidiary, (iv) customary net worth provisions contained in
leases and other agreements entered into by a Subsidiary in the ordinary course
of business, (v) customary restrictions with respect to a Subsidiary pursuant
to an agreement that has been entered into for the sale or disposition of the
assets or stock of such Subsidiary, (vi) any such restrictions existing by
reasons of Contractual Obligations listed on Schedule 14.14, (vii) any
restrictions on a Special Purpose Subsidiary and (viii) any restrictions
contained in any instrument or agreement that refinances any Indebtedness which
contains similar restrictions.
14.15 Special Purpose Subsidiary. Permit (a) any Special Purpose
Subsidiary to engage in any business other than Receivable Financing
Transactions and activities directly related thereto or (b) at any time the
U.S. Borrower or any of its Subsidiaries (other than a Special Purpose
Subsidiary) or any of their respective assets to incur any liability, direct or
indirect, contingent or otherwise, in respect of any obligation of a Special
Purpose Subsidiary whether arising under or in connection with any Receivable
Financing Transaction or otherwise.
14.16 Interest Rate Agreements. Enter into, or become a party to, any
Interest Rate Agreement that is speculative in nature.
SECTION 15. GUARANTEE
15.1 Guarantee. (a) The U.S. Borrower hereby unconditionally and
irrevocably guarantees to the General Administrative Agent, for the ratable
benefit of the Administrative Agents and the Lenders and their respective
successors, indorsees, transferees and assigns, the prompt and complete payment
and performance by each of the other Borrowers when due (whether at the stated
maturity, by acceleration or otherwise) of the Obligations.
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(b) The U.S. Borrower further agrees to pay any and all expenses
(including, without limitation, all reasonable fees and disbursements of
counsel, provided that the U.S. Borrower shall only be required to pay the fees
and disbursements of (i) one counsel for the General Administrative Agent, (ii)
one counsel for the Canadian Administrative Agent, (iii) one counsel for the
Canadian Lenders, (iv) one counsel for the U.S. Lenders and (v) one counsel for
the General Administrative Agent and the Multicurrency Lenders in the
jurisdiction of each Foreign Subsidiary Borrower) which may be paid or incurred
by the Administrative Agents, or any Lender in enforcing, or obtaining advice
of counsel in respect of, any rights with respect to, or collecting, any or all
of the Obligations and/or enforcing any rights with respect to, or collecting
against, the U.S. Borrower under this Section. This Section shall remain in
full force and effect until the Obligations are paid in full and the
Commitments are terminated, notwithstanding that from time to time prior
thereto any Borrower may be free from any Obligations.
(c) No payment or payments made by any Borrower or any other Person or
received or collected by the Administrative Agents or any Lender from any
Borrower or any other Person by virtue of any action or proceeding or any
set-off or appropriation or application, at any time or from time to time, in
reduction of or in payment of the Obligations shall be deemed to modify,
reduce, release or otherwise affect the liability of the U.S. Borrower
hereunder which shall, notwithstanding any such payment or payments, remain
liable hereunder for the Obligations until the Obligations are paid in full and
the Commitments are terminated.
(d) The U.S. Borrower agrees that whenever, at any time, or from time
to time, it shall make any payment to any Administrative Agent or any Lender on
account of its liability hereunder, it will notify such Administrative Agent
and such Lender in writing that such payment is made under this Section for
such purpose.
15.2 No Subrogation. Notwithstanding any payment or payments made by
the U.S. Borrower hereunder, or any set-off or application of funds of the U.S.
Borrower by any Administrative Agent or any Lender, the U.S. Borrower shall not
be entitled to be subrogated to any of the rights of any Administrative Agent
or any Lender against the other Borrowers or against any collateral security or
guarantee or right of offset held by any Administrative Agent or any Lender for
the payment of the Obligations, nor shall the U.S. Borrower seek or be entitled
to seek any contribution or reimbursement from the other Borrowers in respect
of payments made by the U.S. Borrower hereunder, until all amounts owing to the
Administrative Agent and the Lenders by the other Borrowers on account of the
Obligations are paid in full and the Commitments are terminated. If any amount
shall be paid to the U.S. Borrower on account of such subrogation rights at any
time when all of the Obligations shall not have been paid in full, such amount
shall be held by the U.S. Borrower in trust for the Administrative Agents and
the Lenders, segregated from other funds of the U.S. Borrower, and shall,
forthwith upon receipt by the U.S. Borrower, be turned over to the General
Administrative Agent in the exact form received by the U.S. Borrower (duly
indorsed by the U.S. Borrower to the General Administrative Agent, if
required), to be applied against the Obligations, whether matured or unmatured,
in such order as the General Administrative Agent may determine.
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15.3 Amendments, etc. with respect to the Obligations; Waiver of
Rights. The U.S. Borrower shall remain obligated hereunder notwithstanding
that, without any reservation of rights against the U.S. Borrower, and without
notice to or further assent by the U.S. Borrower, any demand for payment of any
of the Obligations made by any Administrative Agent or any Lender may be
rescinded by such Administrative Agent or such Lender, and any of the
Obligations continued, and the Obligations, or the liability of any other party
upon or for any part thereof, or any collateral security or guarantee therefor
or right of offset with respect thereto, may, from time to time, in whole or in
part, be renewed, extended, amended, modified, accelerated, compromised,
waived, surrendered or released by any Administrative Agent or any Lender, and
any Loan Documents and any other documents executed and delivered in connection
therewith may be amended, modified, supplemented or terminated, in whole or in
part, in accordance with the provisions thereof as the General Administrative
Agent or the Lenders (or the Majority Lenders, as the case may be) may deem
advisable from time to time, and any collateral security, guarantee or right of
offset at any time held by any Administrative Agent or any Lender for the
payment of the Obligations may be sold, exchanged, waived, surrendered or
released. None of any Administrative Agent or any Lender shall have any
obligation to protect, secure, perfect or insure any Lien at any time held by
it as security for the Obligations or for this Agreement or any property
subject thereto. When making any demand hereunder against the U.S. Borrower,
any Administrative Agent or any Lender may, but shall be under no obligation
to, make a similar demand on any other Borrowers or any other guarantor, and
any failure by any Administrative Agent or any Lender to make any such demand
or to collect any payments from any such Borrower or any such other guarantor
or any release of such Borrower or such other guarantor shall not relieve the
U.S. Borrower of its obligations or liabilities hereunder, and shall not impair
or affect the rights and remedies, express or implied, or as a matter of law,
of any Administrative Agent or any Lender against the U.S. Borrower. For the
purposes hereof "demand" shall include the commencement and continuance of any
legal proceedings.
15.4 Guarantee Absolute and Unconditional. The U.S. Borrower waives
any and all notice of the creation, renewal, extension or accrual of any of the
Obligations and notice of or proof of reliance by any Administrative Agent or
any Lender upon this Agreement or acceptance of this Agreement; the
Obligations, and any of them, shall conclusively be deemed to have been
created, contracted or incurred, or renewed, extended, amended or waived, in
reliance upon this Agreement; and all dealings between the Borrowers and the
U.S. Borrower and the other Borrowers, on the one hand, and the Administrative
Agents and the Lenders, on the other, shall likewise be conclusively presumed
to have been had or consummated in reliance upon this Agreement. The U.S.
Borrower waives diligence, presentment, protest, demand for payment and notice
of default or nonpayment to or upon the other Borrowers and the U.S. Borrower
with respect to the Obligations. This Section 15 shall be construed as a
continuing, absolute and unconditional guarantee of payment without regard to
(a) the validity or enforceability of this Agreement, any other Loan Document,
any of the Obligations or any other collateral security therefor or guarantee
or right of offset with respect thereto at any time or from time to time held
by any Administrative Agent or any Lender, (b) any defense, set-off or
counterclaim (other than a defense of payment or performance) which may at any
time be available to or be asserted by the Borrowers (other than the U.S.
Borrower) against any Administrative Agent or any Lender, or (c) any other
circumstance whatsoever (with or without notice to or knowledge of the
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Borrowers or the U.S. Borrower) which constitutes, or might be construed to
constitute, an equitable or legal discharge of the Borrowers for the
Obligations, or of the U.S. Borrower under this Section 15, in bankruptcy or in
any other instance. When pursuing its rights and remedies hereunder against
the Borrower, any Administrative Agent and any Lender may, but shall be under
no obligation to, pursue such rights and remedies as it may have against the
other Borrowers or any other Person or against any collateral security or
guarantee for the Obligations or any right of offset with respect thereto, and
any failure by any Administrative Agent or any Lender to pursue such other
rights or remedies or to collect any payments from such other Borrowers or any
such other Person or to realize upon any such collateral security or guarantee
or to exercise any such right of offset, or any release of the other Borrowers
or any such other Person or of any such collateral security, guarantee or right
of offset, shall not relieve the U.S. Borrower of any liability hereunder, and
shall not impair or affect the rights and remedies, whether express, implied or
available as a matter of law, of any Administrative Agent or any Lender against
the U.S. Borrower. This Section 15 shall remain in full force and effect and
be binding in accordance with and to the extent of its terms upon the U.S.
Borrower and its successors and assigns, and shall inure to the benefit of the
Administrative Agents and the Lenders, and their respective successors,
indorsees, transferees and assigns, until all the Obligations and the
obligations of the U.S. Borrower under this Agreement shall have been satisfied
by payment in full and the Commitments shall be terminated, notwithstanding
that from time to time during the term of this Agreement the Borrowers may be
free from any Obligations.
15.5 Reinstatement. This Section 15 shall continue to be effective, or
be reinstated, as the case may be, if at any time payment, or any part thereof,
of any of the Obligations is rescinded or must otherwise be restored or
returned by any Administrative Agent or any Lender upon the insolvency,
bankruptcy, dissolution, liquidation or reorganization of any Borrower or upon
or as a result of the appointment of a receiver, intervenor or conservator of,
or trustee or similar officer for, any Borrower or any substantial part of its
property, or otherwise, all as though such payments had not been made.
15.6 Payments. The U.S. Borrower hereby agrees that all payments
required to be made by it hereunder will be made to the General Administrative
Agent, for the benefit of the Administrative Agents and the Lenders, as the
case may be, without set-off or counterclaim in accordance with the terms of
the Obligations, including, without limitation, in the currency in which
payment is due.
SECTION 16. EVENTS OF DEFAULT
Upon the occurrence of any of the following events:
(a) Any Borrower shall fail to pay (i) any principal of any Loans or
any Acceptance Reimbursement Obligations when due (whether at the stated
maturity, by acceleration or otherwise) in accordance with the terms
thereof or hereof or (ii) any interest on any Loans, any Reimbursement
Obligations or Subsidiary Reimbursement Obligations, or any fee or other
amount payable hereunder, within five days after any such interest, fee
or other amount becomes due in accordance with the terms hereof; or
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(b) Any representation or warranty made or deemed made by the U.S.
Borrower or any other Loan Party herein or in any other Loan Document or
which is contained in any certificate, document or financial or other
statement furnished at any time under or in connection with this
Agreement or any other Loan Document shall prove to have been incorrect
in any material respect on or as of the date made or deemed made; or
(c) The U.S. Borrower or any other Loan Party shall default in the
observance or performance of any negative covenant contained in Section
14 or in any Security Document to which it is a party; or
(d) The U.S. Borrower or any other Loan Party shall default in the
observance or performance of any other agreement contained in this
Agreement or any other Loan Document other than as provided in (a)
through (c) above, and such default shall continue unremedied for a
period of 30 days; or
(e) Any Loan Document shall cease, for any reason, to be in full
force and effect, or the U.S. Borrower or any other Loan Party shall so
assert; or any security interest created by any of the Security Documents
shall cease to be enforceable and of the same effect and priority
purported to be created thereby, except, in each case, as provided in
subsection 18.18; or
(f) Either the Subsidiary Guarantee or the Additional Subsidiary
Guarantee shall cease, for any reason, to be in full force and effect, or
any guarantor thereunder shall so assert; or
(g) The subordination provisions contained in any instrument
pursuant to which the Subordinated Debt was created or in any instrument
evidencing such Subordinated Debt shall cease, for any reason, to be in
full force and effect or enforceable in accordance with their terms; or
(h) The U.S. Borrower or any of its Subsidiaries shall (i) default
in any payment of principal of or interest on any Indebtedness (other
than Indebtedness under this Agreement), in the payment of any Guarantee
Obligation or in the payment of any Interest Rate Agreement Obligation,
in any case where the principal amount thereof then outstanding exceeds
$20,000,000 beyond the period of grace (not to exceed 60 days), if any,
provided in the instrument or agreement under which such Indebtedness,
Guarantee Obligation or Interest Rate Agreement Obligation was created;
or (ii) default in the observance or performance of any other agreement
or condition relating to any such Indebtedness, Guarantee Obligation or
Interest Rate Agreement Obligation or contained in any instrument or
agreement evidencing, securing or relating thereto, or any other event
shall occur or condition exist, the effect of which default or other
event or condition is to cause, or to permit the holder or holders of
such Indebtedness or, beneficiary or beneficiaries of such Guarantee
Obligation (or a trustee or agent on behalf of such holder or holders or
beneficiary or beneficiaries) to cause, with the giving of notice if
required, such Indebtedness to become due prior to its stated maturity or
such Guarantee Obligation to become payable; or
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(i) (i) The U.S. Borrower or any Material Subsidiary shall commence
any case, proceeding or other action (A) under any existing or future law
of any jurisdiction, domestic or foreign, relating to bankruptcy,
insolvency, reorganization or relief of debtors, seeking to have an order
for relief entered with respect to it, or seeking to adjudicate it a
bankrupt or insolvent, or seeking reorganization, arrangement,
adjustment, winding-up, liquidation, dissolution, composition or other
relief with respect to it or its debts, or (B) seeking appointment of a
receiver, trustee, custodian or other similar official for it or for all
or any substantial part of its assets, or the U.S. Borrower or any
Material Subsidiary shall make a general assignment for the benefit of
its creditors; or (ii) there shall be commenced against the U.S. Borrower
or any Material Subsidiary any case, proceeding or other action of a
nature referred to in clause (i) above which (A) results in the entry of
an order for relief or any such adjudication or appointment or (B)
remains undismissed, undischarged or unbonded for a period of 60 days; or
(iii) there shall be commenced against the U.S. Borrower or any Material
Subsidiary any case, proceeding or other action seeking issuance of a
warrant of attachment, execution, distraint or similar process against
all or any substantial part of its assets which results in the entry of
an order for any such relief which shall not have been vacated,
discharged, or stayed or bonded pending appeal within 60 days from the
entry thereof; or (iv) the U.S. Borrower or any Material Subsidiary shall
take any action in furtherance of, or indicating its consent to, approval
of, or acquiescence in, any of the acts set forth in clause (i), (ii), or
(iii) above; or (v) the U.S. Borrower or any Material Subsidiary shall
generally not, or shall be unable to, or shall admit in writing its
inability to, pay its debts as they become due; or
(j) (i) Any Person shall engage in any non-exempt "prohibited
transaction" (as defined in Section 406 of ERISA or Section 4975 of the
Code) involving any Plan, (ii) any "accumulated funding deficiency" (as
defined in Section 302 of ERISA), whether or not waived, shall exist with
respect to any Single Employer Plan, (iii) a Reportable Event shall occur
with respect to, or proceedings shall commence to have a trustee
appointed, or a trustee shall be appointed, to administer or to
terminate, any Single Employer Plan, which Reportable Event or
commencement of proceedings or appointment of a trustee is, in the
reasonable opinion of the Majority Lenders, likely to result in the
termination of such Plan for purposes of Title IV of ERISA, (iv) any
Single Employer Plan shall terminate for purposes of Title IV of ERISA,
(v) the U.S. Borrower or any Commonly Controlled Entity shall, or in the
reasonable opinion of the Majority Lenders is likely to, incur any
liability in connection with a withdrawal from, or the Insolvency or
Reorganization of, a Multiemployer Plan or (vi) any other event or
condition shall occur or exist, with respect to a Plan; and in each case
in clauses (i) through (vi) above, such event or condition, together with
all other such events or conditions, if any, would reasonably be expected
to subject the U.S. Borrower or any of its Subsidiaries to any tax,
penalty or other liabilities in the aggregate material in relation to the
business, operations, property or financial or other condition of the
U.S. Borrower and its Subsidiaries taken as a whole; or
(k) One or more judgments or decrees shall be entered against the
U.S. Borrower or any of its Subsidiaries involving in the aggregate a
liability (not paid or fully covered
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105
by insurance) of $20,000,000 or more and all such judgments or decrees
shall not have been vacated, discharged, stayed or bonded pending
appeal within 60 days from the entry thereof; or
(l) (i) Any Person or "group" (within the meaning of Section 13(d)
or 15(d) of the Exchange Act) (A) shall have acquired beneficial
ownership of 35% or more of any outstanding class of capital stock of the
U.S. Borrower having ordinary voting power in the election of directors
or (B) shall obtain the power (whether or not exercised) to elect a
majority of the U.S. Borrower's directors or (ii) the Board of Directors
of the U.S. Borrower shall not consist of a majority of Continuing
Directors;
then, and in any such event, (A) if such event is an Event of Default specified
in clause (i) or (ii) of paragraph (i) above with respect of the U.S. Borrower
or the Canadian Borrower, automatically the Commitments shall immediately
terminate and the Loans hereunder (with accrued interest thereon) and all other
amounts owing under this Agreement (including, without limitation, all
Reimbursement Obligations, Subsidiary Reimbursement Obligations and Acceptance
Reimbursement Obligations, regardless of whether or not such Reimbursement
Obligations, Subsidiary Reimbursement Obligations and Acceptance Reimbursement
Obligations are then due and payable) shall immediately become due and payable,
and (B) if such event is any other Event of Default, any of the following
actions may be taken: (i) with the consent of the Majority Lenders, the
General Administrative Agent may, or upon the request of the Majority Lenders,
the General Administrative Agent shall, by notice to the U.S. Borrower declare
the Commitments to be terminated forthwith, whereupon the Commitments shall
immediately terminate; (ii) with the consent of the Majority Lenders, the
General Administrative Agent may, or upon the direction of the Majority
Lenders, the General Administrative Agent shall, by notice of default to the
U.S. Borrower, declare the Loans hereunder (with accrued interest thereon) and
all other amounts owing under this Agreement (including all amounts payable in
respect of Letters of Credit whether or not the beneficiaries thereof shall
have presented the drafts and other documents required thereunder) and the
Notes to be due and payable forthwith, whereupon the same shall immediately
become due and payable and (iii) the General Administrative Agent may, and upon
the direction of the Majority Lenders shall, exercise any and all remedies and
other rights provided pursuant to this Agreement and/or the other Loan
Documents.
With respect to all outstanding Reimbursement Obligations and
Subsidiary Reimbursement Obligations which have not matured at the time of
an acceleration pursuant to the second preceding paragraph, the U.S. Borrower
shall at such time deposit in a cash collateral account opened by and
maintained by the General Administrative Agent an amount equal to the aggregate
amount of all such Reimbursement Obligations and Subsidiary Reimbursement
Obligations. Amounts held in such cash collateral account shall be applied by
the General Administrative Agent to the payment of Reimbursement Obligations
and Subsidiary Reimbursement Obligations when drawings under the related
Letters of Credit are made, and any balance in such account shall be applied to
repay other obligations of the U.S. Borrower hereunder. After all
Reimbursement Obligations and Subsidiary Reimbursement Obligations shall have
been satisfied and all other obligations of the U.S. Borrower hereunder shall
have been paid in full, the balance, if any, in such cash collateral account
shall be returned to the U.S. Borrower.
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106
With respect to all outstanding Acceptance Reimbursement Obligations in
respect of Acceptances which have not matured at the time of an acceleration
pursuant to the second preceding paragraph, the Canadian Borrower shall at such
time deposit in a cash collateral account opened by and maintained by the
Canadian Administrative Agent an amount equal to the aggregate undiscounted
face amount of all such unmatured Acceptances. Amounts held in such cash
collateral account shall be applied by the Canadian Administrative Agent to the
payment of maturing Acceptances, and any balance in such account shall be
applied to repay other obligations of the Canadian Borrower hereunder and under
any Canadian Revolving Credit Notes. After all Acceptance Reimbursement
Obligations shall have been satisfied and all other obligations of the Canadian
Borrower hereunder and under any Canadian Revolving Credit Notes shall have
been paid in full, the balance, if any, in such cash collateral account shall
be returned to the Canadian Borrower.
Except as expressly provided above in this Section, presentment, demand,
protest and all other notices of any kind are hereby expressly waived.
SECTION 17. THE ADMINISTRATIVE AGENTS; THE
MANAGING AGENTS, CO-AGENTS
AND LEAD MANAGERS
17.1 Appointment. Each Lender hereby irrevocably designates and
appoints (a) Chase as the General Administrative Agent and (b) The Bank of Nova
Scotia as the Canadian Administrative Agent of such Lender under this Agreement
and the other Loan Documents, and each such Lender irrevocably authorizes (a)
Chase to act as the General Administrative Agent of such Lender, and (b) The
Bank of Nova Scotia to act as the Canadian Administrative Agent, to take such
action on its behalf under the provisions of this Agreement and the other Loan
Documents and to exercise such powers and perform such duties as are expressly
delegated to the General Administrative Agent and the Canadian Administrative
Agent, respectively, by the terms of this Agreement and the other Loan
Documents, together with such other powers as are reasonably incidental
thereto. Notwithstanding any provision to the contrary elsewhere in this
Agreement, the Administrative Agents shall not have any duties or
responsibilities, except those expressly set forth herein, or any fiduciary
relationship with any Lender, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into this
Agreement or any other Loan Document or otherwise exist against either
Administrative Agent.
17.2 Delegation of Duties. Each Administrative Agent may execute any
of its duties under this Agreement and the other Loan Documents by or through
agents or attorneys-in-fact and shall be entitled to advice of counsel
concerning all matters pertaining to such duties. Neither Administrative Agent
shall be responsible for the negligence or misconduct of any agents or
attorneys-in-fact selected by it with reasonable care.
17.3 Exculpatory Provisions. Neither Administrative Agent nor any of
its respective officers, directors, employees, agents, attorneys-in-fact or
affiliates shall be (i) liable for any action lawfully taken or omitted to be
taken by it or such Person under or in connection with this Agreement or any
other Loan Document (except for its or such Person's gross
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107
negligence or willful misconduct) or (ii) responsible in any manner to any of
the Lenders for any recitals, statements, representations or warranties made by
any Borrower or other Person or any officer thereof contained in this Agreement
or any other Loan Document or in any certificate, report, statement or other
document referred to or provided for in, or received by such Administrative
Agent under or in connection with, this Agreement or any other Loan Document or
for the value, validity, effectiveness, genuineness, enforceability or
sufficiency of this Agreement or any other Loan Document or for any failure of
a Borrower or any other Person to perform its obligations hereunder or
thereunder. Neither Administrative Agent shall be under any obligation to any
Lender to ascertain or to inquire as to the observance or performance of any of
the agreements contained in, or conditions of, this Agreement or any other Loan
Document or to inspect the properties, books or records of the Borrowers.
17.4 Reliance by Administrative Agent. Each Administrative Agent shall
be entitled to rely, and shall be fully protected in relying, upon any Note,
writing, resolution, notice, consent, certificate, affidavit, letter, telecopy,
telex or teletype message, statement, order or other document or conversation
believed by it to be genuine and correct and to have been signed, sent or made
by the proper Person or Persons and upon advice and statements of legal counsel
(including, without limitation, counsel to the Borrowers or any of them),
independent accountants and other experts selected by such Administrative
Agent. Each Administrative Agent may deem and treat the payee of any Note as
the owner thereof for all purposes unless a written notice of assignment or
transfer thereof shall have been filed with such Administrative Agent. Each
Administrative Agent shall be fully justified as between itself and the Lenders
in failing or refusing to take any action under this Agreement or any other
Loan Document unless it shall first receive such advice or concurrence of the
Majority Lenders as it deems appropriate or it shall first be indemnified to
its satisfaction by the Lenders against any and all liability and expense which
may be incurred by it by reason of taking or continuing to take any such
action. Each Administrative Agent shall in all cases be fully protected in
acting, or in refraining from acting, under this Agreement and the other Loan
Documents in accordance with a request of the Majority Lenders, and such
request and any action taken or failure to act pursuant thereto shall be
binding upon all the Lenders and all future holders of the Loans and the
Acceptance Reimbursement Obligations.
17.5 Notice of Default. Neither Administrative Agent shall be deemed
to have knowledge or notice of the occurrence of any Default or Event of
Default hereunder unless such Administrative Agent has received notice from a
Lender or a Borrower referring to this Agreement, describing such Default or
Event of Default and stating that such notice is a "notice of default". In the
event that the General Administrative Agent receives such a notice, such
Administrative Agent shall give notice thereof to the Lenders. The General
Administrative Agent shall take such action reasonably promptly with respect to
such Default or Event of Default as shall be reasonably directed by the
Majority Lenders; provided that unless and until the General Administrative
Agent shall have received such directions, such Administrative Agent may (but
shall not be obligated to) take such action, or refrain from taking such
action, with respect to such Default or Event of Default as it shall deem
advisable in the best interests of the Lenders.
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108
17.6 Non-Reliance on Administrative Agents and Other Lender. Each
Lender expressly acknowledges that neither Administrative Agent nor any of
their respective officers, directors, employees, agents, attorneys-in-fact or
affiliates has made any representations or warranties to it and that no act by
such Administrative Agent hereinafter taken, including any review of the
affairs of any Borrower, shall be deemed to constitute any representation or
warranty by such Administrative Agent to any Lender. Each Lender represents to
each Administrative Agent that it has, independently and without reliance upon
such Administrative Agent or any other Lender, and based on such documents and
information as it has deemed appropriate, made its own appraisal of and
investigation into the business, operations, property, financial and other
condition and creditworthiness of the Borrowers and made its own decision to
make its Extensions of Credit hereunder and enter into this Agreement. Each
Lender also represents that it will, independently and without reliance upon
either Administrative Agent or any other Lender, and based on such documents
and information as it shall deem appropriate at the time, continue to make its
own credit analysis, appraisals and decisions in taking or not taking action
under this Agreement and the other Loan Documents, and to make such
investigation as it deems necessary to inform itself as to the business,
operations, property, financial and other condition and creditworthiness of the
Borrowers. Except for notices, reports and other documents expressly required
to be furnished to the Lenders by an Administrative Agent hereunder, such
Administrative Agent shall not have any duty or responsibility to provide any
Lender with any credit or other information concerning the business,
operations, property, condition (financial or otherwise), prospects or
creditworthiness of the Borrowers which may come into the possession of such
Administrative Agent or any of its respective officers, directors, employees,
agents, attorneys-in-fact or affiliates.
17.7 Indemnification. Each U.S. Lender (together with, in the case of
a U.S. Common Lender, its Counterpart Lender on a joint and several basis)
agrees to indemnify each Administrative Agent in its capacity as such (to the
extent not reimbursed by the Borrowers and without limiting the obligation of
the Borrowers to do so), ratably according to its U.S. Revolving Credit
Commitment Percentage in effect on the date on which indemnification is sought
from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind whatsoever which may at any time (including, without limitation, at any
time following the payment of the Loans and the Acceptance Reimbursement
Obligations) be imposed on, incurred by or asserted against such Administrative
Agent in any way relating to or arising out of this Agreement, any of the other
Loan Documents or any documents contemplated by or referred to herein or
therein or the transactions contemplated hereby or thereby or any action taken
or omitted by such Administrative Agent under or in connection with any of the
foregoing; provided that no Lender shall be liable for the payment of any
portion of such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements resulting from the gross
negligence or willful misconduct of such Administrative Agent. The agreements
in this subsection shall survive the payment of the Loans, the Acceptance
Reimbursement Obligations and all other amounts payable hereunder.
17.8 Administrative Agents in their Individual Capacity. Each
Administrative Agent and its respective affiliates may make loans to, accept
Drafts, accept deposits from and generally engage in any kind of business with
the Borrowers as though such Administrative
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109
Agent was not an Administrative Agent hereunder and under the other Loan
Documents. With respect to the Loans made or renewed by such Administrative
Agent, any Acceptances created by such Administrative Agent and any Note or
Acceptance Note issued to it, such Administrative Agent shall have the same
rights and powers under this Agreement and the other Loan Documents as any
Lender and may exercise the same as though it were not an Administrative Agent,
and the terms "Lender" and "Lenders" shall include each Administrative Agent in
its individual capacity.
17.9 Successor Administrative Agents. The General Administrative Agent
may resign as General Administrative Agent, and the Canadian Administrative
Agent may resign as Canadian Administrative Agent, in each case upon 30 days'
notice to the Lenders and the other Administrative Agent. If either
Administrative Agent shall resign as General Administrative Agent or Canadian
Administrative Agent, as the case may be, under this Agreement and the other
Loan Documents, then the Majority Lenders shall appoint from among the U.S.
Lenders (in the case of a resignation of the General Administrative Agent) or
the Canadian Lenders (in the case of a resignation of the Canadian
Administrative Agent) a successor administrative agent for the Lenders, which
successor administrative agent shall be approved by the U.S. Borrower (such
approval not to be unreasonably withheld), whereupon such successor
administrative agent shall succeed to the rights, powers and duties of the
resigning Administrative Agent, and the terms "General Administrative Agent" or
"Canadian Administrative Agent", as the case may be, shall mean such successor
administrative agent effective upon such appointment and approval, and the
former Administrative Agent's rights, powers and duties as either General
Administrative Agent or Canadian Administrative Agent, as the case may be,
shall be terminated, without any other or further act or deed on the part of
such former Administrative Agent or any of the parties to this Agreement or any
holders of the Loans. After any resigning Administrative Agent's resignation as
either General Administrative Agent or Canadian Administrative Agent, as the
case may be, the provisions of this subsection shall inure to its benefit as to
any actions taken or omitted to be taken by it while it was either General
Administrative Agent or Canadian Administrative Agent, as the case may be,
under this Agreement and the other Loan Documents.
17.10 The Managing Agents, Co-Agents and Lead Managers. Each Lender
and each Co-Agent, Managing Agent and Lead Manager acknowledge that the
Managing Agents, Co-Agents and Lead Managers, in such capacities, shall have no
duties or responsibilities, and shall incur no liabilities, under this
Agreement or the other Loan Documents in their respective capacities as such.
SECTION 18. MISCELLANEOUS
18.1 Amendments and Waivers. (a) Neither this Agreement or any other
Loan Document, nor any terms hereof or thereof may be amended, supplemented,
waived or modified except in accordance with the provisions of this subsection
18.1. The Majority Lenders may, or, with the written consent of the Majority
Lenders, the Administrative Agents may, from time to time, (i) enter into with
the U.S. Borrowers written amendments, supplements or modifications hereto and
to the other Loan Documents for the purpose of adding any provisions to this
Agreement or the other Loan Documents or changing in any manner the rights or
obligations of
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110
the Lenders or of the U.S. Borrowers hereunder or thereunder or (ii) waive
at the U.S. Borrowers' request, on such terms and conditions as the Majority
Lenders or the Administrative Agents, as the case may be, may specify in such
instrument, any of the requirements of this Agreement or the other Loan
Documents or any Default or Event of Default and its consequences; provided,
however, that no such waiver and no such amendment, supplement or modification
shall:
(A) reduce the amount or extend the scheduled date of maturity of
any Loan or any Acceptance or any Acceptance Note or of any scheduled
installment thereof, or reduce the stated rate of any interest or fee
payable hereunder or extend the scheduled date of any payment thereof or
increase the amount or extend the expiration date of any Lender's
Canadian Revolving Credit Commitment, Multicurrency Commitment or U.S.
Revolving Credit Commitment, in each case without the consent of each
Lender affected thereby;
(B) amend, supplement, modify or waive any provision of this
subsection 18.1 or reduce the percentages specified in the definition of
"Majority Lenders" or consent to the assignment or transfer by any
Borrower of any of its rights and obligations under this Agreement and
the other Loan Documents, in each case without the consent of all the
Lenders or reduce the percentages specified in the definitions of (I)
"Majority U.S. Lenders" without the consent of all of the U.S. Lenders or
(II) "Majority Canadian Lenders" without the consent of all of the
Canadian Lenders;
(C) amend, supplement, modify or waive any provision of Section 17
or any other provision of this Agreement governing the respective rights
or obligations of the General Administrative Agent or the Canadian
Administrative Agent without the consent of the then Administrative
Agents, respectively;
(D) amend, supplement, modify or waive any provision of Section 3 or
any other provision of this Agreement governing the rights and
obligations of the Swing Line Lender; or the definitions used therein
without the consent of the Swing Line Lender;
(E) extend the expiring date on any Letter of Credit beyond the
Revolving Credit Termination Date without the consent of each Lender;
(F) increase the aggregate amount of the U.S. Revolving Credit
Commitments of all Lenders to an amount in excess of $2,500,000,000
without the consent of each Lender;
(G) amend, modify or waive any provision of subsection 10.8 without
the consent of each Lender; or
(H) release all or substantially all of the guarantees contained in
Section 15 and under the Subsidiary Guarantee or the Additional
Subsidiary Guarantee or all or substantially all of the Collateral under,
and as defined in, the Security Documents
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without the consent of each Lender other than as permitted under
subsections 14.5, 14.6 and 18.18.
Any waiver and any amendment, supplement or modification pursuant to this
subsection 18.1 shall apply to each of the Lenders and shall be binding upon
the Borrowers, the Lenders, the General Administrative Agent, the Canadian
Administrative Agent and all future holders of the Loans and the Reimbursement
Obligations, Subsidiary Reimbursement Obligations and Acceptance Reimbursement
Obligations. In the case of any waiver, the Borrowers, the Lenders, the
General Administrative Agent and the Canadian Administrative Agent shall be
restored to their former positions and rights hereunder and under the other
Loan Documents, and any Default or Event of Default waived shall be deemed to
be cured and not continuing; but no such waiver shall extend to any subsequent
or other Default or Event of Default, or impair any right consequent thereon.
(b) In addition to amendments effected pursuant to the foregoing
paragraph (a), Schedules II and III may be amended as follows:
(i) Schedule II will be amended to add Subsidiaries of the U.S.
Borrower as additional Foreign Subsidiary Borrowers upon (A) execution
and delivery by the U.S. Borrower, any such Foreign Subsidiary Borrower
and the General Administrative Agent, of a Joinder Agreement providing
for any such Subsidiary to become a Foreign Subsidiary Borrower, and (B)
delivery to the General Administrative Agent of (I) a Foreign Subsidiary
Opinion in respect of such additional Foreign Subsidiary Borrower and
(II) such other documents with respect thereto as the General
Administrative Agent shall reasonably request.
(ii) Schedule II will be amended to remove any Subsidiary as a
Foreign Subsidiary Borrower upon (A) execution and delivery by the U.S.
Borrower of a written amendment providing for such amendment and (B)
repayment in full of all outstanding Loans of such Foreign Subsidiary
Borrower.
(iii) Schedule III will be amended (A) to change administrative
information contained therein (other than any interest rate definition,
funding time, payment time or notice time contained therein) or (B) to
add Available Foreign Currencies (and related interest rate definitions
and administrative information) with the approval of the Majority
Multicurrency Lenders, in each case, upon execution and delivery by the
U.S. Borrower and the General Administrative Agent of a written amendment
providing for such amendment.
(iv) Schedule III will be amended to conform any funding time,
payment time or notice time contained therein to then-prevailing market
practices, upon execution and delivery by the U.S. Borrower and the
General Administrative Agent of a written amendment providing for such
amendment.
(v) Schedule III will be amended to change any interest rate
definition contained therein, upon execution and delivery by the U.S.
Borrower, all the
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Multicurrency Lenders and the General Administrative Agent of a written
amendment providing for such amendment.
(c) The General Administrative Agent shall give prompt notice to each
U.S. Lender of any amendment effected pursuant to subsection 18.1(b).
(d) Notwithstanding the provisions of this subsection 18.1, any
Alternate Currency Facility may be amended, supplemented or otherwise modified
in accordance with its terms so long as after giving effect thereto either (i)
such Alternate Currency Facility ceases to be an "Alternate Currency Facility"
and the U.S. Borrower so notifies the General Administrative Agent or (ii) the
Alternate Currency Facility continues to meet the requirements of an Alternate
Currency Facility set forth herein.
18.2 Notices. All notices, requests and demands to or upon the
respective parties hereto to be effective shall be in writing (including by
facsimile transmission) and, unless otherwise expressly provided herein, shall
be deemed to have been duly given or made when delivered by hand, or five days
after being deposited in the mail, postage prepaid, or, in the case of telecopy
notice, when received, or, in the case of delivery by a nationally recognized
overnight courier, when received, addressed as follows in the case of the U.S.
Borrowers, the Canadian Borrower, the General Administrative Agent and the
Canadian Administrative Agent, and as set forth in Schedule I in the case of
the other parties hereto, or to such other address as may be hereafter notified
by the respective parties hereto and any future holders of the Notes:
The U.S. Borrower: Lear Corporation
21557 Telegraph Road
Southfield, Michigan 48034
Attention: Donald J. Stebbins
Telecopy: (810) 746-1593
The Canadian Borrower: Lear Corporation Canada Ltd.
c/o 21557 Telegraph Road
Southfield, Michigan 48034
Attention: Donald J. Stebbins
Telecopy: (810) 746-1593
The Foreign
Subsidiary Borrowers: Lear Corporation
21557 Telegraph Road
Southfield, Michigan 48034
Attention: Donald J. Stebbins
Telecopy: (810) 746-1593
The General
Administrative Agent: The Chase Manhattan Bank
270 Park Avenue
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New York, New York 10017
Attention: Rosemary Bradley
Telecopy: (212) 972-9854
The Canadian
Administrative Agent: The Bank of Nova Scotia
44 King Street West, 14th Floor
Toronto, Ontario
M5H1H1
Attention: IBP Loan Administration and
Agency Services Manager
Telecopy: (416) 866-5991
provided that any notice, request or demand to or upon (i) the Administrative
Agents or the Lenders pursuant to subsection 2.3, 3.2, 4.2, 5.3, 6.2, 7.3, 9.2,
10.2, 10.4 or 10.7 or (ii) the Swing Line Lender pursuant to Section 3, shall
not be effective until received.
18.3 No Waiver; Cumulative Remedies. No failure to exercise and no
delay in exercising, on the part of any Borrower, the General Administrative
Agent, the Canadian Administrative Agent or any Lender, any right, remedy,
power or privilege hereunder or under the other Loan Documents shall operate as
a waiver thereof; nor shall any single or partial exercise of any right,
remedy, power or privilege hereunder preclude any other or further exercise
thereof or the exercise of any other right, remedy, power or privilege. The
rights, remedies, powers and privileges herein provided are cumulative and not
exclusive of any rights, remedies, powers and privileges provided by law.
18.4 Survival of Representations and Warranties. All representations
and warranties made hereunder and in the other Loan Documents (or in any
amendment, modification or supplement hereto or thereto) and in any certificate
delivered pursuant hereto or such other Loan Documents shall survive the
execution and delivery of this Agreement and the Notes and the making of the
Loans hereunder.
18.5 Payment of Expenses and Taxes. The U.S. Borrower agrees (a) to
pay or reimburse each Administrative Agent for all its reasonable out-of-pocket
costs and reasonable expenses incurred in connection with the development,
preparation and execution of, and any amendment, supplement or modification to,
this Agreement, the Notes and the other Loan Documents (other than documents
relating to any Alternate Currency Facility) and any other documents prepared
in connection herewith or therewith, and the consummation of the transactions
contemplated hereby and thereby, including, without limitation, the reasonable
fees and disbursements of counsel to each Administrative Agent, (b) to pay or
reimburse each Lender and each Administrative Agent for all their costs and
expenses incurred in connection with the enforcement or preservation of any
rights under this Agreement, the Notes and any such other documents, including,
without limitation, fees and disbursements of counsel to each Administrative
Agent and the reasonable fees and disbursements of counsel to the several
Lenders, and (c) to pay, indemnify, and hold each Lender and each
Administrative Agent and
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their respective directors, officers, employees and agents harmless from, any
and all recording and filing fees and any and all liabilities with respect to,
or resulting from any delay in paying, stamp, excise and other taxes, if any,
which may be payable or determined to be payable in connection with the
execution and delivery of, or consummation of any of the transactions
contemplated by, or any amendment, supplement or modification of, or any waiver
or consent under or in respect of, this Agreement, the Notes and any such other
documents, and (d) to pay, indemnify, and hold each Lender and each
Administrative Agent harmless from and against any and all other liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind or nature whatsoever with respect to the
execution, delivery, enforcement, performance and administration of this
Agreement, the Notes and the other Loan Documents, the use or proposed use by
the Borrowers of the proceeds of the Loans (all the foregoing, collectively,
the "indemnified liabilities"); provided that the U.S. Borrower shall have no
obligation hereunder to any Administrative Agent or any Lender with respect to
indemnified liabilities arising from the gross negligence or willful misconduct
of such Administrative Agent or any such Lender as finally determined by a
court of competent jurisdiction; provided, however, that nothing in this
subsection shall be construed as requiring the Canadian Borrower to so
indemnify in amounts that would be in violation of, and its obligations to so
indemnify are subject to, the restrictions on financial assistance set out in
the Business Corporations Act (Ontario); and, provided, further, that the
preceding proviso shall not be construed in any way as limiting or derogating
from the obligations of the other Borrowers set out in this subsection. The
agreements in this subsection shall survive repayment of the Loans, the
Acceptance Reimbursement Obligations and all other amounts payable hereunder.
18.6 Successors and Assigns; Participations and Assignments. (a) This
Agreement shall be binding upon and inure to the benefit of the Borrowers, the
Lenders, the Administrative Agents, all future holders of the Loans, the
Reimbursement Obligations, the Subsidiary Reimbursement Obligations and the
Acceptance Reimbursement Obligations and their respective successors and
assigns, except that Borrower assign or transfer any of its rights or
obligations under this Agreement without the prior written consent of each
Lender.
