-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, JNb7IaPaRJ9de+I6/ta1f6ek1XrWCCH+b7Cug8CfQcD0Apg74a3feqgdl0bKeV6Z X5ERCFDUhWnjmBtUkYiPxA== 0000950137-03-004344.txt : 20030814 0000950137-03-004344.hdr.sgml : 20030814 20030814124620 ACCESSION NUMBER: 0000950137-03-004344 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 13 CONFORMED PERIOD OF REPORT: 20030630 FILED AS OF DATE: 20030814 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TENNECO AUTOMOTIVE INC CENTRAL INDEX KEY: 0001024725 STANDARD INDUSTRIAL CLASSIFICATION: MOTOR VEHICLE PARTS & ACCESSORIES [3714] IRS NUMBER: 760515284 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-12387 FILM NUMBER: 03845145 BUSINESS ADDRESS: STREET 1: 500 NORTH FIELD DRIVE CITY: LAKE FOREST STATE: IL ZIP: 60045 BUSINESS PHONE: 847-482-50 MAIL ADDRESS: STREET 1: 500 N FIELD DR STREET 2: ROOM T 2560B CITY: LAKE FOREST STATE: IL ZIP: 60045 FORMER COMPANY: FORMER CONFORMED NAME: NEW TENNECO INC DATE OF NAME CHANGE: 19961011 10-Q 1 c78654e10vq.txt QUARTERLY REPORT - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ------------------------------------ FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended June 30, 2003 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 1-12387 TENNECO AUTOMOTIVE INC. (Exact name of registrant as specified in its charter) DELAWARE 76-0515284 (State or other jurisdiction of incorporation (I.R.S. Employer Identification No.) or organization) 500 NORTH FIELD DRIVE, LAKE FOREST, ILLINOIS 60045 (Address of principal executive offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (847) 482-5000 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 whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes [X] No [ ] Indicate the number of shares outstanding of each of the issuer's classes of common stock as of the latest practicable date. Common Stock, par value $.01 per share: 40,661,873 shares as of July 31, 2003. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- TABLE OF CONTENTS
PAGE ---- PART I--FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) Tenneco Automotive Inc. and Consolidated Subsidiaries-- Independent Accountants' Report...................... 4 Statements of Income (Loss).......................... 5 Balance Sheets....................................... 6 Statements of Cash Flows............................. 7 Statements of Changes in Shareholders' Equity........ 8 Statements of Comprehensive Income (Loss)............ 9 Notes to Consolidated Financial Statements........... 10 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations............... 28 Item 3. Quantitative and Qualitative Disclosures About Market Risk............................................ 49 Item 4. Controls and Procedures........................... 49 PART II--OTHER INFORMATION Item 1. Legal Proceedings................................. * Item 2. Changes in Securities and Use of Proceeds......... 50 Item 3. Defaults Upon Senior Securities................... * Item 4. Submission of Matters to a Vote of Security Holders................................................ 50 Item 5. Other Information................................. 50 Item 6. Exhibits and Reports on Form 8-K.................. 50
- --------------- * No response to this item is included herein for the reason that it is inapplicable or the answer to such item is negative. CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 This Quarterly Report on Form 10-Q contains forward-looking statements regarding, among other things, our prospects and business strategies. The words "may," "will," "believes," "should," "could," "plans," "expects," "anticipate," "intends," "estimates," and similar expressions (and variations thereof), identify these forward-looking statements. Although we believe that the expectations reflected in these forward-looking statements are based on reasonable assumptions, these expectations may not prove to be correct. Because these forward-looking statements are also subject to risks and uncertainties, actual results may differ materially from the expectations expressed in the forward-looking statements. Important factors that could cause actual results to differ materially from the expectations reflected in the forward-looking statements include: - general economic, business and market conditions; - the impact of consolidation among automotive parts suppliers and customers on our ability to compete; - operating hazards associated with our business; - changes in consumer demand and preferences for automobiles and automotive parts, as well as changes in automobile manufacturers' actual and forecasted requirements for our products; - changes in distribution channels or competitive conditions in the markets and countries where we operate, including the impact of changes in distribution channels for aftermarket products on our ability to increase or maintain aftermarket sales; - cyclicality of automotive production and sales; 2 - material substitution; - labor disruptions at our facilities or at any of our significant customers or suppliers; - economic, exchange rate and political conditions in the foreign countries where we operate or sell our products; - customer acceptance of new products; - new technologies that reduce the demand for certain of our products or otherwise render them obsolete; - our ability to realize our business strategy of improving operating performance; - capital availability or costs, including changes in interest rates, market perceptions of the industries in which we operate or ratings of securities; - changes by the Financial Accounting Standards Board or the Securities and Exchange Commission of authoritative generally accepted accounting principles or policies; - the impact of changes in and compliance with laws and regulations, including environmental laws and regulations, and environmental liabilities in excess of the amount reserved; - terrorism, acts of war and similar events, and their resultant impact on economic and political conditions; and - the occurrence or non-occurrence of other circumstances beyond our control. 3 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS (UNAUDITED) INDEPENDENT ACCOUNTANTS' REPORT TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF TENNECO AUTOMOTIVE INC. We have reviewed the accompanying consolidated balance sheet of Tenneco Automotive Inc. and consolidated subsidiaries as of June 30, 2003, and the related consolidated statements of income (loss) and comprehensive income (loss) for the three-month and six-month periods ended June 30, 2003 and 2002, and of cash flows and changes in shareholders' equity for the six-month periods ended June 30, 2003 and 2002. These interim financial statements are the responsibility of Tenneco Automotive Inc.'s management. We conducted our reviews in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with auditing standards generally accepted in the United States of America, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our reviews, we are not aware of any material modifications that should be made to such consolidated interim financial statements for them to be in conformity with accounting principles generally accepted in the United States of America. We previously audited, in accordance with auditing standards generally accepted in the United States of America, the consolidated balance sheet of Tenneco Automotive Inc. and consolidated subsidiaries as of December 31, 2002, and the related consolidated statements of income (loss), cash flows, changes in shareholders' equity and comprehensive income (loss) for the year then ended (not presented herein); and in our report dated February 3, 2003, we expressed an unqualified opinion on those consolidated financial statements (such report includes an explanatory paragraph relating to the adoption of Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets"). In our opinion, the information set forth in the accompanying consolidated balance sheet as of December 31, 2002 is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived. DELOITTE & TOUCHE LLP Chicago, Illinois July 21, 2003 4 TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES STATEMENTS OF INCOME (LOSS) (UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, -------------------------- -------------------------- 2003 2002 2003 2002 ----------- ----------- ----------- ----------- (MILLIONS EXCEPT SHARE AND PER SHARE AMOUNTS) REVENUES Net sales and operating revenues................. $ 998 $ 948 $ 1,919 $ 1,757 ----------- ----------- ----------- ----------- COSTS AND EXPENSES Cost of sales (exclusive of depreciation shown below)......................................... 779 743 1,522 1,383 Engineering, research, and development........... 13 17 32 31 Selling, general, and administrative............. 97 93 185 186 Depreciation and amortization of other intangibles.................................... 41 35 80 69 ----------- ----------- ----------- ----------- 930 888 1,819 1,669 ----------- ----------- ----------- ----------- OTHER INCOME (EXPENSE) Gain on sale of assets........................... -- 11 -- 11 Loss on sale of receivables...................... (1) -- (1) (1) Other income (loss).............................. -- -- (1) -- ----------- ----------- ----------- ----------- (1) 11 (2) 10 ----------- ----------- ----------- ----------- INCOME BEFORE INTEREST EXPENSE, INCOME TAXES, AND MINORITY INTEREST................................ 67 71 98 98 Interest expense (net of interest capitalized)... 38 36 69 72 Income tax expense (benefit)..................... 3 16 1 8 Minority interest................................ 2 -- 3 1 ----------- ----------- ----------- ----------- INCOME BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE............................. 24 19 25 17 Cumulative effect of change in accounting principle, net of income tax..................... -- -- -- (218) ----------- ----------- ----------- ----------- NET INCOME (LOSS).................................. $ 24 $ 19 $ 25 $ (201) =========== =========== =========== =========== EARNINGS (LOSS) PER SHARE Average shares of common stock outstanding-- Basic............................................ 40,394,671 39,746,401 40,244,623 39,748,370 Diluted.......................................... 41,333,408 41,812,025 41,137,177 41,422,775 Basic earnings per share of common stock-- Before cumulative effect of change in accounting principle...................................... $ .59 $ .48 $ .61 $ .42 Cumulative effect of change in accounting principle...................................... -- -- -- (5.49) ----------- ----------- ----------- ----------- $ .59 $ .48 $ .61 $ (5.07) =========== =========== =========== =========== Diluted earnings per share of common stock-- Before cumulative effect of change in accounting principle...................................... $ .58 $ .45 $ .60 $ .41 Cumulative effect of change in accounting principle...................................... -- -- -- (5.49) ----------- ----------- ----------- ----------- $ .58 $ .45 $ .60 $ (5.08) =========== =========== =========== ===========
The accompanying notes to financial statements are an integral part of these statements of income (loss). 5 TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES BALANCE SHEETS (UNAUDITED)
JUNE 30, DECEMBER 31, 2003 2002 -------- ------------ (MILLIONS) ASSETS Current assets: Cash and cash equivalents................................. $ 58 $ 54 Receivables-- Customer notes and accounts, net........................ 508 394 Other................................................... 14 15 Inventories-- Finished goods.......................................... 159 164 Work in process......................................... 76 74 Raw materials........................................... 81 76 Materials and supplies.................................. 39 38 Deferred income taxes..................................... 56 56 Prepayments and other..................................... 106 95 ------- ------- 1,097 966 ------- ------- Other assets: Long-term notes receivable, net........................... 19 14 Goodwill.................................................. 191 185 Intangibles, net.......................................... 20 20 Deferred income taxes..................................... 115 141 Pension assets............................................ 23 17 Other..................................................... 139 135 ------- ------- 507 512 ------- ------- Plant, property, and equipment, at cost..................... 2,161 2,011 Less--Reserves for depreciation and amortization.......... 1,092 985 ------- ------- 1,069 1,026 ------- ------- $ 2,673 $ 2,504 ======= ======= LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Short-term debt (including current maturities of long-term debt)................................................... $ 111 $ 228 Trade payables............................................ 567 505 Accrued taxes............................................. 22 40 Accrued interest.......................................... 18 23 Accrued liabilities....................................... 169 172 Other..................................................... 38 48 ------- ------- 925 1,016 ------- ------- Long-term debt.............................................. 1,386 1,217 ------- ------- Deferred income taxes....................................... 76 103 ------- ------- Postretirement benefits..................................... 242 225 ------- ------- Deferred credits and other liabilities...................... 18 18 ------- ------- Commitments and contingencies Minority interest........................................... 20 19 ------- ------- Shareholders' equity: Common stock.............................................. -- -- Premium on common stock and other capital surplus......... 2,751 2,749 Accumulated other comprehensive loss...................... (284) (357) Retained earnings (accumulated deficit)................... (2,221) (2,246) ------- ------- 246 146 Less--Shares held as treasury stock, at cost.............. 240 240 ------- ------- 6 (94) ------- ------- $ 2,673 $ 2,504 ======= =======
The accompanying notes to financial statements are an integral part of these balance sheets. 6 TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES STATEMENTS OF CASH FLOWS (UNAUDITED)
SIX MONTHS ENDED JUNE 30, --------------- 2003 2002 ----- ---- (MILLIONS) OPERATING ACTIVITIES Income before cumulative effect of change in accounting principle................................................. $ 25 $ 17 Adjustments to reconcile income before cumulative effect of change in accounting principle to cash provided (used) by operating activities-- Depreciation and amortization............................. 80 69 Deferred income taxes..................................... (10) (8) Gain on sale of assets, net............................... -- (10) Changes in components of working capital-- (Increase) decrease in receivables..................... (87) (50) (Increase) decrease in inventories..................... 24 9 (Increase) decrease in prepayments and other current assets................................................ (1) (4) Increase (decrease) in payables........................ 30 76 Increase (decrease) in accrued taxes................... (19) 2 Increase (decrease) in accrued interest................ (5) -- Increase (decrease) in other current liabilities....... (19) 26 Other..................................................... 10 (3) ----- ---- Net cash provided by operating activities................... 28 124 ----- ---- INVESTING ACTIVITIES Net proceeds from sale of fixed assets...................... 3 18 Expenditures for plant, property, and equipment............. (54) (52) Investments and other....................................... (2) 13 ----- ---- Net cash used by investing activities....................... (53) (21) ----- ---- NET CASH PROVIDED (USED) BEFORE FINANCING ACTIVITIES........ (25) 103 FINANCING ACTIVITIES Proceeds from capital contributions......................... 1 -- Issuance of long-term debt.................................. 350 -- Debt issuance costs on long-term debt....................... (12) -- Retirement of long-term debt................................ (276) (25) Net increase (decrease) in short-term debt excluding current maturities of long-term debt.............................. (25) (71) Other....................................................... (1) -- ----- ---- Net cash provided (used) by financing activities............ 37 (96) ----- ---- Effect of foreign exchange rate changes on cash and cash equivalents............................................... (8) (8) ----- ---- Increase (decrease) in cash and cash equivalents............ 4 (1) Cash and cash equivalents, January 1........................ 54 53 ----- ---- Cash and cash equivalents, June 30 (Note)................... $ 58 $ 52 ===== ==== Cash paid during the period for interest.................... $ 67 $ 72 Cash paid during the period for income taxes (net of refunds).................................................. $ 30 $ 16
NOTE: Cash and cash equivalents include highly liquid investments with a maturity of three months or less at the date of purchase. The accompanying notes to financial statements are an integral part of these statements of cash flows. 7 TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (UNAUDITED)
SIX MONTHS ENDED JUNE 30, ---------------------------------------------- 2003 2002 --------------------- --------------------- SHARES AMOUNT SHARES AMOUNT ---------- ------- ---------- ------- (MILLIONS EXCEPT SHARE AMOUNTS) COMMON STOCK Balance January 1.................................. 41,347,340 $ -- 41,355,074 $ -- Issued (Reacquired) pursuant to benefit plans.... 541,865 -- (14,003) -- Stock options exercised.......................... 35,106 -- (2,711) -- ---------- ------- ---------- ------- Balance June 30.................................... 41,924,311 -- 41,338,360 -- ========== ========== PREMIUM ON COMMON STOCK AND OTHER CAPITAL SURPLUS Balance January 1.................................. 2,749 2,748 Premium on common stock issued pursuant to benefit plans................................. 2 1 ------- ------- Balance June 30.................................... 2,751 2,749 ACCUMULATED OTHER COMPREHENSIVE LOSS Balance January 1.................................. (357) (375) Other comprehensive income (loss)................ 73 18 ------- ------- Balance June 30.................................... (284) (357) ------- ------- RETAINED EARNINGS (ACCUMULATED DEFICIT) Balance January 1.................................. (2,246) (2,059) Net income (loss)................................ 25 (201) ------- ------- Balance June 30.................................... (2,221) (2,260) ------- ------- LESS--COMMON STOCK HELD AS TREASURY STOCK, AT COST Balance January 1 and June 30...................... 1,294,692 240 1,294,692 240 ========== ------- ========== ------- Total....................................... $ 6 $ (108) ======= =======
The accompanying notes to financial statements are an integral part of these statements of changes in shareholders' equity. 8 TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)
THREE MONTHS ENDED JUNE 30, ------------------------------------------------------------- 2003 2002 ----------------------------- ----------------------------- ACCUMULATED ACCUMULATED OTHER OTHER COMPREHENSIVE COMPREHENSIVE COMPREHENSIVE COMPREHENSIVE INCOME INCOME INCOME INCOME (LOSS) (LOSS) (LOSS) (LOSS) ------------- ------------- ------------- ------------- (MILLIONS) NET INCOME.................................. $24 $19 --- --- ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) CUMULATIVE TRANSLATION ADJUSTMENT Balance April 1........................... $(251) $(350) Translation of foreign currency statements........................... 47 47 47 47 ----- ----- Balance June 30........................... (204) (303) ----- ----- FAIR VALUE OF INTEREST RATE SWAPS Balance April 1........................... $ -- $ (13) Fair value adjustment.................. -- -- 1 1 ----- ----- Balance June 30........................... -- (12) ----- ADDITIONAL MINIMUM PENSION LIABILITY ADJUSTMENT Balance April 1 and June 30............... (80) -- (42) ----- ----- Balance June 30............................. $(284) $(357) ===== --- ===== --- Other comprehensive income.................. 47 48 --- --- COMPREHENSIVE INCOME........................ $71 $67 === ===
SIX MONTHS ENDED JUNE 30, ------------------------------------------------------------- 2003 2002 ----------------------------- ----------------------------- ACCUMULATED ACCUMULATED OTHER OTHER COMPREHENSIVE COMPREHENSIVE COMPREHENSIVE COMPREHENSIVE INCOME INCOME INCOME INCOME (LOSS) (LOSS) (LOSS) (LOSS) ------------- ------------- ------------- ------------- (MILLIONS) NET INCOME (LOSS)........................... $25 $(201) --- ----- ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) CUMULATIVE TRANSLATION ADJUSTMENT Balance January 1......................... $(273) $(316) Translation of foreign currency statements........................... 69 69 13 13 ----- ----- Balance June 30........................... (204) (303) ----- ----- FAIR VALUE OF INTEREST RATE SWAPS Balance January 1......................... $ (4) $ (17) Fair value adjustment.................. 4 4 5 5 ----- ----- Balance June 30........................... -- (12) ----- ADDITIONAL MINIMUM PENSION LIABILITY ADJUSTMENT Balance January 1 and June 30............. (80) -- (42) ----- ----- Balance June 30............................. $(284) $(357) ===== --- ===== ----- Other comprehensive income.................. 73 18 --- ----- COMPREHENSIVE INCOME (LOSS)................. $98 $(183) === =====
The accompanying notes to financial statements are an integral part of these statements of comprehensive income (loss). 9 TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (1) As you read the accompanying financial statements and Management's Discussion and Analysis you should also read our Annual Report on Form 10-K for the year ended December 31, 2002. In our opinion, the accompanying unaudited financial statements contain all adjustments (consisting of normal recurring adjustments) necessary to present fairly Tenneco Automotive Inc.'s financial position, results of operations, cash flows, changes in shareholders' equity, and comprehensive income (loss) for the periods indicated. We have prepared the unaudited interim consolidated financial statements pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for annual financial statements. Our consolidated financial statements include all majority-owned subsidiaries. We carry investments in 20 percent to 50 percent owned companies at cost plus equity in undistributed earnings and cumulative translation adjustments from the date of acquisition since we have the ability to exert significant influence over operating and financial policies. We have reclassified prior year's financial statements where appropriate to conform to 2003 presentations. (2) In June 2003, we issued $350 million of 10 1/4 percent senior secured notes. The notes have a final maturity date of July 15, 2013. The notes accrue interest from June 19, 2003 with a first interest payment date of January 15, 2004. The notes are senior secured obligations and rank equally in right of payment with our existing and future senior debt and rank senior in right of payment to all of our existing and future subordinated debt. The notes are jointly and severally guaranteed by all of our domestic subsidiaries that also guarantee our senior credit facility. These guarantees are senior obligations of our subsidiary guarantors. The notes and guarantees are secured by second priority liens, subject to specified exceptions, on all of our and our subsidiary guarantors' assets that secure obligations under our senior credit facility, except that only a portion of the capital stock of our and our subsidiary guarantor's domestic subsidiaries is provided as collateral and no assets or capital stock of our direct or indirect foreign subsidiaries will secure the notes or guarantees. We can redeem some or all of the notes at any time after July 15, 2008. We can also redeem up to 35 percent aggregate principal amount of the notes using the proceeds of certain equity offerings completed before July 15, 2006. If we sell certain of our assets or experience specific kinds of changes in control, we must offer to repurchase the notes. The net proceeds of the offering of the notes, after deducting underwriting discounts and commissions and our expenses, were $338 million. We used the net proceeds of the offering to repay outstanding amounts under our senior credit facility as follows: (i) first, to prepay $199 million on the term loan A due November 4, 2005, (ii) second, to prepay $52 million on the term loans B and C due November 4, 2007 and May 4, 2008, respectively, and (iii) third, to prepay outstanding borrowings of $87 million under the revolving credit portion of our senior credit facility without reducing the commitments from $450 million. (3) Over the past several years we have adopted plans to restructure portions of our operations. These plans were approved by the Board of Directors and were designed to reduce operational and administrative overhead costs throughout the business. Prior to the change in accounting required for exit or disposal activities described in Note 5 below, we recorded charges to income related to these plans for costs that do not benefit future activities in the period in which the plans were finalized and approved, while actions necessary to affect these restructuring plans occurred over future periods in accordance with established plans. In the fourth quarter of 2001, our Board of Directors approved a restructuring plan, the first phase of a project known as Project Genesis, designed to lower our fixed costs, improve efficiency and utilization, and better optimize our global footprint. The first phase of Project Genesis involved closing eight facilities, improving the process flow and efficiency through value mapping and plant arrangement at 20 facilities, relocating production among facilities, and centralizing some functional areas. The closed facilities include an 10 TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (UNAUDITED) emissions control aftermarket plant and an aftermarket distribution operation in Europe, a ride control plant in Europe, an engineering center in Europe, one building at an emissions control plant complex in North America, a technology facility in North America, an exhaust manufacturing facility in North America, and our London-based treasury office. In the fourth quarter of 2001, we recorded pre-tax charges related to Project Genesis of $27 million. Within the statement of income (loss), $23 million of the pre-tax charge was reflected in cost of sales, while $4 million was included in selling, general and administrative expenses. These charges were comprised of $18 million in severance and $9 million for equipment lease cancellation, asset impairment and other restructuring costs to close the eight facilities. We wrote down the assets at locations to be closed to their estimated fair value, less costs to sell. We estimated the market value of buildings using external real estate appraisals. As a result of the single purpose nature of the machinery and equipment to be disposed of, fair value was estimated to be scrap value less costs to dispose in most cases. We also recorded a pre-tax charge of $4 million in cost of sales related to a strategic decision to adjust some product offerings and our customer supply strategy in the European aftermarket. The aftermarket parts were written down to their estimated scrap value, less costs to sell. Finally, we also incurred $1 million in other restructuring related costs during the fourth quarter for the value mapping and rearrangement of one of our emission control plants in North America. Since these costs relate to ongoing operations, they could not be accrued as part of the restructuring charge. The total of all these restructuring and other costs recorded in the fourth quarter of 2001 was $32 million before tax, $31 million after tax, or $0.81 per diluted common share. As of June 30, 2003, we have eliminated 965 positions in connection with the first phase of Project Genesis. Additionally, we are executing this plan more efficiently than originally anticipated and as a result in the fourth quarter of 2002 reduced our reserves related to this restructuring activity by $6 million which was recorded in cost of sales. We expect to complete all remaining restructuring activities related to the first phase of Project Genesis in 2003. We incurred other costs in the first six months of 2003 of $5 million for moving and rearrangement activities related to our restructuring actions initiated in prior periods that could not be accrued as part of the restructuring charges for those actions. Including the costs incurred in 2002 of $11 million, we have incurred a total of $16 million for moving and rearrangement activities related to our restructuring actions initiated in prior periods that could not be accrued as part of the restructuring charges for these actions. In the first quarter of 2003, we incurred severance costs of $1 million associated with eliminating 17 salaried positions through selective layoffs and an early retirement program. Additionally, 93 hourly positions were eliminated through selective layoffs in the quarter. These reductions were done to reduce ongoing labor costs in North America. All of this charge was recorded in cost of sales. Amounts related to the reserves we have established regarding activities that are part of our restructuring plans are as follows:
DECEMBER 31, JUNE 30, 2002 2003 2003 CHARGED TO IMPACT OF 2003 RESTRUCTURING RESTRUCTURING CASH ASSET EXCHANGE RESTRUCTURING RESERVE CHARGE PAYMENTS ACCOUNTS RATES RESERVE -------------- ------------- -------- ---------- --------- ------------- (MILLIONS) Severance................... $9 $1 $(6) $-- $2 $6 Asset Impairment............ -- -- -- -- -- -- Other....................... -- -- -- -- -- -- -- -- --- --- -- -- $9 $1 $(6) $-- $2 $6 == == === === == ==
Under the terms of an amendment to our senior credit agreement that took effect on March 13, 2002, we are allowed to exclude up to $60 million of cash charges and expenses, before taxes, related to potential future 11 TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (UNAUDITED) cost reduction initiatives over the 2002-2004 period from the calculation of the financial covenant ratios we are required to maintain under our senior credit agreement. As of June 30, 2003, we have excluded $16 million of the $60 million available under the terms of the amendment. In addition to the announced actions, we continue to evaluate additional opportunities, including additional phases of Project Genesis, to initiate actions that will reduce our costs through implementing the most appropriate and efficient logistics, distribution, and manufacturing footprint for the future. There can be no assurances however, that we will undertake additional phases of Project Genesis or other additional restructuring actions. Actions that we take, if any, will require the approval of our Board of Directors, or its authorized committee, and if the costs of the plans exceed the amount previously approved by our senior lenders, could require approval by our senior lenders. We plan to conduct any workforce reductions that result in compliance with all legal and contractual requirements including obligations to consult with workers' councils, union representatives and others. (4) We are subject to a variety of environmental and pollution control laws and regulations in all jurisdictions in which we operate. We expense or capitalize, as appropriate, expenditures for ongoing compliance with environmental regulations that relate to current operations. We expense expenditures that relate to an existing condition caused by past operations and that do not contribute to current or future revenue generation. We record liabilities when environmental assessments indicate that remedial efforts are probable and the costs can be reasonably estimated. Estimates of the liability are based upon currently available facts, existing technology, and presently enacted laws and regulations taking into consideration the likely effects of inflation and other societal and economic factors. We consider all available evidence including prior experience in remediation of contaminated sites, other companies' cleanup experiences and data released by the United States Environmental Protection Agency or other organizations. These estimated liabilities are subject to revision in future periods based on actual costs or new information. Where future cash flows are fixed or reliably determinable, we have discounted the liabilities. All other environmental liabilities are recorded at their undiscounted amounts. We evaluate recoveries separately from the liability and, when they are assured, recoveries are recorded and reported separately from the associated liability in our financial statements. As of June 30, 2003, we are designated as a potentially responsible party in three Superfund sites. We have estimated our share of the remediation costs for these sites to be less than $1 million in the aggregate. In addition to the Superfund sites, we may have the obligation to remediate current or former facilities, and we estimate our share of remediation costs at these facilities to be approximately $12 million. For each of the Superfund sites and the current and former facilities, we have established reserves that we believe are adequate for these costs. Although we believe our estimates of remediation costs are reasonable and are based on the latest available information, the cleanup costs are estimates and are subject to revision as more information becomes available about the extent of remediation required. At some sites, we expect that other parties will contribute to the remediation costs. In addition, at the Superfund sites, the Comprehensive Environmental Response, Compensation and Liability Act provides that our liability could be joint and several, meaning that we could be required to pay in excess of our share of remediation costs. Our understanding of the financial strength of other potentially responsible parties at the Superfund sites, and of other liable parties at our current and former facilities, has been considered, where appropriate, in our determination of our estimated liability. We believe that any potential costs associated with our current status as a potentially responsible party in the Superfund sites, or as a liable party at our current or former facilities, will not be material to our results of operations or consolidated financial position. We also from time to time are involved in legal proceedings or claims that are incidental to the conduct of our business. Some of these proceedings allege damages against us relating to environmental liabilities (including toxic tort, property damage and remediation), intellectual property matters (including patent, 12 TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (UNAUDITED) trademark and copyright infringement, and licensing disputes), personal injury claims (including injuries due to product failure, design or warnings issues, and other product liability related matters), employment matters, and commercial or contractual disputes, sometimes related to acquisitions or divestitures. For example, we have recently responded to a request from the Federal Trade Commission to substantiate certain of our product claims. As another example, we are involved in litigation with the minority owner of one of our Indian joint ventures over various operational issues. This dispute involves a court-mandated bidding process, which could result in a non-cash charge to earnings if we are required to sell our interest in the joint venture on unfavorable terms. We will continue to vigorously defend ourselves against all of these claims. Although the ultimate outcome of any legal matter cannot be predicted with certainty, based on present information, including our assessment of the merits of the particular claim, we do not expect that these legal proceedings or claims will have any material adverse impact on our future consolidated financial position or results of operations. In addition, we are subject to a number of lawsuits initiated by a significant number of claimants alleging health problems as a result of exposure to asbestos. Many of these cases involve significant numbers of individual claimants. However, only a small percentage of these claimants allege that they were automobile mechanics who were allegedly exposed to our former muffler products and a significant number appear to involve workers in other industries or otherwise do not include sufficient information to determine whether there is any basis for a claim against us. We believe, based on scientific and other evidence, it is unlikely that mechanics were exposed to asbestos by our former muffler products and that, in any event, they would not be at increased risk of asbestos-related disease based on their work with these products. Further, many of these cases involve numerous defendants, with the number of each in some cases exceeding 200 defendants from a variety of industries. Additionally, the plaintiffs either do not specify any, or specify the jurisdictional minimum, dollar amount for damages. On the other hand, we are experiencing an increasing number of these claims, likely due to bankruptcies of major asbestos manufacturers. We vigorously defend ourselves against these claims as part of our ordinary course of business. To date, with respect to claims that have proceeded sufficiently through the judicial process, we have regularly achieved favorable resolution in the form of a dismissal of the claim or a judgment in our favor. Accordingly, we presently believe that these asbestos-related claims will not have a material adverse impact on our future financial condition or results of operations. We provide warranties on some of our products. The warranty terms vary but range from one year up to limited lifetime warranties on some of our premium aftermarket products. Provisions for estimated expenses related to product warranty are made at the time products are sold or when specific warranty issues are identified on OE products. These estimates are established using historical information about the nature, frequency, and average cost of warranty claims. We actively study trends of warranty claims and take action to improve product quality and minimize warranty claims. We believe that the warranty reserve is appropriate; however, actual claims incurred could differ from the original estimates, requiring adjustments to the reserve. The reserve is included in both long-term and short-term liabilities on the balance sheet. Below is a table that shows the activity in the warranty accrual accounts:
SIX MONTHS ENDED JUNE 30, ------------ 2003 2002 ---- ---- (MILLIONS) Beginning balance........................................... $21 $19 Accruals related to product warranties...................... 5 6 Reductions for payments made................................ (3) (4) --- --- Ending balance.............................................. $23 $21 === ===
13 TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (UNAUDITED) During the second quarter of 2002, we reached an agreement with an OE customer to recover our investment in development costs and related equipment, as well as amounts owed to some of our suppliers, for a platform cancelled by the customer. We collected $30 million, net of the amounts we owed to suppliers, during the second quarter pursuant to this agreement. The agreement had no effect on our results of operations. (5) In July 2001, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 141, "Business Combinations," and SFAS No. 142, "Goodwill and Other Intangible Assets." SFAS No. 141 requires that the purchase method of accounting be used for all business combinations initiated after June 30, 2001. SFAS No. 142 changed the accounting for purchased goodwill from an amortization method to an impairment-only approach. Therefore amortization of all purchased goodwill, including amortization of goodwill recorded in past business combinations, ceased upon adoption of SFAS No. 142 in January 2002. Under the provisions of SFAS No. 142, we were required to perform an impairment analysis on the balance of goodwill at January 1, 2002. The fair value of our reporting units used in determining the goodwill impairment was computed using the present value of expected future cash flows. As a result of this analysis, we determined that goodwill associated with our North American original equipment ride control and European aftermarket operations was impaired. As a result, a charge of $218 million, net of taxes of $6 million, was recorded in the first quarter of 2002 as a cumulative effect of a change in accounting principle. The balance of unamortized goodwill was $191 million at June 30, 2003. We are required to test this balance for impairment on an annual basis. The changes in the carrying amount of goodwill for the six months ended June 30, 2003, are as follows:
NORTH AMERICA EUROPE OTHER TOTAL ------------- ------ ----- ----- (MILLIONS) Balance at 12/31/02....................................... $136 $18 $31 $185 Translation adjustment.................................... 1 1 4 6 ---- --- --- ---- Balance at 6/30/03........................................ $137 $19 $35 $191 ==== === === ====
In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement Obligations." SFAS No. 143 requires that the fair value of a liability for an asset retirement obligation be recognized in the period in which it is incurred if a reasonable estimate of fair value can be made. The associated asset retirement costs are capitalized as part of the carrying amount of the long-lived asset. SFAS No. 143 was effective for fiscal years beginning after June 15, 2002. The adoption of SFAS No. 143 did not have a material impact on our financial position or results of operations. In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities." SFAS No. 146 changed the definition of the date at which a liability exists for exit or disposal activities also referred to as restructuring activities. Previously, we recognized a liability for restructuring activities when we committed to a plan of restructuring and announced this plan to the employees. We are required to apply the new standard prospectively to new exit or disposal activities initiated after December 31, 2002. SFAS No. 146 generally requires that these costs be recognized at a later date and over time, rather than in a single charge. The adoption of SFAS No. 146 did not have a material impact on our financial position or results of operations. In November 2002, the FASB issued Interpretation No. 45 "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others" ("FIN 45"), which expanded previously issued accounting guidance and disclosure requirements for certain guarantees. FIN 45 provides that issuing a guarantee imposes a non-contingent obligation to stand ready to perform in the event that the conditions specified in the guarantee occur, and that a liability representing the fair value of such a 14 TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (UNAUDITED) guarantee must be recognized when the guarantee is issued. We are required to apply these initial recognition and measurement provisions to guarantees issued or modified after December 31, 2002. The adoption of FIN 45 has not had a material impact on our financial position or results of operations. You should also read Note 9 to the financial statements. In December 2002, the FASB issued SFAS No. 148 which provided alternative methods of transition for a voluntary change to the fair value method of accounting for stock-based employee compensation and amended the disclosure requirements to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. See Note 7 to our financial statements for this information for the second quarter. In January 2003, the FASB issued Interpretation No. 46, "Consolidation of Variable Interest Entities" ("FIN 46"). FIN 46 requires that the assets, liabilities and results of the activity of variable interest entities be consolidated into the financial statements of the entity that has the controlling financial interest. FIN 46 also provides the framework for determining whether a variable interest entity should be consolidated based on voting interest or significant financial support provided to it. This interpretation was effective immediately for variable interest entities created after January 31, 2003 and effective July 1, 2003 for variable interest entities created before February 1, 2003. The adoption of FIN 46 did not have any impact on our consolidated financial statements. In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement 133 on Derivative Instruments and Hedging Activities." SFAS No. 149 amended and clarified financial accounting and reporting for derivative instruments, including certain derivative instruments embedded in other contracts and for hedging activities under SFAS No. 133. SFAS No. 149 is effective for contracts entered into or modified after June 30, 2003. The adoption of SFAS No. 149 did not have a material impact on our financial position or results of operations. In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity." SFAS No. 150 established standards for classification of certain financial instruments that have characteristics of both liabilities and equity but have been presented entirely as equity or between the liabilities and equity section of the statement of financial position. SFAS No. 150 is effective for financial instruments entered into or modified after May 31, 2003. The adoption of SFAS No. 150 did not have a material impact on our financial position. In May 2003, the FASB's Emerging Issues Task Force (EITF) reached a consensus on Issue No. 01-08, "Determining Whether an Arrangement Contains a Lease." This issue addressed reporting revenue as rental or leasing income that would otherwise be reported as part of product sales or service revenue. This requires the parties to the arrangement to determine whether a service contract or similar arrangement is or includes a lease within the scope of SFAS No. 13, "Accounting for Leases." The consensus should be applied prospectively to arrangements agreed to, modified, or acquired in a business combination in the fiscal periods beginning after May 28, 2003. We are currently evaluating the effect that this consensus may have on our financial position or results of operations. (6) We have an agreement to periodically sell an interest in some of our U.S. trade accounts receivable to a third party. Receivables become eligible for the program on a daily basis, at which time the receivables are sold to the third party, net of a factoring discount, through a wholly-owned subsidiary. Under this agreement, as well as individual agreements with third parties in Europe, we have sold accounts receivable of $128 million and $140 million at June 30, 2003 and 2002, respectively. We recognized a loss of approximately $1 million for both the six months ended June 30, 2003 and 2002, respectively, on these sales of trade accounts, representing the discount from book values at which these receivables were sold to the third party. The discount rate varies 15 TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (UNAUDITED) based on funding cost incurred by the third party, and it averaged three percent during the time period in 2003 when we sold receivables. We retained ownership of the remaining interest in the pool of receivables not sold to the third party. The retained interest represents a credit enhancement for the program. We value the retained interest based upon the amount we expect to collect from our customers, which approximates book value. (7) We account for our stock-based employee compensation plans under the recognition and measurement principles of APB Opinion No. 25, "Accounting for Stock Issued to Employees." No stock-based employee compensation cost is reflected in net income (loss) for stock options, as all options granted under those plans had an exercise price equal to the market value of the stock at the date of grant. We also granted restricted shares, restricted units and stock equivalent units to certain key employees. After-tax stock based compensation expense relating to restricted shares and stock equivalent units for the first six months of 2003 was less than $1 million compared to approximately $3 million for the same period in the prior year relating to restricted shares, performance shares, and stock equivalent units. As permitted by SFAS No. 123, "Accounting for Stock-Based Compensation," and amended by SFAS No. 148, "Accounting for Stock-Based Compensation--Transition and Disclosure, an amendment of FASB Statement No. 123," we follow the disclosure only requirements of SFAS No. 123. We estimate that our net income (loss) for the first six months of 2003 and 2002 would have been lower by approximately $1 million had we applied the fair value method of accounting for stock options. The following table illustrates the effect on net income (loss) and earnings (loss) per share if we had applied the fair value recognition provisions of SFAS No. 123:
THREE MONTHS SIX MONTHS ENDED ENDED JUNE 30, JUNE 30, ------------ -------------- 2003 2002 2003 2002 ---- ---- ---- ------ (MILLIONS EXCEPT SHARE AND PER SHARE AMOUNTS) Net income (loss)........................................... $ 24 $ 19 $ 25 $ (201) Add: Stock-based employee compensation expense included in net income, net of income tax............................. 1 2 -- 3 Deduct: Stock-based employee compensation expense determined under fair value based method for all awards, net of income tax................................................ 1 3 1 4 ---- ---- ---- ------ Pro forma net income (loss)................................. $ 24 $ 18 $ 24 $ (202) ==== ==== ==== ====== Earnings (loss) per share: Basic--as reported.......................................... $.59 $.48 $.61 $(5.07) Basic--pro forma............................................ $.58 $.46 $.59 $(5.09) Diluted--as reported........................................ $.58 $.45 $.60 $(5.08) Diluted--pro forma.......................................... $.57 $.44 $.58 $(5.09)
16 TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (UNAUDITED) (8) Earnings (loss) per share of common stock outstanding were computed as follows:
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30, ---------------------------- -------------------------- 2003 2002 2003 2002 ------------ ------------ ----------- ----------- (MILLIONS EXCEPT SHARE AND PER SHARE AMOUNTS) Basic earnings (loss) per share-- Income (loss) before cumulative effect of change in accounting principle.......................... $ 24 $ 19 $ 25 $ 17 ========== ========== ========== ========== Average shares of common stock outstanding........................ 40,394,671 39,746,401 40,244,623 39,748,370 ========== ========== ========== ========== Earnings (loss) per average share of common stock before cumulative effect of change in accounting principle.......................... $ .59 $ .48 $ .61 $ .42 ========== ========== ========== ========== Diluted earnings (loss) per share-- Income (loss) before cumulative effect of change in accounting principle.......................... $ 24 $ 19 $ 25 $ 17 ========== ========== ========== ========== Average shares of common stock outstanding........................ 40,394,671 39,746,401 40,244,623 39,748,370 Effect of dilutive securities: Restricted stock................... 18,866 167,193 45,930 100,085 Stock options...................... 919,871 1,425,324 846,624 1,145,235 Performance shares................. -- 473,107 -- 429,085 ---------- ---------- ---------- ---------- Average shares of common stock outstanding including dilutive shares............................. 41,333,408 41,812,025 41,137,177 41,422,775 ========== ========== ========== ========== Earnings (loss) per average share of common stock before cumulative effect of change in accounting principle.......................... $ .58 $ .45 $ .60 $ .41 ========== ========== ========== ==========
Options to purchase 4,656,081 and 3,314,024 shares of common stock were outstanding at June 30, 2003 and 2002, respectively, but were not included in the computation of diluted EPS because the options' exercise prices were greater than the average market price of the common shares on such dates. (9) We occasionally provide guarantees that could require us to make future payments in the event that the third party primary obligor does not make its required payments. We have not recorded a liability for any of these guarantees. The only third party guarantee we have made is the performance of lease obligations by a former affiliate. Our maximum liability under this guarantee was approximately $5 million and $6 million at June 30, 2003 and 2002, respectively. We have no recourse in the event of default by the former affiliate. However, we have not been required to make any payments under this guarantee. Additionally, we have from time to time issued guarantees for the performance of obligations by some of our subsidiaries, and some of our subsidiaries have guaranteed our debt. All of our then existing and future material domestic wholly-owned subsidiaries fully and unconditionally guarantee the $964 million senior secured credit facility, the $350 million senior secured notes and the $500 million senior subordinated notes on a joint and several basis. The arrangement for the senior secured credit facility is also secured by first-priority liens on substantially all our domestic assets and pledges of 66 percent of the stock of certain first-tier foreign subsidiaries. The arrangement for the $350 million senior secured notes is also secured by second-priority liens on substantially all our domestic assets, excluding some of the stock of our domestic subsidiaries. This 17 TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (UNAUDITED) arrangement is not secured by any pledges of stock or assets of our foreign subsidiaries. You should also read Note 11 where we present the Supplemental Guarantor Condensed Consolidating Financial Statements. We have issued guarantees through letters of credit in connection with some obligations of our affiliates. We have guaranteed through letters of credit support for local credit facilities, travel and procurement card programs, and cash management requirements for some of our subsidiaries totaling $41 million. We have also issued $18 million in letters of credit to support some of our subsidiaries' insurance arrangements. In addition, we have issued $3 million in guarantees through letters of credit to guarantee other obligations of subsidiaries primarily related to environmental remediation activities. (10) We are a global manufacturer with two geographic reportable segments: North America and Europe. Each segment manufactures and distributes ride control and emission control products primarily for the automotive industry. We have not aggregated individual operating segments within these reportable segments. We evaluate segment performance based primarily on income before interest expense, income taxes, and minority interest. Products are transferred between segments and geographic areas on a basis intended to reflect as nearly as possible the "market value" of the products. The following table summarizes certain segment information:
SEGMENT ----------------------------------------------------------- RECLASS NORTH AMERICA EUROPE OTHER & ELIMS CONSOLIDATED ------------- ------ ----- ------- ------------ (MILLIONS) AT JUNE 30, 2003, AND FOR THE THREE MONTHS THEN ENDED Revenues from external customers............. $ 501 $ 388 $109 $ -- $ 998 Intersegment revenues........................ 2 10 3 (15) -- Income before interest, income taxes, and minority interest.......................... 49 11 7 -- 67 AT JUNE 30, 2002, AND FOR THE THREE MONTHS THEN ENDED Revenues from external customers............. $ 539 $ 321 $ 88 $ -- $ 948 Intersegment revenues........................ 2 9 4 (15) -- Income before interest, income taxes, and minority interest.......................... 53 11 7 -- 71 AT JUNE 30, 2003, AND FOR THE SIX MONTHS THEN ENDED Revenues from external customers............. $ 982 $ 733 $204 $ -- $1,919 Intersegment revenues........................ 4 19 5 (28) -- Income before interest, income taxes, and minority interest.......................... 77 10 11 -- 98 Total Assets................................. 755 1,057 737 124 2,673 AT JUNE 30, 2002, AND FOR THE SIX MONTHS THEN ENDED Revenues from external customers............. $1,006 $ 593 $158 $ -- $1,757 Intersegment revenues........................ 4 16 6 (26) -- Income before interest, income taxes, and minority interest.......................... 72 16 10 -- 98 Total Assets................................. 1,027 1,018 608 112 2,765
18 TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (UNAUDITED) (11) Supplemental guarantor condensed financial statements are presented below: Basis of Presentation Subject to limited exceptions, all of our existing and future material domestic wholly owned subsidiaries (which we refer to as the Guarantor Subsidiaries) fully and unconditionally guarantee our senior subordinated notes due 2009 and our senior secured notes due 2013 on a joint and several basis. We have not presented separate financial statements and other disclosures concerning each of the Guarantor Subsidiaries because management has determined that such information is not material to the holders of the notes. Therefore, Guarantor Subsidiaries are combined in the presentation below. These condensed consolidating financial statements are presented on the equity method. Under this method our investments are recorded at cost and adjusted for our ownership share of a subsidiary's cumulative results of operations, capital contributions and distributions, and other equity changes. You should read the condensed consolidating financial statements of the Guarantor Subsidiaries in connection with our consolidated financial statements and related notes of which this note is an integral part. Distributions There are no significant restrictions on the ability of the Guarantor Subsidiaries to make distributions to us. 19 TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (UNAUDITED) STATEMENT OF INCOME (LOSS)
FOR THE THREE MONTHS ENDED JUNE 30, 2003 ---------------------------------------------------------------------- TENNECO AUTOMOTIVE INC. GUARANTOR NONGUARANTOR (PARENT RECLASS SUBSIDIARIES SUBSIDIARIES COMPANY) & ELIMS CONSOLIDATED ------------ ------------ --------------- ------- ------------ (MILLIONS) REVENUES Net sales and operating revenues-- External..................... $478 $520 $ -- $ -- $998 Affiliated companies......... 12 87 -- (99) -- ---- ---- ---- ---- ---- 490 607 -- (99) 998 ---- ---- ---- ---- ---- COSTS AND EXPENSES Cost of sales (exclusive of depreciation shown below).... 379 499 -- (99) 779 Engineering, research, and development.................. 6 7 -- -- 13 Selling, general, and administrative............... 44 53 -- -- 97 Depreciation and amortization of other intangibles............ 18 23 -- -- 41 ---- ---- ---- ---- ---- 447 582 -- (99) 930 ---- ---- ---- ---- ---- OTHER INCOME (EXPENSE) Gain on sale of assets.......... -- -- -- -- -- Loss on sale of receivables..... -- (1) -- -- (1) Other income (loss)............. -- -- -- -- -- ---- ---- ---- ---- ---- -- (1) -- -- (1) ---- ---- ---- ---- ---- INCOME (LOSS) BEFORE INTEREST EXPENSE, INCOME TAXES, MINORITY INTEREST, AND EQUITY IN NET INCOME FROM AFFILIATED COMPANIES....................... 43 24 -- -- 67 Interest expense-- External (net of interest capitalized)............... (1) 1 38 -- 38 Affiliated companies (net of interest income)........... 25 (2) (23) -- -- Income tax expense (benefit).... (1) (3) (20) 27 3 Minority interest............... -- 2 -- -- 2 ---- ---- ---- ---- ---- 20 26 5 (27) 24 Equity in net income (loss) from affiliated companies......... 33 (1) 19 (51) -- ---- ---- ---- ---- ---- NET INCOME (LOSS)................. $ 53 $ 25 $ 24 $(78) $ 24 ==== ==== ==== ==== ====
20 TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (UNAUDITED) STATEMENT OF INCOME (LOSS)
FOR THE THREE MONTHS ENDED JUNE 30, 2002 ---------------------------------------------------------------------- TENNECO AUTOMOTIVE INC. GUARANTOR NONGUARANTOR (PARENT RECLASS SUBSIDIARIES SUBSIDIARIES COMPANY) & ELIMS CONSOLIDATED ------------ ------------ --------------- ------- ------------ (MILLIONS) REVENUES Net sales and operating revenues-- External..................... $438 $510 $ -- $ -- $948 Affiliated companies......... 13 24 -- (37) -- ---- ---- ---- ---- ---- 451 534 -- (37) 948 ---- ---- ---- ---- ---- COSTS AND EXPENSES Cost of sales (exclusive of depreciation shown below).... 345 435 -- (37) 743 Engineering, research, and development.................. 5 12 -- -- 17 Selling, general, and administrative............... 51 42 -- -- 93 Depreciation and amortization of other intangibles............ 17 18 -- -- 35 ---- ---- ---- ---- ---- 418 507 -- (37) 888 ---- ---- ---- ---- ---- OTHER INCOME (EXPENSE) Gain on sale of assets.......... -- 11 -- -- 11 Loss on sale of receivables..... -- -- -- -- -- Other income (loss)............. 7 (7) -- -- -- ---- ---- ---- ---- ---- 7 4 -- -- 11 ---- ---- ---- ---- ---- INCOME (LOSS) BEFORE INTEREST EXPENSE, INCOME TAXES, MINORITY INTEREST, AND EQUITY IN NET INCOME FROM AFFILIATED COMPANIES....................... 40 31 -- -- 71 Interest expense-- External (net of interest capitalized)............... -- 1 35 -- 36 Affiliated companies (net of interest income)........... 18 1 (19) -- -- Income tax expense (benefit).... (1) 14 (6) 9 16 Minority interest............... -- -- -- -- -- ---- ---- ---- ---- ---- 23 15 (10) (9) 19 Equity in net income (loss) from affiliated companies......... 7 -- 29 (36) -- ---- ---- ---- ---- ---- NET INCOME (LOSS)................. $ 30 $ 15 $ 19 $(45) $ 19 ==== ==== ==== ==== ====
21 TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (UNAUDITED) STATEMENT OF INCOME (LOSS)
FOR THE SIX MONTHS ENDED JUNE 30, 2003 -------------------------------------------------------------------------- TENNECO AUTOMOTIVE INC. GUARANTOR NONGUARANTOR (PARENT RECLASS SUBSIDIARIES SUBSIDIARIES COMPANY) & ELIMS CONSOLIDATED ------------ ------------ --------------- ------- ------------ (MILLIONS) REVENUES Net sales and operating revenues-- External....................... $865 $1,054 $ -- $ -- $1,919 Affiliated companies........... 23 107 -- (130) -- ---- ------ ---- ----- ------ 888 1,161 -- (130) 1,919 ---- ------ ---- ----- ------ COSTS AND EXPENSES Cost of sales (exclusive of depreciation shown below)...... 696 956 -- (130) 1,522 Engineering, research, and development.................... 16 16 -- -- 32 Selling, general, and administrative................. 85 100 -- -- 185 Depreciation and amortization of other intangibles.............. 36 44 -- -- 80 ---- ------ ---- ----- ------ 833 1,116 -- (130) 1,819 ---- ------ ---- ----- ------ OTHER INCOME (EXPENSE) Gain on sale of assets............ -- -- -- -- -- Loss on sale of receivables....... -- (1) -- -- (1) Other income (loss)............... (1) 2 -- (2) (1) ---- ------ ---- ----- ------ (1) 1 -- (2) (2) ---- ------ ---- ----- ------ INCOME (LOSS) BEFORE INTEREST EXPENSE, INCOME TAXES, MINORITY INTEREST, AND EQUITY IN NET INCOME FROM AFFILIATED COMPANIES......... 54 46 -- (2) 98 Interest expense-- External (net of interest capitalized)................. (1) 2 68 -- 69 Affiliated companies (net of interest income)............. 42 1 (43) -- -- Income tax expense (benefit)...... (5) (1) (35) 42 1 Minority interest................. -- 3 -- -- 3 ---- ------ ---- ----- ------ 18 41 10 (44) 25 Equity in net income (loss) from affiliated companies........... 45 (2) 15 (58) -- ---- ------ ---- ----- ------ INCOME (LOSS) BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE......................... 63 39 25 (102) 25 Cumulative effect of change in accounting principle.............. -- -- -- -- -- ---- ------ ---- ----- ------ NET INCOME (LOSS)................... $ 63 $ 39 $ 25 $(102) $ 25 ==== ====== ==== ===== ======
22 TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (UNAUDITED) STATEMENT OF INCOME (LOSS)
FOR THE SIX MONTHS ENDED JUNE 30, 2002 ---------------------------------------------------------------------- TENNECO AUTOMOTIVE INC. GUARANTOR NONGUARANTOR (PARENT RECLASS SUBSIDIARIES SUBSIDIARIES COMPANY) & ELIMS CONSOLIDATED ------------ ------------ --------------- ------- ------------ (MILLIONS) REVENUES Net sales and operating revenues-- External..................... $ 812 $945 $ -- $ -- $1,757 Affiliated companies......... 24 42 -- (66) -- ----- ---- ----- ----- ------ 836 987 -- (66) 1,757 ----- ---- ----- ----- ------ COSTS AND EXPENSES Cost of sales (exclusive of depreciation shown below).... 645 804 -- (66) 1,383 Engineering, research, and development.................. 9 22 -- -- 31 Selling, general, and administrative............... 107 79 -- -- 186 Depreciation and amortization of other intangibles............ 35 34 -- -- 69 ----- ---- ----- ----- ------ 796 939 -- (66) 1,669 ----- ---- ----- ----- ------ OTHER INCOME (EXPENSE) Gain on sale of assets.......... -- 11 -- -- 11 Loss on sale of receivables..... (1) -- -- -- (1) Other income (loss)............. 87 (7) 98 (178) -- ----- ---- ----- ----- ------ 86 4 98 (178) 10 ----- ---- ----- ----- ------ INCOME (LOSS) BEFORE INTEREST EXPENSE, INCOME TAXES, MINORITY INTEREST, AND EQUITY IN NET INCOME FROM AFFILIATED COMPANIES....................... 126 52 98 (178) 98 Interest expense-- External (net of interest capitalized)............... -- 2 70 -- 72 Affiliated companies (net of interest income)........... 36 2 (38) -- -- Income tax expense (benefit).... 32 20 23 (67) 8 Minority interest............... -- 1 -- -- 1 ----- ---- ----- ----- ------ 58 27 43 (111) 17 Equity in net income (loss) from affiliated companies......... 19 (1) (244) 226 -- ----- ---- ----- ----- ------ INCOME (LOSS) BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE....................... 77 26 (201) 115 17 Cumulative effect of change in accounting principle............ (171) (47) -- -- (218) ----- ---- ----- ----- ------ NET INCOME (LOSS)................. $ (94) $(21) $(201) $ 115 $ (201) ===== ==== ===== ===== ======
23 TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (UNAUDITED) BALANCE SHEET
JUNE 30, 2003 ---------------------------------------------------------------------- TENNECO AUTOMOTIVE INC. GUARANTOR NONGUARANTOR (PARENT RECLASS SUBSIDIARIES SUBSIDIARIES COMPANY) & ELIMS CONSOLIDATED ------------ ------------ --------------- ------- ------------ (MILLIONS) ASSETS Current assets: Cash and cash equivalents................. $ 1 $ 57 $ -- $ -- $ 58 Receivables, net.......................... 224 528 18 (248) 522 Inventories............................... 95 260 -- -- 355 Deferred income taxes..................... 47 9 89 (89) 56 Prepayments and other..................... 42 64 -- -- 106 ------ ------ ------ ------- ------ 409 918 107 (337) 1,097 ------ ------ ------ ------- ------ Other assets: Investment in affiliated companies........ 289 3 1,943 (2,235) -- Notes and advances receivable from affiliates.............................. 2,647 53 3,291 (5,991) -- Long-term notes receivable, net........... 2 17 -- -- 19 Goodwill.................................. 136 55 -- -- 191 Intangibles, net.......................... 14 6 -- -- 20 Deferred income taxes..................... 88 -- 78 (51) 115 Pension assets............................ 11 12 -- -- 23 Other..................................... 43 66 30 -- 139 ------ ------ ------ ------- ------ 3,230 212 5,342 (8,277) 507 ------ ------ ------ ------- ------ Plant, property, and equipment, at cost..... 866 1,295 -- -- 2,161 Less--Reserves for depreciation and amortization............................ 490 602 -- -- 1,092 ------ ------ ------ ------- ------ 376 693 -- -- 1,069 ------ ------ ------ ------- ------ $4,015 $1,823 $5,449 $(8,614) $2,673 ====== ====== ====== ======= ====== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Short-term debt (including current maturities of long-term debt) Short-term debt--non-affiliated....... $ -- $ 15 $ 96 $ -- $ 111 Short-term debt--affiliated........... -- 172 10 (182) -- Trade payables............................ 172 451 -- (56) 567 Accrued taxes............................. 63 17 -- (58) 22 Other..................................... 108 108 17 (8) 225 ------ ------ ------ ------- ------ 343 763 123 (304) 925 Long-term debt--non-affiliated.............. -- 17 1,369 -- 1,386 Long-term debt--affiliated.................. 2,039 -- 3,952 (5,991) -- Deferred income taxes....................... 85 56 -- (65) 76 Postretirement benefits and other liabilities............................... 190 67 (1) 4 260 Commitments and contingencies Minority interest........................... -- 20 -- -- 20 Shareholders' equity........................ 1,358 900 6 (2,258) 6 ------ ------ ------ ------- ------ $4,015 $1,823 $5,449 $(8,614) $2,673 ====== ====== ====== ======= ======
24 TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (UNAUDITED) BALANCE SHEET
DECEMBER 31, 2002 -------------------------------------------------------------------------- TENNECO AUTOMOTIVE INC. GUARANTOR NONGUARANTOR (PARENT RECLASS SUBSIDIARIES SUBSIDIARIES COMPANY) & ELIMS CONSOLIDATED ------------ ------------ --------------- ------- ------------ (MILLIONS) ASSETS Current assets: Cash and cash equivalents............. $ 2 $ 52 $ -- $ -- $ 54 Receivables, net...................... 188 282 18 (79) 409 Inventories........................... 108 244 -- -- 352 Deferred income taxes................. 47 9 64 (64) 56 Prepayments and other................. 41 54 -- -- 95 ------ ------ ------ ------- ------ 386 641 82 (143) 966 ------ ------ ------ ------- ------ Other assets: Investment in affiliated companies.... 200 -- 1,854 (2,054) -- Notes and advances receivable from affiliates.......................... 2,644 1 3,265 (5,909) 1 Long-term notes receivable, net....... 2 11 -- -- 13 Goodwill.............................. 135 50 -- -- 185 Intangibles, net...................... 15 5 -- -- 20 Deferred income taxes................. 135 6 78 (78) 141 Pension assets........................ 10 7 -- -- 17 Other................................. 47 63 25 -- 135 ------ ------ ------ ------- ------ 3,188 143 5,222 (8,041) 512 ------ ------ ------ ------- ------ Plant, property, and equipment, at cost.................................. 855 1,156 -- -- 2,011 Less--Reserves for depreciation and amortization........................ 467 518 -- -- 985 ------ ------ ------ ------- ------ 388 638 -- -- 1,026 ------ ------ ------ ------- ------ $3,962 $1,422 $5,304 $(8,184) $2,504 ====== ====== ====== ======= ====== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Short-term debt (including current maturities of long-term debt) Short-term debt--non-affiliated... $ -- $ 14 $ 214 $ -- $ 228 Short-term debt--affiliated....... 4 1 10 (15) -- Trade payables........................ 153 411 -- (59) 505 Accrued taxes......................... 79 25 -- (64) 40 Other................................. 130 92 25 (4) 243 ------ ------ ------ ------- ------ 366 543 249 (142) 1,016 Long-term debt-non-affiliated........... -- 16 1,201 -- 1,217 Long-term debt-affiliated............... 1,934 26 3,949 (5,909) -- Deferred income taxes................... 128 53 -- (78) 103 Postretirement benefits and other liabilities........................... 174 64 (1) 6 243 Commitments and contingencies Minority interest....................... -- 19 -- -- 19 Shareholders' equity.................... 1,360 701 (94) (2,061) (94) ------ ------ ------ ------- ------ $3,962 $1,422 $5,304 $(8,184) $2,504 ====== ====== ====== ======= ======
25 TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (UNAUDITED) STATEMENT OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 2003 -------------------------------------------------------------------------- TENNECO AUTOMOTIVE INC. GUARANTOR NONGUARANTOR (PARENT RECLASS SUBSIDIARIES SUBSIDIARIES COMPANY) & ELIMS CONSOLIDATED ------------ ------------ --------------- ------- ------------ (MILLIONS) OPERATING ACTIVITIES Net cash provided (used) by operating activities.............. $ 68 $ 61 $(101) $-- $ 28 ---- ---- ----- --- ----- INVESTING ACTIVITIES Net proceeds from the sale of fixed assets............................ -- 3 -- -- 3 Expenditures for plant, property, and equipment..................... (20) (34) -- -- (54) Investments and other............... -- (2) -- -- (2) ---- ---- ----- --- ----- Net cash used by investing activities........................ (20) (33) -- -- (53) ---- ---- ----- --- ----- FINANCING ACTIVITIES Issuance of common and treasury stock............................. -- -- -- -- -- Proceeds from capital contributions..................... -- -- 1 -- 1 Proceeds from long-term debt........ -- -- 350 -- 350 Debt issuance cost on long-term debt.............................. -- -- (12) -- (12) Retirement of long-term debt........ -- (2) (274) -- (276) Net increase (decrease) in short-term debt excluding current maturities of long-term debt...... -- -- (25) -- (25) Intercompany dividends and net increase (decrease) in intercompany obligations.......... (47) (14) 61 -- -- Dividends (common).................. -- -- -- -- -- Other............................... -- (1) -- -- (1) ---- ---- ----- --- ----- Net cash provided (used) by financing activities.............. (47) (17) 101 -- 37 ---- ---- ----- --- ----- Effect of foreign exchange rate changes on cash and cash equivalents....................... -- (8) -- -- (8) ---- ---- ----- --- ----- Increase (decrease) in cash and cash equivalents....................... 1 3 -- -- 4 Cash and cash equivalents, January 1................................. -- 54 -- -- 54 ---- ---- ----- --- ----- Cash and cash equivalents, June 30 (Note)............................ $ 1 $ 57 $ -- $-- $ 58 ==== ==== ===== === =====
NOTE: Cash and cash equivalents include highly liquid investments with a maturity of three months or less at the date of purchase. 26 TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (UNAUDITED) STATEMENT OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 2002 -------------------------------------------------------------------------- TENNECO AUTOMOTIVE INC. GUARANTOR NONGUARANTOR (PARENT RECLASS SUBSIDIARIES SUBSIDIARIES COMPANY) & ELIMS CONSOLIDATED ------------ ------------ --------------- ------- ------------ (MILLIONS) OPERATING ACTIVITIES Net cash provided (used) by operating activities.............. $ 54 $ 179 $(109) $ -- $124 ----- ----- ----- ---- ---- INVESTING ACTIVITIES Net proceeds from the sale of fixed assets............................ -- 18 -- -- 18 Expenditures for plant, property, and equipment..................... (22) (30) -- -- (52) Investments and other............... 18 (5) -- -- 13 ----- ----- ----- ---- ---- Net cash used by investing activities........................ (4) (17) -- -- (21) ----- ----- ----- ---- ---- FINANCING ACTIVITIES Issuance of common and treasury stock............................. -- -- -- -- -- Proceeds from capital contributions..................... -- -- -- -- -- Proceeds from long-term debt........ -- -- -- -- -- Debt issuance cost on long-term debt.............................. -- -- -- -- -- Retirement of long-term debt........ -- -- (25) -- (25) Net increase (decrease) in short-term debt excluding current maturities of long-term debt...... -- (5) (66) -- (71) Intercompany dividends and net increase (decrease) in intercompany obligations.......... (126) 72 102 (48) -- Dividends (common).................. 138 (187) 98 (49) -- Other............................... -- -- -- -- -- ----- ----- ----- ---- ---- Net cash provided (used) by financing activities.............. 12 (120) 109 (97) (96) ----- ----- ----- ---- ---- Effect of foreign exchange rate changes on cash and cash equivalents....................... -- (8) -- -- (8) ----- ----- ----- ---- ---- Increase (decrease) in cash and cash equivalents....................... 62 34 -- (97) (1) Cash and cash equivalents, January 1................................. 2 51 -- -- 53 ----- ----- ----- ---- ---- Cash and cash equivalents, June 30 (Note)............................ $ 64 $ 85 $ -- $(97) $ 52 ===== ===== ===== ==== ====
NOTE: Cash and cash equivalents include highly liquid investments with a maturity of three months or less at the date of purchase. (The preceding notes are an integral part of the foregoing financial statements.) 27 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS FROM OPERATIONS FOR THE THREE MONTHS ENDED JUNE 30, 2003 AND 2002 NET SALES AND OPERATING REVENUES The following tables reflect our revenues for the second quarter of 2003 and 2002. We present these reconciliations of revenues in order to reflect the trend in our sales in various product lines and geographic regions separately from the effects of doing business in currencies other than the U.S. dollar. Additionally, "pass-through" catalytic converter sales include precious metals pricing, which may be volatile. These "pass-through" catalytic converter sales occur when, at the direction of our OE customers, we purchase catalytic converters or components from suppliers, use them in our manufacturing process, and sell them as part of the completed system. While our original equipment customers assume the risk of this volatility, it impacts our reported revenue. Excluding pass-through catalytic converter sales removes this impact. We have not reflected any currency impact in the 2002 table since this is the base period for measuring the effects of currency during 2003 on our operations. We use this information to analyze the trend in our revenues before these factors. We believe investors find this information useful in understanding period to period comparisons in our revenues.