(b) Any Lender may, in the ordinary course of its commercial banking
business and in accordance with applicable law, at any time sell to one or more
banks or other entities ("Participants") participating interests in any Loan
owing to such Lender, any Commitment of such Lender or any other interest of
such Lender hereunder and under the other Loan Documents; provided that, in the
case of participations granted by a Canadian Lender, such Participant must be a
resident of Canada for purposes of the Tax Act unless such participation is
granted pursuant to subsection 18.8. In the event of any such sale by a Lender
of a participating interest to a Participant, such Lender's obligations under
this Agreement to the other parties to this Agreement shall remain unchanged,
such Lender shall remain solely responsible for the performance thereof, such
Lender shall remain the holder of any such Loan for all purposes under this
Agreement and the other Loan Documents, and the Borrowers and the
Administrative Agents shall continue to deal solely and directly with such
Lender in connection with such Lender's rights and obligations under this
Agreement and the other Loan Documents. Any agreement pursuant to which any
Lender shall sell any such participating interest shall provide that such
Lender shall retain the sole right and responsibility to exercise such Lender's
rights and enforce the Borrowers' obligations hereunder, including the right to
consent to any amendment,
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supplement, modification or waiver of any provision of this Agreement or any of
the other Loan Documents, provided that such participation agreement may
provide that such Lender will not agree to any amendment, supplement,
modification or waiver described in clause (A) or (B) of the proviso to the
second sentence of subsection 18.1(a) without the consent of the Participant.
Each Borrower agrees that if amounts outstanding under this Agreement are due
or unpaid, or shall have been declared or shall have become due and payable
upon the occurrence of an Event of Default, each Participant shall be deemed to
have the right of setoff in respect of its participating interest in amounts
owing under this Agreement to the same extent as if the amount of its
participating interest were owing directly to it as a Lender under this
Agreement; provided that, in purchasing such participating interest, such
Participant shall be deemed to have agreed to share with the Lenders the
proceeds thereof as provided in subsection 18.7(a) as fully as if it were a
Lender hereunder. Each Borrower agrees that each Participant shall be entitled
to the benefits of subsections 10.10, 10.11, 10.12 and 18.6 with respect to its
participation in the Commitments and the Loans outstanding from time to time
hereunder as if it was a Lender; provided, that no Participant shall be
entitled to receive any greater amount pursuant to such subsections than the
transferor Lender would have been entitled to receive in respect of the amount
of the participation transferred by such transferor Lender to such Participant
had no such transfer occurred.
(c) Any Lender may, in the ordinary course of its commercial banking
business and in accordance with applicable law, at any time and from time to
time assign to any Lender or any Affiliate thereof or, with the prior written
consent of the U.S. Borrower (such consent not to be unreasonably withheld) and
the Administrative Agents (such consent not to be unreasonably withheld), to an
additional bank or financial institution (an "Assignee") all or any part of its
rights and obligations under this Agreement and the other Loan Documents
including, without limitation, its Commitments, Loans and Acceptance
Reimbursement Obligations, pursuant to an Assignment and Acceptance,
substantially in the form of Exhibit K, executed by such Assignee, such
assigning Lender (and, in the case of an Assignee that is not then a Lender or
an Affiliate thereof, by the U.S. Borrower and the Administrative Agents) and
delivered to the Administrative Agents for their acceptance and recording in
the Register; provided that (i) if any Lender assigns a part of its rights and
obligations in respect of Revolving Credit Loans and/or Revolving Credit
Commitment under this Agreement to an Assignee, such Lender and such Lender's
Counterpart Lender (if any) shall each assign proportionate interests in their
respective Revolving Credit Commitment and Revolving Credit Loans and other
related rights and obligations hereunder to such Assignee and a Counterpart
Lender for such Assignee designated by it, (ii) if any U.S. Lender assigns a
part of its rights and obligations under this Agreement in respect of its U.S.
Revolving Credit Loans and/or U.S. Revolving Credit Commitment to an Assignee,
such U.S. Lender shall assign proportionate interests in (A) its participations
in the Swing Line Loans and other rights and obligations hereunder in respect
of the Swing Line Loans to such Assignee and (B) Multicurrency Loans and
Multicurrency Commitments, (iii) in the case of any such assignment to an
additional bank or financial institution, the aggregate amount of any U.S.
Revolving Credit Commitment (or, if the U.S. Revolving Credit Commitments have
terminated or expired, the aggregate principal amount of any U.S. Revolving
Credit Loans) being assigned, or the U.S. Dollar Equivalent of the aggregate
amount of the Canadian Revolving Credit Commitment (or, if the Canadian
Revolving Credit Commitments have terminated or expired, the aggregate amount
of Canadian Revolving Credit Loans and
<PAGE> 123
116
Acceptance Reimbursement Obligations) being assigned shall not be less than
$15,000,000 (or (i) if less, the then outstanding amount of such Commitments,
Loans and/or Acceptance Reimbursement Obligations or (ii) such lesser amount as
may be agreed by the U.S. Borrower and the Administrative Agents), and after
giving effect to such assignment such assignor Lender, if it retains any U.S.
Revolving Credit Commitment, shall retain a U.S. Revolving Credit Commitment of
at least $15,000,000 and (iv) in the case of any such assignment made by a
Canadian Lender, such Assignee must be a resident of Canada for purposes of the
Tax Act unless such assignment is made pursuant to 18.8. Upon such execution,
delivery, acceptance and recording, from and after the closing date determined
pursuant to such Assignment and Acceptance, (I) the Assignee thereunder shall
be a party hereto and, to the extent provided in such Assignment and
Acceptance, have the rights and obligations of a Lender hereunder with
Commitments, rights in respect of Acceptance Reimbursement Obligations and
Loans as set forth therein, and (II) the assigning Lender thereunder shall be
released from its obligations under this Agreement to the extent that such
obligations shall have been expressly assumed by the Assignee pursuant to such
Assignment and Acceptance (and, in the case of an Assignment and Acceptance
covering all or the remaining portion of an assigning Lender's rights and
obligations under this Agreement, such assigning Lender shall cease to be a
party hereto). Notwithstanding the foregoing, no consent of the Borrower shall
be required for any assignment effected while an Event of Default under Section
16(i) is in existence.
(d) The Administrative Agents, on behalf of the Borrowers, shall
maintain at their respective addresses referred to in subsection 18.2 a copy of
each Assignment and Acceptance delivered to it and a register (the "Register")
for the recordation of (i) the names and addresses of the Lenders and the
Commitments of, and principal amounts of the Loans and Acceptances owing to,
each Lender from time to time and (ii) the other information required from time
to time pursuant to subsection 3.1 in respect of Swing Line Loans. The entries
in the Register shall constitute prima facie evidence of the information
recorded therein, and the Borrowers, the Administrative Agents and the Lenders
may (and, in the case of any Loan, Acceptance or other obligation hereunder not
evidenced by a Note, shall) treat each Person whose name is recorded in the
Register as the owner of a Loan, Acceptance or other obligation hereunder as
the owner thereof for all purposes of this Agreement and the other Loan
Documents, notwithstanding any notice to the contrary. Any assignment of any
Loan, Acceptance or other obligation hereunder not evidenced by a Note shall be
effective only upon appropriate entries with respect thereto being made in the
Register. The Register shall be available for inspection by the U.S. Borrowers
or any Lender at any reasonable time and from time to time upon reasonable
prior notice.
(e) Upon its receipt of an Assignment and Acceptance executed by an
assigning Lender and an Assignee (and, in the case of an Assignee that is not
then a Lender or an Affiliate thereof, executed by the Borrowers and the
Administrative Agents), together with payment to the Administrative Agents of a
registration and processing fee of $2,500, the Administrative Agents shall (i)
promptly accept such Assignment and Acceptance and (ii) on the effective date
determined pursuant thereto record the information contained therein in the
Register and give prompt notice of such acceptance and recordation to the
Lenders and the Borrowers.
<PAGE> 124
117
(f) Each Borrower authorizes each Lender to disclose to any Participant
or Assignee (each, a "Transferee") and any prospective Transferee any and all
financial information in such Lender's possession concerning such Borrower and
its Affiliates which has been delivered to such Lender by or on behalf of such
Borrower pursuant to this Agreement or which has been delivered to such Lender
by or on behalf of such Borrower in connection with such Lender's credit
evaluation of such Borrower and its Affiliates prior to becoming a party to
this Agreement; provided, that any such Transferee is advised of the
confidential nature of such information, if applicable, such Lender takes
reasonable steps, in accordance with customary practices, to ensure that any
such information is not used in violation of federal or state securities laws
and such Lender otherwise complies with subsection 18.20.
(g) For avoidance of doubt, the parties to this Agreement acknowledge
that the provisions of this subsection concerning assignments of Loans and
Notes relate only to absolute assignments and that such provisions do not
prohibit assignments creating security interests, including, without
limitation, any pledge or assignment by a Lender of any Loan or Note to any
Federal Reserve Bank in accordance with applicable law.
(h) If, pursuant to this subsection, any interest in this Agreement or
any Loan is transferred from a U.S. Lender to any Transferee which is organized
under the laws of any jurisdiction other than the United States or any state
thereof, the transferor Lender shall cause such Transferee, concurrently with
the effectiveness of such transfer, to agree (for the benefit of the transferor
Lender, the General Administrative Agent and the U.S. Borrower) to provide the
transferor Lender (and, in the case of any Transferee registered in the
Register, the General Administrative Agent and the U.S. Borrower) the tax forms
and other documents required to be delivered pursuant to subsection 10.12(b) or
(c) and to comply from time to time with all applicable U.S. laws and
regulations with regard to such withholding tax exemption.
(i) If, pursuant to this subsection, any interest in this Agreement or
any Loan is transferred from a Lender (other than a U.S. Lender) to any
Transferee, the transferor Lender shall cause such Transferee, concurrently
with the effectiveness of such transfer, to agree (for the benefit of the
transferor Lender, the General Administrative Agent and the Foreign Subsidiary
Borrowers) to provide the transferor Lender, the General Administrative Agent
and the Foreign Subsidiary Borrowers the tax forms and other documents required
to be delivered pursuant to subsection 10.12(c) and (e) and to comply from time
to time with all applicable laws and regulations with regard to such
withholding tax exemption.
18.7 Adjustments; Set-Off. (a) If any Lender (a "Benefitted Lender")
shall at any time receive any payment of all or part of its Extensions of
Credit then due and owing to it from any Borrower, or interest thereon, or
receive any collateral in respect thereof (whether voluntarily or
involuntarily, by set-off, pursuant to events or proceedings of the nature
referred to in Section 16(i), or otherwise), in a greater proportion than any
such payment to or collateral received by any other Lender, if any, in respect
of such other Lender's Extensions of Credit then due and owing to it from such
Borrower, or interest thereon, such Benefitted Lender shall purchase for cash
from the other Lenders a participating interest in such portion of each such
other Lender's Extensions of Credit owing to it from such Borrower, or shall
provide such other Lenders with the benefits of any such collateral, or the
proceeds thereof, as shall be necessary to
<PAGE> 125
118
cause such Benefitted Lender to share the excess payment or benefits of such
collateral or proceeds ratably with each of the Lenders; provided, however,
that if all or any portion of such excess payment or benefits is thereafter
recovered from such Benefitted Lender, such purchase shall be rescinded, and
the purchase price and benefits returned, to the extent of such recovery, but
without interest.
(b) In addition to any rights and remedies of the Lenders provided by
law, each Lender shall have the right, without prior notice to any Borrower,
any such notice being expressly waived by the Borrowers to the extent permitted
by applicable law, upon any amount becoming due and payable hereunder (whether
at the stated maturity thereof, by acceleration or otherwise) to set-off and
appropriate and apply against such amount any and all deposits (general or
special, time or demand, provisional or final), in any currency, and any other
credits, indebtedness or claims, in any currency, in each case whether direct
or indirect, absolute or contingent, matured or unmatured, at any time held or
owing by such Lender or any branch, agency or Affiliate thereof to or for the
credit or the account of such Borrower. Each Lender agrees promptly to notify
the Borrowers and the Administrative Agents after any such set-off and
application made by such Lender, provided that the failure to give such notice
shall not affect the validity of such set-off and application.
18.8 Loan Conversion/Participations. (a) (i) On any Conversion Date,
to the extent not otherwise prohibited by a Requirement of Law or otherwise,
all Loans outstanding in any currency other than U.S. Dollars ("Loans to be
Converted") shall be converted into U.S. Dollars (calculated on the basis of
the relevant Exchange Rates as of the Business Day immediately preceding the
Conversion Date) ("Converted Loans"), (ii) on each date on or after the
Conversion Date on which any Acceptances or Acceptance Notes shall mature such
Acceptances and Acceptance Notes ("Acceptances to be Converted") shall be
converted into Canadian Revolving Credit Loans denominated in U.S. Dollars
(calculated on the basis of the Exchange Rate as of the Business Day
immediately preceding such maturity date) ("Converted Acceptances") and (iii)
on the Conversion Date (with respect to Loans described in the foregoing clause
(i)), and on the respective maturity date (with respect to Acceptances and
Acceptance Notes described in the foregoing clause (ii)) (A) each U.S. Lender
severally, unconditionally and irrevocably agrees that it shall purchase in
U.S. Dollars a participating interest in such Converted Loans and Converted
Acceptances in an amount equal to its Conversion Sharing Percentage of (x) the
outstanding principal amount of the Converted Loans and (y) the face amount of
matured Acceptances and Acceptance Notes, as applicable, and (B) to the extent
necessary to cause the Committed Outstandings Percentage of each U.S. Lender,
after giving effect to the purchase and sale of participating interests under
the foregoing clause (iii), to equal its U.S. Revolving Credit Commitment
Percentage (calculated immediately prior to the termination or expiration of
the U.S. Revolving Credit Commitments), each U.S. Lender severally,
unconditionally and irrevocably agrees that it shall purchase or sell a
participating interest in U.S. Revolving Credit Loans then outstanding. Each
U.S. Lender will immediately transfer to the appropriate Administrative Agent,
in immediately available funds, the amounts of its participation(s), and the
proceeds of such participation(s) shall be distributed by such Administrative
Agent to each Lender from which a participating interest is being purchased in
the amount(s) provided for in the preceding sentence. All Converted Loans and
Converted Acceptances (which shall have
<PAGE> 126
119
been converted into Canadian Revolving Credit Loans denominated in Dollars)
shall bear interest at the rate which would otherwise be applicable to ABR
Loans.
(b) If, for any reason, the Loans to be Converted or Acceptances to be
Converted, as the case may be, may not be converted into U.S. Dollars in the
manner contemplated by paragraph (a) of this subsection 18.8, (i) the General
Administrative Agent shall determine the U.S. Dollar Equivalent of the Loans to
be Converted or Acceptances to be Converted, as the case may be, (calculated on
the basis of the Exchange Rate as of the Business Day immediately preceding the
date on which such conversion would otherwise occur pursuant to paragraph (a)
of this subsection 18.8), (ii) effective on such Conversion Date, each Lender
severally, unconditionally and irrevocably agrees that it shall purchase in
U.S. Dollars a participating interest in such Loans to be Converted or
Acceptances to be Converted, as the case may be, in an amount equal to its
Conversion Sharing Percentage of such Loans to be Converted or Acceptances to
be Converted, as the case may be, and (iii) each U.S. Lender shall purchase or
sell participating interests as provided in paragraph (a)(iii) of this
subsection 18.8. Each U.S. Lender will immediately transfer to the appropriate
Administrative Agent, in immediately available funds, the amount(s) of its
participation(s), and the proceeds of such participation(s) shall be
distributed by such Administrative Agent to each relevant Lender in the
amount(s) provided for in the preceding sentence.
(c) To the extent any Taxes are required to be withheld from any
amounts payable by a Lender (the "First Lender") to another Lender (the "Other
Lender") in connection with its participating interest in any Converted Loan or
Converted Acceptance, each Borrower, with respect to the relevant Loans made to
it, shall be required to pay increased amounts to the Other Lender receiving
such payments from the First Lender to the same extent they would be required
under subsection 10.12 if such Borrower were making payments with respect to
the participating interest directly to the Other Lender.
(d) To the extent not prohibited by any Requirement of Law or
otherwise, at any time after the actions contemplated by paragraphs (a) or (b)
of this subsection 18.8 have been taken, upon the notice of any U.S. Lender to
the Borrowers the following shall occur: (i) the U.S. Borrower (through the
guarantee contained in Section 15) shall automatically be deemed to have
assumed the Converted Loans and Converted Acceptances in which such U.S. Lender
holds a participation, (ii) any Acceptances and Loans outstanding in any
currency other than U.S. Dollars shall be converted into U.S. Dollars on the
dates of such assumption (calculated on the basis of the Exchange Rate on the
Business Day immediately preceding such date of assumption) and such Loans
shall bear interest at the rate which would otherwise be applicable to ABR
Loans and (iii) such Loans and obligations in respect of Acceptances shall be
assigned by the relevant Lender holding such Loans or obligations to the U.S.
Lender who gave the notice requesting such assumption by the U.S. Borrower.
18.9 Counterparts. This Agreement may be executed by one or more of
the parties to this Agreement on any number of separate counterparts (including
by facsimile transmission), and all of said counterparts taken together shall
be deemed to constitute one and the same instrument. A set of the copies of
this Agreement signed by all the parties shall be delivered to the Borrowers
and the Administrative Agents.
<PAGE> 127
120
18.10 Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
18.11 Integration. This Agreement and the other Loan Documents
represent the agreement of the Borrowers, the Administrative Agents and the
Lenders with respect to the subject matter hereof, and there are no promises,
undertakings, representations or warranties by the Borrowers, the
Administrative Agents or any Lender relative to the subject matter hereof not
expressly set forth or referred to herein or in the other Loan Documents.
18.12 GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF
THE PARTIES UNDER THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
18.13 Submission to Jurisdiction; Waivers. (a) Each Borrower hereby
irrevocably and unconditionally:
(i) submits for itself and its property in any legal action or
proceeding relating to this Agreement or any other Loan Document to which
it is a party, or for recognition and enforcement of any judgment in
respect thereof, to the non-exclusive general jurisdiction of the courts
of the State of New York, the courts of the United States of America for
the Southern District of New York, and appellate courts from any thereof;
(ii) consents that any such action or proceeding may be brought in
such courts and waives any objection that it may now or hereafter have to
the venue of any such action or proceeding in any such court or that such
action or proceeding was brought in an inconvenient court and agrees not
to plead or claim the same;
(iii) agrees that service of process in any such action or
proceeding may be effected by mailing a copy thereof by registered or
certified mail (or any substantially similar form of mail), postage
prepaid, to such Borrower at its address set forth in subsection 18.2 or
at such other address of which the General Administrative Agent shall
have been notified pursuant thereto; and
(iv) agrees that nothing herein shall affect the right to effect
service of process in any other manner permitted by law or shall limit
the right to sue in any other jurisdiction.
(b) Each of the Canadian Borrower and each Foreign Subsidiary Borrower
hereby irrevocably appoints the U.S. Borrower as its agent for service of
process in any proceeding referred to in subsection 18.13(a) and agrees that
service of process in any such proceeding may be made by mailing or delivering
a copy thereof to it care of U.S. Borrower at its address for notice set forth
in subsection 18.2.
<PAGE> 128
121
18.14 Acknowledgements. Each Borrower hereby acknowledges that:
(a) it has been advised by counsel in the negotiation, execution and
delivery of this Agreement and the other Loan Documents;
(b) none of the Administrative Agents or any Lender has any
fiduciary relationship with or duty to such Borrower arising out of or in
connection with this Agreement or any of the other Loan Documents, and
the relationship between the Administrative Agents and the Lenders, on
the one hand, and the U.S. Borrower, on the other hand, in connection
herewith or therewith is solely that of debtor and creditor; and
(c) no joint venture is created hereby or by the other Loan
Documents or otherwise exists by virtue of the transactions contemplated
hereby among the Lenders or among the Borrowers and the Lenders.
18.15 WAIVERS OF JURY TRIAL. EACH OF THE BORROWERS, THE ADMINISTRATIVE
AGENTS AND THE LENDERS HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES TRIAL BY
JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER
LOAN DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN.
18.16 Power of Attorney. Each Foreign Subsidiary Borrower hereby
grants to U.S. Borrower an irrevocable power of attorney to act as its
attorney-in-fact with regard to matters relating to this Agreement and each
other Loan Document, including, without limitation, execution and delivery of
any amendments, supplements, waivers or other modifications hereto or thereto,
receipt of any notices hereunder or thereunder and receipt of service of
process in connection herewith or therewith. Each Foreign Subsidiary Borrower
hereby explicitly acknowledges that the Administrative Agents and each Lender
have executed and delivered this Agreement and each other Loan Document to
which it is a party, and has performed its obligations under this Agreement and
each other Loan Document to which it is a party, in reliance upon the
irrevocable grant of such power of attorney pursuant to this subsection. The
power of attorney granted by each Foreign Subsidiary Borrower hereunder is
coupled with an interest.
18.17 Existing Letters of Credit. (a) On the Closing Date, all
outstanding letters of credit under the 1995 Agreement set forth on Schedule V
shall be converted into Letters of Credit hereunder on the terms and conditions
set forth in this Agreement.
18.18 Release of Collateral. (a) The Lenders hereby agree with the
U.S. Borrower, and hereby instruct the General Administrative Agent, that if
(i) the U.S. Borrower attains Investment Grade Status, (ii) the General
Administrative Agent has no actual knowledge of the existence of a Default and
(iii) the U.S. Borrower shall have delivered a certificate of a Responsible
Officer stating that such Responsible Officer has obtained no knowledge of any
Default or Event of Default, the General Administrative Agent shall, at the
request and expense of the U.S. Borrower, take such actions as shall be
reasonably requested by the U.S. Borrower to release its security interest in
all collateral held by it pursuant to the Security Documents.
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122
(b) The Lenders hereby agree with the U.S. Borrower and hereby instruct
the General Administrative Agent, at the request of and expense of the U.S.
Borrower, the General Administrative Agent will, promptly after the Closing
Date, release its security interest in any collateral under the Existing
Agreements other than stock pledged under the Pledge Agreements.
18.19 Judgment. (a) If for the purpose of obtaining judgment in any
court it is necessary to convert a sum due hereunder in one currency into
another currency, the parties hereto agree, to the fullest extent that they may
effectively do so, that the rate of exchange used shall be that at which in
accordance with normal banking procedures the General Administrative Agent
could purchase the first currency with such other currency in the city in which
it normally conducts its foreign exchange operation for the first currency on
the Business Day preceding the day on which final judgment is given.
(b) The obligation of each Borrower in respect of any sum due from it
to any Lender hereunder shall, notwithstanding any judgment in a currency (the
"Judgment Currency") other than that in which such sum is denominated in
accordance with the applicable provisions of this Agreement (the "Agreement
Currency"), be discharged only to the extent that on the Business Day following
receipt by such Lender of any sum adjudged to be so due in the Judgment
Currency such Lender may in accordance with normal banking procedures purchase
the Agreement Currency with the Judgment Currency; if the amount of Agreement
Currency so purchased is less than the sum originally due to such Lender in the
Agreement Currency, such Borrower agrees notwithstanding any such judgment to
indemnify such Lender against such loss, and if the amount of the Agreement
Currency so purchased exceeds the sum originally due to any Lender, such Lender
agrees to remit to such Borrower such excess.
18.20 Confidentiality. Each Lender agrees to take normal and
reasonable precautions to maintain the confidentiality of information
designated in writing as confidential and provided to it by the U.S. Borrower
or any Subsidiary in connection with this Agreement; provided, however, that
any Lender may disclose such information (a) at the request of any bank
regulatory authority or in connection with an examination of such Lender by any
such authority, (b) pursuant to subpoena or other court process, (c) when
required to do so in accordance with the provisions of any applicable law, (d)
at the discretion of any other Governmental Authority, (e) to such Lender's
Affiliates, independent auditors and other professional advisors or (f) to any
Transferee or potential Transferee; provided that such Transferee agrees to
comply with the provisions of this subsection 18.20.
18.21 Effect of Amendment and Restatement of the Existing Credit
Agreements. On the Closing Date, the Existing Credit Agreements shall be
amended, restated and superseded in their entirety. The parties hereto
acknowledge and agree that (a) this Agreement and the other Loan Documents,
whether executed and delivered in connection herewith or otherwise, do not
constitute a novation, payment and reborrowing, or termination of the
"Obligations" (as defined in the Existing Credit Agreements) under the Existing
Credit Agreements as in effect prior to the Closing Date; (b) such
"Obligations" are in all respects continuing (as amended and restated hereby)
with only the terms thereof being modified as provided in this Agreement;
(c) except to the extent released pursuant to subsection 18.18(b), the Liens and
security interests as granted under the Security Documents securing payment of
such "Obligations" are in all respects
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123
continuing and in full force and effect and secure the payment of the
Obligations (as defined in this Agreement), and to the extent necessary to
effect the foregoing, each such Security Document is hereby deemed amended
accordingly; and (d) upon the effectiveness of this Agreement all loans of
Lenders outstanding under the Existing Credit Agreements immediately before the
effectiveness of this Agreement will be converted into U.S. Revolving Credit
Loans of such Lenders hereunder and all outstanding letters of credit under the
1995 Agreement will be converted into Letters of Credit hereunder, in each case
on the terms and conditions set forth in this Agreement.
18.22 Conflicts. In the event that there exists a conflict between
provisions in this Agreement and provisions in any other Loan Document, the
provisions of this Agreement shall control.
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124
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their proper and duly authorized officers as of
the day and year first above written.
LEAR CORPORATION
By:/s/ Donald J. Stebbins
---------------------------
Title: Treasurer
LEAR CORPORATION CANADA LTD.
By:/s/ Donald J. Stebbins
---------------------------
Title: Treasurer
LEAR CORPORATION SWEDEN AB
By:/s/ William A. Reaume
---------------------------
Title: Managing Director
THE CHASE MANHATTAN BANK, as General
Administrative Agent and as a Lender
By:/s/ Andris Kalnins
---------------------------
Title: Vice President
THE BANK OF NOVA SCOTIA,
as Canadian Administrative Agent
and as a Lender
By:/s/ Claude Ashby
---------------------------
Title: Lender
CHASE MANHATTAN BANK DELAWARE, as an Issuing
Lender
By:/s/ Richard J. Nolan
---------------------------
Title: President & CEO
<PAGE> 132
125
ABN AMRO BANK N.V. CHICAGO BRANCH, as a
Co-Agent and as a Lender
By: /s/ Laurie D. Flom
---------------------------
Title: Vice President
By: /s/ David G. Sagers
---------------------------
Title: Vice President
THE ASAHI BANK, LTD., as a Lead Manager and
as a Lender
By: /s/ Shinichi Furukawa
---------------------------
Title: Senior Deputy General Manager
BANCA NAZIONALE DEL LAVORO S.P.A.
NEW YORK BRANCH
By: /s/ Giuliano Violetta
---------------------------
Title: Vice President
By: /s/ Giulio Giovine
---------------------------
Title:Vice President
BANK AUSTRIA AKTIENGESELLSCHAFT
By: /s/ Jeanine Ball
---------------------------
Title: Associate Vice President
By:/s/ James A. Scay
---------------------------
Title: Vice President
BANK OF AMERICA NT & SA, Co-Agent
By:/s/ Steve Ahrenholz
---------------------------
Title: Vice President
<PAGE> 133
126
BANK OF MONTREAL, as a Co-Agent and as a
Lender
By: /s/ Marc R. Heyden
---------------------------
Title: Director
THE BANK OF NEW YORK, as a Co-Agent and as a
Lender
By:/s/ William M. Barnum
---------------------------
Title: Vice President
BANK OF NOVA SCOTIA, as a Managing Agent and
as a Lender
By:/s/ A.S. Norsworth
---------------------------
Title: Sr. Team Leader-Loan
THE BANK OF TOKYO-MITSUBISHI LTD., NEW YORK
BRANCH, as a Co-Agent and as a Lender
By:/s/ Elizabeth A. Joel
---------------------------
Title: Assistant Vice President
By:/s/ E.A. Tocchini
---------------------------
Title: Assistant Vice President
BANKERS TRUST COMPANY, as a Managing Agent
and as a Lender
By:/s/ Mary Zadroga
---------------------------
Title: Vice President
BANQUE NATIONALE DE PARIS, as a Lead Manager
and as a Lender
By:/s/ Arnaud Collin du Bocage
---------------------------
Title: Executive Vice President
<PAGE> 134
127
BANQUE PARIBAS, as a Lead Manager and as a
Lender
By:/s/ Nicholas C. Masi
---------------------------
Title: Vice President
By:/s/ Karen E. Coons
---------------------------
Title: Vice President
CAISSE NATIONALE DE CREDIT AGRICOLE, as a
Lead Manager and as a Lender
By:/s/ David Bouhl, F.V.P.
---------------------------
Title: Head of Corporate Banking
CANADIAN IMPERIAL BANK OF COMMERCE
By:/s/ Doug Zinkiewich
---------------------------
Title: Director
CIBC INC., as a Co-Agent and as a Lender
By:/s/ Kent Davis
---------------------------
Title: Director
CITICORP USA, INC., as a Managing Agent and
as a Lender
By:/s/ Judith Fishlow Minter
---------------------------
Title: Attorney-in-Fact
COMERICA BANK, as a Co-Agent and as a Lender
By: /s/ Barbara J. Palazzo
---------------------------
Title: Account Representative
<PAGE> 135
128
COOPERATIVE CENTRALE
RAIFFEISEN-BOERENLEENBANK B.A., "RABOBANK
NEDERLAND", NEW YORK BRANCH
By:/s/ W. Jeffrey Vollack
---------------------------
Title: Vice President, Manager
By:/s/ Michal de Konkoly Thegs
---------------------------
Title: Deputy General Manager
CREDITO ITALIANO S.P.A.
By:/s/ Hamon P. Butler
---------------------------
Title: SVP & Deputy Manager
By:/s/ Umberto Seretti
---------------------------
Title: Vice President
CREDIT LYONNAIS CHICAGO BRANCH, as a
Co-Agent and as a Lender
By:/s/ Michel Buysschaert
---------------------------
Title: Vice President
DAI-ICHI KANGYO BANK, LTD.,
CHICAGO BRANCH
By:/s/ Seiichiro Ino
---------------------------
Title: Vice President
DRESDNER BANK AG NEW YORK AND GRAND CAYMAN
BRANCHES, as a Co-Agent and as a Lender
By: /s/ Thomas J. Nadramia
---------------------------
Title: Vice President
By: /s/ John S. Runnion
---------------------------
Title: Vice President
<PAGE> 136
129
FIRST AMERICAN NATIONAL BANK
By:/s/ Andrew S. Zimberg
---------------------------
Title: Vice President
FIRST BANK NATIONAL ASSOCIATION
By:/s/ Christopher H. Patton
---------------------------
Title: Commericial Banking Officer
THE FIRST NATIONAL BANK OF BOSTON, as a
Lead Manager and as a Lender
By: /s/ C.M. Holtz
---------------------------
Title: Vice President
FIRST UNION NATIONAL BANK OF
NORTH CAROLINA, as a Co-Agent and as a
Lender
By:/s/ Mark M. Harden
---------------------------
Title: Vice President
FLEET NATIONAL BANK
By:/s/ Robert J. Lord
---------------------------
Title: Vice President Operations
THE FUJI BANK, LIMITED, as a Co-Agent and as
a Lender
By:/s/ Hidehiko Ide
---------------------------
Title: General Manager
<PAGE> 137
130
GULF INTERNATIONAL BANK B.S.C.
By:/s/ Abdel-Fattah Tahoun
---------------------------
Title: Senior Vice President
By:/s/ Haytham F. Khalil
---------------------------
Title: Assistant Vice President
THE INDUSTRIAL BANK OF JAPAN, LIMITED, as a
Co-Agent and as a Lender
By:/s/ Hiroaki Nakamura
---------------------------
Title: Joint General Manager
INSTITUTO BANCARIO SAN PAOLO DI TORINO SPA
By:/s/ Robert Wurster
---------------------------
Title: First Vice President
By:/s/ Ettore Viazzo
---------------------------
Title: Vice President
KEYBANK NATIONAL ASSOCIATION
By:/s/ Thomas A. Crandell
---------------------------
Title: Assistant Vice President
KREDIETBANK N.V.
By: /s/ John F. Thierfelder
---------------------------
Title: Vice President
By:/s/ Robert Snauffer
---------------------------
Title: Vice President
LEHMAN COMMERCIAL PAPER INC.
By:/s/ Michelle Swanson
---------------------------
Title: Authorized Signatory
<PAGE> 138
131
THE LONG-TERM CREDIT BANK OF JAPAN, LTD.
CHICAGO BRANCH, as a Lead Manager and as a
Lender
By:/s/ Richard E. Stahl
---------------------------
Title: Senior Vice President
THE MITSUBISHI TRUST AND BANKING
CORPORATION, CHICAGO BRANCH, as a
Lead Manager and as a Lender
By:/s/Masaaki Yamagishi
---------------------------
Title: Chief Manager
THE MITSUI TRUST AND BANKING COMPANY,
LIMITED
By:/s/ Margaret Holloway
---------------------------
Title: Vice President & Manager
NATIONSBANK N.A., as a Co-Agent and as a
Lender
By:/s/ Wallace Harris, Jr.
---------------------------
Title: Vice President
NBD BANK, as a Co-Agent and as a Lender
By:/s/ Thomas A. Lakocy
---------------------------
Title: Vice President
ROYAL BANK OF CANADA, as a Lead Manager and
as a Lender
By:/s/ Glen D. Carter
---------------------------
Title: Senior Manager
<PAGE> 139
132
THE ROYAL BANK OF SCOTLAND PLC, as a
Lead Manager and as a Lender
By:/s/ Derek Bonnar
---------------------------
Title: Vice President
THE SAKURA BANK, LTD.,
as a Lead Manager and as a Lender
By:/s/ Shunji Sakurai
---------------------------
Title: Joint General Manager
THE SANWA BANK LIMITED,
CHICAGO BRANCH, as a Co-Agent and as a
Lender
By: /s/ Richard H. Ault
---------------------------
Title: Vice President
SOCIETE GENERALE
By:/s/ Gilles Demeulenaere
---------------------------
Title: Vice President
THE SUMITOMO BANK, LIMITED
CHICAGO BRANCH, as a Lead Manager and as a
Lender
By:/s/ H. Iwami
---------------------------
Title: Joint General Manager
THE SUMITOMO TRUST AND BANKING CO., LTD.,
NEW YORK BRANCH
By:/s/ Hidehiko Asai
---------------------------
Title: Deputy General Manager
<PAGE> 140
133
THE TOKAI BANK, LTD.,
CHICAGO BRANCH, as a Lead Manager and as a
Lender
By:/s/ Hiroshi Tanaka
---------------------------
Title: General Manager
THE TOYO TRUST & BANKING CO.,
LTD
By:/s/ Takao Shida
---------------------------
Title: Deputy General Manager
YASUDA TRUST AND BANKING COMPANY, LIMITED,
as a Lead Manager and as a Lender
By:/s/ Joseph C. Meek
---------------------------
Title: Deputy General Manager
<PAGE> 141
SCHEDULE I
COMMITMENTS; ADDRESSES
A. U.S. Revolving Credit Commitment and Multicurrency Commitment Amounts (U.S.
Dollars)
<TABLE>
<CAPTION>
U.S. Revolving Multicurrency
U.S. Lender Credit Commitment Counterpart Lender Commitment
----------- ------------------ ------------------ -------------
<S> <C> <C> <C>
ABN AMRO Bank N.V., Chicago
Branch $ 50,000,000 $ 35,000,000
The Asahi Bank, Ltd. $ 35,000,000
Banca Nazionale del Lavoro
S.p.A., New York Branch $ 15,000,000
Bank Austria Aktiengesellschaft $ 20,000,000
Bank of America NT & SA $ 50,000,000 $ 35,000,000
Bank of Montreal $ 50,000,000 Bank of Montreal
The Bank of New York $ 50,000,000 $ 35,000,000
The Bank of Nova Scotia $ 55,000,000 The Bank of Nova
Scotia
The Bank of Tokyo-Mitsubushi
Ltd., New York Branch $ 50,000,000
Bankers Trust Company $ 55,000,000
Banque Nationale de Paris $ 35,000,000 $ 30,000,000
Banque Paribas $ 35,000,000 $ 15,000,000
</TABLE>
<PAGE> 142
2
<TABLE>
<CAPTION>
U.S. Revolving Multicurrency
U.S. Lender Credit Commitment Counterpart Lender Commitment
----------- ----------------- ------------------ -------------
<S> <C> <C> <C>
Caisse Nationale de Credit
Agricole $ 35,000,000 $ 10,000,000
Chase Manhattan Bank $ 61,000,000 $ 50,000,000
Canadian Imperial
Bank of
CIBC, Inc. $ 50,000,000 Commerce
Citicorp USA, Inc. $ 55,000,000 $ 40,000,000
Comerica Bank $ 50,000,000 $ 10,000,000
Cooperatieve Centrale
Raiffeisen-Boerenleenbank B.A.,
"Rabobank Nederland", New York
Branch $ 25,000,000 $ 5,000,000
Credito Italiano S.p.A. $ 15,000,000
Credit Lyonnais Chicago Branch $ 45,000,000 $ 10,000,000
The Dai-Ichi Kangyo Bank, Ltd.,
Chicago Branch $ 30,000,000
Dresdner Bank $ 35,000,000 $ 35,000,000
First American National Bank $ 15,000,000
First Bank National Association $ 25,000,000 $ 15,000,000
The First National Bank of
Boston $ 35,000,000 $ 30,000,000
</TABLE>
<PAGE> 143
3
<TABLE>
<CAPTION>
U.S. Revolving Multicurrency
U.S. Lender Credit Commitment Counterpart Lender Commitment
----------- ----------------- ------------------ -------------
<S> <C> <C> <C>
First Union National Bank of
North Carolina $ 50,000,000 $ 20,000,000
Fleet National Bank $ 20,000,000
The Fuji Bank, Limited $ 50,000,000
Gulf International Bank B.S.C. $ 15,000,000
The Industrial Bank of Japan,
Limited $ 50,000,000
Instituto Bancario Sao Paolo Di
Torino SpA $ 19,000,000
KeyBank National Association $ 25,000,000
Kredietbank N.V. $ 25,000,000 $ 15,000,000
Lehman Commercial Paper Inc. $ 25,000,000
The Long Term Credit Bank of Japan,
Ltd. Chicago Branch $ 35,000,000
The Mitsubishi Trust & Banking
Corporation, Chicago Branch $ 35,000,000
The Mitsui Trust & Banking
Company, Limited $ 30,000,000
NationsBank, N.A. $ 50,000,000 $ 35,000,000
NBD Bank $ 50,000,000 $ 35,000,000
</TABLE>
<PAGE> 144
4
<TABLE>
<CAPTION>
U.S. Revolving Multicurrency
U.S. Lender Credit Commitment Counterpart Lender Commitment
----------- ----------------- ------------------ -------------
<S> <C> <C> <C>
Royal Bank of Canada $ 35,000,000 Royal Bank of Canada
The Royal Bank of Scotland plc $ 35,000,000 $ 30,000,000
The Sakura Bank, Ltd. $ 35,000,000
The Sanwa Bank, Limited,
Chicago Branch $ 50,000,000
Societe Generale $ 30,000,000 $ 10,000,000
The Sumitomo Bank, Limited
Chicago Branch $ 35,000,000
The Sumitomo Trust & Banking
Co., Ltd., New York Branch $ 25,000,000
The Tokai Bank, Ltd., Chicago
Branch $ 35,000,000
The Toyo Trust & Banking Co.,
Ltd. $ 30,000,000
Yasuda Trust & Banking Company,
Limited $ 35,000,000
-------------- ------------
TOTAL $1,800,000,000 $500,000,000
============== ============
</TABLE>
<PAGE> 145
5
B. Canadian Commitment Amounts (U.S. Dollars)
<TABLE>
<CAPTION>
Canadian Revolving
Canadian Lender Credit Commitment Counterpart Lender
--------------- ------------------ -----------------
<S> <C> <C>
Bank of Montreal $ 5,000,000 Bank of Montreal
The Bank of Nova Scotia $15,000,000 The Bank of Nova Scotia
Canadian Imperial Bank of Commerce $20,000,000 CIBC, Inc.
Royal Bank of Canada $10,000,000 Royal Bank of Canada
-----------
TOTAL $50,000,000
===========
</TABLE>
<PAGE> 146
1
C. ADDRESSES FOR NOTICES
ABN AMRO BANK N.V., CHICAGO BRANCH
135 South LaSalle Street
Suite 625
Chicago, IL 60674
Attn: Laurie D. Flom
Tel: (312) 904-2682
Fax: (312) 606-8425
THE ASAHI BANK, LTD.
One World Trade Center
Suite 6011
New York, NY 10048-0476
Attn: Ms. Annabelle Vibar
Tel: (212) 912-7036
Fax: (212) 432-1135
BANCA NAZIONALE DEL LAVORO S.P.A. - NEW YORK BRANCH
25 West 51st Street
New York, NY 10019
Attn: Giulio Giovine
Tel: (212) 581-0710
Fax: (212) 765-2978
BANK AUSTRIA AKTIENGESELLSCHAFT
565 Fifth Avenue, 26th Floor
New York, NY 10017
Attn: Jeanine Ball
Tel: (212) 880-1075
Fax: (212) 880-1080
BANK OF AMERICA NT & SA
231 South LaSalle Street
Chicago, IL 60693
Attn: Steve Ahrenholz
Tel: (312) 828-1291
Fax: (312) 987-7384
BANK OF MONTREAL
115 South LaSalle Street, 11th Floor
Chicago, IL 60603
Attn: Marc Heyden
Tel: (312) 750-3760
Fax: (312) 750-4314
<PAGE> 147
2
BANK OF NEW YORK
One Wall Street, 22nd Floor
New York, NY 10286
Attn: William M. Barnum
Tel: (212) 635-1019
Fax: (212) 635-6434
BANK OF NOVA SCOTIA
181 West Madison Street, Suite 3700
Chicago, IL 60602
Attn: Brian Hewett
Tel: (312) 201-4145
Fax: (312) 201-4108
THE BANK OF TOKYO-MITSUBUSHI LTD., NEW YORK BRANCH
1251 Avenue of the Americas, 12th Floor
New York, NY 10020-1104
Attn: Friedrich N. Wilms
Tel: (212) 782-4341
Fax: (212) 782-6445
BANKERS TRUST COMPANY
130 Liberty Street, 14th Floor
New York, NY 10006
Attn: Ariana Boer
Tel: (312) 993-8051
Fax: (212) 250-7351/6030
BANQUE NATIONALE DE PARIS
209 South LaSalle Street, 5th Floor
Chicago, IL 60604
Attn: Christine L. Howatt
Tel: (312) 977-1383
Fax: (312) 977-1380
BANQUE PARIBAS
227 West Monroe, Suite 3300
Chicago, IL 60606
Attn: Nicholas C. Mast
Tel: (312) 853-6038
Fax: (312) 853-6020
<PAGE> 148
3
CAISSE NATIONALE DE CREDIT AGRICOLE
55 East Monroe Street, Suite 4700
Chicago, IL 60603-5702
Attn: Richard Drennan
Tel: (312) 917-7441
Fax: (312) 372-3724
CIBC INC. (U.S. BORROWINGS)
Atlanta Agency
Two Paces West
Atlanta, GA 30339
Attn: Ken Auchter
Tel: (770) 319-4814
Fax: (770) 319-4950
CANADIAN IMPERIAL BANK OF COMMERCE (CANADIAN BORROWINGS)
Commerce Court West- 50th Floor
Toronto, Ontario M5L 1A2
Attn: Rick DeGrys
Tel: (416) 214-8411
Fax: (416) 980-5855
CITICORP USA, INC.
One Court Square, 7th Floor
Long Island City, NY 11120
Attn: Angela Valentin
Tel: (718) 248-8618
Fax: (718) 248-7393
COMERICA BANK
Comerica Tower at Detroit Center
500 Woodward Avenue
Detroit, MI 48226
Attn: Andrew Anderson
Tel: (313) 222-9129
Fax: (313) 222-3776
COOPERATIEVE CENTRALE RAIFFEISEN-BOERENLEENBANK B.A.,
"RABOBANK NEDERLAND", NEW YORK BRANCH
245 Park Avenue
New York, NY 10167
Attn: Debra Rivers
Tel: (212) 916-7930
Fax: (212) 916-7845
<PAGE> 149
4
CREDITO ITALIANO S.P.A.
375 Park Avenue
New York, NY 10152
Attn: Harmon P. Butler
Tel: (212) 546-9611
Fax: (212) 546-9675
CREDIT LYONNAIS CHICAGO BRANCH
227 West Monroe Street, Suite 3800
Chicago, IL 60606
Attn: Joce Cote
Tel: (312) 220-7303
Fax: (312) 641-0527
THE DAI-ICHI KANGYO BANK, LTD., CHICAGO BRANCH
10 South Wacker Drive, 26th Floor
Chicago, IL 60606
Attn: Michael D. Pleasants
Tel: (312) 715-6361
Fax: (312) 876-2011
DRESDNER BANK
190 South LaSalle St. Suite 2700
Chicago, IL 60603
Notices:
Attn: Brian Brodeur
Tel: (312) 444-1319
Fax: (312) 444-1305
Funding:
75 Wall Street-Credit Services 33rd Floor
New York, NY 10005
Attn: Lora Lam
Tel: (212) 429-2288
Fax: (212) 429-2130
FIRST AMERICAN NATIONAL BANK
Fourth & Union Street., NA-0310
Nashville, TN 37238
Attn: Andrew Zimberg
Tel: (615) 748-1401
Fax: (615) 748-6072
<PAGE> 150
5
FIRST BANK NATIONAL ASSOCIATION
First Bank Place
601 Second Avenue South
Minneapolis, MN 55447
Notices:
Attn: Chris Patton
Tel: (612) 973-0555
Fax: (612) 973-0825
THE FIRST NATIONAL BANK OF BOSTON
100 Federal Street, MS-01-09-05
Boston MA, 02110
Attn: Christopher M. Holtz
Tel: (617) 434-7690
Fax: (617) 434-6685
Funding:
Attn: Denise Dowd
Tel: (617) 434-7462
Fax: (617) 434-0630
FIRST UNION NATIONAL BANK OF NORTH CAROLINA
One First Union Center, DC-5
Charlotte, NC 28288-0745
Attn: Glenn Edwards
Tel: (704) 383-3810
Fax: (704) 314-2802
FLEET NATIONAL BANK
One Federal Street
Boston, MA 02211
Attn: Robert J. Lord
Tel: (617) 346-0597
Fax: (617) 346-0145
THE FUJI BANK, LIMITED
225 West Wacker Drive, Suite 2000
Chicago, IL 60606
Attn: James R. Fayen
Tel: (312) 621-0397
Fax: (312) 621-0539
<PAGE> 151
6
GULF INTERNATIONAL BANK B.S.C.
380 Madison Avenue, 21st Floor
New York, NY 10017
Attn: Irene Wong
Tel: (212) 922-2325
Fax: (212) 922-2309
THE INDUSTRIAL BANK OF JAPAN, LIMITED
227 West Monroe Street, Suite 2600
Chicago, IL 60606
Attn: John Bowin
Tel: (312) 855-8264
Fax: (312) 855-8200
INSTITUTO BANCARIO SAO PAOLO DI TORINO SPA
245 Park Avenue
New York, NY 10167
Notices:
Attn: Luca Sergio
Tel: (212) 692-3180
Fax: (212) 599-5303
Funding:
Attn: William Coleman
Tel: (212) 692-3193
Fax: (212) 599-5303
KEYBANK NATIONAL ASSOCIATION
Large Corporate Group
127 Public Square
Cleveland, OH 44114
Attn: Thomas A. Crandell
Tel: (216) 689-3589
Fax: (216) 689-3589
KREDIETBANK N.V.
125 West 55th Street, 10th Floor
New York, NY 10019
Attn: John E. Thierfelder
Tel: (212) 541-0727
Fax: (212) 956-5580
<PAGE> 152
7
LEHMAN COMMERCIAL PAPER INC.
3 World Financial Center, 10th Floor
New York, NY 10285
Attn: Michelle Swansen
Tel: (212) 526-0330
Fax: (212) 528-0819
THE LONG TERM CREDIT BANK OF JAPAN, LTD. CHICAGO BRANCH
190 South LaSalle Street, Suite 800
Chicago, IL 60603
Notices:
Attn: Mark Thompson
Tel: (312) 704-5459
Fax: (312) 704-8505
Funding:
Attn: David Miller
Tel: (312) 704-5459
Fax: (312) 704-8717
THE MITSUBISHI TRUST & BANKING CORPORATION, CHICAGO BRANCH
311 South Wacker Drive, Suite 6300
Chicago, IL 60606
Attn: Vicki Kamm
Tel: (312) 408-6014
Fax: (312) 663-0863
THE MITSUI TRUST & BANKING COMPANY, LIMITED
One World Financial Center, 21st Floor
200 Liberty Street
New York, NY 10281
Attn: Paul Verdi
Tel: (212) 341-0470
Fax: (212) 945-4170/4171
NATIONSBANK, N.A.
233 South Wacker Drive, Suite 2800
Chicago, IL 60606
Notices:
Attn: Wallace W. Harris, Jr.
Tel: (312) 234-5626
Fax: (312) 234-5601
<PAGE> 153
8
Funding:
Attn: Jennifer Sawdey
Tel: (704) 386-5181
Fax: (704) 381-8694
NBD BANK
611 Woodward Avenue
Detroit, MI 48226
Attn: Thomas A. Lakocy
Tel: (313) 225-2884
fax: (313) 225-2290
ROYAL BANK OF CANADA
One North Franklin Street, #700
Chicago, IL 60606
Attn: Patrick K. Shields
Tel: (312) 551-1612
Fax: (312) 551-0805
Notices:
32 Old Slip,
One Financial Square, 23rd Floor
New York, NY 10005-3531
Attn: Linda Smith
Tel: (212) 428-6323
Fax: (212) 428-2372
THE ROYAL BANK OF SCOTLAND PLC
Wall Street Plaza
88 Pine Street, 26th Floor
New York, NY 10005-1801
Attn: Derek Bonnar
Tel: (212) 269-1718
Fax: (212) 480-0791
THE SAKURA BANK, LTD.
227 West Monroe Street, Suite 4700
Chicago, IL 60606
Attn: David Wuertz
Tel: (312) 782-3144
Fax: (312) 580-3268
<PAGE> 154
9
THE SANWA BANK, LIMITED, CHICAGO BRANCH
10 South Wacker Drive, 31st Floor
Chicago, IL 60606
Attn: Richard H. Ault, Vice President
Tel: (312) 368-3011
Fax: (312) 346-6677
SOCIETE GENERALE
181 West Madison Street, Suite 3400
Chicago, IL 60602
Attn: Gilles Demeulenaere
Tel: (312) 578-5056
Fax: (312) 578-5099
THE SUMITOMO BANK, LIMITED CHICAGO BRANCH
233 South Wacker Drive, Suite 4800
Chicago, IL 60606-6448
Notices:
Attn: James C. Beckett
Tel: (312) 876-7794
Fax: (312) 876-6436
Funding:
Attn: Kwang Park
Tel: (312) 876-6429
Fax: (312) 876-1490
THE SUMITOMO TRUST & BANKING CO., LTD., NEW YORK BRANCH
527 Madison Avenue
New York, NY 10022
Attn: Mr. Tony Yamada
Tel: (212) 326-0751
Fax: (212) 418-4848
THE TOKAI BANK, LTD., CHICAGO BRANCH
181 West Madison Street, Suite 3600
Chicago, IL 60602
Attn: Cary Shinsako
Tel: (312) 456-3433
Fax: (312) 977-0003
<PAGE> 155
10
THE TOYO TRUST & BANKING CO., LTD.
666 Fifth Avenue, 33rd Floor
New York, NY 10103
Attn: Barry S. Wadler
Tel: (212) 307-3409
Fax: (212) 307-3498
YASUDA TRUST & BANKING COMPANY, LIMITED
181 West Madison Street, Suite 4500
Chicago, IL 60602
Attn: Nicholas E. Walz
Tel: (312) 683-3836
Fax: (312) 683-3899
<PAGE> 156
SCHEDULE II
FOREIGN SUBSIDIARY BORROWER
Jurisdiction of
Name and Address Incorporation
- ---------------- ---------------
Lear Corporation Sweden AB Sweden
c/o Lear Corporation
21557 Telegraph Road
Southfield, Michigan 48034
Attention: Donald J. Stebbins
Telecopy: (810) 746-1593
<PAGE> 157
SCHEDULE III
ADMINISTRATIVE SCHEDULE
I. MULTICURRENCY LOANS
A. Interest Rates for Each Currency
Deutsche Marks:
for any Interest Period in respect of any Tranche, the rate for
deposits in Deutsche Marks for a period beginning on the first
day of such Interest Period and ending on the last day of such
Interest Period which appears on the Telerate Page 3750 (or,
if no such quotation which appears on such Telerate Page, on
the appropriate Reuters Screen) as of 11:00 a.m., London time,
on the Quotation Day for such Interest Period.
French Francs:
for any Interest Period in respect of any Tranche, the rate for
deposits in French Francs for a period beginning on the first
day of such Interest Period and ending on the last day of such
Interest Period which appears on the Telerate Page 3740 (or, if
no such quotation appears on such Telerate Page, on the
appropriate Reuters Screen) as of 11:00 a.m., London time, on
the Quotation Day for such Interest Period.
Sterling:
for any Interest Period in respect of any Tranche, the rate per
annum equal to the average (rounded upward to the nearest 1/16th
of 1%) of the rates at which Chase is offered deposits in
Sterling in the Paris interbank market at or about 11:00 A.M.,
Paris time, on the Quotation Day for such Interest Period for
delivery on the first day of such Interest Period for the
number of days comprised therein and in an amount comparable to
Chase's Multicurrency Commitment Percentage of the applicable
Multicurrency Loan.
Swedish Kroner:
for any Interest Period in respect of any Tranche, the rate per
annum equal to the average (rounded upward to the nearest 1/16th
of 1%) of the rates at which Chase is offered deposits in
Swedish Kroner in the London
<PAGE> 158
2
interbank market at or about 11:00 A.M., London time, on the
Quotation Day for such Interest Period for delivery on the first
day of such Interest Period for the number of days comprised
therein and in an amount comparable to Chase's Multicurrency
Commitment Percentage of the applicable Multicurrency Loan.
Italian Lire:
for any Interest Period in respect of any Tranche, the rate for
deposits in Italian Lire for a period beginning on the first day
of such Interest Period and ending on the last day of such
Interest Period which appears on the Telerate Page 3740 (or, if
no such quotation appears on such Telerate Page, on the
appropriate Reuters Screen) as of 11:00 a.m., London time, on
the Quotation Day for such Interest Period.
Austrian Schillings:
for any Interest Period in respect of any Tranche, the rate
per annum equal to the average (rounded upward to the nearest
1/16th of 1%) of the rates at which Chase is offered deposits in
Austrian Schillings in the London interbank market at or about
11:00 A.M., London time, on the Quotation Day for such Interest
Period for delivery on the first day of such Interest Period for
the number of days comprised therein and in an amount comparable
to Chase's Multicurrency Commitment Percentage of the applicable
Multicurrency Loan.
B. Funding Office, Funding Time, Payment Office, Payment Time for Each
Currency.
Deutsche Marks:
1. Funding Office:
Account of: Chase Manhattan International Limited
Account No: 101-080002101
Chase Bank AG Frankfurt
2. Funding Time: 11:00 A.M., local time.
3. Payment Office:
Account of: Chase Manhattan International Limited
Account No: 101-080002101
Chase Bank AG Frankfurt
4. Payment Time: 11:00 A.M., local time.
<PAGE> 159
3
French Francs:
1. Funding Office:
Account of: Chase Manhattan International Limited
Account No: 020.359.541100
Credit Commercial deFrance, Paris
2. Funding Time: 11:00 A.M., local time.
3. Payment Office:
Account of: 020.359.541100
Credit Commercial deFrance, Paris
4. Payment Time: 11:00 A.M., local time.
Sterling:
1. Funding Office:
Account of: Chase Manhattan International Limited
Account No: CHAPS 40 52 06
Chase Manhattan Bank
125 London Wall
London EC2Y 5AJ
2. Funding Time: 11:00 A.M., local time.
3. Payment Office:
Account of: Chase Manhattan International Limited
Account No: CHAPS 40 52 06
Chase Manhattan Bank
125 London Wall
London EC2Y 5AJ
4. Payment Time: 11:00 A.M., local time.
Swedish Kroner:
1. Funding Office:
Account of: Chase Manhattan International Limited
Account No: 52018519395
2. Funding Time: 11:00 A.M., local time.
<PAGE> 160
4
3. Payment Office:
Account of: Skandinaviska Enskilda Banken, Stockholm
Account No: 52018519395
4. Payment Time: 11:00 A.M., local time.
Italian Lire:
1. Funding Office:
Account of: Chase Manhattan International Limited
Account No: 6010073267
2. Funding Time: 11:00 A.M., local time.
3. Payment Office:
Account of: Chase Manhattan Bank, Milan
Account No: 6010073267
4. Payment Time: 11:00 A.M., local time.
Austrian Schillings:
1. Funding Office:
Account of: Chase Manhattan International Limited
Account No: 0101-07530/01
2. Funding Time: 11:00 A.M., local time.
3. Payment Office:
Account of: Creditanstalt, Bankverein, Vienna
Account No: 0101-07530/01
4. Payment Time: 11:00 A.M., local time.
C. Notice of Multicurrency Loan Borrowing:
1. Deliver to: Chase Manhattan International Limited
Trinity Tower
9 Thomas More Street
London E1 9YT
Attention: Steve Clark
Telephone No: 44-171-777-2353
<PAGE> 161
5
Fax No: 44-171-777-2360/2085
2. Time:
Not later than 11:00 A.M., London time, on the last Business
Day preceding the Quotation Day in respect of such Borrowing
Date.
3. Information Required:
Name of Foreign Subsidiary Borrower, amount to be borrowed, and
Interest Periods.
D. Notice of Multicurrency Loan Continuation; Notice of Prepayment:
1. Deliver to: Chase Manhattan International Limited
Trinity Tower
9 Thomas More Street
London E1 9YT
Attention: Steve Clark
Telephone No: 44-171-777-2353
Fax No: 44-171-777-2360/2085
2. Time:
Not later than 11:00 A.M., London time, on the last Business
Day preceding the Quotation Day for the next Interest Period.
3. Information Required:
Name of Foreign Subsidiary Borrower, amount to be continued or
prepaid, as the case may be, and Interest Periods.
<PAGE> 162
6
II. NOTICE OF ALTERNATE CURRENCY OUTSTANDINGS
1. Deliver to: Chase Manhattan International Limited
Trinity Tower
9 Thomas More Street
London E1 9YT
Attention: Steve Clark
Telephone No: 44-171-777-2353
Fax No: 44-171-777-2360/2085
with a copy to:
The Chase Manhattan Bank
140 East 45th Street
29th Floor
New York, New York 10017
Attention: Chris Consomer
Telephone No.: 212-622-8779
Fax No.: 212-622-0122
2. Delivery time: By close of business in London on the date of
making of each Alternate Currency Loan and
having a fixed maturity of 30 or more days and on
the last Business Day of each month on which the
applicable Alternate Currency Borrower has
outstanding any Alternate Currency Loans.
3. Information to be set forth:
Name of Foreign Subsidiary Borrower
Amount and currency of outstanding Alternate Currency Loans of
each Alternate Currency Lender
<PAGE> 163
SCHEDULE IV
SECURITY DOCUMENTS
I. Pledge Agreements
1. Second Amendment and Restated Domestic Pledge Agreement, dated as of
the date hereof, made by the U.S. Borrower, pledging 100% of the stock of Lear
Tooling Corporation, Lear Corporation Mendon, LS Acquisition Corporation No. 24,
Lear Corporation Holdings Corp. No. 50, Automotive Industries Manufacturing
Inc., Masland Industries, Inc., Lear Operations Corporation, NAB Corporation and
Lear Corporation (Germany) Ltd. in favor of the General Administrative Agent,
substantially in the form of Exhibit Q to the Agreement.
2. Second Amendment and Restated Fair Haven Pledge Agreement, dated as
of the date hereof, made by LS Acquisition Corporation No. 24, pledging 100% of
the stock of Fair Haven Industries, Inc., in favor of the General Administrative
Agent, substantially in the form of Exhibit R to the Agreement.
3. Lear Corporation Canada Ltd. Share Pledge Agreement made by the U.S.
Borrower, pledging 65% of the stock of Lear Corporation Canada Ltd., in favor of
the General Administrative Agent, together with the related Acknowledgment and
Confirmation, in form and substance satisfactory to the General Administrative
Agent.
<PAGE> 164
SCHEDULE V
EXISTING LETTERS OF CREDIT
<TABLE>
<CAPTION>
L/C FACE EXPIRATION
NUMBER AMOUNT BENEFICIARY DATE
- -------- ------------- ----------- ------------------
<S> <C> <C> <C>
T-235091 $9,617,436.17 NBD Bank N.A. October 31, 1996
T-237709 $7,000,000.00 Zurich Insurance Corporation September 30, 1997
T-248499 $ 1,350,000.0 Employees Insurance Casualty December 30,1997
T-250234 $1,567,847.00 Zurich Insurance Company October 31, 1997
T-256694 $ 183,357.00 Lumberman's Mutual Casualty Company October 1, 1997
G-137608 $ 490,750.00 National Union Fire Insurance September 28, 1997
T-216189 $ 750,000.00 Zurich Insurance Company September 30, 1997
T-219868 $4,800,000.00 Zurich Insurance Company September 30, 1997
T-220133 $5,500,000.00 Citibank N.A. October 31, 1997
T-232745 $9,592,779.25 NBD Bank N.A. October 31, 1997
T-256695 $1,000,000.00 Lumberman's Mutual Casualty Company October 1, 1997
T-256696 $ 188,635.00 Lumberman Mutual October 1, 1997
T-256698 $ 709,800.00 Capital Blue Cross October 31, 1997
T-293944 $3,000,000.00 Zurich Insurance June 30, 1997
T-294933 $3,291,250.00 National Union Fire Insurance August 13, 1997
</TABLE>
<PAGE> 165
SCHEDULE VI
SUBSIDIARIES
DOMESTIC SUBSIDIARIES:
<TABLE>
<CAPTION>
Jurisdiction of
Name of Entity Incorporation Stock Ownership Record Holder
- ---------------------------------------- --------------- --------------- -------------
<S> <C> <C> <C>
Lear Corporation (Germany) Ltd. Delaware 100% Lear Corporation
Lear Seating Holdings Corp. No. 50 Delaware 100% Lear Corporation
Lear Tooling Corporation Delaware 100% Lear Corporation
LS Acquisition Corporation No. 24 Delaware 100% Lear Corporation
Fair Haven Industries, Inc. Michigan 100% LS Acquisition Corporation No. 24
Lear Corporation Mendon Delaware 100% Lear Corporation
Lear Operations Corporation Delaware 100% Lear Corporation
NAB Corporation Delaware 100% Lear Corporation
Masland Industries, Inc. Delaware 100% Lear Corporation
LJA, Inc. Delaware 100% Lear Corporation
Masland Specialty Technologies, Inc. Delaware 100% Masland Industries, Inc.
Masland International, Inc. Delaware 100% Masland Industries, Inc.
Masland Transportation, Inc. Delaware 100% Masland Industries, Inc.
Masland Acoustics Components, Inc. Delaware 100% Masland Industries, Inc.
Masland Technologies Corporation Delaware 100% Masland Industries, Inc.
Masland of Wisconsin, Inc. Delaware 100% Masland Industries, Inc.
General Panel B.V. Delaware 100% ASAA International, Inc.
Automotive Industries Manufacturing Inc. Delaware 100% Lear Corporation
Capital Plastics of Ohio, Inc. Ohio 100% Automotive Industries Manufacturing Inc.
ASAA International, Inc. Delaware 100% Automotive Industries Manufacturing Inc.
ASAA, Inc. Wisconsin 100% General Panel B.V.
American Wood Stock Company, Inc. Wisconsin 100% ASAA, Inc.
ASAA Technologies, Inc. Wisconsin 100% ASAA, Inc.
Fibercraft/DESCon Engineering, Inc. Delaware 100% Automotive Industries Manufacturing Inc.
Automotive Industries Sales, Inc. Michigan 100% Automotive Industries Manufacturing Inc.
Surf City, Inc. Michigan 100% Automotive Industries Manufacturing Inc.
</TABLE>
<PAGE> 166
1
FOREIGN SUBSIDIARIES:
<TABLE>
<CAPTION>
Jurisdiction of
Name of Entity Organization Stock Ownership Record Holder
- -------------------------------------- --------------- --------------- -------------
<S> <C> <C> <C>
Lear Corporation Sweden AB Sweden 100% Lear Corporation
Lear Holdings S.A. de C.V. Mexico 81.4% Lear Seating Holdings Corp. No. 50
Lear Holdings S.A. de C.V. Mexico 18.6% Lear Corporation
Lear Corporation Mexico S.A. de C.V. Mexico 99% Lear Holdings S.A. de C.V.
Lear Corporation Canada Ltd. Canada 100% Lear Corporation
Intertrim S.A. de C.V. Mexico 99.5% Lear Corporation
NS Beteiligungs GmbH Germany 100% Lear Corporation (Germany) Ltd.
NS Drahtfedern GmbH Germany 100% NS Beteiligungs GmbH
Lear Corporation GmbH Germany 100% NS Drahtfedern GmbH
Lear France SARL France 100% Lear Corporation
Societe No Sag Francaise France 56% Lear France SARL
Somby S.A. France 100% Societe No Sag Francaise
Automotive Industries (Holdings) Ltd. U.K. 100% Automotive Industries Manufacturing Inc.
Favesa S.A. de C.V. Mexico 91.5% Lear Holdings S.A. de C.V.
Favesa S.A. de C.V. Mexico 8.5% Lear Corporation
Lear Seating (SA)(Pty) Ltd. South Africa 100% Lear Corporation
Lear Seating Italia Holdings, S.r.L. Italy 10% Lear Corporation
Lear Corporation Italia Sud S.p.A. Italy 100% Lear Seating Italia S.p.A.
Lear Corporation Italia S.p.A. Italy 100% Lear Seating Italia Holdings, S.r.L.
Lear Services Ltda. Brazil 100% Lear Corporation
Lear Poland Z o.o. Poland 100% Lear Corporation
R D M Finance Cayman Islands 100% Lear Corporation
Plastifol Holding GmbH Germany 100% Automotive Industries Manufacturing Inc.
Plastifol Property GmbH Germany 100% Plastifol Holdings GmbH
Plastifol Verwaltungs GmbH Germany 100% Plastifol Property GmbH
Manfred Rothe Verwalungs GmbH Germany 100% Plastifol Property GmbH
Plastifol Manfred Rothe Iberia S.A. Spain 71.4% Plastifol Property GmbH
AVB Anlagen und Vorrichtungsban GmbH Germany 55% Plastifol Holding GmbH
Plastifol Beteiligungs GmbH Germany 100% Plastifol Holding GmbH
</TABLE>
<PAGE> 167
2
<TABLE>
<CAPTION>
Jurisdiction of
Name of Entity Organization Stock Ownership Record Holder
- -------------------------------------- --------------- --------------- -------------
<S> <C> <C> <C>
Guildford Kast Plastifol Dynamics Ltd. U.K. 33.3% Plastifol Beteiligungen GmbH
Automotive Industries (U.K.) Ltd. U.K. 100% Automotive Industries (Holdings) Ltd.
Simplay Ltd. U.K. 100% Automotive Industries (U.K.) Ltd.
Davart Group Ltd. U.K. 100% Automotive Industries (U.K.) Ltd.
John Cotton (Plastics) Ltd. U.K. 100% Davart Group Ltd.
Interiores Automotrices Summa, S.A.
de C.V. Mexico 40% ASAA, Inc.
AII Automotive Industries Canada, Inc. Ontario 100% Automotive Industries Manufacturing Inc.
Lear Corporation Australia Pty. Ltd. Australia 100% Lear Corporation
Interiores Para Autos, S.A. de C.V. Mexico 100% Interiores Auto Matricies Summa S.A. de
C.V.
Autoriums S.A. de C.V. Mexico 100% Interiores Auto Metricies Summa S.A. de
C.V.
Lear Corporation (U.K.) Ltd. U.K. 100% Automotive Industries (Holdings) Ltd.
Lear Corporation Austria GmbH Austria 100% NS Beteiligungs GmbH
Rael MabelsgmbH Austria 100% NS Beteiligungs GmbH
Ramco Investments Limited India 100% Lear Corporation
Lear Seating Private Limited India 100% Lear Corporation
Automotive Industries Export Ltd. Barbados 100% Automotive Industries Manufacturing Inc.
Masland Industries of Canada Limited Canada 100% Masland International, Inc.
Empresas Industriales Mexicanas de
Autopartes, S.A. de C.V. ("EIMA") Mexico 75% Masland International, Inc.
Consorcio Industrial Mexicano de
Autopartes, S.A. de C.V. Mexico 98% Masland International, Inc.
Consorcio Industrial Mexicano de
Autopartes, S.A. de C.V. Mexico 2% EIMA
Consorcio Industrial Mexicano de
Autopartes Toluca, S.A. de C.V. Mexico 60% EIMA
Consorcio Industrial Mexicano de
Autopartes Toluca, S.A. de C.V. Mexico 40% Masland International, Inc.
Tapizados Lear S.A. Argentina 79% Lear Corporation
L.S. Servicos Ltda. 100% Lear Corporation
</TABLE>
<PAGE> 168
SCHEDULE VII
HAZARDOUS MATERIAL
The facility at Mendon, Michigan was contaminated with Hazardous
Materials in several areas.
1. Soil beneath one of the plant buildings was contaminated with
heavy metals as the result of spills from the former electroplating
operation and leaks in the floor. The U.S. Borrower excavated the most
heavily contaminated soil and signed a "Declaration of
Restrictions/Consent Agreement" with MDNR, which requires maintenance of
an impermeable cap (i.e., the current concrete floor) over the
contaminated area.
2. The U.S. Borrower believes that it has completed all of the
capital expenditures necessary to remedy the soil and groundwater
contamination identified at the Mendon plant. Monitoring wells indicate
that there has been no migration of contamination toward a drinking water
well located approximately one quarter of a mile from the plant, but it is
remotely possible that MDNR will require the U.S. Borrower to undertake
additional remediation actions as a precaution.
<PAGE> 169
SCHEDULE VIII
CONTRACTUAL OBLIGATION RESTRICTIONS
1. Indenture, dated July 15, 1992, among Lear Corporation, as Issuer, The
Bank of New York, as Trustee, relating to the U.S. Borrower's 11-1/4%
Senior Subordinated Notes.
2. Indenture, dated February 1, 1994, between Lear Corporation, as Issuer
and the State Street Bank & Trust Company (as successor to the First
National Bank of Boston), as Trustee, relating to the U.S. Borrower's 8
1/4% Subordinated Notes.
3. Indenture, dated July 1, 1996 between Lear Corporation, as Issuer, and
the Bank of New York, as Trustee, relating to the U.S. Borrower's 9-1/2%
Subordinated Notes.
4. Loan Agreement between NS Beteilgungs GmbH and Industriekreditbank
AG-Deutsch Industriek.
5. Agreement relating to working capital credit facility provided by SE
Lenderen to Lear Seating Sweden AB.
6. Agreements and security instruments with respect to indebtedness
assumed in connection with the Acquisition and the acquisition of the Fiat
Seat Business and agreement governing indebtedness which refinances such
indebtedness.
7. Loan Agreement between Lear Corporation and the Province of Ontario,
Canada relating to indebtedness of up to $2,000,000 (Canadian).
8. Loan Agreement, dated January 27, 1993, between Lear Corporation and
the Province of Ontario, Canada.
9. Term Loan Agreement between Lear Seating Italia and Istituto Bancario
San Paolo di Torino S.p.A. entered into in connection with the acquisition
of the Fiat Seat Business.
10. Industrial Facilities Agreement governing indebtedness of ASAA
Technologies, Inc. to Cumberland Plateau Planning District Commission and
Cumberland Plateau Company.
11. Mortgage loan agreements governing indebtedness and ASAA Technologies,
Inc. to Associated Lender Lakeshore N.A.
12. Revolving Loan Agreement between Lear Canada Ltd. and The Bank of Nova
Scotia.
13. Loan Agreement between NS Beteiligungs GmbH and IndustrieKreditbank
AG-Deutsch Industriebank.
<PAGE> 170
2
14. Agreements governing working capital Indebtedness of Lear Seating
(Indonesia) Pty Ltd. and Lear Australia Pty Ltd.
<PAGE> 1
EXHIBIT 10.2
[SCOTIABANK LETTERHEAD]
July 11, 1996
LEAR CORPORATION CANADA LTD. AND
AII AUTOMOTIVE INDUSTRIES CANADA, INC.
c/o Lear Corporation Canada Ltd.
536 Manitou Drive
Kitchener, Ontario
N2G 4C2
Attention: Mr. Donald J. Stebbins
Dear Sirs:
RE: ESTABLISHMENT OF REVOLVING TERM CREDIT FACILITY
IN FAVOUR OF LEAR CORPORATION CANADA LTD. AND
AII AUTOMOTIVE INDUSTRIES CANADA INC.
The Bank of Nova Scotia (the "Bank") is pleased to advise that, subject to your
acceptance, the Bank will make available the revolving term credit facility
described in this Agreement upon the following terms and conditions, and that
this Agreement shall replace the existing loan agreement dated April 19, 1995
between Lear Corporation Canada Ltd. (formerly, Lear Seating Canada Ltd.) and
the Bank, accordingly this Agreement shall constitute a refinancing of the
prior facility and not a novation or termination, with outstanding availments
thereunder constituting outstanding applicable Availments (as defined below)
under this Agreement:
BORROWERS Lear Corporation Canada Ltd. ("Lear Canada") and/or AII
Automotive Industries Canada Inc. ("Automotive Industries").
Each of Lear Canada and Automotive Industries shall be
severally liable to the Bank for its obligations hereunder,
provided that Lear Canada shall also be jointly and severally
liable to the Bank for the obligations of Automotive Industries
incurred to the Bank under or in connection with this
Agreement. Lear Canada may obtain any Availment hereunder.
Automotive Industries may obtain the overdraft advances
described below only. For the purposes of this Agreement,
Lear Canada and Automotive Industries may also be referred to
individually as a "Borrower" and collectively as the
"Borrowers".
<PAGE> 2
To: LEAR CORPORATION CANADA LTD. AND Page 2
ALL AUTOMOTIVE INDUSTRIES CANADA, INC.
CREDIT FACILITY Revolving Term Credit.
$50,000,000 Cdn., under which are available, subject to
the limitations applicable to the
respective Borrowers as expressed in
this Agreement, Canadian and U.S.
dollar advances (by direct
disbursement and overdraft), bankers'
acceptances of Canadian dollar bills
of exchange (each a "BA") and, up to a
maximum aggregate principal amount of
$2,000,000 Cdn. outstanding at any one
time, standby and commercial letters
of credit and letters of guarantee
(each a "Documentary Instrument"),
the terms and conditions of which are
contained in Schedules "A" and "B"
hereto;
(the "Credit", with each availment thereunder being an
"Availment").
BOOKING Kitchener Main Branch
POINT 64 King Street West
Kitchener, Ontario
N2G 3X1
(the "Branch")
PURPOSES General corporate purposes of the respective Borrowers,
including loans to Affiliates of the Borrower.
INTEREST RATE/ The interest rate for LIBOR Advances, the issuance fees for
FEE ADJUSTMENTS BA's and Documentary Instruments and the stand-by fee shall
all fluctuate in accordance with the Parent Company's
Coverage Ratio, and such ratio shall be determinative as to
the applicable "Pricing Level" in effect for certain interest
rates and fees hereunder at any time and from time to time
as follows:
Coverage Ratio Pricing Level
-------------- -------------
Less than 3.25:1 Level 1
3.25 or greater Level 2
but less than
4.0:1
4.0:1 or greater Level 3
but less than
<PAGE> 3
To: LEAR CORPORATION CANADA LTD. AND Page 3
ALL AUTOMOTIVE INDUSTRIES CANADA, INC.
5.0:1
5.0:1 or greater Level 4
Subject to the limitations expressed in this section, any
change in the interest rates and fees hereunder (a "Pricing
Change") shall be effective on the second Business Day
(as defined below in the section captioned NOTICE) following
the earlier of:
(I) the Bank's receipt of a quarterly
compliance certificate (as required by the REPORTING
section hereof) indicating that a change has occurred in
the above ratio such that the Pricing Level should be
adjusted; and
(ii) the due date for a quarterly compliance
certificate, if that certificate, whenever actually
received by the Bank, discloses that a change has occurred
in the above ratio such that the Pricing Level should be
adjusted.
The interest rates and fees payable by virtue of any Pricing
Change shall continue to be payable until the second Business
Day following the earlier of the Bank's receipt and the due
date for the next quarterly compliance certificate indicating
that a further Pricing Change should occur as a result of
changes in the above ratio as at the end of the applicable
fiscal period.
No Pricing Change which results in a reduction of interest
rates and fees hereunder shall be permitted at any time that an
Event of Default has occurred and is continuing hereunder.
Further, notwithstanding the foregoing, in the event that any
compliance certificate is not provided to the Bank within 95
days of the end of any fiscal quarter of Lear Canada in any of
its fiscal years, other than any last fiscal quarter, or within
150 days of any last fiscal quarter of Lear Canada in any of
its fiscal years, a Pricing Change shall be deemed to have
occurred on the second Business Day following such date, with
all affected interest rates and fees increasing automatically
to the next Pricing Level having higher interest rates and fees
(unless Pricing Level 1 is already then in effect) and such
increased interest rates and fees shall remain in effect
subject to the terms of this section or until receipt by the
Bank of the relevant overdue compliance certificate, whereupon,
in the latter event only, a further Pricing Change shall occur
on the second Business Day following the date of the Bank's
receipt thereof if warranted by the particulars disclosed in
such certificate.
For the purposes of this Agreement:
<PAGE> 4
To: LEAR CORPORATION CANADA LTD. AND Page 4
ALL AUTOMOTIVE INDUSTRIES CANADA, INC.
(a) "Parent Company" shall mean Lear
Corporation, the U.S. parent company of Lear Canada;
(b) "Coverage Ratio", and all defined terms
used in such definition shall have the respective meanings
ascribed to them in the Syndicated Credit Agreement,
provided that such term shall be read for the purposes of
this Agreement as if to exclude the term "Adjustment Date"
; and
(c) "Syndicated Credit Agreement" shall mean
the credit agreement dated as of August 17, 1995, as
amended December 8, 1995 and May 28, 1996 by and among the
Parent Company, as borrower, Chemical Bank, as
administrative agent for the lenders, certain managing
agents including the Bank (the Bank being a lender
thereunder also) and the other lenders signatory thereto
pursuant to which loan commitments currently in the
maximum principal amount of $1,475,000,000 U.S. are
available to the Parent Company, or any successor
agreement entered into to refinance the Syndicated Credit
Agreement..
CREDIT Advances. Canadian and U.S. dollar advances may be obtained
AVAILMENTS under the Credit by Lear Canada selecting in respect of each such
advance one of the interest options as follows:
(1) Canadian dollars as Prime Rate Advances
in whole multiples of $100,000 Cdn. bearing interest at
Prime Lending Rate (as defined below).
(2) U.S. dollars as Base Rate Advances in
whole multiples of $100,000 U.S. bearing interest at
Alternate Base Rate (as defined below).
(3) U.S. dollars as LIBOR Advances in whole
multiples of $100,000 U.S.: LIBO Rates (as defined below)
for 1, 2, 3, 6 or 12 month LIBOR Periods (subject to
availability) plus a per annum margin fluctuating in
accordance with the applicable Pricing Level (determined
above) as follows:
Pricing Interest Rate
Level Margin (%)
-------- -------------
Level 1 1.0
Level 2 0.875
Level 3 0.75
<PAGE> 5
To: LEAR CORPORATION CANADA LTD. AND Page 5
ALL AUTOMOTIVE INDUSTRIES CANADA, INC.
Level 4 0.50
A conversion from a LIBOR Advance to another Availment may only
be made on the expiry of the applicable LIBOR Period, unless Lear
Canada indemnifies the Bank for the costs of the Bank resulting
from the early termination of such LIBOR Period. No LIBOR Period
may extend beyond the maturity date of the Credit as provided for
below in the section captioned MATURITY, except as provided in
paragraph (3) under the section captioned COVENANTS (Covenants of
Lear Canada and Automotive Industries).
BA's. BA's may be obtained by Lear Canada under the Credit,
provided that each such BA shall be denominated in a whole
multiple of $100,000 Cdn. and shall have a term to maturity of
30 days to 1 year, subject to availability. Lear Canada shall
pay, upon issuance of each BA, a per annum fee determined as
set out below, calculated on the basis of a 365 day year on the
face amount of such BA for the number of days to elapse to
maturity (exclusive of days of grace), subject to a minimum fee
of $100 Cdn. per BA transaction. Each BA may be converted to
another Availment, but only on the maturity date of such BA.
Any BA not paid by Lear Canada on its maturity date will be
paid by the Bank and such payment shall constitute a Prime Rate
Advance under the Credit. No term of a BA may extend beyond
the maturity date of the Credit as provided for below in the
section captioned MATURITY, except as provided in paragraph (3)
under the section captioned COVENANTS (Covenants of Lear Canada
and Automotive Industries). The issuance fee for BA's shall
fluctuate in accordance with the applicable Pricing Level
(determined above) as follows:
Pricing Issuance Fee
Level Per Annum (%)
-------- -------------
Level 1 1.0
Level 2 0.875
Level 3 0.75
Level 4 0.50
Overdrafts.
(a) LEAR CANADA.
Upon presentment to the Bank for payment of any item
drawn by Lear Canada or by any other Customer (as defined
below)
<PAGE> 6
To: LEAR CORPORATION CANADA LTD. AND Page 6
ALL AUTOMOTIVE INDUSTRIES CANADA, INC.
on any Designated Account (as defined below) or
upon any other demand for payment made in accordance with the
provisions of any Mirror Netting Services Agreement (as
defined below), which, when charged against a particular Pool
Account (as defined below), creates or increases a net debit
balance in such Pool Account, the Bank shall transfer such
amounts as may be required to pay such item, provided that,
after transferring the relevant amount, the aggregate amount
of these funds transfers made to such Pool Account (and each
of them, if more than one) and outstanding at any time shall
constitute an Availment of the Credit outstanding to Lear
Canada.
(b) AUTOMOTIVE INDUSTRIES.
Upon presentment to the Bank for payment of any item
drawn by Automotive Industries or by any other Customer
(as defined below) on any Designated Account (as defined
below) or upon any other demand for payment made in
accordance with the provisions of any Mirror Netting
Services Agreement (as defined below), which, when
charged against a particular Pool Account (as defined
below), creates or increases a net debit balance in such
Pool Account, the Bank shall transfer such amounts as may
be required to pay such item, provided that, after
transferring the relevant amount, the aggregate amount of
these funds transfers made to such Pool Account (and each
of them, if more than one) and outstanding at any time
shall constitute an Availment of the Credit outstanding
to Automotive Industries, and further provided however
that the aggregate amount of all such transfers made and
outstanding at any time and from time to time shall not
exceed:
(I) $1,000,000 Cdn., in the case of one or more Canadian
dollar Pool Accounts; and
(ii) $500,000 U.S., in the case of one or more U.S. dollar
Pool Accounts.
If an applicable Mirror Netting Services Agreement entered into
by either Borrower provides for a Pool Account which is a
Canadian dollar account, the aggregate amount of overdrafts
outstanding thereunder shall bear interest at the Prime Lending
Rate. If an applicable Mirror Netting Services Agreement
entered into by either Borrower provides for a Pool Account
which is a U.S. dollar account, the aggregate amount of
overdrafts outstanding thereunder shall bear interest at the
Alternate Base Rate.
<PAGE> 7
To: LEAR CORPORATION CANADA LTD. AND Page 7
ALL AUTOMOTIVE INDUSTRIES CANADA, INC.