THREE MONTHS ENDED JUNE 30, 2003 ---------------------------------------------------------------- PASS-THROUGH REVENUES SALES EXCLUDING REVENUES EXCLUDING CURRENCY AND CURRENCY EXCLUDING CURRENCY PASS-THROUGH REVENUES IMPACT CURRENCY IMPACT SALES -------- -------- --------- ------------ ------------ (MILLIONS) North America Aftermarket Ride Control........ $ 90 $ -- $ 90 $ -- $ 90 Emissions Control........................... 46 -- 46 -- 46 ---- ---- ---- ---- ---- Total North America Aftermarket........ 136 -- 136 -- 136 North America Original Equipment Ride Control................................ 118 -- 118 -- 118 Emissions Control........................... 247 5 242 75 167 ---- ---- ---- ---- ---- Total North America Original Equipment........................... 365 5 360 75 285 Total North America................. 501 5 496 75 421 Europe Aftermarket Ride Control................................ 53 10 43 -- 43 Emissions Control........................... 49 8 41 -- 41 ---- ---- ---- ---- ---- Total Europe Aftermarket............... 102 18 84 -- 84 Europe Original Equipment Ride Control................................ 64 11 53 -- 53 Emissions Control........................... 222 37 185 56 129 ---- ---- ---- ---- ---- Total Europe Original Equipment........ 286 48 238 56 182 Total Europe........................ 388 66 322 56 266 Asia.......................................... 40 -- 40 14 26 South America................................. 29 (2) 31 3 28 Australia..................................... 40 7 33 4 29 ---- ---- ---- ---- ---- Total Other......................... 109 5 104 21 83 ---- ---- ---- ---- ---- Total Tenneco Automotive...................... $998 $ 76 $922 $152 $770 ==== ==== ==== ==== ====
28
THREE MONTHS ENDED JUNE 30, 2002 ----------------------------------------------------------------- PASS-THROUGH REVENUES SALES EXCLUDING REVENUES EXCLUDING CURRENCY AND CURRENCY EXCLUDING CURRENCY PASS-THROUGH REVENUES IMPACT CURRENCY IMPACT SALES -------- -------- --------- ------------ ------------ (MILLIONS) North America Aftermarket Ride Control.............................. $ 92 $-- $ 92 $ -- $ 92 Emissions Control......................... 56 -- 56 -- 56 ---- --- ---- ---- ---- Total North America Aftermarket...... 148 -- 148 -- 148 North America Original Equipment Ride Control.............................. 114 -- 114 -- 114 Emissions Control......................... 277 -- 277 90 187 ---- --- ---- ---- ---- Total North America Original Equipment......................... 391 -- 391 90 301 Total North America............... 539 -- 539 90 449 Europe Aftermarket Ride Control.............................. 44 -- 44 -- 44 Emissions Control......................... 46 -- 46 -- 46 ---- --- ---- ---- ---- Total Europe Aftermarket............. 90 -- 90 -- 90 Europe Original Equipment Ride Control.............................. 49 -- 49 -- 49 Emissions Control......................... 182 -- 182 57 125 ---- --- ---- ---- ---- Total Europe Original Equipment...... 231 -- 231 57 174 Total Europe...................... 321 -- 321 57 264 ---- --- ---- ---- ---- Asia...................................... 29 -- 29 12 17 South America............................. 28 -- 28 3 25 Australia................................. 31 -- 31 1 30 ---- --- ---- ---- ---- Total Other....................... 88 -- 88 16 72 ---- --- ---- ---- ---- Total Tenneco Automotive.................... $948 $-- $948 $163 $785 ==== === ==== ==== ====
Revenues from our North American operations decreased $38 million in the second quarter of 2003 compared to last year's second quarter reflecting lower sales generated from both the original equipment business and aftermarket business. Total North American OE revenues decreased seven percent to $365 million in the second quarter of this year due to decreased volumes and pass-through sales in the emission control product line. Pass-through emission control sales decreased 17 percent to $75 million in the current quarter. OE emission control revenues were down 11 percent in the quarter, while OE ride control revenues increased four percent. Total OE revenues, excluding pass-through sales, decreased four percent in the second quarter, while North American light vehicle production decreased approximately nine percent from the second quarter a year ago. Our revenue decline was less than the build rate decline primarily due to our strong position on top-selling platforms with General Motors and Ford. Aftermarket revenues for North America were $136 million in the second quarter of 2003, representing a decrease of eight percent compared to the same period in the prior year. Aftermarket ride control revenues decreased $2 million or two percent in the second quarter, as a result of a weak economy and, to a lesser extent, lower initial orders related to new customer additions in 2003 compared to the prior year. Aftermarket emission control revenues declined 17 percent in the second quarter reflecting the continued overall market decline in the emission control business and the longer lives of exhaust components due to the use of stainless steel, which reduces aftermarket replacement rates. Our European segment's revenues increased $67 million or 21 percent in the second quarter of 2003 compared to last year's second quarter. Total OE revenues were $286 million, up 24 percent from the second quarter of last year. OE emission control revenues increased 22 percent to $222 million from $182 million the prior year. Excluding a $1 million decrease in pass-through sales and a $37 million increase due to strengthening currency, OE emission control revenues increased three percent. This was a significant 29 improvement from the change in European production levels, which decreased approximately four percent from the second quarter a year ago. Strong volumes on PSA, Volkswagen, General Motors and Volvo platforms more than offset the general market decline. OE ride control revenues increased to $64 million or up 31 percent from $49 million a year ago. Excluding an $11 million benefit from currency appreciation, OE ride control revenues increased eight percent. Our revenue increase was greater than the build rate due to stronger sales on existing platforms with Volkswagen, Ford and PSA. European aftermarket sales were $102 million in the second quarter of this year compared to $90 million in last year's second quarter. Excluding $18 million attributable to currency appreciation, European aftermarket revenues declined seven percent. Ride control aftermarket revenues, excluding the impact of currency, decreased only two percent reflecting the continued positive impact of the Monroe Reflex(R) introduction in the second quarter of last year. Additionally, aftermarket emission control revenues were lower as a result of the now standard use of longer lasting stainless steel by OE manufacturers. Excluding the impact of currency, European aftermarket emission control revenues declined 11 percent from the prior year. Revenues from our Other operations, which include South America, Australia and Asia, increased $21 million to $109 million in the second quarter of 2003 as compared to $88 million in the prior year. Higher volumes and increased pass-through sales drove increased revenues of $11 million at our Asian operations. In Australia, stronger OE volumes and strengthening currency increased revenues by 32 percent. South American revenues were essentially flat year over year as increased OE volumes were offset by unfavorable currency exchange rate changes. EARNINGS BEFORE INTEREST EXPENSE, INCOME TAXES, AND MINORITY INTEREST ("EBIT")
THREE MONTHS ENDED JUNE 30, -------------- 2003 2002 CHANGE ---- ---- ------ (MILLIONS) North America............................................... $49 $53 $(4) Europe...................................................... 11 11 -- Other....................................................... 7 7 -- --- --- --- $67 $71 $(4) === === ===
The EBIT results shown in the preceding table include the following items, discussed below under "Restructuring Charges" and "Liquidity and Capital Resources--Capitalization", which have an effect on the comparability of EBIT results between periods:
THREE MONTHS ENDED JUNE 30, -------------- 2003 2002 ---- ---- (MILLIONS) North America Restructuring-related expenses............................ $-- $ 1 Europe Restructuring-related expenses............................ 1 1 Gain on sale of York UK facility.......................... -- 11
EBIT for North American operations decreased to $49 million in the second quarter of 2003 from $53 million one year ago driven by lower sales volumes in both our OE and aftermarket segments. Lower OE emission control volumes reduced EBIT by $4 million. This decrease was partially offset by increased ride control volumes and lower restructuring and restructuring-related spending. The North American aftermarket EBIT was $2 million lower quarter over quarter as volume decreases were offset by lower changeover and advertising expenses. Included in 2002's second quarter EBIT was $1 million in restructuring-related expenses. 30 Our European segment's EBIT was flat at $11 million quarter over quarter. However, included in 2002's second quarter EBIT was an $11 million gain on the sale of our York UK facility and $1 million in restructuring and restructuring-related expenses. Included in 2003's second quarter EBIT was $1 million of restructuring related expenses. Higher OE volumes in both product lines contributed $2 million to EBIT. Also contributing to EBIT in the current quarter were $5 million in manufacturing efficiencies primarily in OE emission control and currency appreciation of $4 million. Additionally, benefits we are realizing from Project Genesis, which is described further in "Restructuring Charges" later in this Management's Discussion and Analysis, added $4 million to EBIT. These increases were partially offset by lower aftermarket volumes that reduced EBIT by $2 million. In addition, EBIT, as a result of our inventory reduction programs, was reduced by $2 million, as fewer fixed overhead costs were absorbed into inventory. EBIT for our Other operations remained flat at $7 million in the second three months of 2003 compared to the same three months one year ago. Higher OE revenues are being offset by inflation, a weak global aftermarket and increases in raw materials costs. EBIT AS A PERCENTAGE OF REVENUE
THREE MONTHS ENDED JUNE 30, ------------- 2003 2002 ----- ----- North America............................................... 10% 10% Europe...................................................... 3% 3% Other....................................................... 6% 8% Total Tenneco Automotive............................. 7% 7%
In North America, EBIT as a percentage of revenue remained flat as lower OE and aftermarket volumes were partially offset by lower changeover costs and decreased selling, general and administrative spending. In Europe, EBIT margins also remained flat in the second quarter as OE volume increases, manufacturing efficiencies, restructuring savings and currency appreciation in the current quarter replaced an asset sale gain from the prior year. EBIT as a percentage of revenue for our other operations decreased two percent. The decrease is primarily driven by higher pass-through sales year over year and to a lesser extent a weaker global aftermarket. INTEREST EXPENSE, NET OF INTEREST CAPITALIZED We reported interest expense of $38 million during the second quarter of 2003 compared to $36 million during the same period in 2002. The current quarter's interest expense includes $5 million for the write-off of senior debt issuance costs that were deferred on the senior debt that we partially paid with the proceeds of our $350 million bond offering in June of 2003. Partially offsetting this increase were lower interest rates on our variable rate debt and the termination of our three-year floating to fixed interest rate swap agreement that expired on February 3, 2003. See more detailed explanations on our debt structure, including the $350 million bond offering in June 2003 and its anticipated impact on our interest expense, in "Liquidity and Capital Resources--Capitalization" later in this Management's Discussion and Analysis. INCOME TAXES Income taxes were a $3 million expense for the quarter ended June 30, 2003, compared to a $16 million expense for the quarter ended June 30, 2002. The second quarter 2003 included a benefit of $8 million, which occurred as we have continued to settle prior year tax issues on a more favorable basis than originally anticipated. The effective tax rate including the $8 million benefit was 14 percent. Excluding the $8 million benefit our effective tax rate was 40 percent. The effective tax rate for the second quarter of 2002 was 45 percent. 31 EARNINGS PER SHARE We reported earnings per diluted common share before cumulative effect of change in accounting principle of $0.58 for the second quarter of 2003, compared to $0.45 per diluted share for the second quarter of 2002. Included in the results for the second quarter of 2003 are the negative impacts from expenses related to our restructuring activities, the write-off of debt issuance costs relating to the bond transaction in June of 2003 and a tax benefit for the resolution of several audit issues. The net impact of these items increased earnings per diluted share by $0.09. Included in the results for the second quarter 2002 are the negative impacts from expenses related to our restructuring activities and the gain on the sale of our York UK facility. In total, these items improved earnings per diluted common share by $0.11. You should also read Note 8 to the financial statements for more detailed information on earnings per share. RESTRUCTURING CHARGES Over the past several years we have adopted plans to restructure portions of our operations. These plans were approved by the Board of Directors and were designed to reduce operational and administrative overhead costs throughout the business. Prior to the change in accounting required for exit or disposal activities described under "Changes in Accounting Principles" below, we recorded charges to income related to these plans for costs that do not benefit future activities in the period in which the plans were finalized and approved, while actions necessary to affect these restructuring plans occurred over future periods in accordance with established plans. In the fourth quarter of 2001, our Board of Directors approved a restructuring plan, the first phase of a project known as Project Genesis, designed to lower our fixed costs, improve efficiency and utilization, and better optimize our global footprint. The first phase of Project Genesis involved closing eight facilities, improving the process flow and efficiency through value mapping and plant arrangement at 20 facilities, relocating production among facilities, and centralizing some functional areas. The closed facilities include an emissions control aftermarket plant and an aftermarket distribution operation in Europe, a ride control plant in Europe, an engineering center in Europe, one building at an emissions control plant complex in North America, a technology facility in North America, an exhaust manufacturing facility in North America, and our London-based treasury office. In the fourth quarter of 2001, we recorded pre-tax charges related to Project Genesis of $27 million. Within the statement of income (loss), $23 million of the pre-tax charge was reflected in cost of sales, while $4 million was included in selling, general and administrative expenses. These charges were comprised of $18 million in severance and $9 million for equipment lease cancellation, asset impairment and other restructuring costs to close the eight facilities. We wrote down the assets at locations to be closed to their estimated fair value, less costs to sell. We estimated the market value of buildings using external real estate appraisals. As a result of the single purpose nature of the machinery and equipment to be disposed of, fair value was estimated to be scrap value less costs to dispose in most cases. We also recorded a pre-tax charge of $4 million in cost of sales related to a strategic decision to adjust some product offerings and our customer supply strategy in the European aftermarket. The aftermarket parts were written down to their estimated scrap value, less costs to sell. Finally, we also incurred $1 million in other restructuring related costs during the fourth quarter for the value mapping and rearrangement of one of our emission control plants in North America. Since these costs relate to ongoing operations, they could not be accrued as part of the restructuring charge. The total of all these restructuring and other costs recorded in the fourth quarter of 2001 was $32 million before tax, $31 million after tax, or $0.81 per diluted common share. As of June 30, 2003, we have eliminated 965 positions in connection with the first phase of Project Genesis. Additionally, we are executing this plan more efficiently than originally anticipated and as a result in the fourth quarter of 2002 reduced our reserves related to this restructuring activity by $6 million which was recorded in cost of sales. We expect to complete all remaining restructuring activities related to the first phase of Project Genesis in 2003. We incurred other costs in the first six months of 2003 of $5 million for moving and rearrangement activities related to our restructuring actions initiated in prior periods that could not be accrued as part of the restructuring charges for those actions. 32 Including the costs incurred in 2002 of $11 million, we have incurred a total of $16 million for moving and rearrangement activities related to our restructuring actions initiated in prior periods that could not be accrued as part of the restructuring charges for these actions. In the first quarter of 2003, we incurred severance costs of $1 million associated with eliminating 17 salaried positions through selective layoffs and an early retirement program. Additionally, 93 hourly positions were eliminated through selective layoffs in the quarter. These reductions were done to reduce ongoing labor costs in North America. All of this charge was recorded in cost of sales. To date we have generated about $24 million of savings from Project Genesis. About $5 million of savings was related to closing the eight facilities, about $13 million of savings was related to value mapping and plant arrangement and about $6 million of savings was related to relocating production among facilities and centralizing some functional areas. To date, there have been no significant deviations from planned savings. When complete, we expect that the series of restructuring actions initiated in the fourth quarter of 2001 will generate annualized savings of $30 million. About $7 million of the expected savings should be generated by closing the eight facilities, about $13 million of the expected savings should be generated by improving process flow and efficiency through value mapping and plant arrangement and about $10 million of the expected savings will be generated by relocating production among facilities and centralizing some functional areas. Amounts related to the reserves we have established regarding activities that are part of our restructuring plans are as follows:
DECEMBER 31, 2002 2003 2003 CHARGED TO IMPACT OF JUNE 30, 2003 RESTRUCTURING RESTRUCTURING CASH ASSET EXCHANGE RESTRUCTURING RESERVE CHARGE PAYMENTS ACCOUNTS RATES RESERVE ----------------- ------------- -------- ---------- --------- ------------- (MILLIONS) Severance............... $ 9 $ 1 $(6) $-- $ 2 $ 6 Asset Impairment........ -- -- -- -- -- -- Other................... -- -- -- -- -- -- --- --- --- --- --- --- $ 9 $ 1 $(6) $-- $ 2 $ 6 === === === === === ===
Under the terms of an amendment to our senior credit agreement that took effect on March 13, 2002, we are allowed to exclude up to $60 million of cash charges and expenses, before taxes, related to potential future cost reduction initiatives over the 2002-2004 period from the calculation of the financial covenant ratios we are required to maintain under our senior credit agreement. As of June 30, 2003, we have excluded $16 million of the $60 million available under the terms of the amendment. In addition to the announced actions, we continue to evaluate additional opportunities, including additional phases of Project Genesis, to initiate actions that will reduce our costs through implementing the most appropriate and efficient logistics, distribution, and manufacturing footprint for the future. There can be no assurances however, that we will undertake additional phases of Project Genesis or other additional restructuring actions. Actions that we take, if any, will require the approval of our Board of Directors, or its authorized committee, and if the costs of the plans exceed the amount previously approved by our senior lenders, could require approval by our senior lenders. We plan to conduct any workforce reductions that result in compliance with all legal and contractual requirements including obligations to consult with workers' councils, union representatives and others. CRITICAL ACCOUNTING POLICES We prepare our financial statements in accordance with accounting principles generally accepted in the United States. Preparing our financial statements in accordance with generally accepted accounting principles requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The following paragraphs include a discussion of some critical areas where estimates are required. We recognize revenue for sales to our original equipment and aftermarket customers under the terms of our arrangements with those customers, generally at the time of shipment from our plants or distribution 33 centers. For our aftermarket customers, we provide for promotional incentives and returns at the time of sale. Estimates are based upon the terms of the incentives and historical experience with returns. Where we have offered product warranty, we also provide for warranty costs. Those estimates are based upon historical experience and upon specific warranty issues as they arise. While we have not experienced any material differences between these estimates and our actual costs, it is reasonably possible that future warranty issues could arise that could have a significant impact on our financial statements. We expense pre-production design and development costs incurred for our original equipment customers unless we have a contractual guarantee for reimbursement of those costs from the customer. At June 30, 2003, we had $13 million recorded as a long-term receivable from original equipment customers for guaranteed pre-production design and development arrangements. While we believe that the vehicle programs behind these arrangements will enter production, these arrangements allow us to recover our pre-production design and development costs in the event that the programs are cancelled or do not reach expected production levels. We have not experienced any material losses on arrangements where we have a contractual guarantee of reimbursement from our customers. We have a U.S. Federal tax net operating loss ("NOL") carryforward at June 30, 2003, of $516 million, which will expire in varying amounts from 2018 to 2023. The federal tax effect of that NOL is $176 million, and is recorded as an asset on our balance sheet at June 30, 2003. We estimate, based on available evidence, that it is more likely than not that we will utilize the NOL within the prescribed carryforward period. That estimate is based upon our expectations regarding future taxable income of our U.S. operations and upon strategies available to accelerate usage of the NOL. Circumstances that could change that estimate include future U.S. earnings at lower than expected levels or a majority ownership change as defined in the rules of the U.S. tax law. If that estimate changed, we would be required to cease recognizing an income tax benefit for any new NOL and could be required to record a reserve for some or all of the asset currently recorded on our balance sheet. As of June 30, 2003, we believe that there has been a significant change in our ownership, but not a majority change, since the 1999 spin-off of Pactiv. We utilize the intrinsic value method to account for our stock-based compensation plans in accordance with Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees." If our compensation costs for our stock-based compensation plans were determined using the fair value method of accounting as provided in Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting for Stock-Based Compensation," we estimate that our pro-forma net income (loss) and earnings per share for the six months ended June 30, 2003 and 2002 would be lower by approximately $1 million or $.01 per diluted share. You should also read Note 7 to the financial statements. CHANGES IN ACCOUNTING PRINCIPLES In July 2001, the Financial Accounting Standards Board ("FASB") issued SFAS No. 141, "Business Combinations," and SFAS No. 142, "Goodwill and Other Intangible Assets." SFAS No. 141 requires that the purchase method of accounting be used for all business combinations initiated after June 30, 2001. SFAS No. 142 changed the accounting for purchased goodwill from an amortization method to an impairment-only approach. Therefore amortization of all purchased goodwill, including amortization of goodwill recorded in past business combinations, ceased upon adoption of SFAS No. 142 in January 2002. Under the provisions of SFAS No. 142, we were required to perform an impairment analysis on the balance of goodwill at January 1, 2002. The fair value of our reporting units used in determining the goodwill impairment was computed using the present value of expected future cash flows. As a result of this analysis, we determined that goodwill associated with our North American original equipment ride control and European aftermarket operations was impaired. As a result, a charge of $218 million, net of taxes of $6 million, was recorded in the first quarter of 2002 as a cumulative effect of a change in accounting principle. The balance of unamortized goodwill was $191 million at June 30, 2003. We are required to test this balance for impairment on an annual basis. 34 The changes in the carrying amount of goodwill for the six months ended June 30, 2003, are as follows:
NORTH AMERICA EUROPE OTHER TOTAL ------------- ------ ----- ----- (MILLIONS) Balance at 12/31/02........................................ $136 $18 $31 $185 Translation adjustment..................................... 1 1 4 6 ---- --- --- ---- Balance at 6/30/03......................................... $137 $19 $35 $191 ==== === === ====
In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement Obligations." SFAS No. 143 requires that the fair value of a liability for an asset retirement obligation be recognized in the period in which it is incurred if a reasonable estimate of fair value can be made. The associated asset retirement costs are capitalized as part of the carrying amount of the long-lived asset. SFAS No. 143 was effective for fiscal years beginning after June 15, 2002. The adoption of SFAS No. 143 did not have a material impact on our financial position or results of operations. In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities." SFAS No. 146 changed the definition of the date at which a liability exists for exit or disposal activities also referred to as restructuring activities. Previously, we recognized a liability for restructuring activities when we committed to a plan of restructuring and announced this plan to the employees. We are required to apply the new standard prospectively to new exit or disposal activities initiated after December 31, 2002. SFAS No. 146 generally requires that these costs be recognized at a later date and over time, rather than in a single charge. The adoption of SFAS No. 146 did not have a material impact on our financial position or results of operations. In November 2002, the FASB issued Interpretation No. 45 "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others" ("FIN 45"), which expanded previously issued accounting guidance and disclosure requirements for certain guarantees. FIN 45 provides that issuing a guarantee imposes a non-contingent obligation to stand ready to perform in the event that the conditions specified in the guarantee occur, and that a liability representing the fair value of such a guarantee must be recognized when the guarantee is issued. We are required to apply these initial recognition and measurement provisions to guarantees issued or modified after December 31, 2002. The adoption of FIN 45 has not had a material impact on our financial position or results of operations. You should also read Note 9 to the financial statements. In December 2002, the FASB issued SFAS No. 148 which provided alternative methods of transition for a voluntary change to the fair value method of accounting for stock-based employee compensation and amended the disclosure requirements to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. See Note 7 to our financial statements for this information for the second quarter. In January 2003, the FASB issued Interpretation No. 46, "Consolidation of Variable Interest Entities" ("FIN 46"). FIN 46 requires that the assets, liabilities and results of the activity of variable interest entities be consolidated into the financial statements of the entity that has the controlling financial interest. FIN 46 also provides the framework for determining whether a variable interest entity should be consolidated based on voting interest or significant financial support provided to it. This interpretation was effective immediately for variable interest entities created after January 31, 2003 and effective July 1, 2003 for variable interest entities created before February 1, 2003. The adoption of FIN 46 did not have any impact on our consolidated financial statements. In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement 133 on Derivative Instruments and Hedging Activities." SFAS No. 149 amended and clarified financial accounting and reporting for derivative instruments, including certain derivative instruments embedded in other contracts and for hedging activities under SFAS No. 133. SFAS No. 149 is effective for contracts entered into or modified after June 30, 2003. The adoption of SFAS No. 149 did not have a material impact on our financial position or results of operations. 35 In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity." SFAS No. 150 established standards for classification of certain financial instruments that have characteristics of both liabilities and equity but have been presented entirely as equity or between the liabilities and equity section of the statement of financial position. SFAS No. 150 is effective for financial instruments entered into or modified after May 31, 2003. The adoption of SFAS No. 150 did not have a material impact on our financial position. In May 2003, the FASB's Emerging Issues Task Force (EITF) reached a consensus on Issue No. 01-08, "Determining Whether an Arrangement Contains a Lease." This issue addressed reporting revenue as rental or leasing income that would otherwise be reported as part of product sales or service revenue. This requires the parties to the arrangement to determine whether a service contract or similar arrangement is or includes a lease within the scope of SFAS No. 13, "Accounting for Leases." The consensus should be applied prospectively to arrangements agreed to, modified, or acquired in a business combination in the fiscal periods beginning after May 28, 2003. We are currently evaluating the effect that this consensus may have on our financial position or results of operations. RESULTS FROM OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2003 AND 2002 NET SALES AND OPERATING REVENUES The following tables reflect our revenues for the first six months of 2003 and 2002, including the same reconciliations as are presented above for the first three months of 2003 and 2002. See "Results from Operations for the Three Months Ended June 30, 2003 and 2002" for a description of why we present, and how we use, these reconciliations.
SIX MONTHS ENDED JUNE 30, 2003 ----------------------------------------------------------------- PASS-THROUGH REVENUES SALES EXCLUDING REVENUES EXCLUDING CURRENCY AND CURRENCY EXCLUDING CURRENCY PASS-THROUGH REVENUES IMPACT CURRENCY IMPACT SALES -------- -------- --------- ------------ ------------ (MILLIONS) North America Aftermarket Ride Control............................. $ 162 $ -- $ 162 $ -- $ 162 Emissions Control........................ 82 -- 82 -- 82 ------ ---- ------ ---- ------ Total North America Aftermarket..... 244 -- 244 -- 244 North America Original Equipment Ride Control............................. 234 -- 234 -- 234 Emissions Control........................ 504 5 499 162 337 ------ ---- ------ ---- ------ Total North America Original Equipment........................ 738 5 733 162 571 Total North America.............. 982 5 977 162 815 Europe Aftermarket Ride Control............................. 88 16 72 -- 72 Emissions Control........................ 90 16 74 -- 74 ------ ---- ------ ---- ------ Total Europe Aftermarket............ 178 32 146 -- 146 Europe Original Equipment Ride Control............................. 121 20 101 -- 101 Emissions Control........................ 434 71 363 114 249 ------ ---- ------ ---- ------ Total Europe Original Equipment..... 555 91 464 114 350 Total Europe..................... 733 123 610 114 496 Asia....................................... 76 -- 76 27 49 South America.............................. 55 (9) 64 5 59 Australia.................................. 73 11 62 7 55 ------ ---- ------ ---- ------ Total Other...................... 204 2 202 39 163 ------ ---- ------ ---- ------ Total Tenneco Automotive................... $1,919 $130 $1,789 $315 $1,474 ====== ==== ====== ==== ======
36
SIX MONTHS ENDED JUNE 30, 2002 ----------------------------------------------------------------- PASS-THROUGH REVENUES SALES EXCLUDING REVENUES EXCLUDING CURRENCY AND CURRENCY EXCLUDING CURRENCY PASS-THROUGH REVENUES IMPACT CURRENCY IMPACT SALES -------- -------- --------- ------------ ------------ (MILLIONS) North America Aftermarket Ride Control............................. $ 176 $-- $ 176 $ -- $ 176 Emissions Control........................ 98 -- 98 -- 98 ------ --- ------ ---- ------ Total North America Aftermarket..... 274 -- 274 -- 274 North America Original Equipment Ride Control............................. 214 -- 214 -- 214 Emissions Control........................ 518 -- 518 175 343 ------ --- ------ ---- ------ Total North America Original Equipment........................ 732 -- 732 175 557 Total North America.............. 1,006 -- 1,006 175 831 Europe Aftermarket Ride Control............................. 72 -- 72 -- 72 Emissions Control........................ 83 -- 83 -- 83 ------ --- ------ ---- ------ Total Europe Aftermarket............ 155 -- 155 -- 155 Europe Original Equipment Ride Control............................. 90 -- 90 -- 90 Emissions Control........................ 348 -- 348 104 244 ------ --- ------ ---- ------ Total Europe Original Equipment..... 438 -- 438 104 334 Total Europe..................... 593 -- 593 104 489 ------ --- ------ ---- ------ Asia....................................... 47 -- 47 17 30 South America.............................. 54 -- 54 5 49 Australia.................................. 57 -- 57 2 55 ------ --- ------ ---- ------ Total Other...................... 158 -- 158 24 134 ------ --- ------ ---- ------ Total Tenneco Automotive................... $1,757 $-- $1,757 $303 $1,454 ====== === ====== ==== ======
Revenues from our North American operations decreased $24 million in the first six months of 2003 compared to last year's first six months reflecting lower sales generated from the aftermarket business. Total North American OE revenues increased one percent to $738 million in the first six months of this year as higher ride control volumes were partially offset by lower emission control volumes. Pass-through emission control sales decreased seven percent to $162 million in the first six months of 2003. OE emission control revenues were down three percent in the first six months of 2003 as compared to the prior year. Adjusted for pass-through sales OE emission control sales were flat with the prior year. OE ride control revenues increased nine percent from the prior year. Total OE revenues, excluding pass-through sales, increased three percent in the first six months of 2003, while North American light vehicle production decreased approximately four percent from the first six months a year ago. Our revenue improvement was greater than the build rate decline primarily due to our strong position on top-selling platforms with General Motors, Ford and Honda. Aftermarket revenues for North America were $244 million in the first six months of 2003, representing a decrease of 11 percent compared to the same period in the prior year. Aftermarket ride control revenues decreased $14 million or eight percent in the first six months of 2003, as a result of a weak economy and lower initial orders related to new customer additions in 2003 compared to the prior year. Aftermarket emission control revenues declined 16 percent in the first six months of 2003 compared to 2002 reflecting the continued overall market decline in the emission control business and the longer lives of exhaust components due to the use of stainless steel, which reduces aftermarket replacement rates. Our European segment's revenues increased $140 million or 24 percent in the first six months of 2003 compared to last year's first six months. Total OE revenues were $555 million, up 27 percent from the first six months of last year. OE emission control revenues in the first six months increased 25 percent to $434 million from $348 million in the prior year. Excluding a $10 million increase in pass-through sales and a $71 million increase due to strengthening currency, OE emissions control revenues increased two percent over the first six 37 months of 2002. This was a significant improvement from the change in European production levels, which decreased approximately two percent from the first six months a year ago. Strong volumes on PSA, Volkswagen, General Motors and Volvo platforms are more than offsetting the general market decline. OE ride control revenues in the first six months increased to $121 million or up 34 percent from $90 million a year ago. Excluding a $20 million benefit from currency appreciation, OE ride control revenues increased 12 percent. Our revenue increase was greater than the build rate due to stronger sales on existing platforms with Volkswagen, Ford and PSA. European aftermarket sales were $178 million in the first six months of this year compared to $155 million in last year's first six months. Excluding $32 million attributable to currency appreciation, European aftermarket revenues declined six percent in the first six months compared to last year's first six months. Ride control aftermarket revenues, excluding the impact of currency, were flat with the prior year reflecting the continued positive impact of the Monroe Reflex(R) introduction in the second quarter of last year. Additionally, aftermarket emission control revenues were lower as a result of the now standard use of longer lasting stainless steel by OE manufacturers. Excluding the impact of currency, European aftermarket emission control revenues declined 11 percent from the prior year. Revenues from our Other operations, which include South America, Australia and Asia, increased $46 million to $204 million in the first six months of 2003 as compared to $158 million in the first six months of the prior year. Higher volumes and increased pass-through sales drove increased revenues of $29 million at our Asian operations. In Australia, stronger OE volumes and strengthening currency increased revenues by 30 percent. South American revenues were essentially flat year over year as increased OE volumes were offset by unfavorable currency exchange rate changes. EARNINGS BEFORE INTEREST EXPENSE, INCOME TAXES, AND MINORITY INTEREST ("EBIT")
SIX MONTHS ENDED JUNE 30, ----------- 2003 2002 CHANGE ---- ---- ------ (MILLIONS) North America............................................... $77 $72 $ 5 Europe...................................................... 10 16 (6) Other....................................................... 11 10 1 --- --- --- $98 $98 $-- === === ===
The EBIT results shown in the preceding table include the following items, discussed above under "Restructuring Charges" and below under "Liquidity and Capital Resources--Capitalization", which have an effect on the comparability of EBIT results between periods:
SIX MONTHS ENDED JUNE 30, ----------- 2003 2002 ---- ---- (MILLIONS) North America Restructuring-related expenses............................ $ 2 $ 2 Restructuring charges..................................... 1 -- Amendment of senior credit facility....................... -- 1 Europe Restructuring-related expenses............................ 3 1 Amendment of senior credit facility....................... -- 1 Gain on sale of York UK facility.......................... -- 11
EBIT for North American operations increased to $77 million in the first six months of 2003 from $72 million one year ago driven by higher volumes in our OE ride control segment. Higher OE ride control volumes increased EBIT by $3 million. Additionally, OE manufacturing efficiencies added $3 million to EBIT in the first six months of 2003 compared to the prior year. The North American aftermarket volume decreases in both product lines reduced EBIT by $14 million, but were substantially offset by lower selling, general and 38 administrative costs including changeover and advertising expenses. Included in 2003's EBIT for the first six months was $3 million in restructuring and restructuring-related expenses. Included in 2002's EBIT for the first six months was $2 million in restructuring-related expenses and $1 million related to amending the senior credit facility. Our European segment's EBIT was $10 million for the first six months of 2003, down $6 million from $16 million in the first six months of 2002. However, included in 2002's first six months EBIT was an $11 million gain on the sale of our York UK facility, $1 million in restructuring and restructuring-related expenses and $1 million related to amending the senior credit facility. Included in the first six months of 2003's EBIT was $3 million of restructuring-related expenses. Higher OE volumes in both product lines contributed $4 million to EBIT. Also contributing to EBIT were manufacturing efficiencies primarily in OE emission control and currency appreciation of $5 million. Additionally, benefits we are realizing from Project Genesis, which is described further in "Restructuring Charges" in this Management's Discussion and Analysis, added $4 million to EBIT. These increases were partially offset by lower aftermarket volumes that reduced EBIT by $3 million. In addition, EBIT, as a result of our inventory reduction programs, was reduced by $2 million, as fewer fixed overhead costs were absorbed into inventory. EBIT for our Other operations increased $1 million to $11 million in the first six months of 2003 compared to the same six months one year ago. Higher OE revenues are being partially offset by inflation, a weak global aftermarket and increases in raw materials costs. EBIT AS A PERCENTAGE OF REVENUE
SIX MONTHS ENDED JUNE 30, ------------ 2003 2002 ---- ---- North America............................................... 8% 7% Europe...................................................... 1% 3% Other....................................................... 5% 6% Total Tenneco Automotive............................... 5% 6%
In North America, EBIT as a percentage of revenue for the first six months of 2003 increased one percent compared to the prior year. Higher OE ride control volumes and manufacturing efficiencies more than offset lower aftermarket volumes. In Europe, EBIT margins for the first six months decreased two percent compared to the prior year. OE volume increases, manufacturing efficiencies, restructuring savings and currency appreciation in the current quarter partially replaced a one-time gain from the prior year. EBIT as a percentage of revenue for our Other operations decreased one percent in the first six months as compared to the prior year. The decrease is primarily driven by higher pass-through sales year over year and to a lesser extent a weaker global aftermarket. INTEREST EXPENSE, NET OF INTEREST CAPITALIZED We reported interest expense of $69 million during the first six months of 2003 compared to $72 million during the same period in 2002. The current year's interest expense includes $5 million for the write-off of senior debt issuance costs that were deferred on the senior debt that we partially paid with the proceeds of our $350 million bond offering in June of 2003. Offsetting this increase was lower interest rates on our variable rate debt and the termination of our three-year floating to fixed interest rate swap agreement that expired on February 3, 2003. See more detailed explanations on our debt structure, including the $350 million bond offering in June 2003 and its anticipated impact on our interest expense, in "Liquidity and Capital Resources--Capitalization" later in this Management's Discussion and Analysis. INCOME TAXES Income taxes were a $1 million expense for the first six months of 2003, compared to a $8 million expense for the first six months of 2002. The first six months of 2003 included benefits of $11 million, which occurred 39 as we have continued to settle prior year tax issues on a more favorable basis than originally anticipated. The effective tax rate for the first six months of 2003 including the $11 million benefits was five percent. Excluding the $11 million benefits our effective tax rate was 40 percent. The first six months of 2002 included a benefit of $4 million related to lower-than-expected costs for withholding taxes related to foreign operations. The lower cost of tax withholding for the first quarter 2002 tax repatriation transaction resulted from an amendment to our bank agreement allowing a more tax efficient transaction to be completed. The effective tax rate for the first six months of 2002 including the $4 million benefit was 29 percent. Excluding the $4 million benefit our effective tax rate was 49 percent. EARNINGS PER SHARE We reported earnings before cumulative effect of change in accounting principle per diluted common share of $0.60 for the first six months of 2003, compared to $0.41 per diluted share for the first six months of 2002. Included in the results for the first six months of 2003 are the negative impacts from expenses related to our restructuring activities, the write-off of debt issuance costs relating to the bond transaction in June of 2003 and tax benefits for the resolution of several audit issues. The net impact of these items increased earnings per diluted share by $0.10. Included in the results for the first six months of 2002 are the negative impacts from expenses related to our restructuring activities, costs related to amending the senior credit facility, a tax benefit for lower withholding on foreign repatriation of earnings and the gain on the sale of our York UK facility. In total, these items improved earnings per diluted common share by $0.16. You should also read Note 8 to the financial statements for more detailed information on earnings per share. LIQUIDITY AND CAPITAL RESOURCES CAPITALIZATION
JUNE 30, DECEMBER 31, 2003 2002 % CHANGE -------- ------------ -------- (MILLIONS) Short term debt and current maturities...................... $ 111 $ 228 (51)% Long term debt.............................................. 1,386 1,217 14 -------- ------------ Total debt.................................................. 1,497 1,445 4 -------- ------------ Total minority interest..................................... 20 19 5 Common shareholders' equity................................. 6 (94) 106 -------- ------------ Total capitalization........................................ $1,523 $1,370 11 ======== ============
The year-to-date increase in shareholders' equity primarily results from a $4 million increase in the fair market value of our interest rate swaps, which expired in February 2003, and $69 million related to the translation of foreign balances into U.S. dollars. In addition, net income and premium on common stock issued pursuant to benefit plans contributed $27 million to the increase in shareholders' equity. Although our book equity balance was near zero at June 30, 2003, it should not affect our business operations. We have no debt covenant ratios that are based upon our book equity and there are no other agreements that are adversely impacted by our relatively low book equity. Short-term debt, which includes the current portion of long-term obligations and borrowings by foreign subsidiaries, as well as our revolving credit facility, decreased by $117 million during the first six months of 2003. Of the $117 million, $92 million is the result of a $94 million decrease in the current portion of long-term obligations resulting from the restructuring our long-term obligations offset by smaller increases in short-term debt on foreign subsidiaries. In addition, we decreased our borrowings by approximately $25 million during the first six months of 2003 under our revolving credit facility. The borrowings outstanding under our revolving credit facility as of June 30, 2003 were $96 million and were $1 million as of June 30, 2002. The overall increase in long-term debt resulted from the issuance of new long-term debt as described below, offset by payments made on outstanding long-term debt. 40 Our financing arrangements are primarily provided by a committed senior secured financing arrangement with a syndicate of banks and other financial institutions, which was $964 million at June 30, 2003. The arrangement is secured by substantially all our domestic assets and pledges of 66 percent of the stock of certain first-tier foreign subsidiaries, as well as guarantees by our material domestic subsidiaries. We entered into an agreement to amend this facility on October 20, 2000 to (i) relax the financial covenant ratios beginning in the fourth quarter of 2000, (ii) exclude up to $80 million of cash charges and expenses related to cost reduction initiatives from the calculation of consolidated earnings before interest, taxes, depreciation and amortization ("EBITDA") used in our financial covenant ratios through 2001 and (iii) make certain other technical changes. In exchange for these amendments, we agreed to certain interest rate increases, lowered our capital expenditure limits and paid an aggregate fee of about $3 million. As a result of significant reductions in North American vehicle production levels announced in 2000 by our original equipment customers, as well as an accelerated weakening of the global aftermarket, we entered into a second amendment of our senior credit facility on March 22, 2001. The second amendment revised the financial covenant ratios we were required to maintain as of the end of each of the quarters ending in 2001. The second amendment also reduced the limitation on 2001 capital expenditures from $225 million to $150 million, and required that net cash proceeds from all significant, non-ordinary course asset sales be used to prepay the senior term loans. In exchange for these amendments, we agreed to a 25 basis point increase in interest rates on the senior term loans and borrowings under our revolving credit facility and paid an aggregate fee of $3 million to consenting lenders. We incurred legal, advisory and other costs related to the amendment process of $2 million. At the time of the second amendment, we expected that we would meet with the senior lenders during the first quarter of 2002 to negotiate further amendments to the senior credit facility. Consequently, we amended the senior credit facility for a third time on March 13, 2002. The third amendment revised the financial covenant ratios we are required to maintain as of the end of each of the quarters ending in 2002, 2003 and 2004. It also extended the limitation on annual capital expenditures of $150 million through this three-year period. The amendment further provided us with the option to enter into sale and leaseback arrangements on up to $200 million of our assets. The proceeds from these arrangements would have to be used to prepay the term loans under the senior credit agreement. The amendment also allows us to exclude up to $60 million of cash charges and expenses, before taxes, related to any cost reduction initiatives over the 2002-2004 period from the calculation of the financial covenant ratios we are required to maintain under our senior credit agreement. It also permits us to execute exchanges of our senior subordinated bonds for shares of common stock. We do not have any current plans to enter into any debt-for-stock exchanges. Any significant debt-for-stock exchange would require approval of our stockholders. In exchange for these amendments, we agreed to a $50 million reduction in our revolving credit facility, a 25 basis point increase in interest rates on the senior term loans and borrowings under our revolving credit facility, and paid an aggregate fee of $3 million to consenting lenders. We also incurred legal, advisory and other costs related to the amendment process of $2 million. In June 2003, we issued $350 million of 10 1/4 percent senior secured notes. The notes have a final maturity date of July 15, 2013. The notes accrue interest from June 19, 2003 with a first interest payment date of January 15, 2004. The notes are senior secured obligations and rank equally in right of payment with our existing and future senior debt and rank senior in right of payment to all of our existing and future subordinated debt. The notes are jointly and severally guaranteed by all of our domestic subsidiaries that also guarantee our senior credit facility. These guarantees are senior obligations of our subsidiary guarantors. The notes and guarantees are secured by second priority liens, subject to specified exceptions, on all of our and our subsidiary guarantors' assets that secure obligations under our senior credit facility, except that only a portion of the capital stock of our and our subsidiary guarantor's domestic subsidiaries is provided as collateral and no assets or capital stock of our direct or indirect foreign subsidiaries will secure the notes or guarantees. We can redeem some or all of the notes at any time after July 15, 2008. We can also redeem up to 35 percent aggregate principal amount of the notes using the proceeds of certain equity offerings completed before July 15, 2006. If we sell certain of our assets or experience specific kinds of changes in control, we must offer to repurchase the notes. 41 The net proceeds of the offering of the notes, after deducting underwriting discounts and commissions and our expenses, were $338 million. We used the net proceeds of the offering to repay outstanding amounts under our senior credit facility as follows: (i) first, to prepay $199 million on the term loan A due November 4, 2005, (ii) second, to prepay $52 million on the term loans B and C due November 4, 2007 and May 4, 2008, respectively, and (iii) third, to prepay outstanding borrowings of $87 million under the revolving credit portion of our senior credit facility without reducing the commitments from $450 million. We incurred $12 million in fees associated with the transaction which will be amortized into income over the term of the senior secured notes. After giving effect to the use of proceeds we expect the offering will increase annual interest expense by approximately $19 million. In addition, we expensed approximately $5 million of existing deferred debt issuance costs as a result of retiring a portion of the term loans under the senior credit facility. In connection with issuing $350 million of 10 1/4 percent senior secured notes due July 15, 2013, we amended the senior credit facility for the fourth time effective May 29, 2003. The fourth amendment allowed us to incur debt secured by a second lien on our U.S. assets and to have that debt guaranteed by our major U.S. subsidiaries. The amendment also allowed us to use a portion of the proceeds from the new senior secured notes to repay outstanding borrowings under the revolving credit facility, without having to reduce the $450 million size of the revolving credit facility, and to prepay the term loans under the senior credit facility on a non pro-rata basis with the remaining net proceeds from the notes. In exchange for these amendments, we agreed to pay an aggregate sum of $1 million to consenting lenders. We also incurred legal, advisory and other cost related to the amendment process of $1 million. These costs were included in the capitalized debt issuance costs. The senior secured credit facility, as amended effective May 29, 2003 (and after giving effect to the use of proceeds from the bond offering described above on June 19, 2003), consists of: (i) a $450 million revolving credit facility with a final maturity date of November 4, 2005; (ii) a $44 million term loan with a final maturity date of November 4, 2005; (iii) a $235 million term loan with a final maturity date of November 4, 2007; and (iv) a $235 million term loan with a final maturity date of May 4, 2008. Quarterly principal repayment installments on each term loan began October 1, 2001. As of June 30, 2003, borrowings under the facility bear interest at an annual rate equal to, at our option, either (i) the London Interbank Offering Rate plus a margin of 325 basis points for the revolving credit facility and the term loan maturing November 4, 2005, 400 basis points for the term loan maturing November 4, 2007 and 425 basis points for the term loan maturing May 4, 2008; or (ii) a rate consisting of the greater of the JP Morgan Chase prime rate or the Federal Funds rate plus 75 basis points, plus a margin of 225 basis points for the revolving credit facility and the term loan maturing November 4, 2005, 300 basis points for the term loan maturing November 4, 2007 and 325 basis points for the term loan maturing May 4, 2008. We also pay a commitment fee of 50 basis points on the unused portion of the revolving credit facility. Under the provisions of the senior credit facility agreement, the interest margins for borrowings under the revolving credit facility and the term loan maturing November 4, 2005 and fees paid on letters of credit issued under our revolving credit facility are subject to adjustment based on the consolidated leverage ratio (consolidated indebtedness divided by consolidated EBITDA as defined in the senior credit facility agreement) measured at the end of each quarter. Our consolidated leverage ratio rose above 4.50 as of June 30, 2003; therefore, the interest margins for borrowings under our revolving credit facility and on our term loan maturing November 4, 2005, and fees paid on letters of credit issued under our revolving credit facility, will increase by 25 basis points beginning in the third quarter of 2003. Our senior secured credit facility does not contain any terms that could accelerate the payment of the facility as a result of a credit rating agency downgrade. The amended senior credit facility requires that we maintain financial ratios equal to or better than the following consolidated leverage ratios (consolidated indebtedness divided by consolidated EBITDA), consolidated interest coverage ratios (consolidated EBITDA divided by consolidated cash interest paid), and fixed charge coverage ratios (consolidated EBITDA less consolidated capital expenditures, divided by consolidated cash interest paid) at the end of each period indicated. The financial ratios required under the amended senior 42 credit facility and, in the case of the first and second quarters of 2003, the actual ratios we achieved are shown in the following tables:
QUARTER ENDING -------------------------------------------------------- MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31, 2003 2003 2003 2003 ----------- ----------- ------------- ------------ REQ. ACT. REQ. ACT. REQUIRED REQUIRED ---- ---- ---- ---- ------------- ------------ Leverage Ratio (maximum)................. 5.75 4.35 5.50 4.56 5.25 5.00 Interest Coverage Ratio (minimum)........ 1.65 2.31 1.75 2.33 1.80 1.95 Fixed Charge Coverage Ratio (minimum).... 0.80 1.31 0.90 1.32 0.95 1.00
QUARTER ENDING --------------------------------------------------- MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31, 2004 2004 2004 2004 --------- -------- ------------- ------------ Leverage Ratio (maximum)......................... 4.75 4.50 4.25 4.00 Interest Coverage Ratio (minimum)................ 2.10 2.20 2.25 2.35 Fixed Charge Coverage Ratio (minimum)............ 1.15 1.25 1.35 1.45
QUARTER ENDING --------------------------------------------------- MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31, 2005 2005 2005 2005 2006-2008 --------- -------- ------------- ------------ --------- Leverage Ratio (maximum)............... 3.50 3.50 3.50 3.50 3.50 Interest Coverage Ratio (minimum)...... 3.00 3.00 3.00 3.00 3.00 Fixed Charge Coverage Ratio (minimum)............................ 1.75 1.75 1.75 1.75 1.75
The senior credit facility agreement also contains restrictions on our operations that are customary for similar facilities, including limitations on: (i) incurring additional liens; (ii) sale and leaseback transactions (except for the permitted transactions described above); (iii) liquidations and dissolutions; (iv) incurring additional indebtedness or guarantees; (v) capital expenditures; (vi) dividends; (vii) mergers and consolidations; and (viii) prepayments and modifications of subordinated and other debt instruments. Compliance with these requirements and restrictions is a condition for any incremental borrowings under the senior credit facility agreement and failure to meet these requirements enables the lenders to require repayment of any outstanding loans. As of June 30, 2003, we were in compliance with both the financial covenants (as indicated above) and operational restrictions of the facility. Our outstanding debt also includes $500 million of 11 5/8 percent senior subordinated notes due October 15, 2009 and the $350 million of 10 1/4 percent senior secured notes due July 15, 2013 described above. The senior subordinated debt and senior secured debt indentures both require that we, as a condition to incurring certain types of indebtedness not otherwise permitted, maintain an interest coverage ratio of not less than 2.25. We have not incurred any of the types of indebtedness not otherwise permitted by the indentures. The indentures also contain restrictions on our operations, including limitations on: (i) incurring additional indebtedness or liens; (ii) dividends; (iii) distributions and stock repurchases; (iv) investments; and (v) mergers and consolidations. Subject to limited exceptions, all of our existing and future material domestic wholly owned subsidiaries fully and unconditionally guarantee these notes on a joint and several basis. In addition, the senior secured notes and related guarantees are secured by second priority liens, subject to specified exceptions, on all of our and our subsidiary guarantors' assets that secure obligations under our senior credit facility, except that only a portion of the capital stock of our and our subsidiary guarantor's domestic subsidiaries is provided as collateral and no assets or capital stock of our direct or indirect foreign subsidiaries will secure the notes or guarantees. There are no significant restrictions on the ability of the subsidiaries that have guaranteed these notes to make distributions to us. As of June 30, 2003, we were in compliance with the covenants and restrictions of these indentures. In addition to our senior credit facility, senior secured notes and senior subordinated notes, we also sell some of our accounts receivable. In North America, we have an accounts receivable securitization program with a commercial bank. We sell original equipment and aftermarket receivables on a daily basis under this 43 program. We had sold accounts receivable under this program of $50 million and $85 million at June 30, 2003 and 2002, respectively. This program is subject to cancellation prior to its maturity date if we were to (i) fail to pay interest or principal payments on an amount of indebtedness exceeding $50 million, (ii) default on the financial covenant ratios under the senior credit facility, or (iii) fail to maintain certain financial ratios in connection with the accounts receivable securitization program. In January 2003, this program was amended to extend its term to January 31, 2005 and reduce the size of the program to $50 million. The program has since been amended to increase its size to $75 million with its termination date unchanged at January 31, 2005. We also sell some receivables in our European operations to regional banks in Europe. At June 30, 2003, we had sold $78 million of accounts receivable in Europe up from $55 million at June 30, 2002. The arrangements to sell receivables in Europe are not committed and can be cancelled at any time. If we were not able to sell receivables under either the North American or European securitization programs, our borrowings under our revolving credit agreement would increase. These accounts receivable securitization programs provide us with access to cash at costs that are generally favorable to alternative sources of financing, and allow us to reduce borrowings under our revolving credit agreement. We believe that cash flows from operations, combined with available borrowing capacity described above, assuming that we maintain compliance with the financial covenants and other requirements of our loan agreement, will be sufficient to meet our future capital requirements for the following year, including scheduled debt principal amortization payments. Our ability to meet the financial covenants depends upon a number of operational and economic factors, many of which are beyond our control. Factors that could impact our ability to comply with the financial covenants include the rate at which consumers continue to buy new vehicles and the rate at which they continue to repair vehicles already in service, as well as our ability to successfully implement our restructuring plans. Lower North American vehicle production levels, weakening in the global aftermarket, or a reduction in vehicle production levels in Europe, beyond our expectations, could impact our ability to meet our financial covenant ratios. In the event that we are unable to meet these financial covenants, we would consider several options to meet our cash flow needs. These options could include further renegotiations with our senior credit lenders, additional cost reduction or restructuring initiatives, sales of assets or common stock, or other alternatives to enhance our financial and operating position. Should we be required to implement any of these actions to meet our cash flow needs, we believe we can do so in a reasonable time frame. CONTRACTUAL OBLIGATIONS Our remaining required debt principal amortization and payment obligations under lease and certain other financial commitments are shown in the following table:
PAYMENTS DUE IN: -------------------------------------------------------- BEYOND 2003 2004 2005 2006 2007 2007 TOTAL ---- ---- ---- ---- ---- ------ ------ (MILLIONS) Obligations: Revolver borrowings........................... $ 96 $-- $-- $-- $ -- $ -- $ 96 Senior long-term debt......................... -- -- 44 -- 235 235 514 Long-term notes............................... 1 -- 1 -- 1 353 356 Capital leases................................ 1 3 3 3 3 7 20 Subordinated long-term debt................... -- -- -- -- -- 500 500 Short-term debt............................... 11 -- -- -- -- -- 11 ---- --- --- --- ---- ------ ------ Debt and capital lease obligations.......... 109 3 48 3 239 1,095 1,497 Operating leases.............................. 10 15 13 11 10 9 68 Capital commitments........................... 31 -- -- -- -- -- 31 ---- --- --- --- ---- ------ ------ Total payments................................ $150 $18 $61 $14 $249 $1,104 $1,596 ==== === === === ==== ====== ======
We principally use a revolving credit facility to finance our short-term capital requirements. As a result, we classify the outstanding balance of the revolving credit facility within our short-term debt even though the 44 revolving credit facility has a termination date of November 4, 2005. The revolving credit facility balance included in short-term debt is $96 million at June 30, 2003 and $121 million at December 31, 2002. If we do not maintain compliance with the terms of our senior credit facility and the indentures for our senior secured notes and senior subordinated debt described above, all amounts under those arrangements could, automatically or at the option of the lenders or other debt holders, become due. Additionally, each of those facilities contains provisions that certain events of default under one facility will constitute a default under the other facility, allowing the acceleration of all amounts due. We currently expect to maintain compliance with terms of all of our various credit agreements for the foreseeable future. We occasionally provide guarantees that could require us to make future payments in the event that the third party primary obligor does not make its required payments. We have not recorded a liability for any of these guarantees. The only third party guarantee we have made is the performance of lease obligations by a former affiliate. Our maximum liability under this guarantee was approximately $5 million and $6 million at June 30, 2003 and 2002, respectively. We have no recourse in the event of default by the former affiliate. However, we have not been required to make any payments under this guarantee. Additionally, we have from time to time issued guarantees for the performance of obligations by some of our subsidiaries, and some of our subsidiaries have guaranteed our debt. All of our then existing and future material domestic wholly-owned subsidiaries fully and unconditionally guarantee the $964 million senior secured credit facility, the $350 million senior secured notes and the $500 million senior subordinated notes on a joint and several basis. The arrangement for the senior secured credit facility is also secured by substantially all our domestic assets and pledges of 66 percent of the stock of certain first-tier foreign subsidiaries. The arrangement for the senior secured notes is secured by second priority liens, subject to specified exceptions, on all of our domestic assets that secure obligations under our senior credit facility, except that only a portion of the capital stock of our domestic subsidiaries is provided as collateral. No assets or capital stock of our direct or indirect foreign subsidiaries secure these notes. You should also read Note 11 where we present the Supplemental Guarantor Condensed Consolidating Financial Statements. We have issued guarantees through letters of credit in connection with some obligations of our affiliates. We have guaranteed through letters of credit support for local credit facilities, travel and procurement card programs, and cash management requirements for some of our subsidiaries totaling $41 million. We have also issued $18 million in letters of credit to support some of our subsidiaries' insurance arrangements. In addition, we have issued $3 million in guarantees through letters of credit to guarantee other obligations of subsidiaries primarily related to environmental remediation activities. CASH FLOWS
SIX MONTHS ENDED JUNE 30, ------------- 2003 2002 ----- ---- (MILLIONS) Cash provided (used) by: Operating activities...................................... $ 28 $124 Investing activities...................................... (53) (21) Financing activities...................................... 37 (96)
OPERATING ACTIVITIES For the six months ended, cash flows provided from operating activities were $28 million as compared to $124 million in the prior six months. The decrease was primarily attributable to reduced year over year working capital improvements. For the first six months of 2003 working capital was a use of $77 million as compared to an inflow of $59 million for the first six months of 2002. Lower collections of receivables, including factoring balances, higher cash tax payments and the timing of accounts versus payments in the current year as compared to the prior year, are primary drivers to the decrease. Additionally, in the first 45 quarter of 2003, we took steps to more aggressively manage payables to offset the heavier cash use and to help preserve liquidity given the uncertainties in the market. In the second quarter of 2003, while continuing to monitor payable levels, we moderately relaxed our earlier aggressive stance and as a result used cash related to payables. Finally, we generated cash from our inventory reduction programs which increased cash flow from working capital by $15 million. Partially offsetting the working capital decrease were higher earnings in the current year. In June 2001, we entered into arrangements with two major OE customers in North America under which, in exchange for a discount, payments for product sales are made earlier than otherwise required under existing payment terms. These arrangements reduced accounts receivable by $52 million and $50 million as of June 30, 2003 and 2002, respectively. These arrangements reduced accounts receivable by $40 million at December 31, 2002. In June 2003, we entered into a similar arrangement with a third major OE customer in North America. This arrangement did not effect accounts receivable at June 30, 2003. These arrangements can be cancelled at any time. INVESTING ACTIVITIES Cash used for investing activities was $32 million higher in the first six months of 2003 compared to the same period a year ago. In the first six months of 2002, we received $17 million in cash from the sale of our York UK facility and also recorded $19 million from a settlement with an OE customer for reimbursement of expenses related to a cancelled platform. Capital expenditures were $54 million in the first six months of 2003, slightly up from $52 million in the first six months of last year. FINANCING ACTIVITIES Cash flow from financing activities was a $37 million inflow in the first six months of 2003 compared to a use of $96 million in the same period of 2002. The primary reason for the change is attributable to higher short-term borrowings during the first six months of 2003 as compared to the prior year. INTEREST RATE RISK Our financial instruments that are sensitive to market risk for changes in interest rates are our debt securities. We primarily use a revolving credit facility to finance our short-term capital requirements. We pay a current market rate of interest on these borrowings. We have financed our long-term capital requirements with long-term debt with original maturity dates ranging from six to ten years. Under the terms of our senior credit facility agreement, we were required to hedge our exposure to floating interest rates by April 2000 so that at least 50 percent of our long-term debt was fixed for a period of at least three years. In February 2000, we hedged $250 million of our floating rate long-term debt with three-year, floating to fixed interest rate swaps. In April 2000, we hedged an additional $50 million of our floating rate long-term debt with three-year, floating to fixed interest rate swaps. The hedges that we executed fully satisfied the interest rate hedging requirement of the senior credit facility agreement. The swaps expired in February 2003 and we are not required to renew them. On June 30, 2003, we had $858 million in long-term debt obligations that have fixed interest rates. Of that amount, $500 million is fixed until October 2009 and $350 million is fixed until July 2013, while the remainder is fixed over periods of 2003 through 2025. There is also $528 million in long-term debt obligations that have variable interest rates based on a current market rate of interest. We estimate that the fair value of our long-term debt at June 30, 2003 was about 96 percent of its book value. A one percentage point increase or decrease in interest rates would increase or decrease the annual interest expense we recognize in the income statement and the cash we pay for interest expense by about $4 million after tax. 46 OUTLOOK North America light vehicle production continued at a relatively strong pace in 2002. Manufacturer incentives kept consumer purchases higher than estimates at the beginning of the year. Consequently, the 2002 North America light vehicle build rate was an estimated 16.4 million units. Production rates for the first six months of 2003 remained relatively strong at an annualized rate of 16.0 million units or a two percent decline from the prior year. However, we remain cautious regarding volumes for the remainder of 2003 due to continuing uncertain economic conditions in the U.S. and uncertainty about the willingness of the original equipment manufacturers to continue to support consumer automobile sales through incentives. Several major North American OE manufacturers have announced reductions in their production rates for the third and fourth quarter. These overall reductions are targeted at specific platforms, however, and we have not yet seen a percentage reduction in many of the platforms for which we provide parts in the range of those that have been announced. Currently, industry estimates have heavy duty build rates down approximately three percent compared to 2002. These estimates have slightly improved from the expected decline following the implementation of new emissions standards in October 2002 which caused operators to pull forward some of their truck purchases into 2002. In Europe, new vehicle yearly production rates appear to be down two to three percent from last year. In July of 2003, we announced a change to our retiree medical benefits program, which will provide participating retirees with continued access to group health coverage while reducing our subsidization of the program. Based on current estimates, we anticipate that this change will increase our net income by approximately $7 million annually, beginning in the third quarter of 2003. ENVIRONMENTAL AND OTHER MATTERS We are subject to a variety of environmental and pollution control laws and regulations in all jurisdictions in which we operate. We expense or capitalize, as appropriate, expenditures for ongoing compliance with environmental regulations that relate to current operations. We expense expenditures that relate to an existing condition caused by past operations and that do not contribute to current or future revenue generation. We record liabilities when environmental assessments indicate that remedial efforts are probable and the costs can be reasonably estimated. Estimates of the liability are based upon currently available facts, existing technology, and presently enacted laws and regulations taking into consideration the likely effects of inflation and other societal and economic factors. We consider all available evidence including prior experience in remediation of contaminated sites, other companies' cleanup experiences and data released by the United States Environmental Protection Agency or other organizations. These estimated liabilities are subject to revision in future periods based on actual costs or new information. Where future cash flows are fixed or reliably determinable, we have discounted the liabilities. All other environmental liabilities are recorded at their undiscounted amounts. We evaluate recoveries separately from the liability and, when they are assured, recoveries are recorded and reported separately from the associated liability in our financial statements. As of June 30, 2003, we are designated as a potentially responsible party in three Superfund sites. We have estimated our share of the remediation costs for these sites to be less than $1 million in the aggregate. In addition to the Superfund sites, we may have the obligation to remediate current or former facilities, and we estimate our share of remediation costs at these facilities to be approximately $12 million. For each of the Superfund sites and the current and former facilities, we have established reserves that we believe are adequate for these costs. Although we believe our estimates of remediation costs are reasonable and are based on the latest available information, the cleanup costs are estimates and are subject to revision as more information becomes available about the extent of remediation required. At some sites, we expect that other parties will contribute to the remediation costs. In addition, at the Superfund sites, the Comprehensive Environmental Response, Compensation and Liability Act provides that our liability could be joint and several, meaning that we could be required to pay in excess of our share of remediation costs. Our understanding of the financial strength of other potentially responsible parties at the Superfund sites, and of 47 other liable parties at our current and former facilities, has been considered, where appropriate, in our determination of our estimated liability. We believe that any potential costs associated with our current status as a potentially responsible party in the Superfund sites, or as a liable party at our current or former facilities, will not be material to our results of operations or consolidated financial position. We also from time to time are involved in legal proceedings or claims that are incidental to the conduct of our business. Some of these proceedings allege damages against us relating to environmental liabilities (including toxic tort, property damage and remediation), intellectual property matters (including patent, trademark and copyright infringement, and licensing disputes), personal injury claims (including injuries due to product failure, design or warnings issues, and other product liability related matters), employment matters, and commercial or contractual disputes, sometimes related to acquisitions or divestitures. For example, we have recently responded to a request from the Federal Trade Commission to substantiate certain of our product claims. As another example, we are involved in litigation with the minority owner of one of our Indian joint ventures over various operational issues. This dispute involves a court-mandated bidding process, which could result in a non-cash charge to earnings if we are required to sell our interest in the joint venture on unfavorable terms. We will continue to vigorously defend ourselves against all of these claims. Although the ultimate outcome of any legal matter cannot be predicted with certainty, based on present information, including our assessment of the merits of the particular claim, we do not expect that these legal proceedings or claims will have any material adverse impact on our future consolidated financial position or results of operations. In addition, we are subject to a number of lawsuits initiated by a significant number of claimants alleging health problems as a result of exposure to asbestos. Many of these cases involve significant numbers of individual claimants. However, only a small percentage of these claimants allege that they were automobile mechanics who were allegedly exposed to our former muffler products and a significant number appear to involve workers in other industries or otherwise do not include sufficient information to determine whether there is any basis for a claim against us. We believe, based on scientific and other evidence, it is unlikely that mechanics were exposed to asbestos by our former muffler products and that, in any event, they would not be at increased risk of asbestos-related disease based on their work with these products. Further, many of these cases involve numerous defendants, with the number of each in some cases exceeding 200 defendants from a variety of industries. Additionally, the plaintiffs either do not specify any, or specify the jurisdictional minimum, dollar amount for damages. On the other hand, we are experiencing an increasing number of these claims, likely due to bankruptcies of major asbestos manufacturers. We vigorously defend ourselves against these claims as part of our ordinary course of business. To date, with respect to claims that have proceeded sufficiently through the judicial process, we have regularly achieved favorable resolution in the form of a dismissal of the claim or a judgment in our favor. Accordingly, we presently believe that these asbestos-related claims will not have a material adverse impact on our future financial condition or results of operations. During the second quarter of 2002, we reached an agreement with an OE customer to recover our investment in development costs and related equipment, as well as amounts owed to some of our suppliers, for a platform cancelled by the customer. We collected $30 million, net of the amounts we owed to suppliers, during the second quarter pursuant to this agreement. The agreement had no effect on our results of operations. EMPLOYEE STOCK OWNERSHIP PLANS We have established Employee Stock Ownership Plans for the benefit of our employees. Under the plans, participants may elect to defer up to 50 percent of their salary through contributions to the plan, which are invested in selected mutual funds or used to buy our common stock. We currently match in cash 50 percent of each employee's contribution up to 8 percent of the employee's salary. We recorded expense for these matching contributions of approximately $3 million for each of the six months ended June 30, 2003 and 2002, respectively. All contributions vest immediately. 48 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK For information regarding our exposure to interest rate risk, see the caption entitled "Interest Rate Risk" in "Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations," which is incorporated herein by reference. ITEM 4. CONTROLS AND PROCEDURES An evaluation was carried out under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-14(e) under the Securities Exchange Act of 1934) as of the end of the fiscal quarter covered by this report. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that the company's disclosure controls and procedures are effective to ensure that information required to be disclosed by our company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms. There were no changes in our internal control over financial reporting that occurred during the period covered by this report that have materially affected, or are likely to materially affect our internal control over financial reporting. 49 PART II ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS See Item 5, "Other Information," below. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS We held our annual stockholders' meeting on May 13, 2003, to consider and vote on three separate proposals: (i) a proposal to elect Charles W. Cramb, M. Kathryn Eickhoff, Mark P. Frissora, Frank E. Macher, Sir David Plastow, Roger B. Porter, David B. Price, Jr., Dennis G. Severance and Paul T. Stecko as directors of our company for a term expiring at our next annual stockholders' meeting, (ii) a proposal to ratify the appointment of Deloitte & Touche LLP as independent public accountants for 2003 and (iii) a proposal to amend the Tenneco Automotive Inc. 2002 Long-Term Incentive Plan. The meeting proceeded and all proposals were approved by the requisite vote of the holders of our outstanding common stock. The following sets forth the vote results with respect to these proposals at the meeting: Election of Directors
VOTES FOR VOTES WITHHELD ---------- -------------- Charles W. Cramb............................................ 33,050,710 3,417,596 M. Kathryn Eickhoff......................................... 33,084,921 3,383,385 Mark P. Frissora............................................ 32,871,966 3,596,340 Frank E. Macher............................................. 32,562,374 3,905,932 Sir David Plastow........................................... 32,538,817 3,929,489 Roger B. Porter............................................. 32,616,121 3,852,185 David B. Price, Jr.......................................... 32,694,242 3,774,064 Dennis G. Severance......................................... 33,153,115 3,315,191 Paul T. Stecko.............................................. 30,310,979 6,157,327
Ratification of Appointment of Deloitte & Touche LLP
VOTES FOR VOTES AGAINST VOTES ABSTAIN - ---------------------------- ---------------------------- ---------------------------- 34,049,840 2,171,999 246,467
Approval to Amend the Tenneco Automotive Inc. 2002 Long-Term Incentive Plan
VOTES FOR VOTES AGAINST VOTES ABSTAIN - ---------------------------- ---------------------------- ---------------------------- 28,904,413 6,917,863 646,030
ITEM 5. OTHER INFORMATION In June 2003, we issued $350 million of 10 1/4 percent senior secured notes due 2013. These notes are secured by a second priority lien on certain of our consolidated assets and subject us to customary operating restrictions, including dividend limitations. In connection with this, we entered into an agreement with our senior lenders to amend certain provisions of our senior credit facility. Information concerning the senior secured notes and the amendments of the senior credit facility is included in this Quarterly Report under Item 2, "Management's Discussion and Analysis of Financial Condition and Results of Operations." ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits. The exhibits filed with this report are listed on the Exhibit Index following the signature page of this report, which is incorporated herein by reference. 50 (b) Reports on Form 8-K. We filed and/or furnished the following Current Reports on Form 8-K during the quarter ended June 30, 2003: Current Report on Form 8-K dated April 16, 2003, including pursuant to Item 5 certain information pertaining to the resignation of David G. Gabriel as senior vice president and general manager of our North American Aftermarket business unit. Current Report on Form 8-K dated April 22, 2003, including pursuant to Items 5 and 12 certain information pertaining to the results of our operations for the first quarter 2003. Current Report on Form 8-K dated May 9, 2003, including pursuant to Item 5 certain information pertaining to the promotion of Neal Yanos as senior vice president and general manager of both our North American Aftermarket and Original Equipment Ride Control business units. Current Report on Form 8-K dated May 14, 2003, including pursuant to Item 5 certain information pertaining to the results of our 2003 annual stockholder meeting. Current Report on Form 8-K dated May 30, 2003, including pursuant to Item 5 certain information pertaining to the commencement of our offering of $300 million of Senior Secured Notes. Current Report on Form 8-K dated June 2, 2003, including pursuant to Item 5 certain information pertaining to our contemplation of our financing transaction which could increase our annual interest expense. Current Report on Form 8-K dated June 11, 2003, including pursuant to Item 5 certain information pertaining to the pricing of our private offering of $350 million of Senior Secured Notes. Current Report on Form 8-K dated June 20, 2003, as amended, including pursuant to Item 5 certain information pertaining to the settlement of a private offering of $350 million of Senior Secured Notes. 51 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, Tenneco Automotive Inc. has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. TENNECO AUTOMOTIVE INC. By: /s/ MARK A. MCCOLLUM ------------------------------------ Mark A. McCollum Senior Vice President and Chief Financial Officer Dated: August 14, 2003 52 INDEX TO EXHIBITS TO QUARTERLY REPORT ON FORM 10-Q FOR QUARTER ENDED JUNE 30, 2003
EXHIBIT NUMBER DESCRIPTION ------- ----------- 2 -- None. 3.1(a) -- Restated Certificate of Incorporation of the registrant dated December 11, 1996 (incorporated herein by reference from Exhibit 3.1(a) of the registrant's Annual Report on Form 10-K for the year ended December 31, 1997, File No. 1-12387). 3.1(b) -- Certificate of Amendment, dated December 11, 1996 (incorporated herein by reference from Exhibit 3.1(c) of the registrant's Annual Report on Form 10-K for the year ended December 31, 1997, File No. 1-12387). 3.1(c) -- Certificate of Ownership and Merger, dated July 8, 1997 (incorporated herein by reference from Exhibit 3.1(d) of the registrant's Annual Report on Form 10-K for the year ended December 31, 1997, File No. 1-12387). 3.1(d) -- Certificate of Designation of Series B Junior Participating Preferred Stock dated September 9, 1998 (incorporated herein by reference from Exhibit 3.1(d) of the registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 1998, File No. 1-12387). 3.1(e) -- Certificate of Elimination of the Series A Participating Junior Preferred Stock of the registrant dated September 11, 1998 (incorporated herein by reference from Exhibit 3.1(e) of the registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 1998, File No. 1-12387). 3.1(f) -- Certificate of Amendment to Restated Certificate of Incorporation of the registrant dated November 5, 1999 (incorporated herein by reference from Exhibit 3.1(f) of the registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 1999, File No. 1-12387). 3.1(g) -- Certificate of Amendment to Restated Certificate of Incorporation of the registrant dated November 5, 1999 (incorporated herein by reference from Exhibit 3.1(g) of the registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 1999, File No. 1-12387). 3.1(h) -- Certificate of Ownership and Merger merging Tenneco Automotive Merger Sub Inc. with and into the registrant, dated November 5, 1999 (incorporated herein by reference from Exhibit 3.1(h) of the registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 1999, File No. 1-12387). 3.1(i) -- Certificate of Amendment to Restated Certificate of Incorporation of the registrant dated May 9, 2000 (incorporated herein by reference from Exhibit 3.1(i) of the registrant's Quarterly Report on Form 10-Q for the quarter ended March 31, 2000, File No. 1-12387). 3.2 -- By-laws of the registrant, as amended March 14, 2000 (incorporated herein by reference from Exhibit 3.2(a) of the registrant's Annual Report on Form 10-K for the year ended December 31, 1999, File No. 1-12387). 3.3 -- Certificate of Incorporation of Tenneco Global Holdings Inc. ("Global"), as amended (incorporated herein by reference to Exhibit 3.3 to the registrant's Registration Statement on Form S-4, Reg. No. 333-93757). 3.4 -- By-laws of Global (incorporated herein by reference to Exhibit 3.4 to the registrant's Registration Statement on Form S-4, Reg. No. 333-93757). 3.5 -- Certificate of Incorporation of TMC Texas Inc. ("TMC") (incorporated herein by reference to Exhibit 3.5 to the registrant's Registration Statement on Form S-4, Reg. No. 333-93757).
53
EXHIBIT NUMBER DESCRIPTION ------- ----------- 3.6 -- By-laws of TMC (incorporated herein by reference to Exhibit 3.6 to the registrant's Registration Statement on Form S-4, Reg. No. 333-93757). 3.7 -- Amended and Restated Certificate of Incorporation of Tenneco International Holding Corp. ("TIHC") (incorporated herein by reference to Exhibit 3.7 to the registrant's Registration Statement on Form S-4, Reg. No. 333-93757). 3.8 -- Amended and Restated By-laws of TIHC (incorporated herein by reference to Exhibit 3.8 to the registrant's Registration Statement on Form S-4, Reg. No. 333-93757). 3.9 -- Certificate of Incorporation of Clevite Industries Inc. ("Clevite"), as amended (incorporated herein by reference to Exhibit 3.9 to the registrant's Registration Statement on Form S-4, Reg. No. 333-93757). 3.10 -- By-laws of Clevite (incorporated herein by reference to Exhibit 3.10 to the registrant's Registration Statement on Form S-4, Reg. No. 333-93757). 3.11 -- Amended and Restated Certificate of Incorporation of the Pullman Company ("Pullman") (incorporated herein by reference to Exhibit 3.11 to the registrant's Registration Statement on Form S-4, Reg. No. 333-93757). 3.12 -- By-laws of Pullman (incorporated herein by reference to Exhibit 3.12 to the registrant's Registration Statement on Form S-4, Reg. No. 333-93757). 3.13 -- Certificate of Incorporation of Tenneco Automotive Operating Company Inc. ("Operating") (incorporated herein by reference to Exhibit 3.13 to the registrant's Registration Statement on Form S-4, Reg. No. 333-93757). 3.14 -- By-laws of Operating (incorporated herein by reference to Exhibit 3.14 to the registrant's Registration Statement on Form S-4, Reg. No. 333-93757). 4.1(a) -- Rights Agreement dated as of September 8, 1998, by and between the registrant and First Chicago Trust Company of New York, as Rights Agent (incorporated herein by reference from Exhibit 4.1 of the registrant's Current Report on Form 8-K dated September 24, 1998, File No. 1-12387). 4.1(b) -- Amendment No. 1 to Rights Agreement, dated March 14, 2000, by and between the registrant and First Chicago Trust Company of New York, as Rights Agent (incorporated herein by reference from Exhibit 4.4(b) of the registrant's Annual Report on Form 10-K for the year ended December 31, 1999, File No. 1-12387). 4.1(c) -- Amendment No. 2 to Rights Agreement, dated February 5, 2001, by and between the registrant and First Union National Bank, as Rights Agent (incorporated herein by reference from Exhibit 4.4(b) of the registrant's Post-Effective Amendment No. 3, dated February 26, 2001, to its Registration Statement on Form 8-A dated September 17, 1998). 4.2(a) -- Indenture, dated as of November 1, 1996, between the registrant and The Chase Manhattan Bank, as Trustee (incorporated herein by reference from Exhibit 4.1 of the registrant's Registration Statement on Form S-4, Registration No. 333-14003). 4.2(b) -- First Supplemental Indenture dated as of December 11, 1996 to Indenture dated as of November 1, 1996 between registrant and The Chase Manhattan Bank, as Trustee (incorporated herein by reference from Exhibit 4.3(b) of the registrant's Annual Report on Form 10-K for the year ended December 31, 1996, File No. 1-12387). 4.2(c) -- Second Supplemental Indenture dated as of December 11, 1996 to Indenture dated as of November 1, 1996 between the registrant and The Chase Manhattan Bank, as Trustee (incorporated herein by reference from Exhibit 4.3(c) of the registrant's Annual Report on Form 10-K for the year ended December 31, 1996, File No. 1-12387).
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EXHIBIT NUMBER DESCRIPTION ------- ----------- 4.2(d) -- Third Supplemental Indenture dated as of December 11, 1996 to Indenture dated as of November 1, 1996 between the registrant and The Chase Manhattan Bank, as Trustee (incorporated herein by reference from Exhibit 4.3(d) of the registrant's Annual Report on Form 10-K for the year ended December 31, 1996, File No. 1-12387). 4.2(e) -- Fourth Supplemental Indenture dated as of December 11, 1996 to Indenture dated as of November 1, 1996 between the registrant and The Chase Manhattan Bank, as Trustee (incorporated herein by reference from Exhibit 4.3(e) of the registrant's Annual Report on Form 10-K for the year ended December 31, 1996, File No. 1-12387). 4.2(f) -- Eighth Supplemental Indenture, dated as of April 28, 1997, to Indenture, dated as of November 1, 1996 between the registrant and The Chase Manhattan Bank, as Trustee (incorporated herein by reference from Exhibit 4.1 of the registrant's Current Report on Form 8-K dated April 23, 1997, File No. 1-12387). 4.2(g) -- Ninth Supplemental Indenture, dated as of April 28, 1997, to Indenture, dated as of November 1, 1996, between the registrant and The Chase Manhattan Bank, as Trustee (incorporated herein by reference from Exhibit 4.2 of the registrant's Current Report on Form 8-K dated April 23, 1997, File No. 1-12387). 4.2(h) -- Tenth Supplemental Indenture, dated as of July 16, 1997, to Indenture, dated as of November 1, 1996, between the registrant and The Chase Manhattan Bank, as Trustee (incorporated herein by reference from Exhibit 4.1 of the registrant's Current Report on Form 8-K dated June 11, 1997, File No. 1-12387). 4.2(i) -- Eleventh Supplemental Indenture, dated October 21, 1999, to Indenture dated November 1, 1996 between The Chase Manhattan Bank, as Trustee, and the registrant (incorporated herein by reference from Exhibit 4.2(l) of the registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 1999, File No. 1-12387). 4.3 -- Specimen stock certificate for Tenneco Automotive Inc. common stock (incorporated herein by reference from Exhibit 4.3 of the registrant's Annual Report on Form 10-K for the year ended December 31, 2000, File No. 1-12387) 4.4(a) -- Indenture dated October 14, 1999 by and between the registrant and The Bank of New York, as trustee (incorporated herein by reference from Exhibit 4.4(a) of the registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 1999, File No. 1-12387). 4.4(b) -- Supplemental Indenture dated November 4, 1999 among Tenneco Automotive Operating Subsidiary Inc. (formerly Tenneco Automotive Inc.), Tenneco International Holding Corp., Tenneco Global Holdings Inc., the Pullman Company, Clevite Industries Inc. and TMC Texas Inc. in favor of The Bank of New York, as trustee (incorporated herein by reference from Exhibit 4.4(b) of the registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 1999, File No. 1-12387). 4.4(c) -- Subsidiary Guarantee dated as of October 14, 1999 from Tenneco Automotive Operating Subsidiary Inc. (formerly Tenneco Automotive Inc.), Tenneco International Holding Corp., Tenneco Global Holdings Inc., the Pullman Company, Clevite Industries Inc. and TMC Texas Inc. in favor of The Bank of New York, as trustee (incorporated herein by reference to Exhibit 4.4(c) to the registrant's Registration Statement on Form S-4, Reg. No. 333-93757). 4.5(a) -- Credit Agreement, dated as of September 30, 1999, among the registrant, the Lenders named therein, Commerzbank and Bank of America, N.A., Citicorp USA, Inc. and The Chase Manhattan Bank (incorporated herein by reference from Exhibit 4.5(a) of the registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 1999, File No. 1-12387).
55
EXHIBIT NUMBER DESCRIPTION ------- ----------- 4.5(b) -- First Amendment to the Credit Agreement, dated October 20, 2000, among the registrant, The Chase Manhattan Bank and Citicorp USA, Inc. (incorporated herein by reference from Exhibit 4.1 to the registrant's Current Report on Form 8-K dated October 24, 2000, File No. 1-12387). 4.5(c) -- Second Amendment to Credit Agreement, dated March 22, 2001, among the registrant, the lenders party thereto and The Chase Manhattan Bank (incorporated by reference from Exhibit 4.1 to the registrant's Current Report on Form 8-K dated March 22, 2001, File No. 1-12387). 4.5(d) -- Third Amendment to Credit Agreement, dated March 13, 2002, among the registrant, JPMorgan Chase Bank as administrative agent and the lenders named therein (incorporated by reference from Exhibit 4.1 of the registrant's Current Report on Form 8-K dated March 13, 2002, File No. 1-2387). *4.5(e) -- Fourth Amendment, effective as of May 29, 2003, to the Credit Agreement, dated as of September 30, 1999, among Tenneco Automotive Inc. and its subsidiaries named therein, the several lenders from time to time parties thereto, JPMorgan Chase Bank (formerly known as The Chase Manhattan Bank), as Administrative Agent, and the other financial institutions named therein. *4.5(f) -- Amended and Restated Guarantee And Collateral Agreement, dated as of November 4, 1999, by Tenneco Automotive Inc. and the subsidiary guarantors named therein, in favor of JPMorgan Chase Bank, as Administrative Agent. *4.6(a) -- Indenture, dated as of June 19, 2003, among Tenneco Automotive Inc., the subsidiary guarantors named therein and Wachovia Bank, National Association. *4.6(b) -- Collateral Agreement, dated as of June 19, 2003, by Tenneco Automotive Inc. and the subsidiary guarantors named therein in favor of Wachovia Bank, National Association. *4.6(c) -- Registration Rights Agreement, dated as of June 19, 2003, among Tenneco Automotive Inc., the subsidiary guarantors named therein, and the initial purchasers named therein, for whom JPMorgan Securities Inc. acted as representative. *4.7 -- Intercreditor Agreement, dated as of June 19, 2003, among JPMorgan Chase Bank, as Credit Agent, Wachovia Bank, National Association, as Trustee and Collateral Agent, and Tenneco Automotive Inc. 10.1 -- Distribution Agreement, dated November 1, 1996, by and among El Paso Tennessee Pipeline Co. (formerly Tenneco Inc.), the registrant, and Newport News Shipbuilding Inc. (incorporated herein by reference from Exhibit 2 of the registrant's Form 10, File No. 1-12387). 10.2 -- Amendment No. 1 to Distribution Agreement, dated as of December 11, 1996, by and among El Paso Tennessee Pipeline Co. (formerly Tenneco Inc.), the registrant, and Newport News Shipbuilding Inc. (incorporated herein by reference from Exhibit 10.2 of the registrant's Annual Report on Form 10-K for the year ended December 31, 1996, File No. 1-12387). 10.3 -- Debt and Cash Allocation Agreement, dated December 11, 1996, by and among El Paso Tennessee Pipeline Co. (formerly Tenneco Inc.), the registrant, and Newport News Shipbuilding Inc. (incorporated herein by reference from Exhibit 10.3 of the registrant's Annual Report on Form 10-K for the year ended December 31, 1996, File No. 1-12387). 10.4 -- Benefits Agreement, dated December 11, 1996, by and among El Paso Tennessee Pipeline Co. (formerly Tenneco Inc.), the registrant, and Newport News Shipbuilding Inc. (incorporated herein by reference from Exhibit 10.4 of the registrant's Annual Report on Form 10-K for the year ended December 31, 1996, File No. 1-12387).
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EXHIBIT NUMBER DESCRIPTION ------- ----------- 10.5 -- Insurance Agreement, dated December 11, 1996, by and among El Paso Tennessee Pipeline Co. (formerly Tenneco Inc.), the registrant, and Newport News Shipbuilding Inc. (incorporated herein by reference from Exhibit 10.5 of the registrant's Annual Report on Form 10-K for the year ended December 31, 1996, File No. 1-12387). 10.6 -- Tax Sharing Agreement, dated December 11, 1996, by and among El Paso Tennessee Pipeline Co. (formerly Tenneco Inc.), Newport News Shipbuilding Inc., the registrant, and El Paso Natural Gas Company (incorporated herein by reference from Exhibit 10.6 of the registrant's Annual Report on Form 10-K for the year ended December 31, 1996, File No. 1-12387). 10.7 -- First Amendment to Tax Sharing Agreement, dated as of December 11, 1996, among El Paso Tennessee Pipeline Co. (formerly Tenneco Inc.), the registrant, El Paso Natural Gas Company and Newport News Shipbuilding Inc. (incorporated herein by reference from Exhibit 10.7 of the registrant's Annual Report on Form 10-K for the year ended December 31, 1996, File No. 1-12387). 10.8 -- Tenneco Automotive Inc. EVA Incentive Compensation Plan (incorporated herein by reference from Exhibit 10.8 to the registrant's Annual Report in Form 10-K for the year-ended December 31, 2002, File No. 1-12387). 10.9 -- Tenneco Automotive Inc. Change of Control Severance Benefits Plan for Key Executives (incorporated herein by reference from Exhibit 10.13 of the registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 1999, File No. 1-12387). 10.10 -- Tenneco Automotive Inc. Stock Ownership Plan (incorporated herein by reference from Exhibit 10.10 of the registrant's Registration Statement on Form S-4, Reg. No. 333-93757). 10.11 -- Tenneco Automotive Inc. Key Executive Pension Plan (incorporated herein by reference from Exhibit 10.11 to the registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 2000, File No. 1-12387). 10.12 -- Tenneco Automotive Inc. Deferred Compensation Plan (incorporated herein by reference from Exhibit 10.12 to the registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 2000, File No. 1-12387). 10.13 -- Tenneco Automotive Inc. Supplemental Executive Retirement Plan (incorporated herein by reference from Exhibit 10.13 to the registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 2000, File No. 1-12387). 10.14 -- Human Resources Agreement by and between Tenneco Automotive Inc. and Tenneco Packaging Inc. dated November 4, 1999 (incorporated herein by reference to Exhibit 99.1 to the registrant's Current Report on Form 8-K dated November 4, 1999, File No. 1-12387). 10.15 -- Tax Sharing Agreement by and between Tenneco Automotive Inc. and Tenneco Packaging Inc. dated November 3, 1999 (incorporated herein by reference to Exhibit 99.2 to the registrant's Current Report on Form 8-K dated November 4, 1999, File No. 1-12387). 10.16 -- Amended and Restated Transition Services Agreement by and between Tenneco Automotive Inc. and Tenneco Packaging Inc. dated as of November 4, 1999 (incorporated herein by reference from Exhibit 10.21 of the registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 1999, File No. 1-12387). 10.17 -- Assumption Agreement among Tenneco Automotive Operating Company Inc., Tenneco International Holding Corp., Tenneco Global Holdings Inc., The Pullman Company, Clevite Industries Inc., TMC Texas Inc., Salomon Smith Barney Inc. and the other Initial Purchasers listed in the Purchase Agreement dated as of November 4, 1999 (incorporated herein by reference from Exhibit 10.24 of the registrant's Registration Statement on Form S-4, Reg. No. 333-93757).
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EXHIBIT NUMBER DESCRIPTION ------- ----------- 10.18 -- Amendment No. 1 to Change in Control Severance Benefits Plan for Key Executives (incorporated herein by reference from Exhibit 10.23 to the registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 2000, File No. 1-12387). 10.19 -- Letter Agreement dated July 27, 2000 between the registrant and Mark P. Frissora (incorporated herein by reference from Exhibit 10.24 to the registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 2000, File No. 1-12387). 10.20 -- Letter Agreement dated July 27, 2000 between the registrant and Mark A. McCollum (incorporated herein by reference from Exhibit 10.25 to the registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 2000, File No. 1-12387). 10.21 -- Letter Agreement dated July 27, 2000 between the registrant and Richard P. Schneider (incorporated herein by reference from Exhibit 10.26 to the registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 2000, File No. 1-12387). 10.22 -- Letter Agreement dated July 27, 2000 between the registrant and Timothy R. Donovan (incorporated herein by reference from Exhibit 10.28 to the registrant's Annual Report on Form 10-K for the year ended December 31, 2000, File No. 1-12387). 10.23 -- Form of Indemnity Agreement entered into between the registrant and the following directors of the registrant: Paul Stecko, M. Kathryn Eickhoff and Dennis Severance (incorporated herein by reference from Exhibit 10.29 to the registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 2000, File No. 1-12387). 10.24 -- Mark P. Frissora Special Appendix under Tenneco Automotive Inc. Supplemental Executive Retirement Plan (incorporated herein by reference from Exhibit 10.30 to the registrant's Annual Report on Form 10-K for the year ended December 31, 2000, File No. 1-12387). 10.25 -- Letter Agreement dated as of June 1, 2001 between the registrant and Hari Nair (incorporated herein by reference from Exhibit 10.28 to the registrant's Annual Report on Form 10-K for the year ended December 31, 2001. File No. 1-12387). *10.26 -- Tenneco Automotive Inc. 2002 Long-Term Incentive Plan (As Amended and Restated Effective March 11, 2003). 10.27 -- Amendment to No. 1 Tenneco Automotive Inc. Deferred Compensation Plan (incorporated herein by reference from Exhibit 10.27 to the registrant's Annual Report on Form 10-K for the year ended December 31, 2002, File No. 1-12387). 10.28 -- Tenneco Automotive Inc. Supplemental Stock Ownership Plan (incorporated herein by reference from Exhibit 10.28 to the registrant's Annual Report on Form 10-K for the year ended December 31, 2002, File No. 1-12387). 11 -- None. *12 -- Computation of Ratio of Earnings to Fixed Charges. *15 -- Letter Regarding Unaudited Interim Financial Information. 18 -- None. 19 -- None. 22 -- None. 23 -- None. 24 -- None. *31.1 -- Certification of Mark P. Frissora under Section 302 of the Sarbanes-Oxley Act of 2002. *31.2 -- Certification of Mark A. McCollum under Section 302 of the Sarbanes-Oxley Act of 2002.
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EXHIBIT NUMBER DESCRIPTION ------- ----------- *32 -- Certification of Mark P. Frissora and Mark A. McCollum under Section 906 of the Sarbanes-Oxley Act of 2002. 99.3 -- Tenneco Automotive Inc. Code of Ethical Conduct for Financial Managers (incorporated herein by reference from Exhibit 99.3 to the registrant's Annual Report on Form 10-K for the year ended December 31, 2002, File No. 1-12387).
- --------------- * Filed herewith 59 EX-4.5(E) 3 c78654exv4w5xey.txt FOURTH AMENDMENT TO THE CREDIT AGREEMENT Fourth AMENDMENT TO THE CREDIT AGREEMENT FOURTH AMENDMENT, dated as of May 29, 2003 (this "Fourth Amendment"), to the Credit Agreement, dated as of September 30, 1999 (as amended, supplemented, or otherwise modified from time to time, the "Credit Agreement"), among TENNECO AUTOMOTIVE INC., a Delaware corporation (the "Borrower"), the several lenders from time to time parties thereto (the "Lenders"), JPMORGAN CHASE BANK (formerly known as The Chase Manhattan Bank), a New York banking corporation, as administrative agent for the Lenders (in such capacity, the "Administrative Agent"), and the other financial institutions named therein as agents for the Lenders (in such capacity, collectively, the "Other Agents"). W I T N E S S E T H: WHEREAS, the Borrower, the Lenders and the Administrative Agent and the Other Agents are parties to the Credit Agreement; WHEREAS, the Borrower has notified the Lenders of its intention to issue its senior secured second lien notes from time to time (as hereinafter further defined, the "Second Lien Notes"); WHEREAS, the Borrower has requested that the Lenders amend the Credit Agreement as set forth herein; WHEREAS, the Lenders, the Administrative Agent and the Other Agents are willing to agree to such amendment to the Credit Agreement, subject to the terms and conditions set forth herein; NOW, THEREFORE, in consideration of the premises and mutual covenants contained herein, the Borrower, the Lenders, the Administrative Agent and the Other Agents hereby agree as follows: 1. Defined Terms. Unless otherwise defined herein, capitalized terms which are defined in the Credit Agreement are used herein as therein defined. 2. Amendments to Credit Agreement. (a) Section 1.1 of the Credit Agreement is amended as follows: (i) by deleting the definition of "Excess Cash Flow" and substituting therefor the following: "Excess Cash Flow": for any fiscal year of the Borrower, the excess, if any, of (a) the sum, without duplication, of (i) Consolidated Net Income for such fiscal year, (ii) an amount equal to the amount of all non-cash charges (including depreciation and amortization) deducted in arriving at such Consolidated Net Income, (iii) decreases in Consolidated Working Capital for such fiscal year, (iv) an amount equal to the aggregate net non-cash loss on the Disposition of property by the Borrower and its Subsidiaries during such fiscal year (other than sales of inventory in the ordinary course 2 of business), to the extent deducted in arriving at such Consolidated Net Income, (v) an amount equal to the aggregate net increase in Consolidated Working Capital attributable to foreign currency translation adjustments of the Borrower and its Subsidiaries during such fiscal year, (vi) an amount equal to the aggregate net non-cash increase in Consolidated Working Capital of the Borrower and its Subsidiaries during such fiscal year, and (vii) an amount equal to the non-cash, non-current deferred income tax expense deducted in arriving at Consolidated Net Income, over (b) the sum, without duplication, of (i) an amount equal to the amount of all non-cash credits included in arriving at such Consolidated Net Income, (ii) the aggregate amount actually paid by the Borrower and its Subsidiaries in cash during such fiscal year on account of Capital Expenditures (excluding the principal amount of Indebtedness incurred in connection with such expenditures, any such expenditures financed with the proceeds of any Reinvestment Deferred Amount and any Capital Expenditures with respect to which the Borrower delivered a certificate pursuant to the immediately following clause (iii) in connection with the calculation of Excess Cash Flow for the last fiscal year), (iii) the aggregate amount of Capital Expenditures that the Borrower or any of its Subsidiaries became obligated to make but that are not made during such fiscal year, provided that the Borrower shall deliver a certificate to the Administrative Agent not later than 90 days after the end of such fiscal year, signed by a Responsible Officer of the Borrower and certifying that such Capital Expenditure will be made in the following fiscal year and the aggregate amount of all such Capital Expenditures shall not exceed the limitations set forth in Section 7.7 for such fiscal year, (iv) the net amount of all prepayments of Revolving Loans and Swingline Loans and other revolving credit facilities during such fiscal year and all optional prepayments of the Term Loans during such fiscal year, (v) the aggregate amount of all regularly scheduled principal payments of Funded Debt (including the Term Loans) of the Borrower and its Subsidiaries made during such fiscal year, (vi) increases in Consolidated Working Capital for such fiscal year, (vii) an amount equal to the aggregate net cash gains on the Disposition of property by the Borrower and its Subsidiaries during such fiscal year (other than sales of inventory in the ordinary course of business) to the extent included in arriving at such Consolidated Net Income, (viii) an amount equal to Investments permitted by Section 7.8 made by the Borrower and its Subsidiaries during such fiscal year, (ix) an amount equal to the aggregate net cash gains on the Disposition of property by the Borrower and its Subsidiaries consisting of Asset Sales the Net Cash Proceeds of which are required to be applied during such fiscal year to the prepayment of Term Loans pursuant to Section 2.11, (x) an amount equal to the aggregate net decrease in Consolidated Working Capital attributable to foreign currency translation adjustments of the Borrower and its Subsidiaries during such fiscal year, (xi) an amount equal to the aggregate net non-cash decrease in Consolidated Working Capital of the Borrower and its Subsidiaries during such fiscal year and (xii) an amount equal to non-cash, non-current deferred income tax benefit included in arriving at Consolidated Net Income. (ii) by adding the phrase ", the Intercreditor Agreement" immediately after the phase "Security Documents" in the definition of "Loan Documents"; and (iii) adding the following defined terms in proper alphabetical order: 3 "First Priority Claims": as defined in the Intercreditor Agreement. "Fourth Amendment Effective Date": the Effective Date, as defined in the Fourth Amendment dated as of May 29, 2003 to this Agreement. "Intercreditor Agreement": the Intercreditor Agreement, dated as of the Fourth Amendment Effective Date, entered into among the collateral agent for the Second Lien Note Holders, the Administrative Agent and the Borrower as the same may be amended, supplemented or otherwise modified from time to time. "Permitted Second Lien Notes Refinancings": as defined in Section 7.2 "Second Lien Note Holders": holders of the Second Lien Notes from time to time. "Second Lien Note Indenture": the Indenture, dated as of the Fourth Amendment Effective Date, entered into by the Borrower and certain of its Subsidiaries in connection with the issuance of the Second Lien Notes together with all instruments and other agreements entered into by the Borrower or such Subsidiaries in connection therewith, as the same may be amended, supplemented or otherwise modified from time to time. "Second Lien Notes": the senior secured notes of the Borrower to be issued in one or more series pursuant to the Second Lien Note Indenture. "Second Priority Claims": as defined in the Intercreditor Agreement. "Second Priority Collateral Documents": as defined in the Intercreditor Agreement. (b) Section 2.11 of the Credit Agreement is amended by adding the following paragraph at the end thereof: (f) Notwithstanding any other provisions of the Loan Documents to the contrary, Net Cash Proceeds of the issuance of the Second Lien Notes shall be applied as follows: (i) with respect to the Second Lien Notes issued on the Fourth Amendment Effective Date, (A) first, such Net Cash Proceeds will be applied to prepay $199,100,000 (or, if such Net Cash Proceeds are less than $199,100,000, such lesser amount of Net Cash Proceeds) of the Tranche A Term Loans in direct order of maturity; (B) second, following the payment described in clause (i)(A), an amount up to the next $52,200,000, if any, of such Net Cash Proceeds will be applied to prepay the Tranche B Term Loans and the Tranche C Term Loans on a pro rata basis, in direct order of maturity; (C) third, following the payments in clauses (i)(A) and (i)(B), an amount up to next $100,000,000 if any, of such Net Cash Proceeds, will be applied to prepay outstanding Revolving Loans; and (D) fourth, following the payments in clauses (i)(A), (i)(B) and (i)(C), the balance of such Net Cash Proceeds, if any, will be applied in accordance with this Agreement as if such Net Cash Proceeds resulted in a mandatory prepayment 4 pursuant to Section 2.11(a); and (ii) with respect to all other Second Lien Notes, such Net Cash Proceeds will be applied in accordance with this Agreement as if such Net Cash Proceeds resulted in a mandatory prepayment pursuant to Section 2.11(a). (c) Section 2 of the Credit Agreement is amended by adding the following at the end thereof: 2.23 Intercreditor Agreement. The Lenders (a) authorize the Administrative Agent to execute, deliver and perform the Intercreditor Agreement on their behalf, and (b) acknowledge that certain items of the Collateral will from time to time be made subject to a Lien to secure the Second Lien Notes and certain related obligations, subject to the terms of the Intercreditor Agreement. (d) Section 4.19(a) of the Credit Agreement is amended by adding after the phrase "and the proceeds thereof" which appears in the second sentence the phrase "to the extent a security interest can be perfected by filings or other action required thereunder". (e) Section 4 of the Credit Agreement is amended by adding the following at the end thereof: 4.24 First Priority Claims. The Borrower Obligations and the Guarantor Obligations (as such terms are defined in the Guarantee and Collateral Agreement) constitute First Priority Claims (as defined in the Intercreditor Agreement and the Second Lien Note Indenture), and the Liens on the Collateral securing the Borrower Obligations and the Guarantor Obligations constitute First Priority Liens (as defined in the Second Lien Note Indenture). (f) Section 6.10 of the Credit Agreement is amended by adding the following paragraphs at the end thereof: (e) Not permit any Subsidiary to guarantee payment of any of the Second Priority Claims unless and until such Subsidiary has guaranteed payment of the First Priority Claims pursuant to the Guarantee and Collateral Agreement. (f) Except as required by the terms of the Indenture or the Second Priority Collateral Documents, prior to taking any action to create or perfect any Lien on any Collateral securing the Second Priority Claims provide the Administrative Agent at least five Business Days prior notice of such action, and promptly following the taking of any action to create or perfect any Lien on any Collateral securing the Second Priority Claims notify the Administrative Agent in writing of such action; provided that no such notice of the type described in this paragraph (f) shall be required during the first 60 days following the Fourth Amendment Effective Date. 5 (g) Upon request of the Administrative Agent from time to time promptly provide the Administrative Agent with information regarding any property of the Borrower and its Subsidiaries which secures or purports to secure any Second Priority Claims and the actions taken to create or perfect the applicable Liens, to the extent such information is reasonably available to the Borrower or its Subsidiaries and is not subject to any legal or similar privilege. (g) Section 7.2 of the Credit Agreement is amended by adding after the phrase "Hedge Agreements" in clause (g) the phrase "(including Guarantee Obligations of the Loan Parties in respect of Hedge Agreements entered into by Tenneco Management (Europe) Limited or any Subsidiary that succeeds Tenneco Management (Europe) Limited in the performance of international treasury management functions)". (h) Section 7.2 of the Credit Agreement is amended by (i) deleting the word "and" from the end of clause (j), (ii) deleting the period at the end of clause (k) and substituting therefor the phrase "; and" and (iii) adding the following new clause at the end thereof: (l) (i) Indebtedness of the Borrower in respect of the Second Lien Notes and any refinancings, refundings, renewals or extensions thereof on terms and conditions no more restrictive to the Borrower and its Subsidiaries unless approved by the Administrative Agent ("Permitted Second Lien Notes Refinancing"), provided, that (A) the Borrower shall not, in any case, increase, or shorten the maturity of, the principal amount thereof, or make any payment which effectively reduces the outstanding principal amount thereof and (B) the Borrower's and the Subsidiary Guarantors' obligations under the Permitted Second Lien Notes Refinancing shall constitute Second Priority Claims, and any collateral security therefor shall be subordinated to collateral securing the First Priority Claims, as set forth in the Intercreditor Agreement, and (ii) Guarantee Obligations of any Subsidiary Guarantor in respect of such Indebtedness. (i) Section 7.3 of the Credit Agreement is amended by (i) deleting the word "and" from the end of clause (n), (ii) deleting the period at the end of clause (o) and substituting therefor the phrase "; and" and (iii) adding the following new clause at the end thereof: (p) Liens on the Collateral securing Indebtedness of the Borrower or any Subsidiary incurred pursuant to Section 7.2(l), provided that such Liens are, at all times prior to repayment in full in cash of the Obligations and termination of the Revolving Commitments, subordinate to Liens created under the Loan Documents securing the First Priority Claims pursuant to the terms of the Intercreditor Agreement. (j) Section 7.5 of the Credit Agreement is amended by (i) adding in clause (g) after the phrase "(a)-(f) above" the phrase "or (h)-(m) below", (ii) deleting the word "and" from the end of clause (j), (iii) deleting the period at the end of clause (k) and substituting therefor a semi-colon and (iv) adding the following at the end thereof: (l) Tenneco International Holding Corp. ("TIHC") may transfer or contribute ownership of Tenneco Holdings Denmark to Tenneco Automotive Iberica; and 6 (m) the Disposition of property as an Investment made pursuant to Section 7.8(h) in any Joint Venture or in any Person who, prior to the Investment, is not a Subsidiary and who becomes, as a result of the Investment, a Subsidiary that is not a Wholly-Owned Subsidiary. (k) Section 7.7 of the Credit Agreement is amended by inserting after the phrase "Joint Ventures" the phrase "and in any Person who, prior to the Investment, is not a Subsidiary and who becomes, as a result of the Investment, a Subsidiary that is not a Wholly-Owned Subsidiary". (l) Section 7.8(h) of the Credit Agreement is amended by inserting after the phrase "Joint Ventures" the phrase "and in any Person who, prior to the Investment, is not a Subsidiary and who becomes, as a result of the Investment, a Subsidiary that is not a Wholly-Owned Subsidiary". (m) Section 7.9 of the Credit Agreement is amended by deleting the last sentence thereof and substituting therefor the following: Notwithstanding the foregoing or anything in Section 7.16, the Borrower may purchase and cancel or redeem its Senior Subordinated Notes and Second Lien Notes in connection with an exchange of such Notes for shares of common stock issued by the Borrower after the Fourth Amendment Effective Date. (n) Section 7 of the Credit Agreement is amended by adding the following at the end thereof: 7.16 Optional Payments and Modifications of Second Lien Notes. (a) Except for Permitted Second Lien Notes Refinancings, make or offer to make any optional or voluntary payment, prepayment, repurchase or redemption of or otherwise optionally or voluntarily defease or segregate funds with respect to the Second Lien Notes, or (b) amend, modify, waive or otherwise change, or consent or agree to any amendment, modification, waiver or other change to, any of the terms of the Second Lien Notes or the Second Lien Note Indenture (other than any such amendment, modification, waiver or other change that (i) (A) would extend the maturity or reduce the amount of any payment of principal thereof or reduce the rate or extend any date for payment of interest thereon and (B) does not involve the payment of a consent fee or (ii) is not adverse to the holders of the First Priority Claims). (o) Section 8 of the Credit Agreement is amended by adding in paragraph (e) the phrase "or the Second Lien Note Indenture" immediately after the phrase "Senior Subordinated Note Indenture". (p) Section 8 of the Credit Agreement is amended by (i) deleting the word "or" after clause (k), (ii) adding the word "or" at the end of clause (l), and (iii) adding the following paragraph immediately after paragraph (l): 7 (m) any Lien securing or purporting to secure the Second Priority Claims shall cease, for any reason, to be subordinated to the Lien created under the Loan Documents securing or purporting to secure the First Priority Claims, as provided in the Intercreditor Agreement, or any Loan Party, any Affiliate of any Loan Party, the trustee in respect of the Second Lien Notes or the holders of at least 25% in aggregate principal amount of the Second Lien Notes shall so assert; or the Borrower or any of its Subsidiaries shall make any payment, prepayment, repurchase or redemption of or on the Second Lien Notes other than scheduled payments of interest or pursuant to a Permitted Second Lien Notes Refinancing; 3. Representations and Warranties. The Borrower hereby confirms that the representations and warranties set forth in Section 4 of the Credit Agreement, as amended by this Fourth Amendment, are true and correct in all material respects as if made as of the Fourth Amendment Effective Date (except such representations and warranties as are made as of a particular date, which such representations and warranties shall be true and correct in all material respects as if made as of such date). The Borrower represents and warrants that, after giving effect to this Fourth Amendment, no Default or Event of Default has occurred and is continuing. 4. Effectiveness. This Fourth Amendment shall become effective as of the date of receipt by the Administrative Agent of (a) counterparts of this Fourth Amendment executed by the Borrower, the Required Lenders and the Majority Facility Lenders under each of the Tranche A Term Facility, the Tranche B Term Facility and the Tranche C Term Facility and (b) payment for all fees required to be paid and all expenses for which invoices have been presented (including the reasonable fees and expenses of legal counsel) (the "Effective Date"). 5. Amendment of Security Documents. The Lenders authorize the Administrative Agent to enter into amendments to and supplements of the Security Documents (in forms reasonably satisfactory to the Administrative Agent) in order to (a) allow (i) Hedge Agreements entered into by Tenneco Management (Europe) Limited or any Subsidiary that succeeds Tenneco Management (Europe) Limited in the performance of international treasury management functions with any Lender or affiliate of a Lender and (ii) cash management obligations owed by Tenneco or its subsidiaries to Lenders and their affiliates to be secured by the Collateral and guaranteed pursuant to the Security Documents, (b) update the Security Documents for changes in law, including changes in the Uniform Commercial Code, (c) add additional Collateral thereunder and (d) effect other similar changes. In furtherance of the foregoing, the parties hereto agree that, upon or following the effectiveness of this Fourth Amendment, the Guarantee and Collateral Agreement (including the schedules and annexes thereto) may be amended, amended and restated, or otherwise modified as the Borrower and the Administrative Agent shall agree from time to time for the purposes of (i) updating the terms of the Guarantee and Collateral Agreement to conform to changes in law, including revisions to Article 9 of the Uniform Commercial Code, (ii) refining the representations, warranties and covenants contained therein with respect to the description of and perfection of security interests in foreign and ancillary intellectual property collateral and (iii) conforming the representation in Section 4.2 thereof in a manner consistent with the representation set forth in Section 4.19(a) of the Credit Agreement, as amended by this Fourth Amendment. 8 6. Continuing Effect of the Credit Agreement. This Fourth Amendment shall not constitute an amendment of any provision of the Credit Agreement not expressly referred to herein and shall not be construed as a waiver or consent to any further or future action on the part of the Borrower that would require a waiver or consent of the Lenders, the Administrative Agent or the Other Agents. Except as expressly amended hereby, the provisions of the Credit Agreement are and shall remain in full force and effect. Sections 2(d) and 5 of this Fourth Amendment shall be deemed to be in effect for all applicable periods prior to the Effective Date. 7. Counterparts. This Fourth Amendment may be executed by the parties hereto in any number of separate counterparts (including telecopied counterparts), each of which shall be deemed to be an original, and all of which taken together shall be deemed to constitute one and the same instrument. 8. GOVERNING LAW. THIS FOURTH AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. IN WITNESS WHEREOF, the parties hereto have caused this Fourth Amendment to be duly executed and delivered by their respective proper and duly authorized officers as of the day and year first above written. TENNECO AUTOMOTIVE INC. By: ---------------------------------- Name: Title: JPMORGAN CHASE BANK, as Administrative Agent and as a Lender By: ---------------------------------- Name: Title: CITICORP USA, INC., as Syndication Agent and as a Lender By: ---------------------------------- Name: Title: FOURTH AMENDMENT dated as of May 29, 2003 to the Tenneco Automotive Inc. Credit Agreement dated as of September 30, 1999 ------------------------------------- [LENDER] By: ---------------------------------- Name: Title: Each of the undersigned agrees to the foregoing Fourth Amendment and confirms that its obligations under the Loan Documents to which it is a party remain in full force and effect after giving effect to such Fourth Amendment: TENNECO AUTOMOTIVE OPERATING COMPANY INC. TENNECO INTERNATIONAL HOLDING CORP. TENNECO GLOBAL HOLDINGS INC. THE PULLMAN COMPANY TMC TEXAS INC. CLEVITE INDUSTRIES INC. By: ---------------------------------- Name: Title: EX-4.5(F) 4 c78654exv4w5xfy.txt AMENDED & RESTATED GUARANTEE & COLLATERAL AGMT. EXECUTION COPY ================================================================================ GUARANTEE AND COLLATERAL AGREEMENT made by TENNECO AUTOMOTIVE INC., TENNECO AUTOMOTIVE OPERATING COMPANY INC., TENNECO INTERNATIONAL HOLDING CORP., TENNECO GLOBAL HOLDINGS INC., THE PULLMAN COMPANY, TMC TEXAS INC. and CLEVITE INDUSTRIES INC. in favor of THE CHASE MANHATTAN BANK, as Administrative Agent Dated as of November 4, 1999 ================================================================================ TABLE OF CONTENTS
PAGE ---- SECTION 1. DEFINED TERMS..........................................................................................2 1.1 Definitions.....................................................................................2 1.2 Other Definitional Provisions...................................................................6 SECTION 2. GUARANTEE..............................................................................................6 2.1 Guarantee.......................................................................................6 2.2 Right of Contribution...........................................................................7 2.3 No Subrogation..................................................................................7 2.4 Amendments, etc. with respect to the Borrower Obligations.......................................8 2.5 Guarantee Absolute and Unconditional............................................................8 2.6 Reinstatement...................................................................................9 2.7 Payments........................................................................................9 SECTION 3. GRANT OF SECURITY INTEREST.............................................................................9 SECTION 4. REPRESENTATIONS AND WARRANTIES........................................................................10 4.1 Title; No Other Liens..........................................................................10 4.2 Perfected First Priority Liens.................................................................11 4.3 Jurisdiction of Organization...................................................................11 4.4 Inventory and Equipment........................................................................11 4.5 Farm Products..................................................................................11 4.6 Investment Property............................................................................11 4.7 Receivables....................................................................................12 4.8 Intellectual Property..........................................................................12 SECTION 5. COVENANTS.............................................................................................13 5.1 Delivery of Instruments, Certificated Securities and Chattel Paper.............................13 5.2 Maintenance of Insurance.......................................................................13 5.3 Payment of Obligations.........................................................................13 5.4 Maintenance of Perfected Security Interest; Further Documentation..............................14 5.5 Changes in Jurisdiction of Organization, Locations, Name, etc..................................14 5.6 Notices........................................................................................15 5.7 Investment Property............................................................................15 5.8 Receivables....................................................................................16 5.9 Intellectual Property..........................................................................16 5.10 Jurisdiction of Organization...................................................................18 5.11 Commercial Tort Claims.........................................................................18
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PAGE ---- SECTION 6. REMEDIAL PROVISIONS...................................................................................18 6.1 Certain Matters Relating to Receivables........................................................18 6.2 Communications with Obligors; Grantors Remain Liable...........................................19 6.3 Pledged Stock..................................................................................20 6.4 Proceeds to be Turned Over To Administrative Agent.............................................20 6.5 Application of Proceeds........................................................................21 6.6 Code and Other Remedies........................................................................21 6.7 Registration Rights............................................................................22 6.8 Deficiency.....................................................................................23 SECTION 7. THE ADMINISTRATIVE AGENT..............................................................................23 7.1 Administrative Agent's Appointment as Attorney-in-Fact, etc....................................23 7.2 Duty of Administrative Agent...................................................................25 7.3 Financing Statements...........................................................................25 7.4 Authority of Administrative Agent..............................................................26 SECTION 8. MISCELLANEOUS.........................................................................................26 8.1 Amendments in Writing..........................................................................26 8.2 Notices........................................................................................26 8.3 No Waiver by Course of Conduct; Cumulative Remedies............................................26 8.4 Enforcement Expenses; Indemnification..........................................................27 8.5 Successors and Assigns.........................................................................27 8.6 Set-Off........................................................................................27 8.7 Counterparts...................................................................................28 8.8 Severability...................................................................................28 8.9 Section Headings...............................................................................28 8.10 Integration....................................................................................28 8.11 GOVERNING LAW..................................................................................28 8.12 Submission To Jurisdiction; Waivers............................................................29 8.13 Acknowledgements...............................................................................29 8.14 Additional Grantors............................................................................30 8.15 Releases.......................................................................................30 8.16 WAIVER OF JURY TRIAL...........................................................................30 8.17 Amendment and Restatement......................................................................30
ii SCHEDULES Schedule 1 Notice Addresses Schedule 2 Investment Property Schedule 3 Perfection Matters Schedule 4 Jurisdictions of Organization and Chief Executive Offices Schedule 5 Inventory and Equipment Locations Schedule 6 Intellectual Property ANNEX Annex 1 Assumption Agreement iii EXECUTION COPY GUARANTEE AND COLLATERAL AGREEMENT GUARANTEE AND COLLATERAL AGREEMENT, dated as of November 4, 1999, made by each of the signatories hereto (together with any other entity that may become a party hereto as provided herein, the "Grantors"), in favor of JPMORGAN CHASE BANK, as Administrative Agent (in such capacity, the "Administrative Agent") for the banks and other financial institutions (the "Lenders") from time to time parties to the Credit Agreement, dated as of September 30, 1999 (as amended, supplemented or otherwise modified from time to time, the "Credit Agreement"), among Tenneco Automotive Inc. (formerly known as Tenneco, Inc.), a Delaware corporation (the "Borrower"), the Lenders, Commerzbank, AG and Bank of America, N.A., as co-documentation agents, Citicorp USA, Inc., as syndication agent, and the Administrative Agent. W I T N E S S E T H: WHEREAS, pursuant to the Credit Agreement, the Lenders have severally made and agreed to make extensions of credit to the Borrower upon the terms and subject to the conditions set forth therein; WHEREAS, the Borrower is a member of an affiliated group of companies that includes each other Grantor; WHEREAS, the proceeds of the extensions of credit under the Credit Agreement have been and will be used in part to enable the Borrower to make valuable transfers to one or more of the other Grantors in connection with the operation of their respective businesses; WHEREAS, the Borrower and the other Grantors are engaged in related businesses, and each Grantor derives and will derive substantial direct and indirect benefit from the making of the extensions of credit under the Credit Agreement; WHEREAS, the Grantors and the Administrative Agent are parties to the Guarantee and Collateral Agreement dated as of November 4, 1999, as amended prior to June 19, 2003 (the "Original Guarantee and Collateral Agreement"); WHEREAS, it is a condition precedent to the obligation of the Lenders to make their respective extensions of credit to the Borrower under the Credit Agreement that the Grantors shall have executed and delivered this Agreement to the Administrative Agent for the ratable benefit of the Lenders; Whereas, in connection with the Fourth Amendment, dated as of May 29, 2003 (the "Fourth Amendment"), to the Credit Agreement, the parties hereto wish to revise the Original Guarantee and Collateral Agreement pursuant to this Agreement; and WHEREAS, for convenience the parties hereto desire to amend and restate the Original Guarantee and Collateral Agreement pursuant to this Agreement rather than amend the Original Guarantee and Collateral Agreement, 2 NOW, THEREFORE, in consideration of the premises and to induce the Administrative Agent and the Lenders to enter into the Fourth Amendment to the Credit Agreement and to induce the Lenders to make their respective extensions of credit to the Borrower under the Credit Agreement, the Original Guarantee and Collateral Agreement is hereby amended and restated as of the Restatement Date (as defined below) as follows: SECTION 1. DEFINED TERMS 1.1 Definitions. (a) Unless otherwise defined herein, terms defined in the Credit Agreement and used herein shall have the meanings given to them in the Credit Agreement, and the following terms are used herein as defined in the New York UCC: Accounts, Certificated Security, Chattel Paper, Commercial Tort Claims, Documents, Equipment, Farm Products, Instruments, Inventory, Letter of Credit Rights and Supporting Obligations. (b) The following terms shall have the following meanings: "Agreement": the Original Guarantee and Collateral Agreement, as amended and restated by this Guarantee and Collateral Agreement, as the same may be further amended, supplemented or otherwise modified from time to time. "Borrower Obligations": the collective reference to the unpaid principal of and interest on the Loans and Reimbursement Obligations and all other obligations and liabilities of the Borrower (including, without limitation, interest accruing at the then applicable rate provided in the Credit Agreement after the maturity of the Loans and Reimbursement Obligations and interest accruing at the then applicable rate provided in the Credit Agreement after the filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization or like proceeding, relating to the Borrower, whether or not a claim for post-filing or post-petition interest is allowed in such proceeding) to the Administrative Agent or any Lender (or, in the case of any Lender Hedge Agreement or Cash Management Obligations, any Affiliate of any Lender), whether direct or indirect, absolute or contingent, due or to become due, or now existing or hereafter incurred, which may arise under, out of, or in connection with, the Credit Agreement, this Agreement, the other Loan Documents, any Letter of Credit, any Lender Hedge Agreement (including any guarantees of the Borrower of any Lender Hedge Agreements entered into by Tenneco Management (Europe) Limited or any Subsidiary that succeeds Tenneco Management (Europe) Limited in the performance of international treasury management functions for the Company), any Cash Management Obligation (including any guarantees of the Borrower of any Cash Management Obligations entered into by any Subsidiary) or any other document made, delivered or given in connection with any of the foregoing, in each case whether on account of principal, interest, reimbursement obligations, fees, indemnities, costs, expenses or otherwise (including, without limitation, all fees and disbursements of counsel to the Administrative Agent or to the Lenders that are required to be paid by the Borrower pursuant to the terms of any of the foregoing agreements). 3 "Cash Management Obligation": any obligation of the Borrower or any of its Subsidiaries in respect of overdrafts and related liabilities owed to any Lender (or any Affiliate of a Lender) that arise from treasury, depositary or cash management services including in connection with any automated clearing house transfers of funds or any similar transactions. "Collateral": as defined in Section 3. "Collateral Account": any collateral account established by the Administrative Agent as provided in Section 6.1 or 6.4. "Copyrights": (i) all copyrights arising under the laws of the United States, any other country or any political subdivision thereof, whether registered or unregistered and whether published or unpublished (including, without limitation, those listed in Schedule 6), all registrations and recordings thereof, and all applications in connection therewith, including, without limitation, all registrations, recordings and applications in the United States Copyright Office, and (ii) the right to obtain all renewals thereof. "Copyright Licenses": any written agreement naming any Grantor as licensor or, any written agreement naming any Grantor as licensee to the extent such agreement permits the Grantor to grant a security interest in its rights thereunder, including, without limitation, those listed in Schedule 6, granting any right under any Copyright, including, without limitation, the grant of rights to manufacture, distribute, exploit and sell materials derived from any Copyright. "Deposit Account": as defined in the Uniform Commercial Code of any applicable jurisdiction and, in any event, including, without limitation, any demand, time, savings, passbook or like account maintained with a depositary institution. "Foreign Subsidiary": any Subsidiary organized under the laws of any jurisdiction outside the United States of America. "Foreign Subsidiary Voting Stock": the voting Capital Stock of any Foreign Subsidiary. "General Intangibles": all "general intangibles" as such term is defined in Section 9-102(a)(42) of the New York UCC and, in any event, including, without limitation, with respect to any Grantor, all contracts, agreements, instruments and indentures in any form, and portions thereof, to which such Grantor is a party or under which such Grantor has any right, title or interest or to which such Grantor or any property of such Grantor is subject, as the same may from time to time be amended, supplemented or otherwise modified, including, without limitation, (i) all rights of such Grantor to receive moneys due and to become due to it thereunder or in connection therewith, (ii) all rights of such Grantor to damages arising thereunder and (iii) all rights of such Grantor to perform and to exercise all remedies thereunder. 4 "Guarantor Obligations": with respect to any Guarantor, all obligations and liabilities of such Guarantor which may arise under or in connection with this Agreement (including, without limitation, Section 2) or any other Loan Document to which such Guarantor is a party, in each case whether on account of guarantee obligations, reimbursement obligations, fees, indemnities, costs, expenses or otherwise (including, without limitation, all fees and disbursements of counsel to the Administrative Agent or to the Lenders that are required to be paid by such Guarantor pursuant to the terms of this Agreement or any other Loan Document). "Guarantors": the collective reference to each Grantor other than the Borrower. "Immaterial Foreign Subsidiary": at any time, any Foreign Subsidiary of the Borrower having total assets (as determined in accordance with GAAP) in an amount of less than 1% of Consolidated Total Assets of the Borrower; provided, however, that the total assets (as so determined) of all Immaterial Foreign Subsidiaries shall not exceed 5% of Consolidated Total Assets of the Borrower. In the event that the total assets of all Immaterial Foreign Subsidiaries exceed 5% of Consolidated Total Assets of the Borrower, the Borrower will designate Foreign Subsidiaries which would otherwise constitute Immaterial Foreign Subsidiaries to be excluded as Immaterial Foreign Subsidiaries until such 5% threshold is met. "Intellectual Property": the collective reference to all rights, priorities and privileges relating to intellectual property, whether arising under United States, multinational or foreign laws or otherwise, including, without limitation, the Copyrights, the Copyright Licenses, the Patents, the Patent Licenses, the Trademarks and the Trademark Licenses, and all rights to sue at law or in equity for any infringement or other impairment thereof, including the right to receive all proceeds and damages therefrom. "Intercompany Note": any promissory note evidencing loans made by any Grantor to the Borrower or any of its Subsidiaries. "Investment Property": the collective reference to (i) all "investment property" as such term is defined in Section 9-102(a)(49) of the New York UCC (other than any Foreign Subsidiary Voting Stock excluded from the definition of "Pledged Stock") and (ii) whether or not constituting "investment property" as so defined, all Pledged Notes and all Pledged Stock. "Issuers": the collective reference to each issuer of any Investment Property. "Lender Hedge Agreements": all interest rate swaps, caps or collar agreements or similar arrangements entered into by the Borrower or Tenneco Management (Europe) Limited or any Subsidiary that succeeds Tenneco Management (Europe) Limited in the performance of international treasury management functions for the Borrower with any Lender (or any Affiliate of any Lender) providing for protection against fluctuations in interest rates or currency exchange rates or the exchange of nominal interest obligations, either generally or under specific contingencies. 5 "New York UCC": the Uniform Commercial Code as from time to time in effect in the State of New York. "Obligations": (i) in the case of the Borrower, the Borrower Obligations, and (ii) in the case of each Guarantor, its Guarantor Obligations. "Patents": (i) all letters patent of the United States, any other country or any political subdivision thereof, all reissues and extensions thereof and all goodwill associated therewith, including, without limitation, any of the foregoing referred to in Schedule 6, (ii) all applications for letters patent of the United States or any other country and all divisions, continuations and continuations-in-part thereof, including, without limitation, any of the foregoing referred to in Schedule 6, and (iii) all rights to obtain any reissues or extensions of the foregoing. "Patent License": all agreements, whether written or oral, providing for (i) the grant by any Grantor of any right to manufacture, use or sell any invention covered in whole or in part by a Patent and (ii) the grant to any Grantor of any right to manufacture, use or sell any invention covered in whole or in part by a Patent (to the extent such agreement permits the Grantor to grant a security interest in its rights thereunder), including, without limitation, any of the foregoing referred to in Schedule 6. "Pledged Notes": all promissory notes listed on Schedule 2, all Intercompany Notes at any time issued to any Grantor and all other promissory notes issued to or held by any Grantor (other than promissory notes issued in connection with extensions of trade credit by any Grantor in the ordinary course of business). "Pledged Stock": the shares of Capital Stock listed on Schedule 2, together with any other shares, stock certificates, options or rights of any nature whatsoever in respect of the Capital Stock of any Person that may be issued or granted to, or held by, any Grantor while this Agreement is in effect other than the Capital Stock of any Immaterial Foreign Subsidiary; provided that in no event shall more than 66% of the total outstanding Foreign Subsidiary Voting Stock of any Foreign Subsidiary be required to be pledged hereunder, provided, further, that the Borrower shall not be obligated to pledge the Capital Stock of a Foreign Subsidiary to the extent such pledge would violate the laws of the jurisdiction of such Foreign Subsidiary's organization. "Proceeds": all "proceeds" as such term is defined in Section 9-102(a)(64) of the New York UCC and, in any event, shall include, without limitation, all dividends or other income from the Investment Property, collections thereon or distributions or payments with respect thereto. "Receivable": any right to payment for goods sold or leased or for services rendered, whether or not such right is evidenced by an Instrument or Chattel Paper and whether or not it has been earned by performance (including, without limitation, any Account). 6 "Restatement Date": June 19, 2003. "Securities Act": the Securities Act of 1933, as amended. "Trademarks": (i) all trademarks, trade names, corporate names, company names, business names, fictitious business names, trade styles, service marks, logos and other source or business identifiers, and all goodwill associated therewith, now existing or hereafter adopted or acquired, all registrations and recordings thereof, and all applications in connection therewith, whether in the United States Patent and Trademark Office or in any similar office or agency of the United States, any State thereof or any other country or any political subdivision thereof, or otherwise, and all common-law rights related thereto, including, without limitation, any of the foregoing referred to in Schedule 6, and (ii) the right to obtain all renewals thereof. "Trademark License": any agreement, whether written or oral, providing for (i) the grant by any Grantor of any right to use any Trademark and (ii) the grant to any Grantor of any right to use any Trademark (to the extent such agreement permits the Grantor to grant a security interest in its rights thereunder), including, without limitation, any of the foregoing referred to in Schedule 6. 1.2 Other Definitional Provisions. (a) The words "hereof," "herein", "hereto" 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 and Schedule references are to this Agreement unless otherwise specified. (b) The meanings given to terms defined herein shall be equally applicable to both the singular and plural forms of such terms. (c) Where the context requires, terms relating to the Collateral or any part thereof, when used in relation to a Grantor, shall refer to such Grantor's Collateral or the relevant part thereof. SECTION 2. GUARANTEE 2.1 Guarantee. (a) Each of the Guarantors hereby, jointly and severally, unconditionally and irrevocably, guarantees to the Administrative Agent, for the ratable benefit of the Lenders and their respective successors, indorsees, transferees and assigns, the prompt and complete payment and performance by the Borrower when due (whether at the stated maturity, by acceleration or otherwise) of the Borrower Obligations. (b) Anything herein or in any other Loan Document to the contrary notwithstanding, the maximum liability of each Guarantor hereunder and under the other Loan Documents shall in no event exceed the amount which can be guaranteed by such Guarantor under applicable federal and state laws relating to the insolvency of debtors (after giving effect to the right of contribution established in Section 2.2). 7 (c) Each Guarantor agrees that the Borrower Obligations may at any time and from time to time exceed the amount of the liability of such Guarantor hereunder without impairing the guarantee contained in this Section 2 or affecting the rights and remedies of the Administrative Agent or any Lender hereunder. (d) The guarantee contained in this Section 2 shall remain in full force and effect until all the Borrower Obligations and the obligations of each Guarantor under the guarantee contained in this Section 2 shall have been satisfied by payment in full, no Letter of Credit shall be outstanding and the Commitments shall be terminated, notwithstanding that from time to time during the term of the Credit Agreement the Borrower may be free from any Borrower Obligations. (e) No payment made by the Borrower, any of the Guarantors, any other guarantor or any other Person or received or collected by the Administrative Agent or any Lender from the Borrower, any of the Guarantors, any other guarantor 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 Borrower Obligations shall be deemed to modify, reduce, release or otherwise affect the liability of any Guarantor hereunder which shall, notwithstanding any such payment (other than any payment made by such Guarantor in respect of the Borrower Obligations or any payment received or collected from such Guarantor in respect of the Borrower Obligations), remain liable for the Borrower Obligations up to the maximum liability of such Guarantor hereunder until the Borrower Obligations are paid in full, no Letter of Credit shall be outstanding and the Commitments are terminated. 2.2 Right of Contribution. Each Guarantor hereby agrees that to the extent that a Guarantor shall have paid more than its proportionate share of any payment made hereunder, such Guarantor shall be entitled to seek and receive contribution from and against any other Guarantor hereunder which has not paid its proportionate share of such payment. Each Guarantor's right of contribution shall be subject to the terms and conditions of Section 2.3. The provisions of this Section 2.2 shall in no respect limit the obligations and liabilities of any Guarantor to the Administrative Agent and the Lenders, and each Guarantor shall remain liable to the Administrative Agent and the Lenders for the full amount guaranteed by such Guarantor hereunder. 2.3 No Subrogation. Notwithstanding any payment made by any Guarantor hereunder or any set-off or application of funds of any Guarantor by the Administrative Agent or any Lender, no Guarantor shall be entitled to be subrogated to any of the rights of the Administrative Agent or any Lender against the Borrower or any other Guarantor or any collateral security or guarantee or right of offset held by the Administrative Agent or any Lender for the payment of the Borrower Obligations, nor shall any Guarantor seek or be entitled to seek any contribution or reimbursement from the Borrower or any other Guarantor in respect of payments made by such Guarantor hereunder, until all amounts owing to the Administrative Agent and the Lenders by the Borrower on account of the Borrower Obligations are paid in full, no Letter of Credit shall be outstanding and the Commitments are terminated. If any amount shall be paid to any Guarantor on account of such subrogation rights at any time when all of the Borrower Obligations shall not have been paid in full, such amount shall be held by such 8 Guarantor in trust for the Administrative Agent and the Lenders, segregated from other funds of such Guarantor, and shall, forthwith upon receipt by such Guarantor, be turned over to the Administrative Agent in the exact form received by such Guarantor (duly indorsed by such Guarantor to the Administrative Agent, if required), to be applied against the Borrower Obligations, whether matured or unmatured, in such order as the Administrative Agent may determine. 2.4 Amendments, etc. with respect to the Borrower Obligations. Each Guarantor shall remain obligated hereunder notwithstanding that, without any reservation of rights against any Guarantor and without notice to or further assent by any Guarantor, any demand for payment of any of the Borrower Obligations made by the Administrative Agent or any Lender may be rescinded by the Administrative Agent or such Lender and any of the Borrower Obligations continued, and the Borrower Obligations, or the liability of any other Person upon or for any part thereof, or any collateral security or guarantee therefor or right of offset with respect thereto, may, from time to time, in whole or in part, be renewed, extended, amended, modified, accelerated, compromised, waived, surrendered or released by the Administrative Agent or any Lender, and the Credit Agreement and the other Loan Documents and any other documents executed and delivered in connection therewith may be amended, modified, supplemented or terminated, in whole or in part, as the Administrative Agent (or the Required Lenders or all Lenders, as the case may be) may deem advisable from time to time, and any collateral security, guarantee or right of offset at any time held by the Administrative Agent or any Lender for the payment of the Borrower Obligations may be sold, exchanged, waived, surrendered or released. Neither the Administrative Agent nor any Lender shall have any obligation to protect, secure, perfect or insure any Lien at any time held by it as security for the Borrower Obligations or for the guarantee contained in this Section 2 or any property subject thereto. 2.5 Guarantee Absolute and Unconditional. Each Guarantor waives any and all notice of the creation, renewal, extension or accrual of any of the Borrower Obligations and notice of or proof of reliance by the Administrative Agent or any Lender upon the guarantee contained in this Section 2 or acceptance of the guarantee contained in this Section 2; the Borrower 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 the guarantee contained in this Section 2; and all dealings between the Borrower and any of the Guarantors, on the one hand, and the Administrative Agent and the Lenders, on the other hand, likewise shall be conclusively presumed to have been had or consummated in reliance upon the guarantee contained in this Section 2. Each Guarantor waives diligence, presentment, protest, demand for payment and notice of default or nonpayment to or upon the Borrower or any of the Guarantors with respect to the Borrower Obligations. Each Guarantor understands and agrees that the guarantee contained in this Section 2 shall be construed as a continuing, absolute and unconditional guarantee of payment without regard to (a) the validity or enforceability of the Credit Agreement or any other Loan Document, any of the Borrower Obligations or any other collateral security therefor or guarantee or right of offset with respect thereto at any time or from time to time held by the Administrative Agent or any Lender, (b) any defense, set-off or counterclaim (other than a defense of payment or performance) which may at any time be 9 available to or be asserted by the Borrower or any other Person against the Administrative Agent or any Lender, or (c) any other circumstance whatsoever (with or without notice to or knowledge of the Borrower or such Guarantor) which constitutes, or might be construed to constitute, an equitable or legal discharge of the Borrower for the Borrower Obligations, or of such Guarantor under the guarantee contained in this Section 2, in bankruptcy or in any other instance. When making any demand hereunder or otherwise pursuing its rights and remedies hereunder against any Guarantor, the Administrative Agent or any Lender may, but shall be under no obligation to, make a similar demand on or otherwise pursue such rights and remedies as it may have against the Borrower, any other Guarantor or any other Person or against any collateral security or guarantee for the Borrower Obligations or any right of offset with respect thereto, and any failure by the Administrative Agent or any Lender to make any such demand, to pursue such other rights or remedies or to collect any payments from the Borrower, any other Guarantor or any 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 Borrower, any other Guarantor or any other Person or any such collateral security, guarantee or right of offset, shall not relieve any Guarantor of any obligation or liability hereunder, and shall not impair or affect the rights and remedies, whether express, implied or available as a matter of law, of the Administrative Agent or any Lender against any Guarantor. For the purposes hereof "demand" shall include the commencement and continuance of any legal proceedings. 2.6 Reinstatement. The guarantee contained in this Section 2 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 Borrower Obligations is rescinded or must otherwise be restored or returned by the Administrative Agent or any Lender upon the insolvency, bankruptcy, dissolution, liquidation or reorganization of the Borrower or any Guarantor, or upon or as a result of the appointment of a receiver, intervenor or conservator of, or trustee or similar officer for, the Borrower or any Guarantor or any substantial part of its property, or otherwise, all as though such payments had not been made. 2.7 Payments. Each Guarantor hereby guarantees that payments hereunder will be paid to the Administrative Agent without set-off or counterclaim in Dollars at the office of the Administrative Agent located at 270 Park Avenue, New York, New York 10017. SECTION 3. GRANT OF SECURITY INTEREST Each Grantor hereby assigns and transfers to the Administrative Agent, and hereby grants to the Administrative Agent, for the ratable benefit of the Lenders, a security interest in, all of the following property now owned or at any time hereafter acquired by such Grantor or in which such Grantor now has or at any time in the future may acquire any right, title or interest (collectively, the "Collateral"), as collateral security for the prompt and complete payment and performance when due (whether at the stated maturity, by acceleration or otherwise) of such Grantor's Obligations: (a) all Accounts; (b) all Chattel Paper; 10 (c) all Deposit Accounts; (d) all Documents; (e) all Equipment; (f) all General Intangibles; (g) all Instruments; (h) all Intellectual Property; (i) all Inventory; (j) all Investment Property; (k) all Letter of Credit Rights; (l) all Commercial Tort Claims in an amount in excess of $500,000 in which any Grantor has rights, as set forth on Schedule 7; (m) all other property not otherwise described above; (n) all books and records pertaining to the Collateral; and (o) to the extent not otherwise included, all Proceeds, Supporting Obligations and products of any and all of the foregoing and all collateral security and guarantees given by any Person with respect to any of the foregoing. SECTION 4. REPRESENTATIONS AND WARRANTIES To induce the Administrative Agent and the Lenders to enter into the Credit Agreement and to induce the Lenders to make their respective extensions of credit to the Borrower thereunder, each Grantor hereby represents and warrants to the Administrative Agent and each Lender that: 4.1 Title; No Other Liens. Except (a) for the security interest granted to the Administrative Agent for the ratable benefit of the Lenders pursuant to this Agreement, (b) for the other Liens permitted to exist on the Collateral by the Credit Agreement, and (c) those items set forth on Schedule 6, such Grantor owns each item of the Collateral free and clear of any and all Liens or claims of others. No financing statement or other public notice with respect to all or any part of the Collateral is on file or of record in any public office, except such as have been filed in favor of the Administrative Agent, for the ratable benefit of the Lenders, pursuant to this Agreement or as are permitted by the Credit Agreement. 4.2 Perfected First Priority Liens. The security interests granted pursuant to this Agreement (a) upon completion of the filings and other actions specified on Schedule 3 11 (which, in the case of all filings and other documents referred to on said Schedule, have been delivered to the Administrative Agent in completed and, when required, duly executed form unless otherwise referred to in such Schedule) will constitute valid perfected security interests in all of the Collateral (to the extent a perfected security interest is required pursuant to this Agreement and except as otherwise stated on Schedule 3) in favor of the Administrative Agent, for the ratable benefit of the Lenders, as collateral security for such Grantor's Obligations, enforceable in accordance with the terms hereof against all creditors of such Grantor and any Persons purporting to purchase any Collateral from such Grantor and (b) are prior to all other Liens on the Collateral in existence on the date hereof except as are permitted by the Credit Agreement and except for unrecorded Liens permitted by the Credit Agreement which have priority over the Liens on the Collateral by operation of law. 4.3 Jurisdiction of Organization. On the Restatement Date, such Grantor's jurisdiction of organization, identification number from such jurisdiction of organization (if any) and the location of such Grantor's chief executive office or sole place of business are specified on Schedule 4. 4.4 Inventory and Equipment. On the Restatement Date, the Inventory and the Equipment (other than mobile goods) are kept at the locations listed on Schedule 5. 4.5 Farm Products. None of the Collateral constitutes, or is the Proceeds of, Farm Products. 4.6 Investment Property. (a) The shares of Pledged Stock pledged by such Grantor hereunder constitute all the issued and outstanding shares of all classes of the Capital Stock of each Issuer owned by such Grantor or, in the case of Foreign Subsidiary Voting Stock, if less, 66% of the outstanding Foreign Subsidiary Voting Stock of each relevant Issuer owned by such Grantor. (b) All the shares of the Pledged Stock have been duly and validly issued and are fully paid and nonassessable. (c) Each of the Pledged Notes constitutes the legal, valid and binding obligation of the obligor with respect thereto, enforceable in accordance with its terms, subject to the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors' rights generally, general equitable principles (whether considered in a proceeding in equity or at law) and an implied covenant of good faith and fair dealing. (d) Such Grantor is the record and beneficial owner of, and has good and marketable title to, the Investment Property pledged by it hereunder, free of any and all Liens or options in favor of, or claims of, any other Person, except the security interest created by this Agreement and security interests permitted by Section 7.3(p) of the Credit Agreement. 4.7 Receivables. (a) No amount payable to such Grantor under or in connection with any Receivable is evidenced by any Instrument or Chattel Paper which has not 12 been delivered to the Administrative Agent, except for any of the foregoing to the extent subject to and included in a Permitted Receivables Financing. (a) None of the obligors on any Receivables is a Governmental Authority. (b) The amounts represented by such Grantor to the Lenders from time to time as owing to such Grantor in respect of the Receivables will at such times be accurate. 4.8 Intellectual Property. (a) Except as otherwise set forth on such Schedule, Schedule 6 lists all registered, and all material unregistered, Intellectual Property owned by such Grantor in its own name on the Restatement Date and all applications to register any such Intellectual Property. (b) On the Restatement Date, all material Intellectual Property is valid, subsisting, unexpired and enforceable, has not been abandoned and does not infringe the intellectual property rights of any other Person. (c) Except as set forth in Schedule 6, on the Restatement Date, none of the material Intellectual Property is the subject of any licensing or franchise agreement pursuant to which such Grantor is the licensor or franchisor. (d) No holding, decision or judgment has been rendered by any Governmental Authority which would limit, cancel or question the validity of, or such Grantor's rights in, any Intellectual Property in any respect that would reasonably be expected to have a Material Adverse Effect. (e) No action or proceeding is pending, or, to the knowledge of such Grantor, threatened, on the date hereof (i) seeking to limit, cancel or question the validity of any Intellectual Property or such Grantor's ownership interest therein, or (ii) which, if adversely determined, would have a material adverse effect on the value of any material Intellectual Property. SECTION 5. COVENANTS Each Grantor covenants and agrees with the Administrative Agent and the Lenders that, from and after the date of this Agreement until the Obligations shall have been paid in full, no Letter of Credit shall be outstanding and the Commitments shall have terminated: 5.1 Delivery of Instruments, Certificated Securities and Chattel Paper. If any amount payable under or in connection with any of the Collateral in excess of $500,000 shall be or become evidenced by any Instrument, Certificated Security or Chattel Paper, such Instrument, Certificated Security or Chattel Paper shall be immediately delivered to the Administrative Agent, duly indorsed in a manner satisfactory to the Administrative Agent, to be held as Collateral pursuant to this Agreement, except to the extent any of the foregoing is subject to and included in a Permitted Receivables Financing. 13 5.2 Maintenance of Insurance. (a) Such Grantor will maintain, with financially sound and reputable companies with A.M. Best ratings of A-III or better, insurance policies (i) insuring the Inventory and Equipment against loss by fire, explosion, theft and such other casualties and (ii) insuring such Grantor, the Administrative Agent and the Lenders against liability for personal injury and property damage relating to such Inventory and Equipment, in both cases as is normal and customary for the automotive parts industry and mutually agreeable to such Grantor and the Administrative Agent whose consent shall not be unreasonably withheld. (b) All such insurance shall (i) provide that no cancellation, material reduction in amount or material change in coverage thereof shall be effective until at least 30 days after receipt by the Administrative Agent of written notice thereof, (ii) name the Administrative Agent as insured party or additional loss payee as its interests may appear and (iii) be reasonably satisfactory in all other respects to the Administrative Agent. (c) The Borrower shall deliver to the Administrative Agent and the Lenders a report of a reputable insurance broker with respect to such insurance substantially concurrently with each delivery of the Borrower's audited annual financial statements and such supplemental reports with respect thereto as the Administrative Agent may from time to time reasonably request. 5.3 Payment of Obligations. Such Grantor will pay and discharge or otherwise satisfy at or before maturity or before they become delinquent, as the case may be, all taxes, assessments and governmental charges or levies imposed upon the Collateral or in respect of income or profits therefrom, as well as all claims of any kind (including, without limitation, claims for labor, materials and supplies) against or with respect to the Collateral, except that no such charge need be paid if the amount or validity thereof is currently being contested in good faith by appropriate proceedings, reserves in conformity with GAAP with respect thereto have been provided on the books of such Grantor and such proceedings would not reasonably be expected to result in the sale, forfeiture or loss of any material portion of the Collateral or any interest therein. 5.4 Maintenance of Perfected Security Interest; Further Documentation. (a) Such Grantor shall maintain the security interest created by this Agreement as a perfected security interest having at least the priority and perfection described in Section 4.2 (and as otherwise reasonably requested by the Administrative Agent) and shall defend such security interest against the claims and demands of all Persons whomsoever. (b) Such Grantor will furnish to the Administrative Agent and the Lenders from time to time statements and schedules further identifying and describing the assets and property of such Grantor constituting Collateral and such other reports in connection therewith as the Administrative Agent may reasonably request, all in reasonable detail. (c) At any time and from time to time, upon the written request of the Administrative Agent, and at the sole expense of such Grantor, such Grantor will promptly and duly execute and deliver, and have recorded, such further instruments and documents and take such further actions as the Administrative Agent may reasonably request for the purpose of 14 obtaining or preserving the full benefits of this Agreement and of the rights and powers herein granted, including, without limitation, (i) filing any financing or continuation statements under the Uniform Commercial Code (or other similar laws) in effect in any jurisdiction with respect to the security interests created hereby and (ii) in the case of Investment Property, Deposit Accounts and any other relevant Collateral, taking any actions necessary to enable the Administrative Agent to obtain "control" (within the meaning of the applicable Uniform Commercial Code) with respect thereto. 5.5 Changes in Jurisdiction of Organization, Locations, Name, etc. Such Grantor will not, except upon 15 days' prior written notice to the Administrative Agent and delivery to the Administrative Agent of all additional financing statements and other documents (executed where required) reasonably requested by the Administrative Agent to maintain the validity, perfection and priority of the security interests provided for herein: (i) change its jurisdiction of organization or, if such Grantor does not have a jurisdiction of organization for purposes of the New York UCC, the location of its chief executive office or sole place of business from that referred to in Section 4.3; or (ii) change its name. 5.6 Notices. Such Grantor will advise the Administrative Agent and the Lenders promptly, in reasonable detail, of: (a) any Lien (other than security interests created hereby or Liens permitted under the Credit Agreement) on any of the Collateral which would adversely affect the ability of the Administrative Agent to exercise any of its remedies hereunder; and (b) the occurrence of any other event which would reasonably be expected to have a material adverse effect on the aggregate value of the Collateral or on the security interests created hereby. 5.7 Investment Property. (a) If such Grantor shall become entitled to receive or shall receive any stock certificate (including, without limitation, any certificate representing a stock dividend or a distribution in connection with any reclassification, increase or reduction of capital or any certificate issued in connection with any reorganization), option or rights in respect of the Capital Stock of any Issuer, whether in addition to, in substitution of, as a conversion of, or in exchange for, any shares of the Pledged Stock, or otherwise in respect thereof, such Grantor shall accept the same as the agent of the Administrative Agent and the Lenders, hold the same in trust for the Administrative Agent and the Lenders and deliver the same forthwith to the Administrative Agent in the exact form received, duly indorsed by such Grantor to the Administrative Agent, if required, together with an undated stock power covering such certificate duly executed in blank by such Grantor and with, if the Administrative Agent so requests, signature guaranteed, to be held by the Administrative Agent, subject to the terms hereof, as additional collateral security for the Obligations. Except as otherwise provided in the Credit Agreement, any sums paid upon or in respect of the Investment Property upon the liquidation or dissolution of any Issuer shall be paid over to the Administrative Agent to be held by it 15 hereunder as additional collateral security for the Obligations, and in case any distribution of capital shall be made on or in respect of the Investment Property or any property shall be distributed upon or with respect to the Investment Property pursuant to the recapitalization or reclassification of the capital of any Issuer or pursuant to the reorganization thereof, the property so distributed shall, unless otherwise subject to a perfected security interest in favor of the Administrative Agent, be delivered to the Administrative Agent to be held by it hereunder as additional collateral security for the Obligations. If any sums of money or property so paid or distributed in respect of the Investment Property shall be received by such Grantor, such Grantor shall, until such money or property is paid or delivered to the Administrative Agent, hold such money or property in trust for the Lenders, segregated from other funds of such Grantor, as additional collateral security for the Obligations. (b) Without the prior written consent of the Administrative Agent, such Grantor will not (i) vote to enable, or take any other action to permit, any Issuer to issue any stock or other equity securities of any nature or to issue any other securities convertible into or granting the right to purchase or exchange for any stock or other equity securities of any nature of any Issuer (except pursuant to a transaction expressly permitted by the Credit Agreement), (ii) sell, assign, transfer, exchange, or otherwise dispose of, or grant any option with respect to, the Investment Property or Proceeds thereof (except pursuant to a transaction expressly permitted by the Credit Agreement), (iii) create, incur or permit to exist any Lien or option in favor of, or any claim of any Person with respect to, any of the Investment Property or Proceeds thereof, or any interest therein, except for the security interests created by this Agreement except for Liens permitted by Section 7.3(p) of the Credit Agreement or (iv) enter into any agreement or undertaking restricting the right or ability of such Grantor or the Administrative Agent to sell, assign or transfer any of the Investment Property or Proceeds thereof. (c) In the case of each Grantor which is an Issuer, such Issuer agrees that (i) it will be bound by the terms of this Agreement relating to the Investment Property issued by it and will comply with such terms insofar as such terms are applicable to it, (ii) it will notify the Administrative Agent promptly in writing of the occurrence of any of the events described in Section 5.7(a) with respect to the Investment Property issued by it and (iii) the terms of Sections 6.3(c) and 6.7 shall apply to it, mutatis mutandis, with respect to all actions that may be required of it pursuant to Section 6.3(c) or 6.7 with respect to the Investment Property issued by it. 5.8 Receivables. (a) Other than in the ordinary course of business consistent with its past practice, such Grantor will not (i) grant any extension of the time of payment of any Receivable, (ii) compromise or settle any Receivable for less than the full amount thereof, (iii) release, wholly or partially, any Person liable for the payment of any Receivable, (iv) allow any credit or discount whatsoever on any Receivable or (v) amend, supplement or modify any Receivable in any manner that could adversely affect the value thereof. (b) Such Grantor will deliver to the Administrative Agent a copy of each material demand, notice or document received by it that questions or calls into doubt the validity or enforceability of more than 5% of the aggregate amount of the then outstanding Receivables. 