Notwithstanding any other term or condition hereof, if any
Mirror Netting Services Agreement is terminated in accordance
with the applicable provisions thereof, each Borrower hereby
acknowledges and agrees that the borrowing privileges of Lear
Canada or Automotive Industries, as the case may be, hereunder
with respect to that particular Mirror Netting Services
Agreement shall also be canceled automatically at the same
time, without any additional requirement that notice of such
cancellation be given to either Borrower and irrespective of
whether or not notice of such cancellation is referred to in
the notice of termination with respect to a particular Mirror
Netting Services Agreement. Any such cancellation shall be
without prejudice to the Bank's rights of repayment hereunder
in respect of amounts transferred to a Pool Account affected
by the termination of a particular Mirror Netting Services
Agreement (provided that such amounts are transferred prior to
the time that termination of the applicable Mirror Netting
Services Agreement becomes effective and that such transfers
occur in accordance with the provisions of this Agreement),
and any such cancellation shall be without prejudice to any
other right or remedy of the Bank hereunder.
To the extent that the provisions of this Agreement conflict
with the provisions of any Mirror Netting Services Agreement
(and, in particular, any provisions thereof and hereof relating
to the maximum amount of credit which will be made available to
a Borrower under a Mirror Netting Services Agreement and
relating to the rate of interest applicable to funds transfers
made by the Bank to fund net debit balances in any Pool
Account), the provisions of this Agreement shall prevail to the
extent necessary to remove the conflict.
For the purposes of this Agreement:
(1) "Mirror Netting Services Agreement" shall mean any
Money Management Services Mirror Netting Service
Agreement entered into among Lear Canada, any of its
eligible Affiliates and the Bank or, as the case may be,
entered into among Automotive Industries, any of its
eligible Affiliates and the Bank, as such agreement may
be amended, revised, replaced or otherwise modified in
whole or in part from time to time, and each of the terms
"Customer", "Designated Account" and "Pool Account" shall
have the respective meanings ascribed to them in the
applicable Mirror Netting Services Agreement; and
(2) "Affiliate" means an affiliated corporation as defined
in the Ontario Business Corporations Act, as the same may
be amended, re-enacted or substituted.
<PAGE> 8
To: LEAR CORPORATION CANADA LTD. AND Page 8
ALL AUTOMOTIVE INDUSTRIES CANADA, INC.
Documentary Instruments. Refer to the attached Schedules "A"
and "B" to this Agreement.
STAND-BY FEE Lear Canada shall pay, on the last Business Day of each calendar
quarter, a per annum stand-by fee determined as set out below,
computed on the unused portion of the committed limit of the
Credit as it may be reduced from time to time, calculated daily
in arrears on the basis of a 365 day year for the actual number
of days elapsed from and including July 11, 1996, to the
Termination of the Credit. For purposes of calculating the
amount of stand-by fee payable in respect of U.S. dollar
Availments outstanding hereunder, the Canadian dollar exchange
equivalent thereof shall be determined by the Bank on and for
each Business Day in accordance with the spot rate of exchange
for U.S. dollars as announced by the Bank of Canada not later
than 12:00 noon (Toronto time) on such day, or, if such rate is
not announced by the Bank of Canada by such time on any Business
Day, the applicable rate of exchange for the relevant currency
conversion shall be that which was last announced by the Bank of
Canada. Lear Canada shall be entitled to cancel all or any of
the unused portion of the committed limit of the Credit at any
time and from time to time without penalty on not less than 30
days' written notice to the Bank and upon payment of all accrued
stand-by fee to such date of cancellation, whereupon the
committed limit of the Credit shall be permanently reduced
accordingly. The stand-by fee shall fluctuate in accordance with
the applicable Pricing Level (determined above) as follows:
Pricing Stand-by Fee
Level Per Annum (%)
------- -------------
Level 1 0.375
Levels 2
and 3 0.25
Level 4 0.20
MATURITY Termination. The Credit shall revolve and may be drawn down
until the earlier of (a) March 31, 1998 inclusive and (b) the
date of expiry of the loan commitments under the Syndicated
Credit Agreement or any successor thereto, when all amounts then
outstanding or accrued hereunder shall be payable. The term of
the Credit may be extended for successive periods of up to one
year in the absolute discretion of the Bank, upon Lear Canada's
written request therefor received not later than January 31 of
each year, provided that, in no event shall the term of the
Credit be extended beyond September 30, 2001. If the Bank does
not give written notice to Lear Canada of its
<PAGE> 9
To: LEAR CORPORATION CANADA LTD. AND Page 9
ALL AUTOMOTIVE INDUSTRIES CANADA, INC.
consent to any such requested extension on or before March 1 in
any year, neither the requested extension nor any further
extension shall be permitted thereafter and the term of the
Credit shall expire as otherwise provided. No extension shall
be effective if maturity of the Credit shall first occur for
the reason specified above in clause (b) of this section or if
the Bank terminates the Credit at any time prior to the
commencement of any extended term upon the occurrence of any
Event of Default hereunder. If any scheduled date of
termination should not fall on a Business Day, then all amounts
otherwise payable under this Agreement upon termination of the
Credit shall instead be payable on the Business Day immediately
preceding such date.
Outstanding BA's. If, at any time prior to the maturity date
of any BA issued hereunder, the Credit is terminated, Lear
Canada shall pay to the Bank, on demand, an amount with respect
to each such BA equal to the total of amounts which would be
required to purchase in the Canadian money market, as of 10:00
a.m. (Eastern time) on the date of payment of such demand,
Government of Canada treasury bills in an aggregate amount
equal to the face amount of such BA and having in each case a
term to maturity similar to the period from such demand to
maturity of such BA; provided that, subject to the provisions
of paragraph (3) of the section below captioned COVENANTS
(Covenants of Lear Canada and Automotive Industries), no such
payment shall be required to be made by Lear Canada with
respect to any BA prior to its date of maturity if such BA is
outstanding at the time of Lear Canada's receipt of any notice
of repayment given by the Bank to Lear Canada in accordance
with the aforesaid paragraph (3) of the section captioned
COVENANTS . Upon payment by Lear Canada as required under this
paragraph, Lear Canada shall have no further liability in
respect of each such BA and the Bank shall be entitled to all
of the benefits of, and be responsible for all payments to
third parties under, such BA and the Bank shall indemnify and
hold harmless Lear Canada in respect of all amounts which Lear
Canada may be required to pay under each such BA to any party
other than the Bank.
Outstanding Documentary Instruments. Refer to the attached
Schedule "A" to this Agreement.
CALCULATION Determination of Rates. "Prime Lending Rate" is a variable per
& PAYMENT annum reference rate of interest (as announced and adjusted by
the Bank from time to time) for loans made by the Bank in
Canada in Canadian dollars. "Alternate Base Rate" is a
fluctuating interest rate per annum (as shall be in effect from
time to time) (rounded to the nearest 1/100 of 1%) for loans
made by the Bank in Canada in U.S. dollars equal to the
greater of: (a) the annual rate of interest
<PAGE> 10
To: LEAR CORPORATION CANADA LTD. AND Page 10
ALL AUTOMOTIVE INDUSTRIES CANADA, INC.
announced from time to time by the Bank in Canada as its "Base
Rate Canada"; and (b) 0.5% per annum above the rate set forth
for such date opposite the caption "Federal Funds (Effective)"
in the weekly statistical release designated as "H.15(519)",
or any successor publication, published by the Federal Reserve
System. If for any reason the Bank shall have determined
(which determination shall be conclusive, absent manifest
error) that it is unable to ascertain the Federal Funds
(Effective) for any reason, including without limitation, the
inability or failure of the Bank to obtain sufficient bids or
publications in accordance with the terms hereof, the rate
announced by the Bank in Canada as its "Base Rate Canada" shall
be the Alternate Base Rate until the circumstances giving rise
to such inability no longer exist. The "LIBO Rate" for each
LIBOR Period (being the applicable interest period chosen by
Lear Canada for a LIBOR Advance) means the rate of interest per
annum at which the Bank is offered deposits by prime banks in
the London interbank market, as at 11:00 a.m. (London, England
time), on the second Business Day prior to the commencement of
such LIBOR Period, in an amount of U.S. dollars similar to the
amount of the applicable LIBOR Advance for a deposit period
comparable to such LIBOR Period. LIBOR Advances are offered
subject to the availability to the Bank of appropriate LIBO
Rate quotations.
Interest Calculation and Payment. Interest computed with
reference to Prime Lending Rate or Alternate Base Rate shall
accrue from day to day for the actual number of days elapsed
and shall be calculated and payable quarterly, not in advance,
on the last Business Day of each calendar quarter. Interest
computed with reference to a LIBO Rate shall accrue from day to
day for the actual number of days elapsed and shall be
calculated and payable at the end of the applicable LIBOR
Period and, if such LIBOR Period is in excess of 3 months, at
the end of each 3 month period during such LIBOR Period. If
the last day of any LIBOR Period should not fall on a Business
Day, then all interest payable in respect of the applicable
advance upon maturity thereof shall instead be payable on the
Business Day immediately preceding the last day of such LIBOR
Period. Interest computed with reference to Prime Lending Rate
shall be calculated on the basis of a 365 day year, but
interest computed with reference to the Alternate Base Rate or
a LIBO Rate shall be calculated on the basis of a year of 360
days.
Change In Margin. Whenever this Agreement calls for an
increase or decrease on a certain date in a margin over a
reference rate in respect of interest on an advance or the fees
for issuance of a BA or for the issuance of a Documentary
Instrument, Lear Canada shall pay interest or fees or shall be
entitled to receive a refund from the Bank on interest or fees
already paid, as applicable, calculated
<PAGE> 11
To: LEAR CORPORATION CANADA LTD. AND Page 11
ALL AUTOMOTIVE INDUSTRIES CANADA, INC.
proportionately with reference to the new margin effective from
such date, notwithstanding that, in the case of an advance,
such advance was made prior to such date and, in the case of a
BA or Documentary Instrument, the applicable issuance fee is to
be calculated and paid prior to such date.
LIBOR Periods. Lear Canada shall designate the LIBOR Period to
apply to each LIBOR Advance in its notice of any drawdown of
such advance, any conversion to such advance and any renewal of
an existing LIBOR Period, provided that, upon failure of Lear
Canada to give notice of any such designation, when applicable,
as required under this Agreement, the Bank shall convert the
affected LIBOR Advance to a Base Rate Advance for the purpose
of determining the interest rate with respect to same.
Default of Payment. Amounts not paid when due in respect of a
Prime Rate Advance or a Base Rate Advance shall bear interest
at the rates applicable thereto, plus 2% per annum. Amounts
not paid when due in respect of a LIBOR Advance may be
constituted a Base Rate Advance by the Bank and the Bank may so
convert such advance. Any other monetary obligation of either
Borrower arising under this Agreement which is not paid when
due shall be deemed to be an amount not paid when due in
respect of a Prime Rate Advance or a Base Rate Advance, as
applicable. Interest payable under this paragraph shall accrue
from day to day for the actual number of days elapsed, shall be
calculated and payable upon demand, and shall be compounded
monthly until paid. The rights of the Bank under this
paragraph shall continue to apply from the date of such default
for so long as such default shall continue, both before and
after demand and judgment.
Interest Act (Canada). Whenever a rate of interest hereunder
is calculated on the basis of a year (the "deemed year") which
contains fewer days than the actual number of days in the
calendar year of calculation, such rate of interest shall be
expressed as a yearly rate for purposes of the Interest Act
(Canada) by multiplying such rate of interest by the actual
number of days in the calendar year of calculation and dividing
it by the number of days in the deemed year.
REPAYMENTS Lear Canada may make any repayment of an advance in a whole
multiple of $100,000 Cdn. in the case of Prime Rate Advances
and of $100,000 U.S. in the case of a Base Rate Advance, but any
repayment in respect of a LIBOR Advance may be made only in a
whole multiple of $100,000 U.S. and shall be subject to the
terms and conditions set out in the section below captioned
INDEMNITY PROVISIONS. No repayment of any advance made by way
of
<PAGE> 12
To: LEAR CORPORATION CANADA LTD. AND Page 12
ALL AUTOMOTIVE INDUSTRIES CANADA, INC.
overdraft to Automotive Industries shall be subject to any
limitation that it be in a whole multiple or minimum of any
amount.
SECURITY Unsecured.
CONDITIONS TO Initial Drawdown. The right of either Borrower to obtain the
UTILIZATION initial drawdown of an Availment hereunder is subject to the
conditions precedent that, to the extent that they have not
already done so, the Borrowers have provided to the Bank, in
form and substance satisfactory to the Bank, evidence of each
Borrower's authority to borrow hereunder and to execute and
deliver this Agreement, together with executed copies of such
documentation and, if requested by the Bank, opinions of counsel
as to the validity and enforceability of the same.
Each Utilization. The right of either Borrower to obtain at
any time any drawdown of an Availment (including the initial
drawdown) or any conversion from one Availment to another or
any renewal of a LIBOR Period hereunder (each a "Utilization")
is subject to the further conditions precedent that at the time
of such Utilization:
(1) in the case where such Utilization is a drawdown, a
conversion to a LIBOR Advance or a renewal of any LIBOR
Advance, no event or circumstance has occurred and is
continuing, or would result from the making of such
Utilization, which constitutes an Event of Default or
would constitute an Event of Default but for the
requirement that notice be given or time elapse, or both,
or, which when considered by itself or together with other
past or then existing events or circumstances, constitutes
or would constitute a material adverse change in the
business prospects or financial condition of Lear Canada
and its subsidiaries on a consolidated basis; and
(2) the Bank has received such other information as the Bank
may have reasonably requested upon giving prior reasonable
notice thereof to Lear Canada.
NOTICE Lear Canada shall give to the Bank 2 Business Days' notice of
each Utilization or repayment in respect of a LIBOR Advance and
same Business Day's notice of each Utilization (other than a
drawdown by means of an overdraft advance) or repayment in
respect of any other type of Availment. As used herein, a
"Business Day" means any day other than a Saturday, or a
Sunday, or a day that banks are lawfully closed for business in
Toronto, Ontario, or, if in respect of a Base Rate Advance,
New York City, or, if in respect of a LIBOR Advance,
<PAGE> 13
To: LEAR CORPORATION CANADA LTD. AND Page 13
ALL AUTOMOTIVE INDUSTRIES CANADA, INC.
any other day on which transactions cannot be carried out by
and between banks in the London interbank market.
Any notice or communication shall be deemed to have been given
to a party hereunder (I) upon delivery in writing to such party
at its address as noted on page 1 hereof or at the address of
which such party last notified the other, or (ii) upon oral
(including telephone) transmission to an appropriate officer of
such party, provided that such officer believed at such time in
good faith that such notice or communication was given by an
appropriate officer of the notifying or communicating party, or
(iii) in the case of overdrafts (whether or not actually
resulting in an Availment of the Credit hereunder in accordance
with the provisions of the paragraph above entitled
"Overdrafts"), upon receipt by the Bank of a Canadian or U.S.
dollar cheque or wire transfer drawn on an eligible account of
Lear Canada its affiliates, its subsidiaries or, if applicable,
of Automotive Industries or its subsidiaries maintained with
the Bank. Notice or communication to the Bank hereunder (other
than notice given in the manner as set out in (iii) of this
section) to be effective on a certain Business Day must be
given prior to 11:00 a.m. (Eastern time) on that Business Day.
Each notice or communication given by a party hereunder shall
be binding on it and shall not be revocable without the other
party's consent.
REPRESENTATIONS Lear Canada and Automotive Industries.
AND WARRANTIES
Each Borrower represents and warrants that this Agreement is a
legal, valid and binding obligation of such Borrower
enforceable against it in accordance with its terms; is not
contrary to any contractual restriction binding on it; and its
execution and delivery of the same neither requires a third
party consent nor would entitle any third party to accelerate
any debt owing to it.
Lear Canada only.
Lear Canada hereby additionally represents and warrants that it
does not have outstanding, as of the date hereof, any
indebtedness for borrowed money, nor any liability for borrowed
money (including, without limitation, contingent liability
under any guarantee), other than indebtedness incurred to the
Province of Ontario having a maximum aggregate principal amount
of $4,500,000 Cdn. plus accrued interest, indebtedness and
liability incurred to the Bank and contingent liability under
a guarantee in a maximum principal amount of $15,000,000 Cdn.
dated April 26, 1989, as amended on August 11, 1992, in respect
of the indebtedness and liability of General Seating of Canada
Ltd. incurred to Dai-Ichi Kangyo Bank (Canada) Ltd.
<PAGE> 14
To: LEAR CORPORATION CANADA LTD. AND Page 14
ALL AUTOMOTIVE INDUSTRIES CANADA, INC.
All of the representations and warranties of each Borrower
contained herein shall survive the execution and delivery of
this Agreement notwithstanding any investigation made at any
time by or on behalf of the Bank.
COVENANTS Lear Canada and Automotive Industries.
Each Borrower hereby covenants:
(1) to maintain, and cause its material subsidiaries to
maintain, their respective corporate existences and
conduct their respective businesses in the normal
course;
(2) to promptly notify the Bank of the occurrence of any
event or circumstance which constitutes an Event of
Default or would constitute an Event of Default but for
the requirement that notice be given or time elapse or
both and to provide to the Bank a detailed statement of
a senior officer of the applicable Borrower of the
steps, if any, being taken to cure or remedy such
default; and
(3) to repay all of its indebtedness and liability
incurred or accrued under this Agreement if the Bank
should at any time withdraw as a party to the
Syndicated Credit Agreement, subject to the Bank giving
Lear Canada not less than 60 days' prior written notice
of the due date for any such repayment, the date
thereof not to be earlier in any event than the date
that the Bank's withdrawal from the Syndicated Credit
Agreement becomes effective; provided that, if any
Availment (excluding any Prime Rate Advance and any
Base Rate Advance) is outstanding on the date of
receipt by Lear Canada of any such notice and if the
maturity or expiry date of such Availment should not
occur until after the aforesaid 60-day period has
expired, then, all payments in respect of such
Availment, which, if not for the giving of the notice
provided for in this Covenant (3), would otherwise be
due after expiry of the 60-day period, shall instead be
made as and when otherwise required by this Agreement,
except that, in the case of any applicable Documentary
Instrument, payments of principal, interest and other
amounts arising from any drawing thereunder shall be
made on the second Business Day following such drawing.
Notwithstanding any other term or condition of this
Agreement, each Borrower agrees that no further credit
shall be available to it under this Agreement after the
date of Lear Canada's receipt of the notice referred to
above (and Automotive Industries hereby waives any
requirement that the Bank provide any independent
notice to it
<PAGE> 15
To: LEAR CORPORATION CANADA LTD. AND Page 15
ALL AUTOMOTIVE INDUSTRIES CANADA, INC.
under this paragraph (3) with respect to the repayment
of credit extended to it under this Agreement or the
suspension of its entitlement to obtain additional
credit hereunder) and that, if all amounts payable
under this Covenant (3) are received by the Bank within
the aforesaid 60-day period, the Credit shall terminate
on the date of final payment thereof; provided further
that, the Borrowers' entitlement to obtain credit
hereunder shall be re-instated and the Credit shall
expire on the maturity date as otherwise provided,
subject to the terms and conditions of this Agreement,
if (I) at any time prior to the due date for repayment
specified in any such notice by the Bank, Lear Canada
provides an irrevocable standby letter of credit, in
form and substance satisfactory to the Bank in its sole
discretion, for a principal amount not less than the
committed limit of the Credit at such time, plus
interest, fees and other amounts outstanding and payable
under this Agreement and (ii) no Event of Default or
material adverse change in the financial condition of
Lear Canada has occurred at any time prior to or upon
the Bank's receipt of such letter of credit. The
giving of any notice by the Bank under this Covenant
(3) shall not affect the respective rights, privileges
or obligations of the parties to this Agreement except
as expressly set out in this Covenant (3).
Lear Canada only.
Lear Canada additionally hereby covenants:
(a) to maintain, or cause to be maintained, a minimum
Consolidated Net Worth of $25,000,000 Cdn. at all
times. For the purposes of this Agreement,
"Consolidated Net Worth" shall mean, at any particular
time, Shareholders' Equity, where "Shareholders'
Equity" means all amounts which would be included under
shareholders' equity on a consolidated balance sheet
of Lear Canada and its subsidiaries determined on a
consolidated basis plus inter-company indebtedness of
Lear Canada and its subsidiaries which is postponed and
subordinated to the Bank in a form and manner
satisfactory to the Bank in its sole discretion, all
calculated as at the date of determination in
accordance with generally accepted accounting
principles established by the Canadian Institute of
Chartered Accountants or any successor thereto
("Canadian GAAP"); provided that any amortization of
goodwill, deferred financing fees or license fees
(including any write-offs of deferred financing fees and
license fees) shall not be taken into account in
determining Consolidated Net Worth; and
<PAGE> 16
To: LEAR CORPORATION CANADA LTD. AND Page 16
ALL AUTOMOTIVE INDUSTRIES CANADA, INC.
(b) not to incur, nor to permit its subsidiaries to incur,
directly or indirectly, any indebtedness or liability for
borrowed money after the date hereof, whether actual or
contingent (including, without limitation, liability
under any guarantee) other than the re-financing of any
existing obligation of Lear Canada as disclosed above in
the section hereof captioned REPRESENTATIONS AND
WARRANTIES, amounts that the Bank is satisfied are
incurred in the normal course of business and indebtedness
and liability for borrowed money incurred to Affiliates.
EVENTS OF Upon the occurrence and continuation of any Event of Default, the
DEFAULT Bank may terminate the Credit and/or demand payment of all
indebtedness and liability outstanding and accrued hereunder to the
date of demand and proceed to take such steps as it deems fit. Each
Borrower agrees that an Event of Default occurring with respect to
the other Borrower shall constitute an Event of Default hereunder
with respect to itself also, and, subject to the provisions of this
Agreement, upon the occurrence of an Event of Default, the Bank
shall not be limited in the remedies that may be legally available
to it with respect to either Borrower.
An Event of Default shall occur if:
(1) either Borrower fails to pay any amount of principal
within 3 Business Days of when due or fails to pay any
amount of interest, fees or other amounts within 10
Business Days of when due under the Credit, or makes any
representation or warranty hereunder which is incorrect in
any material respect;
(2) either Borrower breaches any material covenant hereof
(including, without limitation, any covenant made
hereunder in the above section captioned COVENANTS) or
fails to comply with any other material term or condition
hereof and such breach of covenant or material
non-compliance (other than a covenant to pay or a covenant
impossible to remedy or a material breach of any
representation or warranty) continues for 10 Business Days
or more after notice to remedy same; or
(3) either Borrower or any subsidiary, where subsidiary is a
majority owned company, of either Borrower admits its
inability to pay its debts generally; becomes a bankrupt
(voluntarily or involuntarily); or, becomes subject to any
proceeding seeking liquidation, rearrangement, relief of
creditors or the appointment of a receiver or trustee
over, or any judgment or order which has or might have a
material and
<PAGE> 17
To: LEAR CORPORATION CANADA LTD. AND Page 17
ALL AUTOMOTIVE INDUSTRIES CANADA, INC.
adverse effect on, any substantial part of its property or
undertaking; unless, in the event of an involuntary
bankruptcy or a proceeding for any of the remedies
specified above in this section (other than a voluntary
bankruptcy), the affected corporation has obtained a
dismissal, permanent stay or other similar disposition
not more than 60 days from (I) the date of the filing of
a petition, in the case of an involuntary bankruptcy, or
(ii) the date of service of the relevant statement of
claim, application or other process, in the case of any
other proceeding; or
(4) Lear Canada, any subsidiary or affiliate of Lear Canada
(including, without limitation, Automotive Industries):
(a) fails to pay any of its (other) indebtedness or
liability when due, such failure continues after any
applicable grace period specified in an agreement or
instrument relating to such (other) indebtedness or
liability and, as a result thereof, Lear Canada or
applicable subsidiary is then in default of payment
of an aggregate principal amount of indebtedness and
liability of $10,000,000 U.S. (or the Canadian
dollar equivalent thereof) or more; or
(b) permits any material default under any agreement or
instrument relating to its (other) indebtedness or
liability, or any other event, to occur and to
continue after any applicable grace period specified
in such agreement or instrument and the effect of
such default or event is to accelerate, or to permit
the acceleration of, the maturity of that
indebtedness or liability such that the aggregate
principal amount of the indebtedness and liability
incurred by Lear Canada or applicable subsidiary
which then has been or may be accelerated by the
relevant creditor(s) exceeds $10,000,000 U.S. (or
the Canadian dollar equivalent thereof);
(irrespective of whether either of the aforesaid
aggregate principal amounts, or any portion thereof, is
incurred jointly, severally or jointly and severally,
provided that the calculation of such aggregate principal
amounts shall be made without duplication); or
(5) subject to the above paragraphs (1) and (4) of this
section, an "Event of Default" within the meaning of the
Syndicated Credit Agreement occurs thereunder as a result
of any of the events or circumstances specified in
Section 9 (h) thereof; or
<PAGE> 18
To: LEAR CORPORATION CANADA LTD. AND Page 18
ALL AUTOMOTIVE INDUSTRIES CANADA, INC.
(6) subject to the above paragraphs (1), (4) and (5) of this
section, any other event of default occurs under the
Syndicated Credit Agreement or any successor thereto which
results in the acceleration of any amount of the Parent
Company's indebtedness or liability outstanding thereunder
and/or the termination of the lenders' commitments
thereunder; or
(7) any course of action is undertaken by Lear Canada or any
material subsidiary of Lear Canada, or with respect to
such corporation or its capital stock by another party,
which is intended to result in, or would result (in the
reasonable opinion of the Bank) in, its reorganization or
reconstruction, or its consolidation, amalgamation or
merger with another corporation, except when Lear Canada
may wish to amalgamate with Automotive Industries, or the
transfer of all or substantially all of the undertaking
and assets of such corporation; or
(8) there occurs or is announced or is scheduled any change in
the ownership of Lear Canada such that the Parent Company
or any wholly-owned subsidiary of the Parent Company
ceases, or would cease, to beneficially own 100% of the
issued and outstanding capital stock in Lear Canada at
any time; or
(9) any Affiliate of Lear Canada (including, without
limitation, Automotive Industries) or of a subsidiary of
Lear Canada which is a party to a postponement and
subordination agreement entered into with the Bank (a
"Postponement and Subordination Agreement") fails to
substantially perform, observe or otherwise comply with
any material term or condition of that Postponement and
Subordination Agreement and such failure continues for 15
Business Days or more after notice given by the Bank to
the applicable Affiliate to remedy same; or any such
Affiliate party to a Postponement and Subordination
Agreement denies, to any extent, its obligations under
such Postponement and Subordination Agreement or claims
such Postponement and Subordination Agreement to be, with
respect to itself or any other party thereto, invalid or
withdrawn in whole or in part; or any Postponement and
Subordination Agreement is invalidated in whole or in
part by any Act, regulation or governmental action; or any
Postponement and Subordination Agreement ceases to be the
valid, binding and enforceable obligation of the applicable
Affiliate(s).
<PAGE> 19
To: LEAR CORPORATION CANADA LTD. AND Page 19
ALL AUTOMOTIVE INDUSTRIES CANADA, INC.
CHANGE OF No amendment or other modification, substitution, abolition or
INTERPRETATION waiver to or of:
(I) any provision of the Syndicated Credit Agreement, or any
portion of any provision of such agreement, which is
specifically referenced in this Agreement, including,
without limitation, any defined term of the
Syndicated Credit Agreement referenced herein (each a
"Referenced Term"); or
(ii) any defined term of the Syndicated Credit Agreement which
is used in or is otherwise relevant to any Referenced Term
but which is not specifically referenced in this Agreement
(each a "Referenced Term" also)
shall be binding upon the Bank for the purposes of this
Agreement unless the Bank gives its prior written consent
thereto for the express purpose of the relevant amendment,
modification, substitution, abolition or waiver, which consent
may be evidenced by the Bank's execution of a consent pursuant
to the Syndicated Credit Agreement. Each Referenced Term shall
survive termination of or the Bank's withdrawal from the
Syndicated Credit Agreement, any transfer of any or all of the
rights and obligations of the Parent Company or any lender
thereunder and shall survive the invalidity of the Syndicated
Credit Agreement or any portion of any provision or defined
term of such agreement which constitutes a Referenced Term for
the purposes of this Agreement.
DETERMINATION The Bank shall have the right to determine at any time, and in
its discretion reasonably exercised, as to whether any event,
circumstance or thing envisaged in this Agreement is or would
be "material", "adverse" or "substantial", as such terms are
used herein. Any accounting terms used and not specifically
defined herein shall be construed in accordance with Canadian
GAAP or, as applicable, generally accepted U.S. accounting
principles, consistently applied, and except as may be
otherwise provided herein all financial data and statements
submitted pursuant to this Agreement shall be prepared in
accordance with such principles.
<PAGE> 20
To: LEAR CORPORATION CANADA LTD. AND Page 20
ALL AUTOMOTIVE INDUSTRIES CANADA, INC.
JOINT AND The obligation of the Borrowers hereunder with respect to the
SEVERAL indebtedness and liability of Automotive Industries incurred
LIABILITY under this Agreement shall be joint and several between the
Borrowers, one for the other. The obligation of the Borrowers
hereunder shall not be limited, lessened or discharged by any
act on the part of the Bank or either or both of the Borrowers
save due performance by the Borrowers and each of them.
INDEMNITY If the introduction or implementation of or any change in or
PROVISIONS in the interpretation of, or any change in its application to
a Borrower of, any law or any regulation or guideline issued
by any central bank or other governmental authority (whether
or not having the force of law), including, without
limitation, any reserve or special deposit requirement or any
tax (other than tax on the Bank's general income) or any
capital requirement, has due to the Bank's compliance the
effect, directly or indirectly, of (I) increasing the cost to
the Bank of performing its obligations hereunder or under any
BA or Documentary Instrument; (ii) reducing any amount
received or receivable by the Bank or its effective return
hereunder or in respect of any BA or Documentary Instrument or
on its capital; or (iii) causing the Bank to make any payment
or to forgo any return based on any amount received or
receivable by the Bank hereunder or in respect of any BA or
Documentary Instrument, then upon receipt by Lear Canada of a
certificate from the Bank setting forth in reasonable detail
any additional costs, reduced amount receivable or foregone
return, the applicable Borrower shall pay such amount as shall
compensate the Bank for any such cost, reduction, payment or
forgone return. Each Borrower shall further indemnify the
Bank for all costs, losses and expenses which may at any time
be imposed on, incurred by or asserted against the Bank in any
way relating to or arising out of the execution, delivery or
enforcement of this Agreement, the transactions contemplated
hereby (including, without limitation, the making and
maintaining of any Availment hereunder) and/or the early
termination of any LIBOR Period and agrees that the Bank shall
have no liability to either Borrower for any reason in
respect of any Availment other than on account of the Bank's
gross negligence or wilful misconduct. Any certificate of the
Bank in respect of the foregoing will be conclusive and
binding upon each Borrower, except for manifest error,
provided that the Bank shall determine the amounts owing to it
in good faith using any reasonable averaging and attribution
methods.
INDEMNITY FOR
ENVIRONMENTAL
HAZARDS Each Borrower hereby represents and warrants that its
business and assets and those of its material subsidiaries are
operated in substantial compliance with applicable
environmental laws, rules,
<PAGE> 21
To: LEAR CORPORATION CANADA LTD. AND Page 21
ALL AUTOMOTIVE INDUSTRIES CANADA, INC.
regulations and orders ("Environmental Laws") and that no
enforcement action in respect thereof is threatened or
pending, to the best of the knowledge, information and belief,
after due enquiry, of each and every senior officer of such
Borrower who could reasonably be expected to have knowledge
of such matters. Each Borrower covenants to and to cause its
subsidiaries to continue to so operate and permit the Bank to
conduct inspections and appraisals of all or any of its and
its subsidiaries' records, business and assets at reasonable
times upon prior written notice to the applicable Borrower at
any time and from time to time at such Borrower's expense to
ensure such compliance. If the Bank is required to expend any
funds in compliance with Environmental Laws, the applicable
Borrower shall indemnify the Bank in respect of such
expenditures as if an advance had been made to such Borrower
under this Agreement for such purpose; provided that the Bank
shall have delivered to the applicable Borrower a certificate
setting forth in reasonable detail the basis for its
expenditures, including the Environmental Laws implicated and
the amount and nature of such expenditures.
REPORTING Lear Canada shall provide to the Bank, to the attention of
Unit Head, Corporate Banking - Ontario, 44 King Street West,
Toronto, Ontario M5H 1H1:
(1) unaudited, quarterly, consolidated financial statements
of Lear Canada within 75 days of the end of each of the
first 3 quarters of each of its fiscal years;
(2) audited, annual, consolidated financial statements of
Lear Canada within 150 days of each of its fiscal
year-ends;
(3) quarterly certificates of compliance, supported by
detailed calculations:
(i) demonstrating that Lear Canada has maintained all
financial performance tests prescribed in this
Agreement and confirming that no Event of Default
has occurred or is continuing hereunder;
(ii) demonstrating that the Parent Company has
maintained all financial performance tests
prescribed in the Syndicated Credit Agreement and
further confirming that no event of default has
occurred or is continuing thereunder; and
(iii) to confirm the Coverage Ratio affecting the
Pricing Levels for certain interest rates and fees
hereunder (determined in accordance with the
Interest Rate/Fee Adjustments section hereof) which
will be in effect, subject to the terms of the
Interest Rate/Fee
<PAGE> 22
To: LEAR CORPORATION CANADA LTD. AND Page 22
ALL AUTOMOTIVE INDUSTRIES CANADA, INC.
Adjustments section hereof, for the 90-day period
commencing on the second Business Day immediately
following the earlier of the Bank's receipt of a
certificate and the due date therefor;
with each certificate to be signed by a senior executive
officer of Lear Canada and the Parent Company and to be
provided as soon as feasible after the end of each fiscal
quarter of Lear Canada and in any event (if not already
provided) within 60 days of the end of each of the first
3 quarters of each of Lear Canada's fiscal years and
within 150 days of each of Lear Canada's fiscal
year-ends; and
(4) such other information as the Bank may reasonably request.
EXPENSES All reasonable fees and out-of-pocket expenses of the Bank in
respect of preparation and enforcement of this Agreement will be
for the account of the applicable Borrower.
EXCHANGE Except as otherwise provided hereunder, the Canadian dollar
EQUIVALENCIES exchange equivalent of U.S. dollars shall be determined by the
Bank in accordance with its normal practices from time to time.
The aggregate amount of Canadian dollar Availments and the
Canadian dollar exchange equivalent of U.S. dollar Availments
outstanding at any time under the Credit shall not exceed the
Canadian dollar committed limit of the Credit at such time, and
for such purposes the Bank may require any such excess resulting
for any reason to be repaid within 30 days of notice thereof to
the applicable Borrower and until such repayment may refuse to
allow a drawdown under the Credit.
PAYMENTS Unless otherwise directed by the appropriate party, all
disbursements to a Borrower shall be made into an account
designated by such Borrower and all payments to the Bank shall
be made in the currency in respect of which the obligations
requiring such payment arose by depositing such payments
(whether by wire transfer or otherwise) into an account
designated by the Bank at the Branch for value on the due date.
Upon the occurrence and continuation of any Event of Default
hereunder, each Borrower hereby acknowledges that the Bank shall
be entitled, from time to time and at any time, to the fullest
extent permitted by law, to set off and apply any and all
deposits (general or special, time or demand, provisional or
final) at any time held and other indebtedness at any time owing
by the Bank to or for the credit or the account of the affected
Borrower against any and all of the obligations of such
Borrower now or hereafter
<PAGE> 23
To: LEAR CORPORATION CANADA LTD. AND Page 23
ALL AUTOMOTIVE INDUSTRIES CANADA, INC.
existing under this Agreement, irrespective of whether or not
the Bank shall have made any demand under this Agreement. The
currency of account of all payments contemplated hereunder
shall be of the essence of this Agreement.
EVIDENCE OF Each Borrower acknowledges that the actual recording of any
INDEBTEDNESS Availment under the Credit and interest, fees and other amounts
due therefor under this Agreement in an account of such
Borrower maintained by the Bank in respect thereof and payments
made under the Credit in accordance with this Agreement shall
constitute, except for manifest error, conclusive evidence
of such Borrower's indebtedness and liability from time to time
under this Agreement in respect of the Credit; provided that
the failure of the Bank to record the indebtedness and
liability of such Borrower in such account shall not affect the
obligation of such Borrower to pay or repay such indebtedness
and liability in accordance with this Agreement.
JUDGEMENT
CURRENCY The obligation of each Borrower hereunder to make payments in
U.S. dollars shall not be discharged or satisfied by any tender
or recovery pursuant to any judgment expressed in or converted
into Canadian dollars except to the extent to which such tender
or recovery shall result in the effective receipt by the Bank
of the full amount of U.S. dollars so payable hereunder.
Accordingly, the obligation of each Borrower shall be
enforceable as an alternative or additional cause of action for
the purpose of recovery in Canadian dollars of the amount (if
any) by which such effective receipt shall fall short of the
full amount of U.S. dollars so payable hereunder and shall not
be affected by any judgment being obtained for any other sums
due hereunder.
SEVERABILITY The invalidity or unenforceability of any particular provision
of this Agreement shall not affect any other provision herein
and the Agreement shall be construed as if the invalid or
unenforceable provision had been omitted.
ASSIGNABILITY Neither Borrower may assign this Agreement. The Bank may
& GOVERNING LAW assign or grant participation in its rights and obligations
hereunder to any of its subsidiaries or affiliates without
the consent of either Borrower, and may assign or grant
participation in its rights and obligations hereunder to any
other third party with the prior written consent of Lear Canada
(not to unreasonably withheld), with each such assignee or
participant to be entitled to rely on the section headed
INDEMNITY PROVISIONS as set out above. This Agreement shall be
construed in accordance with the law of the Province of Ontario.
<PAGE> 24
To: LEAR CORPORATION CANADA LTD. AND Page 24
ALL AUTOMOTIVE INDUSTRIES CANADA, INC.
By: ______________________________
Name:_________________________
Title: ______________________
<PAGE> 25
To: LEAR CORPORATION CANADA LTD. AND Page 25
ALL AUTOMOTIVE INDUSTRIES CANADA, INC.
Please indicate your acceptance of this Agreement by signing and returning to
the Bank the enclosed duplicate copy of this letter, together with Schedules
"A" and "B" hereto, on or before July 11, 1996, failing which the provisions
hereof shall be of no force or effect. By its execution hereof, Lear Canada
also acknowledges, agrees and confirms to the Bank that, without limitation, it
is and shall continue to be indebted or liable to the Bank, as the case may be,
for the amount(s) as properly recorded in the loan account for the predecessor
agreement hereto dated April 19, 1995 which were incurred under or in
connection with that agreement, and that all amounts so recorded shall
constitute indebtedness and liability outstanding under this Agreement, to be
discharged in accordance with the provisions hereof.
Yours truly,
THE BANK OF NOVA SCOTIA
By: ___________________________
B.J. Evans
By: ____________________________
P.D. McNeill
LEAR CORPORATION CANADA LTD.
By: __________________________ Accepted this ___ day
Name: ____________________ of _______, 1996.
Title: ___________________
By: __________________________
Name: ____________________
Title: ___________________
AII AUTOMOTIVE INDUSTRIES CANADA, INC.
By: __________________________ Accepted this ___ day
Name: ____________________ of _________, 1996.
Title: ___________________
<PAGE> 26
To: LEAR CORPORATION CANADA LTD. AND Page 26
ALL AUTOMOTIVE INDUSTRIES CANADA, INC.
By: __________________________
Name: ____________________
Title: ___________________
<PAGE> 27
SCHEDULE "A"
DOCUMENTARY INSTRUMENTS
This Schedule is part of the letter loan agreement (the "Agreement") dated
as of July 11, 1996, among The Bank of Nova Scotia (the "Bank"), Lear
Corporation Canada Ltd. (the "Applicant") and AII Automotive Industries Canada,
Inc. Canadian and U.S. dollar denominated commercial and standby letters of
credit and letters of guarantee (each a "Documentary Instrument"), up to a
maximum aggregate amount outstanding at any time not exceeding $2,000,000 Cdn.,
shall be Availments which may be obtained by the Applicant under the Revolving
Term Credit referred to in the Agreement, provided that each Documentary
Instrument shall be in form satisfactory to the Bank and have a term to expiry
of not more than 365 days and further provided that the issuance thereof will
not contravene any law, regulation or order applicable to such Documentary
Instrument in any jurisdiction. Each Commercial Documentary Instrument shall
be issued subject to the additional terms set forth in Schedule "B" attached
hereto. All other capitalized terms not defined herein shall have the
respective meanings given to them in the Agreement.
IN CONSIDERATION of the Bank issuing each Documentary Instrument, the
Applicant hereby agrees as follows:
1. The availability of the Credit shall be reduced by the face amount of
each Documentary Instrument for and during the period of time that the Bank has
a contingent liability thereunder. The Applicant shall pay, upon issuance of
each Documentary Instrument, a per annum fee fluctuating in accordance with the
applicable Pricing Level as follows:
Pricing Issuance Fee
Level Per Annum (%)
------- -------------
Level 1 0.75
Level 2 0.625
Level 3 0.50
Level 4 0.25
In each case, such fee shall be calculated in each case on the face amount of
such Documentary Instrument for the actual number of days to elapse, based upon
a year of 365 days, from and including the date of issuance thereof to the
applicable date of expiry. The issuance fee shall be recalculated each time a
particular Documentary Instrument is reduced and the Bank will refund to the
Applicant any unearned issuance fee as a result of reductions in or
cancellations or as a result of a change in the Pricing Level of the particular
Documentary Instrument from the date of recalculation hereunder, provided that
in no event shall the minimum issuance fee paid in respect of the particular
Documentary Instrument be less than the greater of $100 Cdn. or U.S., as
applicable, or 1/4 of 1% per annum of the face amount of the Documentary
Instrument issued or renewed. Each
<PAGE> 28
-2-
Documentary Instrument may be converted to another Availment, but only on the
expiry or cancellation of such Documentary Instrument. All drafts, bills of
exchange, receipts, acceptances, demands and other requests for payment drawn
or issued under a Documentary Instrument (any such instrument being a "Draft")
and all other amounts paid by the Bank under or in connection with any
Documentary Instrument shall constitute under the Credit a Prime Rate Advance
to the extent that such amounts are in Canadian dollars and a Base Rate Advance
to the extent that such amounts are in U.S. dollars.
2. The Applicant shall pay to the Bank all of the Bank's contingent
liability in respect of (I) any Documentary Instrument outstanding upon any
termination of the Credit, and (ii) any Documentary Instrument which becomes
the subject matter of any order, judgment, injunction or other such
determination (an "Order"), or any petition or other application for any Order
by the Applicant or any other party, restricting payment by the Bank under and
in accordance with such Documentary Instrument or extending the Bank's
liability under such Documentary Instrument beyond the expiration date stated
therein, provided that payment in respect of each such Documentary Instrument
shall be due forthwith upon demand and in the currency in which such
Documentary Instrument is denominated (the "Instrument Currency"); provided
that, subject to the provisions of paragraph (3) of the section below captioned
COVENANTS (Covenants of Lear Canada and Automotive Industries), no such payment
shall be required to be made by the Applicant with respect to any Documentary
Instrument prior to its date of expiry if such Documentary Instrument is
outstanding at the time of the Applicant's receipt of any notice of repayment
given by the Bank to the Applicant in accordance with the aforesaid paragraph
(3) of the section of the Agreement captioned COVENANTS.
3. The Bank hereby agrees that it will, with respect to each Documentary
Instrument subjected to any such demand for payment under the preceding
section, upon the later of:
(a) the date on which any final and non-appealable order, judgment or other
such determination has been rendered or issued either terminating any
applicable Order, or permanently enjoining the Bank from paying under such
Documentary Instrument; and
(b) the earlier of:
(I) the date on which either the original counterpart of such
Documentary Instrument is returned to the Bank for cancellation or the
Bank is released by the beneficiary thereof from any further
obligations in respect of such Documentary Instrument; and,
(ii) the expiry of such Documentary Instrument;
pay to the Applicant an amount in the applicable Instrument Currency equal to
any excess of the amount received by the Bank hereunder in respect of the
Bank's contingent liability under such Documentary Instrument (the "Received
Amount") over the equivalent in such Instrument Currency of the total of
amounts applied to reimburse the Bank for amounts paid by it under or in
connection with such Documentary Instrument (the Bank having the
right to so appropriate an aggregate sum equal to the amounts paid by it under
the applicable Documentary Instrument), together with an additional amount in
such
<PAGE> 29
-3-
Instrument Currency computed by applying a per annum rate as set out below
to the amount of such excess from time to time. The applicable per annum rate
shall equal 3% per annum less than the Prime Lending Rate, if the applicable
Documentary Instrument is denominated in Canadian dollars or 3% less than the
Bank's Base Rate Canada, if the applicable Documentary Instrument is
denominated in U.S. dollars. Such additional amount shall be calculated daily
on the basis of a 365 day year for the actual number of days elapsed from and
including the date of payment to the Bank of the Received Amount to (but not
including) the date of return to the Applicant of the excess.
4. Amounts not paid when due hereunder shall, for the purposes of the
Agreement, be deemed to be amounts not paid when due for Prime Rate Advances if
in respect of Canadian dollars and Base Rate Advances if in respect of U.S.
dollars.
5. The obligations of the Applicant hereunder shall be absolute,
unconditional and irrevocable and shall not be reduced by any event or
occurrence including, without limitation, any lack of validity or
enforceability of a Documentary Instrument, or any Draft paid or acted upon by
the Bank or any of its correspondents being fraudulent, forged, invalid or
insufficient in any respect, or any claims which the Applicant may have against
any beneficiary or transferee of any Documentary Instrument; provided that the
Bank shall indemnify the Applicant for any cost, expense or other liability
resulting from the Bank's negligence or wilful misconduct. The obligations of
the Applicant hereunder shall remain in full force and effect and shall apply
to any alteration to or extension of the expiration date of any Documentary
Instrument or any standby letter of credit issued to replace, extend or alter
any Documentary Instrument.
6. Any action, inaction or omission taken or suffered by the Bank or any
of the Bank's correspondents under or in connection with a Documentary
Instrument or any Draft made thereunder, if in good faith and in conformity
with foreign or domestic laws, regulations or customs applicable thereto shall
be binding upon the Applicant and shall not place the Bank or any of its
correspondents under any resulting liability to the Applicant. Without
limiting the generality of the foregoing, the Bank and its correspondents may
receive, accept or pay as complying with the terms of a Documentary Instrument,
any Draft thereunder, otherwise in order which may be signed by, or issued to,
the administrator or any executor of, or the trustee in bankruptcy of, or the
receiver for any property of, or other person or entity acting as the
representative or in the place of, such beneficiary or its successors and
assigns. The Applicant covenants that it will not take any steps against the
Bank or any of its correspondents, issue any instructions to the Bank or any of
its correspondents or institute any proceedings against the Bank or any of its
correspondents intended to derogate from the right or ability of the Bank or
its correspondents to honour and pay any Draft or Drafts.
7. The Applicant agrees to pay, upon 10 days' prior written notice
thereof, all reasonable costs and expenses of the Bank incurred in the
enforcement of the Bank's rights under this Agreement and, further, will
indemnify the Bank on demand against all loss or damage to the Bank arising out
of the issuance of or other action taken by the Bank in connection with any
Documentary Instrument including, without limitation, the costs relating to any
legal process instituted by any party restraining or seeking to restrain the
Bank from accepting or paying any Draft; provided that the Bank shall have
delivered to
<PAGE> 30
-4-
the Applicant a certificate setting forth in reasonable detail all such costs,
expenses or damages. The Applicant also agrees that the Bank shall have no
liability to it for any reason in respect of the issuance or payment of or
under any Documentary Instrument other than on account of the Bank's negligence
or wilful misconduct. All payments to be made to the Bank hereunder shall be
made for value on the date due and free of any withholding tax or levy, other
than taxes imposed on the net income of the Bank, and such taxes or levies,
other than as excepted, shall be paid by the Applicant. The provisions of this
paragraph will survive payment in full hereunder.
8. This Schedule and Schedule "B" shall be binding upon the Applicant,
its successors and assigns and shall enure to the benefit of the Bank, its
successors, transferees and assigns. Any provision of this Schedule and any
provision of Schedule "B" which is void or unenforceable shall be ineffective
to the extent void or unenforceable and shall be severable from the other
provisions of the applicable Schedule and this Schedule and Schedule "B" shall
be interpreted as if such provision were not included in Schedule "A" or
Schedule "B", as applicable. Time and the currency of payment hereunder shall
be deemed to be of the essence hereof. None of the terms of this Schedule or
of Schedule "B" shall be amended except in writing signed by the Bank and the
Applicant and any waiver by the Bank shall not constitute any further waiver.
The Uniform Customs and Practice for Documentary Credits as most recently
published by the International Chamber of Commerce (the "UCP") shall in all
respects apply to each standby or commercial letter of credit and shall be
deemed for such purpose to be a part hereof as if fully incorporated herein.
In the event of any conflict between the UCP and the governing law of the
Agreement, the UCP shall prevail to the extent necessary to remove the
conflict.
<PAGE> 31
SCHEDULE "B"
COMMERCIAL DOCUMENTARY INSTRUMENTS
This Schedule is part of the letter loan agreement (the "Agreement") dated
as of July 11, 1996, among The Bank of Nova Scotia (the "Bank"), Lear
Corporation Canada Ltd. (the "Applicant") and Automotive Industries Canada,
Inc. Canadian and U.S. dollar denominated commercial letters of credit (each a
"Commercial Documentary Instrument") shall be Availments which may be obtained
under the Revolving Term Credit referred to in the Agreement, provided that
each Commercial Documentary Instrument shall be in form satisfactory to the
Bank and have a term to expiry of not more than 365 days and further provided
that the issuance thereof will not contravene any laws, regulations or orders
applicable to such Documentary Instrument in any jurisdiction. All other
capitalized terms not defined herein shall have the respective meanings given
to them in the Agreement.
IN CONSIDERATION of the issue by the Bank from time to time of one or more
Commercial Documentary Instruments prepared in accordance with an application
or applications which have been or will be entered into by the Applicant from
time to time during the term of the Agreement and in addition to the terms
contained in Schedule "A" hereto, the Applicant hereby agrees with the Bank as
follows:
1. If a Commercial Documentary Instrument does not specify the unit price
of the goods, wares and merchandise and other commodities which may be
purchased or shipped under or by virtue of such Commercial Documentary
Instrument (the "Goods") and does not state that partial shipments are not
permitted, the Bank shall be entitled to be paid the full amount of any Draft
honoured in respect of a partial shipment notwithstanding that it is for an
amount that is disproportionate to the relative partial shipment.
2. All users of a Commercial Documentary Instrument shall be deemed to be
agents of the Applicant and neither the Bank nor its agents or correspondents
shall be responsible for the negligence or fraudulence of any user of a
Commercial Documentary Instrument, for the existence, nature, condition,
description, value, quality or quantity of the Goods, for the packing,
shipment, export, import, handling, storage or delivery thereof, or for the
safety or preservation thereof at any time, and neither the Bank nor its agents
or correspondents shall be liable for any loss resulting from the total or
partial destruction of or damage to or deterioration or fall in value of the
Goods, or from the delay in arrival or failure to arrive of either the Goods or
of any of the documents relating thereto, or from the inadequacy or invalidity
of any document or insurance, or from the default or insolvency of any insurer,
carrier or other person issuing any document with respect to the Goods, or from
failure to give or delay in giving notice of arrival of the Goods or any other
notice, or from any error in or misinterpretation of or default or delay in the
sending, transmission, arrival or delivery of any message, whether in cipher or
not, by post, telegraph, cable, wireless or otherwise, and the obligations
hereunder of the Applicant to the Bank shall not be in any way lessened or
affected if any Draft or document accepted, paid or acted upon by the Bank or
its agents or correspondents does not bear a reference or sufficient reference
to a Commercial Documentary Instrument or if no note thereof is made on a
Commercial Documentary Instrument.
<PAGE> 32
To: LEAR CORPORATION CANADA LTD. AND Page 24
AII AUTOMOTIVE INDUSTRIES CANADA, INC.
Please indicate your acceptance of this Agreement by signing and returning to
the Bank the enclosed duplicate copy of this letter, together with Schedules "A
and "B" hereto, on or before July 11, 1996, failing which the provisions hereof
shall be of no force or effect. By its execution hereof, Lear Canada also
acknowledges, agrees and confirms to the Bank that, without limitation, it is
and shall continue to be indebted or liable to the Bank, as the case may be, for
the amount(s) as properly recorded in the loan account for the predecessor
agreement hereto dated April 19, 1995 which were incurred under or in connection
with that agreement, and that all amounts so recorded shall constitute
indebtedness and liability outstanding under this Agreement, to be discharged in
accordance with the provisions hereof.
Yours truly,
THE BANK OF NOVA SCOTIA
By: B.J. Evans
----------------------
B.J. Evans
By: P.D. McNeill
----------------------
P.D. McNeill
LEAR CORPORATION CANADA LTD.
By: [sig]
--------------------------------
Name: ACCEPTED THIS ___ DAY
------------------------- OF ________, 1996.
Title:
------------------------
By:
--------------------------------
Name:
-------------------------
Title:
------------------------
AII AUTOMOTIVE INDUSTRIES CANADA, INC.
By:
--------------------------------
Name: ACCEPTED THIS ___ DAY
------------------------- OF ________, 1996.
Title:
------------------------
<PAGE> 1
EXHIBIT 10.6
March 20, 1995
Mr. Terrence E. O'Rourke
5181 Village Road
Saline, MI 48176
Dear Mr. O'Rourke:
Lear Seating Corporation (the "Company") considers it essential to its
best interest and the best interests of its stockholders to foster the
continuous employment of key management personnel.
The Board of Directors of the Company (the "Board") has determined
that appropriate steps should be taken to reinforce and encourage the continued
attention and dedication of members of the Company's management, including
yourself, to their assigned duties. In order to induce you to remain in the
employ of the Company, and in consideration of your agreement to the
termination of any existing employment contract you may have with the Company
or any predecessor; the Company agrees that you shall receive, upon the terms
and conditions set forth herein, the compensation and benefits set forth in
this letter agreement ("Agreement") during the Term hereof.
1. Term of Agreement. This Agreement shall commence as of the
Effective Date (as defined on the signature page hereof) and shall continue in
effect until the second anniversary of such date (the "Term"). The Term may be
extended pursuant to paragraph 12, hereafter.
2. Terms of Employment. During the Term, you agree to be a
full-time employee of the Company serving in the position of President --
Chrysler Division of the Company and to devote substantially all of your
working time and attention to the business and affairs of the Company and, to
the extent necessary to discharge the responsibilities associated with your
position as President -- Chrysler Division of the Company, to use your best
efforts to perform faithfully and efficiently such responsibilities. In
addition, you agree to serve in such other capacities or offices to which you
may be assigned, appointed or elected from time to time by the Board. Nothing
herein shall prohibit you from devoting your time to civic and community
activities, serving as a member of the Board of Directors of other corporations
who do not compete with the Company (provided that you have received prior
written approval from the Company's Chairman), or managing personal
investments, as long as the foregoing do not interfere with the performance of
your duties hereunder.
<PAGE> 2
3. Compensation.
(i) As compensation for your services, under this
Agreement, you shall be entitled to receive an initial base
salary of $275,000 per annum, to be paid in accordance with
existing payroll practices for executives of the Company.
Increases in your base salary, if any, shall be determined by
the Compensation Committee of the Board of Directors. In
addition, you shall be eligible to receive an annual incentive
compensation bonus ("Bonus") to be determined from time to
time by the Compensation Committee of the Board of Directors
of the Company.
(ii) In addition to compensation provided for in
Subsection (i) of this Section 3, the Company agrees (A) to
provide the same or comparable benefits with respect to any
compensation or benefit plan in which you participate as of
the Effective Date which is material to your total
compensation, unless an equitable arrangement (embodied in an
ongoing substitute or alternative plan) has been made with
respect to such plan; and (B) to maintain your ability to
participate therein (or in such substitute or alternative
plan) on a basis not materially less favorable, both in terms
of the opportunities provided and the level of your
participation relative to other participants, than exists on
the Effective Date.
(iii) The Company shall reimburse you for all reasonable
travel, entertainment and other business expenses incurred by
you in the performance of your responsibilities under this
Agreement promptly upon receipt of written substantiation of
such expenses. You shall also be paid all additional amounts
necessary to discharge all federal and state tax liabilities
incurred by you that are attributable to all deemed
compensation arising as a consequence of your personal use of
property owned or leased by the Company, excepting only your
personal use of any Company aircraft, including federal and
state taxes assessed against such additional compensation.
(iv) You shall be entitled to perquisites available to
all other executives of the Company and shall be entitled to
four weeks of vacation per year.
4. Termination of Employment. Your employment may be terminated
by either the Company or you by giving a Notice of Termination, as defined in
Subsection (iv) of this Section 4. If your employment should terminate during
the Term, your entitlement to benefits shall be determined in accordance with
Section 5 hereof.
(i) Disability. If, as a result of your incapacity
due to physical or mental illness, you are unable to perform
your duties hereunder for more than six consecutive months or
six months aggregate during any twelve month period, your
employment may be terminated for "Disability".
(ii) Cause. Termination of your employment for "Cause"
shall mean termination
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<PAGE> 3
upon (A) the willful and continued failure by you to
substantially perform your duties with the Company (other than
any such failure resulting from your Disability), (B) the
engaging by you in conduct which is significantly injurious to
the Company, monetarily or otherwise, (C) your conviction of a
felony, (D) your abuse of illegal drugs or other controlled
substances or your habitual intoxication, or (E) the breach of
any of your material obligations hereunder including without
limitation any breach of Section 9 or 10 hereof. For purposes
of this Subsection, no act or failure to act, on your part
shall be deemed "willful" unless knowingly done, or omitted to
be done, by you not in good faith and without reasonable
belief that your action or omission was in the best interest
of the Company.
(iii) Good Reason. For purposes of this Agreement,
"Good Reason" shall mean the occurrence, without your express
written consent, of any of the following circumstances unless
such circumstances are fully corrected prior to the Date of
Termination specified in the Notice of Termination, as such
terms are defined in Subsections (v) and (iv) of this Section
4, respectively, given in respect thereof:
(A) The permanent assignment to you of any
duties inconsistent with your status as an
executive officer of the Company, your physical
relocation on a permanent basis to an area outside
of the metropolitan Detroit area, a substantial
adverse alteration in the nature or status of
your responsibilities from those in effect
immediately prior to such assignment of duties,
your removal from any office specified in Section
2 hereof;
(B) Any reduction by the Company in your base
salary as in effect from time to time, except for
across-the- board salary reductions similarly
affecting all executive officers of the Company;
(C) The failure by the Company to pay or
provide to you within seven (7) days of receipt by
the Company of your written demand any amounts of
base salary or Bonus or any benefits which are
due, owing and payable to you pursuant to the
terms hereof, except pursuant to an
across-the-board compensation deferral similarly
affecting all executive officers, or to pay to you
any portion of an installment of deferred
compensation due under any deferred compensation
program of the Company;
(D) Except in the case of across-the-board
reductions, deferrals or eliminations similarly
affecting all executive officers of the Company,
the failure by the Company to (i) continue in
effect any compensation plan in which you
participate which is material to your total
compensation, including but not limited to the
Company's plans currently in effect or hereafter
adopted, and any plans adopted in substitution
therefore, or (ii) continue to provide you with
benefits substantially similar, in aggregate, to
the Company's life insurance, medical, dental,
health, accident or disability plans
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<PAGE> 4
in which you are participating at the date of this
Agreement; or
(E) The failure of the Company to obtain a
satisfactory agreement from any successor to
assume and agree to perform this Agreement, as
contemplated in Section 7 hereof.
Your continued employment with the Company shall
not constitute consent to, or a waiver of rights with respect
to, any circumstance constituting Good Reason hereunder.
(iv) Notice of Termination. Any termination of your
employment by the Company or by you shall be communicated by
written Notice of Termination to the other party hereto in
accordance with Section 8 hereof. For purposes of this
Agreement, a "Notice of Termination" shall mean a notice which
shall indicate the specific termination provision in this
agreement relied upon, if any, and shall set forth in
reasonable detail the facts and circumstances claimed to
provide a basis for termination of your employment under the
provision so indicated.
(v) Date of Termination, Etc. "Date of Termination"
shall mean (A) if your employment is terminated for Disability
pursuant to Subsection (i) of this Section 4, thirty (30) days
after Notice of Termination is given (provided that you shall
not have returned to the full-time performance of your duties
during such thirty (30) day period), (B) if your employment is
terminated by reason of your death, the date of your death,
(C) if by you for Good Reason or by either party for any other
reason (other than Disability, death, or your voluntary
resignation without Good Reason), the date specified in the
Notice of Termination (which, in the case of a termination by
you for Good Reason, shall not be less than thirty (30) nor
more than sixty (60) days from the date such Notice of
Termination is given), and (D) if your employment is
terminated by your voluntary resignation without Good Reason
(as defined in Subsection (iii) of this Section 4), the Date
of Termination shall be forty- five (45) days from the date
such Notice of Termination is given or such other date as may
be identified by the Company. Unless the Company instructs
you not to do so, you shall continue to perform services as
provided in this Agreement through the Date of Termination.
5. Compensation Upon Termination or During Disability. Upon
termination of your employment with the Company during the Term, you shall be
entitled to the following compensation and benefits:
(i) If your employment is terminated for Disability, you
shall receive until the end of the Term all compensation
payable to you under the Company's disability and
medical plans and programs, as in effect on the Date of
Termination plus an additional payment from the Company (if
necessary) such that the aggregate amount received by you in
the nature of salary continuation from all sources equals your
base
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<PAGE> 5
salary at the rate in effect on the Date of Termination.
After the end of the Term, your benefits shall be
determined under the Company's retirement, insurance and other
compensation programs then in effect in accordance with the
terms of such programs, provided that such terms shall not be
less advantageous to you than the terms of such programs in
effect as of the Effective Date.
(ii) If your employment shall be terminated (A) by the
Company for Cause, or (B) by you other than for Good Reason,
the Company shall pay you your full base salary through
the Date of Termination, at the rate in effect at the time
Notice of Termination is given, plus all other amounts to
which you are entitled under any compensation or benefit plans
of the Company at the time such payments are due, and the
Company shall have no further obligations to you under this
Agreement. Provided, however, that if your employment is
terminated by your voluntary resignation without Good Reason,
you shall be compensated per this Paragraph only to the extent
that you actively performed your assigned responsibilities
through the Date of Termination.
(iii) If your employment shall be terminated by reason
of your death, the Company shall pay your estate or designated
beneficiary (as designated by you by written notice to
the Company, which designation shall remain in effect for the
remainder of the Term and any extensions thereof until revoked
or a new beneficiary is designated, in either case by written
notice to the Company) your full base salary through the Date
of Termination and for a period of 12 whole calendar months
thereafter plus, if the Date of Termination shall not occur on
the first day of a calendar month, the balance of the month in
which the Date of Termination occurs, at the rate in effect at
the time of your death, plus any Bonus earned, prorated for
the portion of the Bonus measurement period occurring prior to
the date of your death, plus all other amounts to which you
are entitled under any compensation or benefit plans of the
Company at the date of your death, and the Company shall have
no further obligation to you, your beneficiaries or your
estate under this Agreement.
(iv) If your employment shall be terminated (a) by the
Company other than for Cause or Disability or (b) by
you for Good Reason, then you shall be entitled to the
benefits provided below:
(A) The Company shall pay you your full base
salary through the Date of Termination at the rate
in effect at the time Notice of Termination
is given (or, if greater, at the rate in effect 30
days prior to the time Notice of Termination is
given), plus all other amounts to which you are
entitled under any compensation or benefit plans
of the Company, including without limitation, any
Bonus measurement period occurring prior to the
Date of Termination, at the time such payments are
due, except as otherwise provided below;
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<PAGE> 6
(B) in lieu of any further salary payment to
you for periods subsequent to the Date of
Termination, the Company shall pay to you your
full base salary at the rate in effect immediately
prior to the time Notice of Termination is given
(or, if greater, at the rate in effect 30 days
prior to the time Notice of Termination is given),
payable periodically in accordance with past
payroll practices, until the end of the Term;
(C) in lieu of any further Bonus payments to
you for periods subsequent to the Date of
Termination, the Company shall pay to you a
Bonus payable in each March following the Date of
Termination in respect of the previous plan fiscal
year equal to the quotient obtained by aggregating
the Bonuses received by you in respect of the two
plan fiscal years ending prior to the Date of
Termination (the "Bonus Period") and dividing such
sum by two. Such Bonus shall be paid in respect of
each plan fiscal year or portion thereof ending
after the Date of Termination until the end of the
Term, and shall be prorated for partial years, if
any, including without limitation the portion of
the calendar year occurring after the Date of
Termination and the final plan fiscal year in
respect of which any such March Bonus is payable
pursuant to this Section 5(iv)(C). Provided,
however, that the amount of bonus to be paid
pursuant to this Paragraph shall not be greater
than the amount of bonus that would have been paid
in accordance with Bonus Plans, existing from time
to time, had your employment not been terminated;
(D) until the end of the Term, you will
continue to participate in all other compensation
and benefit plans (including perquisites) in
which you were participating immediately prior to
the time Notice of Termination is given, or
comparable plans substituted therefor; provided,
however, that if you are ineligible, (e.g., by
operation of law or the terms of the applicable
plan to continue to participate in any such plan)
the Company will provide you with a comparable
level of compensation or benefits;
(E) the Company shall also pay to you all
reasonable legal fees and expenses incurred by you
in contesting or disputing any such termination or
in seeking to obtain or enforce any right or
benefit provided by this Agreement if such
termination is determined by arbitration to have
been for Good Reason or other than Cause or
Disability; and
(F) if you should die after the Date of
Termination and prior to the end of the period of
payment provided for in paragraphs (B), (C), and
(D) hereof, the Company shall pay your estate or
your designated beneficiary any amounts that are
or become payable pursuant to any of such
paragraphs until the end of the Term.
(v) You shall be required to mitigate the amount of
any payment provided for in
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<PAGE> 7
subsection (iv) of this Section 5 by seeking and accepting, if
offered, other comparable employment, taking into
consideration the provisions of Section 9 of this Agreement,
and the amount of any payment provided for in this Section 5
shall be reduced by any compensation earned by you during the
remainder of the Term as the result of your employment
by another employer, or offset against any amount owed by you
to the Company or as otherwise receivable by you pursuant to
Subsection 5(iv)(D) shall be reduced to the extent a
comparable benefit of the same type was made available to you
during the applicable period of benefit continuation set forth
in such Subsection. Any compensation and benefits actually
received by you shall be promptly reported to the Company.
(vi) In addition to all other amounts payable to you
under this Section 5, you shall be entitled to receive all
benefits payable to you pursuant to the terms of any plan or
agreement of the Company relating to retirement benefits.
6. Travel. You shall be required to travel to the extent
necessary for the performance of your responsibilities under this Agreement.
7. Successors; Binding Agreement. The Company will, by Agreement
in form and substance satisfactory to you, require any successor (whether
direct or indirect, by purchase merger, consolidation or otherwise) to all or
substantially all the business and/or assets of the Company, to expressly
assume and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. Failure of the Company to obtain such assumption and
agreement prior to the effectiveness of any such succession shall entitle you
to compensation from the Company in the same amount and on the same terms as
you would be entitled to hereunder if you terminate your employment for Good
Reason, except that for purposes of implementing the foregoing, the date on
which any such succession becomes effective shall be deemed the Date of
Termination. As used in this Agreement, "Company" shall mean the Company as
herein before defined and any successor to its business and/or assets as
aforesaid which assumes and agrees to perform this Agreement by operation of
law, or otherwise.
8. Notices. For the purpose of this Agreement, notices and all
other communications provided for in the Agreement shall be in writing and
shall be deemed to have been duly given when delivered or mailed by United
States certified mail, return receipt requested, postage prepaid, addressed to
the respective addresses set forth on the first page of this Agreement,
provided that all notices to the Company shall be directed to the attention of
the Secretary of the Company (or, if you are the Secretary at the time such
notice is to be given, to the Company's Board of Directors), or to such other
address as either party may have furnished to the other in writing in
accordance herewith, except that notice of change of address shall be effective
only upon receipt.
9. Noncompetition.
(i) Until the Date of Termination, you agree not to
enter into competitive endeavors and not to undertake any
commercial activity which is contrary to the best
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<PAGE> 8
interests of the Company or its affiliates, including becoming
an employee, owner (except for passive investments of not
more than one percent of the outstanding shares of, or any
other equity interest in, any company or entity listed or
traded on a national securities exchange or in an
over-the-counter securities market), officer, consultant,
agent or director of any firm or person which either directly
competes with a line or lines of business of the Company
accounting for ten percent (10%) or more of the Company's
gross sales, revenues or earnings before taxes or derives ten
percent (10%) or more of such firm's or person's gross sales,
revenues or earnings before taxes from a line or lines of
business which directly compete with the Company.
Notwithstanding any provision of this Agreement to the
contrary, you agree that your breach of the provisions of this
Section 9(i) shall permit the Company to terminate your
employment for Cause.
(ii) If you are terminated for Cause, until the later
of one year after the Date of Termination and during any
period that you continue to be paid your salary (including any
other payments in lieu of salary) pursuant to Section 5 hereof
and for one year thereafter, or if you resign or are
terminated other than for Cause, until the later of the Date
of Termination and during any period that you continue to be
paid your salary (including any other payment in lieu of
salary) pursuant to Section 5 hereof, you agree not to become
an employee, owner (except for passive investments of not more
than one percent of the outstanding shares of, or any other
equity interest in, any company or entity listed or traded on
a national securities exchange or in an over-the-counter
securities market), consultant, officer, agent or director of
any firm or person which directly competes with a business of
the Company producing any class of products accounting for ten
percent (10%) or more of the Company's gross sales, revenues
or earnings before taxes. During the period of payment
provided in Section 5 hereof, you will be available,
consistent with other responsibilities that you may then have,
to answer questions and provide advice to the Company.
Notwithstanding anything in this Agreement to the contrary,
you agree that, from and after any breach by you of the
provisions of this Section 9(ii), the Company shall cease to
have any obligations to make payments to you under this
Agreement.
(iii) If you are terminated for Cause, until the later
of one year after the Date of Termination and during any
period that you continue to be paid your salary (including any
other payments in lieu of salary) pursuant to Section 5 hereof
and for one year thereafter, or if you resign or are
terminated other than for Cause, until the later of the Date
of Termination and during any period that you continue to be
paid your salary (including any other payment in lieu of
salary) pursuant to Section 5 hereof, you shall not directly
or indirectly, either on your own account or with or for
anyone else, (A) solicit or attempt to solicit any of the
Company's customers (B) solicit or attempt to solicit for any
business endeavor any employee of the Company or (C) otherwise
divert or attempt to divert from the Company any business
whatsoever or interfere with any business relationship between
the Company and any other person.
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<PAGE> 9
(iv) You acknowledge and agree that damages for breach
of the covenant not to compete in this Section 9 will be
difficult to determine and will not afford a full and adequate
remedy, and therefore agree that the Company, in addition to
seeking actual damages pursuant to Section 11 hereof, may seek
specific enforcement of the covenant not to compete in any
court of competent jurisdiction, including, without
limitation, by the issuance of a temporary or permanent
injunction, without the necessity of a bond. You and the
Company agree that the provisions of this covenant not to
compete are reasonable. However, should any court or
arbitrator determine that any provision of this covenant not
to compete is unreasonable, either in period of time,
geographical area, or otherwise, the parties agree that this
covenant not to compete should be interpreted and enforced to
the maximum extent which such court or arbitrator deems
reasonable.
10. Confidentiality.
(i) You shall not knowingly use, disclose or reveal to
any unauthorized person, during or after the Term, any trade
secret or other confidential information relating to the
Company or any of its affiliates, or any of their respective
businesses or principals, such as, without limitation,
dealers' or distributor's lists, information regarding
personnel and manufacturing processes, marketing and sales
plans, and all other such information; and you confirm that
such information is the exclusive property of the Company and
its affiliates. Upon termination of your employment, you
agree to return to the Company on demand of the Company all
memoranda, books, papers, letters and other data, and all
copies thereof or therefrom, in any way relating to the
business of the Company and its affiliates, whether made by
you or otherwise in your possession.
(ii) Any ideas, processes, characters, productions,
schemes, titles, names, formats, adaptations, plots, slogans,
catchwords, incidents, treatment, and dialogue which you may
conceive, create, organize, prepare or produce during the
period of your employment and which ideas, processes, etc.
relate to any of the businesses of the Company, shall be owned
by the Company and its affiliates whether or not you should in
fact execute an assignment thereof or other instrument or
document which may be reasonably necessary to protect and
secure such rights to the Company.
(iii) Notwithstanding anything in this Agreement to the
contrary, you agree that from and after any breach by you of
the provisions of this Section 10 during any period of payment
provided in Section 5 hereof, the Company shall cease to have
any obligations to make payments to you under this Agreement.
11. Arbitration.
(i) Except as contemplated by Section 9 (iii), Section
9, (iv), and Section 11 (iii) hereof, any dispute or
controversy arising under or in connection with this
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<PAGE> 10
Agreement that cannot be mutually resolved by the parties to
this Agreement and their respective advisors and
representatives shall be settled exclusively by arbitration in
Southfield, Michigan before one arbitrator of exemplary
qualifications and stature, who shall be selected jointly by
an individual to be designated by the Company and an
individual to be selected by you, or if such two individuals
cannot agree on the selection of the arbitrator, who shall be
selected pursuant to the procedures of the American
Arbitration Association.
(ii) The parties agree to use their best efforts to
cause (a) the two individuals set forth in the preceding
Section 11 (i), or, if applicable, the American Arbitration
Association, to appoint the arbitrator within 30 days of the
date that a party hereto notifies the other party that a
dispute or controversy exists that necessitates the
appointment of an arbitrator, and (b) any arbitration hearing
to be held within 30 days of the date of selection of the
arbitrator, and, as a condition to his or her selection, such
arbitrator must consent to be available for a hearing at such
time.
(iii) Judgment may be entered on the arbitrator's award
in any court having jurisdiction, provided that you shall be
entitled to seek specific performance of your right to be paid
and to participate in benefit programs during the pendency of
any dispute or controversy arising under or in connection
with this Agreement. The Company and you hereby agree that
the arbitrator shall be empowered to enter an equitable decree
mandating specific performance of the terms of this Agreement.
(iv) If you prevail in full or in substantial part, the
Company shall bear all expenses of the arbitrator incurred in
any arbitration hereunder. The Company agrees to pay your
reasonable and documented legal fees and expenses in
connection with any arbitration hereunder if you prevail in
full or in substantial part.
12. Extension of Term. The Term of this Agreement shall be
automatically extended for a period of one year on each anniversary of the
Effective Date of this Agreement. There shall be no renewal of the Term after
the Date of Termination.
13. Modifications. No provision of this Agreement may be
modified, amended, waived or discharged unless such modification, amendment,
waiver or discharge is agreed to in writing and signed by both you and such
officer of the Company as may be specifically designated by the Board.
14. No Implied Waivers. Failure of either party at any time to
require performance by the other party of any provision hereof shall in no way
affect the full right to require such performance at any time thereafter.
Waiver by either party of a breach of any obligation hereunder shall not
constitute a waiver of any succeeding breach of the same obligation. Failure
of either party to exercise any of its rights provided herein shall not
constitute a waiver of such right.
15. Governing Law. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the State of
Michigan.
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16. Payments Net of Taxes. Any payments provided for herein which
are subject to Federal, State or local tax or other withholding requirements,
shall have such amounts withheld prior to payment.
17. Survival of Obligations. The obligations of the Company under
Section 5(iii) and your obligations under Sections 9 and 10 hereof shall
survive the expiration of the Term of this Agreement.
18. Capacity of Parties. The parties hereto warrant that they
have the capacity and authority to execute this Agreement.
19. Validity. The invalidity or unenforceability of any provision
of this Agreement shall not affect the validity or enforceability of any other
provision of the Agreement, which shall remain in full force and effect.
20. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
21. Entire Agreement. This Agreement and any attachments hereto,
contain the entire agreement by the parties with respect to the matters covered
herein and supersedes any prior agreement (including without limitation any
prior employment agreement), condition, practice, custom, usage and obligation
with respect to such matters insofar as any such prior agreement, condition,
practice, custom, usage or obligation might have given rise to any enforceable
right. No agreements, understandings or representations, oral or otherwise,
express or implied, with respect to the subject matter hereof have been made by
either party which are not expressly set forth in this Agreement.
If this letter sets forth our agreement on the subject matter hereof,
kindly sign and return to the Company the enclosed copy of this letter which
will then constitute our agreement on this subject, effective on March 20,
1995 ("Effective Date").
Sincerely,
LEAR SEATING CORPORATION
BY:/s/ Joseph F. McCarthy
----------------------
Vice President and Secretary
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Agreed to this 20th day of March, 1995
BY: /s/ Terrence E. O'Rourke
-------------------------
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<PAGE> 1
EXHIBIT 10.7
March 20, 1995
Mr. Gerald G. Harris
6698 Emerald Lake Drive
Troy, MI 48098
Dear Mr. Harris:
Lear Seating Corporation (the "Company") considers it essential to its
best interest and the best interests of its stockholders to foster the
continuous employment of key management personnel.
The Board of Directors of the Company (the "Board") has determined
that appropriate steps should be taken to reinforce and encourage the continued
attention and dedication of members of the Company's management, including
yourself, to their assigned duties. In order to induce you to remain in the
employ of the Company, and in consideration of your agreement to the
termination of any existing employment contract you may have with the Company
or any predecessor; the Company agrees that you shall receive, upon the terms
and conditions set forth herein, the compensation and benefits set forth in
this letter agreement ("Agreement") during the Term hereof.
1. Term of Agreement. This Agreement shall commence as of the
Effective Date (as defined on the signature page hereof) and shall continue in
effect until the second anniversary of such date (the "Term"). The Term may be
extended pursuant to paragraph 12, hereafter.
2. Terms of Employment. During the Term, you agree to be a
full-time employee of the Company serving in the position of President - GM
Division of the Company and to devote substantially all of your working time
and attention to the business and affairs of the Company and, to the extent
necessary to discharge the responsibilities associated with your position as
President - GM Division of the Company, to use your best efforts to perform
faithfully and efficiently such responsibilities. In addition, you agree to
serve in such other capacities or offices to which you may be assigned,
appointed or elected from time to time by the Board. Nothing herein shall
prohibit you from devoting your time to civic and community activities, serving
as a member of the Board of Directors of other corporations who do not compete
with the Company (provided that you have received prior written approval from
the Company's Chairman), or managing personal investments, as long as the
foregoing do not interfere with the performance of your duties hereunder.
<PAGE> 2
3. Compensation.
(i) As compensation for your services, under this
Agreement, you shall be entitled to receive an initial base
salary of $275,000 per annum, to be paid in accordance with
existing payroll practices for executives of the Company.
Increases in your base salary, if any, shall be determined by
the Compensation Committee of the Board of Directors. In
addition, you shall be eligible to receive an annual incentive
compensation bonus ("Bonus") to be determined from time to
time by the Compensation Committee of the Board of Directors
of the Company.
(ii) In addition to compensation provided for in
Subsection (i) of this Section 3, the Company agrees (A) to
provide the same or comparable benefits with respect to any
compensation or benefit plan in which you participate as of
the Effective Date which is material to your total
compensation, unless an equitable arrangement (embodied in an
ongoing substitute or alternative plan) has been made with
respect to such plan; and (B) to maintain your ability to
participate therein (or in such substitute or alternative
plan) on a basis not materially less favorable, both in terms
of the opportunities provided and the level of your
participation relative to other participants, than exists on
the Effective Date.
(iii) The Company shall reimburse you for all reasonable
travel, entertainment and other business expenses incurred by
you in the performance of your responsibilities under this
Agreement promptly upon receipt of written substantiation of
such expenses. You shall also be paid all additional amounts
necessary to discharge all federal and state tax liabilities
incurred by you that are attributable to all deemed
compensation arising as a consequence of your personal use of
property owned or leased by the Company, excepting only your
personal use of any Company aircraft, including federal and
state taxes assessed against such additional compensation.
(iv) You shall be entitled to perquisites available to
all other executives of the Company and shall be entitled to
four weeks of vacation per year.
4. Termination of Employment. Your employment may be terminated
by either the Company or you by giving a Notice of Termination, as defined in
Subsection (iv) of this Section 4. If your employment should terminate during
the Term, your entitlement to benefits shall be determined in accordance with
Section 5 hereof.
(i) Disability. If, as a result of your incapacity
due to physical or mental illness, you are unable to perform
your duties hereunder for more than six consecutive months or
six months aggregate during any twelve month period, your
employment may be terminated for "Disability".
(ii) Cause. Termination of your employment for "Cause"
shall mean termination
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<PAGE> 3
upon (A) the willful and continued failure by you to
substantially perform your duties with the Company (other than
any such failure resulting from your Disability), (B) the
engaging by you in conduct which is significantly injurious to
the Company, monetarily or otherwise, (C) your conviction of a
felony, (D) your abuse of illegal drugs or other controlled
substances or your habitual intoxication, or (E) the breach of
any of your material obligations hereunder including without
limitation any breach of Section 9 or 10 hereof. For purposes
of this Subsection, no act or failure to act, on your part
shall be deemed "willful" unless knowingly done, or omitted to
be done, by you not in good faith and without reasonable
belief that your action or omission was in the best interest
of the Company.
(iii) Good Reason. For purposes of this Agreement,
"Good Reason" shall mean the occurrence, without your express
written consent, of any of the following circumstances unless
such circumstances are fully corrected prior to the Date of
Termination specified in the Notice of Termination, as such
terms are defined in Subsections (v) and (iv) of this Section
4, respectively, given in respect thereof:
(A) The permanent assignment to you of any
duties inconsistent with your status as an
executive officer of the Company, your physical
relocation on a permanent basis to an area outside
of the metropolitan Detroit area, a substantial
adverse alteration in the nature or status of
your responsibilities from those in effect
immediately prior to such assignment of duties,
your removal from any office specified in Section
2 hereof;
(B) Any reduction by the Company in your base
salary as in effect from time to time, except for
across-the-board salary reductions similarly
affecting all executive officers of the Company;
(C) The failure by the Company to pay or
provide to you within seven (7) days of receipt by
the Company of your written demand any amounts of
base salary or Bonus or any benefits which are
due, owing and payable to you pursuant to the
terms hereof, except pursuant to an
across-the-board compensation deferral similarly
affecting all executive officers, or to pay to you
any portion of an installment of deferred
compensation due under any deferred compensation
program of the Company;
(D) Except in the case of across-the-board
reductions, deferrals or eliminations similarly
affecting all executive officers of the Company,
the failure by the Company to (i) continue in
effect any compensation plan in which you
participate which is material to your total
compensation, including but not limited to the
Company's plans currently in effect or hereafter
adopted, and any plans adopted in substitution
therefore, or (ii) continue to provide you with
benefits substantially similar, in aggregate, to
the Company's life insurance, medical, dental,
health, accident or disability plans
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in which you are participating at the date of this
Agreement; or
(E) The failure of the Company to obtain a
satisfactory agreement from any successor to
assume and agree to perform this Agreement, as
contemplated in Section 7 hereof.
Your continued employment with the Company shall
not constitute consent to, or a waiver of rights with respect
to, any circumstance constituting Good Reason hereunder.
(iv) Notice of Termination. Any termination of your
employment by the Company or by you shall be communicated by
written Notice of Termination to the other party hereto in
accordance with Section 8 hereof. For purposes of this
Agreement, a "Notice of Termination" shall mean a notice which
shall indicate the specific termination provision in this
agreement relied upon, if any, and shall set forth in
reasonable detail the facts and circumstances claimed to
provide a basis for termination of your employment under the
provision so indicated.