16 5.9 Intellectual Property. (a) Such Grantor (either itself or through licensees) will (i) continue to use each material Trademark on each and every trademark class of goods applicable to its current line as reflected in its current catalogs, brochures and price lists in order to maintain such Trademark in full force free from any claim of abandonment for non-use, (ii) maintain as in the past the quality of products and services offered under such Trademark, (iii) use such Trademark with the appropriate notice of registration and all other notices and legends required by applicable Requirements of Law, (iv) not adopt or use any mark which is confusingly similar or a colorable imitation of such Trademark unless the Administrative Agent, for the ratable benefit of the Lenders, shall obtain a perfected security interest in such mark (to the extent a security interest in such mark may be perfected by filing under the applicable Uniform Commercial Code, or similar law in a foreign jurisdiction, or with the US Patent and Trademark Office, or corresponding foreign office, and to the extent requested pursuant to clause (f) below) pursuant to this Agreement, and (v) not (and not permit any licensee or sublicensee thereof to) do any act or knowingly omit to do any act whereby such Trademark may become invalidated or impaired in any way. (b) Such Grantor (either itself or through licensees) will not do any act, or omit to do any act, whereby any material Patent may become forfeited, abandoned or dedicated to the public. (c) Such Grantor (either itself or through licensees) (i) will employ each material Copyright and (ii) will not (and will not permit any licensee or sublicensee thereof to) do any act or knowingly omit to do any act whereby any material portion of the Copyrights may become invalidated or otherwise impaired. Such Grantor will not (either itself or through licensees) do any act whereby any material portion of the Copyrights may fall into the public domain. (d) Such Grantor (either itself or through licensees) will not do any act that knowingly uses any material Intellectual Property to infringe the intellectual property rights of any other Person. (e) Such Grantor will notify the Administrative Agent and the Lenders immediately if it knows, or has reason to know, that any application or registration relating to any material Intellectual Property may become forfeited, abandoned or dedicated to the public, or of any adverse determination or development (including, without limitation, the institution of, or any such determination or development in, any proceeding in the United States Patent and Trademark Office, the United States Copyright Office or any court or tribunal in any country) regarding such Grantor's ownership of, or the validity of, any material Intellectual Property subject to such an application or registration or such Grantor's right to register the same or to own and maintain the same. (f) Whenever such Grantor, either by itself or through any agent, employee, licensee or designee, shall file an application for the registration of any Intellectual Property with the United States Patent and Trademark Office, the United States Copyright Office or any similar office or agency in any other country or any political subdivision thereof, such Grantor shall report such filing to the Administrative Agent within five Business Days after the last day of the 17 fiscal quarter in which such filing occurs. Upon request of the Administrative Agent, such Grantor shall execute and deliver, and have recorded, any and all agreements, instruments, documents, and papers as the Administrative Agent may request to evidence the Administrative Agent's and the Lenders' security interest in any Copyright, Patent or Trademark and the goodwill (if applicable) and general intangibles of such Grantor relating thereto or represented thereby. (g) Such Grantor will take all reasonable and necessary steps, including, without limitation, in any proceeding before the United States Patent and Trademark Office, the United States Copyright Office or any similar office or agency in any other country or any political subdivision thereof, to maintain and pursue each application (and to obtain the relevant registration) and to maintain each registration of the material registered Intellectual Property, including, without limitation, filing of applications for renewal, affidavits of use and affidavits of incontestability. (h) In the event that any material Intellectual Property is infringed, misappropriated or diluted by a third party, such Grantor shall (i) take such actions as such Grantor shall reasonably deem appropriate under the circumstances to protect such Intellectual Property and (ii) if such Intellectual Property is of material economic value, promptly notify the Administrative Agent after it learns thereof and sue for infringement, misappropriation or dilution, to seek injunctive relief where appropriate and to recover any and all damages for such infringement, misappropriation or dilution. 5.10 Jurisdiction of Organization. At the Administrative Agent's request, each Grantor will provide its jurisdiction of organization, identification number from the jurisdiction of organization (if any), and the location of such Grantor's chief executive office or sole place of business. In addition, the Administrative Agent may request, and such Grantor shall provide, a certified charter, certificate of incorporation, or other organizational document and long form good standing certificate from each Grantor. 5.11 Commercial Tort Claims. Such Grantor will advise the Administrative Agent of such Grantor's interest in any Commercial Tort Claim in an amount in excess of $500,000 in which such Grantor believes it has rights, and such Grantor shall promptly provide the Administrative Agent with an updated Schedule 7 describing such Commercial Tort Claim or such information with respect thereto as the Administrative Agent may reasonably request in order to attach and perfect a security interest therein in accordance with applicable law. SECTION 6. REMEDIAL PROVISIONS 6.1 Certain Matters Relating to Receivables. (a) The Administrative Agent shall have the right to make test verifications of the Receivables in any manner and through any medium that it reasonably considers advisable, and each Grantor shall furnish all such assistance and information as the Administrative Agent may require in connection with such test verifications after the occurrence of an Event of Default. At any time and from time to time, upon the Administrative Agent's request and at the expense of the relevant Grantor, such Grantor shall cause independent public accountants or others satisfactory to the Administrative Agent to 18 furnish to the Administrative Agent reports showing reconciliations, aging and test verifications of, and trial balances for, the Receivables. (b) The Administrative Agent hereby authorizes each Grantor to collect such Grantor's Receivables, subject to the Administrative Agent's direction and control, and the Administrative Agent may curtail or terminate said authority at any time after the occurrence and during the continuance of an Event of Default. If required by the Administrative Agent at any time after the occurrence and during the continuance of an Event of Default, any payments of Receivables, when collected by any Grantor, (i) shall be forthwith (and, in any event, within two Business Days) deposited by such Grantor in the exact form received, duly indorsed by such Grantor to the Administrative Agent if required, in a Collateral Account maintained under the sole dominion and control of the Administrative Agent, subject to withdrawal by the Administrative Agent for the account of the Lenders only as provided in Section 6.5, and (ii) until so turned over, shall be held by such Grantor in trust for the Administrative Agent and the Lenders, segregated from other funds of such Grantor. Each such deposit of Proceeds of Receivables shall be accompanied by a report identifying in reasonable detail the nature and source of the payments included in the deposit. (c) At the Administrative Agent's request, each Grantor shall deliver to the Administrative Agent all original and other documents evidencing, and relating to, the agreements and transactions which gave rise to the Receivables, including, without limitation, all original orders, invoices and shipping receipts. 6.2 Communications with Obligors; Grantors Remain Liable. (a) The Administrative Agent in its own name or in the name of others may at any time after the occurrence and during the continuance of an Event of Default communicate with obligors under the Receivables and parties to any material contract of any Grantor to verify with them to the Administrative Agent's satisfaction the existence, amount and terms of any Receivables or any material contract of any Grantor. (b) Upon the request of the Administrative Agent at any time after the occurrence and during the continuance of an Event of Default, each Grantor shall notify obligors on the Receivables and parties to any material contract of any Grantor that the Receivables and such contracts have been assigned to the Administrative Agent for the ratable benefit of the Lenders and that payments in respect thereof shall be made directly to the Administrative Agent. (c) Anything herein to the contrary notwithstanding, each Grantor shall remain liable under each of the Receivables and material contracts of any Grantor to observe and perform all the conditions and obligations to be observed and performed by it thereunder, all in accordance with the terms of any agreement giving rise thereto. Neither the Administrative Agent nor any Lender shall have any obligation or liability under any Receivable (or any agreement giving rise thereto) or any contract of any Grantor by reason of or arising out of this Agreement or the receipt by the Administrative Agent or any Lender of any payment relating thereto, nor shall the Administrative Agent or any Lender be obligated in any manner to perform any of the obligations of any Grantor under or pursuant to any Receivable (or any agreement giving rise thereto) or any contract of any Grantor, to make any payment, to make any inquiry as 19 to the nature or the sufficiency of any payment received by it or as to the sufficiency of any performance by any party thereunder, to present or file any claim, to take any action to enforce any performance or to collect the payment of any amounts which may have been assigned to it or to which it may be entitled at any time or times. 6.3 Pledged Stock. (a) Unless an Event of Default shall have occurred and be continuing and the Administrative Agent shall have given notice to the relevant Grantor of the Administrative Agent's intent to exercise its corresponding rights pursuant to Section 6.3(b), each Grantor shall be permitted to receive all cash dividends paid in respect of the Pledged Stock and all payments made in respect of the Pledged Notes, in each case paid in the normal course of business of the relevant Issuer and consistent with past practice, to the extent permitted in the Credit Agreement, and to exercise all voting and corporate rights with respect to the Investment Property; provided, however, that no vote shall be cast or corporate right exercised or other action taken which, in the Administrative Agent's reasonable judgment, would impair the Collateral or which would be inconsistent with or result in any violation of any provision of the Credit Agreement, this Agreement or any other Loan Document. (b) If an Event of Default shall occur and be continuing and the Administrative Agent shall give notice of its intent to exercise such rights to the relevant Grantor or Grantors, (i) the Administrative Agent shall have the right to receive any and all cash dividends, payments or other Proceeds paid in respect of the Investment Property and make application thereof to the Obligations in such order as the Administrative Agent may determine, and (ii) any or all of the Investment Property shall be registered in the name of the Administrative Agent or its nominee, and the Administrative Agent or its nominee may thereafter exercise (x) all voting, corporate and other rights pertaining to such Investment Property at any meeting of shareholders of the relevant Issuer or Issuers or otherwise and (y) any and all rights of conversion, exchange and subscription and any other rights, privileges or options pertaining to such Investment Property as if it were the absolute owner thereof (including, without limitation, the right to exchange at its discretion any and all of the Investment Property upon the merger, consolidation, reorganization, recapitalization or other fundamental change in the corporate structure of any Issuer, or upon the exercise by any Grantor or the Administrative Agent of any right, privilege or option pertaining to such Investment Property, and in connection therewith, the right to deposit and deliver any and all of the Investment Property with any committee, depository, transfer agent, registrar or other designated agency upon such terms and conditions as the Administrative Agent may determine), all without liability except to account for property actually received by it, but the Administrative Agent shall have no duty to any Grantor to exercise any such right, privilege or option and shall not be responsible for any failure to do so or delay in so doing. (c) Each Grantor hereby authorizes and instructs each Issuer of any Investment Property pledged by such Grantor hereunder to (i) comply with any instruction received by it from the Administrative Agent in writing that (x) states that an Event of Default has occurred and is continuing and (y) is otherwise in accordance with the terms of this Agreement, without any other or further instructions from such Grantor, and each Grantor agrees that each Issuer shall be fully protected in so complying, and (ii) unless otherwise expressly 20 permitted hereby, pay any dividends or other payments with respect to the Investment Property directly to the Administrative Agent. 6.4 Proceeds to be Turned Over To Administrative Agent. In addition to the rights of the Administrative Agent and the Lenders specified in Section 6.1 with respect to payments of Receivables, if an Event of Default shall occur and be continuing, all Proceeds received by any Grantor in respect of Collateral consisting of cash, checks and other near-cash items shall be held by such Grantor in trust for the Administrative Agent and the Lenders, segregated from other funds of such Grantor, and shall, forthwith upon receipt by such Grantor, be turned over to the Administrative Agent in the exact form received by such Grantor (duly indorsed by such Grantor to the Administrative Agent, if required). All Proceeds received by the Administrative Agent hereunder shall be held by the Administrative Agent in a Collateral Account maintained under its sole dominion and control. All Proceeds while held by the Administrative Agent in a Collateral Account (or by such Grantor in trust for the Administrative Agent and the Lenders) shall continue to be held as collateral security for all the Obligations and shall not constitute payment thereof until applied as provided in Section 6.5. 6.5 Application of Proceeds. At such intervals as may be agreed upon by the Borrower and the Administrative Agent, or, if an Event of Default shall have occurred and be continuing, at any time at the Administrative Agent's election, the Administrative Agent may apply all or any part of Proceeds held in any Collateral Account in payment of the Obligations in such order as the Administrative Agent may elect, and any part of such funds which the Administrative Agent elects not so to apply and deems not required as collateral security for the Obligations shall be paid over from time to time by the Administrative Agent to the Borrower or to whomsoever may be lawfully entitled to receive the same. Any balance of such Proceeds remaining after the Obligations shall have been paid in full, no Letters of Credit shall be outstanding and the Commitments shall have terminated shall be paid over to the Borrower or to whomsoever may be lawfully entitled to receive the same. 6.6 Code and Other Remedies. If an Event of Default shall occur and be continuing, the Administrative Agent, on behalf of the Lenders, may exercise, in addition to all other rights and remedies granted to them in this Agreement and in any other instrument or agreement securing, evidencing or relating to the Obligations, all rights and remedies of a secured party under the New York UCC or any other applicable law. Without limiting the generality of the foregoing, the Administrative Agent, without demand of performance or other demand, presentment, protest, advertisement or notice of any kind (except any notice required by law referred to below) to or upon any Grantor or any other Person (all and each of which demands, defenses, advertisements and notices are hereby waived), may in such circumstances forthwith collect, receive, appropriate and realize upon the Collateral, or any part thereof, and/or may forthwith sell, lease, assign, give option or options to purchase, or otherwise dispose of and deliver the Collateral or any part thereof (or contract to do any of the foregoing), in one or more parcels at public or private sale or sales, at any exchange, broker's board or office of the Administrative Agent or any Lender or elsewhere upon such terms and conditions as it may deem advisable and at such prices as it may deem best, for cash or on credit or for future delivery without assumption of any credit risk. The Administrative Agent or any Lender shall have the right upon any such public sale or sales, and, to the extent permitted by law, upon any such 21 private sale or sales, to purchase the whole or any part of the Collateral so sold, free of any right or equity of redemption in any Grantor, which right or equity is hereby waived and released. Each Grantor further agrees, at the Administrative Agent's request, to assemble the Collateral and make it available to the Administrative Agent at places which the Administrative Agent shall reasonably select, whether at such Grantor's premises or elsewhere. The Administrative Agent shall apply the net proceeds of any action taken by it pursuant to this Section 6.6, after deducting all reasonable costs and expenses of every kind incurred in connection therewith or incidental to the care or safekeeping of any of the Collateral or in any way relating to the Collateral or the rights of the Administrative Agent and the Lenders hereunder, including, without limitation, reasonable attorneys' fees and disbursements, to the payment in whole or in part of the Obligations, in such order as the Administrative Agent may elect, and only after such application and after the payment by the Administrative Agent of any other amount required by any provision of law, including, without limitation, Section 9-615(a)(3) of the New York UCC, need the Administrative Agent account for the surplus, if any, to any Grantor. To the extent permitted by applicable law, each Grantor waives all claims, damages and demands it may acquire against the Administrative Agent or any Lender arising out of the exercise by them of any rights hereunder. If any notice of a proposed sale or other disposition of Collateral shall be required by law, such notice shall be deemed reasonable and proper if given at least 10 days before such sale or other disposition. 6.7 Registration Rights. (a)(1) If the Administrative Agent shall determine to exercise its right to sell any or all of the Pledged Stock pursuant to Section 6.6, and if in the opinion of the Administrative Agent it is necessary or advisable to have the Pledged Stock, or that portion thereof to be sold, registered under the provisions of the Securities Act, the relevant Grantor will cause the Issuer thereof to (i) execute and deliver, and cause the directors and officers of such Issuer to execute and deliver, all such instruments and documents, and do or cause to be done all such other acts as may be, in the opinion of the Administrative Agent, necessary or advisable to register the Pledged Stock, or that portion thereof to be sold, under the provisions of the Securities Act, (ii) use its best efforts to cause the registration statement relating thereto to become effective and to remain effective for a period of one year from the date of the first public offering of the Pledged Stock, or that portion thereof to be sold, and (iii) make all amendments thereto and/or to the related prospectus which, in the opinion of the Administrative Agent, are necessary or advisable, all in conformity with the requirements of the Securities Act and the rules and regulations of the Securities and Exchange Commission applicable thereto. Each Grantor agrees to cause such Issuer to comply with the provisions of the securities or "Blue Sky" laws of any and all jurisdictions which the Administrative Agent shall designate and to make available to its security holders, as soon as practicable, an earnings statement (which need not be audited) which will satisfy the provisions of Section 11(a) of the Securities Act. (b) Each Grantor recognizes that the Administrative Agent may be unable to effect a public sale of any or all the Pledged Stock, by reason of certain prohibitions contained in the Securities Act and applicable state securities laws or otherwise, and may be compelled to resort to one or more private sales thereof to a restricted group of purchasers which will be obliged to agree, among other things, to acquire such securities for their own account for investment and not with a view to the distribution or resale thereof. Each Grantor acknowledges 22 and agrees that any such private sale may result in prices and other terms less favorable than if such sale were a public sale and, notwithstanding such circumstances, agrees that any such private sale shall be deemed to have been made in a commercially reasonable manner. The Administrative Agent shall be under no obligation to delay a sale of any of the Pledged Stock for the period of time necessary to permit the Issuer thereof to register such securities for public sale under the Securities Act, or under applicable state securities laws, even if such Issuer would agree to do so. (c) Each Grantor agrees to use its best efforts to do or cause to be done all such other acts as may be necessary to make such sale or sales of all or any portion of the Pledged Stock pursuant to this Section 6.7 valid and binding and in compliance with any and all other applicable Requirements of Law. Each Grantor further agrees that a breach of any of the covenants contained in this Section 6.7 will cause irreparable injury to the Administrative Agent and the Lenders, that the Administrative Agent and the Lenders have no adequate remedy at law in respect of such breach and, as a consequence, that each and every covenant contained in this Section 6.7 shall be specifically enforceable against such Grantor, and such Grantor hereby waives and agrees not to assert any defenses against an action for specific performance of such covenants except for a defense that no Event of Default has occurred under the Credit Agreement. 6.8 Deficiency. Each Grantor shall remain liable for any deficiency if the proceeds of any sale or other disposition of the Collateral are insufficient to pay its Obligations and the reasonable fees and disbursements of any attorneys employed by the Administrative Agent or any Lender to collect such deficiency. SECTION 7. THE ADMINISTRATIVE AGENT 7.1 Administrative Agent's Appointment as Attorney-in-Fact, etc. (a) Each Grantor hereby irrevocably constitutes and appoints the Administrative Agent and any officer or agent thereof, with full power of substitution, as its true and lawful attorney-in-fact with full irrevocable power and authority in the place and stead of such Grantor and in the name of such Grantor or in its own name, for the purpose of carrying out the terms of this Agreement, to take any and all appropriate action and to execute any and all documents and instruments which may be necessary or desirable to accomplish the purposes of this Agreement, and, without limiting the generality of the foregoing, each Grantor hereby gives the Administrative Agent the power and right, on behalf of such Grantor, without notice to or assent by such Grantor, to do any or all of the following: (i) in the name of such Grantor or its own name, or otherwise, take possession of and indorse and collect any checks, drafts, notes, acceptances or other instruments for the payment of moneys due under any Receivable or any material contract of any Grantor or with respect to any other Collateral and file any claim or take any other action or proceeding in any court of law or equity or otherwise deemed appropriate by the Administrative Agent for the purpose of collecting any and all such moneys due under any Receivable or any material contract of any Grantor or with respect to any other Collateral whenever payable; 23 (ii) in the case of any Intellectual Property, execute and deliver, and have recorded, any and all agreements, instruments, documents and papers as the Administrative Agent may request to evidence the Administrative Agent's and the Lenders' security interest in such Intellectual Property and the goodwill (if applicable) and general intangibles of such Grantor relating thereto or represented thereby; (iii) pay or discharge taxes and Liens levied or placed on or threatened against the Collateral, effect any repairs or any insurance called for by the terms of this Agreement and pay all or any part of the premiums therefor and the costs thereof; (iv) execute, in connection with any sale provided for in Section 6.6 or 6.7, any indorsements, assignments or other instruments of conveyance or transfer with respect to the Collateral; and (v) (1) direct any party liable for any payment under any of the Collateral to make payment of any and all moneys due or to become due thereunder directly to the Administrative Agent or as the Administrative Agent shall direct; (2) ask or demand for, collect, and receive payment of and receipt for, any and all moneys, claims and other amounts due or to become due at any time in respect of or arising out of any Collateral; (3)(i) sign and indorse any invoices, freight or express bills, bills of lading, storage or warehouse receipts, drafts against debtors, assignments, verifications, notices and other documents in connection with any of the Collateral; (4) commence and prosecute any suits, actions or proceedings at law or in equity in any court of competent jurisdiction to collect the Collateral or any portion thereof and to enforce any other right in respect of any Collateral; (5) defend any suit, action or proceeding brought against such Grantor with respect to any Collateral; (6) settle, compromise or adjust any such suit, action or proceeding and, in connection therewith, give such discharges or releases as the Administrative Agent may deem appropriate; (7) assign any Copyright, Patent or Trademark (along with the goodwill of the business to which any such Copyright, Patent or Trademark pertains), throughout the world for such term or terms, on such conditions, and in such manner, as the Administrative Agent shall in its sole discretion determine; and (8) generally, sell, transfer, pledge and make any agreement with respect to or otherwise deal with any of the Collateral as fully and completely as though the Administrative Agent were the absolute owner thereof for all purposes, and do, at the Administrative Agent's option and such Grantor's expense, at any time, or from time to time, all acts and things which the Administrative Agent deems necessary to protect, preserve or realize upon the Collateral and the Administrative Agent's and the Lenders' security interests therein and to effect the intent of this Agreement, all as fully and effectively as such Grantor might do. Anything in this Section 7.1(a) to the contrary notwithstanding, the Administrative Agent agrees that it will not exercise any rights under the power of attorney provided for in this Section 7.1(a) unless an Event of Default shall have occurred and be continuing. 24 (b) If any Grantor fails to perform or comply with any of its agreements contained herein, the Administrative Agent, at its option, but without any obligation so to do, may perform or comply, or otherwise cause performance or compliance, with such agreement. (c) The expenses of the Administrative Agent incurred in connection with actions undertaken as provided in this Section 7.1, together with interest thereon at a rate per annum equal to the highest rate per annum at which interest would then be payable on any category of past due ABR Loans under the Credit Agreement, from the date of payment by the Administrative Agent to the date reimbursed by the relevant Grantor, shall be payable by such Grantor to the Administrative Agent on demand. (d) Each Grantor hereby ratifies all that said attorneys shall lawfully do or cause to be done by virtue hereof. All powers, authorizations and agencies contained in this Agreement are coupled with an interest and are irrevocable until this Agreement is terminated and the security interests created hereby are released. 7.2 Duty of Administrative Agent. The Administrative Agent's sole duty with respect to the custody, safekeeping and physical preservation of the Collateral in its possession, under Section 9-207 of the New York UCC or otherwise, shall be to deal with it in the same manner as the Administrative Agent deals with similar property for its own account. Neither the Administrative Agent, any Lender nor any of their respective officers, directors, employees or agents shall be liable for failure to demand, collect or realize upon any of the Collateral or for any delay in doing so or shall be under any obligation to sell or otherwise dispose of any Collateral upon the request of any Grantor or any other Person or to take any other action whatsoever with regard to the Collateral or any part thereof. The powers conferred on the Administrative Agent and the Lenders hereunder are solely to protect the Administrative Agent's and the Lenders' interests in the Collateral and shall not impose any duty upon the Administrative Agent or any Lender to exercise any such powers. The Administrative Agent and the Lenders shall be accountable only for amounts that they actually receive as a result of the exercise of such powers, and neither they nor any of their officers, directors, employees or agents shall be responsible to any Grantor for any act or failure to act hereunder, except for their own gross negligence or willful misconduct. 7.3 Financing Statements. Pursuant to applicable law, each Grantor authorizes the Administrative Agent to file or record financing statements and other filing or recording documents or instruments with respect to the Collateral without the signature of such Grantor in such form and in such offices as the Administrative Agent determines appropriate to perfect the security interests of the Administrative Agent under this Agreement. Each Grantor authorizes the Administrative Agent to use the collateral description of "all personal property" in any such financing statements. Each Grantor hereby ratifies and authorizes the filing by the Administrative Agent of any financing statement with respect to the Collateral made prior to the Restatement Date. A photographic or other reproduction of this Agreement shall be sufficient as a financing statement or other filing or recording document or instrument for filing or recording in any jurisdiction. 25 7.4 Authority of Administrative Agent. Each Grantor acknowledges that the rights and responsibilities of the Administrative Agent under this Agreement with respect to any action taken by the Administrative Agent or the exercise or non-exercise by the Administrative Agent of any option, voting right, request, judgment or other right or remedy provided for herein or resulting or arising out of this Agreement shall, as between the Administrative Agent and the Lenders, be governed by the Credit Agreement and by such other agreements with respect thereto as may exist from time to time among them, but, as between the Administrative Agent and the Grantors, the Administrative Agent shall be conclusively presumed to be acting as agent for the Lenders with full and valid authority so to act or refrain from acting, and no Grantor shall be under any obligation, or entitlement, to make any inquiry respecting such authority. SECTION 8. MISCELLANEOUS 8.1 Amendments in Writing. None of the terms or provisions of this Agreement may be waived, amended, supplemented or otherwise modified except in accordance with subsection 10.1 of the Credit Agreement. 8.2 Notices. All notices, requests and demands to or upon the Administrative Agent or any Grantor hereunder shall be effected in the manner provided for in subsection 10.2 of the Credit Agreement; provided that any such notice, request or demand to or upon any Guarantor shall be addressed to such Guarantor at its notice address set forth on Schedule 1. 8.3 No Waiver by Course of Conduct; Cumulative Remedies. Neither the Administrative Agent nor any Lender shall by any act (except by a written instrument pursuant to Section 8.1), delay, indulgence, omission or otherwise be deemed to have waived any right or remedy hereunder or to have acquiesced in any Default or Event of Default. No failure to exercise, nor any delay in exercising, on the part of the Administrative Agent or any Lender, any right, power or privilege hereunder shall operate as a waiver thereof. No single or partial exercise of any right, power or privilege hereunder shall preclude any other or further exercise thereof or the exercise of any other right, power or privilege. A waiver by the Administrative Agent or any Lender of any right or remedy hereunder on any one occasion shall not be construed as a bar to any right or remedy which the Administrative Agent or such Lender would otherwise have on any future occasion. The rights and remedies herein provided are cumulative, may be exercised singly or concurrently and are not exclusive of any other rights or remedies provided by law. 8.4 Enforcement Expenses; Indemnification. (a) Each Guarantor agrees to pay or reimburse each Lender and the Administrative Agent for all its costs and expenses incurred in collecting against such Guarantor under the guarantee contained in Section 2 or otherwise enforcing or preserving any rights under this Agreement and the other Loan Documents to which such Guarantor is a party, including, without limitation, the reasonable fees and disbursements of counsel (including the allocated fees and expenses of in-house counsel) to each Lender and of counsel to the Administrative Agent. (b) Each Guarantor agrees to pay, and to save the Administrative Agent and the Lenders harmless from, any and all liabilities with respect to, or resulting from any delay in 26 paying, any and all stamp, excise, sales or other taxes which may be payable or determined to be payable with respect to any of the Collateral or in connection with any of the transactions contemplated by this Agreement. (c) Each Guarantor agrees to pay, and to save the Administrative Agent and the Lenders harmless from, any and all 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 to the extent the Borrower would be required to do so pursuant to subsection 10.5 of the Credit Agreement. (d) The agreements in this Section 8.4 shall survive repayment of the Obligations and all other amounts payable under the Credit Agreement and the other Loan Documents. 8.5 Successors and Assigns. This Agreement shall be binding upon the successors and assigns of each Grantor and shall inure to the benefit of the Administrative Agent and the Lenders and their successors and assigns; provided that no Grantor may assign, transfer or delegate any of its rights or obligations under this Agreement without the prior written consent of the Administrative Agent. 8.6 Set-Off. Each Grantor hereby irrevocably authorizes the Administrative Agent and each Lender at any time and from time to time while an Event of Default pursuant to subsection 8(a) of the Credit Agreement shall have occurred and be continuing, without notice to such Grantor or any other Grantor, any such notice being expressly waived by each Grantor, to set-off and appropriate and apply any and all deposits (general or special, time or demand, provisional or final), in any currency, and any other credits, indebtedness or claims, in any currency, in each case whether direct or indirect, absolute or contingent, matured or unmatured, at any time held or owing by the Administrative Agent or such Lender to or for the credit or the account of such Grantor, or any part thereof in such amounts as the Administrative Agent or such Lender may elect, against and on account of the obligations and liabilities of such Grantor to the Administrative Agent or such Lender hereunder and claims of every nature and description of the Administrative Agent or such Lender against such Grantor, in any currency, whether arising hereunder, under the Credit Agreement, any other Loan Document or otherwise, as the Administrative Agent or such Lender may elect, whether or not the Administrative Agent or any Lender has made any demand for payment and although such obligations, liabilities and claims may be contingent or unmatured. The Administrative Agent and each Lender shall notify such Grantor promptly of any such set-off and the application made by the Administrative Agent or such Lender of the proceeds thereof, provided that the failure to give such notice shall not affect the validity of such set-off and application. The rights of the Administrative Agent and each Lender under this Section 8.6 are in addition to other rights and remedies (including, without limitation, other rights of set-off) which the Administrative Agent or such Lender may have. 8.7 Counterparts. This Agreement may be executed by one or more of the parties to this Agreement on any number of separate counterparts (including by telecopy), and all of said counterparts taken together shall be deemed to constitute one and the same instrument. 27 8.8 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. 8.9 Section Headings. The Section headings used in this Agreement are for convenience of reference only and are not to affect the construction hereof or be taken into consideration in the interpretation hereof. 8.10 Integration. This Agreement and the other Loan Documents represent the agreement of the Grantors, the Administrative Agent and the Lenders with respect to the subject matter hereof and thereof, and there are no promises, undertakings, representations or warranties by the Administrative Agent or any Lender relative to subject matter hereof and thereof not expressly set forth or referred to herein or in the other Loan Documents. 8.11 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK. 8.12 Submission To Jurisdiction; Waivers. Each Grantor hereby irrevocably and unconditionally: (a) submits for itself and its property in any legal action or proceeding relating to this Agreement and the other Loan Documents to which it is a party, or for recognition and enforcement of any 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; (b) consents that any such action or proceeding may be brought in such courts and waives any objection that it may now or hereafter have to the venue of any such action or proceeding in any such court or that such action or proceeding was brought in an inconvenient court and agrees not to plead or claim the same; (c) agrees that service of process in any such action or proceeding may be effected by mailing a copy thereof by registered or certified mail (or any substantially similar form of mail), postage prepaid, to such Grantor at its address referred to in Section 8.2 or at such other address of which the Administrative Agent shall have been notified pursuant thereto; (d) agrees that nothing herein shall affect the right to effect service of process in any other manner permitted by law or shall limit the right to sue in any other jurisdiction; and (e) waives, to the maximum extent not prohibited by law, any right it may have to claim or recover in any legal action or proceeding referred to in this Section any special, exemplary, punitive or consequential damages. 28 8.13 Acknowledgements. Each Grantor hereby acknowledges that: (a) it has been advised by counsel in the negotiation, execution and delivery of this Agreement and the other Loan Documents to which it is a party; (b) neither the Administrative Agent nor any Lender has any fiduciary relationship with or duty to any Grantor arising out of or in connection with this Agreement or any of the other Loan Documents, and the relationship between the Grantors, on the one hand, and the Administrative Agent and Lenders, 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 Grantors and the Lenders. 8.14 Additional Grantors. Each Subsidiary of the Borrower that is required to become a party to this Agreement pursuant to subsection 6.10 of the Credit Agreement shall become a Grantor for all purposes of this Agreement upon execution and delivery by such Subsidiary of an Assumption Agreement in the form of Annex 1 hereto. 8.15 Releases. (a) At such time as the Loans, the Reimbursement Obligations and the other Obligations shall have been paid in full, the Commitments have been terminated and no Letters of Credit shall be outstanding, the Collateral shall be released from the Liens created hereby, and this Agreement and all obligations (other than those expressly stated to survive such termination) of the Administrative Agent and each Grantor hereunder shall terminate, all without delivery of any instrument or performance of any act by any party, and all rights to the Collateral shall revert to the Grantors. At the request and sole expense of any Grantor following any such termination, the Administrative Agent shall deliver to such Grantor any Collateral held by the Administrative Agent hereunder, and execute and deliver to such Grantor such documents as such Grantor shall reasonably request to evidence such termination. (b) If any of the Collateral shall be sold, transferred or otherwise disposed of by any Grantor in a transaction permitted by the Credit Agreement, then the Administrative Agent, at the request and sole expense of such Grantor, shall execute and deliver to such Grantor all releases or other documents reasonably necessary or desirable for the release of the Liens created hereby on such Collateral. At the request and sole expense of the Borrower, a Subsidiary Guarantor shall be released from its obligations hereunder in the event that all the Capital Stock of such Subsidiary Guarantor shall be sold, transferred or otherwise disposed of in a transaction permitted by the Credit Agreement; provided that the Borrower shall have delivered to the Administrative Agent, at least ten Business Days prior to the date of the proposed release, a written request for release identifying the relevant Subsidiary Guarantor and the terms of the sale or other disposition in reasonable detail, including the price thereof and any expenses in connection therewith, together with a certification by the Borrower stating that such transaction is in compliance with the Credit Agreement and the other Loan Documents. 29 8.16 WAIVER OF JURY TRIAL. EACH PARTY HERETO 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. 8.17 Amendment and Restatement. (a) This Agreement amends and restates the Original Guarantee and Collateral Agreement. All terms, conditions, agreements, covenants and representations and warranties contained in the Original Guarantee and Collateral Agreement remain in full force and effect, except as expressly amended herein. Nothing herein or in the other Loan Documents shall impair or adversely affect the continuation of the liability of the Borrower for the Borrower Obligations or of any other Grantor for the Guarantor Obligations incurred before the Restatement Date and the security interests, Liens and other interests in the Collateral granted, pledged and or assigned by the Grantors to the Administrative Agent pursuant to the Original Guarantee and Collateral Agreement. (b) The amendment and restatement herein shall not, in any manner, be construed to constitute payment of, or impair, limit, cancel or extinguish, or constitute a novation in respect of any of the obligations, liabilities and indebtedness of the Grantors evidenced by or arising under the Original Guarantee and Collateral Agreement and the other Loan Documents, and the Lien and security interests securing such obligations, liabilities and indebtedness, which shall continue in full force and effect and shall not in any manner be impaired, limited, terminated, waived or released. (c) Notwithstanding anything to the contrary herein or in any other Loan Document, any term, condition, agreement, covenant or representation or warranty amended by this Agreement shall be deemed to have been so amended for all periods prior to the Restatement Date (regardless of whether such amendment by its terms purports to apply as of a certain date), and during all such periods no Grantor shall have been required, or be liable for any failure, to comply with any such provision except as amended by this Agreement. IN WITNESS WHEREOF, each of the undersigned has caused this Guarantee and Collateral Agreement to be duly executed and delivered, and amended and restated as set forth herein. TENNECO AUTOMOTIVE INC. By: --------------------------------------- Name: Title: TENNECO AUTOMOTIVE OPERATING COMPANY INC. By: --------------------------------------- Name: Title: TENNECO INTERNATIONAL HOLDING CORP. By: --------------------------------------- Name: Title: TENNECO GLOBAL HOLDINGS INC. By: --------------------------------------- Name: Title: THE PULLMAN COMPANY By: --------------------------------------- Name: Title: TMC TEXAS INC. By: --------------------------------------- Name: Title: CLEVITE INDUSTRIES INC. By: --------------------------------------- Name: Title: Acknowledged and Agreed as of the date hereof: JPMORGAN CHASE BANK, as Administrative Agent By: --------------------------------------- Name: Title: CORPORATE ACKNOWLEDGEMENT State of New York ) ) ) ss.: ) County of New York ) On the _______ day of June in the year 2003 before me personally came ______________________________ to me known, who, being by me duly sworn, did depose and say that he resides in 270 Park Avenue, New York, New York 10017; that he is the Vice President of JPMorgan Chase Bank, the corporation described in and which executed the above instrument; and that he signed his name thereto by authority of the board of directors of said corporation. _________________________________________ Notary Public Annex 1 to Guarantee and Collateral Agreement ASSUMPTION AGREEMENT, dated as of ____________ __, 200_, made by ______________________________, a ______________ corporation (the "Additional Grantor"), in favor of JPMORGAN CHASE BANK, as administrative agent (in such capacity, the "Administrative Agent") for the banks and other financial institutions (the "Lenders") parties to the Credit Agreement referred to below. All capitalized terms not defined herein shall have the meaning ascribed to them in such Credit Agreement. W I T N E S S E T H : --------------------- WHEREAS, Tenneco Automotive Inc. (the "Borrower"), the Lenders, Commerzbank and Bank of America, as Co-Documentation Agents, Citibank, as Syndication Agent, and the Administrative Agent have entered into the Credit Agreement, dated as of September 30, 1999 (as amended, supplemented or otherwise modified from time to time, the "Credit Agreement"); WHEREAS, in connection with the Credit Agreement, the Borrower and certain of its Affiliates (other than the Additional Grantor) have entered into the Guarantee and Collateral Agreement, dated as of November 4, 1999 (as amended, supplemented or otherwise modified from time to time, the "Guarantee and Collateral Agreement") in favor of the Administrative Agent for the benefit of the Lenders; WHEREAS, the Credit Agreement requires the Additional Grantor to become a party to the Guarantee and Collateral Agreement; and WHEREAS, the Additional Grantor has agreed to execute and deliver this Assumption Agreement in order to become a party to the Guarantee and Collateral Agreement; NOW, THEREFORE, IT IS AGREED: 1. Guarantee and Collateral Agreement. By executing and delivering this Assumption Agreement, the Additional Grantor, as provided in Section 8.14 of the Guarantee and Collateral Agreement, hereby becomes a party to the Guarantee and Collateral Agreement as a Grantor thereunder with the same force and effect as if originally named therein as a Grantor and, without limiting the generality of the foregoing, hereby expressly assumes all obligations and liabilities of a Grantor thereunder. The information set forth in Annex 1-A hereto is hereby added to the information set forth in the Schedules to the Guarantee and Collateral Agreement. The Additional Grantor hereby represents and warrants that each of the representations and warranties contained in Section 4 of the Guarantee and Collateral Agreement is true and correct on and as the date hereof (after giving effect to this Assumption Agreement) as if made on and as of such date. 2. Governing Law. THIS ASSUMPTION AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK. IN WITNESS WHEREOF, the undersigned has caused this Assumption Agreement to be duly executed and delivered as of the date first above written. [ADDITIONAL GRANTOR] By: --------------------------------------- Name: Title: EX-4.6(A) 5 c78654exv4w6xay.txt INDENTURE EXECUTION COPY ================================================================================ INDENTURE Dated as of June 19, 2003 among TENNECO AUTOMOTIVE INC., as Issuer, CERTAIN SUBSIDIARIES OF THE ISSUER, as Guarantors and WACHOVIA BANK, NATIONAL ASSOCIATION, as Trustee ---------------- 10 1/4% Senior Secured Notes due 2013, Series A 10 1/4% Senior Secured Notes due 2013, Series B ================================================================================ CROSS-REFERENCE TABLE
TIA Indenture Section Section - ------- --------- 310(a)(1)................................................................. 7.10 (a)(2)................................................................. 7.10 (a)(3)................................................................. N.A. (a)(4)................................................................. N.A. (a)(5)................................................................. 7.10 (b).................................................................... 7.08; 7.10 (c).................................................................... N.A. 311(a).................................................................... 7.11 (b).................................................................... 7.11 312(a).................................................................... 2.05 (b).................................................................... 11.03 (c).................................................................... 11.03 313(a).................................................................... 7.06 (b)(1)................................................................. 7.06 (b)(2)................................................................. 7.06; 7.07 (c).................................................................... 7.05; 7.06; 11.02 (d).................................................................... 7.06 314(a).................................................................... 4.08; 4.10; 11.02 (b).................................................................... N.A. (c)(1)................................................................. 4.08; 11.04 (c)(2)................................................................. 11.04 (c)(3.................................................................. 4.08; 11.04 (d).................................................................... N.A. (e).................................................................... 11.05 (f).................................................................... N.A. 315(a).................................................................... 7.01(b) (b).................................................................... 7.05; 11.02 (c).................................................................... 7.01(a) (d).................................................................... 7.01(c) (e).................................................................... 6.11 316(a)(last sentence)..................................................... 2.09 (a)(1)(A).............................................................. 6.05 (a)(1)(B).............................................................. 6.04 (a)(2)................................................................. N.A. (b).................................................................... 6.07; 9.04 (c).................................................................... 9.04 317(a)(1)................................................................. 6.08 (a)(2)................................................................. 6.09 (b).................................................................... 2.04 318(a).................................................................... 11.01 (c).................................................................... 11.01
- --------------- "N.A." means Not Applicable. NOTE: This Cross-Reference Table shall not, for any purpose, be deemed to be a part of the Indenture. -i- TABLE OF CONTENTS
Page ---- ARTICLE One DEFINITIONS AND INCORPORATION BY REFERENCE SECTION 1.01. Definitions........................................................1 SECTION 1.02. Incorporation by Reference of TIA.................................38 SECTION 1.03. Rules of Construction.............................................38 SECTION 1.04. Designated Senior Debt............................................39 ARTICLE Two THE SECURITIES SECTION 2.01. Form and Dating...................................................39 SECTION 2.02. Execution and Authentication......................................40 SECTION 2.03. Registrar and Paying Agent........................................41 SECTION 2.04. Paying Agent To Hold Assets in Trust..............................41 SECTION 2.05. Securityholder Lists..............................................42 SECTION 2.06. Transfer and Exchange.............................................42 SECTION 2.07. Replacement Securities............................................43 SECTION 2.08. Outstanding Securities............................................43 SECTION 2.09. Treasury Securities...............................................43 SECTION 2.10. Temporary Securities..............................................44 SECTION 2.11. Cancellation......................................................44 SECTION 2.12. Defaulted Interest................................................44 SECTION 2.13. CUSIP Number......................................................44 SECTION 2.14. Deposit of Moneys.................................................45 SECTION 2.15. Book-Entry Provisions for Global Securities.......................45 SECTION 2.16. Registration of Transfers and Exchanges...........................46 ARTICLE Three REDEMPTION SECTION 3.01. Notices to Trustee................................................50 SECTION 3.02. Selection of Securities To Be Redeemed............................50 SECTION 3.03. Notice of Redemption..............................................51 SECTION 3.04. Effect of Notice of Redemption....................................52 SECTION 3.05. Deposit of Redemption Price.......................................52 SECTION 3.06. Securities Redeemed in Part.......................................52
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Page ---- ARTICLE Four COVENANTS SECTION 4.01. Payment of Securities.............................................52 SECTION 4.02. Maintenance of Office or Agency...................................53 SECTION 4.03. Limitation on Incurrence of Additional Indebtedness...............53 SECTION 4.04. Limitation on Restricted Payments.................................54 SECTION 4.05. Corporate Existence...............................................57 SECTION 4.06. Payment of Taxes and Other Claims.................................58 SECTION 4.07. Maintenance of Properties and Insurance...........................58 SECTION 4.08. Compliance Certificate; Notice of Default.........................59 SECTION 4.09. Compliance with Laws..............................................59 SECTION 4.10. Reports to Holders................................................60 SECTION 4.11. Waiver of Stay, Extension or Usury Laws...........................60 SECTION 4.12. Limitation on Asset Sales.........................................61 SECTION 4.13. Limitation on Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries ................................64 SECTION 4.14. Limitation on Issuances of Capital Stock of Restricted Subsidiaries......................................................66 SECTION 4.15. Limitation on Liens...............................................66 SECTION 4.16. [Reserved.].......................................................67 SECTION 4.17. Limitation on Transactions with Affiliates........................67 SECTION 4.18. Issuance of Subsidiary Guarantees.................................68 SECTION 4.19. Payments for Consent..............................................70 SECTION 4.20. Limitation on Designations of Unrestricted Subsidiaries...........71 SECTION 4.21. Change of Control.................................................72 ARTICLE Five SUCCESSOR CORPORATION SECTION 5.01. Merger, Consolidation and Sale of Assets..........................74 SECTION 5.02. Successor Corporation Substituted.................................77 ARTICLE Six DEFAULT AND REMEDIES SECTION 6.01. Events of Default.................................................77 SECTION 6.02. Acceleration......................................................79 SECTION 6.03. Other Remedies....................................................80 SECTION 6.04. Waiver of Past Defaults...........................................80
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Page ---- SECTION 6.05. Control by Majority...............................................81 SECTION 6.06. Limitation on Suits...............................................81 SECTION 6.07. Rights of Holders to Receive Payment..............................82 SECTION 6.08. Collection Suit by Trustee........................................82 SECTION 6.09. Trustee May File Proofs of Claim..................................82 SECTION 6.10. Priorities........................................................83 SECTION 6.11. Payment of Interest; Interest Rights Preserved....................83 SECTION 6.12. Undertaking for Costs.............................................84 ARTICLE Seven TRUSTEE SECTION 7.01. Duties of Trustee.................................................85 SECTION 7.02. Rights of Trustee.................................................87 SECTION 7.03. Individual Rights of Trustee......................................88 SECTION 7.04. Trustee's Disclaimer..............................................88 SECTION 7.05. Notice of Default.................................................88 SECTION 7.06. Reports by Trustee to Holders.....................................89 SECTION 7.07. Compensation and Indemnity........................................89 SECTION 7.08. Replacement of Trustee............................................92 SECTION 7.09. Successor Trustee by Merger, Etc..................................93 SECTION 7.10. Eligibility; Disqualification.....................................93 SECTION 7.11. Preferential Collection of Claims Against Company.................93 ARTICLE Eight SATISFACTION AND DISCHARGE OF INDENTURE SECTION 8.01. Legal Defeasance and Covenant Defeasance..........................94 SECTION 8.02. Satisfaction and Discharge........................................97 SECTION 8.03. Survival of Certain Obligations...................................98 SECTION 8.04. Acknowledgment of Discharge by Trustee............................98 SECTION 8.05. Application of Trust Assets.......................................98 SECTION 8.06. Repayment to the Company or Guarantors; Unclaimed Money...........99 SECTION 8.07. Reinstatement.....................................................99 ARTICLE Nine AMENDMENTS, SUPPLEMENTS AND WAIVERS SECTION 9.01. Without Consent of Holders.......................................100 SECTION 9.02. With Consent of Holders..........................................101
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Page ---- SECTION 9.03. Compliance with TIA...............................................102 SECTION 9.04. Revocation and Effect of Consents.................................102 SECTION 9.05. Notation on or Exchange of Securities.............................103 SECTION 9.06. Trustee to Sign Amendments, Etc...................................103 ARTICLE Ten GUARANTEE SECTION 10.01. Unconditional Guarantee...........................................104 SECTION 10.02. Severability......................................................105 SECTION 10.03. Release of a Guarantor............................................105 SECTION 10.04. Limitation of a Guarantor's Liability.............................106 SECTION 10.05. Contribution......................................................106 SECTION 10.06. Waiver of Subrogation.............................................106 SECTION 10.07. Execution of Subsidiary Guarantees................................107 SECTION 10.08. Waiver of Stay, Extension or Usury Laws...........................107 ARTICLE Eleven MISCELLANEOUS SECTION 11.01. TIA Controls......................................................108 SECTION 11.02. Notices...........................................................108 SECTION 11.03. Communications by Holders with Other Holders......................109 SECTION 11.04. Certificate and Opinion as to Conditions Precedent................109 SECTION 11.05. Statements Required in Certificate or Opinion.....................110 SECTION 11.06. Rules by Trustee, Paying Agent, Registrar.........................110 SECTION 11.07. Legal Holidays....................................................110 SECTION 11.08. Governing Law.....................................................110 SECTION 11.09. No Adverse Interpretation of Other Agreements.....................111 SECTION 11.10. No Recourse Against Others........................................111 SECTION 11.11. Successors........................................................112 SECTION 11.12. Duplicate Originals...............................................112 SECTION 11.13. Severability......................................................112 SECTION 11.14. Table of Contents, Headings, Etc..................................112 ARTICLE Twelve COLLATERAL AND SECURITY DOCUMENTS SECTION 12.01. Collateral and Security Documents.................................112 SECTION 12.02. Application of Proceeds of Collateral.............................114 SECTION 12.03. Possession, Use and Release of Collateral.........................114
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Page ---- SECTION 12.04. Opinion of Counsel................................................118 SECTION 12.05. Certain Covenants Relating to Mortgaged Property..................118 SECTION 12.06. Trust Indenture Act Requirements..................................119 SECTION 12.07. Suits to Protect the Collateral...................................119 SECTION 12.08. Purchaser Protected...............................................120 SECTION 12.09. Powers Exercisable by Receiver or Trustee.........................120 SECTION 12.10. Release upon Termination of Company's Obligations.................120 SECTION 12.11. Collateral Agent..................................................120 SECTION 12.12. Post-Closing Filings; Further Assurances..........................122 SECTION 12.13. Taking and Destruction............................................123 SECTION 12.14. Designations......................................................123
Exhibit A - Form of Series A Security Exhibit B - Form of Series B Security Exhibit C - Form of Legend for Global Securities Exhibit D - Transfer Certificate Exhibit E - Transferee Certificate for Institutional Accredited Investors Exhibit F - Transferee Certificate for Regulation S Transfers Exhibit G - Form of Subsidiary Guarantee Note: This Table of Contents shall not, for any purpose, be deemed to be a part of the Indenture. -vi- INDENTURE dated as of June 19, 2003, among TENNECO AUTOMOTIVE INC., a Delaware corporation (the "Company"), as issuer, such subsidiaries of the Company, as shall from time to time execute a Subsidiary Guarantee (as defined), and WACHOVIA BANK, NATIONAL ASSOCIATION, a national banking association, as Trustee (the "Trustee"). The Company has duly authorized the issue of 10 1/4% Senior Secured Notes due 2013, Series A, and 10 1/4% Senior Secured Notes due 2013, Series B, and to provide therefor, the Company has duly authorized the execution and delivery of this Indenture. All things necessary to make the Securities, when duly issued and executed by the Company and authenticated and delivered hereunder, the valid and binding obligations of the Company, and to make this Indenture a valid and binding agreement of the Company, have been done. Each party hereto agrees as follows for the benefit of each other party and for the equal and ratable benefit of the Holders of the Securities: ARTICLE ONE DEFINITIONS AND INCORPORATION BY REFERENCE SECTION 1.01. Definitions. "Accounts Receivable Entity" means a Person, including, without limitation, a Subsidiary of the Company, whose operations consist solely of owning and/or selling accounts receivable of the Company and its Subsidiaries and engaging in other activities in connection with transactions that are Permitted Receivables Financings. "Acquired Indebtedness" means Indebtedness of a Person or any of its Subsidiaries existing at the time such Person becomes a Restricted Subsidiary or at the time it merges or consolidates with the Company or any of the Restricted Subsidiaries or assumed by the Company or any Restricted Subsidiary in connection with the acquisition of assets from such Person and in each case not incurred by such Person in connection with, or in anticipation or contemplation of, such Person becoming a Restricted Subsidiary or such acquisition, merger or consolidation. "Acquired Subsidiary" means a Person which becomes a Restricted Subsidiary after the Issue Date; provided that such Person has outstanding voting Capital Stock prior to becoming a Subsidiary of the Company and a majority of such voting Capital Stock was owned by Persons other than the Company and its Restricted Subsidiaries. "Adjusted Net Assets" has the meaning set forth in Section 10.05. -2- "Affiliate" means, with respect to any specified Person, any other Person who directly or indirectly through one or more intermediaries controls, or is controlled by, or is under common control with, such specified Person. The term "control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative of the foregoing. "Affiliate Transaction" has the meaning set forth in Section 4.17. "Agent" means any Registrar, Paying Agent or co-Registrar. "Applicable Indebtedness" means (1) in respect of any asset that is the subject of an Asset Sale at a time when such asset is included in the Collateral, Pari Passu Indebtedness or Indebtedness of a Subsidiary of the Company that, in each case, is secured at such time by Collateral under a Lien that is senior or prior to the Second Priority Liens (including, without limitation, the First Priority Claims); or (2) in respect of any other asset, any Pari Passu Indebtedness or any unsubordinated Indebtedness of any Guarantor, and in the case of an Asset Sale by a Subsidiary that is not a Guarantor, Indebtedness of such Subsidiary. "Applicable Pari Passu Indebtedness" means (1) in respect of any asset that is the subject of an Asset Sale at a time when such asset is included in the Collateral, Pari Passu Indebtedness that is secured at such time by all or any part of the Collateral; or (2) in respect of any other asset, any Pari Passu Indebtedness. "Applicable Value" has the meaning set forth in the definition of "Collateral." "Asset Acquisition" means (1) an Investment by the Company or any Restricted Subsidiary in any other Person pursuant to which such Person shall become a Restricted Subsidiary, or shall be merged with or into the Company or any Restricted Subsidiary, or (2) the acquisition by the Company or any Restricted Subsidiary of the assets of any Person (other than a Restricted Subsidiary) which constitute all or substantially all of the assets of such Person or comprise any division or line of business of such Person or any other properties or assets of such Person other than in the ordinary course of business. -3- "Asset Sale" means any direct or indirect sale, issuance, conveyance, lease (other than operating leases entered into in the ordinary course of business), assignment or other transfer (other than the granting of a Lien in accordance with this Indenture) for value by the Company or any of the Restricted Subsidiaries (including any Sale and Leaseback Transaction) to any Person other than the Company or a Restricted Subsidiary of (a) any Capital Stock of any Restricted Subsidiary; or (b) any other property or assets of the Company or any Restricted Subsidiary other than in the ordinary course of business; provided, however, that Asset Sales shall not include: (1) a transaction or series of related transactions for which the Company or the Restricted Subsidiaries receive aggregate consideration of less than $5 million; (2) the sale, lease, conveyance, disposition or other transfer of all or substantially all of the assets of the Company as permitted by Section 5.01; (3) any Restricted Payment made in accordance with Section 4.04; or (4) sales of accounts receivable and related assets pursuant to a Permitted Receivables Financing made in accordance with Section 4.03. "Attributable Debt" in respect of a Sale and Leaseback Transaction means, as at the time of determination, the present value (discounted at the interest rate borne by the Securities, compounded annually) of the total obligations of the lessee for rental payments during the remaining term of the lease included in such Sale and Leaseback Transaction (including any period for which such lease has been extended). "Bankruptcy Law" means Title 11, U.S. Code or any similar Federal, state or foreign law for the relief of debtors. "Blockage Period" has the meaning provided in Section 12.02. "Board of Directors" means, as to any Person, the board of directors of such Person or any duly authorized committee thereof. "Board Resolution" means, with respect to any Person, a copy of a resolution certified by the Secretary or an Assistant Secretary of such Person to have been duly adopted by the Board of Directors of such Person and to be in full force and effect on the date of such certification, and delivered to the Trustee. "Business Day" means any day other than a Saturday, Sunday or any other day on which banking institutions in The City of New York or in the city in which the principal corporate trust office of the Trustee is located, are required or authorized by law or other governmental action to be closed. -4- "Capital Stock" means (1) with respect to any Person that is a corporation, any and all shares, interests, participation or other equivalents (however designated and whether or not voting) of corporate stock, including each class of Common Stock and Preferred Stock of such Person, and (2) with respect to any Person that is not a corporation, any and all partnership or other equity interests of such Person. "Capitalized Lease Obligations" means, as to any Person, the obligations of such Person under a lease that are required to be classified and accounted for as capital lease obligations under GAAP and, for purposes of this definition, the amount of such obligations at any date shall be the capitalized amount of such obligations at such date, determined in accordance with GAAP. "Cash Equivalents" means (1) marketable direct obligations issued by, or unconditionally guaranteed by, the United States Government or issued by any agency thereof and backed by the full faith and credit of the United States, in each case maturing within one year from the date of acquisition thereof; (2) marketable direct obligations issued by any state of the United States of America or any political subdivision of any such state or any public instrumentality thereof maturing within one year from the date of acquisition thereof and, at the time of acquisition, having one of the two highest ratings obtainable from either Standard & Poor's Corporation ("S&P") or Moody's Investors Service, Inc. ("Moody's"); (3) commercial paper maturing no more than one year from the date of creation thereof and, at the time of acquisition, having a rating of at least A-1 from S&P or at least P-1 from Moody's; (4) certificates of deposit or bankers' acceptances maturing within one year from the date of acquisition thereof issued by any bank organized under the laws of the United States of America or any state thereof or the District of Columbia or any U.S. branch of a foreign bank having at the date of acquisition thereof combined capital and surplus of not less than $250 million; (5) repurchase obligations with a term of not more than seven days for underlying securities of the types described in clause (1) above entered into with any bank meeting the qualifications specified in clause (4) above; and (6) investments in money market funds which invest substantially all their assets in securities of the types described in clauses (1) through (5) above. -5- "Cash Management Obligations" means, with respect to any Person, all obligations of such Person in respect of overdrafts and related liabilities owed to any other Person that arise from treasury, depositary or cash management services, including in connection with any automated clearing house transfers of funds, or any similar transactions. "Change of Control" means the occurrence of one or more of the following events: (1) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all or substantially all of the assets of the Company to any Person or group of related Persons for purposes of Section 13(d) of the Exchange Act (a "Group"), together with any Affiliates thereof (whether or not otherwise in compliance with the provisions of this Indenture); (2) the approval by the holders of Capital Stock of the Company of any plan or proposal for the liquidation or dissolution of the Company (whether or not otherwise in compliance with the provisions of this Indenture); (3) any Person or Group shall become the beneficial owner, directly or indirectly, of shares representing more than 35% of the aggregate ordinary voting power represented by the issued and outstanding Capital Stock of the Company; or (4) during any period of two consecutive years, individuals who at the beginning of such period constituted the Board of Directors (together with any new directors whose election by such Board of Directors or whose nomination for election by the stockholders of the Company was approved pursuant to a vote of a majority of the directors then still in office who were either directors at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority of the Board of Directors then in office. "Change of Control Offer" has the meaning set forth in Section 4.21. "Change of Control Payment Date" has the meaning set forth in Section 4.21. "Collateral" means all property and assets that from time to time secure the Securities and Subsidiary Guarantees pursuant to the Security Documents. "Collateral Agency Agreement" means that certain Collateral Agency Agreement, dated as of the Issue Date, by and among the Trustee, the Collateral Agent and the Company, as amended (including any amendment and recitation thereof), supplemented or otherwise modified from time to time. -6- "Collateral Agent" means the Trustee in its capacity as the "Collateral Agent" under and as defined in the Collateral Agency Agreement and the Security Documents and any successor thereto. "Collateral Agreement" means that certain Collateral Agreement, dated as of the Issue Date, among the Collateral Agent, the Company and the Subsidiaries of the Company party thereto, granting, among other things, a second-priority Lien on the Collateral described therein in favor of the Collateral Agent for its benefit and the benefit of the Trustee and the holders of the Securities, as amended, modified, restated, supplemented or replaced from time to time. "Combined EBITDA" means, with respect to the Restricted Subsidiaries that are not Guarantors (and are not a Finance Subsidiary or an Accounts Receivable Entity that is a Domestic Restricted Subsidiary), for any period, the sum (without duplication) of: (1) Combined Net Income; and (2) to the extent Combined Net Income has been reduced thereby: (A) all income taxes of the Restricted Subsidiaries that are not Guarantors (and are not a Finance Subsidiary or an Accounts Receivable Entity that is a Domestic Restricted Subsidiary) paid or accrued in accordance with GAAP for such period; (B) Combined Interest Expense; and (C) Combined Non-cash Charges; less any non-cash items increasing Combined Net Income for such period, all as determined on a combined basis for the Restricted Subsidiaries that are not Guarantors (and are not a Finance Subsidiary or an Accounts Receivable Entity that is a Domestic Restricted Subsidiary) in accordance with GAAP. "Combined Fixed Charge Coverage Ratio" means, with respect to the Restricted Subsidiaries that are not Guarantors (and are not a Finance Subsidiary or an Accounts Receivable Entity that is a Domestic Restricted Subsidiary), the ratio of Combined EBITDA during the four full fiscal quarters (the "Four Quarter Period") ending on or prior to the date of the transaction giving rise to the need to calculate the Combined Fixed Charge Coverage Ratio (the "Transaction Date") to Combined Fixed Charges for the Four Quarter Period. In addition to and without limitation of the foregoing, for purposes of this definition, "Combined EBITDA" and "Combined Fixed Charges" shall be calculated after giving effect on a pro forma basis for the period of such calculation to -7- (1) the incurrence or repayment of any Indebtedness of any of the Restricted Subsidiaries that are not Guarantors (and are not a Finance Subsidiary or an Accounts Receivable Entity that is a Domestic Restricted Subsidiary) (and the application of the proceeds thereof) giving rise to the need to make such calculation and any incurrence or repayment of other Indebtedness (and the application of the proceeds thereof), other than the incurrence or repayment of Indebtedness in the ordinary course of business for working capital purposes pursuant to working capital facilities, occurring during the Four Quarter Period or at any time subsequent to the last day of the Four Quarter Period and on or prior to the Transaction Date, as if such incurrence or repayment, as the case may be (and the application of the proceeds thereof), occurred on the first day of the Four Quarter Period; and (2) any Asset Sales or other disposition or Asset Acquisitions (including, without limitation, any Asset Acquisition giving rise to the need to make such calculation as a result of one of the Restricted Subsidiaries that are not Guarantors (and are not a Finance Subsidiary or an Accounts Receivable Entity that is a Domestic Restricted Subsidiary) (including any Person who becomes such a Restricted Subsidiary as a result of the Asset Acquisition) incurring, assuming or otherwise being liable for Acquired Indebtedness and also including any Combined EBITDA (provided that such Combined EBITDA shall be included only to the extent includable pursuant to the definition of "Combined Net Income") attributable to the assets which are the subject of the Asset Acquisition or Asset Sale or other disposition during the Four Quarter Period) occurring during the Four Quarter Period or at any time subsequent to the last day of the Four Quarter Period and on or prior to the Transaction Date as if such Asset Sale or Asset Acquisition or other disposition (including the incurrence, assumption or liability for any such Acquired Indebtedness) occurred on the first day of the Four Quarter Period. If any of the Restricted Subsidiaries that are not Guarantors (and are not a Finance Subsidiary or Accounts Receivable Entity that is a Domestic Restricted Subsidiary) directly or indirectly guarantee Indebtedness of a third Person, the preceding sentence shall give effect to the incurrence of such guaranteed Indebtedness as if the Restricted Subsidiary had directly incurred or otherwise assumed such guaranteed Indebtedness. Furthermore, in calculating "Combined Fixed Charges" for purposes of determining the denominator (but not the numerator) of this "Combined Fixed Charge Coverage Ratio" (1) interest on outstanding Indebtedness determined on a fluctuating basis as of the Transaction Date and which will continue to be so determined thereafter shall be deemed to have accrued at a fixed rate per annum equal to the rate of interest on such Indebtedness in effect on the Transaction Date; -8- (2) if interest on any Indebtedness actually incurred on the Transaction Date may optionally be determined at an interest rate based upon a factor of a prime or similar rate, a eurocurrency interbank offered rate, or other rates, then the interest rate in effect on the Transaction Date will be deemed to have been in effect during the Four Quarter Period; and (3) notwithstanding clause (1) above, interest on Indebtedness determined on a fluctuating basis, to the extent such interest is covered by agreements relating to Interest Swap Obligations, shall be deemed to accrue at the rate per annum in effect on the Transaction Date resulting after giving effect to the operation of such agreements on such date. "Combined Fixed Charges" means, with respect to the Restricted Subsidiaries that are not Guarantors (and are not a Finance Subsidiary or an Accounts Receivable Entity that is a Domestic Restricted Subsidiary) for any period, the sum, without duplication, of (1) Combined Interest Expense, plus (2) the product of (x) the amount of all dividend payments on any series of Preferred Stock of the Restricted Subsidiaries that are not Guarantors (other than Finance Subsidiaries and Accounts Receivable Entities that are Domestic Restricted Subsidiaries) paid, accrued and/or scheduled to be paid or accrued during such period times (y) a fraction, the numerator of which is one and the denominator of which is one minus the then current effective consolidated federal, state and local income tax rate of the Company, expressed as a decimal. "Combined Interest Expense" means, with respect to the Restricted Subsidiaries that are not Guarantors (and are not a Finance Subsidiary or Accounts Receivable Entity that is a Domestic Restricted Subsidiary) for any period, the sum of, without duplication, (1) the aggregate of the interest expense of the Restricted Subsidiaries that are not Guarantors (and are not a Finance Subsidiary or Accounts Receivable Entity that is a Domestic Restricted Subsidiary) for such period determined on a combined basis in accordance with GAAP, including without limitation, (A) any amortization of debt discount, (B) the net costs under Interest Swap Obligations and Attributable Debt, (C) all capitalized interest, and (D) the interest portion of any deferred payment obligation; -9- (2) the interest component of Capitalized Lease Obligations and Attributable Debt paid, accrued and/or scheduled to be paid or accrued by the Restricted Subsidiaries that are not Guarantors (and are not a Finance Subsidiary or Accounts Receivable Entity that is a Domestic Restricted Subsidiary) during such period as determined on a consolidated basis in accordance with GAAP; and (3) net losses relating to sales of accounts receivable pursuant to Permitted Receivables Financings during such period as determined on a combined basis in accordance with GAAP; provided that Combined Interest Expense shall not include any of the foregoing to the extent owing to the Company or any Restricted Subsidiary or to the extent owed by a Finance Subsidiary or an Accounts Receivable Entity that is a Domestic Restricted Subsidiary. "Combined Net Income" means, with respect to the Restricted Subsidiaries that are not Guarantors (and are not Finance Subsidiaries or Accounts Receivable Entities that are Domestic Restricted Subsidiaries), for any period, the aggregate net income (or loss) of the Restricted Subsidiaries that are not Guarantors (and are not Finance Subsidiaries or Accounts Receivable Entities that are Domestic Restricted Subsidiaries) for such period as determined on a combined basis in accordance with GAAP; provided that there shall be excluded therefrom; (1) after-tax gains and losses from Asset Sales or abandonments or reserves relating thereto; (2) extraordinary or non-recurring gains or losses (determined on an after-tax basis); (3) the net income of any Person acquired in a "pooling of interests" transaction accrued prior to the date it becomes a Restricted Subsidiary or is merged or consolidated with any Restricted Subsidiary that is not a Guarantor (and are not Finance Subsidiaries or Accounts Receivable Entities that are Domestic Restricted Subsidiaries); (4) the net income of any Person, other than a Restricted Subsidiary, except to the extent of cash dividends or distributions paid to the Restricted Subsidiaries that are not Guarantors (and are not Finance Subsidiaries or Accounts Receivable Entities that are Domestic Restricted Subsidiaries) by such Person; (5) any restoration to income of any contingency reserve, except to the extent that provision for such reserve was made out of Combined Net Income accrued at any time following the Issue Date; -10- (6) income or loss attributable to discontinued operations (including, without limitation, operations disposed of during such period whether or not such operations were classified as discontinued); (7) write downs resulting from the impairment of intangible assets; and (8) the amount of amortization or write-off deferred financing costs and debt issuance costs of the Company and its Restricted Subsidiaries during such period and any premium or penalty paid in connection with redeeming or retiring Indebtedness of the Company and its Restricted Subsidiaries prior to the stated maturity thereof pursuant to the agreements governing such Indebtedness. "Combined Non-cash Charges" means, with respect to the Restricted Subsidiaries that are not Guarantors (and are not Finance Subsidiaries or Accounts Receivable Entities that are Domestic Restricted Subsidiaries), for any period, the aggregate depreciation, amortization and other non-cash expenses of the Restricted Subsidiaries that are not Guarantors (and are not Finance Subsidiaries or Accounts Receivable Entities that are Domestic Restricted Subsidiaries) reducing Combined Net Income for such period, determined on a combined basis in accordance with GAAP (excluding any such charge which requires an accrual of or a reserve for cash charges for any future period). "Commission" means the Securities and Exchange Commission, as from time to time constituted, or if at any time after the execution of this Indenture such Commission is not existing and performing the applicable duties now assigned to it, then the body or bodies performing such duties at such time. "Commodity Agreement" means any commodity futures contract, commodity option or other similar agreement or arrangement entered into by the Company or any Restricted Subsidiary of the Company designed to protect the Company or any of its Restricted Subsidiaries against fluctuations in the price of the commodities at the time used in the ordinary course of business of the Company or any of its Restricted Subsidiaries. "Common Collateral" means all of the assets of any Grantor, whether real, personal or mixed, constituting both First Priority Collateral and Second Priority Collateral. "Common Collateral Agent" means a bank or trust company authorized to exercise corporate trust powers that has been appointed by the Company, and has agreed, to act as collateral agent hereunder and under the Security Documents for the equal and ratable benefit of both the holders of obligations secured by the Liens securing Note Obligations and the holders of all other obligations secured by Liens securing Other Second-Lien Obligations, in its capacity as such collateral agent. -11- "Common Stock" of any Person means any and all shares, interests or other participations in, and other equivalents (however designated and whether voting or non-voting) of such Person's common stock, whether outstanding on the Issue Date or issued after the Issue Date, and includes, without limitation, all series and classes of such common stock. "Company" means the party named as such in this Indenture until a successor replaces it pursuant to this Indenture and thereafter means such successor. "Consolidated EBITDA" means, with respect to the Company, for any period, the sum (without duplication) of (1) Consolidated Net Income; and (2) to the extent Consolidated Net Income has been reduced thereby: (A) all income taxes of the Company and the Restricted Subsidiaries paid or accrued in accordance with GAAP for such period; (B) Consolidated Interest Expense; and (C) Consolidated Non-cash Charges, less any non-cash items increasing Consolidated Net Income for such period, all as determined on a consolidated basis for the Company and the Restricted Subsidiaries in accordance with GAAP. "Consolidated Fixed Charge Coverage Ratio" means, with respect to the Company, the ratio of Consolidated EBITDA of the Company during the Four Quarter Period ending on or prior to the Transaction Date to Consolidated Fixed Charges of the Company for the Four Quarter Period. In addition to and without limitation of the foregoing, for purposes of this definition, "Consolidated EBITDA" and "Consolidated Fixed Charges" shall be calculated after giving effect on a pro forma basis for the period of such calculation to: (1) the incurrence or repayment of any Indebtedness of the Company or any of the Restricted Subsidiaries (and the application of the proceeds thereof) giving rise to the need to make such calculation and any incurrence or repayment of other Indebtedness (and the application of the proceeds thereof), other than the incurrence or repayment of Indebtedness in the ordinary course of business for working capital purposes pursuant to working capital facilities, occurring during the Four Quarter Period or at any time subsequent to the last day of the Four Quarter Period and on or prior to the Transaction Date, as if such incurrence or repayment, as the case may be (and the application of the proceeds thereof), occurred on the first day of the Four Quarter Period; and -12- (2) any Asset Sales or other disposition or Asset Acquisitions (including, without limitation, any Asset Acquisition giving rise to the need to make such calculation as a result of the Company or one of the Restricted Subsidiaries (including any Person who becomes a Restricted Subsidiary as a result of the Asset Acquisition) incurring, assuming or otherwise being liable for Acquired Indebtedness and also including any Consolidated EBITDA (provided that such Consolidated EBITDA shall be included only to the extent includable pursuant to the definition of "Consolidated Net Income") attributable to the assets which are the subject of the Asset Acquisition or Asset Sale or other disposition during the Four Quarter Period) occurring during the Four Quarter Period or at any time subsequent to the last day of the Four Quarter Period and on or prior to the Transaction Date as if such Asset Sale or Asset Acquisition or other disposition (including the incurrence, assumption or liability for any such Acquired Indebtedness) occurred on the first day of the Four Quarter Period. If the Company or any of the Restricted Subsidiaries directly or indirectly guarantees Indebtedness of a third Person, the preceding sentence shall give effect to the incurrence of such guaranteed Indebtedness as if the Company or any Restricted Subsidiary had directly incurred or otherwise assumed such guaranteed Indebtedness. Furthermore, in calculating "Consolidated Fixed Charges" for purposes of determining the denominator (but not the numerator) of this "Consolidated Fixed Charge Coverage Ratio": (1) interest on outstanding Indebtedness determined on a fluctuating basis as of the Transaction Date and which will continue to be so determined thereafter shall be deemed to have accrued at a fixed rate per annum equal to the