(v) Date of Termination, Etc. "Date of Termination"
shall mean (A) if your employment is terminated for Disability
pursuant to Subsection (i) of this Section 4, thirty (30) days
after Notice of Termination is given (provided that you shall
not have returned to the full-time performance of your duties
during such thirty (30) day period), (B) if your employment is
terminated by reason of your death, the date of your death,
(C) if by you for Good Reason or by either party for any other
reason (other than Disability, death, or your voluntary
resignation without Good Reason), the date specified in the
Notice of Termination (which, in the case of a termination by
you for Good Reason, shall not be less than thirty (30) nor
more than sixty (60) days from the date such Notice of
Termination is given), and (D) if your employment is
terminated by your voluntary resignation without Good Reason
(as defined in Subsection (iii) of this Section 4), the Date
of Termination shall be forty-five (45) days from the date
such Notice of Termination is given or such other date as may
be identified by the Company. Unless the Company instructs
you not to do so, you shall continue to perform services as
provided in this Agreement through the Date of Termination.
5. Compensation Upon Termination or During Disability. Upon
termination of your employment with the Company during the Term, you shall be
entitled to the following compensation and benefits:
(i) If your employment is terminated for Disability,
you shall receive until the end of the Term all compensation
payable to you under the Company's disability and medical
plans and programs, as in effect on the Date of Termination
plus an additional payment from the Company (if necessary)
such that the aggregate amount received by you in the nature
of salary continuation from all sources equals your base
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salary at the rate in effect on the Date of Termination.
After the end of the Term, your benefits shall be determined
under the Company's retirement, insurance and other
compensation programs then in effect in accordance with the
terms of such programs, provided that such terms shall not be
less advantageous to you than the terms of such programs in
effect as of the Effective Date.
(ii) If your employment shall be terminated (A) by the
Company for Cause, or (B) by you other than for Good Reason,
the Company shall pay you your full base salary through the
Date of Termination, at the rate in effect at the time Notice
of Termination is given, plus all other amounts to which you
are entitled under any compensation or benefit plans of the
Company at the time such payments are due, and the Company
shall have no further obligations to you under this Agreement.
Provided, however, that if your employment is terminated by
your voluntary resignation without Good Reason, you shall be
compensated per this Paragraph only to the extent that you
actively performed your assigned responsibilities through the
Date of Termination.
(iii) If your employment shall be terminated by reason
of your death, the Company shall pay your estate or designated
beneficiary (as designated by you by written notice to the
Company, which designation shall remain in effect for the
remainder of the Term and any extensions thereof until revoked
or a new beneficiary is designated, in either case by written
notice to the Company) your full base salary through the Date
of Termination and for a period of 12 whole calendar months
thereafter plus, if the Date of Termination shall not occur on
the first day of a calendar month, the balance of the month in
which the Date of Termination occurs, at the rate in effect at
the time of your death, plus any Bonus earned, prorated for
the portion of the Bonus measurement period occurring prior to
the date of your death, plus all other amounts to which you
are entitled under any compensation or benefit plans of the
Company at the date of your death, and the Company shall have
no further obligation to you, your beneficiaries or your
estate under this Agreement.
(iv) If your employment shall be terminated (a) by the
Company other than for Cause or Disability or (b) by you for
Good Reason, then you shall be entitled to the benefits
provided below:
(A) The Company shall pay you your full base
salary through the Date of Termination at the rate
in effect at the time Notice of Termination is
given (or, if greater, at the rate in effect 30
days prior to the time Notice of Termination is
given), plus all other amounts to which you are
entitled under any compensation or benefit plans
of the Company, including without limitation, any
Bonus measurement period occurring prior to the
Date of Termination, at the time such payments are
due, except as otherwise provided below;
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(B) in lieu of any further salary payment to
you for periods subsequent to the Date of
Termination, the Company shall pay to you your
full base salary at the rate in effect immediately
prior to the time Notice of Termination is given
(or, if greater, at the rate in effect 30 days
prior to the time Notice of Termination is given),
payable periodically in accordance with past
payroll practices, until the end of the Term;
(C) in lieu of any further Bonus payments to
you for periods subsequent to the Date of
Termination, the Company shall pay to you a Bonus
payable in each March following the Date of
Termination in respect of the previous plan fiscal
year equal to the quotient obtained by aggregating
the Bonuses received by you in respect of the two
plan fiscal years ending prior to the Date of
Termination (the "Bonus Period") and dividing such
sum by two. Such Bonus shall be paid in respect
of each plan fiscal year or portion thereof ending
after the Date of Termination until the end of the
Term, and shall be prorated for partial years, if
any, including without limitation the portion of
the calendar year occurring after the Date of
Termination and the final plan fiscal year in
respect of which any such March Bonus is payable
pursuant to this Section 5(iv)(C). Provided,
however, that the amount of bonus to be paid
pursuant to this Paragraph shall not be greater
than the amount of bonus that would have been paid
in accordance with Bonus Plans, existing from time
to time, had your employment not been terminated;
(D) until the end of the Term, you will
continue to participate in all other compensation
and benefit plans (including perquisites) in which
you were participating immediately prior to the
time Notice of Termination is given, or comparable
plans substituted therefor; provided, however,
that if you are ineligible, (e.g., by operation of
law or the terms of the applicable plan to
continue to participate in any such plan) the
Company will provide you with a comparable level
of compensation or benefits;
(E) the Company shall also pay to you all
reasonable legal fees and expenses incurred by you
in contesting or disputing any such termination or
in seeking to obtain or enforce any right or
benefit provided by this Agreement if such
termination is determined by arbitration to have
been for Good Reason or other than Cause or
Disability; and
(F) if you should die after the Date of
Termination and prior to the end of the period of
payment provided for in paragraphs (B), (C), and
(D) hereof, the Company shall pay your estate or
your designated beneficiary any amounts that are
or become payable pursuant to any of such
paragraphs until the end of the Term.
(v) You shall be required to mitigate the amount of
any payment provided for in
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subsection (iv) of this Section 5 by seeking and accepting, if
offered, other comparable employment, taking into
consideration the provisions of Section 9 of this Agreement,
and the amount of any payment provided for in this Section 5
shall be reduced by any compensation earned by you during the
remainder of the Term as the result of your employment by
another employer, or offset against any amount owed by you to
the Company or as otherwise receivable by you pursuant to
Subsection 5(iv)(D) shall be reduced to the extent a
comparable benefit of the same type was made available to you
during the applicable period of benefit continuation set forth
in such Subsection. Any compensation and benefits actually
received by you shall be promptly reported to the Company.
(vi) In addition to all other amounts payable to you
under this Section 5, you shall be entitled to receive all
benefits payable to you pursuant to the terms of any plan or
agreement of the Company relating to retirement benefits.
6. Travel. You shall be required to travel to the extent
necessary for the performance of your responsibilities under this Agreement.
7. Successors; Binding Agreement. The Company will, by Agreement
in form and substance satisfactory to you, require any successor (whether
direct or indirect, by purchase merger, consolidation or otherwise) to all or
substantially all the business and/or assets of the Company, to expressly
assume and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. Failure of the Company to obtain such assumption and
agreement prior to the effectiveness of any such succession shall entitle you
to compensation from the Company in the same amount and on the same terms as
you would be entitled to hereunder if you terminate your employment for Good
Reason, except that for purposes of implementing the foregoing, the date on
which any such succession becomes effective shall be deemed the Date of
Termination. As used in this Agreement, "Company" shall mean the Company as
herein before defined and any successor to its business and/or assets as
aforesaid which assumes and agrees to perform this Agreement by operation of
law, or otherwise.
8. Notices. For the purpose of this Agreement, notices and all
other communications provided for in the Agreement shall be in writing and
shall be deemed to have been duly given when delivered or mailed by United
States certified mail, return receipt requested, postage prepaid, addressed to
the respective addresses set forth on the first page of this Agreement,
provided that all notices to the Company shall be directed to the attention of
the Secretary of the Company (or, if you are the Secretary at the time such
notice is to be given, to the Company's Board of Directors), or to such other
address as either party may have furnished to the other in writing in
accordance herewith, except that notice of change of address shall be effective
only upon receipt.
9. Noncompetition.
(i) Until the Date of Termination, you agree not to
enter into competitive endeavors and not to undertake any
commercial activity which is contrary to the best
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<PAGE> 8
interests of the Company or its affiliates, including becoming
an employee, owner (except for passive investments of not
more than one percent of the outstanding shares of, or any
other equity interest in, any company or entity listed or
traded on a national securities exchange or in an
over-the-counter securities market), officer, consultant,
agent or director of any firm or person which either directly
competes with a line or lines of business of the Company
accounting for ten percent (10%) or more of the Company's
gross sales, revenues or earnings before taxes or derives ten
percent (10%) or more of such firm's or person's gross sales,
revenues or earnings before taxes from a line or lines of
business which directly compete with the Company.
Notwithstanding any provision of this Agreement to the
contrary, you agree that your breach of the provisions of this
Section 9(i) shall permit the Company to terminate your
employment for Cause.
(ii) If you are terminated for Cause, until the later
of one year after the Date of Termination and during any
period that you continue to be paid your salary (including any
other payments in lieu of salary) pursuant to Section 5 hereof
and for one year thereafter, or if you resign or are
terminated other than for Cause, until the later of the Date
of Termination and during any period that you continue to be
paid your salary (including any other payment in lieu of
salary) pursuant to Section 5 hereof, you agree not to become
an employee, owner (except for passive investments of not more
than one percent of the outstanding shares of, or any other
equity interest in, any company or entity listed or traded on
a national securities exchange or in an over-the-counter
securities market), consultant, officer, agent or director of
any firm or person which directly competes with a business of
the Company producing any class of products accounting for ten
percent (10%) or more of the Company's gross sales, revenues
or earnings before taxes. During the period of payment
provided in Section 5 hereof, you will be available,
consistent with other responsibilities that you may then have,
to answer questions and provide advice to the Company.
Notwithstanding anything in this Agreement to the contrary,
you agree that, from and after any breach by you of the
provisions of this Section 9(ii), the Company shall cease to
have any obligations to make payments to you under this
Agreement.
(iii) If you are terminated for Cause, until the later
of one year after the Date of Termination and during any
period that you continue to be paid your salary (including any
other payments in lieu of salary) pursuant to Section 5 hereof
and for one year thereafter, or if you resign or are
terminated other than for Cause, until the later of the Date
of Termination and during any period that you continue to be
paid your salary (including any other payment in lieu of
salary) pursuant to Section 5 hereof, you shall not directly
or indirectly, either on your own account or with or for
anyone else, (A) solicit or attempt to solicit any of the
Company's customers (B) solicit or attempt to solicit for any
business endeavor any employee of the Company or (C) otherwise
divert or attempt to divert from the Company any business
whatsoever or interfere with any business relationship between
the Company and any other person.
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(iv) You acknowledge and agree that damages for breach
of the covenant not to compete in this Section 9 will be
difficult to determine and will not afford a full and adequate
remedy, and therefore agree that the Company, in addition to
seeking actual damages pursuant to Section 11 hereof, may seek
specific enforcement of the covenant not to compete in any
court of competent jurisdiction, including, without
limitation, by the issuance of a temporary or permanent
injunction, without the necessity of a bond. You and the
Company agree that the provisions of this covenant not to
compete are reasonable. However, should any court or
arbitrator determine that any provision of this covenant not
to compete is unreasonable, either in period of time,
geographical area, or otherwise, the parties agree that this
covenant not to compete should be interpreted and enforced to
the maximum extent which such court or arbitrator deems
reasonable.
10. Confidentiality.
(i) You shall not knowingly use, disclose or reveal to
any unauthorized person, during or after the Term, any trade
secret or other confidential information relating to the
Company or any of its affiliates, or any of their respective
businesses or principals, such as, without limitation,
dealers' or distributor's lists, information regarding
personnel and manufacturing processes, marketing and sales
plans, and all other such information; and you confirm that
such information is the exclusive property of the Company and
its affiliates. Upon termination of your employment, you
agree to return to the Company on demand of the Company all
memoranda, books, papers, letters and other data, and all
copies thereof or therefrom, in any way relating to the
business of the Company and its affiliates, whether made by
you or otherwise in your possession.
(ii) Any ideas, processes, characters, productions,
schemes, titles, names, formats, adaptations, plots, slogans,
catchwords, incidents, treatment, and dialogue which you may
conceive, create, organize, prepare or produce during the
period of your employment and which ideas, processes, etc.
relate to any of the businesses of the Company, shall be owned
by the Company and its affiliates whether or not you should in
fact execute an assignment thereof or other instrument or
document which may be reasonably necessary to protect and
secure such rights to the Company.
(iii) Notwithstanding anything in this Agreement to the
contrary, you agree that from and after any breach by you of
the provisions of this Section 10 during any period of payment
provided in Section 5 hereof, the Company shall cease to have
any obligations to make payments to you under this Agreement.
11. Arbitration.
(i) Except as contemplated by Section 9 (iii), Section
9, (iv), and Section 11 (iii) hereof, any dispute or
controversy arising under or in connection with this
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Agreement that cannot be mutually resolved by the parties to
this Agreement and their respective advisors and
representatives shall be settled exclusively by arbitration in
Southfield, Michigan before one arbitrator of exemplary
qualifications and stature, who shall be selected jointly by
an individual to be designated by the Company and an
individual to be selected by you, or if such two individuals
cannot agree on the selection of the arbitrator, who shall be
selected pursuant to the procedures of the American
Arbitration Association.
(ii) The parties agree to use their best efforts to
cause (a) the two individuals set forth in the preceding
Section 11 (i), or, if applicable, the American Arbitration
Association, to appoint the arbitrator within 30 days of the
date that a party hereto notifies the other party that a
dispute or controversy exists that necessitates the
appointment of an arbitrator, and (b) any arbitration hearing
to be held within 30 days of the date of selection of the
arbitrator, and, as a condition to his or her selection, such
arbitrator must consent to be available for a hearing at such
time.
(iii) Judgment may be entered on the arbitrator's award
in any court having jurisdiction, provided that you shall be
entitled to seek specific performance of your right to be paid
and to participate in benefit programs during the pendency of
any dispute or controversy arising under or in connection
with this Agreement. The Company and you hereby agree that
the arbitrator shall be empowered to enter an equitable decree
mandating specific performance of the terms of this Agreement.
(iv) If you prevail in full or in substantial part, the
Company shall bear all expenses of the arbitrator incurred in
any arbitration hereunder. The Company agrees to pay your
reasonable and documented legal fees and expenses in
connection with any arbitration hereunder if you prevail in
full or in substantial part.
12. Extension of Term. The Term of this Agreement shall be
automatically extended for a period of one year on each anniversary of the
Effective Date of this Agreement. There shall be no renewal of the Term after
the Date of Termination.
13. Modifications. No provision of this Agreement may be
modified, amended, waived or discharged unless such modification, amendment,
waiver or discharge is agreed to in writing and signed by both you and such
officer of the Company as may be specifically designated by the Board.
14. No Implied Waivers. Failure of either party at any time to
require performance by the other party of any provision hereof shall in no way
affect the full right to require such performance at any time thereafter.
Waiver by either party of a breach of any obligation hereunder shall not
constitute a waiver of any succeeding breach of the same obligation. Failure
of either party to exercise any of its rights provided herein shall not
constitute a waiver of such right.
15. Governing Law. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the State of
Michigan.
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16. Payments Net of Taxes. Any payments provided for herein which
are subject to Federal, State or local tax or other withholding requirements,
shall have such amounts withheld prior to payment.
17. Survival of Obligations. The obligations of the Company under
Section 5(iii) and your obligations under Sections 9 and 10 hereof shall
survive the expiration of the Term of this Agreement.
18. Capacity of Parties. The parties hereto warrant that they
have the capacity and authority to execute this Agreement.
19. Validity. The invalidity or unenforceability of any provision
of this Agreement shall not affect the validity or enforceability of any other
provision of the Agreement, which shall remain in full force and effect.
20. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
21. Entire Agreement. This Agreement and any attachments hereto,
contain the entire agreement by the parties with respect to the matters covered
herein and supersedes any prior agreement (including without limitation any
prior employment agreement), condition, practice, custom, usage and obligation
with respect to such matters insofar as any such prior agreement, condition,
practice, custom, usage or obligation might have given rise to any enforceable
right. No agreements, understandings or representations, oral or otherwise,
express or implied, with respect to the subject matter hereof have been made by
either party which are not expressly set forth in this Agreement.
If this letter sets forth our agreement on the subject matter hereof,
kindly sign and return to the Company the enclosed copy of this letter which
will then constitute our agreement on this subject, effective on March 20,
1995 ("Effective Date").
Sincerely,
LEAR SEATING CORPORATION
BY: /s/ Joseph F. McCarthy
-----------------------------------
Vice President and Secretary
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Agreed to this 20th day of March, 1995
BY: /s/ Gerald G. Harris
-----------------------------
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EXHIBIT 10.18
LEAR CORPORATION
LONG-TERM STOCK INCENTIVE PLAN
ARTICLE 1. ESTABLISHMENT, OBJECTIVES AND DURATION
1.1 Establishment of the Plan. Lear Corporation, a Delaware corporation
(hereinafter referred to as the "Company"), hereby establishes a long-term
incentive compensation plan to be known as the "Lear Corporation Long-Term Stock
Incentive Plan" (hereinafter referred to as the "Plan"), as set forth in this
document. The Plan permits the grant of Nonqualified Stock Options, Incentive
Stock Options, Stock Appreciation Rights, Restricted Stock, Restricted Units,
Performance Shares and Performance Units. In addition, the Plan provides the
opportunity for the deferral of the payment of salary, bonuses and other forms
of incentive compensation.
Subject to the approval of the Company's stockholders, the Plan shall
become effective as of January 1, 1996 (the "Effective Date") and shall remain
in effect as provided in Section 1.3 hereof.
1.2 Objectives of the Plan. The objectives of the Plan are to optimize the
profitability and growth of the Company through long-term incentives which are
consistent with the Company's objectives and which link the interests of
Participants to those of the Company's stockholders; to provide Participants
with an incentive for excellence in individual performance; and to promote
teamwork among Participants; and to give the Company a significant advantage in
attracting and retaining officers, key employees and directors.
The Plan is further intended to provide flexibility to the Company in its
ability to motivate, attract and retain the services of Participants who make
significant contributions to the Company's success and to allow Participants to
share in the success of the Company.
1.3 Duration of the Plan. The Plan shall commence on the Effective Date, as
described in Section 1.1 hereof, and shall remain in effect, subject to the
right of the Board of Directors to amend or terminate the Plan at any time
pursuant to Article 15 hereof, until all Shares subject to it pursuant to
Article 4 shall have been purchased or acquired according to the Plan's
provisions. However, in no event may an Award be granted under the Plan on or
after December 31, 2006.
ARTICLE 2. DEFINITIONS
Whenever used in the Plan, the following terms shall have the meanings set
forth below, and when the meaning is intended, the initial letter of the word
shall be capitalized:
2.1 "Affiliates" means the Company's subsidiaries within the meaning of
Code Section 424(f) and, if any, the Company's parent within the meaning of Code
Section 424(e).
2.2 "Award" means, individually or collectively, a grant under this Plan of
Nonqualified Stock Options, Incentive Stock Options, Stock Appreciation Rights,
Restricted Stock, Restricted Units, Performance Shares or Performance Units.
2.3 "Award Agreement" means an agreement entered into by the Company and a
Participant setting forth the terms and provisions applicable to an Award or
Awards granted under this Plan to such Participant or the terms and provisions
applicable to an election to defer compensation under Section 8.2.
2.4 "Beneficial Owner" or "Beneficial Ownership" shall have the meaning
ascribed to such term in Rule 13d-3 of the General Rules and Regulations under
the Exchange Act.
2.5 "Board" or "Board of Directors" means the Board of Directors of the
Company.
2.6 "Cause" shall have the meaning set forth in any unexpired employment or
severance agreement between the Participant and the Company and/or an Affiliate,
and, in the absence of any such agreement, shall mean (i) the willful and
continued failure of the Participant to substantially perform his or her duties
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with or for the Company or an Affiliate, (ii) the engaging by the Participant in
conduct which is significantly injurious to the Company or an Affiliate,
monetarily or otherwise, (iii) the Participant's conviction of a felony, (iv)
the Participant's abuse of illegal drugs or other controlled substances or (v)
the Participant's habitual intoxication. Unless otherwise defined in the
Participant's employment or severance agreement, an act or omission is "willful"
for this purpose if such act or omission was knowingly done, or knowingly
omitted to be done, by the Participant not in good faith and without reasonable
belief that such act or omission was in the best interest of the Company or an
Affiliate.
2.7 "Change in Control" of the Company shall be deemed to have occurred (as
of a particular day, as specified by the Board) as of the first day any one or
more of the following paragraphs shall have been satisfied:
(a) Any Person (other than the Company or a trustee or other fiduciary
holding securities under an employee benefit plan of the Company,
or a corporation owned directly or indirectly by the stockholders
of the Company in substantially the same proportions as their
ownership of stock of the Company) becomes the Beneficial Owner,
directly or indirectly, of securities of the Company, representing
more than twenty percent of the combined voting power of the
Company's then outstanding securities; or
(b) During any period of twenty-six consecutive months (not including
any period prior to the Effective Date), individuals who at the
beginning of such period constitute the Board (and any new
Directors, whose election by the Board or nomination for election
by the company's stockholders was approved by a vote of at least
two-thirds of the Directors then still in office who either were
Directors at the beginning of the period or whose election or
nomination for election was so approved) cease for any reason
(except for death, Disability or voluntary Retirement) to
constitute a majority thereof; or
(c) The stockholders of the Company approve: (i) a plan of complete
liquidation or dissolution of the Company; or (ii) an agreement
for the sale or disposition of all or substantially all the
Company's assets; or (iii) a merger, consolidation or
reorganization of the Company with or involving any other
corporation, other than a merger, consolidation or reorganization
that would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into voting
securities of the surviving entity) at least eighty percent of the
combined voting power of the voting securities of the Company (or
such surviving entity) outstanding immediately after such merger,
consolidation, or reorganization.
2.8 "Code" means the Internal Revenue Code of 1986, as amended from time to
time.
2.9 "Committee" means, as specified in Article 3 herein, the Compensation
Committee of the Board or such other committee as may be appointed by the Board
to administer the Plan.
2.10 "Company" means Lear Corporation, a Delaware corporation, and any
successor thereto as provided in Article 18 herein.
2.11 "Director" means any individual who is a member of the Board of
Directors of the Company.
2.12 "Disability" shall mean (a) long-term disability as defined under the
Company's long-term disability plan covering that individual, or (b) if the
individual is not covered by such a long-term disability plan, disability as
defined for purposes eligibility for a disability award under the Social
Security Act.
2.13 "Effective Date" shall have the meaning ascribed to such term in
Section 1.1 hereof.
2.14 "Eligible Employee" means any officer or key employee of the Company
or any of its Affiliates. Directors who are not employed by the Company or its
Affiliates shall not be considered Eligible Employees under this Plan.
2.15 "Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time, or any successor act thereto.
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2.16 "Exercise Price" means the price at which a Share may be purchased by
a Participant pursuant to an Option.
2.17 "Fair Market Value" means:
(a) the average of the high and low prices of publicly traded Shares
on the national securities exchange on which the Shares as listed (if the
Shares are so listed) or on the NASDAQ National Market System (if the
Shares are regularly quoted on the NASDAQ National Market System);
(b) if not so listed or regularly quoted, the mean between the closing
bid and asked prices of publicly traded Shares in the over-the-counter
market; and
(c) if such bid and asked prices are not available, as reported by any
nationally recognized quotation service selected by the Committee or as
determined by the Committee.
2.18 "Freestanding SAR" means an SAR that is granted independently of any
Options, as described in Article 7 herein.
2.19 "Incentive Stock Option" or "ISO" means an option to purchase Shares
granted under Article 6 herein which is designated as an Incentive Stock Option
and that is intended to meet the requirements of Code Section 422.
2.20 "Nonemployee Director" means an individual who is a member of the
Board of Directors of the Company but who is not an employee of the Company or
any of its Affiliates.
2.21 "Nonqualified Stock Option" or "NQSO" means an option to purchase
Shares granted under Article 6 herein that is not intended to meet the
requirements of Code Section 422.
2.22 "Option" means an Incentive Stock Option or a Nonqualified Stock
Option, as described in Article 6 herein.
2.23 "Participant" means an Eligible Employee who has been selected by the
Committee to participate in the Plan pursuant to Section 5.2 and who has
outstanding an Award granted under the Plan. The term "Participant" shall not
include Nonemployee Directors.
2.24 "Performance-Based Exception" means the performance-based exception
from the tax deductibility limitations of Code Section 162(m) and any
regulations promulgated thereunder.
2.25 "Performance Share" means an Award granted to a Participant, as
described in Article 9 herein.
2.26 "Performance Unit" means an Award granted to a Participant, as
described in Article 9 herein.
2.27 "Person" shall have the meaning ascribed to such term in Section
3(a)(9) of the Exchange Act and used in Sections 13(d) and 14(d) thereof,
including a "group" as defined in Section 13(d) thereof.
2.28 "Restriction Period" means the period during which the transfer of
Shares of Restricted Stock/Units is limited in some way (based on the passage of
time, the achievement of performance objectives, or upon the occurrence of other
events as determined by the Committee, at its discretion), and/or the Restricted
Stock/Units are not vested.
2.29 "Restricted Stock" means a contingent grant of stock awarded to a
Participant pursuant to Article 8 herein.
2.30 "Restricted Stock Unit" means a Restricted Unit granted to a
Participant, as described in Article 8 herein, which is payable in Shares.
2.31 "Restricted Unit" means a notional account established pursuant to an
Award granted to a Participant, as described in Article 8 herein, which is (a)
credited with amounts equal to Shares, or some other unit of measurement
specified in the Award Agreement, (b) subject to restrictions and (c) payable in
cash or Shares.
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2.32 "Retirement" shall mean termination of employment on or after (a)
attaining the age established by the Company as the normal retirement age in any
unexpired employment agreement between the Participant and the Company and/or an
Affiliate, or, in the absence of such an agreement, the normal retirement age
under the tax-qualified defined benefit retirement plan or, if none, the
tax-qualified defined contribution retirement plan, sponsored by the Company or
an Affiliate in which the Participant participates, or (b) attaining age
sixty-two with ten years of service with the Company and/or an Affiliate
provided the retirement is approved by the Chief Executive Officer of the
Company unless the Participant is an officer subject to Section 16 of the
Exchange Act in which case the retirement must be approved by the Committee.
2.33 "Shares" means the shares of common stock, $.01 par value, of the
Company.
2.34 "Stock Appreciation Right" or "SAR" means an Award, granted alone or
in connection with a related Option, designated as an SAR, pursuant to the terms
of Article 7 herein.
2.35 "Tandem SAR" means an SAR that is granted in connection with a related
Option pursuant to Article 7 herein, the exercise of which requires forfeiture
of the right to purchase a Share under the related Option (and when a Share is
purchased under the Option, the Tandem SAR shall similarly be canceled).
ARTICLE 3. ADMINISTRATION
3.1 The Committee. The Plan shall be administered by the Compensation
Committee of the Board, or by any other Committee appointed by the Board, which
Committee (unless otherwise determined by the Board) shall satisfy the
"nonemployee director" requirements of Rule 16b-3 under the Exchange Act and the
regulations of Rule 16b-3 under the Exchange Act and the "outside director"
provisions of Code Section 162(m), or any successor regulations or provisions.
The members of the Committee shall be appointed from time to time by, and shall
serve at the discretion of, the Board of Directors. The Committee shall act by a
majority of its members at the time in office and eligible to vote on any
particular matter, and such action may be taken either by a vote at a meeting or
in writing without a meeting.
3.2 Authority of the Committee. Except as limited by law and subject to the
provisions herein, the Committee shall have full power to: select Eligible
Employees who shall participate in the Plan; select Nonemployee Directors to
receive Awards under Article 6; determine the sizes and types of Awards;
determine the terms and conditions of Awards in a manner consistent with the
Plan; construe and interpret the Plan and any agreement or instrument entered
into under the Plan; establish, amend or waive rules and regulations for the
Plan's administration; and (subject to the provisions of Article 15 herein)
amend the terms and conditions of any outstanding Award to the extent such terms
and conditions are within the discretion of the Committee as provided in the
Plan. Further, the Committee shall make all other determinations which may be
necessary or advisable for the administration of the Plan. As permitted by law
and consistent with Section 3.1, the Committee may delegate its authority as
identified herein.
3.3 Decisions Binding. All determinations and decisions made by the
Committee pursuant to the provisions of the Plan shall be final, conclusive and
binding on all persons, including the Company, its Board of Directors, its
stockholders, all Affiliates, employees, Participants and their estates and
beneficiaries.
ARTICLE 4. SHARES SUBJECT TO THE PLAN AND MAXIMUM AWARDS
4.1 Number of Shares Available for Grants. Subject to adjustment as
provided in Section 4.3 herein, the number of Shares that may be issued or
transferred to Participants under the Plan shall be 2,200,000 Shares. The
maximum numbers of Shares that may be issued or transferred to the Participants
under Restricted Stock Units and Performance Units shall be 700,000.
The maximum number of Shares and Share equivalent units that may be granted
during any calendar year to any one Participant, under Options, Freestanding
SARs, Restricted Stock, Restricted Units or Performance Shares, shall be 50,000
Shares (on an aggregate basis for all such types of Awards), which limit shall
apply regardless of whether such compensation is paid in Shares or in cash.
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4.2 Lapsed Awards. If any Award granted under this Plan is canceled,
terminates, expires or lapses for any reason, any Shares subject to such Award
again shall be available for the grant of an Award under the Plan (other than
for purposes of Subsection 4.1 above).
4.3 Adjustments in Authorized Shares.
(a) In the event the Shares, as presently constituted, shall be
changed into or exchanged for a different number or kind of shares of stock
or other securities of the Company or of another corporation (whether by
reason of merger, consolidation, recapitalization, reclassification, split,
reverse split, combination of shares, or otherwise) or if the number of
such Shares shall be increased through the payment of a stock dividend,
then there shall be substituted for or added to each Share theretofore
appropriated or thereafter subject or which may become subject to an Award
under this Plan, the number and kind of shares of stock or other securities
into which each outstanding Share shall be so changed, or for which each
such Share shall be exchanged, or to which each such Share shall be
entitled, as the case may be. Outstanding Awards shall also be
appropriately amended as to price and other terms as may be necessary to
reflect the foregoing events. In the event there shall be any other change
in the number or kind of the outstanding Shares, or of any stock or other
securities into which such Shares shall have been changed, or for which it
shall have been exchanged, then, if the Committee shall, in its sole
discretion, determine that such change equitably requires an adjustment in
any Award therefore granted or which may be granted under the Plan, such
adjustments shall be made in accordance with such determination.
(b) Fractional Shares resulting from any adjustment in Awards pursuant
to this section may be settled in cash or otherwise as the Committee shall
determine. Notice of any adjustment shall be given by the Company to each
Participant who holds an Award which has been so adjusted and such
adjustment (whether or not such notice is given) shall be effective and
binding for all purposes of the Plan.
ARTICLE 5. ELIGIBILITY AND PARTICIPATION
5.1 Eligibility. Persons eligible to participate in this Plan consist of
all Eligible Employees, including Eligible Employees who are members of the
Board, and Nonemployee Directors but only to the extent provided herein.
5.2 Actual Participation. Subject to the provisions of the Plan, the
Committee may, from time to time, select from all Eligible Employees, those to
whom Awards shall be granted and shall determine the nature and amount of each
Award.
ARTICLE 6. STOCK OPTIONS
6.1 Grant of Options. Subject to the terms and provisions of the Plan,
Options may be granted to Eligible Employees in such number, and upon such
terms, and at any time and from time to time as shall be determined by the
Committee. In addition, NQSO may be granted to Nonemployee Directors in such
number, and upon such terms, and at any time and from time to time as shall be
determined by the Committee.
6.2 Award Agreement. Each Option grant shall be evidenced by an Award
Agreement that shall specify the Exercise Price, the duration of the Option, the
number of Shares to which the Option pertains, the manner, time and rate of
exercise or vesting of the Option, and such other provisions as the Committee
shall determine. The Award Agreement also shall specify whether the Option is
intended to be an ISO within the meaning of Code Section 422 or an NQSO which is
not intended to qualify under the provisions of Code Section 422.
6.3 Exercise Price. The Exercise Price for each share subject to an Option
granted under this Plan shall be at least equal to one hundred percent of the
Fair Market Value of a Share on the date the Option is granted.
6.4 Duration of Options. Each Option granted to an Eligible Employee or a
Nonemployee Director shall expire at such time as the Committee shall determine
at the time of grant; provided, however, that no Option shall be exercisable
later than the tenth anniversary of the date of its grant.
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6.5 Dividend Equivalents. The Committee may grant dividend equivalents in
connection with Options granted under this Plan. Such dividend equivalents may
be payable in cash or in Shares, upon such terms as the Committee, in its sole
discretion, deems appropriate.
6.6 Exercise of Options. Options granted under this Article 6 shall be
exercisable at such times and be subject to such restrictions and conditions as
the Committee shall in each instance approve, which need not be the same for
each Award or for each Participant.
6.7 Payment. Options granted under this Article 6 shall be exercised by the
delivery of a written notice of exercise to the Company, setting forth the
number of Shares with respect to which the Option is to be exercised accompanied
by full payment for the Shares and any withholding tax-relating to the exercise
of the Option.
The Exercise Price, and any related withholding taxes, upon exercise of any
Option shall be payable to the Company in full either: (a) in cash, or its
equivalent, in United States dollars, or (b) if permitted in the governing Award
Agreement, by tendering previously acquired Shares having an aggregate Fair
Market Value at the time of exercise equal to the total Exercise Price, or (c)
if permitted in the governing Award Agreement, by a combination of (a) and (b).
The Committee also may allow cashless exercise as permitted under Federal
Reserve Board's Regulation T, subject to applicable securities law restrictions,
or by any other means which the Committee determines to be consistent with the
Plan's purpose and applicable law.
6.8 Restrictions on Share Transferability. The Committee may impose such
restrictions on any Shares acquired pursuant to the exercise of an Option
granted under this Article 6 as the Committee deems necessary or advisable,
including, without limitation, restrictions under applicable federal securities
laws, under the requirements of any stock exchange or market upon which such
Shares are then listed and/or traded, and under any blue sky or state securities
laws applicable to such Shares.
6.9 Termination of Employment. Each Option Award Agreement shall set forth
the extent to which the Participant shall have the right to exercise the Option
following termination of the Participant's employment with the Company and all
Affiliates. Such provisions shall be determined in the sole discretion of the
Committee, shall be included in the Award Agreement entered into with each
Participant or Nonemployee Director, need not be uniform among all Options
issued pursuant to this Article 6, and may reflect distinctions based on the
reasons for termination of employment.
6.10 Transferability of Options.
(a) Except as provided in paragraph (b), an Option shall be
transferable only by will or the laws of descent and distribution,
or pursuant to a domestic relations order (as defined in Code
Section 414(p)).
(b) Notwithstanding anything contained herein to the contrary, the
Committee may grant an Option pursuant to an Agreement that
permits transfer of any portion of that Option by the Participant
to (i) the Participant's spouse, children, step-children,
grandchildren or step-grandchildren ("Immediate Family Members"),
(ii) a trust or trusts for the exclusive benefit of Immediate
Family Members, (iii) a partnership in which Immediate Family
Members are the only partners or (iv) any other person as
determined by the Committee. Such a transfer shall only be
permitted if there is no consideration for the transfer, or the
transfer is to a partnership in which Immediate Family Members are
the only partners and the Participant's sole consideration for the
transfer was an interest in the partnership. Such a transfer shall
only become effective upon written notice to the Committee of the
transfer. Following the transfer of an Option, it shall remain
subject to the same terms and conditions that were applicable
immediately prior to the transfer and the term "Participant" shall
be deemed to refer to the transferee except that events concerning
the continuation of employment shall continue to apply with
respect to the original Participant not the transferee. A
transferee of an Option may not transfer the Option except as
provided in paragraph (a).
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(c) Options shall be exercisable during the Participant's lifetime
only by the Participant or a transferee pursuant to paragraph (b)
hereof, or by the guardian or legal representative of the same.
The Committee may, in its discretion, require a guardian or legal
representative to supply it with such evidence as the Committee
deems necessary to establish the authority of the guardian or
legal representative to exercise the Option on behalf of the
Participant or transferee, as the case may be.
ARTICLE 7. STOCK APPRECIATION RIGHTS
7.1 Grant of SARs. Subject to the terms and conditions of the Plan. SARs
may be granted to Participants at any time and from time to time as shall be
determined by the Committee. The Committee may grant Freestanding SARs, Tandem
SARs or any combination of these forms of SAR.
The Committee shall have sole discretion in determining the number of SARs
granted to each Participant (subject to Article 4 herein) and, consistent with
the provisions of the Plan, in determining the terms and conditions pertaining
to such SARs.
The grant price of a Freestanding SAR shall equal the Fair Market Value of
a Share on the date of grant of the SAR. The grant price of Tandem SARs shall
equal the Exercise Price of the related Option.
7.2 Exercise of Tandem SARs. Tandem SARs may be exercised for all or part
of the Shares subject to the related Option upon the surrender of the right to
exercise the equivalent portion of the related Option. A Tandem SAR may be
exercised only with respect to the Shares for which its related Option is then
exercisable.
7.3 Exercise of Freestanding SARs. Freestanding SARs may be exercised upon
whatever terms and conditions the Committee, in its sole discretion, imposes
upon them.
7.4 Award Agreement. Each SAR grant shall be evidenced by an Award
Agreement that shall specify the grant price, the term of the SAR and such other
provisions as the Committee shall determine.
7.5 Term of SARS. The term of an SAR granted under the Plan shall be
determined by the Committee, in its sole discretion; provided, however, that
such term shall not exceed ten years.
7.6 Payment of SAR Amount. Upon exercise of an SAR, a Participant shall be
entitled to receive payment from the Company in an amount determined by
multiplying:
(a) The excess (or some portion of such excess as determined at the
time of the grant by the Committee) if any, of the Fair Market
Value of a Share on the date of exercise of the SAR over the grant
price specified in the Award Agreement; by
(b) The number of Shares with respect to which the SAR is exercised.
At the sole discretion of the Committee, the payment upon SAR exercise may
be in cash, in Shares of equivalent Fair Market Value or in some combination
thereof.
7.7 Termination of Employment. Each SAR Award Agreement shall set forth the
extent to which the Participant shall have the right to exercise the SAR
following termination of the Participant's employment with the Company and all
Affiliates. Such provisions shall be determined in the sole discretion of the
Committee, shall be included in the Award Agreement entered into with
Participants, need not be uniform among all SARs issued pursuant to the Plan,
and may reflect distinctions based on the reasons for termination of employment.
7.8 Nontransferability of SARs. Except as otherwise provided in a
Participant's Award Agreement, no SAR granted under the Plan may be sold,
transferred, pledged, assigned, or otherwise alienated or hypothecated, other
than by will or by the laws of descent and distribution. Further, except as
otherwise provided in a Participant's Award Agreement, all SARs granted to a
Participant under the Plan shall be exercisable during the Participant's
lifetime only by such Participant or the Participant's guardian or legal
representative. The Committee may, in its discretion, require a Participant's
guardian or legal representative to
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supply it with such evidence as the Committee deems necessary to establish the
authority of the guardian or legal representative to act on behalf of the
Participant.
ARTICLE 8. RESTRICTED STOCK, RESTRICTED STOCK UNITS AND RESTRICTED UNITS
8.1 Grant of Restricted Stock/Units. Subject to the terms and provisions of
the Plan, the Committee may, at any time and from time to time, grant Restricted
Stock and/or Restricted Units to Participants in such amounts as the Committee
shall determine. Each grant of Restricted Stock shall be represented by the
number of Shares to which the Award relates. Each grant of restricted Units
shall be represented by the number of Share equivalent units to which the Award
relates.
8.2 Deferral of Compensation into Restricted Stock Units. Subject to the
terms and provisions of the Plan, the Committee may, at any time and from time
to time, allow (or require with respect to bonuses) selected Eligible Employees
to defer the payment of any portion of their salary and/or annual bonuses
pursuant to this Section. A Participant's deferral under this Section shall be
credited to the Participant in the form of Restricted Stock Units. The Committee
shall establish rules and procedures for such deferrals as it deems appropriate.
In consideration for forgoing compensation, the dollar amount so deferred
by a Participant shall be increased by twenty-five percent (or such lesser
percentage as the Committee may determine) for purposes of determining the
amount of Restricted Stock Units to credit to the Participant. If a
Participant's compensation is so deferred, there shall be credited to the
Participant as of the date specified in the Award Agreement a number of
Restricted Stock Units (determined to the nearest 100th of a unit) equal to the
amount of the deferral (increased as described above) divided by the Fair Market
Value of a Share on such date.
8.3 Award Agreement. Each Restricted Stock/Unit grant shall be evidenced by
an Award Agreement that shall specify the Restriction Periods, the number of
Shares or Share equivalent units granted, and such other provisions as the
Committee shall determine.
8.4 Nontransferability. Except as provided in this Article 8, the
Restricted Stock/Units granted herein may not be sold, transferred, pledged,
assigned, or otherwise alienated or hypothecated until the end of the applicable
Restriction Period established by the Committee and as specified in the Award
Agreement, or upon earlier satisfaction of any other conditions, as specified by
the Committee in its sole discretion and as set forth in the Award Agreement.
All rights with respect to Restricted Stock/Units granted to a Participant under
the Plan shall be available during the Participant's lifetime only to such
Participant or the Participant's guardian or legal representative. The Committee
may, in its discretion, require a Participant's guardian or legal representative
to supply it with such evidence as the Committee deems necessary to establish
the authority of the guardian or legal representative to act on behalf of the
Participant.
8.5 Other Restrictions. Subject to Article 11 herein, the Committee may
impose such other conditions and/or restrictions on any restricted Stock/Units
granted pursuant to the Plan as it deems advisable including, without
limitation, restrictions based upon the achievement of specific performance
objectives (Company-wide, business unit, and/or individual), time-based
restrictions on vesting following the attainment of the performance objectives,
and/or restrictions under applicable federal or state securities laws.
The Company shall retain the certificates representing Shares of restricted
Stock in the Company's possession until such time as all conditions and/or
restrictions applicable to such Shares have been satisfied.
8.6 Payment of Awards. Except as otherwise provided in this Article 8, (i)
Shares covered by each Restricted Stock grant made under the Plan shall become
freely transferable by the Participant after the last day of the applicable
Restriction Period and (ii) Share equivalent units covered by each Restricted
Unit under Section 8.1 or 8.2 shall be paid out in cash or Shares to the
Participant following the last day of the applicable Restriction Period or such
later date as provided in the Award Agreement.
8.7 Voting Rights. During the Restriction Period, Participants holding
Shares of Restricted Stock granted hereunder may exercise full voting rights
with respect to those Shares.
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8.8 Dividends and Other Distributions. During the Restriction Period,
Participants holding Shares of Restricted Stock/Units hereunder shall be
credited with regular cash dividends or dividend equivalents paid with respect
to the underlying Shares or Share equivalent units while they are so held. Such
dividends may be paid currently, accrued as contingent cash obligations, or
converted into additional Shares or units of Restricted Stock/Units, upon such
terms as the Committee establishes.
The Committee may apply any restrictions to the crediting and payment of
dividends and other distributions that the Committee deems advisable. Without
limiting the generality of the preceding sentence, if the grant or vesting of
Restricted Stock/Units is designed to qualify for the Performance-Based
Exception, the Committee may apply any restrictions it deems appropriate to the
payment of dividends declared with respect to such Restricted Stock/Units, such
that the dividends and/or the Restricted Stock/Units maintain eligibility for
the Performance-Based Exception.
8.9 Termination of Employment. Each Award Agreement shall set forth the
extent to which the Participant shall have the right to retain unvested
Restricted Stock/Units following termination of the Participant's employment
with the Company or an Affiliate. Such provisions shall be determined in the
sole discretion of the Committee, shall be included in the Award Agreement
entered into with each Participant, need not be uniform among all Awards of
Restricted Stock/Units issued pursuant to the Plan, and may reflect distinctions
based on the reasons for termination of employment.
ARTICLE 9. PERFORMANCE UNITS AND PERFORMANCE SHARES
9.1 Grant of Performance Units/Shares. Subject to the terms of the Plan,
Performance Units and/or Performance Shares may be granted to Participants in
such amounts and upon such terms, and at any time and from time to time, as
shall be determined by the Committee.
9.2 Value of Performance Units/Shares. Each Performance Unit shall have an
initial value that is established by the Committee at the time of grant. Each
Performance Share shall have an initial value equal to the Fair Market Value of
a Share on the date of grant. The Committee shall set performance objectives in
its discretion which, depending on the extent to which they are met, will
determine the number and/or value of Performance Units/Shares that will be paid
out to the Participant. For purposes of this Article 9, the time period during
which the performance objectives must be met shall be called a "Performance
Period" and shall be set by the Committee in its discretion.
9.3 Earning of Performance Units/Shares. Subject to the terms of this Plan,
after the applicable Performance Period has ended, the holder of Performance
Units/Shares shall be entitled to receive payout on the number and value of
Performance Units/Shares earned by the Participant over the Performance Period,
to be determined as a function of the extent to which the corresponding
performance objectives have been achieved.
9.4 Award Agreement. Each grant of Performance Units and/or Performance
Shares shall be evidenced by an Award Agreement which shall specify the material
terms and conditions of the Award, and such other provisions as the Committee
shall determine.
9.5 Form and Timing of Payment of Performance Units/Shares. Except as
provided in Article 12, payment of earned Performance Units/Shares shall be made
within seventy-five calendar days following the close of the applicable
Performance Period in a manner determined by the Committee, in its sole
discretion. Subject to the terms of this Plan, the Committee, in its sole
discretion, may pay earned Performance Units/Shares in the form of cash or in
Shares (or in a combination thereof). Such Shares may be paid subject to any
restrictions deemed appropriate by the Committee.
9.6 Termination of Employment Due to Death, Disability, or
Retirement. Unless determined otherwise by the Committee and set forth in the
Participant's Award Agreement, in the event the employment of a Participant is
terminated by reason of death, Disability or Retirement during a Performance
Period, the Participant shall receive a payout of the Performance Units/Shares
which is prorated, as specified by the Committee in its discretion in the Award
Agreement. Payment of earned Performance Units/Shares shall be
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made at a time specified by the Committee in its sole discretion and set forth
in the Participant's Award Agreement.
9.7 Termination of Employment for Other Reasons. In the event that a
Participant's employment terminates during a Performance Period for any reason
other than those reasons set forth in Section 9.6 herein, all Performance
Units/Shares shall be forfeited by the Participant to the Company, unless
determined otherwise by the Committee in the Participant's Award Agreement.
9.8 Nontransferability. Except as otherwise provided in a Participant's
Award Agreement, Performance Units/Shares may not be sold, transferred, pledged,
assigned or otherwise alienated or hypothecated, other than by will or by the
laws of descent and distribution. Further, except as otherwise provided in a
Participant's Award Agreement, a Participant's rights under the Plan shall be
exercisable during the Participant's lifetime only by such Participant or
Participant's guardian or legal representative. The Committee may, in its
discretion, require a Participant's guardian or legal representative to supply
it with such evidence as the Committee deems necessary to establish the
authority of the guardian or legal representative to act on behalf of the
Participant.
ARTICLE 10. PERFORMANCE MEASURES
Unless and until the Committee proposes for shareholder approval and the
Company's shareholders approve a change in the general performance measures set
forth in this Article 10, the attainment of which may determine the degree of
payout and/or vesting with respect to Awards which are designed to qualify for
the Performance-Based Exception, the performance measure(s) to be used for
purposes of such awards shall be chosen from among the following alternatives:
(a) return to shareholders (absolute or peer-group comparative);
(b) stock price increase (absolute or peer-group comparative);
(c) cumulative net income (absolute or competitive growth rates
comparative);
(d) return on equity;
(e) return on capital;
(f) cash flow, including operating cash flow, free cash flow,
discounted cash flow return on investment, and cash flow
in excess of cost of capital;
(g) economic value added (income in excess of capital costs); or
(h) market share.
The Committee shall have the discretion to adjust the determinations of the
degree of attainment of the preestablished performance objectives; provided,
however, that Awards which are designed to qualify for the Performance-Based
Exception may not be adjusted upward (the Committee shall retain the discretion
to adjust such Awards downward), except to the extent permitted under Code
Section 162(m) to reflect accounting changes or other events.
In the event that Code Section 162(m) or applicable tax and/or securities
laws change to permit Committee discretion to alter the governing performance
measures without obtaining shareholder approval of such changes, the Committee
shall have sole discretion to make such changes without obtaining shareholder
approval. In addition, in the event that the Committee determines that it is
advisable to grant Awards which shall not qualify for the Performance-Based
Exception, the Committee may make such grants without satisfying the
requirements of Code Section 162(m).
ARTICLE 11. BENEFICIARY DESIGNATION
Each Participant under the Plan may, from time to time, name any
beneficiary or beneficiaries (who may be named contingently or successively) to
whom any benefit under the Plan is to be paid in case of the death of the
Participant before he or she receives any or all of such benefit. Each such
designation shall revoke all
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prior designations by the same Participant, shall be in a form prescribed by the
Committee during the Participant's lifetime. If the Participant's designated
beneficiary predeceases the Participant or no beneficiary has been designated,
benefits remaining unpaid at the Participant's death shall be paid to the
Participant's spouse or if none, the Participant's estate.
ARTICLE 12. DEFERRALS
The Committee may permit or require a Participant to defer such
Participant's receipt of the payment of cash or the delivery of Shares that
would otherwise be due to such Participant by virtue of the exercise of an
Option or SAR, the lapse or waiver of restrictions with respect to Restricted
Stock/Units, or the satisfaction of any requirements or objectives with respect
to Performance Units/Shares. If any such deferral election is permitted or
required, the Committee shall, in its sole discretion, establish rules and
procedures for such deferrals. Notwithstanding the foregoing, the Committee in
its sole discretion may defer payment of cash or the delivery of Shares that
would otherwise be due to a Participant under the Plan if such payment or
delivery would result in compensation not deductible by the Company or an
Affiliate by virtue of Code Section 162(m). Such a deferral may continue until
the payment or delivery would result in compensation deductible by the Company
under Code Section 162(m).
ARTICLE 13. RIGHTS OF EMPLOYEES
13.1 Employment. Nothing in the Plan shall interfere with or limit in any
way the right of the Company or any Affiliate to terminate any Participant's
employment at any time, or confer upon any Participant any right to continue in
the employ of the Company or any Affiliate.
13.2 Participation. No Eligible Employee shall have the right to be
selected to receive an Award under this Plan, or, having been so selected, to be
selected to receive a future Award.
ARTICLE 14. CHANGE IN CONTROL
14.1 Treatment of Outstanding Awards. Upon the occurrence of a Change in
Control, unless otherwise specifically prohibited under applicable laws, or by
the rules and regulations of any governing governmental agencies or national
securities exchanges:
(a) Any and all outstanding Options and SARs granted hereunder shall
become immediately exercisable, and shall remain exercisable throughout
their entire term.
(b) Any Periods of Restriction and restrictions imposed on Restricted
Stock/Units shall lapse; provided, however, that the degree of vesting
associated with Restricted Stock/Units which has been conditioned upon the
achievement of performance conditions pursuant to Section 8.4 herein shall
be determined in the manner set forth in Section 14.1(c) herein.
(c) Except as otherwise provided in the Award Agreement, the vesting
of all Performance Units and Performance Shares shall be accelerated as of
the effective date of the Change in Control, and there shall be paid out in
cash to Participants within thirty days following the effective date of the
Change in Control a pro rata amount based upon an assumed achievement of
all relevant performance objectives at target levels, and upon the length
of time within the Performance Period which has elapsed prior to the
effective date of the Change in Control; provided, however, that in the
event the Committee determines that actual performance to the effective
date of the Change in Control exceeds target levels, the prorated payouts
shall be made at levels commensurate with such actual performance
(determined by extrapolating such actual performance to the end of the
Performance Period), based upon the length of time within the Performance
Period which has elapsed prior to the effective date of the Change in
Control.
14.2 Termination, Amendment, and Modifications of Change in-Control
Provisions. Notwithstanding any other provision of this Plan or any Award
Agreement provision, the provisions of this Article 14 may not be terminated,
amended, or modified on or after the effective date of a Change in Control to
affect adversely any Award theretofore granted under the Plan without the prior
written consent of the Participant with respect to said Participant's
outstanding Awards.
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ARTICLE 15. AMENDMENT, MODIFICATION AND TERMINATION
15.1 Amendment, Modification and Termination. Subject to Section 14.2
herein, the Board may at any time and from time to time, alter, amend, modify or
terminate the Plan in whole or in part.
Subject to the terms and conditions of the Plan, the Committee may modify,
extend or renew outstanding Awards under the Plan, or accept the surrender of
outstanding Awards (to the extent not theretofore exercised) and grant new
Awards in substitution therefor (to the extent not theretofore exercised). The
Committee shall not, however, modify any outstanding Incentive Stock Option so
as to specify a lower Exercise Price. Notwithstanding the foregoing, no
modification of an Award shall, without the consent of the Participant, alter or
impair any rights or obligations under any Award theretofore granted under the
Plan.
15.2 Adjustment of Awards Upon the Occurrence of Certain Unusual or
Nonrecurring Events. The Committee may make adjustments in the terms and
conditions of, and the criteria included in, Awards in recognition of unusual or
nonrecurring events (including, without limitation, the events described in
Section 4.3 hereof) affecting the Company or the financial statements of the
Company or of changes in applicable laws, regulations, or accounting principles,
whenever the Committee determines that such adjustments are appropriate in order
to prevent dilution or enlargement of the benefits or potential benefits
intended to be made available under the Plan, subject to the requirements of
Code Section 162(m) for the Performance-Based Exception in the case of Awards
designed to qualify for the Performance-Based Exception.
15.3 Awards Previously Granted. No termination, amendment or modification
of the Plan shall adversely affect in any material way any Award previously
granted under the Plan, without the written consent of the Participant holding
such Award.
15.4 Compliance with Code Section 162(m). Awards relating to years after
1996, when Code Section 162(m) is applicable, shall comply with the requirements
of Code Section 162(m); provided, however, that in the event the Committee
determines that such compliance is not desired with respect to any Award or
Awards available for grant under the Plan, then compliance with Code Section
162(m) will not be required. In addition, in the event that changes are made to
Code Section 162(m) to permit greater flexibility with respect to any Award or
Awards available under the Plan, the Committee may, subject to this Article 15,
make any adjustments it deems appropriate.
ARTICLE 16. WITHHOLDING
16.1 Tax Withholding. The Company shall have the power and the right to
deduct or withhold, or require a Participant to remit to the Company, an amount
(either in cash or Shares) sufficient to satisfy federal, state, and local
taxes, domestic or foreign, required by law or regulation to be withheld with
respect to any taxable event arising as a result of this Plan.
16.2 Share Withholding. With respect to withholding required upon the
exercise of Options or SARs, upon the lapse of restrictions on Restricted Stock,
or upon any other taxable event arising as a result of Awards granted hereunder,
the Company may satisfy the minimum withholding requirement for supplemental
wages, in whole or in part, by withholding Shares having a Fair Market Value
(determined on the date the Participant recognizes taxable income on the Award)
equal to the withholding tax required to be collected on the transaction. The
Participant may elect, subject to the approval of the Committee, to deliver the
necessary funds to satisfy the withholding obligation to the Company, in which
case there will be no reduction in the Shares otherwise distributable to the
Participant.
ARTICLE 17. INDEMNIFICATION
Each person who is or been a member of the Committee, or of the Board,
shall be indemnified and held harmless by the Company against and from any loss,
cost, liability, or expense that may be imposed upon or reasonably incurred by
such person in connection with or resulting from any claim, action, suit, or
proceeding to which such person may be a party or in which such person may be
involved by reason of any action taken or failure to act under the Plan and
against and from any and all amounts paid by such person in a settlement
12
<PAGE> 13
approved by the Company, or paid by such person in satisfaction of any judgment
in any such action, suit, or proceeding against such person, provided such
person shall give the Company an opportunity, at its own expense, to handle and
defend the same before such person undertakes to handle and defend it. The
foregoing right of indemnification shall not be exclusive of any other rights of
indemnification to which such persons may be entitled under the Company's
Articles of Incorporation or By-Laws, as a matter of law, or otherwise, or any
power that the Company may have to indemnify them or hold them harmless.
ARTICLE 18. SUCCESSORS
All obligations of the Company under the Plan or any Award Agreement with
respect to Awards granted hereunder shall be binding on any successor to the
Company, whether the existence of such successor is the result of a direct or
indirect purchase of all or substantially all of the business and/or assets of
the Company, or a merger, consolidation, or otherwise.
ARTICLE 19. LEGAL CONSTRUCTION
19.1 Gender and Number. Except where otherwise indicated by the context,
any masculine term used herein also shall include the feminine; the plural shall
include the singular and the singular shall include the plural.
19.2 Severability. In the event any provision of the Plan shall be held
illegal or invalid for any reason, the illegality or invalidity shall not affect
the remaining parts of the Plan, and the Plan shall be construed and enforced as
if the illegal or invalid provision had not been included.
19.3 Requirements of Law. The granting of Awards and the issuance of Share
and/or cash payouts under the Plan shall be subject to all applicable laws,
rules, and regulations, and to such approvals by any governmental agencies or
national securities exchanges as may be required.
19.4 Securities Law Compliance. With respect to any individual who is, on
the relevant date, an officer, director or ten percent beneficial owner of any
class of the Company's equity securities that is registered pursuant to Section
12 of the Exchange Act, all as defined under Section 16 of the Exchange Act,
transactions under this Plan are intended to comply with all applicable
conditions of Rule 16b-3 under the Exchange Act, or any successor rule. To the
extent any provision of the Plan or action by the Committee fails to so comply,
it shall be deemed null and void, to the extent permitted by law and deemed
advisable by the Committee.
19.5 Awards to Foreign Nationals and Employees Outside the United
States. To the extent the Committee deems it necessary, appropriate or desirable
to comply with foreign law of practice and to further the purposes of this Plan,
the Committee may, without amending the Plan, (i) establish rules applicable to
Awards granted to Participants who are foreign nationals, are employed outside
the United States, or both, including rules that differ from those set forth in
this Plan, and (ii) grant Awards to such Participants in accordance with those
rules.
19.6 Unfunded Status of the Plan. The Plan is intended to constitute an
"unfunded" plan for incentive and deferred compensation. With respect to any
payments or deliveries of Shares not yet made to a Participant by the Company,
nothing contained herein shall give any rights that are greater than those of a
general creditor of the Company. The Committee may authorize the creation of
trusts or other arrangements to meet the obligations created under the Plan to
deliver Shares or payments hereunder consistent with the foregoing.
19.7 Governing Law. To the extent not preempted by federal law, the Plan,
and all agreements hereunder, shall be construed in accordance with and governed
by the laws of the State of Delaware.
13
<PAGE> 1
EXHIBIT 10.21
LEAR CORPORATION
OUTSIDE DIRECTORS COMPENSATION PLAN
<PAGE> 2
LEAR CORPORATION
OUTSIDE DIRECTORS COMPENSATION PLAN
ARTICLE 1. ESTABLISHMENT, OBJECTIVES AND DURATION
1.1 ESTABLISHMENT OF THE PLAN. Lear Corporation, a Delaware
corporation, hereby establishes a compensation plan for outside directors to be
known as the "Lear Corporation Outside Directors Compensation Plan"
(hereinafter referred to as the "Plan"), as set forth in this document.
The Plan shall become effective as of July 1, 1997 (the " Effective
Date") and shall remain in effect as provided in Section 1.3 hereof.
1.2 PLAN OBJECTIVES. The objectives of the Plan are to give
the Company an advantage in attracting and retaining Directors and to link the
interests of Outside Directors to those of the Company's stockholders.
1.3 DURATION OF THE PLAN. The Plan shall commence on the
Effective Date, as described in Section 1.1 hereof, and shall remain in effect
until the Board of Directors terminates the Plan pursuant to Section 6.1.
ARTICLE 2. DEFINITIONS
Whenever used in the Plan, the following terms shall have the meanings
set forth below, and when the meaning is intended, the initial letter of the
word shall be capitalized:
2.1 "AFFILIATES" means, with respect to any person, any other
person which, directly or indirectly, is in control of, is controlled by, or is
under common control with, such person.
2.2 "ANNUAL RETAINER" means the retainer fee established by the
Board in accordance with Section 5.1 and paid to an Outside Director for
services performed as a member of the Board of Directors for a Plan Year.
2.3 "BOARD" or "BOARD OF DIRECTORS" means the Board of
Directors of the Company.
2.4 "COMPANY" means Lear Corporation, a Delaware corporation,
and any successor thereto as provided in Section 6.4 herein.
2.5 "DIRECTOR" means any individual who is a member of the
Board of Directors.
2.6 "EFFECTIVE DATE" shall have the meaning ascribed to such
term in Section 1.1 hereof.
2.7 "EXCHANGE ACT" means the Securities Exchange Act of 1934,
as amended from time to time, or any successor act thereto.
-2-
<PAGE> 3
2.8 "FAIR MARKET VALUE" means:
(a) the price at which publicly traded Shares are purchased
(pursuant to Sections 5.1 and 6.2) on the national
securities exchange on which the Shares are listed; and
(b) if not so purchased, as determined by the Board of
Directors.
2.9 "INSTALLMENT PAYMENT" shall have the meaning ascribed to
such term in Section 5.1.
2.10 "MEETING FEE" means the fee established by the Board in
accordance with Section 5.2 and paid to an Outside Director for attendance at
meetings of (a) the Board of Directors and (b) any committee of the Board which
is not held on the same day as a Board meeting.
2.11 "OUTSIDE DIRECTOR" means a Director who during his or her
entire term as a Director was not an employee of the Company, Lehman Brothers,
Inc. or any of their respective Affiliates.
2.12 "PLAN" shall have the meaning ascribed to such term in
Section 1.1 hereof.
2.13 "PLAN YEAR" means (a) for 1997, the period beginning on
July 1 and ending on December 31 and (b) after 1997, the twelve month period
beginning on January 1 and ending on December 31.
2.14 "SHARES" means the shares of common stock, $.01 par value,
of the Company.
ARTICLE 3. ADMINISTRATION
3.1 THE BOARD OF DIRECTORS. The Plan shall be administered by
the Board of Directors. The Board of Directors shall act by a majority of its
members at the time in office and eligible to vote on any particular matter,
and such action may be taken either by a vote at a meeting or in writing
without a meeting.
3.2 AUTHORITY OF THE BOARD OF DIRECTORS. Except as limited by
law and subject to the provisions herein, the Board of Directors shall have
full power to: construe and interpret the Plan and any agreement or instrument
entered into under the Plan; establish, amend or waive rules and regulations
for the Plan's administration; and amend the terms and conditions of the Plan.
Further, the Board of Directors shall make all other determinations which may
be necessary or advisable for the administration of the Plan. As permitted by
law and consistent with Section 3.1, the Board of Directors may delegate its
authority as identified herein.
3.3 DECISIONS BINDING. All determinations and decisions made
by the Board of Directors pursuant to the provisions of the Plan shall be
final, conclusive and binding on all persons, including the Company, its
stockholders, all Affiliates, Outside Directors and their estates and
beneficiaries.
-3-
<PAGE> 4
ARTICLE 4. ELIGIBILITY
Each Outside Director of the Board during a Plan Year shall
participate in the Plan for that year.
ARTICLE 5. COMPENSATION
5.1 ANNUAL RETAINER. Each Outside Director shall be entitled
to receive an Annual Retainer in such amount as shall be determined from time
to time by the Board. Until changed by resolution of the Board of Directors,
the Annual Retainer shall be $24,000.
The Annual Retainer shall be paid in four equal installments (the
"Installment Payments") as of the first business day of each calendar quarter to
each Outside Director on that date. Each Installment Payment to an Outside
Director shall equal the quotient of the Outside Director's Annual Retainer
divided by four. Any Outside Director who first becomes an Outside Director
during a calendar quarter shall be entitled to an Installment Payment for that
calendar quarter. Such an Installment Payment shall be paid as soon as
administratively feasible after the individual becomes an Outside Director.
Installment Payments shall be paid one-half in Shares, with the value
of any fractional Shares paid in cash, and one-half in cash. Notwithstanding
the foregoing, each Installment Payment to an Outside Director during a Plan
Year shall be paid solely in Shares if either (a) the Outside Director elects
in writing, or (b) the Outside Director fails on the last day of the preceding
Plan Year to satisfy the stock ownership guidelines for Outside Directors
established from time to time by the Board of Directors. The number of Shares
delivered as an Installment Payment under this Section shall equal the quotient
of (i) the portion of the Outside Director's Installment Payment for that
quarter to be paid in Shares, divided by (ii) the Fair Market Value of a Share
on the date the Installment Payment is made.
5.2 MEETING FEE. Each Outside Director shall be entitled to
receive a Meeting Fee, in such amount as shall be determined from time to time
by the Board, for each meeting he or she attends (including telephonic meetings
but excluding execution of unanimous written consents) of the Board of
Directors and each meeting of a Board committee, provided, that such meeting is
not held on the same day as a Board meeting. Until changed by resolution by
the Board of Directors, the Meeting Fee shall be $1,000. The Meeting Fee shall
be paid in quarterly cash payments for the meetings, if any, attended during
the previous quarter.
ARTICLE 6. MISCELLANEOUS
6.1 MODIFICATION AND TERMINATION. The Board may at any time
and from time to time, alter, amend, modify or terminate the Plan in whole or
in part.
6.2 SHARES SUBJECT TO THE PLAN. Unless determined otherwise by
the Board of Directors, Shares subject to this Plan shall be made available
from Shares purchased on the open market.
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<PAGE> 5
6.3 INDEMNIFICATION. Each person who is or has been a member
of the Board shall be indemnified and held harmless by the Company against and
from any loss, cost, liability, or expense that may be imposed upon or
reasonably incurred by such person in connection with or resulting from any
claim, action, suit, or proceeding to which such person may be a party or in
which such person may be involved by reason of any action taken or failure to
act under the Plan and against and from any and all amounts paid by such person
in a settlement approved by the Company, or paid by such person in satisfaction
of any judgment in any such action, suit, or proceeding against such person,
provided such person shall give the Company an opportunity, at its own expense,
to handle and defend the same before such person undertakes to handle and
defend it. The foregoing right of indemnification shall not be exclusive of
any other rights of indemnification to which such persons may be entitled under
the Company's Certificate of Incorporation or By-Laws, as a matter of law, or
otherwise, or any power that the Company may have to indemnify them or hold
them harmless.
6.4 SUCCESSORS. All obligations of the Company under the Plan
with respect to a current Plan Year shall be binding on any successor to the
Company, whether the existence of such successor is the result of a direct or
indirect purchase of all or substantially all of the business and/or assets of
the Company, or a merger, consolidation, or otherwise.
6.5 RESERVATION OF RIGHTS. Nothing in this Plan shall be
construed to limit in any way the Board's right to remove an Outside Director
from the Board of Directors.
ARTICLE 7. LEGAL CONSTRUCTION
7.1 GENDER AND NUMBER. Except where otherwise indicated by the
context, any masculine term used herein also shall include the feminine; the
plural shall include the singular and the singular shall include the plural.
7.2 SEVERABILITY. In the event any provision of the Plan shall
be held illegal or invalid for any reason, the illegality or invalidity shall
not affect the remaining parts of the Plan, and the Plan shall be construed and
enforced as if the illegal or invalid provision had not been included.
7.3 REQUIREMENTS OF LAW. The issuance of Share and/or cash
payouts under the Plan shall be subject to all applicable laws, rules, and
regulations, and to such approvals by any governmental agencies or national
securities exchanges as may be required.
7.4 SECURITIES LAW COMPLIANCE. To the extent any provision of
the Plan or action by the Board would subject any Outside Director to liability
under Section 16(b) of the Exchange Act, it shall be deemed null and void, to
the extent permitted by law and deemed advisable by the Board.
7.5 UNFUNDED STATUS OF THE PLAN. The Plan is intended to
constitute an "unfunded" plan. With respect to any payments or deliveries of
Shares not yet made to an Outside Director by the Company, nothing contained
herein shall give any rights that are greater than those of a general creditor
of the Company.
-5-
<PAGE> 6
7.6 GOVERNING LAW. The Plan shall be construed in accordance
with and governed by the laws of the State of Delaware, determined without
regard to its conflict of law rules.
-6-
<PAGE> 1
EXHIBIT 10.23
SHARE PURCHASE AGREEMENT
This Agreement as of 22 November, 1996, by and between
1. Borealis Holding AB, 556182-5174, 444 86 Stenungsund, Sweden
("Seller")
2. Lear Corporation Sweden AB, 556410-5673, Box 942,
461 29 Trollhattan, Sweden
("Buyer")
____________
BACKGROUND
Borealis Industrier AB (the "Company"), a company duly organized and validly
existing under the laws of Sweden with Swedish corporate registration number
556034-7634, is on its own and through its Subsidiaries engaged principally in
business related to developing, manufacturing and marketing polymer systems and
components for the automotive industry.
Seller owns all of the issued and outstanding capital stock of the Company,
which consists of 33,300 shares, each having a par value of SEK 1,000
(collectively, the "Shares").
Seller wishes to sell the Shares.
Buyer is inter alia engaged in business related to the automotive industry,
principally the development, manufacturing and marketing of automotive seating,
interior and similar products.
Buyer wishes to buy the Shares.
The parties have therefore entered into the following agreement.
<PAGE> 2
2
DEFINITIONS
In this agreement, the following terms will have the following meanings
(equally applicable to the singular and plural forms):
"Accounting Principles" means the accounting principles applied by Company and
Subsidiaries, as defined below, which principles are reflected in the Audited
Financial Statements and are in accordance with applicable laws and the
generally accepted accounting principles in Sweden ("god redovisningssed").
"Accounts" means the consolidated balance sheets and profit and loss statements
of the Group as of 30 June 1996, including the Auditors report 1996-07-11,
prepared in accordance with the Accounting Principles and annexed as Appendix
1.
"Affiliates" means the companies listed in Appendix 2.
"Agreement" means this share purchase agreement including all appendices and
exhibits, all as may be amended in writing from time to time.
"Audited Financial Statements" means the audited consolidated financial
statements, including the balance sheet and profit and loss statement, with
notes, of Company and each of Subsidiaries, except for Tanum Komponenter AB, as
of 31 December 1995 prepared in accordance with the Accounting Principles and
certified by the external auditors of Company, Appendix 3.
"Buyer" has the meaning set forth in the introductory paragraph.
"Closing" means the closing of the sale and the purchase of the Shares in
accordance with section 2.
"Closing Date" means the tenth business day after the date on which the
condition in section 2.2.c and 2.3 is met and provided that the conditions in
section 2.2.a and 2.2.b are met on such date, or such later day as may be
agreed in writing.
<PAGE> 3
3
"Company" has the meaning set forth in the background paragraph.
"Force Majeure" means any event occurring outside the normal course of business
which is (i) beyond the direct control of Company or Subsidiaries and (ii) not
adequately covered by insurance, the consequence of which is so adverse to the
financial condition, business or operations of the Group as to substantially
frustrate the normal commercial activities of the Group including without
limitation but subject to the foregoing qualifications an inadequately insured
major and sudden environmental occurrence, explosion, fire or catastrophe at
the premises of Company or any of Subsidiaries, the effect of which would
decommission a substantial portion of the production for an extended period,
war, hostilities, invasion, rebellion, general labour walkouts by the personnel
of the Group or a significant proportion of them, not caused by an act of
Buyer, contamination, or natural catastrophe such as earthquake or similar
occurrence.
"Group" means Company and Subsidiaries.
"Lien" means any lien, security interest, charge, mortgage or other similar
encumbrance.
"Material Adverse Effect" means any material adverse change in, or material
adverse effect on, the financial condition, business or operations of the Group
taken as a whole and for these purposes such a change or effect would be
material if the resulting net loss or damage exceeds SEK 1,000,000.
"Material Agreements" has the meaning set forth in section 3.22.
"Parties" means Seller and Buyer.
"Purchase Price" has the meaning set forth in section 1.
"Seller" has the meaning set forth in the introductory paragraph.
"Seller Affiliates" means companies within the Borealis A/S group of companies,
except the Group.
<PAGE> 4
4
"Seller's knowledge" means the knowledge of the directors and management of
Seller and the knowledge of the management team, the site managers, the
environmental officers and the financial officers of the Group.
"Shares" has the meaning set forth in the background paragraph.
"Subsidiaries" means the direct and indirect owned subsidiaries of Company
listed in Appendix 4.
"Taxes" has the meaning set forth in section 3.12.
__________
1. PURCHASE PRICE
1.1 The Purchase Price for the Shares shall be SEK four hundred sixty nine
million (469,000,000)
The Purchase Price shall be paid at Closing in readily available funds in
Swedish kronor to the bank account designated by Seller at the latest ten
(10) days prior to the Closing and in accordance with section 2 below.
1.2 EQUITY
The Group's equity as per 27 October 1996 will be SEK two hundred fifty
four million four hundred thousand (254,400,000) whereby the result for
the period 1 January - 27 October 1996 will (independent whether a profit
or a loss) be adjusted with a tax rate at 28 % on taxable profits and on
tax deductible losses. Should the equity as of 27 October 1996 differ
from the amount of SEK 254,400,000, the Purchase Price will be adjusted
by such difference as set forth in paragraph 1.4 below.
Equity shall mean restricted equity consisting of share capital and
restricted reserves as of 31 December 1995 to which shall be added
profit/loss brought forward and profit/loss for 1996 up to and including
27 October 1996.
<PAGE> 5
5
1.3 CLOSING AUDIT
1.3.1 Seller and Buyer will together with representatives from Company and in
consultation with Company's auditors and the auditors nominated by Buyer
establish a complete balance sheet for the Group as per 27 October 1996
("Closing Audit") by the later of 27 November 1996 and thirty (30) days
after Closing.
1.3.2 The Closing Audit - which forms the basis for the establishment of the
Group's equity as per 27 October 1996 according to Section 1.2 above -
will be established in accordance with the Accounting Principles.
If Company's costs for the period 1 January - 27 October 1996 includes
costs incurred under the divestiture agreement with Applied Composites
AB greater than MSEK 8.0 (which amount has been included in the
calculation of the MSEK 254.4 amount) only 75 % of the excess amount
shall be included in the result calculation for the said period forming
part of the Closing Audit.
In the Company's costs for the period 1 January - 27 October 1996 will
only be included costs incurred under the divestiture agreement with
Seitz Skandinavien AB greater than SEK 300,000 (which amount has been
included in the calculation of the MSEK 254.4 amount).
Any difference from the book value of the value of the real properties
Granaten 28, Tidaholm, Sibbarp 24:1, Eslov and Assarebyn 1:15,
Fargelanda, shall not affect the establishment of the Group's equity as
per 27 October 1996.
1.3.3 The Closing Audit will be audited by the current auditors of Company and
the auditors nominated by Buyer. The auditors will not later than 30 days
after the establishment of the Closing Audit jointly render their opinion
concerning the equity of the Group according to the Closing Audit. Should
the auditors not be able to
<PAGE> 6
6
render a joint opinion concerning the equity, the value will finally be
established by a third party auditor nominated by the above mentioned
auditors or if such auditors could not agree on a third party auditor, by
an auditor appointed at either Party's request by the Stockholm Chamber
of Commerce which auditor shall be a member of the Association of
Authorised Auditors (FAR, Foreningen Auktoriserade Revisorer). The equity
established by the third party auditor shall be presented no later than
thirty (30) days after the appointment of such third party auditor.
1.3.4 Time limits provided for in 1.3.1 - 1.3.3 above shall be adjusted by
such time as may be deemed reasonable by the auditors.
1.4 PURCHASE PRICE ADJUSTMENTS
1.4.1 The Purchase Price will be adjusted by an amount equal to the
difference between the equity as per 27 October 1996 set forth
according to the Closing Audit established under 1.3 above and the
equity amount SEK 254,400,000 according to 1.2 above.
1.4.2 Settlement of the Purchase Price adjustment according to Section
1.4.1 above, will be carried out within ten (10) business days from
the presentation of the established equity. The established
adjustment amount will carry an interest from Closing in accordance
with 5 Section the Swedish Interest Act up to the due date and in
accordance with 6 Section thereafter.
<PAGE> 7
7
2. CLOSING
2.1 On the terms and subject to the conditions set forth in the Agreement,
Seller hereby agrees to sell the Shares on the Closing Date, and Buyer
hereby agrees to purchase the Shares and to pay to Seller the Purchase
Price.
On execution and delivery of this Agreement Seller will deliver to Buyer
evidence reasonably satisfactory to Buyer of the authority of any person
signing for Seller's behalf and Buyer will deliver to Seller evidence
reasonably satisfactory to Seller of the authority of any person signing
on its behalf.
On the delivery by Seller to Buyer of the stock certificates
representing the Shares, Buyer will have full title to and ownership of
the Shares, free and clear of any and all Liens other than Liens Buyer
created.
The Closing will take place on the Closing Date in the offices of
Lagerlof & Leman in Brussels, Belgium, at 11.00 am.
2.2 CONDITIONS TO BUYER'S OBLIGATIONS
Buyer's obligations to proceed to Closing in accordance with the terms
of this Agreement will at Buyer's option be subject to the following
conditions:
(a) no Force Majeure or other event has occured which fundamentally
changes the conditions and the prerequisites for this Agreement,
and which could not have been foreseen at signing hereof and which
is not due to events caused by Buyer.
(b) no withdrawal has been made by a third party of its consent,
comfort or quiet enjoyment required and given as agreed between
the parties prior to signing, provided the withdrawal is not
caused by Buyer.
(c) the Swedish Competition Authority (i) having issued an order
declaring that it will not challenge the sale or any terms of
<PAGE> 8
8
this Agreement, or (ii) having permitted 30 days to elapse after
notification of the transaction(s) contemplated by this Agreement
to it without initiating a special investigation provided that,
for the avoidance of doubt, in the event of any challenge by the
Swedish Competition Authority to any of the terms of this
Agreement, the provisions of section 2.8 shall apply.
2.3 CONDITIONS TO SELLER'S OBLIGATIONS
Seller's obligations to proceed with the Closing in accordance with the
terms of this Agreement will be subject to the Swedish Competition
Authority (i) having issued an order declaring that it will not
challenge the sale or any terms of this Agreement, or (ii) having
permitted 30 days to elapse after notification of the transaction(s)
contemplated by this Agreement to it without initiating a special
investigation provided that, for the avoidance of doubt, in the event of
any challenge by the Swedish Competition Authority to any of the terms
of this Agreement, the provisions of section 2.8 shall apply.
2.4 BEST EFFORTS
Each party agrees to use its best efforts to cause the conditions
precedent to its own obligations to be fulfilled as soon as possible.
2.5 NON-OCCURRENCE
If Closing has not occurred by 15 December 1996, due to the
nonfulfillment of the conditions described in Sections 2.2 or 2.3 above,
this Agreement will, on the expiry of the said date, and provided that
none of the Parties is in breach of its obligations under section 2.4
above and that the other party does not waive such obligation in
writing, terminate and become void without either party having any
liability towards the other.
If Closing has not duly occurred by reason of Buyer's or Seller's
breach of its obligations hereunder, the non-defaulting party may
terminate the Agreement and such termination will be without prejudice
to the rights of the non-defaulting party to recover
<PAGE> 9
9
damages and/or, in its discretion, to obtain any other available
remedies, such as specific performance.
2.6 AT CLOSING
At Closing;
(a) Seller will deliver to Buyer duly endorsed in blank share
certificates in respect of the Shares and all shares of
Subsidiaries and owned shares in Affiliates according to Appendix 2
with all dividend rights (if any) attached thereto.
(b) Seller will cause Company to make the share ledger of
Company available to Buyer;
(c) A certificate in approved terms signed by Seller confirming
that as far as Seller is aware all conditions to Closing are
fulfilled.
(d) Each party will deliver to the other all certificates and
other documents required to be delivered by such party under this
Agreement.
2.7 SHAREHOLDERS MEETING
At Closing an Extraordinary General Meeting of Company's shareholders
shall be held by Buyer in order to elect a new Board of Directors chosen
by Buyer.
2.8 MODIFICATION
If the Swedish Competition Authority should request or require that any
provision or part thereof of this Agreement or other documents hereunder
be terminated, deleted or amended, the Parties will negotiate in good
faith with each other and with that authority with a view to modifying
any such provision in a manner which as closely as reasonably
practicable reflects the commercial objectives and effect of the
transaction contemplated hereby but for the avoidance of doubt, no party
will have any legally binding obligation to so agree provided that Buyer
or Seller, as the case
<PAGE> 10
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may be, will have the right to waive any provision, that is for the
benefit of such waiving party, in order to satisfy the conditions of
this Agreement.
3. REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Buyer the following and acknowledges
that Buyer has entered into this Agreement in reliance on the
representations and warranties. All such representations and warranties
are true, complete and accurate as of the date hereof and will be true,
complete and accurate in all material respects on Closing Date as if
each had been made as of the Closing Date. It is, however, understood
that if a specific representation refers to a specific date such
representation would apply to such date only. The warranties are
continuing warranties and will not merge on Closing but will remain in
full force and effect.
3.1 SELLERS TITLE TO THE SHARES; SUBSIDIARIES
Seller owns and has good and marketable title to the Shares, free and
clear of all Liens. The Shares are fully transferable to Buyer.
Company owns directly or indirectly and has good and marketable title
directly or indirectly to all the outstanding shares of Subsidiaries and
to the number of shares of Affiliates, as set forth in Exhibit 3.1 a.
The Shares and the outstanding shares of Subsidiaries and Affiliates
directly or indirectly owned by Company have been duly authorized,
legally and validly issued and are fully paid. No convertible
debentures, warrants or other securities of Company or any Subsidiary or
Affiliate are issued and outstanding.
Other than set forth in Exhibit 3.1.b there is no legal, audit or any
other requirement for Seller or any shareholder in the Group to pay any
additional capital into Company, Subsidiaries or Affiliates.
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3.2 NO CONFLICT
Subject to section 7, the execution of this Agreement, the consummation
of the transaction(s) contemplated and the fulfilment of its terms will
not result in a breach of any applicable law, any judgement, decree or
order of any court, governmental body or authority applicable to Seller,
Company, any Subsidiary or any Affiliate, or the articles of association
of Seller, Company, any Subsidiary or any Affiliate, or, to the best of
Seller's knowledge, any applicable competition rules.
3.3 NO VIOLATION/CHANGE OF CONTROL
Except as disclosed in Exhibit 3.3, neither this Agreement, nor the
transaction(s) contemplated herein are in violation of the articles of
association or other organizational instruments of Company or
Subsidiaries or will, in accordance with the terms of any Material
Agreement, constitute a breach of or an event of default under such
agreement to which Seller or Company or any Subsidiary is a party or to
which any of its assets are bound, or will, in accordance with its terms
modify in any way the rights and obligations of any of the parties
thereto.
3.4 ORGANIZATION AND EXISTENCE
Each of Company, Subsidiaries and Affiliates is duly organized and
validly existing under the laws of its jurisdiction, and has the legal
capacity and corporate authority to own its property and carry on its
business as now conducted and is not in breach of its articles of
association.
3.5 ASSETS
Each of Company and Subsidiaries has right of use of the material assets
and properties used in and necessary for the conduct of its business
either as owner, holder of customer owned tools or as lessee and such
assets and properties are in good working condition for their intended
use, normal wear and tear excluded and are free and clear of any Lien,
other than reservations of title provided for in contracts or the
relevant invoices for the purchase
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of goods entered into in the ordinary course of business and other than
Liens reflected in the Accounts and the Audited Financial Statements.
There is no cancellation or other material obstacle to the deliveries to
be made to and from the Group under existing undertakings and the stocks
of the Group are in good marketable condition and saleable at prices
recorded in the books of the Group.
3.6 REAL PROPERTY
Exhibit 3.6.a sets forth a true and complete list of all real property
and interests in real property owned or otherwise held, directly or
indirectly (including sale and leaseback transactions entered into), by
Company Subsidiaries. The Property owned by Company and Subsidiaries, is
held free and clear of all Liens or rights of third parties except as
set forth in Exhibit 3.6.a.
Exhibit 3.6.b is a complete list of all leases to third parties by
Company and Subsidiaries.