rate of interest on such Indebtedness in effect on the Transaction Date; (2) if interest on any Indebtedness actually incurred on the Transaction Date may optionally be determined at an interest rate based upon a factor of a prime or similar rate, a eurocurrency interbank offered rate, or other rates, then the interest rate in effect on the Transaction Date will be deemed to have been in effect during the Four Quarter Period; and (3) notwithstanding clause (1) above, interest on Indebtedness determined on a fluctuating basis, to the extent such interest is covered by agreements relating to Interest Swap Obligations, shall be deemed to accrue at the rate per annum in effect on the Transaction Date resulting after giving effect to the operation of such agreements on such date. "Consolidated Fixed Charges" means, with respect to the Company for any period, the sum, without duplication, of (1) Consolidated Interest Expense, plus -13- (2) the product of (x) the amount of all dividend payments on any series of Preferred Stock of the Company (other than dividends paid in Qualified Capital Stock) or any Restricted Subsidiary paid, accrued and/or scheduled to be paid or accrued during such period times (y) a fraction, the numerator of which is one and the denominator of which is one minus the then current effective consolidated federal, state and local income tax rate of the Company, expressed as a decimal. "Consolidated Interest Expense" means, with respect to the Company for any period, the sum of, without duplication: (1) the aggregate of the interest expense of the Company and the Restricted Subsidiaries for such period determined on a consolidated basis in accordance with GAAP, including without limitation, (A) any amortization of debt discount, (B) the net costs under Interest Swap Obligations, (C) all capitalized interest, and (D) the interest portion of any deferred payment obligation; (2) the interest component of Capitalized Lease Obligations and Attributable Debt paid, accrued and/or scheduled to be paid or accrued by the Company and the Restricted Subsidiaries during such period as determined on a consolidated basis in accordance with GAAP; and (3) net losses relating to sales of accounts receivable pursuant to Permitted Receivables Financings during such period as determined on a consolidated basis in accordance with GAAP. "Consolidated Net Income" means, with respect to the Company, for any period, the aggregate net income (or loss) of the Company and the Restricted Subsidiaries for such period as determined on a consolidated basis in accordance with GAAP; provided that there shall be excluded therefrom: (1) after-tax gains and losses from Asset Sales or abandonments or reserves relating thereto; (2) extraordinary or non-recurring gains or losses (determined on an after-tax basis); -14- (3) the net income of any Person acquired in a "pooling of interests" transaction accrued prior to the date it becomes a Restricted Subsidiary or is merged or consolidated with the Company or any Restricted Subsidiary; (4) the net income (but not loss) of any Restricted Subsidiary to the extent that the declaration of dividends or similar distributions by that Restricted Subsidiary of that income is restricted by a contract, operation of law or otherwise; (5) the net income of any Person, other than a Restricted Subsidiary, except to the extent of cash dividends or distributions paid to the Company or to a Restricted Subsidiary by such Person; (6) any restoration to income of any contingency reserve, except to the extent that provision for such reserve was made out of Consolidated Net Income accrued at any time following March 31, 2003; (7) income or loss attributable to discontinued operations (including, without limitation, operations disposed of during such period whether or not such operations were classified as discontinued); (8) in the case of a successor to the Company by consolidation or merger or as a transferee of the Company's assets, any earnings of the successor corporation prior to such consolidation, merger or transfer of assets; (9) write downs resulting from the impairment of intangible assets; and (10) the amount of amortization or write-off of deferred financing costs and debt issuance costs of the Company and its Restricted Subsidiaries during such period and any premium or penalty paid in connection with redeeming or retiring Indebtedness of the Company and its Restricted Subsidiaries prior to the stated maturity thereof pursuant to the agreements governing such Indebtedness. "Consolidated Net Tangible Assets" means, as of any date of determination, the total assets, less goodwill and other intangibles (other than patents, trademarks, copyrights, licenses and other intellectual property), shown on the balance sheet of the Company and its Restricted Subsidiaries for the most recently ended fiscal quarter for which financial statements are available, determined on a consolidated basis in accordance with GAAP. "Consolidated Non-cash Charges" means, with respect to the Company, for any period, the aggregate depreciation, amortization and other non-cash expenses of the Company and the Restricted Subsidiaries reducing Consolidated Net Income of the Company for such period, determined on a consolidated basis in accordance with GAAP (excluding any such charge which requires an accrual of or a reserve for cash charges for any future period). -15- "Corporate Trust Department" means the principal corporate trust office of the Trustee at which at any particular time its corporate trust business shall be principally administered, which office at the date of this Indenture is located at 5847 San Filipe, Suite 1050, Houston, Texas 77057. "Covenant Defeasance" has the meaning set forth in Section 8.01. "Credit Agent" means JPMorgan Chase Bank in its capacity as collateral agent under the Credit Agreement or any Person designated the "Credit Agent" pursuant to the Intercreditor Agreement. "Credit Agreement" means the Credit Agreement dated as of September 30, 1999, among the Company, the Guarantors, the lenders party thereto in their capacities as lenders thereunder and Commerzbank and Bank of America, as co-documentation agents, Citibank, N.A., as syndication agent, and JPMorgan Chase Bank, as administrative agent, together with the documents related thereto (including, without limitation, any guarantee agreements and security documents), in each case as such agreements may be amended (including any amendment and restatement thereof), supplemented or otherwise modified from time to time, including any agreement extending the maturity of, refinancing, replacing or otherwise restructuring (including increasing the amount of available borrowings thereunder (provided that such increase in borrowings is permitted by Section 4.03 (including the definition of Permitted Indebtedness)) or adding Subsidiaries as additional borrowers or guarantors thereunder) all or any portion of the Indebtedness under such agreement or any successor or replacement agreement and whether by the same or any other agent, lender or group of lenders. "Credit Agreement Obligations" means all Obligations under or pursuant to the Credit Agreement. "Credit Facilities" means one or more debt facilities (including the Credit Agreement) or commercial paper facilities providing for revolving credit loans, term loans, receivables financing (including through the sale of receivables to lenders or to special purpose entities formed to borrow from lenders against such receivables) or letters of credit, or any debt securities or other form of debt financing (including convertible or exchangeable debt instruments), in each case, as amended, supplemented, modified, extended, renewed, restated or refunded in whole or in part from time to time. "Currency Agreement" means any foreign exchange contract, currency swap agreement or other similar agreement or arrangement designed to protect the Company or any Restricted Subsidiary against fluctuations in currency values. "Custodian" means any receiver, trustee, assignee, liquidator, sequestrator or similar official under any Bankruptcy Law. -16- "Default" means an event or condition the occurrence of which is, or with the lapse of time or the giving of notice or both would be, an Event of Default. "Defaulted Interest" has the meaning set forth in Section 6.11. "Depository" means, with respect to the Securities issued in the form of one or more Global Securities, The Depository Trust Company or another Person designated as Depository by the Company, which must be a clearing agency registered under the Exchange Act. "Designation" has the meaning set forth in Section 4.20. "Designation Amount" has the meaning set forth in Section 4.20. "Destruction" means any damage to, loss of or destruction of all or any portion of the Collateral. "Discharge of First Priority Claims" means, except to the extent otherwise provided in the Intercreditor Agreement, payment in full in cash of (a) the principal of and interest and premium, if any, on all Indebtedness outstanding under the First-Lien Credit Facilities or, with respect to letters of credit outstanding thereunder, delivery of cash collateral or backstop letters of credit in respect thereof in compliance with such First-Lien Credit Facilities, as applicable, in each case after or concurrently with termination of all commitments to extend credit thereunder and (b) any other First Priority Claims that are due and payable or otherwise accrued and owing at or prior to the time such principal and interest are paid. "Disqualified Capital Stock" means that portion of any Capital Stock which, by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable), or upon the happening of any event, matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or is mandatorily exchangeable for Indebtedness, or is redeemable or exchangeable for Indebtedness, at the sole option of the holder thereof on or prior to the final maturity date of the Securities. "Domestic Restricted Subsidiary" means a Restricted Subsidiary incorporated or otherwise organized under the laws of the United States or any state thereof or the District of Columbia. "DTC" means the Depository Trust Company or any successor thereto. "Equity Offering" has the meaning set forth in Paragraph 6 of the Securities. "Event of Default" has the meaning provided in Section 6.01. -17- "Exchange Act" means the Securities Exchange Act of 1934, as amended, or any successor statute or statutes thereto, and the rules and regulations of the Commission promulgated thereunder. "Excluded Collateral" means (i) any property or assets owned by any Foreign Subsidiary, Immaterial Domestic Subsidiary, Accounts Receivable Entity or Finance Subsidiary, (ii) the Capital Stock or other securities of Foreign Subsidiaries, (iii) any Capital Stock and other securities of Domestic Restricted Subsidiaries to the extent the Applicable Value of such Capital Stock and other securities (on a Subsidiary-by-Subsidiary basis) is equal to or greater than 20% of the aggregate principal amount of the Securities then outstanding and (iv) proceeds and products from any and all of the foregoing excluded collateral described in clauses (i) through (iii), unless such proceeds or products would otherwise constitute Collateral within the definition thereof. In addition, in the event that Rule 3-16 or Rule 3-10 of Regulation S-X under the Securities Act is amended, modified or interpreted by the Commission to require (or is replaced with another rule or regulation, or any other law, rule or regulation is adopted, which would require) the filing with the Commission (or any other governmental agency) of separate financial statements of any Domestic Subsidiary of the Company due to the fact that such Domestic Subsidiary's Capital Stock or other securities secure the Securities, then the Capital Stock or other securities of such Subsidiary shall automatically be deemed not to be part of the Collateral but only to the extent necessary to not be subject to such requirement. In the event that Rule 3-16 or Rule 3-10 of Regulation S-X under the Securities Act is amended, modified or interpreted by the Commission to permit (or are replaced with another rule or regulation, or any other law, rule or regulation is adopted, which would permit) such Domestic Subsidiary's Capital Stock and other securities to secure the Securities in excess of the amount then pledged without the filing with the Commission (or any other governmental agency) of separate financial statements of such Domestic Subsidiary, then the Capital Stock and other securities of such Subsidiary shall automatically be deemed to be a part of the Collateral but only to the extent necessary to not be subject to any such financial statement requirement. "Fair Market Value" means, with respect to any asset or property, the price which could be negotiated in an arm's-length, free market transaction, for cash, between a willing seller and a willing and able buyer, neither of whom is under undue pressure or compulsion to complete the transaction. Fair Market Value shall be determined by the Board of Directors of the Company acting reasonably and in good faith and shall be evidenced by a Board Resolution of the Board of Directors of the Company. "Final Maturity Date" means July 15, 2013. "Finance Subsidiary" means a Restricted Subsidiary that is organized solely for the purpose of owning Indebtedness of the Company and/or other Restricted Subsidiaries -18- and issuing securities the proceeds of which are utilized by the Company and/or other Restricted Subsidiaries, and which engages only in such activities and activities incident thereto. "First-Lien Credit Facilities" means (a) the Credit Facilities provided pursuant to the Credit Agreement and (b) any other Credit Facility, that, in the case of both clauses (a) and (b), is secured by a Lien permitted pursuant to clause (B) of Section 4.15. "First Priority Cash Management Obligations" means any Cash Management Obligations secured by any Common Collateral under the same First Priority Collateral Documents that secure Obligations under the Senior Credit Agreement. "First Priority Claims" means (a) all Credit Agreement Obligations, (b) all Obligations under one or more First-Lien Credit Facilities (other than the Credit Facilities provided pursuant to the Credit Agreement), the Indebtedness under each of which is designated by the Company as "First Priority Claims" for purposes of this Indenture, provided that the First Priority Lenders under each First-Lien Credit Facility then in effect have consented to such designation pursuant to the provisions of the First Priority Documents then in effect, (c) all other Obligations of the Company or any other Grantor under the First Priority Documents, including all First Priority Hedging Obligations and First Priority Cash Management Obligations and (d) all Future Other First-Lien Obligations. First Priority Claims shall include all interest accrued or accruing (or which would, absent the commencement of an Insolvency or Liquidation Proceeding, accrue) after the commencement of an Insolvency or Liquidation Proceeding in accordance with and at the rate specified in the relevant First Priority Document whether or not the claim for such interest is allowed as a claim in such Insolvency or Liquidation Proceeding. To the extent any payment with respect to the First Priority Claims (whether by or on behalf of any Grantor, as proceeds of security, enforcement of any right of set-off or otherwise) is declared to be fraudulent or preferential in any respect, set aside or required to be paid to a debtor in possession, trustee, receiver or similar Person, then the obligation or part thereof originally intended to be satisfied shall be deemed to be reinstated and outstanding as if such payment had not occurred. Notwithstanding the foregoing, the Securities and related Obligations will not constitute First Priority Claims and Collateral therefor will not constitute First Priority Collateral even if any proceeds of the Securities are used to repay Obligations under the Credit Agreement. Notwithstanding anything to the contrary contained in this definition, any Obligation under a First Priority Document (including any Cash Management Obligations or Hedging Obligations) shall constitute a "First Priority Claim" if the Credit Agent or the relevant First Priority Lender or First Priority Lenders under such First Priority Document shall have received a written representation from the Company in or in connection with such First Priority Document that such Obligation constitutes a "First Priority Claim" under and as defined in this Indenture (whether or not such Obligation is at any time determined not to have been permitted to be incurred under this Indenture). -19- "First Priority Collateral" means all of the assets of any Grantor, whether real, personal or mixed, with respect to which a Lien is granted or held as security for any First Priority Claim. "First Priority Collateral Documents" means any agreement, document or instrument pursuant to which a Lien is granted securing any First Priority Claims or under which rights or remedies with respect to such Liens are governed. "First Priority Documents" means the Credit Agreement, the First Priority Collateral Documents, and each of the other agreements, documents and instruments (including each agreement, document or instrument providing for or evidencing a First Priority Hedging Obligation or First Priority Cash Management Obligation) providing for or evidencing any other Obligation under the Credit Agreement or any other First-Lien Credit Facility or any Future Other First-Lien Obligations, and any other related document or instrument executed or delivered pursuant to any First Priority Document at any time or otherwise evidencing any First Priority Claims. "First Priority Hedging Obligations" means any Hedging Obligations secured by any Common Collateral under the same First Priority Collateral Documents that secure Obligations under the Senior Credit Agreement. "First Priority Lenders" means the Persons holding First Priority Claims, including the Credit Agent. "First Priority Liens" means all Liens that secure the First Priority Claims. "Foreign Restricted Subsidiary" means any Restricted Subsidiary that is organized and existing under the laws of a jurisdiction other than the United States, any State thereof or the District of Columbia. "Foreign Subsidiary" means any Subsidiary that is organized and existing under the laws of a jurisdiction other than the United States, any State thereof or the District of Columbia. "Four Quarter Period" has the meaning provided in the definition of "Combined Fixed Charge Coverage Ratio" above. "Funding Guarantor" has the meaning provided in Section 10.05. "Future Other First-Lien Obligations" means all Obligations of the Company or any other Grantor in respect of Cash Management Obligations or Hedging Obligations that are designated by the Company as "First Priority Claims" for purposes of this Indenture (other than any First Priority Cash Management Obligations and First Priority Hedging Obligations); -20- provided that the required lenders (however denominated) under any Senior Credit Agreement then in effect have consented to such designation. "GAAP" means generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as may be approved by a significant segment of the accounting profession of the United States, which are in effect as of the Issue Date. "Global Security" means a security evidencing all or a part of the Securities issued to the Depository in accordance with Section 2.01 and bearing the legend prescribed in Exhibit C. "Grantors" means each of the Company and the Subsidiaries that has executed and delivered a Security Document or a First Priority Collateral Document. "Guarantee" has the meaning set forth in Section 4.18. "Guaranteed Indebtedness" has the meaning set forth in Section 4.18. "Guarantor" means (1) each Wholly Owned Domestic Restricted Subsidiary of the Company (other than any Immaterial Domestic Subsidiaries, Accounts Receivable Entities and Finance Subsidiaries) as of the Issue Date and (2) each other Restricted Subsidiary that in the future is required to or executes a Subsidiary Guarantee pursuant to Section 4.18 or otherwise; provided that any Person constituting a Guarantor as described above shall cease to constitute a Guarantor when its Subsidiary Guarantee is released in accordance with the terms of this Indenture. "Hedging Obligations" means, with respect to any Person, the obligations of such Person in respect of (a) interest rate or currency swap agreements, interest rate or currency cap agreements, interest rate or currency collar agreements or (b) other agreements or arrangements designed to protect such Person against fluctuations in interest rates and/or currency exchange rates. "Holder" or "Securityholder" means a Person in whose name a Security is registered on the Registrar's books. "Immaterial Domestic Subsidiaries" means at any time, any Domestic Restricted Subsidiary of the Company having total assets (as determined in accordance with GAAP) in an amount of less than 1% of the consolidated total assets of the Company and its Domestic Restricted Subsidiaries (as determined in accordance with GAAP); provided, however, that the total assets (as so determined) of all Immaterial Domestic Subsidiaries shall not -21- exceed 5% of consolidated total assets of the Company and its Domestic Restricted Subsidiaries (as so determined). In the event that the total assets of all Immaterial Domestic Subsidiaries exceed 5% of consolidated total assets of the Company and its Domestic Restricted Subsidiaries, the Company will designate Domestic Restricted Subsidiaries that would otherwise be Immaterial Domestic Subsidiaries to be excluded as Immaterial Domestic Subsidiaries until such 5% threshold is met. Notwithstanding the foregoing, no Domestic Restricted Subsidiary that guarantees the Credit Agreement or any Credit Agreement Obligation shall be deemed an Immaterial Domestic Subsidiary. "incur" has the meaning provided in Section 4.03. "Indebtedness" means, with respect to any Person, without duplication: (1) all Obligations of such Person for borrowed money; (2) all Obligations of such Person evidenced by bonds, debentures, notes or other similar instruments; (3) all Capitalized Lease Obligations of such Person and Attributable Debt of such Person; (4) all Obligations of such Person issued or assumed as the deferred purchase price of property, all conditional sale obligations and all Obligations under any title retention agreement (but excluding trade accounts payable and other accrued liabilities arising in the ordinary course of business that are not overdue by 90 days or more or are being contested in good faith by appropriate proceedings promptly instituted and diligently conducted); (5) all Obligations for the reimbursement of any obligor on any letter of credit, banker's acceptance or similar credit transaction; (6) guarantees and other contingent obligations in respect of Indebtedness of any other Person referred to in clauses (1) through (5) above and clauses (8) and (10) below; (7) all Obligations of any other Person of the type referred to in clauses (1) through (6) which are secured by any Lien on any property or asset of such Person, the amount of such Obligation being deemed to be the lesser of the Fair Market Value of such property or asset or the amount of the Obligation so secured; (8) all Obligations under currency agreements and interest swap agreements of such Person; -22- (9) all Disqualified Capital Stock of the Company and all Preferred Stock of a Restricted Subsidiary with the amount of Indebtedness represented by such Disqualified Capital Stock or Preferred Stock being equal to the greater of its voluntary or involuntary liquidation preference and its maximum fixed repurchase price, but excluding accrued and unpaid dividends, if any; and (10) all Outstanding Permitted Receivables Financings. For purposes hereof, the "maximum fixed repurchase price" of any Disqualified Capital Stock or Preferred Stock which does not have a fixed repurchase price shall be calculated in accordance with the terms of such Disqualified Capital Stock or Preferred Stock as if such Disqualified Capital Stock or Preferred Stock were purchased on any date on which Indebtedness shall be required to be determined pursuant to this Indenture, and if such price is based upon, or measured by, the Fair Market Value of such Disqualified Capital Stock or Preferred Stock, such Fair Market Value shall be determined reasonably and in good faith by the Board of Directors of the issuer of such Disqualified Capital Stock or Preferred Stock. "Indenture" means this Indenture, as amended or supplemented from time to time in accordance with the terms hereof. "Independent" when used with respect to any specified Person means such a Person who (a) is in fact independent; (b) does not have any direct financial interest or any material indirect financial interest in the Company or any of its Subsidiaries, or in any Affiliate of the Company or any of its Subsidiaries; and (c) is not an officer, employee, promoter, underwriter, trustee, partner, director or Person performing similar functions for the Company or any of its Subsidiaries. Whenever it is provided in this Indenture that any Independent Person's opinion or certificate shall be furnished to the Trustee, such Person shall be appointed by the Company, and such opinion or certificate shall state that the signer has read this definition and that the signer is Independent within the meaning hereof. "Independent Financial Advisor" means a firm (1) which does not, and whose directors, officers and employees and Affiliates do not, have a direct or indirect material financial interest in the Company and (2) which, in the judgment of the Board of Directors of the Company, is otherwise independent and qualified to perform the task for which it is to be engaged. "Initial Purchasers" means the initial purchasers party to the Purchase Agreement. "Insolvency or Liquidation Proceeding" means (a) any voluntary or involuntary case or proceeding under any Bankruptcy Law with respect to any Grantor, (b) any other voluntary or involuntary insolvency, reorganization or bankruptcy case or proceeding, or any receivership, liquidation, reorganization or other similar case or proceeding with respect to -23- any Grantor or with respect to any of their respective assets, (c) any liquidation, dissolution, reorganization or winding up of any Grantor whether voluntary or involuntary and whether or not involving insolvency or bankruptcy or (d) any assignment for the benefit of creditors or any other marshaling of assets and liabilities of any Grantor. "Institutional Accredited Investor" means an institution that is an "accredited investor" as that term is defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act. "Intercreditor Agreement" means (a) that certain Intercreditor Agreement, dated as of the Issue Date, by and among the Company, JPMorgan Chase Bank, as Credit Agent, and Wachovia Bank, National Association, as Trustee and as Collateral Agent, as amended (including any amendment and restatement thereof), supplemented or otherwise modified from time to time and (b) any substantially identical intercreditor agreement hereafter entered into pursuant to Section 12.11(c). "Interest Payment Date" means the stated maturity of an installment of interest on the Securities. "Interest Swap Obligations" means the obligations of the Company and the Restricted Subsidiaries pursuant to any arrangement with any other Person, whereby, directly or indirectly, the Company or any Restricted Subsidiary is entitled to receive from time to time periodic payments calculated by applying either a floating or a fixed rate of interest on a stated notional amount in exchange for periodic payments made by such other Person calculated by applying a fixed or a floating rate of interest on the same notional amount and shall include, without limitation, interest rate swaps, caps, floors, collars and similar agreements. "Investment" means, with respect to any Person, any direct or indirect loan or other extension of credit (including, without limitation, a guarantee) or capital contribution to (by means of any transfer of cash or other property to others or any payment for property or services for the account or use of others), or any purchase or acquisition by such Person of any Capital Stock, bonds, notes, debentures or other securities or evidences of Indebtedness issued by, any Person. "Investment" shall exclude extensions of trade credit by the Company and the Restricted Subsidiaries on commercially reasonable terms in accordance with normal trade practices of the Company or such Restricted Subsidiaries, as the case may be. If the Company or any Restricted Subsidiary sells or otherwise disposes of any Capital Stock of any Restricted Subsidiary (the "Referent Subsidiary") such that, after giving effect to any such sale or disposition, the Referent Subsidiary shall cease to be a Restricted Subsidiary, the Company shall be deemed to have made an Investment on the date of any such sale or disposition equal to the Fair Market Value of the Capital Stock of the Referent Subsidiary not sold or disposed of. "Issue Date" means the date of original issuance of the Securities. -24- "Legal Defeasance" has the meaning set forth in Section 8.01. "Lien" means any lien, mortgage, deed of trust, deed to secure debt, pledge, security interest, charge or encumbrance of any kind (including any conditional sale or other title retention agreement, any lease in the nature thereof and any agreement to give any security interest). "Liens Securing Note Obligations" has the meaning set forth in Section 12.11. "Liens Securing Other Second-Lien Obligations" has the meaning set forth in Section 12.11. "Mortgaged Property" means each of the Company's properties at 1801 Highway 49B North, Paragould, Arkansas 72450, 2000 South Bolton Street, Paragould, Arkansas 72450, 200 McIntyre Dr., Hartwell, Georgia 30643, 503 Weatherhead St., Angola, Indiana 46703, 4852 Hoffman St., Elkhart, Indiana 46516, 3901 Willis Road, Grass Lake, Michigan 49240, 2701 North Dettman Road, Jackson, Michigan 49201, 929 Anderson Road, Litchfield, Michigan 49252, 13910 Lake Drive (Bolles Harbor), Monroe, Michigan 48161, 1 International Drive, Monroe, Michigan 48161, 121 Meridian Dr, Cozad, Nebraska 69130, P.O. Box 348 - S. Highway 15, Seward, Nebraska 68434-0348, 33 Lockwood Rd., Milan, Ohio 44846, 11800 State Route 424, Napolean, Ohio, 4500 Early Road, Harrisonburg, Virginia 22801, 3160 Abbot Lane, Harrisonburg, Virginia 22801, 10840 West Allen Road, Hayward, Wisconsin 54843 and each other real property which is subject to a Second Priority Mortgage. "Net Cash Proceeds" means, with respect to any Asset Sale, the proceeds in the form of cash or Cash Equivalents, including payments in respect of deferred payment obligations when received in the form of cash or Cash Equivalents (other than the portion of any such deferred payment constituting interest), received by the Company or any of the Restricted Subsidiaries from such Asset Sale net of: (1) reasonable out-of-pocket expenses and fees relating to such Asset Sale (including, without limitation, legal, accounting and investment banking fees, sales commissions and relocation expenses); (2) taxes paid or payable after taking into account any reduction in consolidated tax liability due to available tax credits or deductions and any tax sharing arrangements; (3) repayments of Indebtedness secured by the property or assets subject to such Asset Sale that is required to be repaid in connection with such Asset Sale; and (4) appropriate amounts to be determined by the Company or any Restricted Subsidiary, as the case may be, as a reserve, in accordance with GAAP, -25- against any liabilities associated with such Asset Sale and retained by the Company or any Restricted Subsidiary, as the case may be, after such Asset Sale, including, without limitation, pension and other post-employment benefit liabilities, liabilities related to environmental matters and liabilities under any indemnification obligations associated with such Asset Sale. "Net Insurance Proceeds" means the insurance proceeds (excluding liability insurance proceeds payable to the Trustee for any loss, liability or expense incurred by it and excluding the proceeds of business interruption insurance) or condemnation awards actually received by the Company or any Restricted Subsidiary of the Company as a result of the Destruction or Taking of all or any portion of the Collateral, net of: (1) reasonable out-of-pocket expenses and fees paid by the Company or a Restricted Subsidiary relating to such Taking or Destruction (including, without limitation, expenses of attorneys and insurance adjusters); (2) taxes paid or payable by the Company or a Restricted Subsidiary after taking into account any reduction in consolidated tax liability due to available tax credits or deductions and any tax sharing arrangements; and (3) repayment of Indebtedness that is secured by the property or assets that are the subject of such Taking or Destructions; provided that, in the case of any Destruction or Taking involving Collateral, the Lien securing such Indebtedness constitutes a Lien permitted by this Indenture to be prior to the Lien granted to the Collateral Agent for the benefit of the Trustee and the Holders pursuant to the Security Documents. "Net Proceeds Offer" has the meaning set forth in Section 4.12. "Net Proceeds Offer Amount" has the meaning set forth in Section 4.12. "Net Proceeds Offer Payment Date" has the meaning set forth in Section 4.12. "Net Proceeds Offer Trigger Date" has the meaning set forth in Section 4.12. "New York Presenting Agent" has the meaning set forth in Section 2.03. "Obligations" means any and all obligations with respect to the payment of (a) any principal of or interest (including interest accruing on or after the commencement of any Insolvency or Liquidation Proceedings, whether or not a claim for post-filing interest is allowed in such proceeding) or premium on any Indebtedness, including any reimbursement obligation in respect of any letter of credit, (b) any fees, indemnification obligations, damages, expense reimbursement obligations or other liabilities payable under the documentation -26- governing any Indebtedness, (c) any obligation to post cash collateral in respect of letters of credit and any other obligations and (d) any Cash Management Obligations or Hedging Obligations. "Offering Memorandum" means the offering memorandum of the Company dated June 10, 2003 related to the Securities. "Officer" means, with respect to any Person, the Chairman of the Board, the Chief Executive Officer, the President, any Vice President and the Chief Financial Officer of such Person. "Officers' Certificate" means a certificate signed by an Officer of the Company and another Officer or the secretary, treasurer or controller of the Company. "Offshore Physical Securities" has the meaning provided in Section 2.01. "Opinion of Counsel" means a written opinion from legal counsel which is and who are acceptable to the Trustee or, if addressed to the Collateral Agent, to the Collateral Agent. "Other Second-Lien Obligations" means any Indebtedness of the Company or any Restricted Subsidiary, other than the Securities, that is secured by a Permitted Lien described in Section 4.15 granted to a Common Collateral Agent and that is designated by the Company as an "Other Second-Lien Obligation" upon the incurrence thereof for the purposes of this Indenture. "Outstanding Permitted Receivables Financings" means the aggregate amount of the receivables sold or financed pursuant to a Permitted Receivables Financing that remain uncollected at any one time. "Pari Passu Indebtedness" means any unsubordinated Indebtedness of the Company (other than any Indebtedness owed to any Subsidiary of the Company). "Participants" has the meaning provided in Section 2.15. "Paying Agent" has the meaning provided in Section 2.03. "Payment Default" has the meaning provided in Section 6.01. "Permitted Indebtedness" means, without duplication, each of the following: (1) Indebtedness under the Securities, this Indenture and any Subsidiary Guarantees outstanding on the Issue Date; -27- (2) Indebtedness incurred pursuant to the Credit Agreement (or, in the case of clause (2)(x) below, pursuant to a Credit Facility) in an aggregate principal amount at any time outstanding not to exceed the greater of: (x) the sum of (i) $1,000 million (reduced by any required permanent repayments with the proceeds of Asset Sales (which are accompanied by a corresponding permanent commitment reduction) thereunder) and (ii) $150.0 million less the aggregate amount then outstanding under the Outstanding Permitted Receivables Financings referred to in clause (14) below; and (y) the sum of (A) 85% of the net book value of the accounts receivable of the Company and the Restricted Subsidiaries and (B) 50% of the net book value of the inventory of the Company and the Restricted Subsidiaries; (3) other Indebtedness of the Company and the Restricted Subsidiaries outstanding on the Issue Date reduced by the amount of any scheduled amortization payments or mandatory prepayments when actually paid or permanent reductions are made thereon; (4) Interest Swap Obligations of the Company covering Indebtedness of the Company or any Guarantor and Interest Swap Obligations of any Restricted Subsidiary covering Indebtedness of such Restricted Subsidiary; provided, however, that such Interest Swap Obligations are entered into to protect the Company and the Restricted Subsidiaries from fluctuations in interest rates on Indebtedness incurred in accordance with this Indenture to the extent the notional principal amount of such Interest Swap Obligations does not exceed the principal amount of the Indebtedness to which such Interest Swap Obligations relate; (5) Indebtedness under Currency Agreements; provided that in the case of Currency Agreements which relate to Indebtedness, such Currency Agreements do not increase the Indebtedness of the Company and the Restricted Subsidiaries outstanding other than as a result of fluctuations in foreign currency exchange rates or by reason of fees, indemnities and compensation payable thereunder; (6) Indebtedness of a Restricted Subsidiary of the Company to the Company or to a Restricted Subsidiary of the Company for so long as such Indebtedness is held by the Company, a Restricted Subsidiary of the Company or the lenders or collateral agent under the Credit Agreement or the Collateral Agent for the benefit of the Trustee and the holders of the Securities, in each case subject to no Lien held by a Person other than the Company, a Restricted Subsidiary of the Company or the lenders or collateral agent under the Credit Agreement or the Collateral Agent for the benefit of the Trustee and the holders of the Securities; provided that if as of any date any Person -28- other than the Company, a Restricted Subsidiary of the Company or the lenders or collateral agent under the Credit Agreement or the Collateral Agent for its benefit and for the benefit of the Trustee and the holders of the Securities owns or holds any such Indebtedness or holds a Lien in respect of such Indebtedness, such date shall be deemed the incurrence of Indebtedness not constituting Permitted Indebtedness under this clause (6) by the issuer of such Indebtedness; (7) Indebtedness of the Company to a Restricted Subsidiary of the Company for so long as such Indebtedness is held by a Restricted Subsidiary of the Company or the lenders or the collateral agent under the Credit Agreement or the Collateral Agent for the benefit of the Trustee and the holders of the Securities and is subject to no Lien other than a Lien in favor of the lenders or collateral agent under the Credit Agreement or the Collateral Agent for the benefit of the Trustee and the holders of the Securities; provided that (a) any Indebtedness of the Company to any Restricted Subsidiary of the Company is unsecured and, except in the case of Indebtedness owed to Foreign Subsidiaries, subordinated, pursuant to a written agreement to the Company's obligations under this Indenture and the Securities and (b) if as of any date any Person other than a Restricted Subsidiary of the Company owns or holds any such Indebtedness or any Person holds a Lien other than a Lien in favor of the lenders or collateral agent under the Credit Agreement or the Collateral Agent for its benefit and for the benefit of the Trustee and the holders of the Securities in respect of such Indebtedness, such date shall be deemed the incurrence of Indebtedness not constituting Permitted Indebtedness under this clause (7) by the Company; (8) Indebtedness arising from the honoring by a bank or other financial institution of a check, draft or similar instrument inadvertently (except in the case of daylight overdrafts) drawn against insufficient funds in the ordinary course of business; provided, however, that such Indebtedness is extinguished within five Business Days after incurrence; (9) Indebtedness of the Company or any of the Restricted Subsidiaries represented by letters of credit for the account of the Company or any such Restricted Subsidiary, as the case may be, in order to provide security for workers' compensation claims, payment obligations in connection with self-insurance or similar requirements in the ordinary course of business; (10) Refinancing Indebtedness; (11) additional Indebtedness of the Company and the Restricted Subsidiaries in an aggregate principal amount not to exceed $50.0 million at any one time outstanding; -29- (12) additional Indebtedness of Foreign Subsidiaries of the Company under working capital facilities in an aggregate principal amount not to exceed $50.0 million at any one time outstanding; (13) Purchase Money Indebtedness and Capitalized Lease Obligations (and any Indebtedness incurred to Refinance such Purchase Money Indebtedness or Capitalized Lease Obligations) not to exceed 5% of Consolidated Net Tangible Assets at any one time outstanding; and (14) Outstanding Permitted Receivables Financings not to exceed $150.0 million at any one time outstanding less any amount of Indebtedness then outstanding and incurred pursuant to clause (2)(x)(ii) above. If any Indebtedness incurred by the Company or any Restricted Subsidiary would qualify in more than one of the categories of Permitted Indebtedness as set forth in clauses (1) through (14) of this definition, the Company may designate under which category such incurrence shall be deemed to have been made. "Permitted Investments" means (1) Investments by the Company or any Restricted Subsidiary in any Person that is or will become immediately after such Investment a Restricted Subsidiary or that will merge or consolidate into the Company or a Restricted Subsidiary; (2) Investments in the Company by any Restricted Subsidiary; provided that any Indebtedness evidencing such Investment is unsecured; (3) Investments in cash and Cash Equivalents; (4) loans and advances to employees, officers and directors of the Company and the Restricted Subsidiaries in the ordinary course of business for bona fide business purposes not in excess of an aggregate of $15.0 million at any one time outstanding; (5) Currency Agreements and Interest Swap Obligations entered into in the ordinary course of the Company's or a Restricted Subsidiary's businesses and otherwise in compliance with this Indenture; (6) Investments in securities of trade creditors or customers received pursuant to any plan of reorganization or similar arrangement upon the bankruptcy or insolvency of such trade creditors or customers; -30- (7) Investments made by the Company or the Restricted Subsidiaries as a result of consideration received in connection with an Asset Sale made in compliance with Section 4.12; (8) Investments in Persons, including, without limitation, Unrestricted Subsidiaries and joint ventures, engaged in a business similar or related to or logical extensions of the businesses in which the Company and the Restricted Subsidiaries are engaged on the Issue Date, not to exceed 5% of Consolidated Net Tangible Assets at any one time outstanding; (9) Investments in the Securities; and (10) Investments in an Accounts Receivable Entity. "Permitted Liens" means the following types of Liens: (1) Liens for taxes, assessments or governmental charges or claims either (A) not delinquent or (B) contested in good faith by appropriate proceedings and, in each case, as to which the Company or any Restricted Subsidiary shall have set aside on its books such reserves as may be required pursuant to GAAP; (2) statutory Liens of landlords and Liens of carriers, warehousemen, mechanics, suppliers, materialmen, repairmen and other Liens imposed by law incurred in the ordinary course of business for sums not yet delinquent or being contested in good faith, if such reserve or other appropriate provision, if any, as shall be required by GAAP shall have been made in respect thereof; (3) Liens incurred or deposits made in the ordinary course of business in connection with workers' compensation, unemployment insurance and other types of social security, including any Lien securing letters of credit issued in the ordinary course of business consistent with past practice in connection therewith, or to secure the performance of tenders, statutory obligations, surety and appeal bonds, bids, leases, contracts, performance and return-of-money bonds and other similar obligations (exclusive of obligations for the payment of borrowed money); (4) judgment Liens not giving rise to an Event of Default so long as such Lien is adequately bonded and any appropriate legal proceedings which may have been duly initiated for the review of such judgment shall not have been finally terminated or the period within which such proceedings may be initiated shall not have expired; -31- (5) easements, rights-of-way, zoning restrictions and other similar charges or encumbrances in respect of real property not impairing in any material respect the ordinary conduct of the business of the Company or any of the Restricted Subsidiaries; (6) any interest or title of a lessor under any Capitalized Lease Obligation; provided that such Liens do not extend to any property or asset which is not leased property subject to such Capitalized Lease Obligation; (7) purchase money Liens securing Indebtedness incurred to finance property or assets of the Company or any Restricted Subsidiary acquired in the ordinary course of business, and Liens securing Indebtedness which Refinances any such Indebtedness; provided, however, that (A) the related purchase money Indebtedness (or Refinancing Indebtedness) shall not exceed the cost of such property or assets and shall not be secured by any property or assets of the Company or any Restricted Subsidiary other than the property and assets so acquired and (B) the Lien securing the purchase money Indebtedness shall be created within 90 days after such acquisition; (8) Liens upon specific items of inventory or other goods and proceeds of any Person securing such Person's obligations in respect of bankers' acceptances issued or created for the account of such Person to facilitate the purchase, shipment or storage of such inventory or other goods; (9) Liens securing reimbursement obligations with respect to commercial letters of credit which encumber documents and other property relating to such letters of credit and products and proceeds thereof; (10) Liens encumbering deposits made to secure obligations arising from statutory, regulatory, contractual or warranty requirements of the Company or any of the Restricted Subsidiaries, including rights of offset and set-off; (11) Liens securing Interest Swap Obligations which Interest Swap Obligations relate to Indebtedness that is otherwise permitted under this Indenture; (12) Liens securing Indebtedness and other Obligations under Currency Agreements and Cash Management Obligations, in each case permitted under this Indenture; (13) Liens securing Acquired Indebtedness (and any Indebtedness which Refinances such Acquired Indebtedness) incurred in accordance with Section 4.03; provided that (A) such Liens secured the Acquired Indebtedness at the time of and prior to the incurrence of such Acquired Indebtedness by the Company or a Restricted Subsidiary and were not granted in connection with, or in anticipation of the incurrence of such Acquired Indebtedness by the Company or a Restricted Subsidiary and -32- (B) such Liens do not extend to or cover any property or assets of the Company or of any of the Restricted Subsidiaries other than the property or assets that secured the Acquired Indebtedness prior to the time such Indebtedness became Acquired Indebtedness of the Company or a Restricted Subsidiary; (14) Liens securing Indebtedness of Foreign Restricted Subsidiaries incurred in accordance with this Indenture; provided that such Liens do not extend to any property or assets other than property or assets of Foreign Restricted Subsidiaries; and (15) Liens incurred in connection with a Permitted Receivables Financing. "Permitted Receivables Financing" means any sale by the Company or a Restricted Subsidiary of accounts receivable and related assets intended to be (and which shall be treated for purposes of this Indenture as) a true sale transaction with customary limited recourse based upon the collectibility of the receivables sold and the corresponding sale or pledge of such accounts receivable (or an interest therein) in each case without any guarantee by the Company or any Restricted Subsidiary other than an Accounts Receivable Entity. "Person" means an individual, partnership, corporation, unincorporated organization, trust or joint venture, or a governmental agency or political subdivision thereof. "Physical Securities" has the meaning provided in Section 2.01. "Preferred Stock" of any Person means any Capital Stock of such Person that has preferential rights to any other Capital Stock of such Person with respect to dividends or redemptions or upon liquidation. "Private Placement Legend" means the legend initially set forth on the Securities in the form set forth on Exhibit A. "pro forma" means, with respect to any calculation made or required to be made pursuant to the terms of this Indenture, a calculation in accordance with Article 11 of Regulation S-X under the Securities Act as interpreted by the Company's Board of Directors in consultation with its Independent certified public accountants. "Purchase Agreement" means the purchase agreement dated as of June 10, 2003, by and among the Company and the Initial Purchasers. "Purchase Money Indebtedness" means Indebtedness of the Company or any Restricted Subsidiary incurred for the purpose of financing all or any part of the purchase price or the cost of an Asset Acquisition or construction or improvement of any property; provided that the aggregate principal amount of such Indebtedness does not exceed such purchase price or cost. -33- "Qualified Capital Stock" means any Capital Stock that is not Disqualified Capital Stock. "Qualified Institutional Buyer" or "QIB" shall have the meaning specified in Rule 144A under the Securities Act. "Record Date" means the Record Dates specified in the Securities; provided that if any such date is not a Business Day, the Record Date shall be the first day immediately preceding such specified day that is a Business Day. "Redemption Date," when used with respect to any Security to be redeemed, means the date fixed for such redemption pursuant to this Indenture and the Securities. "Redemption Price," when used with respect to any Security to be redeemed, means the price fixed for such redemption, payable in immediately available funds, pursuant to this Indenture and the Securities. "Reference Date" has the meaning set forth in Section 4.04. "Refinance" means in respect of any security or Indebtedness, to refinance, extend, renew, refund, repay, prepay, redeem, defease or retire, or to issue a security or Indebtedness in exchange or replacement for, such security or Indebtedness in whole or in part. "Refinanced" and "Refinancing" shall have correlative meanings. "Refinancing Indebtedness" means any Refinancing by the Company or any Restricted Subsidiary of Indebtedness incurred in accordance with Section 4.03 (other than pursuant to clause (2), (4), (5), (6), (7), (8), (9), (11), (12), (13) or (14) of the definition of Permitted Indebtedness), in each case that does not: (1) result in an increase in the aggregate principal amount of any Indebtedness of such Person as of the date of such proposed Refinancing (plus the amount of any premium reasonably necessary to Refinance such Indebtedness and plus the amount of reasonable expenses incurred by the Company in connection with such Refinancing); or (2) create Indebtedness with (A) a Weighted Average Life to Maturity that is less than the Weighted Average Life to Maturity of the Indebtedness being Refinanced or (B) a final maturity earlier than the final maturity of the Indebtedness being Refinanced; provided that (i) if such Indebtedness being Refinanced is Indebtedness of the Company and/or a Guarantor, then such Refinancing Indebtedness shall be Indebtedness solely of the Company and/or such Guarantor and (ii) if such Indebtedness being Refinanced is subordinate -34- or junior in right of payment to the Securities, then such Refinancing Indebtedness shall be expressly subordinate to the Securities to the same extent and in the same manner as the Indebtedness being Refinanced. "Registrar" has the meaning provided in Section 2.03. "Registration Rights Agreement" means the Registration Rights Agreement dated the Issue Date among the Company, the Guarantors and the Initial Purchasers. "Regulation S" means Regulation S under the Securities Act. "Replacement Assets" means assets and property that will be used in the business of the Company and/or its Restricted Subsidiaries as existing on the Issue Date or in a business the same, similar or reasonably related thereto (including Capital Stock of a Person which becomes a Restricted Subsidiary). "Responsible Officer" shall mean, when used with respect to the Trustee (in all capacities appointed hereunder, including, but not limited to, acting as Collateral Agent), any officer in the Corporate Trust Department of the Trustee including any vice president, assistant vice president or any other officer of the Trustee who customarily performs functions similar to those performed by the Persons who at the time shall be such officers, respectively, and to whom any corporate trust matter is referred because of such officer's knowledge of and familiarity with the particular subject. "Restricted Payment" has the meaning set forth in Section 4.04. "Restricted Security" has the meaning set forth in Rule 144(a)(3) under the Securities Act; provided that the Trustee shall be entitled to request and conclusively rely upon an Opinion of Counsel with respect to whether any Security is a Restricted Security. "Restricted Subsidiary" means any Subsidiary of the Company that has not been designated by the Board of Directors of the Company, by a Board Resolution delivered to the Trustee, as an Unrestricted Subsidiary pursuant to and in compliance with Section 4.20. Any such Designation may be revoked by a Board Resolution of the Company delivered to the Trustee, subject to the provisions of such covenant. "Revocation" has the meaning set forth in Section 4.20. "Rule 144A" means Rule 144A under the Securities Act. "Sale and Leaseback Transaction" means any direct or indirect arrangement with any Person or to which any such Person is a party, providing for the leasing to the Company or a Restricted Subsidiary of any property, whether owned by the Company or any -35- Restricted Subsidiary at the Issue Date or later acquired, which has been or is to be sold or transferred by the Company or such Restricted Subsidiary to such Person or to any other Person from whom funds have been or are to be advanced on the security of such Property. "Second Priority Claims" means all Obligations in respect of the Securities or arising under the Second Priority Documents or any of them. "Second Priority Collateral" means all of the assets of any Grantor, whether real, personal or mixed, with respect to which a Lien is granted or held as security for any Second Priority Claim. "Second Priority Documents" means (a) this Indenture, the Securities, the Security Documents and each of the other agreements, documents or instruments evidencing or governing any Other Second-Lien Obligations and (b) any other related documents or instruments executed and delivered pursuant to any Second Priority Document described in clause (a) above evidencing or governing any Obligations thereunder. "Second Priority Liens" means the second priority Liens on the Collateral described in the Security Documents and granted in favor of the Collateral Agent for the benefit of the Trustee and the Holders of the Securities and holders, if any, of Other Second Lien Obligations. "Second Priority Mortgages" means a collective reference to each mortgage, deed of trust, deed to secure debt, and any other document or instrument under which any Lien on real property owned by any Grantor is granted to secure any Second Priority Claims or under which rights or remedies with respect to any such Liens are governed. "Securities" means the Series A Securities and the Series B Securities treated as a single class of securities, as amended or supplemented from time to time in accordance with the terms hereof, that are issued pursuant to this Indenture. "Securities Act" means the Securities Act of 1933, as amended, or any successor statute or statutes thereto, and the rules and regulations of the Commission promulgated thereunder. "Security Documents" means the Collateral Agreement, the Second Priority Mortgages and any other document or instrument pursuant to which a Lien is granted by any Grantor to secure any Second Priority Claims or under which rights or remedies with respect to any such Lien are governed. "Security Interests" means the Liens on the Collateral created by the Security Documents in favor of the Collateral Agent for the benefit of the Trustee and the holders of the Securities. -36- "Senior Credit Agreement" means the agreement designated as the "Senior Credit Agreement" pursuant to the Intercreditor Agreement. "Senior Subordinated Notes" means the Company's 11-5/8% Senior Subordinated Notes due 2009 issued under that certain indenture dated as of October 14, 1999 with The Bank of New York, as trustee. "Series A Securities" means the 10 1/4% Senior Secured Notes due 2013, Series A, of the Company issued pursuant to this Indenture and sold pursuant to the Purchase Agreement. "Series B Securities" means the 10 1/4% Senior Secured Notes due 2013, Series B, of the Company to be issued in exchange for the Series A Securities pursuant to this Indenture. "Significant Subsidiary" means, with respect to any Person, any Restricted Subsidiary of such Person that satisfies the criteria for a "significant subsidiary" set forth in Rule 1.02(w) of Regulation S-X under the Securities Act. "Special Record Date" has the meaning set forth in Section 6.11. "Subordinated Indebtedness" means Indebtedness as to which the payment of principal (and premium, if any) and interest and other payment obligations is subordinate or junior in right of payment by its terms to the Securities or the Subsidiary Guarantees of the Company or a Guarantor, as applicable, including, without limitation, the Senior Subordinated Notes. "Subsidiary," with respect to any Person, means (1) any corporation of which the outstanding Capital Stock having at least a majority of the votes entitled to be cast in the election of directors under ordinary circumstances shall at the time be owned, directly or indirectly, by such Person or (2) any other Person of which at least a majority of the voting interest under ordinary circumstances is at the time, directly or indirectly, owned by such Person. "Subsidiary Guarantee" has the meaning set forth in Section 4.18 and also includes any Guarantee of an initial Guarantor under Article X of this Indenture. "Surviving Entity" has the meaning set forth in Section 5.01. "Taking" means any taking of all or any portion of the Collateral by condemnation or other eminent domain proceedings, pursuant to any law, general or special, or by reason of the temporary requisition of the use or occupancy of all or any portion of the Collateral by any governmental authority, civil or military, or any sale pursuant to the exercise by -37- any such governmental authority of any right which it may then have to purchase or designate a purchaser or to order a sale of all or any portion of the Collateral. "TIA" means the Trust Indenture Act of 1939 (15 U.S.C. Sections 77aaa-77bbbb), as amended, as in effect on the date of the execution of this Indenture until such time as this Indenture is qualified under the TIA, and thereafter as in effect on the date on which this Indenture is qualified under the TIA, except as otherwise provided in Section 9.03. "Transaction Date" has the meaning set forth in the definition of Combined Fixed Charge Coverage Ratio. "Treasury Yield" means the yield to maturity at the time of computation of United States Treasury securities with a constant maturity (as compiled by and published in the most recent Federal Reserve Statistical Release H.15 (519) which has become publicly available at least two business days prior to the date fixed for redemption (or, if such Statistical Release is no longer published, any publicly available source of similar data)) most nearly equal to the then remaining average life of the Securities, provided that if the average life of the Securities is not equal to the constant maturity of a United States Treasury security for which a weekly average yield is given, the Treasury Yield shall be obtained by linear interpolation (calculated to the nearest one-twelfth of a year) from the weekly average yields of United States Treasury securities for which such yields are given, except that if the average life of the Securities is less than one year, the weekly average yield on actually traded United States Treasury securities adjusted to a constant maturity of one year shall be used. "Trustee" means the party named as such in this Indenture until a successor replaces it in accordance with the provisions of this Indenture and thereafter means such successor. "Unrestricted Subsidiary" means any Subsidiary of the Company designated as such pursuant to and in compliance with Section 4.20. Any such designation may be revoked by a Board Resolution of the Company delivered to the Trustee, subject to the provisions of such covenant. "U.S. Government Obligations" shall have the meaning provided in Section 8.01. "U.S. Legal Tender" means such coin or currency in immediately available funds of the United States of America as at the time of payment shall be legal tender for the payment of public and private debts. "U.S. Physical Securities" shall have the meaning set forth in Section 2.01. -38- "Weighted Average Life to Maturity" means, when applied to any Indebtedness at any date, the number of years obtained by dividing (A) the then outstanding aggregate principal amount of such Indebtedness into (B) the sum of the total of the products obtained by multiplying (I) the amount of each then remaining installment, sinking fund, serial maturity or other required payment of principal, including payment at final maturity, in respect thereof, by (II) the number of years (calculated to the nearest one-twelfth) which will elapse between such date and the making of such payment. "Wholly Owned Domestic Restricted Subsidiary" means a Wholly Owned Restricted Subsidiary that is also a Domestic Restricted Subsidiary. "Wholly Owned Restricted Subsidiary" of the Company means any Restricted Subsidiary of which all the outstanding voting securities (other than in the case of a Foreign Restricted Subsidiary, directors' qualifying shares or an immaterial amount of shares required to be owned by other Persons pursuant to applicable law) are owned by the Company or any other Wholly Owned Restricted Subsidiary. SECTION 1.02. Incorporation by Reference of TIA. Whenever this Indenture refers to a provision of the TIA, such provision is incorporated by reference in, and made a part of, this Indenture. The following TIA terms used in this Indenture have the following meanings: "indenture securities" means the Securities. "indenture security holder" means a Holder or a Securityholder. "indenture to be qualified" means this Indenture. "indenture trustee" or "institutional trustee" means the Trustee. "obligor" on the indenture securities means the Company, any Guarantor and any other obligor on the Securities. All other TIA terms used in this Indenture that are defined by the TIA, defined by TIA reference to another statute or defined by Commission rule and not otherwise defined herein have the meanings assigned to them therein. SECTION 1.03. Rules of Construction. Unless the context otherwise requires (1) a term has the meaning assigned to it; -39- (2) an accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP; (3) "or" is not exclusive; (4) words in the singular include the plural, and words in the plural include the singular; (5) provisions apply to successive events and transactions; and (6) "herein," "hereof" and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision. SECTION 1.04. Designated Senior Debt. For purposes of the indenture that governs the Senior Subordinated Notes, the Securities shall constitute Designated Senior Debt (as such term is defined in such indenture). ARTICLE TWO THE SECURITIES SECTION 2.01. Form and Dating. The Series A Securities and the Trustee's certificate of authentication thereof shall be substantially in the form of Exhibit A annexed hereto, which is hereby incorporated in and expressly made a part of this Indenture. The Series B Securities and the Trustee's certificate of authentication thereof shall be substantially in the form of Exhibit B annexed hereto, which is hereby incorporated in and expressly made a part of this Indenture. The Securities may have notations, legends or endorsements (including notations relating to any Subsidiary Guarantees, stock exchange rule or usage). The Company and the Trustee shall approve the form of the Securities and any notation, legend or endorsement (including notations relating to any Subsidiary Guarantees) on them any such approval to be evidenced by the execution or authentication thereof. Each Security shall be dated the date of its issuance and shall be authenticated by the Trustee. Securities offered and sold in reliance on Rule 144A shall be issued initially in the form of one or more permanent Global Securities in registered form, substantially in the form set forth in Exhibit A, deposited with the Trustee, as custodian for the Depository, and shall bear the legend set forth in Exhibit C. The aggregate principal amount of any Global Security may from time to time be increased or decreased by adjustments made on the records of the Trustee, as custodian for the Depository, as hereinafter provided. -40- Securities offered and sold in offshore transactions in reliance on Regulation S shall be issued in the form of certificated Securities in registered form in substantially the form set forth in Exhibit A (the "Offshore Physical Securities"). Securities offered and sold in reliance on any other exemption from registration under the Securities Act other than as described in the preceding paragraph shall be issued, and Securities offered and sold in reliance on Rule 144A may be issued, in the form of certificated Securities in registered form in substantially the form set forth in Exhibit A (the "U.S. Physical Securities"). The Offshore Physical Securities and the U.S. Physical Securities are sometimes collectively herein referred to as the "Physical Securities." SECTION 2.02. Execution and Authentication. Two Officers, or an Officer and a secretary, treasurer, controller or an assistant secretary of the Company, shall sign, or one Officer shall sign and one Officer or a Secretary or an Assistant Secretary of the Company (each of whom shall, in each case, have been duly authorized by all requisite corporate actions) shall attest to, the Securities for the Company by manual or facsimile signature. If an Officer or a secretary, treasurer, controller or an assistant secretary of the Company whose signature is on a Security was an Officer or a Secretary or an Assistant Secretary of the Company at the time of such execution but no longer holds that office at the time the Trustee authenticates the Security, the Security shall be valid nevertheless. Each Guarantor shall execute its Subsidiary Guarantee in the manner set forth in Section 10.07. A Security shall not be valid until an authorized signatory of the Trustee manually signs the certificate of authentication on the Security. The signature shall be conclusive evidence that the Security has been authenticated under this Indenture. The Trustee shall authenticate Securities for original issue on the Issue Date in the aggregate principal amount of $350,000,000 upon a written order of the Company in the form of an Officers' Certificate. Each such Officers' Certificate shall specify the amount of Securities to be authenticated, the series of Securities and the date on which the Securities are to be authenticated. Except as provided in Section 2.07, additional Securities may be issued only in compliance with Section 4.03 and, in the case of any such additional Securities, such Officers' Certificate shall certify that (i) such issuance is not prohibited under Section 4.03 of this Indenture, and (ii) the principal amount of Securities secured by each Second Priority Mortgage then in effect will be equal to or greater than the principal amount of Securities outstanding after giving effect to such issuance. Any additional Securities shall be part of the same issue as the Securities being issued on the Issue Date and will vote on all matters as one class with the Securities being issued on the Issue Date, including, without limitation, waivers, amendments, redemptions, Change of Control Offers and Net Proceeds Offers. Upon receipt of a written order of the Company in the form of an Officers' Certificate, the Trustee -41- shall authenticate Securities in substitution for Securities originally issued to reflect any name change of the Company. The Trustee may appoint an authenticating agent reasonably acceptable to the Company to authenticate Securities. Unless otherwise provided in the appointment, an authenticating agent may authenticate Securities whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by such agent. An authenticating agent has the same rights as an Agent to deal with the Company and Affiliates of the Company. The Securities shall be issuable only in registered form without coupons in denominations of $1,000 and any integral multiple thereof. SECTION 2.03. Registrar and Paying Agent. The Company shall maintain an office or agency in the Borough of Manhattan, The City of New York, (the "New York Presenting Agent") where (a) Securities may be presented or surrendered in New York City for registration of transfer or for exchange, (b) Securities may be presented or surrendered for payment in New York City and (c) notices and demands upon the Company in respect of the Securities and this Indenture may be served in New York City. The Trustee shall initially act as Registrar ("Registrar") and Paying Agent ("Paying Agent") for the Securities. The Registrar shall keep a register of the Securities and of their transfer and exchange. The Company, upon written notice to the Trustee, may have one or more co-Registrars and one or more additional Paying Agents reasonably acceptable to the Trustee. The term "Paying Agent" includes any additional Paying Agent. The Company initially appoints the Trustee as Registrar, Paying Agent and New York Presenting Agent until such time as the Trustee has resigned or a successor has been appointed. Notices and demands upon the Company in respect of the Securities and this Indenture may be served at the Corporate Trust Department of the Trustee or at the Trustee's office in The City of New York located as of the date hereof at One Penn Plaza, Suite 1414, New York, New York 10119. Neither the Company nor any Affiliate of the Company may act as Paying Agent except as otherwise expressly provided in the form of the Security. SECTION 2.04. Paying Agent To Hold Assets in Trust. The Company shall require each Paying Agent other than the Trustee to agree in writing that each Paying Agent shall hold in trust for the benefit of Holders or the Trustee all assets held by the Paying Agent for the payment of principal of, premium, if any, or interest on the Securities, and shall notify the Trustee in writing of any Default by the Company in making any such payment. The Company at any time may require a Paying Agent to distribute all assets held by it to the Trustee and account for any assets disbursed and the Trustee may at any time, but shall be under no obligation to, during the continuance of any payment Default, upon written request to a Paying Agent, require such Paying Agent to distribute all -42- assets held by it to the Trustee and to account for any assets distributed. Upon distribution to the Trustee of all assets that shall have been delivered by the Company to the Paying Agent, the Paying Agent shall have no further liability for such assets. SECTION 2.05. Securityholder Lists. The Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of Holders. If the Trustee is not the Registrar, the Company shall furnish to the Trustee before each Record Date and at such other times as the Trustee may request in writing a list as of such date and in such form as the Trustee may reasonably require of the names and addresses of Holders, which list may be conclusively relied upon by the Trustee. SECTION 2.06. Transfer and Exchange. Subject to the provisions of Sections 2.15 and 2.16, when Securities are presented to the Registrar or a co-Registrar (through the New York Presenting Agent or otherwise) with a request to register the transfer of such Securities or to exchange such Securities for an equal principal amount of Securities of other authorized denominations of the same series, the Registrar or co-Registrar shall register the transfer or make the exchange as requested if its requirements for such transaction are met; provided, however, that the Securities surrendered for transfer or exchange shall be duly endorsed or accompanied by a written instrument of transfer in form satisfactory to the Company and the Registrar or co-Registrar, duly executed by the Holder thereof or his attorney duly authorized in writing. To permit registrations of transfers and exchanges, the Company shall execute and the Trustee shall authenticate Securities at the Registrar's or co-Registrar's written request. No service charge shall be made for any registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any transfer tax or similar governmental charge payable in connection therewith (other than any such transfer taxes or other governmental charge payable upon exchanges or transfers pursuant to Section 2.02, 2.10, 3.06, 3.07, 4.12, 4.21 or 9.05). The Registrar or co-Registrar shall not be required to register the transfer of or exchange of any Security (i) during a period beginning at the opening of business 15 days before the mailing of a notice of redemption of Securities and ending at the close of business on the day of such mailing and (ii) selected for redemption in whole or in part pursuant to Article Three, except the unredeemed portion of any Security being redeemed in part. Any Holder of a Global Security shall, by acceptance of such Global Security, agree that transfers of beneficial interests in such Global Security may be effected only through a book-entry system maintained by the Depository (or its agent), and that ownership of a beneficial interest in a Global Security shall be required to be reflected in a book entry system. -43- SECTION 2.07. Replacement Securities. If a mutilated Security is surrendered to the Registrar or if the Holder of a Security claims that the Security has been lost, destroyed or wrongfully taken, the Company shall issue and the Trustee shall authenticate upon written notice from the Company a replacement Security if the Trustee's requirements are met. If required by the Trustee or the Company, such Holder must provide an indemnity bond or other indemnity, sufficient in the judgment of both the Company and the Trustee, to protect the Company, the Trustee and any Agent from any loss which any of them may suffer if a Security is replaced. The Company and the Trustee may charge such Holder for their respective reasonable out-of-pocket expenses in replacing a Security, including reasonable fees and expenses of counsel. Every replacement Security is an additional obligation of the Company. SECTION 2.08. Outstanding Securities. Securities outstanding at any time are all the Securities that have been authenticated by the Trustee except those canceled by it, those delivered to it for cancellation and those described in this Section as not outstanding. Subject to Section 2.09, a Security does not cease to be outstanding because the Company or any of its Affiliates holds the Security. If a Security is replaced pursuant to Section 2.07 (other than a mutilated Security surrendered for replacement), it ceases to be outstanding unless the Trustee receives proof satisfactory to it that the replaced Security is held by a bona fide purchaser. A mutilated Security ceases to be outstanding upon surrender of such Security and replacement thereof pursuant to Section 2.07. If on a Redemption Date or the Final Maturity Date the Paying Agent holds U.S. Legal Tender or U.S. Government Obligations sufficient to pay all of the principal and interest due on the Securities payable on that date, then on and after that date such Securities cease to be outstanding and interest on them ceases to accrue. SECTION 2.09. Treasury Securities. In determining whether the Holders of the required principal amount of Securities have concurred in any direction, waiver or consent, Securities owned by the Company, any Guarantor or any of their respective Affiliates shall be disregarded, except that, for the purposes of determining whether the Trustee shall be protected in relying on any such direction, waiver or consent, only Securities that a Responsible Officer of the Trustee actually knows are so owned shall be disregarded. The Trustee may require an Officers' Certificate listing Securities owned by the Company, any Guarantor or any of their respective Affiliates. -44- SECTION 2.10. Temporary Securities. Until definitive Securities are ready for delivery, the Company may prepare and the Trustee shall authenticate temporary Securities upon receipt of a written order of the Company in the form of an Officers' Certificate. The Officers' Certificate shall specify the amount of temporary Securities to be authenticated and the date on which the temporary Securities are to be authenticated. Temporary Securities shall be substantially in the form of definitive Securities but may have variations that the Company considers appropriate for temporary Securities. Without unreasonable delay, the Company shall prepare and the Trustee shall authenticate upon receipt of a written order of the Company pursuant to Section 2.02 definitive Securities in exchange for temporary Securities. SECTION 2.11. Cancellation. The Company at any time may deliver Securities to the Trustee for cancellation. The Registrar and the Paying Agent shall forward to the Trustee any Securities surrendered to them for transfer, exchange or payment. The Trustee, or at the direction of the Trustee, the Registrar or the Paying Agent, and no one else, shall cancel and, at the written direction of the Company, shall dispose of all Securities surrendered for transfer, exchange, payment or cancellation; provided, however, that in no event shall the Trustee be required to destroy any cancelled Securities. Subject to Section 2.07, the Company may not issue new Securities to replace Securities that it has paid or delivered to the Trustee for cancellation. If the Company or any Guarantor shall acquire any of the Securities, such acquisition shall not operate as a redemption or satisfaction of the Indebtedness represented by such Securities unless and until the same are surrendered to the Trustee for cancellation pursuant to this Section 2.11. SECTION 2.12. Defaulted Interest. If the Company defaults in a payment of interest on the Securities, it shall pay interest on overdue principal and on overdue installments of interest (without grace periods) from time to time on demand at the rate of 2% per annum in excess of the rate shown on the Security. SECTION 2.13. CUSIP Number. The Company in issuing the Securities will use a "CUSIP" number, and if so, the Trustee shall use the CUSIP number in notices of redemption or exchange as a convenience to Holders; provided that any such notice may state that no representation is made as to the correctness or accuracy of the CUSIP number printed in the notice or on the Securities, and that reliance may be placed only on the other identification numbers printed on the Securities. -45- SECTION 2.14. Deposit of Moneys. Prior to the close of business of the Paying Agent on the Business Day next prior to each Interest Payment Date and the Final Maturity Date, the Company shall deliver by wire transfer to the Paying Agent in immediately available funds money sufficient to make cash payments due on such Interest Payment Date or the Final Maturity Date, as the case may be, in a timely manner which permits the Paying Agent to remit payment to the Holders on such Interest Payment Date or the Final Maturity Date, as the case may be. SECTION 2.15. Book-Entry Provisions for Global Securities. (a) The Global Securities initially shall (i) be registered in the name of the Depository or the nominee of such Depository, (ii) be delivered to the Trustee as custodian for such Depository and (iii) bear legends as set forth in Exhibit C. Members of, or participants in, the Depository ("Participants") shall have no rights under this Indenture with respect to any Global Security held on their behalf by the Depository, or the Trustee as its custodian, or under the Global Security, and the Depository may be treated by the Company, the Trustee and any agent of the Company or the Trustee as the absolute owner of the Global Security for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the Company, the Trustee or any agent of the Company or the Trustee from giving effect to any written certification, proxy or other authorization furnished by the Depository or impair, as between the Depository and Participants, the operation of customary practices governing the exercise of the rights of a Holder of any Security. (b) Transfers of Global Securities shall be limited to transfers in whole, but not in part, to the Depository, its successors or their respective nominees. Interests of beneficial owners in the Global Securities may be transferred or exchanged for Physical Securities in accordance with the rules and procedures of the Depository and the provisions of Section 2.16. In addition, Physical Securities shall be transferred to all beneficial owners in exchange for their beneficial interests in Global Securities if (i) the Depository notifies the Company that it is unwilling or unable to continue as Depository for any Global Security and a successor depositary is not appointed by the Company within 90 days of such notice or (ii) an Event of Default has occurred and is continuing and the Registrar has received a request from the Depository to issue Physical Securities. (c) In connection with the transfer of Global Securities as an entirety to beneficial owners pursuant to paragraph (b) of this Section 2.15, the Global Securities shall be deemed to be surrendered to the Trustee for cancellation, and the Company shall execute, and the Trustee shall upon written instructions from the Company authenticate and deliver, to each beneficial owner identified by the Depository in exchange for its beneficial interest in the Global Securities, an equal aggregate principal amount of Physical Securities of authorized denominations. -46- (d) Any Physical Security constituting a Restricted Security delivered in exchange for an interest in a Global Security pursuant to paragraph (b) or (c) of this Section 2.15 shall, except as otherwise provided by Section 2.16, bear the Private Placement Legend. (e) The Holder of any Global Security may grant proxies and otherwise authorize any Person, including Participants and Persons that may hold interests through Participants, to take any action which a Holder is entitled to take under this Indenture or the Securities. SECTION 2.16. Registration of Transfers and Exchanges. (a) Transfer and Exchange of Physical Securities. When Physical Securities are presented to the Registrar with a request (i) to register the transfer of the Physical Securities; or (ii) to exchange such Physical Securities for an equal number of Physical Securities of other authorized denominations, the Registrar shall register the transfer or make the exchange as requested if the requirements under this Indenture as set forth in this Section 2.16 for such transactions are met; provided, however, that the Physical Securities presented or surrendered for registration of transfer or exchange (I) shall be duly endorsed or accompanied by a written instrument of transfer in form satisfactory to the Registrar or co-Registrar, duly executed by the Holder thereof or his attorney duly authorized in writing and accompanied by reasonable assurance that each necessary endorsement or instrument is genuine and authorized; and (II) in the case of Physical Securities the offer and sale of which have not been registered under the Securities Act, such Physical Securities shall be accompanied by an Opinion of Counsel addressed to the Registrar to the effect that such transfer and exchange is in compliance with applicable securities law and, in the sole discretion of the Company, by the following additional information and documents, as applicable: (A) if such Physical Security is being delivered to the Registrar by a holder for registration in the name of such holder, without transfer, a certification from such holder to that effect (in substantially the form of Exhibit D hereto); or -47- (B) if such Physical Security is being transferred to a Qualified Institutional Buyer in accordance with Rule 144A under the Securities Act, a certification to that effect (in substantially the form of Exhibit D hereto); or (C) if such Physical Security is being transferred to an Institutional Accredited Investor, delivery of a certification to that effect (in substantially the form of Exhibit D hereto) and a Transferee Certificate for Institutional Accredited Investors in substantially the form of Exhibit E hereto; or (D) if such Physical Security is being transferred in reliance on Regulation S, delivery of a certification to that effect (in substantially the form of Exhibit D hereto) and a Transferee Certificate for Regulation S Transfers in substantially the form of Exhibit F hereto and an Opinion of Counsel reasonably satisfactory to the Company to the effect that such transfer is in compliance with the Securities Act; or (E) if such Physical Security is being transferred in reliance on Rule 144 under the Securities Act, delivery of a certification to that effect (in substantially the form of Exhibit D hereto) and an Opinion of Counsel reasonably satisfactory to the Company to the effect that such transfer is in compliance with the Securities Act; or (F) if such Physical Security is being transferred in reliance on another exemption from the registration requirements of the Securities Act, a certification to that effect (in substantially the form of Exhibit D hereto) and an Opinion of Counsel reasonably satisfactory to the Company to the effect that such transfer is in compliance with the Securities Act. (b) Restrictions on Transfer of a Physical Security for a Beneficial Interest in a Global Security. A Physical Security may not be exchanged for a beneficial interest in a Global Security except upon satisfaction of the requirements set forth below. Upon receipt by the Registrar of a Physical Security, duly endorsed or accompanied by appropriate instruments of transfer, in form satisfactory to the Registrar, together with (A) a certification, in substantially the form of Exhibit D hereto, that such Physical Security is being transferred to a Qualified Institutional Buyer; and (B) written instructions directing the Registrar to make, or to direct the Depository to make, an endorsement on the Global Security to reflect an increase in the aggregate amount of the Securities represented by the Global Security, then the Registrar shall cancel such Physical Security and cause, or direct the Depository to cause, in accordance with the standing instructions and procedures existing between the -48- Depository and the Registrar, the number of Securities represented by the Global Security to be increased accordingly. If no Global Security is then outstanding, the Company shall issue and the Trustee shall upon written instructions from the Company authenticate a new Global Security in the appropriate amount. (c) Transfer and Exchange of Global Securities. The transfer and exchange of Global Securities or beneficial interests therein shall be effected through the Depository, in accordance with this Indenture (including the restrictions on transfer set forth herein) and the procedures of the Depository therefor. (d) Transfer of a Beneficial Interest in a Global Security for a Physical Security. (i) Any Person having a beneficial interest in a Global Security may upon request exchange such beneficial interest for a Physical Security. Upon receipt by the Registrar of written instructions or such other form of instructions as is customary for the Depository from the Depository or its nominee on behalf of any Person having a beneficial interest in a Global Security and upon receipt by the Trustee of a written order or such other form of instructions as is customary for the Depository or the Person designated by the Depository as having such a beneficial interest containing registration instructions and, in the case of any such transfer or exchange of a beneficial interest in Securities the offer and sale of which have not been registered under the Securities Act, an Opinion of Counsel addressed to the Registrar to the effect that such transfer and exchange is in compliance with applicable securities laws and the following additional information and documents: (A) if such beneficial interest is being transferred to the Person designated by the Depository as being the beneficial owner, a certification from such Person to that effect (in substantially the form of Exhibit D hereto); or (B) if such beneficial interest is being transferred to a Qualified Institutional Buyer in accordance with Rule 144A under the Securities Act, a certification to that effect (in substantially the form of Exhibit D hereto); or (C) if such beneficial interest is being transferred to an Institutional Accredited Investor, delivery of a