Exhibit 3.6.c attached hereto is a true and complete list of all leases,
subleases, and other agreements under which Company and Subsidiaries use
or occupy or have the right to use and/or occupy any real property.
No real estate or leasehold interest, owned, leased, occupied or used by
Company, any Subsidiary or any Affiliate, is subject to any official or
governmental complaint or notice of violation of any applicable zoning
or building code.
Except as set forth in Exhibit 3.6.b and c, neither Company nor
Subsidiaries whether as tenant or landlord is in default in any material
respect under any real property lease and no written claim of any
default thereunder has been received by Seller which has not been cured.
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3.7 INSURANCE
Each of Company and Subsidiaries is fully insured according to normal
business practice either by way of global policy held by Seller or a
Seller Affiliate or by policies listed in Exhibit 3.7.
Nothing has been done or omitted to be done which reasonably would or
might make the policies listed in Exhibit 3.7 void or voidable and all
premiums due have been duly paid and, as of the date of this Agreement,
there is no claim outstanding under such policies.
In addition to the policies listed in Exhibit 3.7, Company and
Subsidiaries are insured under a policy held by Seller or Seller
Affiliate, covering inter alia property damage, interruption and product
liability. Seller will cause this insurance to be maintained up to and
including 30 days after the Closing Date.
Neither Seller nor Company nor Subsidiaries have been notified by any
insurer that it will discontinue the insurance or materially change the
conditions in the insurances listed in Exhibit 3.7 or that Seller,
Company or any Subsidiary is required to or that it is advisable for any
of them to carry out any maintenance, repairs or other work in relation
to any of the assets of Company or Subsidiaries.
3.8 EMPLOYMENT MATTERS
a) Exhibit 3.8.a lists all employees and officers of Company
with a salary in excess of SEK 500.000 per annum including all
benefits.
b) Except as set forth in Exhibit 3.8.b or expressly provided
for in the general and local collective bargaining agreements
applicable to Company and Subsidiaries and their respective
employees, or established or required by Swedish law, there are no
deferred compensation agreements, bonus plans, profit sharing
plans, pension plans, severance or retirement plans, employees
stock option or purchase plans, private life insurance plans or
hospitalization insurance plans in effect
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with respect to any current or former director, officer or other
employee of Company or any Subsidiary.
Neither Company nor any Subsidiary has, effective after 1 July
1996, granted any general wage increase, or adopted any bonus,
profit sharing, pension, savings or other employee benefit plan or
amendment thereto or entered into any employment contracts except
in the ordinary course of business.
Neither Company nor any Subsidiary has any current, future or
contingent liability in respect of current or past employees in
respect of pension or related retirement benefits that are not
either fully insured by a third party, fully funded or fully
provisioned in the Audited Financial Statements and the Accounts
except as indicated in Exhibit 3.8.b.
c) As of signing of this Agreement there is no pending claim
by any current or former Company or Subsidiary director, officer or
employee against Company or any Subsidiary or labour or union
litigation in respect of Company or any Subsidiary. As of signing,
Company and Subsidiaries have not received notice of any
outstanding labour disputes including go-slows, stoppages or
grievances with respect to Company and Subsidiary employees which
would have or result in a Material Adverse Effect. Neither Company
nor any Subsidiary has received notice of any claim that it has not
complied with any employment-, labour- or related laws.
d) Neither Company nor any of Subsidiaries has entered into
reemployment undertakings other than as set forth in Exhibit 3.8.d.
The reemployment undertakings related to Applied Composites AB and
to Seitz Skandinavien AB will not cause Company to incur costs
which would otherwise not be incurred, provided that Company takes
all appropriate measures in case of the execution by a beneficiary
of a reemployment undertaking.
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3.9 FINANCIAL STATEMENTS
Except as otherwise provided in this Agreement and in Exhibit 3.9, and
except for the values of the real estates Granaten 28, Tidaholm, Sibbarp
24:1, Eslov and Assarebyn 1:15, Fargelanda, the Accounts and the Audited
Financial Statements, give an accurate and complete view of Company's
and Subsidiaries' financial condition as of the respective date and the
results of their operations during the respective periods. The Accounts
and the Audited Financial Statements have been prepared in accordance
with the Accounting Principles.
3.10 BOOKS AND RECORDS
All Company and Subsidiary books and records have been properly
maintained in accordance with the legal requirements of Company's and
Subsidiaries' jurisdiction and are, together with all company minutes,
agreements, permits, etc., kept with Company and Subsidiaries
respectively.
3.11 SHAREHOLDER CONTRIBUTIONS
Neither Company nor any Subsidiary has debt or obligation to make a
payment of any kind to Seller or any Seller Affiliate, other than in the
ordinary course of business.
3.12 TAXES
The Audited Financial Statement and the Accounts are correct and contain
adequate reserves for all unpaid real property, personal property,
income, social security, customs, duties and all other taxes and
governmental or authority charges (collectively the "Taxes") for Company
and Subsidiaries, including interest and penalties in respect thereof,
for the financial year ended December 31, 1995, and all fiscal periods
ended prior thereto and for the period 1 January through 30 June 1996.
Company and Subsidiaries have timely and accurately filed all required
returns and reports covering the Taxes and paid all Taxes fallen due.
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3.13 LITIGATION AND CLAIMS
As of signing of this Agreement and except as disclosed in Exhibit 3.13,
there are no civil, criminal or administrative actions or
investigations, litigation or arbitration proceedings pending
irrespective of its kind or, to the best of Seller's knowledge,
threatened, or any claim asserted against Company which individually or
in aggregate could result in a Material Adverse Effect.
3.14 DIVIDENDS
Since 31 December 1995 up to and including Closing, Company has not
declared any dividends, paid any management charges or group
contributions to Seller or Seller Affiliate or made any other
distribution of its profits or unrestricted equity to Seller or Seller
Affiliate or made any disposition to such effect.
3.15 INTELLECTUAL PROPERTY
The conduct by Company and each of Subsidiaries of their present
business activities does not to the best of Seller's knowledge infringe
upon or violate the proprietary rights of any third party.
All know-how, business secrets and other intellectual property rights
which Company and Subsidiaries use or require for the proper conduct of
their business as currently pursued are either vested in Company or
licenced to Company or its Subsidiaries as the case may be.
Neither Company nor any Subsidiary has granted licences or other rights
other than as set forth in Exhibit 3.15.
There is no claim, litigation or legal action as to any such knowhow,
business secret or intellectual property right pending or to the best of
Seller's knowledge anticipated.
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3.16 ENVIRONMENT
At Closing,
a) Company and Subsidiaries have obtained all material permits,
licenses and other authorizations which are required for
operation of their business under any applicable laws, statutes,
directives and regulations ("Environmental Laws") relating to
pollution or protection of public health and the environment,
including laws, rules, regulations, policies or guidelines relating
to emissions, discharges, releases of pollutants, contaminants,
chemicals, or industrial, toxic or hazardous substances or wastes
into the environment (including without limitation ambient air,
surface water, ground water or land), or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage,
disposal, transport, or handling of pollutants, contaminants,
chemicals, industrial, toxic or hazardous substances or wastes or
any other material, the presence of which required investigation or
disclosure under Environmental Laws. (Buyer is aware that the
Ljungby plant is under present application for extended trial
period and the plant in Aviken is consented to by the local
authorities but not formally applied for to such authorities.);
b) Except as provided for above, each of Company and Subsidiaries is
in compliance in all material respects with all required permits,
licenses, decrees, judgments, orders, authorizations and
Environmental Laws. Neither Seller nor Company nor any of
Subsidiaries has received written notice of, any claim, action,
demand, suit, proceeding, hearing, study or investigation,
based on or related to the manufacture, processing, distribution,
storage, disposal, transport, or handling, the emission, discharge
or release into the environment, of any pollutant, contaminant,
chemical, or industrial, toxic or hazardous substance or waste or
any other material, the presence of which requires investigation
or disclosure under Environmental Laws, which have not been
properly discharged of under Environmental Laws applicable as of
signing of this Agreement and which
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could reasonably be expected to have a Material Adverse Effect
on Company and Subsidiaries. There is no civil, criminal or
administrative action, suit, demand, claim, hearing, notice or
demand letter, notice of violation, investigation or proceeding
pending or threatened against Company or Subsidiaries relating to
Environmental Laws or any regulation, code, plan, order, decree,
judgment or injunction promulgated or approved thereunder;
c) All measures required in relation to any pollution created
by any company in the Group has been undertaken in as far as such
measures results from pollution and/or contamination caused by any
company in the Group prior to Closing, and no unsettled claims by
third parties exist for environmental damage caused by a company in
the Group prior to Closing or due to such event which existed at
the time of Closing and which could not have been remedied by
Buyer.
d) As to claims made under this section 3.16 Seller shall be
invited at its own cost to participate in any such investigations
and procedures related thereto and shall at Buyer's request grant
such reasonable assistance as may be deemed required. In addition,
provided that such defense is reasonable, Buyer shall exercise any
defense Seller would ask Buyer to exercise together with Seller
against such investigations and claims.
3.17 BUSINESS ARRANGEMENT
Except as set forth in Exhibit 3.17, neither Company nor any Subsidiary
is bound by any agreement that restrict its business activity or its
disposition of its assets.
3.18 INDEBTEDNESS
Accurate descriptions of (i) all material loan, credit, overdraft
facilities agreements and (ii) other indebtedness, incurred outside the
ordinary course of business, and (iii) Company and Subsidiary securities
pledged therefor, are set forth in Exhibit 3.18.
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3.19 ACCOUNT RECEIVABLE
Except as set forth in Exhibit 3.19, all accounts receivable shown in
the Accounts are good and collectible in the ordinary course of
business.
3.20 COMPLIANCE WITH LAW
In respect of issues other than environmental which have been
specifically addressed under section 3.16, Company and Subsidiaries are
in compliance with, and are not in default or violation in any respect
of any applicable law, regulation, permit or ordinance affecting its
properties or the operation of its businesses, where such non-compliance
individually or in the aggregate could have a Material Adverse Effect.
3.21 INTER-COMPANY ARRANGEMENTS
As of Closing, all amounts owed to Company or Subsidiaries by Seller or
any Seller Affiliate, except for those relating to purchases of products
under market terms and contractual conditions normal in the ordinary
course of business, will have been paid. All guarantees given by or
binding on Company or any Subsidiaries in respect of any or obligations
of Seller or any Seller Affiliate will have been fully and effectively
released without any payment or other consideration for such release by
Company or Subsidiaries. Except as set forth in Exhibit 3.21, there are
no agreements, guarantees, indemnity arrangements or other rights,
obligations or debts between Company or any Subsidiary on the one hand
and Seller, any Seller Affiliate or any Affiliate on the other hand
other than in the ordinary course of business.
3.22 MATERIAL AGREEMENTS
3.22.1 In this Agreement "Material Agreement" means all binding
contracts, agreements, understandings or obligation as amended,
supplemented or modified, whether oral or written, (in this Section
"Contracts") which fulfil any of the criteria described below to
which any of Company and Subsidiaries
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(in this Section "the Companies") is a party, and provided
the loss of such Contract would have a Material Adverse Effect.
(i) Each Contract which involves performance of service or
delivery of goods and/or materials by any of the Companies of an
amount or value in excess of SEK 1,000,000;
(ii) Each finance or equipment lease, rental agreement, licence,
instalment and conditional sale agreement in relation to any
property, except such Contracts having a value per item or
aggregate payments in any one year of less than SEK 1,000,000.
(iii) Each joint venture contract, partnership arrangement,
research and development agreement or other Contract involving a
sharing of profits, losses, costs, or liabilities by any of the
Companies with any other person which Contract accounts for more
than SEK 1,000,000.
(iv) Those agreements listed in Exhibit 3.18 under section 3.18.
(v) Each written warranty, guarantee or other similar undertaking
with respect to contractual performance extended by any of the
Companies other than in the ordinary course of business.
3.22.2 Neither Company nor any Subsidiary is liable or potentially liable
under any binding guarantee other than guarantees within the Group
and guarantees listed in the Audited Financial Statement and in
Tanum Komponenter AB's financial statements as of 31 December 1995,
which would if called have a Material Adverse Effect.
3.22.3 All Material Agreements are valid and in full force and effect and
constitute legal, valid and binding obligations of Company and/or
the Subsidiaries and no notice of cancellation or renegotiation has
been given to or received by Company or any of Subsidiaries with
respect to any Material Agreement.
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3.22.4 Except as described in Exhibit 3.22.4 there are no supply or
purchase contracts which are Material Agreements and which cannot
be terminated in accordance with their terms by notice of twelve
months or less.
3.22.5 There are no existing defaults by any party to any Material
Agreements.
3.23 CHANGES SINCE 31 DECEMBER 1995
Except as set forth in Exhibit 3.23, since 31 December 1995 through 30
June 1996 there has not occurred, arisen or been created, any material
change in the business operations or internal conditions (financial or
otherwise) of Company or any Subsidiary, which is not reflected in the
Accounts.
The discontinuation of the manufacturing of mobile cold storages will
not cause the company to incur costs due to the discontinuation of the
production, including but not limited to unnecessary investments,
corresponding to not yet depreciated investments, lay offs and
other closing costs to be taken in direct relation to the cessation of
the production.
Since 30 June 1996 through the date hereof and except as set forth in
Exhibit 3.23.
a) the business and affairs of Company and Subsidiaries have
been conducted and carried on only in the ordinary course of
business;
b) Company and Subsidiaries have not made any change in any
method of accounting practice or policy;
c) there has been no change in the share capital of Company
and Subsidiaries;
d) the Group has not surrendered to Seller or any Seller Affiliate
any of its tax reserve credits and benefits as of January 1, 1996;
and
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e) the Group has not entered into any non arms length employment or
consultant contract(s).
3.24 INTERIM OPERATION
During the period starting on the date of signing of this Agreement and
up to Closing, Seller will cause Company and each of Subsidiaries to be
operated in a prudent manner, in the normal course of its business and
in accordance with the following (except as otherwise authorized in
writing by Buyer):
(i) No dispositions of any significant assets other than in the
ordinary course of business;
(ii) No major expenditures, transactions, commitments, undertaking or
actions outside the normal course of business.
Seller will cause Company and each of Subsidiaries to keep Buyer
contemporaneously informed of any business decisions within the ordinary
course of business, (except for day to day matters) and of other not
insignificant events.
Seller further undertakes to keep Buyer informed of the development of
Company's business by providing Buyer with copies of the Company's
management reports.
Seller will advice Buyer without delay of any anticipated material
adverse change.
Until Closing, Seller will give Buyer and its representatives access
during normal business hours to Company premises and to all relevant
Group books, records and documents and provide to Buyer copies thereof
as requested by Buyer in consultation with the managing director of
Company.
3.25 AFFILIATES
All material information regarding the Affiliates and their businesses
known to Company and Subsidiaries has been
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disclosed to Buyer.
4. INDEMNIFICATION BY SELLER
4.1 SELLER'S INDEMNIFICATION OBLIGATION
a) Subject to the terms of this section, Seller hereby agrees to
indemnify and hold harmless Buyer, Company and each Subsidiary from
any losses, damages, claims, liabilities or expenses directly or
indirectly suffered or incurred by Buyer, Company or any Subsidiary
as a result of or on account of any of Seller's representation,
warranty or covenant ("Losses") however caused provided that Seller
shall not be liable under this section in respect of any claim
arising out of facts or circumstances expressly stated in this
Agreement with its appendices and exhibits or excepted from
Seller's liability as provided hereinafter.
b) Seller will pay to Buyer any amounts to which Buyer is
entitled as indemnification hereunder as soon as practicable and in
no event later than 30 days after a claim for such indemnification
has been submitted by Buyer to Seller, or if such claim is disputed
by Seller, as soon as practicable but not later than 30 days after
a valid and final judgement in respect of such claim has been
entered.
In the event of a claim by Buyer for indemnification by Seller
hereunder, in respect of a matter which in Seller's reasonable
opinion is capable of cure, Seller will have the right,
exercisable upon written notice within seven days to Buyer, to
attempt to cure the breach of representation or warranty in
question for a period of 30 days following the date of notice by
Buyer to Seller claiming indemnification with respect thereto.
c) The amount of any Loss shall be calculated taking into account any
tax benefits which can be realized under any applicable law by
Buyer, Company, or any Subsidiary on account of the Loss.
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The amount of any Loss related to the divestiture agreement with
Applied Composites AB shall be reduced to 75 % of the actual Loss.
The amount of any Loss related to the specific environmental
matters referred to in Section 3.16 c shall be reduced to 50 % of
the actual Loss, if such Loss is due to new legislation enacted
after Closing and which new legislation gives rise to obligations
ordered by authorities under such laws.
d) The payment of indemnification claims under this Agreement
will be deemed to be in the nature of reduction of the Purchase
Price.
e) Interest will be calculated on the indemnifiable Loss as
from Closing Date or, if the Loss is related to a payment after
Closing by Company or any Subsidiary, as from the date of such
payment.
The interest rate will be in accordance with 5 Section , the
Swedish Interest Act up to 30 days after the date of Buyer's claim
and in accordance with 6 Section thereafter until payment is
made.
f) In the event of a claim by Buyer for indemnification in
respect of accounts receivable other than due by Seller, which
claim is paid by Seller, Buyer will cause Company or the respective
Subsidiary to assign to Seller, the accounts receivable in
question.
4.2 INDEMNIFICATION LIMITATION
Seller will not be obligated to indemnify Buyer for any Loss for which
the Purchase Price has been adjusted pursuant to Section 1.4.
a) Save as for claims related to the divestiture agreement
with Applied Composites AB and to the discontinuation of the
manufacturing of mobile cold storages, Seller will not be obliged
to indemnify Buyer for any Loss unless the aggregate amount of all
Losses is greater than SEK 3,000,000 (it is
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understood that if the Losses exceed such SEK 3,000,000, the Buyer
shall be entitled to indemnification for the aggregate amount of
all Losses).
It is further understood that Losses for which Seller's liability
has expired as set forth in subsection b) and c) below will
neither be subject to any payment obligation of Seller nor
included in the of the aggregate amount except if the aggregate
amount of Losses, for which claims have been duly made on and
before 28 February 1998 and of Losses under subsection c) (iii)
below, for which claims have been duly made within the time limit
set out therein, exceeds SEK 3,000,000, then the cumulative amount
of such Losses will be recoverable.
b) Except as provided in subsection 4.2.c below, any claims
for indemnification hereunder will be made in writing not later
than 60 days after Buyer becomes aware of the breach in question,
describing in reasonable detail the nature of the claim and a good
faith estimate of the amount claimed. Seller's obligation to
indemnify Buyer in respect of such claim will only apply to claims
made on or before 28 February 1998.
c)(i)Any claims for indemnification in respect of liabilities for taxes
and social charges will be made by Buyer in writing as soon as
possible after liability has been claimed with Buyer, Company or
any Subsidiary by the relevant authority, and Seller's obligation
to indemnify Buyer in respect of such liability terminate on the
earlier of three months thereafter or three months after valid and
final judgment with respect to such liability has been entered by
a court or tax authority of competent jurisdiction.
(ii) Any claims for indemnification in respect of environmental matters
will be made by Buyer in writing not later than 60 days after Buyer
becomes aware of the breach in question, describing in reasonable
detail the nature of the claim and a good faith estimate of the
amount claimed. Seller's obligation
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to indemnify Buyer in respect of such claim will only apply to
claims made on or before 1 March 2004.
(iii) Any claims for indemnification in respect of the representation
and warranty given under the last sentence of section 3.8 d and
for environmental claims in relation to the divestiture agreements
with Seitz Skandinavien AB, Hagglunds Vehicle AB and Applied
AB will be made by Buyer in writing not later than 60 days after
Buyer becomes aware of the breach in question, describing in
reasonable detail the nature of the claim and a good faith
estimate of the amount claimed. Seller's obligation to indemnify
Buyer in respect of such claim will only apply to claims made on
or before the original expiry date of the respective reemployement
undertaking and the expiry of the environmental representations
and warranties under the said divestiture agreements, as the case
may be.
d) The aggregate amount for which Seller may be liable under
this section shall in no case exceed the Purchase Price.
4.3 THIRD PARTY CLAIMS
When Buyer becomes aware of any claim, suit, action or proceeding by a
third party - including tax authorities - against Company or any
Subsidiary which may give rise to a Loss which may be indemnifiable
under this section, Buyer will, unless it is evident that time will not
allow such procedure:
a) not make any admission of liability, agreement or
compromise to or with any person or entity in respect thereto
without the Seller's prior written consent, which consent will not
be unreasonably withheld;
b) permit Seller and its professional advisors to have reasonable
access to Company's and Subsidiaries' personnel and to any
relevant accounts, documents and records within the possession
and control of Company or any Subsidiary to enable Seller and its
professional advisors to assess the merits and potential liability
in respect of its claim,
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suit, action or proceeding and to take copies of such relevant
accounts, documents and records at their own expense; provided,
however, that Seller will have no rights under this section if
Buyer agrees to discharge and release Seller from its
indemnification obligation hereunder in of the Loss or portion
thereof which arises out of the claim, action or proceeding;
c) give prompt notice to Seller, and Seller will have the
right at its election to cooperate in the defense of such
third-party claim at its own expense by giving prompt notice to
Buyer. Buyer will, in handling the defense, do so acting in good
faith and taking into consideration the reasonable interests of
Seller.
5. REPRESENTATIONS AND WARRANTIES OF BUYER AND SELLER
Each of Buyer and Seller warrants that it is a corporation duly
organized, validly existing and in good standing under the laws of its
respective jurisdiction and has all corporate power and authority to
make and perform its respective obligations under this Agreement.
This Agreement has been duly authorized and, upon execution and delivery
by Buyer and Seller, is a valid and binding obligation of Buyer and
Seller enforceable against them in accordance with its terms.
6. JOINT COVENANTS
6.1 PUBLICITY
No press release or other announcement concerning the transaction
contemplated by this Agreement or any auxiliary matter will be made by
either party except on prior notice to and with the consent of the other
party, provided that nothing in this Agreement prevents either party or
any affiliated company from making, in consultation with the other
party, any announcement of filing
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required by applicable law or regulation or by the rules and regulations
of any Stock Exchange on which it is listed.
6.2 CONFIDENTIALITY
Seller covenants up to and including the fifth anniversary of Closing
not to make use of or disclose any confidential information which is a
business or trade secret in Company's existing business as of Closing.
The non-disclosure obligation will not, however, apply to any
information which was generally avilable to the public or has become -
through no act or failure of Seller - public information or generally
available to the public, or which may be required by law or called for
by the requirements of any Stock Exchange.
6.3 NON COMPETE
Seller and Seller's Affiliates will neither directly nor indirectly
through third parties for a period of three years from Closing enter
into business arrangements in direct competition with Company's or
Subsidiaries' business as pursued as of the Date of Closing including
but not limited to, in Europe, Canada, United States, Mexico, China,
India, Singapore, Thailand, Korea, Malaysia or Indonesia and will not,
during a period of two years from Closing, solicit for employment or
offer employment to the employees listed in Exhibit 3.8.a.
6.4 REMEDIES
The remedies being the representations and warranties herein given and
indemnifications being the reduction in Purchase Price and interest
provided for in this Agreement shall be exclusive.
7. COMPLIANCE WITH COMPETITION REGULATIONS
The Parties shall immediately upon effectivity of this Agreement jointly
notify the Swedish Competition Authority of the acquisition by Buyer.
<PAGE> 29
29
8. RELEASE OF SELLER'S PARENT GUARANTEE
As to the parent guarantee by Seller set forth in Exhibit 3.21 Buyer
undertakes to procure the release of the guarantor from such guarantee
as of the Closing Date.
As to the parent guarantee by Borealis A/S to FR Fastighetsrenting AB
set forth in Exhibit 3.21 Buyer undertakes to procure the release of
Borealis A/S from the guarantee not later than 30 June 1998. The Buyer
and the Buyer's Swedish subsidiary - Lear Corporation Sweden AB - will
on the Closing Date issue to Borealis A/S a joint and several
undertaking to reimburse Borealis A/S for any payments made by Borealis
A/S under its gurantee to FR Fastighetsrenting AB related to the time
after Closing Date (including any costs incurred by Borealis A/S in
connection herewith). Such undertaking will be in the format provided
for in Appendix 8. Further Borealis A/S will have full recourse against
the Company for any such payment or cost.
Seller shall assist Buyer and Company in defending itself against any
challenge or claim instituted by FR Fastighetsrenting AB against Company
provided Company continues to fulfill its current obligations under the
Lease Contracts in connection with the leases and options as to the real
estate Granaten 28, Tidaholm and Assarebyn 1:15, Fargelanda.
Buyer will cause Company to keep Borealis A/S
contemporaneously informed on its payment to FR
Fastighetsrenting AB and on any request by FR Fastighetsrenting
AB for changes to the payment scheme or to its agreement with
FR Fastighetsrenting AB
9. NAME CHANGE
Buyer shall cause Company and each Subsidiary to delete the word
"Borealis" from its respective corporate name and trade marks and trade
names without undue delay after Closing and not later than 31 December
1996.
<PAGE> 30
30
Buyer shall further cause Company and Subsidiaries within the same time
period to cease to use the logotypes of "Borealis" presently used by
Company and Subsidiaries.
10. DISCHARGE OF DIRECTORS LIABILITY
Buyer shall as soon as possible, at the ordinary shareholders meeting of
Company and each Subsidiary, cause the directors and managing directors
of Company and each Subsidiary to be discharged from liability for their
administration of Company and each Subsidiary as from 1 January 1996 up
to and including the Closing Date, provided that the respective external
auditors of Company and Subsidiaries recommend such discharge from
liability.
11. EFFECTIVITY
This Agreement is effective upon the signing of both Parties and the
approval hereof by the respective board of directors of the Parties.
12. MISCELLANEOUS
12.1 ENTIRE AGREEMENT
This Agreement, including all appendices and exhibits, supersedes any
other agreements, oral or written, between the parties, including
Seller's Affiliates - except for the confidentiality agreement entered
into 14 May 1996, which however shall cease to be valid on Closing -
with respect to the subject matter.
12.2 AMENDMENTS
This Agreement may be amended only in writing by both parties.
<PAGE> 31
31
12.3 NOTICES
Any notice, consent and other communication to be provided under this
Agreement shall be provided in accordance with the following notice
information:
If to Seller; to Borealis Holding AB, S- 444 86 Stenungsund, Sweden,
with copy to Mr Bjarne Mitts, Borealis Coordination Center N.V., Woluwe
Garden, Woluwedal 26, B-1932 Sint-Stevens-Woluwe, Belgien.
If to Buyer; to Lear Corporation, att: General Counsel and head of the
legal Department, Southfield, MI 48086, USA, telefax: 1-810-7461677.
Messages shall be submitted by courier or telefax, courier to be deemed
received two business days after remittance and telefax the business day
of the remittance subject to confirmed telefax receipt.
12.4 COSTS
Seller and Buyer will each bear its own fees and expenses, including
legal fees and expenses, incurred in connection with the negotiation,
preparation and execution of this Agreement and the transactions
contemplated.
12.5 NO WAIVER
Save as provided for as to the right to grant specific waivers, the
failure of any party to insist upon strict adherence to any term of this
Agreement on any occasion shall not be considered a waiver of any right
hereunder, nor shall it deprive that party of the right thereafter to
insist upon the strict adherence to that term or any other of this
Agreement.
<PAGE> 32
32
12.6 EXECUTION
This Agreement shall be executed in two counterparts.
12.7 LANGUAGE
This Agreement is executed in the English language and shall be
construed and interpreted in accordance with the English language text.
12.8 ILLEGALITY
Save as provided for in article 2.8, in the event any provision of this
Agreement is declared illegal or unenforceable, it is the intent of the
parties that the remaining provisions shall continue in full force and
effect, provided that the fundamental considerations which induced the
parties to enter this Agreement remain valid.
12.9 FURTHER ASSISTANCE
Seller shall do everything reasonably required of it upon notice from
Buyer to carry out and give full effect to this Agreement.
12.10 GOVERNING LAW AND JURISDICTION
This Agreement shall be governed by and construed in accordance with the
laws of Sweden (excluding the law 1987:822 on International Sales).
All disputes arising in connection with this Agreement shall be finally
settled under the Rules of Conciliation and Arbitration of the
International Chamber of Commerce by three arbitrators appointed in
accordance with the said Rules. The arbitration shall take place in
London, UK, and the language to be used in the proceedings
<PAGE> 33
33
shall be English.
- ---------------------
The Parties and the undersigned guarantors confirm that this agreement was
entered into as of 22 November 1996.
the 9 December 1996 the 9 December 1996
BOREALIS HOLDING AB LEAR CORPORATION
SWEDEN AB
/s/ Bjarne Mitts /s/ William A. Reaume
- ------------------------ -------------------------
Borealis A/S hereby guarantees as for its own debt for the undertakings by
Borealis Holding AB set forth in sections 3, 4 and 8 of this Agreement above.
Borealis A/S hereby submits itself to arbitration in accordance with section
12.10 above and accepts irrevocably and unconditionally the nomination of
arbitrator by Borealis Holding AB as a nomination of its own and hence to be
deemed as jointly nominated by them.
the 9 December 1996
BOREALIS A/S
/s/ Bjarne Mitts
- ---------------------
Lear Corporation hereby guarantees as for its own debt for the undertakings by
Buyer set forth in sections 1, 2, 5, 8 and 9 of this Agreement above. Lear
Corporation hereby submits itself to arbitration in accordance with section
12.10 and accepts irrevocably and unconditionally the nomination of arbitrator
by Buyer as a nomination of
<PAGE> 34
34
its own and hence to be deemed as jointly nominated by them.
the 9 December 1996
LEAR CORPORATION
/s/ William A. Reaume
----------------------
<PAGE> 1
EXHIBIT 11.1
COMPUTATION OF NET INCOME (LOSS) PER SHARE
(In millions, except share information)
<TABLE>
<CAPTION>
For the Year Ended For the Year Ended For the Year Ended
December 31, 1996 December 31, 1995 December 31, 1994
--------------------------- -------------------------- ---------------------------
Primary Fully Diluted Primary Fully Diluted Primary Fully Diluted
----------- ------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Income (loss) before
extraordinary items $ 151.9 $ 151.9 $ 94.2 $ 94.2 $ 59.8 $ 59.8
Extraordinary items - - (2.6) (2.6) - -
----------- ----------- ----------- ----------- ---------- ----------
Net income (loss) $ 151.9 $ 151.9 $ 91.6 $ 91.6 $ 59.8 $ 59.8
=========== =========== =========== =========== =========== ===========
Weighted Average Shares:
Common shares
outstanding 60,485,696 60,485,696 48,944,181 48,944,181 42,602,167 42,602,167
Exercise of stock
options (1) 3,275,938 3,279,914 3,544,757 3,698,491 3,321,954 3,443,913
Exercise of warrants (2) - - - - 1,514,356 1,514,356
----------- ----------- ----------- ----------- ----------- -----------
Common and equivalent shares
outstanding 63,761,634 63,765,610 52,488,938 52,642,672 47,438,477 47,560,436
=========== =========== =========== =========== =========== ===========
Per Common and Equivalent Share:
Income (loss) before
extraordinary items $ 2.38 $ 2.38 $ 1.79 $ 1.79 $ 1.26 $ 1.26
Extraordinary items - - (0.05) (0.05) - -
----------- ----------- ----------- ----------- ----------- -----------
Net income (loss) per
share $ 2.38 $ 2.38 $ 1.74 $ 1.74 $ 1.26 $ 1.26
=========== =========== =========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
For the Year Ended For the Six Months Ended For the Year Ended
December 31, 1993 December 31, 1993 June 30, 1993
---------------------------- --------------------------- ----------------------------
Primary Fully Diluted(3) Primary Fully Diluted(3) Primary Fully Diluted
----------- ------------- ---------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Income (loss) before
extraordinary items $ (2.1) $ (2.1) $ (23.0) $ (23.0) $ 10.1 $ 10.1
Extraordinary items (11.7) (11.7) (11.7) (11.7) - -
----------- ----------- ---------- ----------- ----------- -----------
Net income (loss) $ (13.8) $ (13.8) $ (34.7) $ (34.7) $ 10.1 $ 10.1
=========== =========== ========== =========== =========== ===========
Weighted Average Shares:
Common shares
outstanding 35,500,014 35,500,014 35,500,014 35,500,014 35,166,747 35,166,747
Exercise of stock
options (1) - 2,801,372 - 2,801,372 1,582,317 1,582,317
Exercise of warrants (2) - 3,300,000 - 3,300,000 3,300,000 3,300,000
----------- ----------- ---------- ---------- ---------- ----------
Common and equivalent shares
outstanding 35,500,014 41,601,386 35,500,014 41,601,386 40,049,064 40,049,064
=========== =========== ========== ========== ========== ===========
Per Common and Equivalent Share:
Income (loss) before
extraordinary items $ (0.06) $ (0.05) $ (0.65) $ (0.55) $ 0.25 $ 0.25
Extraordinary items (0.33) (0.28) (0.33) (0.28) - -
----------- ----------- ---------- --------- ---------- -----------
Net income (loss) per $ (0.39) $ (0.33) $ (0.98) $ (0.83) $ 0.25 $ 0.25
share =========== =========== ========== ========= ========== ===========
</TABLE>
<TABLE>
<CAPTION>
For the Year Ended
June 30, 1992
---------------------------
Primary Fully Diluted (3)
------- -----------------
<S> <C> <C>
Income (loss) before
extraordinary items $ (17.1) $ (17.1)
Extraordinary items (5.1) (5.1)
----------- -----------
Net income (loss) $ (22.2) $ (22.2)
=========== ===========
Weighted Average Shares:
Common shares
outstanding 27,768,312 27,768,312
Exercise of stock options (1) - 1,582,317
Exercise of warrants (2) - 3,300,000
----------- -----------
Common and equivalent shares
outstanding 27,768,312 32,650,629
=========== ===========
Per Common and Equivalent Share:
Income (loss) before
extraordinary items $ (0.62) $ (0.52)
Extraordinary items (0.18) (0.16)
----------- -----------
Net income (loss) per share $ (0.80) $ (0.68)
=========== ===========
</TABLE>
- --------------
(1) Amount represents the number of shares issued assuming exercise of stock
options, reduced by the number of shares which could have been purchased
with the proceeds from the exercise of such options.
(2) Amount represents the number of common shares issued assuming exercise
of warrants outstanding.
(3) This calculation is submitted in accordance with Regulation S-K item
601(b)(11) although not required by footnote 2 to paragraph 14 of the
APB Opinion No. 15 because of the antidilutive effect on net loss per
share.
<PAGE> 1
EXHIBIT 21.1
SUBSIDIARIES OF THE COMPANY
<TABLE>
<S> <C>
AB Extruding (Sweden) Lear Corporation Sweden Interior Systems, AB (Sweden)
AB Trelleborgplast (Sweden) Lear Corporation Sweden Tanuum Components AB (Sweden)
AII Automotive Industries Canada Inc. (Canada) Lear Corporation Verwaltungs GmbH (Germany)
American Woodstock Company, Inc. (Wisconsin) Lear de Venezuela, C.A. (Venezuela)
AVB Anlagen und Vorrichtungsbau GmbH (55%) (Germany) Lear France S.A.R.L (France)
ASAA International Inc. (Delaware) Lear Holding S.A. de C.V. (Mexico)
ASAA Technologies, Inc. (Wisconsin) Lear Inespo Comercial de Industrial Ltda. (50%) (Brazil)
ASAA Inc. (Wisconsin) Lear Operations Corporation (Delaware) (1)
Automotive Industries Export Ltd (Barbados) Lear Seating (Thailand) Corp., Ltd. (49%) (Thailand)
Automotive Industries (Holdings) Ltd. (U.K.) Lear Seating Holdings Corp. No. 50 (Delaware)
Automotive Industries (U.K.) Ltd. Lear Corporation Italia Holdings S.r.L. (Italy)
Automotive Industries Manufacturing, Inc. (Delaware) Lear Seating Private Limited (80.4%)(India)
Automotive Industries Sales, Inc. (Michigan) LECA Sp. z o.o. (Poland)
Autotrim, S.A. de C.V. (Mexico) LS Acquisition Corporation No. 24 (Delaware)
Aviken Plast AB (Sweden) LS Servicos Ltda (Brazil)
Capitol Plastics of Ohio, Inc. (Ohio) Manfred Rothe Verwaltungs GmbH (Germany)
Celluloid Gislaved AB (Sweden) Markol Otomotiv Yan Sanayi VE Ticaret A.S. (35%)
Consorcio Industrial Mexicana de Auto Partes S.A. de C.V. (Turkey)
(85%) (Mexico) Masland Acoustic Components, Inc. (Delaware)
Consorcio Industrial Mexicana de Auto Partes Toluca S.A. de
C.V. (99.5%) (Mexico) Masland Industries Foreign Sales Corp. (US Virgin Islands)
Davart Group Ltd. (U.K.) Masland Industries, Inc, (Delaware)
Detroit Automotive Interiors L.L.C. (Michigan) Masland Industries of Canada Limited (Canada)
Empresas Industrial Mexicanos de Auto Partes S.A. de C.V.
(75%) (Mexico) Masland International, Inc. (Delaware)
Fair Haven Industries, Inc. (Michigan)
Favesa S.A. de C.V. (Mexico) Masland of Wisconsin, Inc. (Wisconsin)
Fibercraft/DESCon Engineering, Inc. (Michigan) Masland Specialty Technologies, Inc. (Delaware)
General Panel B.V. (Delaware) Masland Technologies Corporation (Delaware)
General Panel B.V. (Netherlands) Masland Transportation, Inc. (Delaware)
General Seating of America, Inc. (35%) (Delaware) Masland (U.K.) Limited (U.K.)
General Seating of Canada Ltd. (35%) (Canada) NAB Corporation (Delaware) (2)
General Seating (Thailand) Company, Ltd (50%) (Thailand) No Sag Drahtfedern GmbH (Germany)
Guildford Kast Plastifol Ltd. (33%) (U.K.) No Sag Drahtfedern Spitzer & Co. KG (62.5%) (Austria)
Industrias Cousin Freres, S.L. (49.9%) (Spain) NS Beteilgungs GmbH (Germany)
Industrias Lear de Argentina, S.A. (50%) (Argentina) Pacific Trim Corporation Ltd. (20%) (Thailand)
Interiores Automotrices Summa S.A. de C.V. (40%) (Mexico) Plastifol Beteiligungs GmbH (Germany)
Interiores Para Autos, S.A. de C. V. (40%) (Mexico) Plastifol GmbH & Co. KG(Germany)
Intertrim S.A. de C.V. (99.5%) (Mexico) Plastifol Holding GmbH (Germany)
John Cotton (Plastics) Ltd. (U.K.) Plastifol Manfred Rothe Iberia S.A. (71.4%) (Spain)
LCT, Inc. (Michigan) Probel S.A. (30.86%) (Brazil)
Lear Corporation Australia Pty., Ltd. (Australia) Quadrestra Vermogensver Waltungs GmbH (Germany)
Lear Corporation Austria Autositze GmbH (Austria) Rael Handels gmbH (Austria)
Lear Corporation Austria Autositze GmbH & Co. KG (Austria) Ramco Investments Limited (60%) (Mauritius)
Lear Corporation Canada Ltd. (Canada) Rolloplast Fornsprutning AB (Sweden)
Lear Corporation do Brasil Ltda (98%) (Brazil) Simplay Ltd. (U.K.)
Lear Corporation Germany Ltd. (Delaware) Societe No Sag Francaise (56%) (France)
Lear Corporation GmbH (Germany) Sommer Masland (U.K.) Limited (50%) (U.K.)
Lear Corporation GmbH & Co. KG (Germany) Spitzer GmbH (62.5%) (Austria)
Lear Corporation (U.K.) Ltd. (United Kingdom) SWECA Sp. z o.o. (Poland)
Lear Corporation Italia S.p.A. (Italy) Tapizados Lear S.A. (55%)(Argentina)
Lear Corporation Italia Sud S.p.A. (Italy) Teknoseating S.A. (50%) (Argentina)
Lear Corporation (S.A.)(Pty.) Ltd. (South Africa)
Lear Corporation Mendon (Delaware)
Lear Corporation Mexico S. A. de C. V. (99.6%) (Mexico)
Lear Corporation Poland Sp. z o.o. (Poland)
Lear Corporation Sweden, AB (Sweden)
Lear Corporation Sweden Gnosjvplast AB (Sweden)
</TABLE>
(1) Lear Opeartions Corporation also conducts business under the names Lear
Corporation, Lear Corporation of Georgia, Lear Corporation of Kentucky,
and Lear Corporation of Ohio.
(2) NAB Corporation also conduct business under the name Lear Corporation.
All Subsidiaries are wholly-owned unless otherwise indicated.
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
of our reports included in this Form 10-K, into Lear Corporation's (formerly
known as Lear Seating Corporation) previously filed Registration Statements on
Form S-8 File Nos. 33-55783, 33-57237, 33-59943, 33-61739, 33-62209, 333-01353,
333-03383, 333-06209, 333-10753, 333-16413, 333-16415, 333-16341, and Form S-3
File Nos. 33-51317, 33-47867, 33-61583, 333-05807 and 333-05809.
ARTHUR ANDERSEN LLP
Detroit, Michigan
March 24, 1997.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 26
<SECURITIES> 0
<RECEIVABLES> 910
<ALLOWANCES> 9
<INVENTORY> 200
<CURRENT-ASSETS> 1,347
<PP&E> 1,176
<DEPRECIATION> 310
<TOTAL-ASSETS> 3,817
<CURRENT-LIABILITIES> 1,499
<BONDS> 1,055
0
0
<COMMON> 1
<OTHER-SE> 1,018
<TOTAL-LIABILITY-AND-EQUITY> 3,817
<SALES> 6,249
<TOTAL-REVENUES> 6,249
<CGS> 5,629
<TOTAL-COSTS> 5,629
<OTHER-EXPENSES> 264
<LOSS-PROVISION> 3
<INTEREST-EXPENSE> 103
<INCOME-PRETAX> 253
<INCOME-TAX> 101
<INCOME-CONTINUING> 152
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 152
<EPS-PRIMARY> 2.38
<EPS-DILUTED> 2.38
</TABLE>