certification to that effect (in substantially the form of Exhibit D hereto) and a Certificate for Institutional Accredited Investors in substantially the form of Exhibit E hereto; or (D) if such beneficial interest is being transferred in reliance on Regulation S, delivery of a certification to that effect (in substantially the form of Exhibit D hereto) and a Transferee Certificate for Regulation S Transfers in substantially the form of Exhibit F hereto and an Opinion of Counsel reasonably satisfactory to the Company to the effect that such transfer is in compliance with the Securities Act; or -49- (E) if such beneficial interest is being transferred in reliance on Rule 144 under the Securities Act, delivery of a certification to that effect (in substantially the form of Exhibit D hereto) and an Opinion of Counsel reasonably satisfactory to the Company to the effect that such transfer is in compliance with the Securities Act; or (F) if such beneficial interest is being transferred in reliance on another exemption from the registration requirements of the Securities Act, a certification to that effect (in substantially the form of Exhibit D hereto) and an Opinion of Counsel reasonably satisfactory to the Company to the effect that such transfer is in compliance with the Securities Act, then the Registrar will cause, in accordance with the standing instructions and procedures existing between the Depository and the Registrar, the aggregate amount of the Global Security to be reduced and, following such reduction, the Company will execute and, upon receipt of an authentication order in the form of an Officers' Certificate, the Trustee will authenticate and deliver to the transferee a Physical Security. (ii) Securities issued in exchange for a beneficial interest in a Global Security pursuant to this Section 2.16(d) shall be registered in such names and in such authorized denominations as the Depository, pursuant to instructions from its direct or indirect participants or otherwise, shall instruct the Registrar in writing. The Registrar shall make such Physical Securities available for delivery to the Persons in whose names such Physical Securities are so registered. (e) Restrictions on Transfer and Exchange of Global Securities. Notwithstanding any other provisions of this Indenture, a Global Security may not be transferred as a whole except by the Depository to a nominee of the Depository or by a nominee of the Depository to the Depository or another nominee of the Depository or by the Depository or any such nominee to a successor Depository or a nominee of such successor Depository. (f) Private Placement Legend. Upon the transfer, exchange or replacement of Securities not bearing the Private Placement Legend, the Registrar shall deliver Securities that do not bear the Private Placement Legend. Upon the transfer, exchange or replacement of Securities bearing the Private Placement Legend, the Registrar shall deliver only Securities that bear the Private Placement Legend unless, and the Trustee is hereby authorized to deliver Securities without the Private Placement Legend if, (i) there is delivered to the Trustee an Opinion of Counsel reasonably satisfactory to the Company and the Trustee to the effect that neither such legend nor the related restrictions on transfer are required in order to maintain compliance with the provisions of the Securities Act or (ii) such Security has been sold pursuant to an effective registration statement under the Securities Act. (g) General. By its acceptance of any Security bearing the Private Placement Legend, each Holder of such a Security acknowledges the restrictions on transfer of -50- such Security set forth in this Indenture and in the Private Placement Legend and agrees that it will transfer such Security only as provided in this Indenture. The Registrar shall retain copies of all letters, notices and other written communications received pursuant to Section 2.15 or this Section 2.16 in accordance with its customary procedures. The Company shall have the right to inspect and make copies of all such letters, notices or other written communications at any reasonable time upon the giving of reasonable written notice to the Registrar. The Registrar and the Trustee shall have no obligation or duty to monitor, determine or inquire as to compliance with any restrictions on transfer imposed under this Indenture or under applicable law with respect to any transfer of any interest in any Security (including any transfers between or among Participants or beneficial owners of interests in any Global Security) other than to require delivery of such certificates and other documentation or evidence as are expressly required by, and to do so if and when expressly required by the terms of, this Indenture, and to examine the same to determine substantial compliance as to form with the express requirements hereof. ARTICLE THREE REDEMPTION SECTION 3.01. Notices to Trustee. If the Company elects to redeem Securities pursuant to Paragraph 5 or Paragraph 6 of the Securities, it shall notify the Trustee in writing of the Redemption Date, the Redemption Price and the principal amount of Securities to be redeemed. The Company shall give notice of redemption to the Trustee at least 45 days but not more than 60 days before the Redemption Date (unless a shorter notice shall be agreed to by the Trustee in writing), together with an Officers' Certificate stating that such redemption will comply with the conditions contained herein. SECTION 3.02. Selection of Securities To Be Redeemed. If fewer than all of the Securities are to be redeemed at any time, the Trustee shall select the Securities to be redeemed in compliance with the requirements of the principal national securities exchange, if any, on which the Securities are listed or, if the Securities are not then listed on a national securities exchange, on a pro rata basis, by lot or by such method as the Trustee shall deem fair and appropriate; provided, however, that if the Securities are redeemed pursuant to Paragraph 6 of the Securities, the Securities shall be redeemed solely on a pro rata basis or on as nearly a pro rata basis as is practicable (subject to the procedures of the Depository) unless the securities exchange, if any, on which the Securities are listed requires a different method. If the Securities are listed on any national securities exchange, the -51- Company shall notify the Trustee in writing of the requirements of such exchange in respect of any redemption. The Trustee shall make the selection from the Securities outstanding and not previously called for redemption and shall promptly notify the Company in writing of the Securities selected for redemption and, in the case of any Security selected for partial redemption, the principal amount thereof to be redeemed. The Trustee may select for redemption portions (equal to $1,000 or any integral multiple thereof) of the principal of Securities that have denominations larger than $1,000. Provisions of this Indenture that apply to Securities called for redemption also apply to portions of Securities called for redemption. SECTION 3.03. Notice of Redemption. At least 30 days but not more than 60 days before a Redemption Date, the Company shall mail or cause to be mailed a notice of redemption by first-class mail, postage prepaid, to each Holder whose Securities are to be redeemed. At the Company's written request delivered at least 15 days prior to the proposed date of such mailing (unless a shorter notice shall be acceptable to the Trustee), the Trustee shall give the notice of redemption in the Company's name and at the Company's expense. Each notice for redemption shall identify the Securities to be redeemed (including CUSIP numbers, if any) and shall state (1) the Redemption Date; (2) the Redemption Price and the amount of accrued interest, if any, to be paid; (3) the name and address of the Paying Agent; (4) that Securities called for redemption must be surrendered to the Paying Agent to collect the Redemption Price plus accrued interest, if any; (5) that, unless the Company defaults in making the redemption payment, interest on Securities called for redemption ceases to accrue on and after the Redemption Date, and the only remaining right of the Holders of such Securities is to receive payment of the Redemption Price and accrued interest, if any, to the Redemption Date upon surrender to the Paying Agent of the Securities redeemed; (6) if any Security is being redeemed in part, the portion of the principal amount of such Security to be redeemed and that, after the Redemption Date, and upon surrender of such Security, a new Security or Securities in aggregate principal amount equal to the unredeemed portion thereof will be issued; (7) if fewer than all the Securities are to be redeemed, the identification of the particular Securities (or portion thereof) to be redeemed, as well as the aggregate -52- principal amount of Securities to be redeemed and the aggregate principal amount of Securities to be outstanding after such partial redemption; and (8) the paragraph of the Securities pursuant to which the Securities are to be redeemed. SECTION 3.04. Effect of Notice of Redemption. Once notice of redemption is mailed in accordance with Section 3.03, Securities called for redemption become due and payable on the Redemption Date and at the Redemption Price plus accrued interest, if any. Upon surrender to the Paying Agent, such Securities called for redemption shall be paid at the Redemption Price (which shall include accrued interest thereon to the Redemption Date), but installments of interest, the maturity of which is on or prior to the Redemption Date, shall be payable to Holders of record at the close of business on the relevant Record Dates. SECTION 3.05. Deposit of Redemption Price. Prior to 11:00 a.m. New York City time on the Redemption Date, the Company shall deposit with the Paying Agent U.S. Legal Tender sufficient to pay the Redemption Price plus accrued interest, if any, of all Securities to be redeemed on that date. If the Company complies with the preceding paragraph, then, unless the Company defaults in the payment of such Redemption Price plus accrued interest, if any, interest on the Securities to be redeemed will cease to accrue on and after the applicable Redemption Date, whether or not such Securities are presented for payment. SECTION 3.06. Securities Redeemed in Part. Upon surrender of a Security that is to be redeemed in part, the Trustee shall authenticate for the Holder a new Security or Securities equal in principal amount to the unredeemed portion of the Security surrendered. ARTICLE FOUR COVENANTS SECTION 4.01. Payment of Securities. The Company shall pay the principal of and interest on the Securities in the manner provided in the Securities. An installment of principal of or interest on the Securities shall be considered paid on the date it is due if the Trustee or Paying Agent holds on that date U.S. Legal Tender designated for and sufficient to pay the installment. -53- The Company shall pay, to the extent such payments are lawful, interest on overdue principal and it shall pay interest on overdue installments of interest (without regard to any applicable grace periods) from time to time on demand at the rate borne by the Securities plus 2% per annum. Interest will be computed on the basis of a 360-day year comprised of twelve 30-day months. SECTION 4.02. Maintenance of Office or Agency. The Company shall maintain in the Borough of Manhattan, The City of New York, the office or agency required under Section 2.03. The Company shall give prompt written notice to the Trustee of the location, and any change in the location, of such office or agency. If at any time the Company shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the address of the Trustee set forth in Section 11.02. The Company hereby initially designates the Trustee's office located at One Penn Plaza, Suite 1414, New York, New York 10119 as its office or agency in the Borough of Manhattan, The City of New York. SECTION 4.03. Limitation on Incurrence of Additional Indebtedness. The Company will not, and will not permit any of the Restricted Subsidiaries to, directly or indirectly, create, incur, issue, assume, guarantee, acquire, become liable, contingently or otherwise, with respect to, or otherwise become responsible for payment of (collectively, "incur") any Indebtedness (other than Permitted Indebtedness); provided, however, that if no Default or Event of Default shall have occurred and be continuing at the time of or as a consequence of the incurrence of any such Indebtedness: (a) the Company, any Guarantor, any Finance Subsidiary that is a Domestic Restricted Subsidiary and any Accounts Receivable Entity that is a Domestic Restricted Subsidiary may incur Indebtedness (including, without limitation, Acquired Indebtedness) if on the date of the incurrence of such Indebtedness, after giving effect to the incurrence thereof, the Consolidated Fixed Charge Coverage Ratio of the Company would be greater than 2.25 to 1.0; and (b) any Restricted Subsidiary that is not a Guarantor (and is not a Finance Subsidiary or an Accounts Receivable Entity that is a Domestic Restricted Subsidiary) may incur Indebtedness (including, without limitation, Acquired Indebtedness) if, on the date of the incurrence of such Indebtedness, after giving effect to the incurrence thereof, (i) the Consolidated Fixed Charge Coverage Ratio of the Company would be greater than 2.25 to 1.0; and -54- (ii) if the agreements governing such Indebtedness contain an encumbrance or restriction on the ability of the applicable Restricted Subsidiary that is not a Guarantor (and is not a Finance Subsidiary or an Accounts Receivable Entity that is a Domestic Restricted Subsidiary) to pay dividends or make distributions on or in respect of its Capital Stock, the Combined Fixed Charge Coverage Ratio of the Restricted Subsidiaries that are not Guarantors would be greater than 2.5 to 1.0. Notwithstanding the foregoing, the Company will not incur any Permitted Indebtedness if the proceeds thereof are used, directly or indirectly, to refinance any Subordinated Indebtedness unless such Permitted Indebtedness is Refinancing Indebtedness. No Indebtedness incurred pursuant to the Consolidated Fixed Charge Coverage Ratio test of the preceding paragraph (including, without limitation, Indebtedness under the Credit Agreement) shall reduce the amount of Indebtedness which may be incurred pursuant to any clause of the definition of Permitted Indebtedness (including, without limitation, Indebtedness under the Credit Agreement pursuant to clause (2) of the definition of Permitted Indebtedness). Indebtedness of a Person existing at the time such Person becomes a Restricted Subsidiary or which is secured by a Lien on an asset acquired by the Company or a Restricted Subsidiary (whether or not such Indebtedness is assumed by the acquiring Person) shall be deemed incurred at the time the Person becomes a Restricted Subsidiary or at the time of the asset acquisition, as the case may be. The Company and the Guarantors will not incur or suffer to exist any Indebtedness that is subordinated in right of payment to any other Indebtedness of the Company or the Guarantors unless such Indebtedness is at least equally subordinated in right of payment to the Securities and any Subsidiary Guarantee. SECTION 4.04. Limitation on Restricted Payments. The Company will not, and will not cause or permit any of the Restricted Subsidiaries to, directly or indirectly: (a) declare or pay any dividend or make any distribution (other than dividends or distributions payable in Qualified Capital Stock of the Company) on or in respect of shares of its Capital Stock to holders of such Capital Stock (including by means of a Person (including an Unrestricted Subsidiary) making such a payment with the proceeds of an Investment made by the Company or any Restricted Subsidiary); (b) purchase, redeem or otherwise acquire or retire for value any Capital Stock of the Company or any warrants, rights or options to purchase or acquire shares -55- of any class of such Capital Stock (including by means of a Person (including an Unrestricted Subsidiary) making such a payment with the proceeds of an Investment made by the Company or any Restricted Subsidiary); (c) make any principal payment on, or purchase, redeem, defease, retire or otherwise acquire for value, prior to any scheduled principal payment, sinking fund or maturity, any Subordinated Indebtedness (other than the principal payment on, or the purchase, redemption, defeasance, retirement or other acquisition for value of, Subordinated Indebtedness made in satisfaction of or anticipation of satisfying a sinking fund obligation, principal installment or final maturity within one year of the due date of such obligation, installment or final maturity); or (d) make any Investment (other than Permitted Investments); (each of the foregoing actions set forth in clauses (a), (b), (c) and (d) being referred to as a "Restricted Payment"), if at the time of such Restricted Payment or immediately after giving effect thereto: (1) a Default or an Event of Default shall have occurred and be continuing; (2) the Company is not able to incur at least $1.00 of additional Indebtedness (other than Permitted Indebtedness) in compliance with Section 4.03; or (3) the aggregate amount of Restricted Payments (including such proposed Restricted Payment) made after March 31, 2003 (the amount expended for such purpose, if other than in cash, being the Fair Market Value of such property as determined reasonably and in good faith by the Board of Directors of the Company) shall exceed the sum of: (v) $30.0 million; plus (w) 50% of the cumulative Consolidated Net Income (or if cumulative Consolidated Net Income shall be a loss, minus 100% of such loss) of the Company earned during the period beginning on the first day of the fiscal quarter commencing on April 1, 2003 and through the end of the most recent fiscal quarter for which financial statements are available prior to the date such Restricted Payment occurs (the "Reference Date") (treating such period as a single accounting period); plus (x) 100% of the Fair Market Value of the net proceeds received by the Company from any Person (other than a Subsidiary of the Company) from the issuance and sale subsequent to March 31, 2003 and on or prior to the Reference Date of Qualified Capital Stock of the Company (excluding any net -56- proceeds from an Equity Offering to the extent used to redeem Securities pursuant to the provisions of paragraph 6 of the Securities) or from the issuance of Indebtedness of the Company that has been converted into or exchanged for Qualified Capital Stock of the Company subsequent to the Issue Date and on or prior to the Reference Date; plus (y) without duplication of any amounts included in clause (3)(x) above, 100% of the Fair Market Value of the net proceeds of any contribution to the common equity capital of the Company received by the Company from a holder of the Company's Capital Stock (excluding any net proceeds from an Equity Offering to the extent used to redeem the Securities pursuant to the provisions of paragraph 6 of the Securities) subsequent to March 31, 2003; plus (z) an amount equal to the lesser of (A) the sum of the Fair Market Value of the Capital Stock of an Unrestricted Subsidiary owned by the Company and/or the Restricted Subsidiaries and the aggregate amount of all Indebtedness of such Unrestricted Subsidiary owed to the Company and each Restricted Subsidiary on the date of Revocation of such Unrestricted Subsidiary as an Unrestricted Subsidiary in accordance with Section 4.20 or (B) the Designation Amount with respect to such Unrestricted Subsidiary on the date of the Designation of such Subsidiary as an Unrestricted Subsidiary in accordance with Section 4.20. Notwithstanding the foregoing, the provisions set forth in the immediately preceding paragraph do not prohibit: (I) the payment of any dividend within 60 days after the date of declaration of such dividend if the dividend would have been permitted on the date of declaration; (II) the acquisition of any shares of Capital Stock of the Company, either (A) solely in exchange for shares of Qualified Capital Stock of the Company or (B) through the application of net proceeds of a substantially concurrent sale for cash (other than to a Subsidiary of the Company) of shares of Qualified Capital Stock of the Company; (III) so long as no Default or Event of Default shall have occurred and be continuing, repurchases of Capital Stock (or rights or options therefor) of the Company from officers, directors, employees or consultants pursuant to equity ownership or compensation plans or stockholders agreements not to exceed $15.0 million in the aggregate subsequent to March 31, 2003; -57- (IV) dividends and distributions paid on Common Stock of a Restricted Subsidiary on a pro rata basis; (V) any purchase or redemption of Indebtedness that ranks subordinate and junior in right of payment to the Securities utilizing any Net Cash Proceeds remaining after the Company has complied with the requirements of Sections 4.12 and 4.21; (VI) any purchase, redemption, defeasance, retirement, payment or prepayment of principal of Subordinated Indebtedness either (i) solely in exchange for shares of Qualified Capital Stock of the Company or (ii) through the application of net proceeds of a substantially concurrent sale for cash (other than to a Subsidiary of the Company) of shares of Qualified Capital Stock of the Company or Refinancing Indebtedness; and (VII) an Investment with the net proceeds of a substantially concurrent sale for cash (other than to a Subsidiary of the Company) of shares of Qualified Capital Stock of the Company. In determining the aggregate amount of Restricted Payments made subsequent to March 31, 2003 in accordance with clause (3) of the first paragraph of this Section 4.04, amounts expended pursuant to clauses (I), (II) and (III), (VI)(ii)(a) and (VII) shall be included in such calculation. Not later than the date the Company is required to file its financial statements with the Commission (without giving effect to any extensions thereof) with respect to any fiscal quarter during which any Restricted Payment was made (which, in the case of the Company's fourth fiscal quarter of any fiscal year, shall be the date on which the Company is required to file its annual financial statements for that fiscal year), the Company will deliver to the Trustee an Officers' Certificate stating that such Restricted Payment complies with this Indenture and setting forth in reasonable detail the basis upon which the required calculations were computed, which calculations may be based upon the Company's latest available internal quarterly financial statements. SECTION 4.05. Corporate Existence. Except as otherwise permitted by Article Five, the Company shall do or cause to be done all things necessary to preserve and keep in full force and effect its corporate existence and the corporate, partnership or other existence of each of the Restricted Subsidiaries in accordance with the respective organizational documents of each Restricted Subsidiary and the rights (charter and statutory) and material franchises of the Company and each of its Restricted Subsidiaries; provided, however, that the Company shall not be required to preserve any such right or franchise, or the corporate existence of any Restricted Subsidiary, if the Board of Directors of the Company shall determine that the preservation thereof is no longer -58- desirable in the conduct of the business of the Company and its Restricted Subsidiaries, taken as a whole, and that the loss thereof is not, and will not be, adverse in any material respect to the Holders. SECTION 4.06. Payment of Taxes and Other Claims. The Company shall pay or discharge or cause to be paid or discharged, before the same shall become delinquent, (i) all material taxes, assessments and governmental charges levied or imposed upon it or any of the Restricted Subsidiaries or upon the income, profits or property of it or any of the Restricted Subsidiaries and (ii) all lawful claims for labor, materials and supplies which, in each case, if unpaid, might by law become a material liability or Lien upon the property of it or any of the Restricted Subsidiaries; provided, however, that the Company shall not be required to pay or discharge or cause to be paid or discharged any such tax, assessment, charge or claim whose amount, applicability or validity is being contested in good faith by appropriate proceedings and for which appropriate provision has been made. SECTION 4.07. Maintenance of Properties and Insurance. (a) The Company shall cause all material properties owned by or leased by it or any of the Restricted Subsidiaries used in the conduct of its business or the business of any of the Restricted Subsidiaries to be improved or maintained and kept in normal condition, repair and working order (reasonable wear and tear excepted) and supplied with all necessary equipment and shall cause to be made all necessary repairs, renewals, replacements, betterments and improvements thereof, all as in its judgment may be necessary, so that the business carried on in connection therewith may be properly and advantageously conducted at all times; provided, however, that nothing in this Section 4.07 shall prevent the Company or any of the Restricted Subsidiaries from discontinuing the use, operation or maintenance of any of such properties, or disposing of any of them, if such discontinuance or disposal is, in the judgment of the Board of Directors of the Company or of the Board of Directors of any Restricted Subsidiary, or of an officer (or other agent employed by the Company or of any of the Restricted Subsidiaries) of the Company or any of its Restricted Subsidiaries having managerial responsibility for any such property, desirable in the conduct of the business of the Company or any Restricted Subsidiary, and if such discontinuance or disposal is not adverse in any material respect to the Holders. (b) The Company shall maintain, and shall cause the Restricted Subsidiaries to maintain, insurance with responsible carriers against such risks and in such amounts, and with such deductibles, retentions, self-insured amounts and co-insurance provisions, as are customarily carried by similar businesses of similar size, including property and casualty loss, workers' compensation and interruption of business insurance. -59- SECTION 4.08. Compliance Certificate; Notice of Default. (a) The Company shall deliver to the Trustee, within 100 days after the close of each fiscal year, an Officers' Certificate stating that a review of the activities of the Company has been made under the supervision of the signing officers with a view to determining whether it has kept, observed, performed and fulfilled its obligations under this Indenture, the Security Documents and the Intercreditor Agreement and further stating, as to each such Officer, Secretary or Controller of the Company signing such certificate, that to the best of his knowledge the Company during such preceding fiscal year has kept, observed, performed and fulfilled each and every such covenant and no Default or Event of Default occurred during such year and at the date of such certificate no Default or Event of Default has occurred and is continuing or, if such signers do know of such Default or Event of Default, the certificate shall describe its status with particularity. The Officers' Certificate shall also notify the Trustee should the Company elect to change the manner in which it fixes its fiscal year end. (b) The annual financial statements delivered pursuant to Section 4.10 shall be accompanied by a written report of the Company's independent accountants (who shall be a firm of established national reputation) that in conducting their audit of such financial statements nothing has come to their attention that would lead them to believe that the Company has violated any provisions of Article Four, Five or Six of this Indenture insofar as they relate to accounting matters or, if any such violation has occurred, specifying the nature and period of existence thereof, it being understood that such accountants shall not be liable directly or indirectly to any Person for any failure to obtain knowledge of any such violation. (c) The Company shall deliver to the Trustee, within ten days after becoming aware of any Default or Event of Default in the performance of any covenant, agreement or condition contained in this Indenture, an Officers' Certificate specifying the Default or Event of Default and describing its status with particularity. Upon the written request of the Trustee (which may be given at any time and from time to time), the Company shall promptly provide written notice to the Trustee confirming that no Default or Event of Default has occurred or is continuing, or if a Default or Event of Default has occurred or is continuing, written notice briefly describing such Default or Event of Default. SECTION 4.09. Compliance with Laws. The Company shall comply, and shall cause each of the Restricted Subsidiaries to comply, with all applicable statutes, rules, regulations, orders and restrictions of the United States of America, all states and municipalities thereof, and of any governmental department, commission, board, regulatory authority, bureau, agency and instrumentality of the foregoing, in respect of the conduct of their respective businesses and the ownership of their respective properties, except for such noncompliances as would not in the aggregate have a material -60- adverse effect on the financial condition or results of operations of the Company and the Restricted Subsidiaries taken as a whole. SECTION 4.10. Reports to Holders. (a) Notwithstanding that the Company may not be subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act, to the extent permitted by the Exchange Act, the Company will file with the Commission, and provide to the Trustee and the Holders of the Securities, the annual reports and the information, documents and other reports (or copies of such portions of any of the foregoing as the Commission may by rules and regulations prescribe) that are specified in Sections 13 and 15(d) of the Exchange Act within the time periods required; provided, however, that availability of the foregoing materials on the Commission's EDGAR service shall be deemed to satisfy the Company's delivery obligations hereunder. In the event that the Company is not permitted to file such reports, documents and information with the Commission pursuant to the Exchange Act, the Company will nevertheless provide such Exchange Act information to the Trustee and the Holders of the Securities as if the Company were subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act within the time periods required by law. (b) If the Company has designated any of its Subsidiaries as an Unrestricted Subsidiary, then the quarterly and annual financial information required by the preceding paragraph will include a reasonably detailed presentation, either on the face of the financial statements or in the footnotes to the financial statements, and in "Management's Discussion and Analysis of Financial Condition and Results of Operations," of the financial condition and results of operations of the Company and the Restricted Subsidiaries. (c) In addition, the Company has agreed that, for so long as any Securities remain outstanding, it will furnish to the Holders and to securities analysts and prospective investors, upon their request, the information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act. Delivery of such reports, information and documents to the Trustee pursuant to this Section 4.10 is for informational purposes only and the Trustee's receipt of such shall not constitute constructive notice of any information contained therein or determinable from information contained therein, including the Company's compliance with any of its covenants hereunder (as to which the Trustee is entitled to rely exclusively on Officers' Certificates). SECTION 4.11. Waiver of Stay, Extension or Usury Laws. The Company covenants (to the extent that it may lawfully do so) that it shall not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension law or any usury law or other law that would prohibit or forgive the Company from paying all or any portion of the principal of and/or interest on the -61- Securities as contemplated herein, wherever enacted, now or at any time hereafter in force, or which may affect the covenants or the performance of this Indenture, and (to the extent that it may lawfully do so) the Company hereby expressly waives all benefit or advantage of any such law, and covenants that it will not hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted. SECTION 4.12. Limitation on Asset Sales. The Company will not, and will not permit any of the Restricted Subsidiaries to, consummate an Asset Sale unless: (1) the Company or the applicable Restricted Subsidiary, as the case may be, receives consideration at the time of such Asset Sale at least equal to the Fair Market Value of the assets sold or otherwise disposed of; (2) at least 75% of the consideration received by the Company or the Restricted Subsidiary, as the case may be, from such Asset Sale shall be in the form of cash or Cash Equivalents and is received at the time of such disposition; and (3) upon the consummation of an Asset Sale, the Company shall apply, or cause such Restricted Subsidiary to apply, the Net Cash Proceeds relating to such Asset Sale within 365 days after receipt thereof either (A) to repay any Applicable Indebtedness and, in the case of any such Applicable Indebtedness under any revolving credit facility, effect a permanent reduction in the availability under such revolving credit facility (or effect a permanent reduction in availability under such revolving credit facility, regardless of the fact that no prepayment is required), (B) to acquire Replacement Assets (which, if Collateral will be made subject to the Liens of the applicable Security Documents), or (C) a combination of prepayment and investment permitted by the foregoing clauses (3)(A) and (3)(B). Pending the final application of the Net Cash Proceeds, the Company and the Restricted Subsidiaries may temporarily reduce Pari Passu Indebtedness (or, in the case of an Asset Sale by a Restricted Subsidiary, Indebtedness of a Restricted Subsidiary) or otherwise invest such Net Cash Proceeds in any manner not prohibited by this Indenture. On the 366th day after an Asset Sale or such earlier date, if any, as the Board of Directors of the Company or of such Restricted Subsidiary determines not to apply the Net Cash Proceeds relating to such Asset Sale as set forth in clauses (3)(A), (3)(B) and (3)(C) of the preceding paragraph (each, a "Net Proceeds Offer Trigger Date"), such aggregate amount of Net Cash Proceeds which have not been applied on or before such Net Proceeds Offer Trigger Date as permitted in clauses (3)(A), (3)(B) and (3)(C) of the preceding paragraph (each a "Net Proceeds Offer Amount") shall be applied by the Company to make an offer to -62- purchase (the "Net Proceeds Offer") on a date (the "Net Proceeds Offer Payment Date") not less than 30 nor more than 60 days following the applicable Net Proceeds Offer Trigger Date, from all Holders on a pro rata basis, that principal amount of Securities equal to the Net Proceeds Offer Amount at a price equal to 100% of the principal amount of the Securities to be purchased, plus accrued and unpaid interest, if any, thereon to the date of purchase; provided, however, that if the Company elects (or is required by the terms of any Applicable Pari Passu Indebtedness), such Net Proceeds Offer may be made ratably to purchase the Securities and such Applicable Pari Passu Indebtedness. If at any time any non-cash consideration received by the Company or any Restricted Subsidiary, as the case may be, in connection with any Asset Sale is converted into or sold or otherwise disposed of for cash (other than interest received with respect to any such non-cash consideration) or Cash Equivalents, then such conversion or disposition shall be deemed to constitute an Asset Sale hereunder and the Net Cash Proceeds thereof shall be applied in accordance with this Section 4.12. The Company may defer the Net Proceeds Offer until there is an aggregate unutilized Net Proceeds Offer Amount equal to or in excess of $35.0 million resulting from one or more Asset Sales or deemed Asset Sales (at which time, the entire unutilized Net Proceeds Offer Amount, and not just the amount in excess of $35.0 million, shall be applied as required pursuant to this paragraph). The first such date the aggregate unutilized Net Proceeds Offer Amount is equal to or in excess of $35.0 million shall be treated for this purpose as the Net Proceeds Offer Trigger Date. In the event of the transfer of substantially all (but not all) of the property and assets of the Company and the Restricted Subsidiaries after the Issue Date as an entirety to a Person in a transaction permitted under Section 5.01, the successor corporation shall be deemed to have sold the properties and assets of the Company and the Restricted Subsidiaries not so transferred for purposes of this Section 4.12, and shall comply with the provisions of this Section 4.12 with respect to such deemed sale as if it were an Asset Sale. In addition, the Fair Market Value of such properties and assets of the Company or the Restricted Subsidiaries deemed to be sold shall be deemed to be Net Cash Proceeds for purposes of this Section 4.12. Each Net Proceeds Offer will be mailed or caused to be mailed, by first class mail, by the Company within 30 days following the Net Proceeds Offer Trigger Date to all record Holders as shown on the register of Holders, with a copy to the Trustee. The notice shall contain all instructions and materials necessary to enable such Holders to tender Securities pursuant to the Net Proceeds Offer and shall state the following terms: (1) that the Net Proceeds Offer is being made pursuant to this Section 4.12 and that the Holders may elect to tender their Securities in whole or in part in integral multiples of $1,000 in exchange for cash; provided, however, that if the aggregate principal amount of Securities properly tendered in a Net Proceeds Offer exceeds the -63- Net Proceeds Offer Amount, Securities of tendering Holders will be purchased on a pro rata basis (based on amounts tendered); (2) the purchase price (including the amount of accrued interest, if any) and the Net Proceeds Offer Payment Date (which shall be at least 20 Business Days from the date of mailing of notice of such Net Proceeds Offer, or such longer period as required by law); (3) that any Security not tendered will continue to accrue interest; (4) that, unless the Company defaults in making payment therefor, any Security accepted for payment pursuant to the Net Proceeds Offer shall cease to accrue interest after the Net Proceeds Offer Payment Date; (5) that Holders electing to have a Security purchased pursuant to a Net Proceeds Offer will be required to surrender the Security, with the form entitled "Option of Holder to Elect Purchase" on the reverse of the Security completed, to the Paying Agent at the address specified in the notice prior to the close of business on the Net Proceeds Offer Payment Date; (6) that Holders will be entitled to withdraw their election if the Paying Agent receives, not later than the Business Day prior to the Net Proceeds Offer Payment Date, a facsimile transmission or letter setting forth the name of the Holder, the principal amount of the Security the Holder delivered for purchase and a statement that such Holder is withdrawing his election to have such Security purchased; and (7) that Holders whose Securities are purchased only in part will be issued new Securities in a principal amount equal to the unpurchased portion of the Securities surrendered. On or before the Net Proceeds Offer Payment Date, the Company shall (i) accept for payment Securities or portions thereof tendered pursuant to the Net Proceeds Offer which are to be purchased in accordance with item (1) above, (ii) deposit with the Paying Agent in accordance with Section 2.14 U.S. Legal Tender sufficient to pay the purchase price plus accrued interest, if any, of all Securities to be purchased and (iii) deliver to the Trustee Securities so accepted together with an Officers' Certificate stating the Securities or portions thereof being purchased by the Company. The Paying Agent shall promptly mail to the Holders of Securities so accepted payment in an amount equal to the purchase price plus accrued interest, if any. For purposes of this Section 4.12, the Trustee shall act as the Paying Agent. To the extent that the aggregate amount of the notes tendered pursuant to a Net Proceeds Offer is less than the Net Proceeds Offer Amount, the Company may use such excess Net Proceeds Offer Amount for general corporate purposes or for any other purposes not -64- prohibited by this Indenture. Upon completion of any such Net Proceeds Offer, the Net Proceeds Offer Amount shall be reset to zero. The Company will comply with all tender offer rules under state and federal securities laws and regulations, including, but not limited to, Section 14(e) under the Exchange Act and Rule 14e-1 thereunder, to the extent applicable to such offer. To the extent that the provisions of any securities laws or regulations conflict with the foregoing "Asset Sale" provisions of this Indenture, the Company shall comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations under the foregoing provisions of this Indenture by virtue thereof. SECTION 4.13. Limitation on Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries. The Company will not, and will not cause or permit any of the Restricted Subsidiaries to, directly or indirectly, create or otherwise cause or permit to exist or become effective any encumbrance or restriction on the ability of any Restricted Subsidiary to: (a) pay dividends or make any other distributions on or in respect of its Capital Stock (it being understood that the priority of any preferred stock in receiving dividends or liquidating distributions prior to dividends or liquidating distributions being paid on common stock shall not be deemed a restriction on the ability to make distributions on Capital Stock); (b) make loans or advances or to pay any Indebtedness or other obligation owed to the Company or any other Restricted Subsidiary; or (c) transfer any of its property or assets to the Company or any other Restricted Subsidiary; except for such encumbrances or restrictions existing under or by reasons of: (1) applicable law; (2) this Indenture and/or the Security Documents; (3) the Credit Agreement and/or the documentation for the First Priority Liens; (4) customary non-assignment provisions of any contract or any lease governing a leasehold interest of any Restricted Subsidiary; -65- (5) any instrument governing Acquired Indebtedness, which encumbrance or restriction is not applicable to any Person, or the properties or assets of any Person, other than the Person or the properties or assets of the Person so acquired; (6) agreements existing on the Issue Date to the extent and in the manner such agreements are in effect on the Issue Date; (7) any other agreement entered into after the Issue Date which contains encumbrances and restrictions which are not materially more restrictive with respect to any Restricted Subsidiary than those in effect with respect to such Restricted Subsidiary pursuant to agreements as in effect on the Issue Date; (8) any instrument governing Indebtedness of a Foreign Restricted Subsidiary; (9) customary restrictions on the transfer of any property or assets arising under a security agreement governing a Lien permitted under this Indenture; (10) secured Indebtedness otherwise permitted to be incurred pursuant to Section 4.03 and Section 4.15 that limit the right of the debtor to dispose of the assets securing such Indebtedness; (11) any agreement governing Refinancing Indebtedness incurred to Refinance the Indebtedness issued, assumed or incurred pursuant to an agreement referred to in clause (2), (5), (6) or (8) above; provided, however, that the provisions relating to such encumbrance or restriction contained in any such Refinancing Indebtedness are not materially more restrictive than the provisions relating to such encumbrance or restriction contained in agreements referred to in such clause (2), (5), (6) or (8); (12) any agreement governing the sale or disposition of any Restricted Subsidiary which restricts dividends and distributions pending such sale or disposition; (13) any agreement, instrument or Lien placing encumbrances or restrictions applicable only to a Finance Subsidiary or an Accounts Receivable Entity; or (14) any agreement governing Indebtedness permitted to be incurred pursuant to Section 4.03; provided that the provisions relating to such encumbrance or restriction contained in such Indebtedness, taken as a whole, are not materially more restrictive than the provisions contained in the Credit Agreement or in the Indenture as in effect on the Issue Date. -66- SECTION 4.14. Limitation on Issuances of Capital Stock of Restricted Subsidiaries. The Company will not permit any of the Restricted Subsidiaries (other than a Finance Subsidiary or an Accounts Receivable Entity) to issue any Preferred Stock (other than to the Company or to a Restricted Subsidiary) or permit any Person (other than the Company or a Restricted Subsidiary) to own any Preferred Stock of any Restricted Subsidiary (other than a Finance Subsidiary or an Accounts Receivable Entity). The Company will not, and will not permit any Restricted Subsidiary to, issue, sell, transfer or dispose of any Capital Stock of any Restricted Subsidiary (other than a Finance Subsidiary or an Accounts Receivable Entity) that is not a Guarantor (other than the granting of Liens permitted by Section 4.15) unless such issuance, sale, transfer or disposition results in the issuer of such Capital Stock no longer being a Restricted Subsidiary. SECTION 4.15. Limitation on Liens. The Company will not, and will not cause or permit any of the Restricted Subsidiaries to, directly or indirectly, create, incur, assume or permit or suffer to exist any Liens of any kind against or upon any property or assets of the Company or any of the Restricted Subsidiaries, whether now owned or hereafter acquired, or any proceeds therefrom, or assign or otherwise convey any right to receive income or profits therefrom unless: (1) in the case of Liens securing Indebtedness that is expressly subordinate or junior in right of payment to the Securities or a Subsidiary Guarantee, the Securities or such Subsidiary Guarantee is secured by a Lien on such property, assets or proceeds that is senior in priority to such Liens; and (2) in all other cases, the Securities are equally and ratably secured, except for: (A) Liens existing as of the Issue Date to the extent and in the manner such Liens are in effect on the Issue Date, other than First Priority Liens; (B) Liens securing Indebtedness permitted to be incurred pursuant to clause (2) or (11) of the definition of "Permitted Indebtedness" and all other Obligations relating thereto; (C) Liens securing the Securities and any Subsidiary Guarantee; (D) Liens in favor of the Company or any Guarantor; (E) Liens securing Refinancing Indebtedness which is incurred to Refinance any Indebtedness (including, without limitation, Acquired Indebtedness) -67- which has been secured by a Lien permitted under this Indenture and which has been incurred in accordance with the provisions of this Indenture; provided, however, that such Liens: (I) are no less favorable to holders of the Securities and are not more favorable to the lienholders with respect to such Liens than the Liens in respect of the Indebtedness being Refinanced; (II) do not extend to or cover any property or assets of the Company or any of its Restricted Subsidiaries not securing the Indebtedness so Refinanced; and (III) do not grant a First Priority Lien on any property unless the Indebtedness refinanced had the benefit of a First Priority Lien on such property; and (F) Permitted Liens. If the Company or any Restricted Subsidiary shall, directly or indirectly, create, incur, assume or suffer to exist any Lien (other than a Permitted Lien and a First Priority Lien permitted by this Indenture) on any Excluded Collateral, the Company or such Restricted Subsidiary shall equally and ratably secure the Obligations of the Company in respect of this Indenture and the Securities; provided, however, that the Company and the Restricted Subsidiaries may incur up to $50.0 million aggregate principal or stated amount of Indebtedness outstanding at any one time secured by Excluded Collateral as to which it would otherwise have had to equally and ratably secure the obligations of the Company in respect of this Indenture and the Securities without doing so. SECTION 4.16. [Reserved.] SECTION 4.17. Limitation on Transactions with Affiliates. (a) The Company will not, and will not permit any of the Restricted Subsidiaries to, directly or indirectly, enter into or permit to exist any transaction or series of related transactions (including, without limitation, the purchase, sale, lease or exchange of any property or the rendering of any service) with, or for the benefit of, any of its Affiliates (each, an "Affiliate Transaction"), other than: (x) Affiliate Transactions permitted under paragraph (b) below; and (y) Affiliate Transactions on terms that are not materially less favorable than those that would have reasonably been expected in a comparable transaction at -68- such time on an arm's-length basis from a Person that is not an Affiliate of the Company or such Restricted Subsidiary. All Affiliate Transactions (and each series of related Affiliate Transactions which are similar or part of a common plan) involving aggregate payments or other property with a Fair Market Value in excess of $10.0 million shall be approved by the Board of Directors of the Company or such Restricted Subsidiary, as the case may be, such approval to be evidenced by a Board Resolution stating that such Board of Directors has determined that such transaction complies with the foregoing provisions. If the Company or any Restricted Subsidiary enters into an Affiliate Transaction (or series of related Affiliate Transactions related to a common plan) on or after the Issue Date that involves an aggregate Fair Market Value of more than $50.0 million, the Company or such Restricted Subsidiary, as the case may be, shall, prior to the consummation thereof, obtain a favorable opinion as to the fairness of such transaction or series of related transactions to the Company or the relevant Restricted Subsidiary, as the case may be, from a financial point of view, from an Independent Financial Advisor and file the same with the Trustee. (b) The restrictions set forth in paragraph (a) above shall not apply to (1) employment, consulting and compensation arrangements and agreements of the Company or any Restricted Subsidiary consistent with past practice or approved by a majority of the disinterested members of the Board of Directors (or a committee comprised of disinterested directors); (2) reasonable fees and compensation paid to and indemnity provided on behalf of, officers, directors, employees, consultants or agents of the Company or any Restricted Subsidiary as determined in good faith by the Company's Board of Directors or senior management; (3) transactions exclusively between or among the Company and any of the Restricted Subsidiaries or exclusively between or among such Restricted Subsidiaries; provided that such transactions are not otherwise prohibited by this Indenture; and (4) Restricted Payments, Permitted Investments or Permitted Liens permitted by this Indenture. SECTION 4.18. Issuance of Subsidiary Guarantees. If, on or after the Issue Date, the Company forms or acquires any Domestic Restricted Subsidiary (other than (w) an Acquired Subsidiary for so long as it is not a Wholly Owned Domestic Restricted Subsidiary, (x) a Finance Subsidiary, (y) an Accounts Receivable Entity or (z) an Immaterial Domestic Subsidiary) that incurs any Indebtedness (other than Indebtedness owing to the Company or a Restricted Subsidiary), or if, on or after the Issue Date, -69- any Restricted Subsidiary that is not a Guarantor guarantees (a "Guarantee") any Indebtedness of the Company or a Guarantor (other than Indebtedness owing to the Company or a Restricted Subsidiary) ("Guaranteed Indebtedness"), then the Company shall cause such Domestic Restricted Subsidiary or Restricted Subsidiary that is not a Guarantor, as the case may be, to: (1) execute and deliver to the Trustee a supplemental indenture in form reasonably satisfactory to the Trustee pursuant to which such Domestic Restricted Subsidiary or Restricted Subsidiary that is not a Guarantor, as the case may be, shall unconditionally guarantee (each, a "Subsidiary Guarantee") all of the Company's obligations under the Securities and this Indenture on the terms set forth in this Indenture; (2) in the case of a Domestic Restricted Subsidiary, if such Domestic Restricted Subsidiary grants any Lien upon any of its property as security for any First Priority Claims, execute one or more Security Documents upon substantially the same terms, but subject to the Intercreditor Agreement, that grants the Collateral Agent a Second Priority Lien upon such property for its benefit, the benefit of the Trustee and the benefit of the Holders of the Securities, subject to the exceptions described in the definition of "Excluded Collateral"; and (3) execute and deliver to the Trustee and the Collateral Agent an Opinion of Counsel (which may contain customary exceptions) that such supplemental indenture and Security Documents have been duly authorized, executed and delivered by such Domestic Restricted Subsidiary or Restricted Subsidiary that is not a Guarantor, as the case may be, and constitutes a legal, valid, binding and enforceable obligation of such Domestic Restricted Subsidiary or Restricted Subsidiary that is not a Guarantor, as the case may be. Thereafter, such Domestic Restricted Subsidiary or Restricted Subsidiary that was not a Guarantor, as the case may be, shall be a Guarantor for all purposes of this Indenture. The Company may cause any other Restricted Subsidiary of the Company to issue a Subsidiary Guarantee and become a Guarantor. If granting the Lien described in clause (2) above requires the consent of a third party, such Domestic Restricted Subsidiary will use commercially reasonable efforts to obtain such consent with respect to the Second Priority Lien for the benefit of the Collateral Agent, the Trustee and the benefit of the Holders of the Securities, but if the third party does not consent to the granting of the Second Priority Lien after the use of commercially reasonable efforts, such Domestic Restricted Subsidiary will not be required to do so. Also if a Second Priority Lien on such property cannot be granted or perfected under applicable law, the Domestic Restricted Subsidiary will not be required to grant such Lien. -70- If the Guaranteed Indebtedness is pari passu with the Securities, then the Guarantee of such Guaranteed Indebtedness shall be pari passu with the Subsidiary Guarantee. If the Guaranteed Indebtedness is subordinated to the Securities, then the Guarantee of such Guaranteed Indebtedness shall be subordinated to the Subsidiary Guarantee at least to the extent that the Guaranteed Indebtedness is subordinated to the Securities. Notwithstanding the foregoing, a Subsidiary Guarantee of the Securities provided by a Guarantor will be released without any action required on the part of the Trustee or any Holder of the Securities: (1) if the Credit Agent releases the guarantee of First Priority Claims made by such Guarantor, unless such Guarantor has any Indebtedness outstanding or remains a guarantor of Indebtedness of the Company or another Guarantor; (2) if (a) all of the Capital Stock of, or all or substantially all of the assets of, such Guarantor is sold or otherwise disposed of (including by way of merger or consolidation) to a Person other than the Company or any of its Domestic Restricted Subsidiaries or (b) such Guarantor ceases to be a Restricted Subsidiary, and the Company otherwise complies, to the extent applicable, with Section 4.12; (3) if the Company designates such Guarantor as an Unrestricted Subsidiary in accordance with Section 4.20; and (4) upon the Company's request if the fair market value of the assets of the applicable Guarantor (as determined in good faith by the Board of Directors of the Company), together with the fair market value of the assets of other Guarantors whose Subsidiary Guarantee was released in the same calendar year in reliance on this paragraph (4), does not exceed $1.0 million (subject to cumulative carryover for amounts not used in any prior calendar year). At the Company's request, the Trustee will execute and deliver any instrument evidencing such release. A Guarantor may also be released from its obligation under its Subsidiary Guarantee in connection with amendments permitted in accordance with the provisions of Article 9 of this Indenture. The Trustee shall only be obligated to deliver any such instrument upon receipt of an Officers' Certificate stating that such release is in compliance with this Indenture, the Security Documents and the Intercreditor Agreement. SECTION 4.19. Payments for Consent. The Company will not, and will not cause or permit any of its Subsidiaries to, directly or indirectly, pay or cause to be paid any consideration, whether by way of interest, fee or otherwise, to any Holder of any Securities for or as an inducement to any consent, waiver or amendment of any of the terms or provisions of this Indenture, the Securities or the -71- Subsidiary Guarantees or any of the Security Documents unless such consideration is offered to be paid to all Holders who so consent, waive or agree to amend in the time frame set forth in solicitation documents relating to such consent, waiver or amendment. SECTION 4.20. Limitation on Designations of Unrestricted Subsidiaries. The Company may, on or after the Issue Date, designate any Subsidiary of the Company (other than a Subsidiary of the Company which owns Capital Stock of a Restricted Subsidiary or is a Guarantor) as an "Unrestricted Subsidiary" under this Indenture (a "Designation") only if: (1) no Default or Event of Default shall have occurred and be continuing at the time of or after giving effect to such Designation; (2) the Company would be permitted under this Indenture to make an Investment at the time of Designation (assuming the effectiveness of such Designation) in an amount (the "Designation Amount") equal to the sum of (A) the Fair Market Value of the Capital Stock of such Subsidiary owned by the Company and/or any of the Restricted Subsidiaries on such date and (B) the aggregate amount of Indebtedness of such Subsidiary owed to the Company and the Restricted Subsidiaries on such date; and (3) the Company would be permitted to incur $1.00 of additional Indebtedness (other than Permitted Indebtedness) pursuant to Section 4.03 at the time of Designation (assuming the effectiveness of such Designation). In the event of any such Designation, the Company shall be deemed to have made an Investment constituting a Restricted Payment in the Designation Amount pursuant to Section 4.04 for all purposes of this Indenture. The Company shall not, and shall not permit any Restricted Subsidiary to, at any time: (x) provide direct or indirect credit support for or a guarantee of any Indebtedness of any Unrestricted Subsidiary (including any undertaking agreement or instrument evidencing such Indebtedness); (y) be directly or indirectly liable for any Indebtedness of any Unrestricted Subsidiary; or (z) be directly or indirectly liable for any Indebtedness which provides that the holder thereof may (upon notice, lapse of time or both) declare a default thereon or -72- cause the payment thereof to be accelerated or payable prior to its final scheduled maturity upon the occurrence of a default with respect to any Indebtedness of any Unrestricted Subsidiary (including any right to take enforcement action against such Unrestricted Subsidiary), except, in the case of clause (x) or (y), to the extent permitted under Section 4.04 hereof. The Company may revoke any Designation of a Subsidiary as an Unrestricted Subsidiary ("Revocation"), whereupon such Subsidiary shall then constitute a Restricted Subsidiary, if (1) no Default or Event of Default shall have occurred and be continuing at the time and after giving effect to such Revocation; (2) all Liens and Indebtedness of such Unrestricted Subsidiary outstanding immediately following such Revocation would, if incurred at such time, have been permitted to be incurred for all purposes of this Indenture; and (3) such Subsidiary shall for purposes of Section 4.18 be treated as having then been acquired by the Company. All Designations and Revocations must be evidenced by an Officers' Certificate of the Company delivered to the Trustee certifying compliance with the foregoing provisions. SECTION 4.21. Change of Control. (a) Upon the occurrence of a Change of Control, each Holder will have the right to require that the Company purchase all or a portion of such Holder's Securities pursuant to the offer described below (the "Change of Control Offer"), at a purchase price equal to 101% of the principal amount thereof plus accrued interest, if any, thereon to the date of purchase. Prior to the mailing of the notice referred to below, but in any event within 30 days following any Change of Control, the Company will (1) repay in full and terminate all commitments under Indebtedness under the Credit Agreement and all other First Priority Claims the terms of which require repayment upon a Change of Control or offer to repay in full and terminate all commitments under the Credit Agreement and all other First Priority Claims and to repay the Indebtedness owed to (and terminate all commitments of) each lender under the Credit Agreement and each of the holders of a First Priority Lien Claim which has accepted such offer; or -73- (2) obtain the consents required under the Credit Agreement and all such other First Priority Claims to permit the repurchase of the Securities as provided below. The Company shall first comply with the covenant in the immediately preceding sentence before it shall be required to repurchase Securities pursuant to the provisions described below. (b) Within 30 days following the date upon which the Change of Control occurs, the Company must send, by first class mail, a notice to each Holder, with a copy to the Trustee, which notice shall govern the terms of the Change of Control Offer. Such notice shall state, among other things, (1) that the Change of Control Offer is being made pursuant to this Section 4.21 and that all Securities tendered and not withdrawn will be accepted for payment; (2) the purchase price (including the amount of accrued interest) and the purchase date, which must be no earlier than 30 days nor later than 60 days from the date such notice is mailed, other than as may be required by law (the "Change of Control Payment Date"); (3) that any Security not tendered will continue to accrue interest; (4) that, unless the Company defaults in making payment therefor, any Security accepted for payment pursuant to the Change of Control Offer shall cease to accrue interest after the Change of Control Payment Date; (5) that Holders electing to have a Security purchased pursuant to a Change of Control Offer will be required to surrender the Security, with the form entitled "Option of Holder to Elect Purchase" on the reverse of the Security completed, to the Paying Agent at the address specified in the notice prior to the close of business on the third Business Day prior to the Change of Control Payment Date; (6) that Holders will be entitled to withdraw their election if the Paying Agent receives, not later than the Business Day prior to the Change of Control Payment Date, a facsimile transmission or letter setting forth the name of the Holder, the principal amount of the Securities the Holder delivered for purchase and a statement that such Holder is withdrawing his election to have such Securities purchased; (7) that Holders whose Securities are purchased only in part will be issued new Securities in a principal amount equal to the unpurchased portion of the Securities surrendered; and -74- (8) the circumstances and relevant facts regarding such Change of Control. On or before the Change of Control Payment Date, the Company shall (i) accept for payment Securities or portions thereof tendered pursuant to the Change of Control Offer, (ii) deposit with the Paying Agent, in accordance with Section 2.14, U.S. Legal Tender sufficient to pay the purchase price plus accrued interest, if any, of all Securities so tendered and (iii) deliver to the Trustee Securities so accepted together with an Officers' Certificate stating the Securities or portions thereof being purchased by the Company. Upon receipt by the Paying Agent of the monies specified in clause (ii) above and a copy of the Officers' Certificate specified in clause (iii) above, the Paying Agent shall promptly mail to the Holders of Securities so accepted payment in an amount equal to the purchase price plus accrued interest, if any, and the Trustee shall promptly authenticate and mail to such Holders new Securities equal in principal amount to any unpurchased portion of the Securities surrendered. Any Securities not so accepted shall be promptly mailed by the Company to the Holder thereof. For purposes of this Section 4.21, the Trustee shall act as the Paying Agent. The Company will not be required to make a Change of Control Offer upon a Change of Control if a third party makes the Change of Control Offer in the manner, at the times and otherwise in compliance with the requirements set forth in this Indenture applicable to a Change of Control Offer made by the Company and purchases all Securities validly tendered and not withdrawn under such Change of Control Offer. Any amounts remaining after the purchase of all validly tendered and not validly withdrawn Securities pursuant to a Change of Control Offer shall be returned by the Trustee to the Company. The Company shall and shall cause its Subsidiaries to comply with all tender offer rules under state and federal securities laws, including, but not limited to, Section 14(e) under the Exchange Act and Rule 14e-1 thereunder, to the extent applicable to such offer. To the extent that the provisions of any securities laws or regulations conflict with this Section 4.21, the Company shall comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations under this Section 4.21 by virtue thereof. ARTICLE FIVE SUCCESSOR CORPORATION SECTION 5.01. Merger, Consolidation and Sale of Assets. (a) The Company will not, in a single transaction or series of related transactions, consolidate or merge with or into any Person, or sell, assign, transfer, lease, convey or otherwise dispose of (or cause or permit any Restricted Subsidiary to sell, assign, transfer, lease, convey or otherwise dispose of) all or substantially all of the Company's assets -75- (determined on a consolidated basis for the Company and the Restricted Subsidiaries) whether as an entirety or substantially as an entirety to any Person unless: (1) either (A) the Company shall be the surviving or continuing corporation or (B) the Person (if other than the Company) formed by such consolidation or into which the Company is merged or the Person which acquires by sale, assignment, transfer, lease, conveyance or other disposition the properties and assets of the Company and the Restricted Subsidiaries substantially as an entirety (the "Surviving Entity") (x) shall be a corporation organized and validly existing under the laws of the United States or any State thereof or the District of Columbia, (y) shall expressly assume, by supplemental indenture (in form and substance satisfactory to the Trustee), executed and delivered to the Trustee, the due and punctual payment of the principal of, and premium, if any, and interest on all of the Securities and the performance of every covenant of the Securities, this Indenture and the Registration Rights Agreement on the part of the Company to be performed or observed and (z) shall expressly assume, by documentation specified by, and executed and delivered to, the Trustee and the Collateral Agent, the due and punctual performance of every covenant and obligation under the Security Documents on the part of the Company to be performed or observed; (2) immediately after giving effect to such transaction on a pro forma basis and the assumption contemplated by clause (1)(B)(y) above (including giving effect to any Indebtedness and Acquired Indebtedness incurred or anticipated to be incurred in connection with or in respect of such transaction), the Company or such Surviving Entity, as the case may be, shall be able to incur at least $1.00 of additional Indebtedness (other than Permitted Indebtedness) pursuant to Section 4.03; (3) immediately before and immediately after giving effect to such transaction and the assumption contemplated by clause (1)(B)(y) above (including, without limitation, giving effect to any Indebtedness and Acquired Indebtedness incurred or anticipated to be incurred and any Lien granted or to be released in connection with or in respect of the transaction), no Default or Event of Default shall have occurred and be continuing; and (4) the Company or the Surviving Entity shall have delivered to the Trustee and the Collateral Agent an Officers' Certificate and an Opinion of Counsel, each stating that such consolidation, merger, sale, assignment, transfer, lease, conveyance or other disposition and, if a supplemental indenture is required in connection with such transaction, such supplemental indenture comply with the applicable provisions of this Indenture and that all conditions precedent in this Indenture relating to such transaction have been satisfied. -76- (b) For purposes of the foregoing, the transfer (by lease, assignment, sale or otherwise, in a single transaction or series of transactions) of all or substantially all of the properties or assets of one or more Restricted Subsidiaries, the Capital Stock of which constitutes all or substantially all of the properties and assets of the Company, shall be deemed to be the transfer of all or substantially all of the properties and assets of the Company. (c) No Guarantor (other than any Guarantor whose Subsidiary Guarantee is to be released in accordance with the terms of the Subsidiary Guarantee and this Indenture in connection with any transaction complying with the provisions of Section 4.12) will, and the Company will not cause or permit any Guarantor to, consolidate with or merge with or into any Person other than the Company or any other Guarantor unless: (1) the entity formed by or surviving any such consolidation or merger (if other than the Guarantor) is a corporation organized and existing under the laws of the United States or any State thereof or the District of Columbia; (2) such entity expressly assumes by supplemental indenture (in form and substance satisfactory to the Trustee), executed and delivered to the Trustee, the performance of every covenant of the Securities, this Indenture and the Registration Rights Agreement on the part of such Guarantor to be performed or observed; (3) such entity shall expressly assume, by documentation specified by, and executed and delivered to the Trustee, the due and punctual performance of every covenant and obligation under the Security Documents on the part of such Guarantor to be performed or observed; (4) immediately after giving effect to such transaction, no Default or Event of Default shall have occurred and be continuing; (5) immediately after giving effect to such transaction and the use of any net proceeds therefrom on a pro forma basis, the Company could satisfy the provisions of clause (a)(2) of this Section 5.01; and (6) the Company shall have delivered to the Trustee and the Collateral Agent an Officers' Certificate and Opinion of Counsel, each stating that such consolidation or merger and, if a supplemental indenture is required in connection with such transaction, such supplemental indenture comply with the applicable provisions of this Indenture and that all conditions precedent in this Indenture relating to such transaction have been satisfied. -77- SECTION 5.02. Successor Corporation Substituted. In accordance with the foregoing, upon any such consolidation, combination, merger, conveyance, lease or any transfer of all or substantially all of the assets of the Company in which the Company is not the continuing corporation, the Surviving Entity formed by such consolidation or into which the Company is merged or to which such conveyance, lease or transfer is made shall succeed to, and be substituted for, and may exercise every right and power of, the Company under this Indenture and the Securities with the same effect as if such successor had been named as the Company herein, and thereafter the predecessor corporation will be relieved of all further obligations and covenants under this Indenture, the Securities and the Registration Rights Agreement; provided that solely for purposes of computing amounts described in subclause (iii) of the first paragraph of Section 4.04, any such Surviving Entity shall only be deemed to have succeeded to and be substituted for the Company with respect to periods subsequent to the effective time of such merger, consolidation or transfer of assets. ARTICLE SIX DEFAULT AND REMEDIES SECTION 6.01. Events of Default. An "Event of Default" occurs if (1) the failure to pay interest on any Security when the same becomes due and payable and the default continues for a period of 30 days; (2) the failure to pay the principal on any Securities, when such principal becomes due and payable, at maturity, upon redemption or otherwise (including the failure to make a payment to purchase Securities tendered pursuant to a Change of Control Offer or a Net Proceeds Offer); (3) a default by the Company or any Restricted Subsidiary in the observance or performance of any other covenant or agreement contained in this Indenture which default continues for a period of 30 days after (x) the Company receives written notice specifying the default from the Trustee or the Holders of at least 25% of the outstanding principal amount of the Securities (except in the case of a default with respect to Article Five, which will constitute an Event of Default with such notice requirement but without such passage of time requirement); (4) a default under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness of the Company or of any Restricted Subsidiary (or the payment of which is guaranteed -78- by the Company or any Restricted Subsidiary), whether such Indebtedness now exists or is created after the Issue Date, which default (a) is caused by a failure to pay principal of such Indebtedness after any applicable grace period provided in such Indebtedness on the date of such default (a "Payment Default"), or (b) results in the acceleration of such Indebtedness prior to its express maturity (and such acceleration is not rescinded, or such Indebtedness is not repaid, within 30 days) and, in each case, the principal amount of any such Indebtedness, together with the principal amount of any other such Indebtedness under which there has been a Payment Default or the maturity of which has been so accelerated, exceeds $75.0 million or more at any time; (5) the Company or any of its Restricted Subsidiaries (A) admits in writing its inability to pay its debts generally as they become due, (B) commences a voluntary case or proceeding under any Bankruptcy Law with respect to itself, (C) consents to the entry of a judgment, decree or order for relief against it in an involuntary case or proceeding under any Bankruptcy Law, (D) consents to the appointment of a Custodian of it or for substantially all of its property, (E) consents to or acquiesces in the institution of a bankruptcy or an insolvency proceeding against it, (F) makes a general assignment for the benefit of its creditors, or (G) takes any corporate action to authorize or effect any of the foregoing; (6) a court of competent jurisdiction enters a judgment, decree or order for relief in respect of the Company or any of its Significant Subsidiaries in an involuntary case or proceeding under any Bankruptcy Law, which shall (A) approve as properly filed a petition seeking reorganization, arrangement, adjustment or composition in respect of the Company or any of its Significant Subsidiaries, (B) appoint a Custodian of the Company or any of its Significant Subsidiaries or for substantially all of any of their property or (C) order the winding-up or liquidation of its affairs; and such judgment, decree or order shall remain unstayed and in effect for a period of 60 consecutive days; (7) one or more judgments in an aggregate amount in excess of $75.0 million not covered by adequate insurance (other than self-insurance) shall have been rendered against the Company or any of the Restricted Subsidiaries and such judgments remain undischarged, unpaid or unstayed for a period of 60 days after such judgment or judgments become final and nonappealable; (8) any Subsidiary Guarantee of a Significant Subsidiary ceases to be in full force and effect, or any Subsidiary Guarantee of such a Significant Subsidiary is declared to be null and void and unenforceable or any Subsidiary Guarantee of such a Significant Subsidiary is found to be invalid or any Guarantor which is a Significant Subsidiary denies its liability under its Subsidiary Guarantee (other than by reason of release of such Guarantor in accordance with the terms of this Indenture); or -79- (9) unless all of the Collateral has been released from the Second Priority Liens in accordance with the provisions of the Security Documents, default by the Company or any Restricted Subsidiary in the performance of the Security Documents which adversely affects the enforceability, validity, perfection (in the case of Collateral for which perfection is required under the Security Documents, other than the Second Priority Mortgages, with respect to which perfection is required) or priority of the Second Priority Lien on a material portion of the Collateral granted to the Collateral Agent for its benefit and the benefit of the Trustee and the holders of the Securities, the repudiation or disaffirmation by the Company or any Restricted Subsidiary of its material obligations under the Security Documents or the determination in a judicial proceeding that the Security Documents are unenforceable or invalid against the Company or any Restricted Subsidiary party thereto for any reason with respect to a material portion of the Collateral (which default, repudiation, disaffirmation or determination is not rescinded, stayed or waived by the Persons having such authority pursuant to the Security Documents or otherwise cured within 60 days after the Company receives written notice thereof specifying such occurrence from the Trustee or the holders of at least 25% of the outstanding principal amount of the Securities and demanding that such default be remedied). The Trustee shall, within 90 days after the occurrence of any Default actually known to a Responsible Officer of the Trustee, give to the Securityholders notice of such Default; provided that, except in the case of a Default in the payment of principal of or interest on any of the Securities, the Trustee shall be protected in withholding such notice if and so long as a Responsible Officer of the Trustee in good faith determines that the withholding of such notice is in the interest of the Securityholders. SECTION 6.02. Acceleration. If an Event of Default (other than an Event of Default specified in clause (5) or (6) above) shall occur and be continuing, the Trustee or the Holders of at least 25% in principal amount of outstanding Securities may declare the principal of, premium, if any, and accrued and unpaid interest on all the Securities to be due and payable by notice in writing to the Company (and to the Trustee, if given by the Holders) specifying the respective Events of Default and that it is a "notice of acceleration," and the same shall become immediately due and payable. If an Event of Default specified in clause (5) or (6) above occurs and is continuing, then all unpaid principal of, premium, if any, and accrued and unpaid interest on all of the outstanding Securities shall ipso facto become and be immediately due and payable without any declaration or other act on the part of the Trustee or any Holder. At any time after a declaration of acceleration with respect to the Securities as described in the preceding paragraph, the Holders of a majority in principal amount of the then outstanding Securities may rescind and cancel such declaration and its consequences; -80- (i) if the rescission would not conflict with any judgment or decree; (ii) if all existing Events of Default have been cured or waived except nonpayment of principal or interest that has become due solely because of the acceleration; (iii) to the extent the payment of such interest is lawful, if interest on overdue installments of interest and overdue principal, which has become due otherwise than by such declaration of acceleration, has been paid; (iv) if the Company has paid the Trustee its compensation and reimbursed the Trustee for its reasonable expenses, disbursements and advances and any other sums owing to the Trustee pursuant to Section 7.07; and (v) in the event of the cure or waiver of an Event of Default of the type described in clauses (5) and (6) of the description above of Events of Default, the Trustee shall have received an Officers' Certificate and an Opinion of Counsel that such Event of Default has been cured or waived. No such rescission shall affect any subsequent Default or Event of Default or impair any right consequent thereto. SECTION 6.03. Other Remedies. If an Event of Default occurs and is continuing, the Trustee may pursue any available remedy by proceeding at law or in equity to collect the payment of principal of or interest on the Securities or to enforce the performance of any provision of the Securities, this Indenture or any Subsidiary Guarantee. The Trustee may maintain a proceeding even if it does not possess any of the Securities or does not produce any of them in the proceeding. A delay or omission by the Trustee or any Securityholder in exercising any right or remedy accruing upon an Event of Default shall not impair the right or remedy or constitute a waiver of or acquiescence in the Event of Default. No remedy is exclusive of any other remedy. All available remedies are cumulative to the extent permitted by law. SECTION 6.04. Waiver of Past Defaults. Subject to Sections 6.02, 6.07 and 9.02, the Holders of a majority in principal amount of the then outstanding Securities by written notice to the Trustee may waive an existing Default or Event of Default and its consequences, except a Default in the payment of principal of or premium, if any, or interest on any Security as specified in clauses (1) and (2) of Section 6.01. The Company shall deliver to the Trustee an Officers' Certificate stating that -81- the requisite percentage of Holders have consented to such waiver and attaching copies of such consents upon which the Trustee may conclusively rely. When a Default or Event of Default is waived, it is cured and ceases. SECTION 6.05. Control by Majority. The Holders of not less than a majority in principal amount of the outstanding Securities may direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or exercising any trust or power conferred on it. Subject to Section 7.01, however, the Trustee may refuse to follow any direction that conflicts with any law or this Indenture, that the Trustee determines may be unduly prejudicial to the rights of another Securityholder, or that may involve the Trustee in personal liability; provided that the Trustee may take any other action deemed proper by the Trustee which is not inconsistent with such direction. Prior to taking any action or following any direction pursuant to this Section 6.05, the Trustee shall be entitled to indemnification from such Holders satisfactory to it in its sole discretion against any fees, loss, liability, cost or expense caused by taking such action or following such direction. SECTION 6.06. Limitation on Suits. A Securityholder may not pursue any remedy with respect to this Indenture, the Securities or any Subsidiary Guarantee unless (1) the Holder gives to the Trustee written notice of a continuing Event of Default; (2) the Holder or Holders of at least 25% in principal amount of the outstanding Securities make a written request to the Trustee to pursue the remedy; (3) such Holder or Holders offer and, if requested, provide to the Trustee indemnity satisfactory to the Trustee against any loss, liability or expense; (4) the Trustee does not comply with the request within 30 days after receipt of the request and the offer and, if requested, the provision of indemnity; and (5) during such 30-day period the Holder or Holders of a majority in principal amount of the outstanding Securities do not give the Trustee a direction which, in the opinion of the Trustee, is inconsistent with the request. A Securityholder may not use this Indenture to prejudice the rights of another Securityholder or to obtain a preference or priority over such other Securityholder. -82- SECTION 6.07. Rights of Holders to Receive Payment. Notwithstanding any other provision of this Indenture, the right of any Holder to receive payment of principal of, premium and interest on a Security, on or after the respective due dates expressed in such Security, or to bring suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected without the consent of the Holder. SECTION 6.08. Collection Suit by Trustee. If an Event of Default in payment of principal, premium or interest specified in clause (1) or (2) of Section 6.01 occurs and is continuing, the Trustee may recover judgment in its own name and as trustee of an express trust against the Company or any other obligor on the Securities for the whole amount of principal and accrued interest remaining unpaid, together with interest on overdue principal and, to the extent that payment of such interest is lawful, interest on overdue installments of interest, in each case at the rate per annum borne by the Securities and such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel. SECTION 6.09. Trustee May File Proofs of Claim. The Trustee may file such proofs of claim and other papers or documents and take such other actions as it may determine in its reasonable discretion to be necessary or advisable (including participating as a member of any creditors committee acting in the matter) in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, legal fees, disbursements and advances of the Trustee, its agents, nominees, custodians, counsel, accountants and experts) and the Securityholders allowed in any judicial proceedings relating to the Company, its creditors or its property and shall be entitled and empowered to collect and receive any monies or other property payable or deliverable on any such claims and to distribute the same, and any Custodian in any such judicial proceedings is hereby authorized by each Securityholder to make such payments to the Trustee and, in the event that the Trustee shall consent to the making of such payments directly to the Securityholders, to pay to the Trustee any amount due to it for the reasonable compensation, expenses, legal fees, disbursements and advances of the Trustee, its agents, nominees, custodians and counsel, and any other amounts due the Trustee under Section 7.07. Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Securityholder any plan of reorganization, arrangement, adjustment or composition affecting the Securities or the rights of any Holder thereof, or to authorize the Trustee to vote in respect of the claim of any Securityholder in any such proceeding. -83- SECTION 6.10. Priorities. If the Trustee collects any money or property pursuant to this Article Six, it shall pay out the money or property in the following order, subject to the Intercreditor Agreement: First: without duplication, to the Trustee for amounts owing under Section 7.07 and to the Collateral Agent for amounts owing to it under the Collateral Agency Agreement; Second: if the Holders are forced to proceed against the Company, a Guarantor or any other obligor on the Securities directly without the Trustee, to Holders for their collection costs; Third: subject to Article Twelve, to Holders for amounts due and unpaid on the Securities for principal, premium and interest, ratably, without preference or priority of any kind, according to the amounts due and payable on the Securities for principal, premium and interest, respectively; and Fourth: to the Company or any Guarantors, as their respective interests may appear. The Trustee, upon prior notice to the Company, may fix a record date and payment date for any payment to Securityholders pursuant to this Section 6.10. SECTION 6.11. Payment of Interest; Interest Rights Preserved. Interest on any Security which is payable, and is punctually paid or duly provided for, on any Interest Payment Date shall be paid to the Person in whose name that Security is registered at the close of business on the Record Date for such interest. Any interest on any Security which is payable, but is not punctually paid or duly provided for, on any Interest Payment Date (herein called "Defaulted Interest") shall forthwith cease to be payable to the Holder on such Record Date by virtue of having been such Holder; and such Defaulted Interest may be paid by the Company, at its election in each case, as provided in Subsection (1) or (2) below: (1) The Company may elect to make payment of any Defaulted Interest to the Persons in whose names the Securities are registered at the close of business on a special Record Date (the "Special Record Date") for the payment of such Defaulted Interest, which shall be fixed in the following manner. The Company shall notify the Trustee in writing of the amount of Defaulted Interest proposed to be paid on each Security and the date of the proposed payment, and at the same time the Company shall -84- deposit with the Trustee an amount of money equal to the aggregate amount proposed to be paid in respect of such Defaulted Interest or shall make arrangements satisfactory to the Trustee for such deposit prior to the date of the proposed payment, such money when deposited to be held in trust for the benefit of the Persons entitled to such Defaulted Interest as in this Subsection provided. Thereupon the Trustee shall fix a Special Record Date for the payment of such Defaulted Interest which shall be not more than 15 days and not less than 10 days prior to the date of the proposed payment and not less than 10 days after the receipt by the Trustee of the notice of the proposed payment. The Trustee shall promptly notify the Company of such Special Record Date. In the name and at the expense of the Company, the Trustee shall cause notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor to be mailed, first-class postage prepaid, to each Holder at his address as it appears in the Security Register, not less than 10 days prior to such Special Record Date. Notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor having been so mailed, such Defaulted Interest shall be paid to the Persons in whose names the Securities (or their respective predecessor securities) are registered on such Special Record Date and shall no longer be payable pursuant to the following Subsection (2). (2) The Company may make payment of any Defaulted Interest in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Company has caused the Securities to be listed, and upon such notice as may be required by such exchange, if, after notice given by the Company to the Trustee of the proposed payment pursuant to this Subsection, such payment shall be deemed practicable by the Trustee. Subject to the foregoing provisions of this Section, each Security delivered under this Indenture upon registration of transfer of or in exchange for or in lieu of any other Security shall carry the rights to interest accrued and unpaid, and to accrue, which were carried by such other Security. SECTION 6.12. Undertaking for Costs. In any suit for the enforcement of any right or remedy under this Indenture, the Security Documents, the Intercreditor Agreement or the Collateral Agency Agreement or in any suit against the Trustee (in any capacities appointed hereunder, including, but not limited to, as Collateral Agent) for any action taken or omitted by it as Trustee, a court in its discretion may require the filing by any party litigant in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys' fees and expenses, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section 6.12 does not apply to a suit by the Trustee (in any capacities appointed hereunder, including, but -85- not limited to, as Collateral Agent), a suit by a Holder pursuant to Section 6.07, or a suit by a Holder or Holders of more than 10% in principal amount of the outstanding Securities. ARTICLE SEVEN TRUSTEE SECTION 7.01. Duties of Trustee. (a) If an Event of Default actually known to a Responsible Officer of the Trustee has occurred and is continuing, the Trustee shall exercise such of the rights and powers vested in it by this Indenture and use the same degree of care and skill in its exercise as a prudent Person would exercise or use under the circumstances in the conduct of its own affairs. Subject to such provisions, the Trustee shall be under no obligation to exercise any of its rights or powers under this Indenture at the request of any of the Holders of Securities, unless they shall have offered to the Trustee security and indemnity satisfactory to it in its sole discretion. (b) Except during the continuance of an Event of Default actually known to a Responsible Officer of the Trustee: (1) The Trustee need perform only those duties as are specifically set forth herein and no others and no implied covenants or obligations shall be read into this Indenture against the Trustee. (2) In the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions and such other documents delivered to it pursuant to Section 11.04 hereof furnished to the Trustee and conforming to the requirements of this Indenture. However, the Trustee shall examine the certificates and opinions to determine whether or not they conform to the requirements of this Indenture (but need not confirm or investigate the accuracy of mathematical calculations or other facts stated therein). (c) The Trustee may not be relieved from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that: (1) This paragraph does not limit the effect of paragraph (b) of this Section 7.01. (2) The Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer of the Trustee, unless it is proved that the Trustee was negligent in ascertaining the pertinent facts. -86- (3) The Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 6.05. (d) No provision of this Indenture, the Security Documents, the Intercreditor Agreement or the Collateral Agency Agreement shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder or to take or omit to take any action under this Indenture, the Security Documents, the Intercreditor Agreement or the Collateral Agency Agreement or take any action at the request or direction of Holders if it shall have reasonable grounds for believing that repayment of such funds is not assured to it or it does not receive an indemnity satisfactory to it in its sole discretion against such risk, liability, loss, fee or expense which might be incurred by it in compliance with such request or direction. (e) Every provision of this Indenture that in any way relates to the Trustee is subject to this Section 7.01. (f) The Trustee shall not be liable for interest on any money received by it except as the Trustee may agree in writing with the Company. Money held in trust by the Trustee need not be segregated from other funds except to the extent required by law. (g) Beyond the exercise of reasonable care in the custody thereof, the Trustee shall have no duty as to any Collateral in its possession or control or any income thereon or as to preservation of rights against prior parties or any other rights pertaining thereto and the Trustee shall not be responsible for filing any financing or continuation statements or recording any documents or instruments in any public office at any time or times or otherwise perfecting or maintaining the perfection of any security interest in the Collateral. The Trustee shall be deemed to have exercised reasonable care in the custody of the Collateral in its possession if the Collateral is accorded treatment substantially equal to that which it accords its own property. (h) The foregoing provisions of this Section 7.01 do not apply to the Trustee in its capacity as Collateral Agent. The Trustee, in its capacity as Collateral Agent, need perform only those duties as are specifically set forth in the Indenture, the Security Documents, the Intercreditor Agreement and the Collateral Agency Agreement, and no others, and no implied covenants or obligations shall be read into such agreements against the Collateral Agent. Neither the Collateral Agent nor any of its directors, officers, agents, or employees shall be liable for any action taken or omitted to be taken by it or them under or in connection with this Indenture, the Security Documents, and the Intercreditor Agreement and the Collateral Agency Agreement, except for its or their own gross negligence or willful misconduct. -87- SECTION 7.02. Rights of Trustee. Subject to Section 7.01: (a) The Trustee may conclusively rely and shall be protected in acting or refraining from acting on any document believed by it to be genuine and to have been signed or presented by the proper Person. The Trustee need not investigate any fact or matter stated in the document. (b) Before the Trustee acts or refrains from acting, it may require an Officers' Certificate and an Opinion of Counsel, which shall conform to the provisions of Section 11.05. The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on such certificate or opinion. (c) The Trustee may act through its attorneys, agents, custodians and nominees and shall not be responsible for the misconduct or negligence of any attorney, agent, custodian or nominee (other than such a person who is an employee of the Trustee) appointed with due care. (d) The Trustee shall not be liable for any action it takes or omits to take in good faith which it reasonably believes to be authorized or within its rights or powers. (e) The Trustee may consult with counsel and the advice or opinion of such counsel as to matters of law shall be full and complete authorization and protection from liability in respect of any action taken, omitted or suffered by it under this Indenture, the Security Documents, the Intercreditor Agreement or the Collateral Agency Agreement, in good faith and in accordance with the advice or opinion of such counsel. (f) The Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture, the Security Documents, the Intercreditor Agreement or the Collateral Agency Agreement at the request, order or direction of any of the Holders pursuant to the provisions of this Indenture, unless such Holders shall have offered to the Trustee reasonable security or indemnity against the fees, costs, expenses and liabilities which may be incurred therein or thereby. (g) Except with respect to Section 4.01, the Trustee shall not have any duty as to inquire as to the performance by the Company of its covenants or obligations under this Indenture, the Security Documents, the Intercreditor Agreement or the Collateral Agency Agreement. The Trustee shall not be deemed to have notice or any knowledge of any matter (including without limitation defaults or events of default) unless a Responsible Officer assigned to and working in the Trustee's Corporate Trust Department has actual knowledge thereof or unless written notice thereof is received -88- by the Trustee, attention: Corporate Trust Department and such notice references the Securities generally, the Company or this Indenture. (h) The rights, privileges, protections, immunities and benefits given to the Trustee, including, without limitation, its right to be indemnified, are extended to, and shall be enforceable by, the Trustee in each of its capacities hereunder, including, but not limited to, serving as Collateral Agent, and to each agent, custodian and other Person employed to act hereunder. SECTION 7.03. Individual Rights of Trustee. The Trustee in its individual or any other capacity may become the owner or pledgee of Securities and may otherwise deal with the Company, its Subsidiaries, any Guarantors and their respective Affiliates with the same rights it would have if it were not Trustee. Any Agent may do the same with like rights. However, the Trustee must comply with Sections 7.10 and 7.11 of this Indenture as well as the provisions of the TIA. SECTION 7.04. Trustee's Disclaimer. The Trustee shall not be responsible for and makes no representation as to the validity or adequacy of this Indenture, the Security Documents, the Intercreditor Agreement, the Collateral Agency Agreement or the Securities, it shall not be accountable for the Company's use of the proceeds from the Securities or any money paid to the Company or upon the Company's direction under any provision of this Indenture, the Security Documents, the Intercreditor Agreement or the Collateral Agency Agreement, and it shall not be responsible for any statement of the Company in this Indenture, the Security Documents or the Intercreditor Agreement, or any document issued in connection with the sale of Securities (including without limitation any preliminary or final offering memorandum) or any statement in the Securities other than the Trustee's certificate of authentication. The Trustee shall not be accountable for the use or application of any money received by any Paying Agent other than the Trustee. The Trustee makes no representations with respect to the effectiveness or adequacy of this Indenture, the Security Documents, the Intercreditor Agreement or the Collateral Agency Agreement. The Trustee shall not be responsible for independently ascertaining or maintaining such validity, if any, and shall be fully protected in relying upon certificates and opinions delivered to it in accordance with the terms of this Indenture, the Security Documents, the Intercreditor Agreement or the Collateral Agency Agreement. SECTION 7.05. Notice of Default. If a Default or an Event of Default occurs and is continuing and a Responsible Officer of the Trustee receives actual notice of such event, the Trustee shall mail to each Securityholder, as their names and addresses appear on the Securityholder list described in Section 2.05, notice of the uncured Default or Event of Default within 90 days after the Trustee -89- receives such notice (or 30 days in the case of a Default or Event of Default specified in the following sentence). Except in the case of a Default or an Event of Default in payment of principal of, premium or interest on, any Security, including the failure to make payment on (i) the Change of Control Payment Date pursuant to a Change of Control Offer or (ii) the Excess Proceeds Offer Payment Date pursuant to an Excess Proceeds Offer, the Trustee may withhold the notice if and so long as the board of directors, the executive committee, or a trust committee of directors, of the Trustee in good faith determines that withholding the notice is in the interest of the Securityholders. SECTION 7.06. Reports by Trustee to Holders. This Section 7.06 shall not be operative as a part of this Indenture until this Indenture is qualified under the TIA, and, until such qualification, this Indenture shall be construed as if this Section 7.06 were not contained herein. Within 60 days after each May 15 of each year beginning with 2004, the Trustee shall, to the extent that any of the events described in TIA Section 313(a) occurred within the previous twelve months, but not otherwise, mail to each Securityholder a brief report dated as of such May 15 that complies with TIA Section 313(a). The Trustee also shall comply with TIA Sections 313(b), 313(c) and 313(d). A copy of each report at the time of its mailing to Securityholders shall be mailed to the Company and filed with the Commission and each securities exchange, if any, on which the Securities are listed. The Company shall notify a Responsible Officer of the Trustee if the Securities become listed on any securities exchange or of any delisting thereof. SECTION 7.07. Compensation and Indemnity. (a) The Company shall pay to the Trustee from time to time such compensation for its services hereunder as the Company and the Trustee shall from time to time agree in writing. The Trustee's compensation shall not be limited by any law on compensation of a trustee of an express trust. The Company shall reimburse the Trustee upon request for all reasonable disbursements, expenses and advances (including reasonable fees and expenses of counsel) incurred or made by it in addition to the compensation for its services, except any such disbursements, expenses and advances as may be attributable to the Trustee's negligence or bad faith. Such expenses shall include the reasonable compensation, legal fees, disbursements and expenses of the Trustee's agents, accountants, experts, nominees, custodians and counsel and any taxes or other expenses incurred by a trust created pursuant to Section 8.01. (b) The Company shall indemnify each of the Trustee, its directors, officers and employees and each predecessor Trustee for, and hold them harmless against, (i) any -90- loss, liability or expense incurred by the Trustee, without negligence or bad faith on its part arising out of or in connection with the administration of this trust and its duties under this Indenture, the Security Documents or, the Intercreditor Agreement, including the reasonable expenses and attorneys' fees of defending itself against any claim of liability arising under this Indenture, the Security Documents or, the Intercreditor Agreement and (ii) Environmental Damages (as defined below). The Trustee shall notify the Company promptly of any claim asserted against the Trustee for which it may seek indemnity. However, the failure by the Trustee to so notify the Company shall not relieve the Company of its obligations hereunder. The Company shall defend the claim and the Trustee shall cooperate in the defense (and may employ its own counsel) at the Company's expense. The Company need not pay for any settlement made without its written consent, which consent shall not be unreasonably withheld or delayed. The Company need not reimburse any expense or indemnify against any loss or liability incurred by the Trustee as a result of the violation of this Indenture, the Security Documents or, the Intercreditor Agreement by the Trustee if such violation arose from the Trustee's negligence or bad faith. "Environmental Damages" shall mean all claims, demands, liabilities, losses, damages, causes of action, judgments, penalties, fines, costs and expenses, of any and every kind or character, contingent or otherwise, matured or unmatured, known or unknown, foreseeable or unforeseeable, made, incurred, suffered, brought, or imposed at any time and from time to time: (i) the presence of any Hazardous Material on the Mortgaged Property, or any escape, seepage, leakage, spillage, emission, release, discharge or disposal of any Hazardous Material on or from the Mortgaged Property, or the migration or release or threatened migration or release of any Hazardous Material to, from or through the Mortgaged Property; or (ii) any act, omission, event or circumstance existing or occurring in connection with the handling, treatment, containment, removal, storage, decontamination, clean-up, transport or disposal of any Hazardous Material which is present on the Mortgaged Property; or (iii) any violation of any Environmental Requirement, regardless of whether any act, omission, event or circumstance giving rise to the violation constituted a violation at the time of the occurrence or inception of such act, omission, event or circumstance. "Environmental Law" means any federal, state or local law, statue, ordinance, code, rule, regulation, license, authorization, decision, order, injunction, decree, or rule of common law, and any judicial interpretation of any of the foregoing, which pertains to health, safety, any Hazardous Material, or the environment (including but not limited to ground or air or water or noise pollution or contamination, and underground or above ground tanks) and -91- shall include without limitation, the Solid Waste Disposal Act, 42 U.S.C. Section 6901 et seq.; the Comprehensive Environmental Response, Compensation and Liability Act of 1980, 42 U.S.C. Section 9601 et seq. ("CERCLA"), as amended by the Superfund Amendments and Reauthorization Act of 1986 ("SARA"); the Hazardous Materials Transportation Act, 49 U.S.C. Section 1801 et seq.; the Federal Water Pollution Control Act, 33 U.S.C. Section 1251 et seq.; the Clean Air Act, 42 U.S.C. Section 7401 et seq.; the Toxic Substances Control Act, 15 U.S.C. Section 2601 et seq.; the Safe Drinking Water Act, 42 U.S.C. Section 300f et seq.; and any other state or federal environmental statutes, and all rules, regulations, orders and decrees now or hereafter promulgated under any of the foregoing, as any of the foregoing now exist or may be changed or amended or come into effect in the future. "Environmental Requirement" means any Environmental Law (hereinafter defined), agreement or restriction, as the same now exists or may be changed or amended or come into effect in the future, which pertains to health, safety, any Hazardous Material, or the environment, including but not limited to ground or air or water or noise pollution or contamination, and underground or aboveground tanks. "Hazardous Material" means any substance, whether solid, liquid or gaseous: which is listed defined or regulated as a "hazardous substance", "hazardous waste" or "solid waste", or otherwise classified as hazardous or toxic, in or pursuant to any Environmental Requirement; or which is or contains asbestos, radon, any polychlorinated biphenyl, urea formaldehyde foam insulation, explosive or radioactive material, or motor fuel or other petroleum hydrocarbons, or which causes or poses a threat to cause a contamination or nuisance on the subject property or any adjacent property or a hazard to the environment or to the health or safety of persons on the subject property. (c) To secure the Company's payment obligations in this Section 7.07, the Trustee shall have a senior claim and lien prior to the Securities against all money or property held or collected by the Trustee, in its capacity as Trustee or as Collateral Agent. When the Trustee incurs expenses or renders services after an Event of Default specified in clause (5) or (6) of Section 6.01 occurs, the expenses (including the reasonable fees and expenses of its agents and counsel) and the compensation for the services shall be preferred over the status of the Holders in a proceeding under any Bankruptcy Law and are intended to constitute expenses of administration under any Bankruptcy Law. The Company's obligations under this Section 7.07 and any claim arising hereunder shall survive termination of this Indenture, the resignation or removal of any Trustee, the discharge of the Company's obligations pursuant to Article Eight and any rejection or termination under any Bankruptcy Law. -92- SECTION 7.08. Replacement of Trustee. The Trustee may resign at any time by so notifying the Company in writing. The Holders of a majority in principal amount of the outstanding Securities may remove the Trustee by so notifying the Company and the Trustee in writing and may appoint a successor Trustee with the Company's consent. The Company may remove the Trustee if (1) the Trustee fails to comply with Section 7.10; (2) the Trustee is adjudged a bankrupt or an insolvent; (3) a receiver or other public officer takes charge of the Trustee or its property; or (4) the Trustee becomes legally incapable of acting with respect to its duties hereunder. If the Trustee resigns or is removed or if a vacancy exists in the office of Trustee for any reason, the Company shall notify each Holder of such event and shall promptly appoint a successor Trustee. Within one year after the successor Trustee takes office, the Holders of a majority in principal amount of the Securities may appoint a successor Trustee to replace the successor Trustee appointed by the Company. A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Company. Immediately after that, the retiring Trustee shall transfer, after payment of all sums then owing to the Trustee pursuant to Section 7.07, all property held by it as Trustee to the successor Trustee, subject to the lien provided in Section 7.07, the resignation or removal of the retiring Trustee shall become effective, and the successor Trustee shall have all the rights, powers and duties of the Trustee under this Indenture; provided, however, that no Trustee under this Indenture shall be liable for any act or omission of any successor Trustee. A successor Trustee shall mail notice of its succession to each Securityholder. Notwithstanding any other provision of this Section 7.08, upon the occurrence of an Event of Default, the Trustee may resign, and upon notice to the Company shall immediately be deemed to have resigned, and Deutsche Bank National Trust Company (or its successors) shall be appointed as successor Trustee. Deutsche Bank National Trust Company hereby accepts appointment as successor Trustee upon the resignation by the Trustee as a result of the occurrence of an Event of Default. If a successor Trustee does not take office within 30 days after the retiring Trustee resigns or is removed, the retiring Trustee (at the expense of the Company), the Company -93- or the Holders of at least 10% in principal amount of the outstanding Securities may petition any court of competent jurisdiction for the appointment of a successor Trustee. If the Trustee fails to comply with Section 7.10, any Securityholder may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. Notwithstanding replacement of the Trustee pursuant to this Section 7.08, the Company's obligations under Section 7.07 shall continue for the benefit of the retiring Trustee and the Company shall pay to any such replaced or removed Trustee all amounts owed under Section 7.07 upon such replacement or removal. SECTION 7.09. Successor Trustee by Merger, Etc. If the Trustee consolidates with, merges or converts into, or transfers all or substantially all of its corporate trust business to, another corporation, the resulting, surviving or transferee corporation without any further act shall, if such resulting, surviving or transferee corporation is otherwise eligible hereunder, be the successor Trustee. In case any Securities shall have been authenticated, but not delivered, by the Trustee then in office, any successor by merger, conversion or consolidation to such authenticating Trustee may adopt such authentication and deliver the Securities so authenticated with the same effect as if such successor Trustee had itself authenticated such Securities. SECTION 7.10. Eligibility; Disqualification. This Indenture shall always have a Trustee who satisfies the requirement of TIA Sections 310(a)(1) and 310(a)(5). The Trustee shall have a combined capital and surplus of at least $50,000,000 as set forth in its most recent published annual report of condition. The Trustee shall comply with TIA Section 310(b); provided, however, that there shall be excluded from the operation of TIA Section 310(b)(1) any indenture or indentures under which other securities, or certificates of interest or participation in other securities, of the Company are outstanding, if the requirements for such exclusion set forth in TIA Section 310(b)(1) are met. SECTION 7.11. Preferential Collection of Claims Against Company. The Trustee, in its capacity as Trustee hereunder, shall comply with TIA Section 311(a), excluding any creditor relationship listed in TIA Section 311(b). A Trustee who has resigned or been removed shall be subject to TIA Section 311(a) to the extent indicated. -94- ARTICLE EIGHT SATISFACTION AND DISCHARGE OF INDENTURE SECTION 8.01. Legal Defeasance and Covenant Defeasance. (a) The Company may, at its option and at any time, with respect to the Securities, elect to have either paragraph (b) or paragraph (c) below be applied to the outstanding Securities upon compliance with the conditions set forth in paragraph (d). (b) Upon the Company's exercise under paragraph (a) of the option applicable to this paragraph (b), the Company shall be deemed to have been released and discharged from its obligations with respect to the outstanding Securities on the date the conditions set forth below are satisfied (hereinafter, "Legal Defeasance"). For this purpose, such Legal Defeasance means that the Company shall be deemed to have paid and discharged the entire indebtedness represented by the outstanding Securities, which shall thereafter be deemed to be "outstanding" only for the purposes of the Sections and matters under this Indenture referred to in (i) and (ii) below, and to have satisfied all its other obligations under such Securities and this Indenture insofar as such Securities are concerned, except for the following, which shall survive until otherwise terminated or discharged hereunder: (i) the rights of the Holders of outstanding Securities to receive payments in respect of the principal of, premium, if any, and interest on such Securities when such payments are due, (ii) the Company's obligations to issue temporary Securities, register the transfer or exchange of any Securities, replace mutilated, destroyed, lost or stolen Securities and maintain an office or agency for payments in respect of the Securities, (iii) the rights, powers, trusts, duties and immunities of the Trustee and the Company's obligations in connection therewith, (iv) the Legal Defeasance provisions of this Indenture and (v) Article Twelve. The Company may exercise its option under this paragraph (b) notwithstanding the prior exercise of its option under paragraph (c) below with respect to the Securities. (c) Upon the Company's exercise under paragraph (a) of the option applicable to this paragraph (c), the Company shall be released and discharged from its obligations under any covenant contained in Article Five and in Sections 4.03 through 4.21 with respect to the outstanding Securities on and after the date the conditions set forth below are satisfied (hereinafter, "Covenant Defeasance"), and the Securities shall thereafter be deemed to be not "outstanding" for the purpose of any direction, waiver, consent or declaration or act of Holders (and the consequences of any thereof) in connection with such covenants, but shall continue to be deemed "outstanding" for all other purposes hereunder. For this purpose, such Covenant Defeasance means that, with respect to the outstanding Securities, the Company and any Guarantor may omit to comply with and shall have no liability in respect of any term, condition or limitation set forth in any such covenant, whether directly or indirectly, by reason of any reference elsewhere herein to any such covenant or by reason of any reference in any -95- such covenant to any other provision herein or in any other document and such omission to comply shall not constitute a Default or an Event of Default under Section 6.01(3), nor shall any event referred to in Section 6.01(4) or (7) thereafter constitute a Default or an Event of Default thereunder but, except as specified above, the remainder of this Indenture and such Securities shall be unaffected thereby. (d) The following shall be the conditions to application of either paragraph (b) or paragraph (c) above to the outstanding Securities: (1) The Company must irrevocably deposit with the Trustee, in trust, for the benefit of the Holder pursuant to an irrevocable trust and security agreement in form and substance reasonably satisfactory to the Trustee, U.S. Legal Tender or direct non-callable obligations of, or non-callable obligations guaranteed by, the United States of America for the payment of which obligation or guarantee the full faith and credit of the United States of America is pledged ("U.S. Government Obligations") or a combination thereof, maturing as to principal and interest in such amounts and at such times as are sufficient, without consideration of the reinvestment of such interest and principal and after payment of all federal, state and local taxes or other charges or assessments in respect thereof payable by the Trustee, in the opinion of a nationally recognized firm of Independent public accountants, selected by the Company, expressed in a written certification thereof (in form and substance reasonably satisfactory to the Trustee) delivered to the Trustee, to pay the principal of, premium, if any, and interest on all the outstanding Securities on the dates on which any such payments are due and payable in accordance with the terms of this Indenture and of the Securities; (2) Such deposits shall not cause the Trustee to have a conflicting interest as defined in and for purposes of the TIA; (3) The Trustee shall have received Officers' Certificates stating that no Default or Event of Default or event which with notice or lapse of time or both would become a Default or an Event of Default with respect to the Securities shall have occurred and be continuing on the date of such deposit or, insofar as Section 6.01(5) or (6) is concerned, at any time during the period ending on the 91st day after the date of such deposit (it being understood that this condition shall not be deemed satisfied until the expiration of such period); (4) The Trustee shall have received Officers' Certificates stating that such deposit will not result in a Default under this Indenture, any Security Document or a breach or violation of, or constitute a default under, any other material instrument or agreement to which the Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries is bound; -96- (5) (i) In the event the Company elects paragraph (b) hereof, the Company shall deliver to the Trustee an Opinion of Counsel in the United States, in form and substance reasonably satisfactory to the Trustee confirming that (A) the Company has received from, or there has been published by, the Internal Revenue Service a ruling or (B) since the Issue Date, there has been a change in the applicable federal income tax law, in either case to the effect that, and based thereon such Opinion of Counsel shall confirm that, Holders of the Securities will not recognize income, gain or loss for federal income tax purposes as a result of such deposit and the defeasance contemplated hereby and will be subject to federal income taxes on the same amounts, in the same manner and at the same times as would have been the case if such deposit and defeasance had not occurred, or (ii) in the event the Company elects paragraph (c) hereof, the Company shall deliver to the Trustee an Opinion of Counsel in the United States, in form and substance reasonably satisfactory to the Trustee, confirming that, Holders of the Securities will not recognize income, gain or loss for federal income tax purposes as a result of such deposit and the defeasance contemplated hereby and will be subject to federal income tax on the same amounts and in the same manner and at the same times as would have been the case if such deposit and defeasance had not occurred; (6) The Company shall have delivered to the Trustee an Opinion of Counsel stating that as a result of the Legal Defeasance or Covenant Defeasance, neither the Trustee nor the trust have become or are deemed to have become an "investment company" under the Investment Company Act of 1940, as amended; (7) The Company shall have delivered to the Trustee an Officers' Certificate, in form and substance reasonably satisfactory to the Trustee, stating that the deposit under clause (1) was not made by the Company, a Guarantor or any Subsidiary of the Company with the intent of defeating, hindering, delaying or defrauding any other creditors of the Company, a Guarantor, or any Subsidiary of the Company or others; (8) The Company shall have delivered to the Trustee an Opinion of Counsel, in form and substance reasonably satisfactory to the Trustee, to the effect that, after the 91st day following the deposit, the trust funds will not be subject to the effect of any applicable bankruptcy, insolvency, reorganization or similar laws affecting creditors' rights generally; (9) The Company has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent specified herein relating to the defeasance contemplated by this Section 8.01 have been complied with; provided, however, that no deposit under clause (1) above shall be effective to -97- terminate the obligations of the Company under the Securities or this Indenture prior to 90 days following any such deposit; and (10) The Company shall have paid all amounts owing to the Trustee pursuant to Section 7.07. Notwithstanding the foregoing, the Opinion of Counsel required by paragraph (5) above need not be delivered if all Securities not theretofore delivered to the Trustee for cancellation (i) have become due and payable, (ii) will become due and payable on the maturity date for the securities within one year, or (iii) are to be called for redemption within one year under arrangements satisfactory to the Trustee for the giving of notice of redemption by the Trustee in the name, and at the expense, of the Company. In the event all or any portion of the Securities are to be redeemed through such irrevocable trust, the Company must make arrangements satisfactory to the Trustee, at the time of such deposit, for the giving of the notice of such redemption or redemptions by the Trustee in the name and at the expense of the Company. SECTION 8.02. Satisfaction and Discharge. In addition to the Company's rights under Section 8.01, the Company may terminate all of its obligations under this Indenture (subject to Section 8.03) when (1) all Securities theretofore authenticated and delivered (other than Securities which have been destroyed, lost or stolen and which have been replaced or paid as provided in Section 2.07 and Securities for whose payment money has theretofore been deposited in trust or segregated and held in trust by the Company or thereafter repaid to the Company from such trust) have been delivered to the Trustee for cancellation; or (2) all Securities not theretofore delivered to the Trustee for cancellation (except lost, stolen or destroyed Securities which have been replaced or paid) have (i) become due and payable, (ii) will become due and payable at their stated maturity within one year or (iii) are to be called for redemption within one year under arrangements satisfactory to the Trustee, and the Company has irrevocably deposited or caused to be deposited with the Trustee funds in an amount sufficient to pay and discharge the entire Indebtedness on the Securities not theretofore delivered to the Trustee for cancellation, for principal of, premium, if any, and interest on the Securities to the date of deposit together with irrevocable instructions from the Company directing the Trustee to apply such funds to the payment thereof at maturity or redemption, as the case may be; and -98- (3) the Company and/or the Guarantors have paid or caused to be paid all other sums payable under this Indenture and the Security Documents; and (4) there exists no Default or Event of Default under this Indenture; and (5) the Company has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent specified herein relating to the satisfaction and discharge of this Indenture have been complied with; and (6) the Company shall have paid all amounts owing to the Trustee pursuant to Section 7.07. SECTION 8.03. Survival of Certain Obligations. Notwithstanding the satisfaction and discharge of this Indenture and of the Securities referred to in Section 8.01 or 8.02, the respective obligations of the Company and the Trustee under Sections 2.02, 2.03, 2.04, 2.05, 2.06, 2.07, 2.10, 2.12, 2.13, 4.01, 4.02 and 6.07, Article Seven and Sections 8.05, 8.06 and 8.07 and Article Twelve shall survive until the Securities are no longer outstanding, and thereafter the obligations of the Company and the Trustee under Sections 7.07, 8.05, 8.06 and 8.07 shall survive. Nothing contained in this Article Eight shall abrogate any of the rights, obligations or duties of the Trustee under this Indenture. SECTION 8.04. Acknowledgment of Discharge by Trustee. Subject to Section 8.07, after (i) the conditions of Section 8.01 or 8.02 have been satisfied, (ii) the Company has paid or caused to be paid all other sums payable hereunder by the Company, and (iii) the Company has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent referred to in clause (i) above relating to the satisfaction and discharge of this Indenture have been complied with, the Trustee upon written request shall acknowledge in writing the discharge of the Company's obligations under this Indenture except for those surviving obligations specified in Section 8.03. SECTION 8.05. Application of Trust Assets. The Trustee shall hold any U.S. Legal Tender or U.S. Government Obligations deposited with it in the irrevocable trust established pursuant to Section 8.01. The Trustee shall apply the deposited U.S. Legal Tender or the U.S. Government Obligations, together with earnings thereon, through the Paying Agent, in accordance with this Indenture and the terms of the irrevocable trust agreement established pursuant to Section 8.01, to the payment of principal of and interest on the Securities. The U.S. Legal Tender or U.S. Government Obligations so held in trust and deposited with the Trustee in compliance with Section 8.01 shall -99- not be part of the trust estate under this Indenture, but shall constitute a separate trust fund for the benefit of all Holders entitled thereto. The Company shall pay and indemnify the Trustee against any tax, fee or other charge imposed on or assessed against the U.S. Government Obligations deposited pursuant to Section 8.01 or the principal and interest received in respect thereof other than any such tax, fee or other charge which by law is for the account of the Holders of Outstanding Securities. SECTION 8.06. Repayment to the Company or Guarantors; Unclaimed Money. Subject to Sections 7.07 and 8.01 and to applicable laws relating to escheat, the Trustee shall promptly pay to the Company, or if deposited with the Trustee by any Guarantor, to such Guarantor, upon receipt by the Trustee of an Officers' Certificate, any excess money, determined in accordance with Section 8.01, held by it at any time. The Trustee and the Paying Agent shall pay to the Company or any Guarantor, as the case may be, upon receipt by the Trustee or the Paying Agent, as the case may be, of an Officers' Certificate, any money held by it for the payment of principal, premium, if any, or interest that remains unclaimed for two years after payment to the Holders is required; provided, however, that the Trustee and the Paying Agent before being required to make any payment may, but need not, at the expense of the Company cause to be published once in a newspaper of general circulation in The City of New York or mail to each Holder entitled to such money notice that such money remains unclaimed and that after a date specified therein (which shall not be less than 30 days from the date of such mailing or publication and shall be at least two years after the date such money held by the Trustee for the payment of principal, premium, if any, or interest remains unclaimed), any unclaimed balance of such money then remaining will be repaid to the Company. After payment to the Company or any Guarantor, as the case may be, Securityholders entitled to such money must look solely to the Company for payment as general creditors unless an applicable abandoned property law designates another Person, and all liability of the Trustee or Paying Agent with respect to such money shall thereupon cease. SECTION 8.07. Reinstatement. If the Trustee or Paying Agent is unable to apply any money or U.S. Government Obligations in accordance with this Indenture by reason of any legal proceeding or by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, then and only then the Company's and each Guarantor's, if any, obligations under this Indenture and the Securities shall be revived and reinstated as though no deposit had been made pursuant to this Indenture until such time as the Trustee is permitted to apply all such money or U.S. Government Obligations in accordance with this Indenture; provided, however, that if the Company or the Guarantors, as the case may be, have made any payment of principal of, premium, if any, or interest on any Securities -100- because of the reinstatement of their obligations, the Company or the Guarantors, as the case may be, shall be subrogated to the rights of the holders of such Securities to receive such payment from the money or U.S. Government Obligations held by the Trustee or Paying Agent. ARTICLE NINE AMENDMENTS, SUPPLEMENTS AND WAIVERS SECTION 9.01. Without Consent of Holders. The Company and any Guarantors (when authorized by Board Resolutions), and the Trustee, together, may amend or supplement this Indenture or the Securities or direct the Collateral Agent to amend the Security Documents and the Intercreditor Agreement without notice to or consent of any Securityholder (1) to cure any ambiguity, defect or inconsistency; (2) to evidence the succession in accordance with Article Five hereof of another Person to the Company or a Guarantor and the assumption by any such successor of the covenants of the Company or a Guarantor herein and in the Securities or a Subsidiary Guarantee, as the case may be; (3) to provide for uncertificated Securities in addition to or in place of certificated Securities; (4) to make any other change that does not materially adversely affect the rights of any Securityholders hereunder; (5) to comply with any requirements of the Commission in connection with the qualification of this Indenture under the TIA; (6) to add or release any Guarantor pursuant to the terms of this Indenture; (7) to add any additional assets as Collateral; (8) to release any Collateral from the Lien of this Indenture and the Security Documents when permitted or required by the Security Documents or this Indenture; or (9) upon any amendment, waiver or consent to the security documents granting the First Priority Liens on the Collateral, amending, waiving or consenting to the comparable provisions of the Security Documents as and to the extent set forth in Article Twelve. -101- provided that each of the Company and any Guarantors has delivered to the Trustee and the Collateral Agent an Opinion of Counsel and an Officers' Certificate, each stating that such amendment or supplement complies with the provisions of this Section 9.01; and provided, further, that such amendment or supplement does not, in the opinion of the Trustee or the Collateral Agent, adversely affect the rights of any of the Holders in any material respect. In formulating its opinion on such matters, the Trustee and the Collateral Agent will be entitled to rely on such evidence as it deems appropriate, including, without limitation, solely on an Opinion of Counsel. In addition, without the consent of any Holder, any amendment, waiver or consent agreed to with respect to a First Priority Collateral Document shall automatically apply to the comparable provision of the comparable Security Document to the extent provided in Section 5.3 of the Intercreditor Agreement. The Company will provide to the Trustee and the Collateral Agent written notice of any such amendment, waiver or consent prior to or concurrently with the effectiveness thereof. Amendments of the Security Documents are also subject to Section 5.3 of the Intercreditor Agreement. SECTION 9.02. With Consent of Holders. Subject to Section 6.07, the Company and any Guarantors (when authorized by Board Resolutions) and the Trustee, together, with the written consent of the Holder or Holders of at least a majority in aggregate principal amount of the then outstanding Securities, may amend or supplement this Indenture, the Securities and any Subsidiary Guarantees and the Security Documents without notice to any other Securityholders. Subject to Section 6.07, the Holder or Holders of a majority in aggregate principal amount of the then outstanding Securities may waive compliance by the Company with any provision of this Indenture or the Securities without notice to any other Securityholder (including, without limitation, the provisions of Section 4.22). Without the consent of each Securityholder affected, however, no amendment, supplement or waiver, including a waiver pursuant to Section 6.04, may (1) reduce the principal amount of Securities whose Holders must consent to an amendment, supplement or waiver of any provision of this Indenture, the Securities or any Subsidiary Guarantees; (2) reduce the rate of or change or have the effect of changing the time for payment of interest, including defaulted interest, on any Security; (3) reduce the principal of or change or have the effect of changing the fixed maturity of any Securities; or change the date on which any Securities may be subject to redemption, or reduce the redemption price therefor; (4) make any Securities payable in money other than that stated in the Securities; -102- (5) make any change in provisions of this Indenture protecting the right of each Holder to receive payment of principal of, premium, if any, and interest on such Securities on or after the stated due date thereof or to bring suit to enforce such payment, or permitting Holders of a majority in principal amount of the then outstanding Securities to waive Defaults or Events of Default; (6) amend, change or modify in any material respect the obligations of the Company to make and consummate a Change of Control Offer after the occurrence of a Change of Control or make and consummate a Net Proceeds Offer with respect to any Asset Sale that has been consummated or modify any of the provisions or definitions with respect thereto; (7) modify or change any provision of this Indenture or the related definitions affecting the ranking of the Securities or any Subsidiary Guarantee in a manner which adversely affects the Holders; (8) modify the provisions of Section 4.19, 6.04, 6.07 or this Section 9.02 in any manner adverse to a Holder of Securities; or (9) release any Guarantor from any of its obligations under its Subsidiary Guarantee or this Indenture otherwise than in accordance with the terms of this Indenture. It shall not be necessary for the consent of the Holders under this Section 9.02 to approve the particular form of any proposed amendment, supplement or waiver, but it shall be sufficient if such consent approves the substance thereof. After an amendment, supplement or waiver under this Section 9.02 becomes effective, the Company shall mail to the Holders affected thereby a notice briefly describing the amendment, supplement or waiver. Any failure of the Company to mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such supplemental indenture. SECTION 9.03. Compliance with TIA. From the date on which this Indenture is qualified under the TIA, every amendment, waiver or supplement of this Indenture or the Securities shall comply with the TIA as then in effect. SECTION 9.04. Revocation and Effect of Consents. Until an amendment, waiver or supplement becomes effective, a consent to it by a Holder is a continuing consent by the Holder and every subsequent Holder of a Security -103- or portion of a Security that evidences the same debt as the consenting Holder's Security, even if notation of the consent is not made on any Security. However, any such Holder or subsequent Holder may revoke the consent as to his Security or portion of his Security by notice to the Trustee or the Company received before the date on which the Trustee receives an Officers' Certificate certifying that the Holders of the requisite principal amount of Securities have consented (and not theretofore revoked such consent) to the amendment, supplement or waiver. The Company may, but shall not be obligated to, fix a record date for the purpose of determining the Holders entitled to consent to any amendment, supplement or waiver. If a record date is fixed, then notwithstanding the last sentence of the immediately preceding paragraph, those Persons who were Holders at such record date (or their duly designated proxies), and only those Persons, shall be entitled to revoke any consent previously given, whether or not such Persons continue to be Holders after such record date. No such consent shall be valid or effective for more than 90 days after such record date. After an amendment, supplement or waiver becomes effective, it shall bind every Securityholder, unless it makes a change described in any of clauses (1) through (11) of Section 9.02, in which case, the amendment, supplement or waiver shall bind only each Holder of a Security who has consented to it and every subsequent Holder of a Security or portion of a Security that evidences the same debt as the consenting Holder's Security; provided that any such waiver shall not impair or affect the right of any Holder to receive payment of principal of and interest on a Security, on or after the respective due dates expressed in such Security, or to bring suit for the enforcement of any such payment on or after such respective dates without the consent of such Holder. SECTION 9.05. Notation on or Exchange of Securities. If an amendment, supplement or waiver changes the terms of a Security, the Trustee may require the Holder of the Security to deliver it to the Trustee. The Trustee may place an appropriate notation on the Security about the changed terms and return it to the Holder. Alternatively, if the Company or the Trustee so determines, the Company in exchange for the Security shall issue and the Trustee shall authenticate a new Security that reflects the changed terms. Failure to make the appropriate notation or to issue a new Security shall not affect the validity and effect of such amendment, supplement or waiver. SECTION 9.06. Trustee to Sign Amendments, Etc. The Trustee shall execute any amendment, supplement or waiver authorized pursuant to this Article Nine; provided that the Trustee may, but shall not be obligated to, execute any such amendment, supplement or waiver which affects the Trustee's own rights, duties or immunities under this Indenture, the Security Documents, the Intercreditor Agreement or the Collateral Agency Agreement; provided, further, that no amendment which -104- affects the Collateral Agent's rights, duties or immunities under this Indenture, the Security Documents, the Intercreditor Agreement or the Collateral Agency Agreement, shall be effective unless the Collateral Agent shall consent in writing thereto. The Trustee shall be entitled to receive, and shall be fully protected in relying upon, an Opinion of Counsel and an Officers' Certificate each stating that the execution of any amendment, supplement or waiver authorized pursuant to this Article Nine is authorized or permitted by this Indenture and constitutes the legal, valid and binding obligations of the Company and any Guarantor enforceable in accordance with its terms (subject to customary exceptions) and, in the case of any supplemental indenture required by Section 4.18, constitutes a guarantee as defined therein. Such Opinion of Counsel shall be at the expense of the Company, and the Trustee shall have a lien under Section 7.07 for any such expense. ARTICLE TEN GUARANTEE SECTION 10.01. Unconditional Guarantee. Each Guarantor agrees to unconditionally, jointly and severally, guarantee to each Holder of a Security authenticated and delivered by the Trustee, and to the Trustee and its successors and assigns, that (i) the principal of, premium, if any, and interest on the Securities will be promptly paid in full when due, subject to any applicable grace period, whether at maturity, by acceleration or otherwise and interest on the overdue principal, if any, and interest on any interest, to the extent lawful, of the Securities and all other Obligations of the Company to the Holders or the Trustee hereunder or thereunder will be promptly paid in full or performed, all in accordance with the terms hereof and thereof; (ii) in case of any extension of time of payment or renewal of any Securities or of any such other Obligations, the same will be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, subject to any applicable grace period, whether at stated maturity, by acceleration or otherwise; and (iii) all other obligations and liabilities of the Company to the Holders, the Trustee or the Collateral Agent, whether direct or indirect, absolute or contingent, due or to become due, or now existing or hereafter incurred, which may arise under, out of or in connection with any Security Document, in each case whether on account of principal, interest, reimbursement obligations, fees, indemnities, costs, expenses or otherwise (including, without limitation, all fees, charges and disbursements of counsel to the Securityholders, the Trustee or the Collateral Agent that are required to be paid by the Company pursuant to any Security Document) will be promptly paid in full when due, subject, however, in the case of clauses (i), (ii) and (iii) above, to the limitations set forth in Section 10.03. Each Guarantor agrees that its obligations hereunder shall be unconditional, irrespective of the validity, regularity or enforceability of the Securities or this Indenture, the absence of any action to enforce the same, any waiver or consent by any Holder of the Securities with respect to any provisions hereof or thereof, the recovery of any judgment against the Company, any action to -105- enforce the same or any other circumstance which might otherwise constitute a legal or equitable discharge or defense of a Guarantor. Each Guarantor waives diligence, presentment, demand of payment, filing of claims with a court in the event of insolvency or bankruptcy of the Company, any right to require a proceeding first against the Company, protest, notice and all demands whatsoever and covenants that its Subsidiary Guarantee will not be discharged except by complete performance of the obligations contained in the Securities, this Indenture and each Subsidiary Guarantee. If any Securityholder or the Trustee is required by any court or otherwise to return to the Company, any Guarantor or any custodian, trustee, liquidator or other similar official acting in relation to the Company or any Guarantor, any amount paid by the Company or any Guarantor to the Trustee or such Securityholder, each Subsidiary Guarantee to the extent theretofore discharged, shall be reinstated in full force and effect. Each Guarantor further agrees that, as between each Guarantor, on the one hand, and the Holders and the Trustee, on the other hand, (x) the maturity of the obligations guaranteed hereby may be accelerated as provided in Article Six for the purposes of each Subsidiary Guarantee notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the obligations guaranteed hereby, and (y) in the event of any acceleration of such obligations as provided in Article Six, such obligations (whether or not due and payable) shall forthwith become due and payable by each Guarantor for the purpose of its Subsidiary Guarantee. SECTION 10.02. Severability. In case any provision of a Subsidiary Guarantee shall be invalid, illegal or unenforceable, the validity, legality, and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. SECTION 10.03. Release of a Guarantor. In the event of either (i) the issuance or sale of Capital Stock of a Guarantor in compliance with this Indenture which results in the Guarantor no longer being a Subsidiary of the Company, (ii) a Guarantor becoming an Unrestricted Subsidiary or (iii) the sale of all or substantially all of the assets of a Guarantor pursuant to an Asset Sale which complies with the provisions of Section 4.12, the applicable Guarantor's Subsidiary Guarantee will be released. The Trustee shall deliver an appropriate instrument evidencing such release upon receipt of a request by the Company accompanied by an Officers' Certificate and Opinion of Counsel certifying as to the compliance with this Section 10.03. Any Guarantor not so released remains liable for the full amount of principal of and interest on the Securities as provided in this Article Ten. -106- SECTION 10.04. Limitation of a Guarantor's Liability. Each Guarantor and, by its acceptance hereof, each Holder hereby confirms that it is the intention of all such parties that the guarantee by such Guarantor pursuant to its Subsidiary Guarantee not constitute a fraudulent transfer or conveyance for purposes of any Bankruptcy Law, the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act or any similar federal or state law. To effectuate the foregoing intention, the Holders and each Guarantor irrevocably agree that the obligations of each Guarantor under its Subsidiary Guarantee shall be limited to the maximum amount as will, after giving effect to all other contingent and fixed liabilities of such Guarantor, and after giving effect to any collections from or payments made by or on behalf of any other Guarantor in respect of the obligations of such other Guarantor under its Subsidiary Guarantee, or pursuant to Section 10.05, result in the obligations of such Guarantor under its Subsidiary Guarantee not constituting such fraudulent transfer or conveyance. SECTION 10.05. Contribution. In order to provide for just and equitable contribution among the Guarantors, the Guarantors agree, inter se, that in the event any payment or distribution is made by any Guarantor (a "Funding Guarantor") under its Subsidiary Guarantee, such Funding Guarantor shall be entitled to a contribution from all other Guarantors in a pro rata amount based on the Adjusted Net Assets of each Guarantor (including the Funding Guarantor) for all payments, damages and expenses incurred by that Funding Guarantor in discharging the Company's obligations with respect to the Securities or any other Guarantor's obligations with respect to its Subsidiary Guarantee. "Adjusted Net Assets" of a Guarantor at any date shall mean the lesser of the amount by which (x) the fair value of the property of such Guarantor exceeds the total amount of liabilities, including, without limitation, contingent liabilities (after giving effect to all other fixed and contingent liabilities incurred or assumed on such date), but excluding liabilities under the Subsidiary Guarantee of such Guarantor at such date and (y) the present fair salable value of the assets of such Guarantor at such date exceeds the amount that will be required to pay the probable liability of such Guarantor on its debts (after giving effect to all other fixed and contingent liabilities incurred or assumed on such date), excluding debt in respect of the Subsidiary Guarantee of such Guarantor, as they become absolute and matured. SECTION 10.06. Waiver of Subrogation. Until all Subsidiary Guarantee Obligations are paid in full, each Guarantor hereby irrevocably waives any claims or other rights which it may now or hereafter acquire against the Company that arise from the existence, payment, performance or enforcement of such Guarantor's obligations under its Subsidiary Guarantee and this Indenture, including, without limitation, any right of subrogation, reimbursement, exoneration, indemnification, and any right to participate in any claim or remedy of any Holder of Securities against the Company, whether or not such claim, remedy or right arises in equity, or under contract, -107- statute or common law, including, without limitation, the right to take or receive from the Company, directly or indirectly, in cash or other property or by set-off or in any other manner, payment or security on account of such claim or other rights. If any amount shall be paid to any Guarantor in violation of the preceding sentence and the Securities shall not have been paid in full, such amount shall be deemed to have been paid to such Guarantor for the benefit of, and held in trust for the benefit of, the Holders of the Securities, and shall forthwith be paid to the Trustee for the benefit of such Holders to be credited and applied upon the Securities, in accordance with the terms of this Indenture. Each Guarantor acknowledges that it will receive direct and indirect benefits from the financing arrangements contemplated by this Indenture and that the waiver set forth in this Section 10.06 is knowingly made in contemplation of such benefits. SECTION 10.07. Execution of Subsidiary Guarantees. To evidence its guarantee to the Securityholders set forth in this Article Ten, each Guarantor shall execute a Subsidiary Guarantee in substantially the form of Exhibit G attached hereto, which shall be endorsed on each Security ordered to be authenticated and delivered by the Trustee. Each Guarantor agrees that its Subsidiary Guarantee set forth in this Article Ten shall remain in full force and effect notwithstanding any failure to endorse on each Security a notation of such Subsidiary Guarantee as well as a supplemental indenture as required by Section 4.18. Each such Subsidiary Guarantee shall be signed on behalf of each Guarantor by two Officers, or an Officer and a secretary, treasurer, controller or an assistant secretary of the Guarantor or one Officer shall sign and one Officer or a secretary, treasurer, controller or an assistant secretary of the Guarantor (each of whom shall, in each case, have been duly authorized by all requisite corporate actions) shall attest to such Subsidiary Guarantee prior to the authentication of the Security on which it is endorsed, and the delivery of such Security by the Trustee, after the authentication thereof hereunder, shall constitute due delivery of such Subsidiary Guarantee on behalf of such Guarantor. Such signatures upon the Subsidiary Guarantee may be by manual or facsimile signature of such officers and may be imprinted or otherwise reproduced on the Subsidiary Guarantee, and in case any such officer who shall have signed the Subsidiary Guarantee shall cease to be such officer before the Security on which such Subsidiary Guarantee is endorsed shall have been authenticated and delivered by the Trustee or disposed of by the Company, such Security nevertheless may be authenticated and delivered or disposed of as though the person who signed the Subsidiary Guarantee had not ceased to be such officer of the Guarantor. SECTION 10.08. Waiver of Stay, Extension or Usury Laws. Each Guarantor covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension law or any usury law or other law that would prohibit or forgive each such Guarantor from performing its Subsidiary Guarantee as contemplated -108- herein, wherever enacted, now or at any time hereafter in force, or which may affect the covenants or the performance of this Indenture; and (to the extent that it may lawfully do so) each such Guarantor hereby expressly waives all benefit or advantage of any such law, and covenants that it will not hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted. ARTICLE ELEVEN MISCELLANEOUS SECTION 11.01. TIA Controls. If any provision of this Indenture limits, qualifies, or conflicts with the duties imposed by operation of Section 318(c) of the TIA, the imposed duties shall control. SECTION 11.02. Notices. Any notices or other communications required or permitted hereunder shall be in writing, and shall be sufficiently given if made by hand delivery, by telecopier or registered or certified mail, postage prepaid, return receipt requested, addressed as follows: if to the Company or a Guarantor: Tenneco Automotive Inc. 500 North Field Drive Lake Forest, Illinois 60045 Attention: Mark A. McCollum Chief Financial Officer Facsimile: (847) 482-5180 with a copy to: Timothy R. Donovan General Counsel Tenneco Automotive Inc. 500 North Field Drive Lake Forest, Illinois 60045 Facsimile: (847) 482-5040 -109- if to the Trustee: Wachovia Bank, National Association 5847 San Felipe, Suite 1050 Houston, Texas 77057 Attention: Corporate Trust Department Facsimile: (713) 278-4329 Each of the Company and the Trustee by written notice to each other such Person may designate additional or different addresses for notices to such Person. Any notice or communication to the Company or a Guarantor or the Trustee shall be deemed to have been given or made as of the date so delivered if personally delivered; when receipt is acknowledged, if telecopied; and five (5) calendar days after mailing if sent by registered or certified mail, postage prepaid (except that a notice of change of address shall not be deemed to have been given until actually received by the addressee). Any notice or communication mailed to a Securityholder shall be mailed to him by first class mail or other equivalent means at his address as it appears on the registration books of the Registrar and shall be sufficiently given to him if so mailed within the time prescribed. Failure to mail a notice or communication to a Securityholder or any defect in it shall not affect its sufficiency with respect to other Securityholders. If a notice or communication is mailed in the manner provided above, it is duly given, whether or not the addressee receives it. SECTION 11.03. Communications by Holders with Other Holders. Securityholders may communicate pursuant to TIA Section 312(b) with other Securityholders with respect to their rights under this Indenture, the Securities or any Subsidiary Guarantees. The Company, the Trustee, the Registrar and any other Person shall have the protection of TIA Section 312(c). SECTION 11.04. Certificate and Opinion as to Conditions Precedent. Upon any request or application by the Company to the Trustee or the Collateral Agent to take any action under this Indenture, the Security Documents or the Intercreditor Agreement, the Company shall furnish to the Trustee or the Collateral Agent, as the case may be, at the request of the Trustee or the Collateral Agent, as the case may be: -110- (1) an Officers' Certificate, in form and substance satisfactory to the Trustee, stating that, in the opinion of the signers, all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with; and (2) an Opinion of Counsel stating that, in the opinion of such counsel, all such conditions precedent have been complied with. SECTION 11.05. Statements Required in Certificate or Opinion. Each certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture, the Security Documents or the Intercreditor Agreement, other than the Officers' Certificate required by Section 4.08, shall include (1) a statement that the person making such certificate or opinion has read such covenant or condition; (2) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (3) a statement that, in the opinion of such person, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with; and (4) a statement as to whether or not, in the opinion of each such person, such condition or covenant has been complied with; provided, however, that with respect to matters of fact an Opinion of Counsel may rely on an Officers' Certificate or certificates of public officials. SECTION 11.06. Rules by Trustee, Paying Agent, Registrar. The Trustee, Paying Agent or Registrar may make reasonable rules for its functions. SECTION 11.07. Legal Holidays. If a payment date is not a Business Day, payment may be made on the next succeeding day that is a Business Day with the same force and effect as if made on such payment date. SECTION 11.08. Governing Law. THIS INDENTURE, THE SECURITIES AND ANY GUARANTEES WILL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF -111- THE STATE OF NEW YORK BUT WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAW OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY. Each of the parties hereto hereby irrevocably and unconditionally: (a) submits for itself and its property in any legal action or proceeding relating to this Indenture, the Securities and the Security Documents to which it is a party, or for recognition and enforcement of any judgment in respect thereof, to the non-exclusive general jurisdiction of the Courts of the State of New York, the courts of the United States of America for the Southern District of New York and appellate courts from any thereof; (b) consents that any such action or proceeding may be brought in such courts and waives any objection that it may now or hereafter have to the venue of any such action or proceeding in any such court or that such action or proceeding was brought in an inconvenient court and agrees not to plead or claim the same; (c) agrees that service of process in any such action or proceeding may be effected by mailing a copy thereof by registered or certified mail (or any substantially similar from of mail), postage prepaid, to such person at its address referred to in Section 11.02 or at such other address of which notice shall have been given pursuant thereto; (d) agrees that nothing herein shall affect the right to effect service of process in any other manner permitted by law or shall limit the right to sue in any other jurisdiction; and (e) waives, to the maximum extent not prohibited by law, any right it may have to claim or recover in any legal action or proceeding referred to in this Section any special, exemplary, punitive or consequential damages. SECTION 11.09. No Adverse Interpretation of Other Agreements. This Indenture may not be used to interpret another indenture, loan or debt agreement of any of the Company or any of its Subsidiaries or any Guarantor. Any such indenture, loan or debt agreement may not be used to interpret this Indenture. SECTION 11.10. No Recourse Against Others. A director, officer, employee, stockholder or incorporator, as such, of the Company or any of its Subsidiaries or any Guarantor shall not have any liability for any obligations of the Company or any Guarantor under the Securities, this Indenture or any Subsidiary Guarantee or for any claim based on, in respect of or by reason of such obligations or their -112- creations. Each Securityholder by accepting a Security waives and releases all such liability. Such waiver and release are part of the consideration for the issuance of the Securities. SECTION 11.11. Successors. All agreements of the Company and any Guarantors in this Indenture, the Securities and any Subsidiary Guarantees shall bind their respective successors. All agreements of the Trustee in this Indenture shall bind its successor. SECTION 11.12. Duplicate Originals. All parties may sign any number of copies of this Indenture. Each signed copy or counterpart shall be an original, but all of them together shall represent the same agreement. SECTION 11.13. Severability. In case any one or more of the provisions in this Indenture, in the Securities or in any Subsidiary Guarantee shall be held invalid, illegal or unenforceable, in any respect for any reason, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions shall not in any way be affected or impaired thereby, it being intended that all of the provisions hereof shall be enforceable to the full extent permitted by law. SECTION 11.14. Table of Contents, Headings, Etc. The table of contents, cross-reference sheet and headings of the Articles and Sections of this Indenture have been inserted for convenience of reference only, and are not to be considered a part hereof, and shall in no way modify or restrict any of the terms or provisions hereof. ARTICLE TWELVE COLLATERAL AND SECURITY DOCUMENTS SECTION 12.01. Collateral and Security Documents. (a) In order to secure the due and punctual payment of the Securities, the Company and the Guarantors have entered into the Collateral Agreement and the other Security Documents to create the Second Priority Liens on the Collateral in accordance with the terms thereof, subject to the Intercreditor Agreement. Pursuant to the provisions of the Collateral Agreement, the Intercreditor Agreement, the other Security Documents and this Indenture, the rights and remedies of the Trustee and the Holders of the Securities in the Collateral -113- shall be subordinate and subject to the rights and remedies of the holders of the First Priority Liens in accordance with the terms of the Collateral Agreement, the other Security Documents and the Intercreditor Agreement. In the event of a conflict between the terms of this Indenture and the Security Documents, the Security Documents shall control. (b) Each Holder of a Security, by accepting such Security, agrees to all of the terms and provisions of the Collateral Agreement, the other Security Documents and the Intercreditor Agreement. (c) The Company and the Guarantors shall not, and shall not cause or permit any of their Restricted Subsidiaries to, intentionally grant a Lien on any of their Collateral to the collateral agent under the Credit Agreement and/or the security agreement and other documents and instruments entered into in connection therewith for the benefit of the lenders under the Credit Agreement unless a Second Priority Lien is created, subject to the Intercreditor Agreement, in favor of the Collateral Agent for the benefit of the Trustee (on behalf of the Trustee and the Holders of the Securities) with respect to such property or assets and with the same (in all material respects) priorities, consent rights and provisions regarding release of Collateral and other provisions set forth in the Security Documents as then in effect, subject to the Intercreditor Agreement. From and after the date of this Indenture, if the Company or any Guarantor creates any additional Lien upon any of its property to secure any Credit Agreement Obligations, other First Priority Claims or any Other Second Lien Obligations, it shall concurrently grant a Second Priority Lien (subject to Permitted Liens and First Priority Liens) upon such property as security for the Securities and execute any and all further Security Documents, financing statements, agreements and instruments, but subject to the Intercreditor Agreement, that grant the Collateral Agent a Second Priority Lien upon such property for its benefit and the benefit of the Trustee and Holders and take all such actions (including the filing and recording of financing statements, fixture filings, Mortgages and other documents) that may be required under any applicable law, or which the Collateral Agent or Trustee may reasonably request to create such Second Priority Lien, all at the expense of the Company and the Guarantors, including reasonable fees and expenses of counsel incurred by the Trustee and the Collateral Agent in connection therewith; provided that (i) the Company or such Guarantor shall not be required to grant or perfect, as the case may be, a second priority Lien upon such property as security for the Securities if a second priority Lien in such property cannot be granted or perfected, as the case may be, under applicable law, (ii) such grant requires the consent of any third party, which consent the Company or such Guarantor is unable to obtain using commercially reasonable efforts or (iii) to the extent such property is Excluded Collateral. In addition, the Company and each Guarantor shall, with respect to each parcel of real property in the United States owned by the Company or any Guarantor that secures the Credit Agreement Obligations, other First Priority Claims or any Other Second Lien -114- Obligations, use commercially reasonable efforts to deliver to the Collateral Agent, for the benefit of or addressed to the Trustee or the Collateral Agent, as applicable, the following: (1) a fully executed, acknowledged, and recorded Second Priority Mortgage similar to those delivered on the date hereof with such changes as may be required under local law, subject to the Intercreditor Agreement; (2) an opinion of local counsel in a form substantially similar to the opinion provided for the benefit of the Credit Agent, or otherwise reasonably acceptable to the Trustee and the Collateral Agent; (3) if provided to the Credit Agent, a fully-paid title insurance policy (including such endorsements as the Credit Agent obtained in its title insurance policy) with no exceptions other than (i) exceptions included under the title insurance policy in favor of the Credit Agent, (ii) the Credit Agent's existing Lien on such property and other First Priority Liens and (iii) other changes reasonably acceptable to the Trustee; (4) if provided to the Credit Agent, the most recent survey of each property together with either (i) an updated survey certification in favor of the Trustee and the Collateral Agent from the applicable surveyor stating that, based on a visual inspection of the property and the knowledge of the surveyor, there has been no change in the facts depicted in the survey or (ii) an affidavit from the Company and the Guarantors stating that there has been no change, other than, in each case, changes reasonably acceptable to the Trustee, in the facts depicted in the survey; and (5) such other related deliveries and deliverables as the Trustee and the Collateral Agent shall reasonably require. The Company and the Guarantors shall provide each of the foregoing described in clauses (1) through (5) above at their own expense and shall pay all reasonable fees and expenses of counsel incurred by the Trustee and the Collateral Agent in connection with each of the foregoing. SECTION 12.02. Application of Proceeds of Collateral. Upon any realization upon the Collateral, the proceeds thereof shall be applied in accordance with the terms of the Security Documents and the terms hereof, subject to the Intercreditor Agreement. SECTION 12.03. Possession, Use and Release of Collateral. (a) Unless an Event of Default shall have occurred and be continuing, subject to the terms of the Security Documents, the Company and the Guarantors will have the -115- right to remain in possession and retain exclusive control of the Collateral securing the Securities and any Subsidiary Guarantees (other than any cash, securities, obligations and Cash Equivalents constituting part of the Collateral and deposited with the Collateral Agent in accordance with the provisions of the Security Documents and other than as set forth in the Security Documents), to freely operate the Collateral and to collect, invest and dispose of any income thereon. (b) Each Holder of a Security, by accepting such Security, acknowledges that (i) the Security Documents shall provide that so long as any First Priority Claims (or any commitments or letters of credit in respect thereof) are outstanding, the holders thereof shall have the exclusive right and authority to determine the release, sale, or other disposition with respect to the Collateral and to change, waive or vary the Security Documents, subject in the case of changes, waivers, or variances, to the conditions specified in the Security Documents and in Section 5.3 of the Intercreditor Agreement and (ii) the holders of the First Priority Claims may (x) direct the Collateral Agent to take actions with respect to the Collateral (including the release of the Collateral and the manner of realization) without the consent of the Holders or the Trustee and (y) agree to modify the Security Documents, without the consent of the Holders or the Trustee, as set forth in the Intercreditor Agreement. Subject to the terms of the Security Documents and the Intercreditor Agreement, if at any time or from time to time Collateral which also secures the First Priority Claims is released or otherwise disposed of pursuant to the terms of the relevant governing documents, as applicable, such Collateral securing the Securities and any Subsidiary Guarantees shall be automatically released or disposed of. (c) Subject to subsections (b), (d) and (e) of this Section 12.03, Collateral may be released from the Lien and security interest created by the Security Documents at any time or from time to time in accordance with the provisions of the Security Documents, the Intercreditor Agreement or as provided hereby. Whether prior to or after the Discharge of the First Priority Claims, upon the request of the Company pursuant to an Officers' Certificate certifying that all conditions precedent hereunder have been met and without the consent of any Holder of the Securities, the Company and the Guarantors will be entitled to releases of assets included in the Collateral from the Liens created by the Security Documents securing the Securities under any one or more of the following circumstances: (1) if all other Liens on that asset securing First Priority Claims or any Other Second-Lien Obligations then secured by that asset (including all commitments thereunder) are released; provided, that after giving effect to the release, obligations secured by the First-Priority Liens on the remaining Collateral remain outstanding; provided, further, however, that in the event that an Event of Default under this Indenture of which the Credit Agent has at least one Business Day's notice exists as of the date on which the First Priority Claims release a Lien on any asset as described in this clause (1), the Second Priority Liens on the Collateral will not be released, except in -116- connection with the exercise of remedies by the Credit Agent and thereafter, the Trustee (acting at the direction of the holders of a majority of outstanding principal amount of Second Priority Claims) will have the right to direct the Collateral Agent to foreclose upon the Collateral (but in such event, the Second Priority Liens will be released when such Event of Default and all other Events of Default under this Indenture cease to exist); (2) to enable the Company or any Guarantor to consummate any sale, lease, conveyance or other disposition of any assets or rights permitted or not prohibited under Section 4.12 hereof; (3) if the Company provides substitute collateral with at least an equivalent Fair Market Value as the assets included in the Collateral sought to be released, and such substitute collateral is subject to the Liens of the Security Documents and the Company or applicable Guarantor delivers to the Collateral Agent the following, as applicable: (i) financing statements, agreements and instruments, but subject to the Intercreditor Agreement, that grant the Collateral Agent a Second Priority Lien upon such property for its benefit and the benefit of the Trustee and Holders and take all such actions (including the filing and recording of financing statements, fixture filings, Mortgages and other documents) that may be required under any applicable law, or which the Collateral Agent or Trustee may reasonably request to create such Lien, all at the expense of the Company and the Guarantors, including reasonable fees and expenses of counsel incurred by the Trustee and the Collateral Agent in connection therewith; (ii) with respect each parcel of real property constituting substitute collateral, a fully executed, acknowledged, and recorded Second Priority Mortgage encumbering such parcel similar to those delivered on the date hereof with such changes as may be required under local law, subject to the Intercreditor Agreement; (iii) an opinion of Company counsel and local counsel from each jurisdiction in which any real property constituting substitute collateral is located, which opinion shall be in a form substantially similar to those opinions delivered on the date hereof and, in the case of local counsel, with such changes as may be required under local law and otherwise reasonably acceptable to the Trustee and the Collateral Agent; (iv) with respect to each Second Priority Mortgage encumbering real property constituting substitute collateral, a fully-paid title insurance policy (including such endorsements as are included in the title insurance policies delivered on the date hereof with such changes as may be required under local law) with no exceptions -117- other than (a) exceptions of the type as are included in the title insurance policies delivered on the date hereof (b) the Credit Agent's existing Lien on such property and other First Priority Liens and (c) other changes reasonably acceptable to the Trustee; (v) with respect each parcel of real property constituting substitute collateral, the most recent survey thereof together with either (a) an updated survey certification in favor of the Trustee and the Collateral Agent from the applicable surveyor stating that, based on a visual inspection of the property and the knowledge of the surveyor, there has been no change in the facts depicted in the survey or (b) an affidavit from the Company and the Guarantors stating that there has been no change, other than, in each case, changes reasonably acceptable to the Trustee, in the facts depicted in the survey; and (vi) such other related deliveries and deliverables as the Trustee and the Collateral Agent shall reasonably require. The Company and the Guarantors shall provide each of the foregoing described in clauses (i) through (vi) above at their own expense and shall pay all reasonable fees and expenses of counsel incurred by the Trustee and the Collateral Agent in connection with each of the foregoing; (4) if all of the stock of any of the Company's Subsidiaries that is pledged to the Collateral Agent is released or if any Subsidiary that is a Guarantor is released from its Subsidiary Guarantee, that Subsidiary's assets will also be released; (5) in respect of assets included in the Collateral with a fair value, as determined in good faith by the Board of Directors of the Company, of up to $1.0 million in any calendar year, subject to a cumulative carryover for any amount not used in any prior calendar year; (6) pursuant to an amendment, waiver or supplement pursuant to Article Nine hereof; or (7) as provided in the Intercreditor Agreement. Upon receipt of such Officers' Certificate, the Collateral Agent shall execute, deliver or acknowledge any necessary or proper instruments of termination, satisfaction or release to evidence the release of any Collateral permitted to be released pursuant to this Indenture or the Security Documents. Except as otherwise provided in the Intercreditor Agreement, no Collateral may be released from the Lien and security interest created by the Security Documents -118- pursuant to the provisions of the Security Documents unless the Officers' Certificate required by this Section 12.03 has been delivered to the Collateral Agent. (d) Notwithstanding any provision to the contrary in this Indenture, subject to Section 12.03(c), Collateral comprised of (i) inventory or (ii) accounts receivable shall be subject to release upon sales of such inventory in the ordinary course of business, sales of such accounts receivable pursuant to a Permitted Receivables Financing made in accordance with Section 4.03 or the collection of such accounts receivable, as the case may be. If reasonably requested in writing by the Company, the Trustee shall instruct the Collateral Agent to execute and deliver such documents, instruments or statements and to take such other action as the Company may reasonably request to evidence or confirm that such Collateral has been released from the Liens of each of the Security Documents. The Collateral Agent shall execute and deliver such documents, instruments and statements and shall take all such actions promptly upon receipt of such instructions from the Trustee. The Company and the Guarantors shall pay all reasonable fees and expenses of the Trustee and Collateral Agent and their respective counsels in connection with each of the foregoing. (e) At any time when a Default or Event of Default has occurred and is continuing and the maturity of the Securities has been accelerated (whether by declaration or otherwise) and the Trustee has delivered a notice of acceleration to the Collateral Agent, no release of Collateral pursuant to the provisions of the Security Documents will be effective as against the Holders of Securities, except as otherwise provided in the Intercreditor Agreement. SECTION 12.04. Opinion of Counsel. So long as the Security Documents have not been terminated in accordance with the terms thereof, the Company shall deliver to the Trustee and the Collateral Agent, so long as such delivery is required by Section 314(b) of the TIA, on the Issue Date and thereafter, at least annually, within 30 days of April 1 of each year (commencing with April 1, 2004), an Opinion of Counsel either stating that in the opinion of such counsel, such action has been taken with respect to the recording, filing, recording and refiling of this Indenture or any Security Document as is necessary to maintain the Security Interests granted thereunder, and reciting the details of such action, or stating that in the opinion of such counsel, no such action is necessary to maintain such Security Interests granted thereunder. SECTION 12.05. Certain Covenants Relating to Mortgaged Property Following the Discharge of the First Priority Claims, and in compliance with the terms of the Security Documents, and so long as no Default or Event of Default shall have occurred and be continuing or would result therefrom, the Company or any Restricted Subsidiaries may, without any prior release or consent by the Trustee, subject to the provisions of the Security Documents, grant leases or subleases in respect of any material properties in the event -119- that the Company or the relevant Restricted Subsidiary determines, in its reasonable business judgment, that such property is no longer useful in the conduct of such entity's business and such leases or subleases do not materially interfere with the ordinary course of business of the Company and its Subsidiaries and do not materially affect the value of the property subject thereto; provided, however, that in the case of Mortgaged Property any such lease or sublease shall by its terms be subject and subordinate to the Lien, and otherwise comply with the provisions, of any Second Priority Mortgage affecting such property. SECTION 12.06. Trust Indenture Act Requirements. The release of any Collateral from the Second Priority Lien of any of the Security Documents or the release of, in whole or in part, the Second Priority Liens created by any of the Security Documents, will not be deemed to impair the Security Interests in contravention of the provisions hereof if and to the extent the Collateral or Second Priority Liens are released pursuant to the applicable Security Documents and pursuant to the terms hereof. Each of the Holders of the Securities acknowledge that a release of Collateral or Liens strictly in accordance with the terms of the Security Documents and the terms hereof will not be deemed for any purpose to be an impairment of the Security Documents or otherwise contrary to the terms of this Indenture. To the extent applicable, the Company and the Guarantors will cause TIA Sections 313(b), relating to reports, and TIA Sections 314(d), relating to the release of property or securities from the Lien and security interest of the Security Documents and relating to the substitution therefor of any property or securities to be subjected to the Lien and security interest of the Security Documents, to be complied with. Any certificate or opinion required by TIA Sections 314(d) may be made by an Officer of the Company or Guarantors except in cases where TIA Sections 314(d) requires that such certificate or opinion be made by an independent Person, which Person will be an independent engineer, appraiser or other expert selected or approved by the Trustee and the Collateral Agent in the exercise of reasonable care. SECTION 12.07. Suits to Protect the Collateral. Subject to the provisions of the Security Documents and the Intercreditor Agreement, the Trustee shall have the authority to direct the Collateral Agent to institute and to maintain such suits and proceedings as the Trustee may deem expedient to prevent any impairment of the Collateral by any acts which may be unlawful or in violation of any of the Security Documents or this Indenture, and such suits and proceedings as the Trustee may deem expedient to preserve or protect its interests and the interests of the Holders of the Securities in the Collateral (including suits or proceedings to restrain the enforcement of or compliance with any legislative or other governmental enactment, rule or order that may be unconstitutional or otherwise invalid if the enforcement of, or compliance with, such enactment, rule or order would impair the Security Interests or be prejudicial to the interests of the Holders of the Securities). -120- SECTION 12.08. Purchaser Protected. In no event shall any purchaser in good faith or other transferee of any property purported to be released hereunder be bound to ascertain the authority of the Trustee to direct the Collateral Agent to execute the release or to inquire as to the satisfaction of any conditions required by the provisions hereof for the exercise of such authority or to see to the application of any consideration given by such purchaser or other transferee; nor shall any purchaser or other transferee of any property or rights permitted to be sold by this Article Twelve, be under obligation to ascertain or inquire into the authority of the Company or any Guarantor, as applicable, to make any such sale or other transfer. SECTION 12.09. Powers Exercisable by Receiver or Trustee. In case the Collateral shall be in the possession of a receiver or trustee, lawfully appointed, the powers conferred in this Article Twelve upon the Company or any Guarantor, as applicable, with respect to the release, sale or other disposition of such property may be exercised by such receiver or trustee, and an instrument signed by such receiver or trustee shall be deemed the equivalent of any similar instrument of the Company or any Guarantor, as applicable, or of any officer or officers thereof required by the provisions of this Article Twelve, all subject to the Intercreditor Agreement. SECTION 12.10. Release upon Termination of Company's Obligations. In the event that the Company delivers an Officers' Certificate and Opinion of Counsel certifying that (i) its obligations under this Indenture have been satisfied and discharged by complying with the provisions of Article VIII or (ii) the Company has paid in full the principal of, accrued and unpaid interest and liquidated damages, if any, on the Securities and all other Obligations under this Indenture, the Subsidiary Guarantees and the Security Documents that are due and payable at or prior to the time such principal, accrued and unpaid interest and liquidated damages, if any, are paid, the Trustee shall (i) execute and deliver such releases, termination statements and other instruments (in recordable form, where appropriate) as the Company or any Guarantor, as applicable, may reasonably request to evidence the termination of the Security Interests created by the Security Documents and (ii) not be deemed to hold the Security Interests for its benefit and the benefit of the Holders of the Securities. SECTION 12.11. Collateral Agent. (a) The Trustee is hereby appointed and shall act as Collateral Agent and shall be authorized to appoint co-Collateral Agents as necessary in its sole discretion. Neither the Collateral Agent nor any of its respective officers, directors, employees or agents shall be liable for failure to demand, collect or realize upon any of the Collateral or for any delay in doing so or shall be under any obligation to sell or otherwise dispose of any Collateral upon -121- the request of any other Person or to take any other action whatsoever with regard to the Collateral or any part thereof. The powers conferred on the Collateral Agent hereunder are solely to protect the Collateral Agent's interest in the Collateral and shall not impose any duty upon the Collateral Agent to exercise any such powers. The Collateral Agent shall be accountable only for amounts that it actually receives as a result of the exercise of such powers, and neither the Collateral Agent nor any of its officers, directors, employees or agents shall be responsible for any act or failure to act hereunder or under the Security Documents, except for its own gross negligence or willful misconduct. (b) The Trustee, as Collateral Agent and as Trustee, as the case may be, is authorized and directed to (i) enter into the Security Documents and the Intercreditor Agreement, (ii) bind the Holders on the terms as set forth therein and (iii) perform and observe its obligations under the Security Documents and the Intercreditor Agreement. (c) If the Company or the Guarantors (i) incur Indebtedness constituting Credit Agreement Obligations or other First Priority Claims at any time when no Intercreditor Agreement is in effect or at any time when Indebtedness constituting Credit Agreement Obligations or other First Priority Claims entitled to the benefit of an existing Intercreditor Agreement is concurrently retired, and (ii) deliver to the Collateral Agent an Officers' Certificate so stating and requesting the Collateral Agent to enter into the Intercreditor Agreement or an intercreditor agreement substantially in the form of the Intercreditor Agreement in favor of a designated agent or representative for the holders of the Indebtedness so incurred, the Collateral Agent shall (and is hereby authorized and directed to) enter into such Intercreditor Agreement, bind the Holders on the terms set forth therein, and perform and observe its obligations thereunder. (d) Subject to the Intercreditor Agreement, if (i) the Company or the Guarantors at any time incur any Indebtedness constituting Other Second-Lien Obligations, (ii) the indenture or agreement governing such Indebtedness provides that, notwithstanding the date, manner or order of grant, attachment or perfection of any Liens granted to the Collateral Agent under the Security Documents (the "Liens Securing Note Obligations") or granted to the holders of Other Second-Lien Obligations or any agent or representative for the holders of Other Second-Lien Obligations (the "Liens Securing Other Second-Lien Obligations"), the Liens Securing Note Obligations and the Liens Securing Other Second-Lien Obligations shall be of equal dignity, priority and rank, (iii) the Company and the Guarantors deliver to the Collateral Agent an Officer's Certificate so stating and requesting that the Collateral Agent assign or transfer the Liens Securing Note Obligations to a Common Collateral Agent identified therein and (iv) the Company and the Guarantors deliver to the Collateral Agent an Opinion of Counsel stating that, in the opinion of such counsel, the Common Collateral Agent is empowered and obligated (on substantially the terms applicable to the Collateral Agent pursuant to this Indenture and the Security Documents, including, without limitation, the Intercreditor Agreement) to hold the Liens Securing Note Obligations and all Liens Securing Other-Second -122- Lien Obligations and all proceeds of all such Liens for the equal and ratable benefit of the holders of all Obligations secured thereby and further confirming as to all such Liens each of the matters referred to in Section 12.04, giving effect to the assignment or transfer requested in such Officer's Certificate, then (A) the Liens Securing Note Obligations shall be of equal dignity, priority and rank with all such Liens Securing Other Second-Lien Obligations and (B) the Collateral Agent shall assign or transfer the Liens Securing Note Obligations to the Common Collateral Agent as requested in such Officer's Certificate. (e) The Company shall provide written notice to the Trustee and the Collateral Agent of any change in the Credit Agent under the Intercreditor Agreement and of any change in the notice address of the Credit Agent, in each case within two Business Days of the Company becoming aware of any such change. SECTION 12.12. Post-Closing Filings; Further Assurances. (a) The Company and each Guarantor shall maintain the Second Priority Liens as perfected security interests having at least the priority and perfection required by the Security Documents and as perfected Second Priority Mortgage Liens and shall defend such security interests against the claims and demands of all Persons whomsoever, other than the holders of the First Priority Liens and Permitted Liens and subject to the Intercreditor Agreement. (b) The Company and each Guarantor will furnish to the Collateral Agent and the Holders from time to time statements and schedules further identifying and describing their assets and property constituting Collateral and such other reports in connection therewith as the Collateral Agent may reasonably request, all in reasonable detail. (c) Subject to the priority of the First Priority Liens and subject to the terms of the Intercreditor Agreement, at any time and from time to time, upon the written request of the Collateral Agent, and at the sole expense of the Company or such Guarantor, the Company and each Guarantor will promptly and duly execute and deliver, and have recorded, such further instruments and documents and take such further actions as the Collateral Agent may reasonably request for the purpose of obtaining or preserving the full benefits of the Security Documents and of the rights and powers therein granted. (d) The Company is currently the fee owner of a certain parcel of real property located at 515 W. Mill Street in Culver, Indiana 46511 which, as part of the First Priority Collateral, is encumbered by a mortgage in favor of JPMorgan Chase Bank (as successor by merger to The Chase Manhattan Bank), as administrative agent. The Company is currently contemplating a sale of this property. In the event that the Company does not consummate the sale of the Culver, Indiana property prior to the date which is 180 days from the date hereof in accordance with the provisions of the Indenture and the Credit Agreement, the Company covenants and agrees that, within 210 days from the date hereof the Culver, Indiana -123- property shall become a Mortgaged Property and the Company shall, with regard to the Culver, Indiana property (i) deliver to the Trustee a Second Priority Mortgage encumbering such property and (ii) comply with all other requirements and deliver the other documents specified in Section (5)(p) of the Purchase Agreement with regard to such Mortgaged Property, the terms of which are incorporated herein by reference to the same extent as fully set forth in Section (5)(p) of the Purchase Agreement except that each reference therein to the "Representative" shall be deemed to be a reference to the Trustee hereunder. SECTION 12.13. Taking and Destruction. Following Discharge of the First Priority Claims, upon any Taking or Destruction of any Collateral, all Net Insurance Proceeds received by the Company or any Guarantor shall be deemed Net Cash Proceeds and shall be applied in accordance with Section 4.12 (except that references to "270 days" and "271st day" shall be deemed to be replaced with "360 days" and "361st day"). SECTION 12.14. Designations. For purposes of the provisions hereof and the Intercreditor Agreement requiring the Company to designate Indebtedness for the purposes of the term "First Priority Claims," "Other Second-Lien Obligations" or any other such designations hereunder or under the Intercreditor Agreement, any such designation shall be sufficient if the relevant designation is set forth in writing, signed on behalf of the Company by an Officer and delivered to the Trustee and the Credit Agent. For all purposes hereof and the Intercreditor Agreement, the Company hereby designates any Obligations in respect of the Credit Agreement as "Credit Agreement Obligations." [Signature Pages Follow] S-1 SIGNATURES IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed as of the date first written above. TENNECO AUTOMOTIVE INC. By: ----------------------------------- Name: Title: TENNECO AUTOMOTIVE OPERATING COMPANY INC., as Guarantor By: ----------------------------------- Name: Title: THE PULLMAN COMPANY, as Guarantor By: ----------------------------------- Name: Title: CLEVITE INDUSTRIES INC., as Guarantor By: ----------------------------------- Name: Title: TENNECO GLOBAL HOLDINGS INC., as Guarantor By: ----------------------------------- Name: Title: S-2 TMC TEXAS INC., as Guarantor By: ----------------------------------- Name: Title: TENNECO INTERNATIONAL HOLDING CORP., as Guarantor By: ----------------------------------- Name: Title: WACHOVIA BANK, NATIONAL ASSOCIATION, as Trustee By: ----------------------------------- Name: Title: S-3 The undersigned Deutsche Bank National Trust Company hereby acknowledges its agreement to become successor Trustee pursuant to Section 7.08 and that it shall become successor Trustee and a party to this Indenture as set forth therein without any further action in accordance with the terms of Section 7.08. DEUTSCHE BANK NATIONAL TRUST COMPANY, as Successor Trustee By: ----------------------------------- Name: Title: EXHIBIT A [FORM OF SERIES A SECURITY] THIS NOTE (AND ANY GUARANTEE THEREOF) HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") AND NEITHER THIS SECURITY (NOR ANY GUARANTEE THEREOF) NOR ANY INTEREST OR PARTICIPATION HEREIN (OR THEREIN) MAY BE OFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. THE HOLDER HEREOF, BY ITS ACCEPTANCE OF THIS SECURITY, AGREES FOR THE BENEFIT OF THE ISSUER THAT THIS SECURITY MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED PRIOR TO THE EXPIRATION OF THE HOLDING PERIOD APPLICABLE THERETO UNDER RULE 144(k) UNDER THE SECURITIES ACT WHICH IS APPLICABLE TO THIS SECURITY (THE "RESALE RESTRICTION TERMINATION DATE") OTHER THAN (1) TO THE ISSUER OR ITS SUBSIDIARIES, (2) SO LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT ("RULE 144A"), TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" WITHIN THE MEANING OF RULE 144A PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER, IN EACH CASE TO WHOM NOTICE IS GIVEN THAT THE RESALE, PLEDGE OR OTHER TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A (AS INDICATED BY THE BOX CHECKED BY THE TRANSFEROR ON THE CERTIFICATE OF TRANSFER ON THE REVERSE OF THIS SECURITY IF THIS SECURITY IS NOT IN BOOK-ENTRY FORM), (3) TO A NON-"U.S. PERSON" IN AN "OFFSHORE TRANSACTION" (AS SUCH TERMS ARE DEFINED IN REGULATION S UNDER THE SECURITIES ACT) IN ACCORDANCE WITH REGULATION S UNDER THE SECURITIES ACT (AS INDICATED BY THE BOX CHECKED BY THE TRANSFEROR ON THE CERTIFICATE OF TRANSFER ON THE REVERSE OF THIS SECURITY IF THIS SECURITY IS NOT IN BOOK-ENTRY FORM), (4) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, INCLUDING THE EXEMPTION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT, IF AVAILABLE, OR (5) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, SUBJECT IN EACH OF THE FOREGOING CASES TO ANY REQUIREMENT OF LAW THAT THE DISPOSITION OF ITS PROPERTY OR THE PROPERTY OF SUCH INVESTOR ACCOUNT OR ACCOUNTS BE AT ALL TIMES WITHIN ITS OR THEIR CONTROL, AND SUBJECT TO THE RIGHT OF THE A-1 ISSUER OR THE TRUSTEE FOR THE SECURITIES PRIOR TO ANY SUCH SALE, PLEDGE OR OTHER TRANSFER PURSUANT TO CLAUSE (4) ABOVE TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATIONS AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM. THIS LEGEND WILL BE REMOVED UPON REQUEST OF THE HOLDER ON OR AFTER THE RESALE RESTRICTION TERMINATION DATE. A-2 TENNECO AUTOMOTIVE INC. 10 1/4% Senior Secured Notes due July 15, 2013, Series A CUSIP No.: No. [ ] $[ ] TENNECO AUTOMOTIVE INC., a Delaware corporation (the "Company," which term includes any successor corporation), for value received promises to pay to Cede & Co. or registered assigns, the principal sum of [ ] Dollars, on July 15, 2013. Interest Payment Dates: January 15 and July 15, commencing [ ]. Record Dates: January 1 and July 1. Reference is made to the further provisions of this Security contained herein, which will for all purposes have the same effect as if set forth at this place. A-3 IN WITNESS WHEREOF, the Company has caused this Security to be signed manually or by facsimile by its duly authorized officers. Dated: [ ] TENNECO AUTOMOTIVE INC. By: ----------------------------------- Name: Title: By: ----------------------------------- Name: Title: A-4 This is one of the 10 1/4% Senior Secured Notes due 2013, Series A, described in the within-mentioned Indenture. Dated: [ ] WACHOVIA BANK, NATIONAL ASSOCIATION, as Trustee By: ----------------------------------- Authorized Signatory A-5 (REVERSE OF SECURITY) TENNECO AUTOMOTIVE INC. 10 1/4% Senior Secured Notes due July 15, 2013, Series A 1. Interest. TENNECO AUTOMOTIVE INC., a Delaware corporation (the "Company"), promises to pay interest on the principal amount of this Security at the rate per annum shown above. The Company will pay interest semi-annually on January 15 and July 15 of each year (an "Interest Payment Date"), commencing [ ]. Interest on the Securities will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from [ ]. Interest will be computed on the basis of a 360-day year of twelve 30-day months. The Company shall pay interest on overdue principal from time to time on demand at the rate borne by the Securities plus 2% and on overdue installments of interest (without regard to any applicable grace periods) to the extent lawful. 2. Method of Payment. The Company shall pay interest on the Securities (except defaulted interest) to the persons who are the registered Holders at the close of business on the Record Date immediately preceding the Interest Payment Date even if the Securities are canceled on registration of transfer or registration of exchange after such Record Date. Holders must surrender Securities to a Paying Agent to collect principal payments. The Company shall pay principal and interest in money of the United States that at the time of payment is legal tender for payment of public and private debts. The Company may deliver any such interest payment to the Paying Agent or to a Holder at the Holder's registered address. 3. Paying Agent and Registrar. Initially, Wachovia Bank, National Association (the "Trustee") will act as Paying Agent and Registrar. The Company may change any Paying Agent, Registrar or co-Registrar without notice to the Holders. 4. Indenture. The Company issued the Securities under an Indenture, dated as of June 19, 2003 (the "Indenture"), between the Company and the Trustee. Capitalized terms herein are used as defined in the Indenture unless otherwise defined herein. The terms of the Securities include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S.C. Sections 77aaa-77bbbb) (the "TIA"), as in effect on the date A-6 of the Indenture until such time as the Indenture is qualified under the TIA, and thereafter as in effect on the date on which the Indenture is qualified under the TIA. Notwithstanding anything to the contrary herein, the Securities are subject to all such terms, and Holders of Securities are referred to the Indenture and the TIA for a statement of them. 5. Optional Redemption. The Securities will be redeemable, at the Company's option, in whole at any time or in part from time to time, on and after July 15, 2008 upon not less than 30 nor more than 60 days' notice, at the following redemption prices (expressed as percentages of the principal amount thereof) if redeemed during the twelve-month period commencing on July 15 of the applicable year set forth below, plus, in each case, accrued and unpaid interest, if any, to the date of redemption:
Year Percentage ---- ---------- 2008........................................ 105.125% 2009........................................ 103.417% 2010........................................ 101.708% 2011 and thereafter......................... 100.000%
6. Optional Redemption upon Equity Offerings. At any time, or from time to time, on or prior to July 15, 2006, the Company may, at its option, use all or any portion of the net cash proceeds of one or more Equity Offerings (as defined below) to redeem up to 35% of the aggregate principal amount of the Securities issued at a redemption price equal to 110.25% of the principal amount thereof plus accrued and unpaid interest, if any, to the date of redemption; provided that at least 65% of the aggregate principal amount of Securities issued remains outstanding immediately after any such redemption. In order to effect the foregoing redemption with the proceeds of any Equity Offering, the Company shall make such redemption not more than 180 days after the consummation of any such Equity Offering. As used in the preceding paragraph, "Equity Offering" means any public or private sale of the common stock of the Company, other than any public offering with respect to the Company's common stock registered on Form S-8 or other issuances upon exercise of options by employees of the Company or any of its Restricted Subsidiaries. 7. Notice of Redemption. Notice of redemption will be mailed at least 30 days but not more than 60 days before the Redemption Date to each Holder of Securities to be redeemed at such Holder's registered address. Securities in denominations of $1,000 may be redeemed only in whole. The Trustee may select for redemption portions (equal to $1,000 or any integral multiple thereof) of the principal of Securities that have denominations larger than $1,000. A-7 If any Security is to be redeemed in part only, the notice of redemption that relates to such Security shall state the portion of the principal amount thereof to be redeemed. A new Security in a principal amount equal to the unredeemed portion thereof will be issued in the name of the Holder thereof upon cancellation of the original Security. On and after the Redemption Date, interest will cease to accrue on Securities or portions thereof called for redemption. 8. Change of Control Offer. Upon the occurrence of a Change of Control, the Company will be required to offer to purchase all of the outstanding Securities at a purchase price equal to 101% of the principal amount thereof plus accrued and unpaid interest, if any, to the date of repurchase. 9. Limitation on Disposition of Assets. The Company is, subject to certain conditions, obligated to make an offer to purchase Securities at 100% of their principal amount plus accrued and unpaid interest to the date of repurchase with certain net cash proceeds of certain sales or other dispositions of assets in accordance with the Indenture. 10. Denominations; Transfer; Exchange. The Securities are in registered form, without coupons, in denominations of $1,000 and integral multiples of $1,000. A Holder shall register the transfer of or exchange Securities in accordance with the Indenture. The Registrar may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and to pay certain transfer taxes or similar governmental charges payable in connection therewith as permitted by the Indenture. The Registrar need not register the transfer of or exchange any Securities or portions thereof selected for redemption, except the unredeemed portion of any security being redeemed in part. 11. Persons Deemed Owners. The registered Holder of a Security shall be treated as the owner of it for all purposes. 12. Unclaimed Funds. If funds for the payment of principal or interest remain unclaimed for two years, the Trustee and the Paying Agent will repay the funds to the Company at its request. After that, all liability of the Trustee and such Paying Agent with respect to such funds shall cease. A-8 13. Legal Defeasance and Covenant Defeasance. The Company may be discharged from its obligations under the Indenture and the Securities except for certain provisions thereof, and may be discharged from its obligations to comply with certain covenants contained in the Indenture and the Securities, in each case upon satisfaction of certain conditions specified in the Indenture. 14. Amendment; Supplement; Waiver. Subject to certain exceptions, the Indenture or the Securities may be amended or supplemented with the written consent of the Holders of at least a majority in aggregate principal amount of the Securities then outstanding, and any existing Default or Event of Default or compliance with any provision may be waived with the consent of the Holders of a majority in aggregate principal amount of the Securities then outstanding. Without notice to or consent of any Holder, the parties thereto may amend or supplement the Indenture or the Securities to, among other things, cure any ambiguity, defect or inconsistency, provide for uncertificated Securities in addition to or in place of certificated Securities or comply with any requirements of the Commission in connection with the qualification of the Indenture under the TIA, or make any other change that does not materially adversely affect the rights of any Holder of a Security. 15. Restrictive Covenants. The Indenture contains certain covenants that, among other things, limit the ability of the Company and certain of its subsidiaries to make restricted payments, to incur indebtedness, to create liens, to issue preferred or other capital stock of subsidiaries, to sell assets, to permit restrictions on dividends and other payments by subsidiaries to the Company, to consolidate, merge or sell all or substantially all of its assets, to engage in transactions with affiliates or to engage in certain businesses. The limitations are subject to a number of important qualifications and exceptions. 16. Defaults and Remedies. If an Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in aggregate principal amount of Securities then outstanding may declare all the Securities to be due and payable immediately in the manner and with the effect provided in the Indenture. Holders of Securities may not enforce the Indenture or the Securities except as provided in the Indenture. The Trustee is not obligated to enforce the Indenture or the Securities unless it has received indemnity satisfactory to it. The Indenture permits, subject to certain limitations therein provided, Holders of a majority in aggregate principal amount of the Securities then outstanding to direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Holders of Securities notice of any continuing Default or Event of Default (except a Default in payment of principal, premium or interest, including an accelerated payment) if it determines that withholding notice is in their interest. A-9 17. Trustee Dealings with Company. The Trustee under the Indenture, in its individual or any other capacity, may become the owner or pledgee of Securities and may otherwise deal with the Company, its Subsidiaries, any Guarantor and their respective Affiliates as if it were not the Trustee. 18. No Recourse Against Others. No stockholder, director, officer, employee or incorporator, as such, of the Company shall have any liability for any obligation of the Company under the Securities or the Indenture or for any claim based on, in respect of or by reason of, such obligations or their creation. Each Holder of a Security by accepting a Security waives and releases all such liability. The waiver and release are part of the consideration for the issuance of the Securities. 19. Authentication. This Security shall not be valid until the Trustee or authenticating agent signs the certificate of authentication on this Security. 20. Abbreviations and Defined Terms. Customary abbreviations may be used in the name of a Holder of a Security or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors Act). 21. CUSIP Numbers. Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Company has caused CUSIP numbers to be printed on the Securities as a convenience to the Holders of the Securities. No representation is made as to the accuracy of such numbers as printed on the Securities and reliance may be placed only on the other identification numbers printed hereon. 22. Registration Rights. Pursuant to the Registration Rights Agreement, the Company will be obligated upon the occurrence of certain events to consummate an exchange offer pursuant to which the Holder of this Security shall have the right to exchange this Series A Security for the Company's 10 1/4% Senior Secured Notes due 2013, Series B (the "Series B Securities"), which have been registered under the Securities Act, in like principal amount and having terms identical in all material respects as the Series A Securities. The Holders shall be entitled to receive certain additional interest payments in the event such exchange offer is not consummated and upon certain other conditions, all pursuant to and in accordance with the terms of the Registration Rights Agreement. A-10 23. Security. The Company's and Guarantors' obligations under the Securities are secured by Second Priority Liens on the Collateral pursuant to the terms of the Security Documents and the Intercreditor Agreement. The actions of the Trustee and the Holders of the Securities secured by such Second Priority Liens and the application of proceeds from the enforcement of any remedies with respect to such Collateral are limited pursuant to the terms of the Security Documents and the Intercreditor Agreement. The Company will furnish to any Holder of a Security upon written request and without charge a copy of the Indenture. Requests may be made to TENNECO AUTOMOTIVE INC., 500 North Field Drive, Lake Forest, IL 60045, Attention: Chief Financial Officer. A-11 ASSIGNMENT FORM I or we assign and transfer this Security to - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (Print or type name, address and zip code of assignee or transferee) - -------------------------------------------------------------------------------- (Insert Social Security or other identifying number of assignee or transferee) and irrevocably appoint _______________________________________________________ agent to transfer this Security on the books of the Company. The agent may substitute another to act for him. Dated: Signed: ----------------- ---------------------------------- (Sign exactly as name appears on the other side of this Security) Signature Guarantee: ---------------------------------------------------------- Participant in a recognized Signature Guarantee Medallion Program (or other signature guarantor reasonably acceptable to the Trustee) A-12 OPTION OF HOLDER TO ELECT PURCHASE If you want to elect to have this Security purchased by the Company pursuant to Section 4.12 or Section 4.21 of the Indenture, check the appropriate box: Section 4.12 [ ] Section 4.21 [ ] If you want to elect to have only part of this Security purchased by the Company pursuant to Section 4.12 or Section 4.21 of the Indenture, state the amount: $_____________ Date: Your Signature: ---------------- --------------------------- (Sign exactly as your name appears on the other side of this Security) Signature Guarantee: ---------------------------------------------------------- Participant in a recognized Signature Guarantee Medallion Program (or other signature guarantor reasonably acceptable to the Trustee) A-13 EXHIBIT B [FORM OF SERIES B SECURITY] TENNECO AUTOMOTIVE INC. 10 1/4% Senior Secured Notes due July 15, 2013, Series B CUSIP No.: [ ] No. [ ] $[ ] TENNECO AUTOMOTIVE INC., a Delaware corporation (the "Company," which term includes any successor corporation), for value received promises to pay to Cede & Co. or registered assigns, the principal sum of [ ] Dollars, on July 15, 2013. Interest Payment Dates: January 15 and July 15, commencing [ ]. Record Dates: January 1 and July 1. Reference is made to the further provisions of this Security contained herein, which will for all purposes have the same effect as if set forth at this place. B-1 IN WITNESS WHEREOF, the Company has caused this Security to be signed manually or by facsimile by its duly authorized officers. Dated: [ ] TENNECO AUTOMOTIVE INC. By: ----------------------------------- Name: Title: By: ----------------------------------- Name: Title: B-2 This is one of the 10 1/4% Senior Secured Notes due 2013, Series B, described in the within-mentioned Indenture. Dated: [ ] WACHOVIA BANK, NATIONAL ASSOCIATION, as Trustee By: ----------------------------------- Authorized Signatory B-3 (REVERSE OF SECURITY) TENNECO AUTOMOTIVE INC. 10 1/4% Senior Secured Notes due July 15, 2013, Series B 1. Interest. TENNECO AUTOMOTIVE INC., a Delaware corporation (the "Company"), promises to pay interest on the principal amount of this Security at the rate per annum shown above. The Company will pay interest semi-annually on January 15 and July 15 of each year (an "Interest Payment Date"), commencing [ ]. Interest on the Securities will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from [ ]. Interest will be computed on the basis of a 360-day year of twelve 30-day months. The Company shall pay interest on overdue principal from time to time on demand at the rate borne by the Securities plus 2% and on overdue installments of interest (without regard to any applicable grace periods) to the extent lawful. 2. Method of Payment. The Company shall pay interest on the Securities (except defaulted interest) to the persons who are the registered Holders at the close of business on the Record Date immediately preceding the Interest Payment Date even if the Securities are canceled on registration of transfer or registration of exchange after such Record Date. Holders must surrender Securities to a Paying Agent to collect principal payments. The Company shall pay principal and interest in money of the United States that at the time of payment is legal tender for payment of public and private debts. The Company may deliver any such interest payment to the Paying Agent or to a Holder at the Holder's registered address. 3. Paying Agent and Registrar. Initially, Wachovia Bank, National Association (the "Trustee") will act as Paying Agent and Registrar. The Company may change any Paying Agent, Registrar or co-Registrar without notice to the Holders. 4. Indenture. The Company issued the Securities under an Indenture, dated as of June 19, 2003 (the "Indenture"), between the Company and the Trustee. Capitalized terms herein are used as defined in the Indenture unless otherwise defined herein. The terms of the Securities B-4 include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S.C. Sections 77aaa-77bbbb) (the "TIA"), as in effect on the date of the Indenture until such time as the Indenture is qualified under the TIA, and thereafter as in effect on the date on which the Indenture is qualified under the TIA. Notwithstanding anything to the contrary herein, the Securities are subject to all such terms, and Holders of Securities are referred to the Indenture and the TIA for a statement of them. 5. Optional Redemption. The Securities will be redeemable, at the Company's option, in whole at any time or in part from time to time, on and after July 15, 2008 upon not less than 30 nor more than 60 days' notice, at the following redemption prices (expressed as percentages of the principal amount thereof) if redeemed during the twelve-month period commencing on July 15 of the applicable year set forth below, plus, in each case, accrued and unpaid interest, if any, to the date of redemption:
Year Percentage ---- ---------- 2008........................................ 105.125% 2009........................................ 103.417% 2010........................................ 101.708% 2011 and thereafter......................... 100.000%
6. Optional Redemption upon Equity Offerings. At any time, or from time to time, on or prior to July 15, 2006, the Company may, at its option, use all or any portion of the net cash proceeds of one or more Equity Offerings (as defined below) to redeem up to 35% of the aggregate principal amount of the Securities issued at a redemption price equal to 110.25% of the principal amount thereof plus accrued and unpaid interest, if any, to the date of redemption; provided that at least 65% of the aggregate principal amount of Securities issued remains outstanding immediately after any such redemption. In order to effect the foregoing redemption with the proceeds of any Equity Offering, the Company shall make such redemption not more than 180 days after the consummation of any such Equity Offering. As used in the preceding paragraph, "Equity Offering" means any public or private sale of the common stock of the Company, other than any public offering with respect to the Company's common stock registered on Form S-8 or other issuances upon exercise of options by employees of the Company or any of its Restricted Subsidiaries. 7. Notice of Redemption. Notice of redemption will be mailed at least 30 days but not more than 60 days before the Redemption Date to each Holder of Securities to be redeemed at such Holder's registered address. Securities in denominations of $1,000 may be redeemed only in whole. The B-5 Trustee may select for redemption portions (equal to $1,000 or any integral multiple thereof) of the principal of Securities that have denominations larger than $1,000. If any Security is to be redeemed in part only, the notice of redemption that relates to such Security shall state the portion of the principal amount thereof to be redeemed. A new Security in a principal amount equal to the unredeemed portion thereof will be issued in the name of the Holder thereof upon cancellation of the original Security. On and after the Redemption Date, interest will cease to accrue on Securities or portions thereof called for redemption. 8. Change of Control Offer. Upon the occurrence of a Change of Control, the Company will be required to offer to purchase all of the outstanding Securities at a purchase price equal to 101% of the principal amount thereof plus accrued and unpaid interest, if any, to the date of repurchase. 9. Limitation on Disposition of Assets. The Company is, subject to certain conditions, obligated to make an offer to purchase Securities at 100% of their principal amount plus accrued and unpaid interest to the date of repurchase with certain net cash proceeds of certain sales or other dispositions of assets in accordance with the Indenture. 10. Denominations; Transfer; Exchange. The Securities are in registered form, without coupons, in denominations of $1,000 and integral multiples of $1,000. A Holder shall register the transfer of or exchange Securities in accordance with the Indenture. The Registrar may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and to pay certain transfer taxes or similar governmental charges payable in connection therewith as permitted by the Indenture. The Registrar need not register the transfer of or exchange any Securities or portions thereof selected for redemption, except the unredeemed portion of any security being redeemed in part. 11. Persons Deemed Owners. The registered Holder of a Security shall be treated as the owner of it for all purposes. 12. Unclaimed Funds. If funds for the payment of principal or interest remain unclaimed for two years, the Trustee and the Paying Agent will repay the funds to the Company at its request. After that, all liability of the Trustee and such Paying Agent with respect to such funds shall cease. B-6 13. Legal Defeasance and Covenant Defeasance. The Company may be discharged from its obligations under the Indenture and the Securities except for certain provisions thereof, and may be discharged from its obligations to comply with certain covenants contained in the Indenture and the Securities, in each case upon satisfaction of certain conditions specified in the Indenture. 14. Amendment; Supplement; Waiver. Subject to certain exceptions, the Indenture or the Securities may be amended or supplemented with the written consent of the Holders of at least a majority in aggregate principal amount of the Securities then outstanding, and any existing Default or Event of Default or compliance with any provision may be waived with the consent of the Holders of a majority in aggregate principal amount of the Securities then outstanding. Without notice to or consent of any Holder, the parties thereto may amend or supplement the Indenture or the Securities to, among other things, cure any ambiguity, defect or inconsistency, provide for uncertificated Securities in addition to or in place of certificated Securities or comply with any requirements of the Commission in connection with the qualification of the Indenture under the TIA, or make any other change that does not materially adversely affect the rights of any Holder of a Security. 15. Restrictive Covenants. The Indenture contains certain covenants that, among other things, limit the ability of the Company and certain of its subsidiaries to make restricted payments, to incur indebtedness, to create liens, to issue preferred or other capital stock of subsidiaries, to sell assets, to permit restrictions on dividends and other payments by subsidiaries to the Company, to consolidate, merge or sell all or substantially all of its assets, to engage in transactions with affiliates or to engage in certain businesses. The limitations are subject to a number of important qualifications and exceptions. 16. Defaults and Remedies. If an Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in aggregate principal amount of Securities then outstanding may declare all the Securities to be due and payable immediately in the manner and with the effect provided in the Indenture. Holders of Securities may not enforce the Indenture or the Securities except as provided in the Indenture. The Trustee is not obligated to enforce the Indenture or the Securities unless it has received indemnity satisfactory to it. The Indenture permits, subject to certain limitations therein provided, Holders of a majority in aggregate principal amount of the Securities then outstanding to direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Holders of Securities notice of any continuing Default or Event of Default (except a Default in payment of principal, premium or interest, including an accelerated payment) if it determines that withholding notice is in their interest. B-7 17. Trustee Dealings with Company. The Trustee under the Indenture, in its individual or any other capacity, may become the owner or pledgee of Securities and may otherwise deal with the Company, its Subsidiaries, any Guarantor and their respective Affiliates as if it were not the Trustee. 18. No Recourse Against Others. No stockholder, director, officer, employee or incorporator, as such, of the Company shall have any liability for any obligation of the Company under the Securities or the Indenture or for any claim based on, in respect of or by reason of, such obligations or their creation. Each Holder of a Security by accepting a Security waives and releases all such liability. The waiver and release are part of the consideration for the issuance of the Securities. 19. Authentication. This Security shall not be valid until the Trustee or authenticating agent signs the certificate of authentication on this Security. 20. Abbreviations and Defined Terms. Customary abbreviations may be used in the name of a Holder of a Security or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors Act). 21. CUSIP Numbers. Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Company has caused CUSIP numbers to be printed on the Securities as a convenience to the Holders of the Securities. No representation is made as to the accuracy of such numbers as printed on the Securities and reliance may be placed only on the other identification numbers printed hereon. 22. Security. The Company's and Guarantors' obligations under the Securities are secured by Second Priority Liens on the Collateral pursuant to the terms of the Security Documents and the Intercreditor Agreement. The actions of the Trustee and the Holders of the Securities secured by such Second Priority Liens and the application of proceeds from the enforcement of any remedies with respect to such Collateral are limited pursuant to the terms of the Security Documents and the Intercreditor Agreement. The Company will furnish to any Holder of a Security upon written request and without charge a copy of the Indenture. Requests may be made to: TENNECO AUTOMOTIVE INC., 500 North Field Drive, Lake Forest, IL 60045, Attention: Chief Financial Officer. B-8 ASSIGNMENT FORM I or we assign and transfer this Security to - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (Print or type name, address and zip code of assignee or transferee) - -------------------------------------------------------------------------------- (Insert Social Security or other identifying number of assignee or transferee) and irrevocably appoint _______________________________________________________ agent to transfer this Security on the books of the Company. The agent may substitute another to act for him. Dated: Signed: ----------- ------------------------------------ (Sign exactly as name appears on the other side of this Security) Signature Guarantee: ---------------------------------------------------------- Participant in a recognized Signature Guarantee Medallion Program (or other signature guarantor program reasonably acceptable to the Trustee) B-9 OPTION OF HOLDER TO ELECT PURCHASE If you want to elect to have this Security purchased by the Company pursuant to Section 4.12 or Section 4.21 of the Indenture, check the appropriate box: Section 4.12 [ ] Section 4.21 [ ] If you want to elect to have only part of this Security purchased by the Company pursuant to Section 4.12 or Section 4.21 of the Indenture, state the amount: $_____________ Date: Your Signature: ---------------- --------------------------- (Sign exactly as your name appears on the other side of this Security) Signature Guarantee: --------------------------------------------------------- Participant in a recognized Signature Guarantee Medallion Program (or other signature guarantor program reasonably acceptable to the Trustee) B-10 EXHIBIT C FORM OF LEGEND FOR GLOBAL SECURITIES Any Global Security authenticated and delivered hereunder shall bear a legend (which would be in addition to any other legends required in the case of a Restricted Security) in substantially the following form: THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITORY OR A NOMINEE OF A DEPOSITORY OR A SUCCESSOR DEPOSITORY. THIS SECURITY IS NOT EXCHANGEABLE FOR SECURITIES REGISTERED IN THE NAME OF A PERSON OTHER THAN THE DEPOSITORY OR ITS NOMINEE EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE, AND NO TRANSFER OF THIS SECURITY (OTHER THAN A TRANSFER OF THIS SECURITY AS A WHOLE BY THE DEPOSITORY TO A NOMINEE OF THE DEPOSITORY OR BY A NOMINEE OF THE DEPOSITORY TO THE DEPOSITORY OR ANOTHER NOMINEE OF THE DEPOSITORY) MAY BE REGISTERED EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. C-1 EXHIBIT D CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR REGISTRATION OF TRANSFER OF SECURITIES Re: 10 1/4% Senior Secured Notes due 2013, Series A, and 10 1/4% Senior Secured Notes due 2013, Series B (the "Securities"), of Tenneco Automotive Inc. This Certificate relates to $_______ principal amount of Securities held in the form of* ___ a beneficial interest in a Global Security or* _______ Physical Securities by ______ (the "Transferor"). The Transferor:* [ ] has requested by written order that the Registrar deliver in exchange for its beneficial interest in the Global Security held by the Depositary a Physical Security or Physical Securities in definitive, registered form of authorized denominations and an aggregate number equal to its beneficial interest in such Global Security (or the portion thereof indicated above); or [ ] has requested by written order that the Registrar exchange or register the transfer of a Physical Security or Physical Securities. In connection with such request and in respect of each such Security, the Transferor does hereby certify that the Transferor is familiar with the Indenture relating to the above captioned Securities and the restrictions on transfers thereof as provided in Section 2.16 of such Indenture, and that the transfer of this Securities does not require registration under the Securities Act of 1933, as amended (the "Act") because*: [ ] Such Security is being acquired for the Transferor's own account, without transfer (in satisfaction of Section 2.16(a)(II)(A) or Section 2.16(d)(i)(A) of the Indenture). [ ] Such Security is being transferred to a "qualified institutional buyer" (as defined in Rule 144A under the Act), in reliance on Rule 144A. [ ] Such Security is being transferred to an institutional "accredited investor" (within the meaning of subparagraphs (a)(1), (2), (3) or (7) of Rule 501 under the Act. - ------------------------ * Check applicable box. D-1 [ ] Such Security is being transferred in reliance on Regulation S under the Act [ ] Such Security is being transferred in reliance on Rule 144 under the Act. [ ] Such Security is being transferred in reliance on and in compliance with an exemption from the registration requirements of the Act other than Rule 144A or Rule 144 or Regulation S under the Act to a person other than an institutional "accredited investor." -------------------------------------- [INSERT NAME OF TRANSFEROR] By: ----------------------------------- [Authorized Signatory] Date: ----------------------- D-2 EXHIBIT E Form of Certificate To Be Delivered in Connection with Transfers to Institutional Accredited Investors ---------------, ---- Wachovia Bank, National Association 5847 San Felipe, Suite 1050 Houston, Texas 77057 Attention: Corporate Trust Department Re: Tenneco Automotive Inc. (the "Company") Indenture (the "Indenture") relating to 10 1/4% Senior Secured Notes due 2013, Series A, or 10 1/4% Senior Secured Notes due 2013, Series B Ladies and Gentlemen: In connection with our proposed purchase of 10 1/4% Senior Secured Notes due 2013, Series A, or 10 1/4% Senior Secured Notes due 2013, Series B (the "Securities"), of Tenneco Automotive Inc. (the "Company"), we confirm that: 1. We have received such information as we deem necessary in order to make our investment decision. 2. We understand that any subsequent transfer of the Securities is subject to certain restrictions and conditions set forth in the Indenture and the undersigned agrees to be bound by, and not to resell, pledge or otherwise transfer the Securities except in compliance with, such restrictions and conditions and the Securities Act of 1933, as amended (the "Securities Act"). 3. We understand that the offer and sale of the Securities have not been registered under the Securities Act, and that the Securities may not be offered or sold within the United States or to, or for the account or benefit of, U.S. persons except as permitted in the following sentence. We agree for the benefit of the issuer that this Security may not be offered, sold, pledged or otherwise transferred prior to the expiration of the holding period applicable thereto under Rule 144(k) under the Securities Act which is applicable to this Security (the "Resale Restriction Termination Date") other than (1) to the issuer or its subsidiaries, (2) so long as this Security is eligible for resale pursuant to Rule 144A under the Securities Act ("Rule 144A"), to a person E-1 whom the seller reasonably believes is a "Qualified Institutional Buyer" within the meaning of Rule 144A purchasing for its own account or for the account of a Qualified Institutional Buyer, in each case to whom notice is given that the resale, pledge or other transfer is being made in reliance on Rule 144A (as indicated by the box checked by the transferor on the certificate of transfer on the reverse of this Security if this Security is not in book-entry form), (3) to a non-"U.S. person" in an "Offshore Transaction" (as such terms are defined in Regulation S under the Securities Act) in accordance with Regulation S under the Securities Act (as indicated by the box checked by the transferor on the certificate of transfer on the reverse of this Security if this Security is not in book-entry form), (4) pursuant to any other available exemption from the registration requirements of the Securities Act, including the exemption provided by Rule 144 under the Securities Act, if available, or (5) pursuant to an effective registration statement under the Securities Act, subject in each of the foregoing cases to any requirement of law that the disposition of its property or the property of such investor account or accounts be at all times within its or their control, and subject to the right of the issuer or the Trustee for the Securities prior to any such sale, pledge or other transfer pursuant to clause (4) above to require the delivery of an opinion of counsel, certifications and/or other information satisfactory to each of them. This legend will be removed upon request of the holder on or after the Resale Restriction Termination Date. 4. We understand that, on any proposed resale of Securities, we will be required to furnish to the Trustee and the Company, such certification, legal opinions and other information as the Trustee and the Company may reasonably require to confirm that the proposed sale complies with the foregoing restrictions. We further understand that the Securities purchased by us will bear a legend to the foregoing effect. 5. We are an institutional "accredited investor" (as defined in Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and have such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of our investment in the Securities, and we and any accounts for which we are acting are each able to bear the economic risk of our or their investment, as the case may be. 6. We are acquiring the Securities purchased by us for our account or for one or more accounts (each of which is an institutional "accredited investor") as to each of which we exercise sole investment discretion. E-2 You and the Company are entitled to rely upon this letter and are irrevocably authorized to produce this letter or a copy hereof to any interested party in any administrative or legal proceeding or official inquiry with respect to the matters covered hereby. Very truly yours, [Name of Transferee] By: ---------------------------------------------- [Authorized Signatory] E-3 EXHIBIT F Form of Certificate To Be Delivered in Connection with Regulation S Transfers ---------------, ---- Wachovia Bank, National Association 5847 San Felipe, Suite 1050 Houston, Texas 77057 Attention: Corporate Trust Department Re: Tenneco Automotive Inc. (the "Company") 10 1/4% Senior Secured Notes due 2013, Series A, and 10 1/4% Senior Secured Notes due 2013, Series B (the "Securities") Dear Sirs: In connection with our proposed sale of $____________ aggregate principal amount of the Securities, we confirm that such sale has been effected pursuant to and in accordance with Regulation S under the Securities Act of 1933, as amended (the "Securities Act"), and, accordingly, we represent that: (1) the offer of the Securities was not made to a person in the United States; (2) either (a) at the time the buy offer was originated, the transferee was outside the United States or we and any person acting on our behalf reasonably believed that the transferee was outside the United States, or (b) the transaction was executed in, on or through the facilities of a designated offshore securities market and neither we nor any person acting on our behalf knows that the transaction has been pre-arranged with a buyer in the United States; (3) no directed selling efforts have been made in the United States in contravention of the requirements of Rule 903(b) or Rule 904(b) of Regulation S, as applicable; (4) the transaction is not part of a plan or scheme to evade the registration requirements of the Securities Act; and F-1 (5) we have advised the transferee of the transfer restrictions applicable to the Securities. You and the Company are entitled to rely upon this letter and are irrevocably authorized to produce this letter or a copy hereof to any interested party in any administrative or legal proceedings or official inquiry with respect to the matters covered hereby. Defined terms used herein without definition have the respective meanings provided in Regulation S. Very truly yours, [Name of Transferor] By: -------------------------------------- [Authorized Signatory] F-2 EXHIBIT G [FORM OF SUBSIDIARY GUARANTEE] Each undersigned Guarantor (as defined in the Indenture referred to in the Security upon which this notation is endorsed and each referred to as the "Guarantor," which term includes any successor person under the Indenture) unconditionally guarantees on a senior basis as set forth in the Indenture (such guarantee by the Guarantor being referred to herein as a "Subsidiary Guarantee") (i) the due and punctual payment of the principal of and interest on the Securities, whether at maturity, by acceleration or otherwise, the due and punctual payment of interest on the overdue principal and interest, if any, on the Securities, to the extent lawful, and the due and punctual performance of all other obligations of the Company to the Holders or the Trustee all in accordance with the terms set forth in Article Ten of the Indenture and (ii) in case of any extension of time of payment or renewal of any Securities or any of such other obligations, that the same will be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, whether at stated maturity, by acceleration or otherwise. No stockholder, officer, director or incorporator, as such, past, present or future, of the Guarantor shall have any liability under the Subsidiary Guarantee by reason of his or its status as such stockholder, officer, director or incorporator. The Subsidiary Guarantee shall not be valid or obligatory for any purpose until the certificate of authentication on the Securities upon which the Subsidiary Guarantee is noted shall have been executed by the Trustee under the Indenture by the manual signature of one of its authorized officers. G-1 EX-4.6(B) 6 c78654exv4w6xby.txt COLLATERAL AGREEMENT [EXECUTION COPY] ================================================================================ COLLATERAL AGREEMENT made by TENNECO AUTOMOTIVE INC., TENNECO AUTOMOTIVE OPERATING COMPANY INC., TENNECO INTERNATIONAL HOLDING CORP., TENNECO GLOBAL HOLDINGS INC., THE PULLMAN COMPANY, TMC TEXAS INC. and CLEVITE INDUSTRIES INC. in favor of WACHOVIA BANK, NATIONAL ASSOCIATION, as Collateral Agent Dated as of June 19, 2003 ================================================================================ TABLE OF CONTENTS
PAGE ---- SECTION 1. DEFINED TERMS..............................................................................2 1.1 Definitions....................................................................................2 1.2 Other Definitional Provisions..................................................................6 SECTION 2. [INTENTIONALLY OMITTED]....................................................................6 SECTION 3. GRANT OF SECURITY INTEREST.................................................................6 SECTION 4. REPRESENTATIONS AND WARRANTIES.............................................................7 4.1 Title; No Other Liens..........................................................................7 4.2 Second Priority Liens..........................................................................7 4.3 Jurisdiction of Organization...................................................................8 4.4 Inventory and Equipment........................................................................8 4.5 Farm Products..................................................................................8 4.6 Investment Property............................................................................8 4.7 Receivables....................................................................................8 4.8 Intellectual Property..........................................................................8 SECTION 5. COVENANTS..................................................................................9 5.1 Delivery of Instruments, Certificated Securities and Chattel Paper.............................9 5.2 Maintenance of Insurance.......................................................................9 5.3 Payment of Secured Obligations................................................................10 5.4 Maintenance of Perfected Security Interest; Further Documentation.............................10 5.5 Changes in Jurisdiction of Organization, Location, Name, etc..................................10 5.6 Notices.......................................................................................11 5.7 Investment Property...........................................................................11 5.8 Receivables...................................................................................12 5.9 Intellectual Property.........................................................................12 5.10 Jurisdiction of Organization..................................................................14 5.11 Commercial Tort Claims........................................................................14 SECTION 6. REMEDIAL PROVISIONS.......................................................................14 6.1 Certain Matters Relating to Receivables.......................................................14 6.2 Communications with Obligors; Grantors Remain Liable..........................................15 6.3 Pledged Stock.................................................................................15
-i- TABLE OF CONTENTS (continued)
PAGE ---- 6.4 Proceeds to be Turned Over To Collateral Agent................................................16 6.5 Application of Proceeds.......................................................................17 6.6 Code and Other Remedies.......................................................................17 6.7 Registration Rights...........................................................................18 6.8 Deficiency....................................................................................19 SECTION 7. THE COLLATERAL AGENT......................................................................19 7.1 Collateral Agent's Appointment as Attorney-in-Fact, etc.......................................19 7.2 Duty of Collateral Agent......................................................................20 7.3 Execution of Financing Statements.............................................................21 7.4 Authority of Collateral Agent.................................................................21 SECTION 8. MISCELLANEOUS.............................................................................21 8.1 Amendments in Writing.........................................................................21 8.2 Notices.......................................................................................21 8.3 No Waiver by Course of Conduct; Cumulative Remedies...........................................22 8.4 [Intentionally Omitted].......................................................................22 8.5 Successors and Assigns........................................................................22 8.6 Set-Off.......................................................................................22 8.7 Counterparts..................................................................................23 8.8 Severability..................................................................................23 8.9 Section Headings..............................................................................23 8.10 Integration...................................................................................23 8.11 Governing Law; Submission To Jurisdiction.....................................................23 8.12 Acknowledgments...............................................................................24 8.13 Additional Grantors...........................................................................24 8.14 Releases......................................................................................24 8.15 Intercreditor Agreement.......................................................................25
-ii- TABLE OF CONTENTS (continued)
PAGE ---- SCHEDULES Schedule 1 Notice Addresses of Guarantors Schedule 2 Description of Investment Property Schedule 3 Filings and Other Actions Required to Perfect Security Interests Schedule 4 Location of Jurisdiction of Organization and Chief Executive Office Schedule 5 Location of Inventory and Equipment Schedule 6 Intellectual Property Schedule 7 Commercial Tort Claims ANNEXES Annex 1 Assumption Agreement Annex 1-A Supplements to Schedules 1-7
-iii- COLLATERAL AGREEMENT COLLATERAL AGREEMENT, dated as of June 19, 2003, made by each of the signatories hereto (together with any other entity that may become a party hereto as provided herein, the "Grantors"), in favor of WACHOVIA BANK, NATIONAL ASSOCIATION, as Collateral Agent (in such capacity, the "Collateral Agent") for the Holders (as defined in the Indenture described below). WITNESSETH: WHEREAS, pursuant to the Indenture, dated as of the date hereof (as amended, supplemented or otherwise modified from time to time, the "Indenture"), among Tenneco Automotive Inc., a Delaware corporation (the "Company"), as issuer, the Subsidiaries (such term, and all other capitalized terms used herein, as defined and otherwise referenced pursuant to Section 1.1) of the Company party thereto as guarantors, and Wachovia Bank, National Association, as Trustee (the "Trustee"), the Company has duly authorized the issue of 10.25% Senior Secured Notes due 2013, Series A, and 10.25% Senior Secured Notes due 2013, Series B (as further defined in the Indenture, the "Securities"); WHEREAS, as a condition precedent to the issuance of the Securities, the Company has entered into an Intercreditor Agreement, dated as of the date hereof (as amended, supplemented or otherwise modified from time to time, the "Intercreditor Agreement"), among the Company, the Collateral Agent, the Trustee, and JPMorgan Chase Bank, as administrative agent (as further defined in the Indenture, the "Credit Agent") under the Credit Agreement dated as of September 30, 1999, as amended, among the Company, the lenders party thereto in their capacities as lenders thereunder and Commerzbank, AG and Bank of America, N.A., as co-documentation agents, Citibank, N.A., as syndication agent and the Credit Agent, as administrative agent; WHEREAS, the Company is a member of an affiliated group of companies that includes each other Grantor; WHEREAS, the proceeds from the issuance of the Securities will be used in part to enable the Company to make valuable transfers to one or more of the other Grantors in connection with the operation of their respective businesses and to repay certain indebtedness of the Company that is guaranteed by the Guarantors; WHEREAS, the Company and the other Grantors are engaged in related businesses, and each Grantor will derive substantial direct and indirect benefit from the proceeds from the issuance of the Securities; and WHEREAS, it is a condition precedent to the issuance of the Securities that the Grantors shall have executed and delivered this Agreement to the Collateral Agent, for its benefit and the ratable benefit of the Trustee and the Holders; NOW, THEREFORE, in consideration of the premises and to induce the Holders to purchase the Securities, each Grantor hereby agrees with the Collateral Agent, for its benefit and the ratable benefit of the Trustee and the Holders, as follows: SECTION 1. DEFINED TERMS 1.1 Definitions. (a) Unless otherwise defined herein, terms defined in the Indenture and used herein shall have the meanings given to them in the Indenture, and the following terms are used herein as defined in the New York UCC: Accounts, Certificated Security, Chattel Paper, Commercial Tort Claims, Documents, Equipment, Farm Products, Instruments, Inventory, Letter of Credit Rights and Supporting Obligations. (b) The following terms shall have the following meanings: "Agreement": this Collateral Agreement, as the same may be amended, supplemented or otherwise modified from time to time. "Applicable Value": the aggregate principal amount, par value, book value as carried by the Company or market value, whichever is greatest, of any securities (as such term is used for purposes of Rules 3-10 and 3-16 of Regulation S-X under the Securities Act, or any similar replacement rule or regulation) of any Subsidiary of the Company. "Collateral": as defined in Section 3. "Collateral Account": any collateral account established by the Collateral Agent as provided in Section 6.1 or 6.4. "Company Obligations": the collective reference to the unpaid principal of and interest on the Securities and all other obligations and liabilities of the Company (including, without limitation, interest accruing at the applicable default rate provided in the Indenture and interest accruing at the rate provided in the Indenture after the filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization or like proceeding, relating to the Company, whether or not a claim for post-filing or post-petition interest is allowed in such proceeding) to the Trustee or the Collateral Agent or any Holder of the Securities, whether direct or indirect, absolute or contingent, due or to become due, or now existing or hereafter incurred, which may arise under, out of, or in connection with, the Indenture, any other Specified Document or any other document made, delivered or given in connection with any of the foregoing, in each case whether on account of principal, interest, fees, indemnities, costs, expenses or otherwise (including, without limitation, all fees and disbursements of counsel to the Trustee or the Collateral Agent or to the Holders of the Securities that are required to be paid by the Company pursuant to the terms of any of the foregoing agreements). "Copyrights": (i) all copyrights arising under the laws of the United States, any other country or any political subdivision thereof, whether registered or unregistered and whether published or unpublished (including, without limitation, those listed in Schedule 6), all registrations and recordings thereof, and all applications in connection therewith, including, without limitation, all registrations, recordings and applications in the United States Copyright Office, and (ii) the right to obtain all renewals thereof. "Copyright Licenses": any written agreement naming any Grantor as licensor or any written agreement naming any Grantor as licensee to the extent such agreement -2- permits the Grantor to grant a security interest in its rights thereunder, including, without limitation, those listed in Schedule 6, granting any right under any Copyright, including, without limitation, the grant of rights to manufacture, distribute, exploit and sell materials derived from any Copyright. "Deposit Account": as defined in the Uniform Commercial Code of any applicable jurisdiction and, in any event, including, without limitation, any demand, time, savings, passbook or like account maintained with a depositary institution. "Discharge of First Priority Claims": as defined in the Intercreditor Agreement. "Excluded Collateral": the collective reference to: (i) any property or assets owned by any Foreign Subsidiary, Immaterial Domestic Subsidiary, Accounts Receivable Entity or Finance Subsidiary; (ii) any Capital Stock of any Foreign Subsidiary of the Company; (iii) any real property and real property leases (domestic or foreign); (iv) all securities (as such term is used for purposes of Rules 3-10 and 3-16 of Regulation S-X under the Securities Act, or any similar replacement rule or regulation) of any Domestic Restricted Subsidiary to the extent the Applicable Value of such securities (on a Subsidiary by Subsidiary basis) is equal to or greater than 20% of the then aggregate principal amount of the Securities then outstanding; and (v) all proceeds and products from any and all of the foregoing excluded Collateral described in clauses (i) through (iv), unless such proceeds or products would otherwise constitute Collateral without regard to the preceding clauses (i) through (iv); provided, however, in the event that Rule 3-10 or Rule 3-16 of Regulation S-X under the Securities Act is amended, modified or interpreted by the SEC to require (or is replaced with another rule or regulation, or any other law, rule or regulation is adopted, which would require) the filing with the SEC (or any other governmental agency) of separate financial statements of any Domestic Restricted Subsidiary of the Company due to the fact that such Domestic Restricted Subsidiary's securities secure the Securities, then the securities of such Grantor shall automatically be deemed not to be part of the Collateral for which the Collateral Agent, the Trustee or the Holders have a security interest and shall automatically be deemed to be part of the Excluded Collateral but only to the extent necessary to not be subject to such requirement. In such event, the applicable Security Documents shall be deemed to be amended or modified to include as Excluded Collateral the Domestic Restricted Subsidiary's securities that are so deemed to no longer constitute part of the Collateral. In the event that Rule 3-16 or Rule 3-10 of Regulation S-X under the Securities Act is amended, modified or interpreted by the SEC to permit (or are replaced with another rule or regulation, or any other law, rule or regulation is adopted, which would permit) such Domestic Restricted Subsidiary's Capital Stock and other securities to secure the Securities in excess of the amount then pledged without the filing with the SEC (or any other governmental agency) of separate financial statements of such Domestic Restricted Subsidiary, then the Capital Stock and other securities of such Subsidiary shall automatically be deemed to be a part of the Collateral but only to the extent necessary to not be subject to any such financial statement requirement. "Foreign Subsidiary": any Subsidiary organized under the laws of any jurisdiction outside the United States of America. -3- "General Intangibles": all "general intangibles" as such term is defined in Section 9-102(a)(42) of the New York UCC and, in any event, including, without limitation, with respect to any Grantor, all contracts, agreements, instruments and indentures in any form, and portions thereof, to which such Grantor is a party or under which such Grantor has any right, title or interest or to which such Grantor or any property of such Grantor is subject, as the same may from time to time be amended, supplemented or otherwise modified, including, without limitation, (i) all rights of such Grantor to receive moneys due and to become due to it thereunder or in connection therewith, (ii) all rights of such Grantor to damages arising thereunder and (iii) all rights of such Grantor to perform and to exercise all remedies thereunder. "Guarantor Obligations": with respect to any Guarantor, all obligations and liabilities of such Guarantor which may arise under or in connection with the Securities or otherwise under the Specified Documents. "Guarantors": the collective reference to each Grantor other than the Company. "Intellectual Property": the collective reference to all rights, priorities and privileges relating to intellectual property, whether arising under United States, multinational or foreign laws or otherwise, including, without limitation, the Copyrights, the Copyright Licenses, the Patents, the Patent Licenses, the Trademarks and the Trademark Licenses, and all rights to sue at law or in equity for any infringement or other impairment thereof, including the right to receive all proceeds and damages therefrom. "Intercompany Note": any promissory note evidencing loans made by any Grantor to the Company or any of its Subsidiaries. "Investment Property": the collective reference to (i) all "investment property" as such term is defined in Section 9-102(a)(49) of the New York UCC and (ii) whether or not constituting "investment property" as so defined, all Pledged Notes and all Pledged Stock. "Issuers": the collective reference to each issuer of any Investment Property. "New York UCC": the Uniform Commercial Code as from time to time in effect in the State of New York. "Patents": (i) all letters patent of the United States, any other country or any political subdivision thereof, all reissues and extensions thereof and all goodwill associated therewith, including, without limitation, any of the foregoing referred to in Schedule 6, (ii) all applications for letters patent of the United States or any other country and all divisions, continuations and continuations-in-part thereof, including, without limitation, any of the foregoing referred to in Schedule 6, and (iii) all rights to obtain any reissues or extensions of the foregoing. "Patent License": all agreements, whether written or oral, providing for (i) the grant by any Grantor of any right to manufacture, use or sell any invention covered in whole or in part by a Patent and (ii) the grant to any Grantor of any right to manufacture, -4- use or sell any invention covered in whole or in part by a Patent (to the extent such agreement permits the Grantor to grant a security interest in its rights thereunder), including, without limitation, any of the foregoing referred to in Schedule 6. "Pledged Notes": all promissory notes listed on Schedule 2, all Intercompany Notes at any time issued to any Grantor and all other promissory notes issued to or held by any Grantor (other than promissory notes issued in connection with extensions of trade credit by any Grantor in the ordinary course of business). "Pledged Stock": the shares of Capital Stock listed on Schedule 2, together with any other shares, stock certificates, options or rights of any nature whatsoever in respect of the Capital Stock of any Person that may be issued or granted to, or held by, any Grantor while this Agreement is in effect other than Capital Stock constituting Excluded Collateral. "Proceeds": all "proceeds" as such term is defined in Section 9-102(a)(64) of the New York UCC and, in any event, shall include, without limitation, all dividends or other income from the Investment Property, collections thereon or distributions or payments with respect thereto. "Receivable": any right to payment for goods sold or leased or for services rendered, whether or not such right is evidenced by an Instrument or Chattel Paper and whether or not it has been earned by performance (including, without limitation, any Account). "SEC": the Securities and Exchange Commission. "Secured Obligations": (i) in the case of the Company, the Company Obligations, and (ii) in the case of each Guarantor, its Guarantor Obligations. "Securities Act": the Securities Act of 1933, as amended. "Specified Documents": collectively, the Indenture, the Securities and the Security Documents. "Trademarks": (i) all trademarks, trade names, corporate names, company names, business names, fictitious business names, trade styles, service marks, logos and other source or business identifiers, and all goodwill associated therewith, now existing or hereafter adopted or acquired, all registrations and recordings thereof, and all applications in connection therewith, whether in the United States Patent and Trademark Office or in any similar office or agency of the United States, any State thereof or any other country or any political subdivision thereof, or otherwise, and all common-law rights related thereto, including, without limitation, any of the foregoing referred to in Schedule 6, and (ii) the right to obtain all renewals thereof. "Trademark License": any agreement, whether written or oral, providing for (i) the grant by any Grantor of any right to use any Trademark and (ii) the grant to any Grantor of any right to use any Trademark (to the extent such agreement permits the -5- Grantor to grant a security interest in its rights thereunder), including, without limitation, any of the foregoing referred to in Schedule 6. 1.2 Other Definitional Provisions. (a) The words "hereof," "herein", "hereto" 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 and Schedule references are to this Agreement unless otherwise specified. (b) The meanings given to terms defined herein shall be equally applicable to both the singular and plural forms of such terms. (c) Where the context requires, terms relating to the Collateral or any part thereof, when used in relation to a Grantor, shall refer to such Grantor's Collateral or the relevant part thereof. SECTION 2. [INTENTIONALLY OMITTED] SECTION 3. GRANT OF SECURITY INTEREST (a) Subject to clause (b) of this Section 3, each Grantor hereby assigns and transfers to the Collateral Agent, and hereby grants to the Collateral Agent, for its benefit and the ratable benefit of the Trustee and the Holders, a security interest in, all of the following property now owned or at any time hereafter acquired by such Grantor or in which such Grantor now has or at any time in the future may acquire any right, title or interest (collectively, the "Collateral"), as collateral security for the prompt and complete payment and performance when due (whether at the stated maturity, by acceleration or otherwise) of such Grantor's Secured Obligations (it being understood and agreed that the security interest granted herein for the benefit of the Collateral Agent on behalf of the Holders shall be subject to the subordination terms of the Intercreditor Agreement): (i) all Accounts; (ii) all Chattel Paper; (iii) all Deposit Accounts; (iv) all Documents; (v) all Equipment; (vi) all General Intangibles; (vii) all Instruments; (viii) all Intellectual Property; (ix) all Inventory; (x) all Investment Property; -6- (xi) all Letter of Credit Rights; (xii) all Commercial Tort Claims in an amount in excess of $500,000 in which any Grantor has rights, as set forth on Schedule 7; (xiii) all other property not otherwise described above; (xiv) all books and records pertaining to the Collateral; and (xv) to the extent not otherwise included, all Proceeds, Supporting Obligations and products of any and all of the foregoing and all collateral security and guarantees given by any Person with respect to any of the foregoing. (b) Notwithstanding anything to the contrary contained in this Agreement, neither the Collateral Agent nor any of the Holders shall have a security interest in, and the grant of security interests pursuant to this Section 3 for the benefit of the Collateral Agent on behalf of the Holders shall not extend to, any Excluded Collateral, and with respect to the Trustee, the Collateral Agent and the Holders the term "Collateral" shall not include the Excluded Collateral. SECTION 4. REPRESENTATIONS AND WARRANTIES To induce the Holders to purchase the Securities, each Grantor hereby represents and warrants to the Collateral Agent and each Holder that: 4.1 Title; No Other Liens. Except (i) as set forth on Schedule 6, (ii) for the First Priority Liens, (iii) for the security interest granted to the Collateral Agent for its benefit and the ratable benefit of the Trustee and the Holders pursuant to this Agreement and (iv) for the other Liens permitted to exist on the Collateral by the Indenture, such Grantor owns each item of the Collateral free and clear of any and all Liens or claims of others. Except with respect to financing statements and other public notices filed with respect to the First Priority Liens, no financing statement or other public notice with respect to all or any part of the Collateral is on file or of record in any public office, except such (a) as have been filed in favor of the Collateral Agent, for its benefit and the ratable benefit of the Trustee and the Holders, pursuant to this Agreement or (b) as are permitted by the Indenture. 4.2 Second Priority Liens. The security interests granted pursuant to this Agreement (a) upon completion of the filings and other actions specified on Schedule 3 (which, in the case of all filings and other documents referred to on said Schedule, have been delivered to the Collateral Agent in completed and, when required, duly executed form unless otherwise referred to in such Schedule) will constitute valid perfected security interests in all of the Collateral (to the extent a perfected security interest is required pursuant to this Agreement, and except as otherwise stated on Schedule 3) in favor of the Collateral Agent, for its benefit and the ratable benefit of the Trustee and the Holders, as collateral security for such Grantor's Secured Obligations, enforceable in accordance with the terms hereof against all creditors of such Grantor and any Persons purporting to purchase any Collateral from such Grantor and (b) are prior to all other Liens on the Collateral in existence on the date hereof except the First Priority Liens, the Liens permitted by the Indenture and except for unrecorded Liens permitted by the Indenture which have priority over the Liens on the Collateral by operation of law. The stock certificates -7- described on Schedule 2 have been delivered to the Credit Agent, each together with a duly executed stock power. 4.3 Jurisdiction of Organization. On the date hereof, such Grantor's jurisdiction of organization, identification number from such jurisdiction of organization (if any) and the location of such Grantor's chief executive office or sole place of business are specified on Schedule 4. 4.4 Inventory and Equipment. On the date hereof, the Inventory and the Equipment (other than mobile goods) are kept at the locations listed on Schedule 5. 4.5 Farm Products. None of the Collateral constitutes, or is the Proceeds of, Farm Products. 4.6 Investment Property. (a) The shares of Pledged Stock constituting Collateral and pledged by such Grantor hereunder have been duly and validly issued and are fully paid and nonassessable. (b) Each of the Pledged Notes constitutes the legal, valid and binding obligation of the obligor with respect thereto, enforceable in accordance with its terms, subject to the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors' rights generally, general equitable principles (whether considered in a proceeding in equity or at law) and an implied covenant of good faith and fair dealing. (c) Such Grantor is the record and beneficial owner of, and has good and marketable title to, the Investment Property pledged by it hereunder, free of any and all Liens or options in favor of, or claims of, any other Person, except the First Priority Liens, the security interest created by this Agreement and Liens permitted under the Indenture. 4.7 Receivables. (a) No amount payable to such Grantor under or in connection with any Receivable is evidenced by any Instrument or Chattel Paper which has not been delivered to the Credit Agent or, following the Discharge of First Priority Claims and subject to the terms of the Intercreditor Agreement, to the Collateral Agent, except for any of the foregoing to the extent subject to and included in Permitted Receivables Financing. (b) None of the obligors on any Receivables is a governmental authority. (c) The amounts represented by such Grantor to the Holders from time to time as owing to such Grantor in respect of the Receivables will at such times be accurate. 4.8 Intellectual Property. (a) Except as otherwise set forth on such Schedule, Schedule 6 lists all registered, and all material unregistered, Intellectual Property owned by such Grantor in its own name on the date hereof and all applications to register any such Intellectual Property. (b) On the date hereof, all material Intellectual Property is valid, subsisting, unexpired and enforceable, has not been abandoned and does not infringe the intellectual property rights of any other Person. -8- (c) Except as set forth in Schedule 6, on the date hereof, none of the material Intellectual Property is the subject of any licensing or franchise agreement pursuant to which such Grantor is the licensor or franchisor. (d) No holding, decision or judgment has been rendered by any governmental authority which would limit, cancel or question the validity of, or such Grantor's rights in, any Intellectual Property in any respect that would reasonably be expected in the aggregate to have a material adverse effect on the business, property, operations or condition (financial or otherwise) of the Company and its Subsidiaries taken as a whole. (e) No action or proceeding is pending, or, to the knowledge of such Grantor, threatened, on the date hereof (i) seeking to limit, cancel or question the validity of any Intellectual Property or such Grantor's ownership interest therein, or (ii) which, if adversely determined, would have a material adverse effect on the value of any material Intellectual Property. SECTION 5. COVENANTS Each Grantor covenants and agrees with the Collateral Agent and the Holders that, from and after the date of this Agreement until the Secured Obligations shall have been paid in full: 5.1 Delivery of Instruments, Certificated Securities and Chattel Paper. Following the Discharge of First Priority Claims and subject to the terms of the Intercreditor Agreement, if any amount payable under or in connection with any of the Collateral in excess of $500,000 shall be or become evidenced by any Instrument, Certificated Security or Chattel Paper, such Instrument, Certificated Security or Chattel Paper (in each case following receipt thereof by such Grantor from the Credit Agent, if in the possession of the Credit Agent or its agent prior to the Discharge of First Priority Claims) shall be immediately delivered to the Collateral Agent, duly indorsed in a manner satisfactory to the Collateral Agent, to be held as Collateral pursuant to this Agreement, except to the extent any of the foregoing is subject to and included in a Permitted Receivables Financing. 5.2 Maintenance of Insurance. (a) Such Grantor will maintain, with financially sound and reputable companies with A.M. Best ratings of A-III or better, (i) insurance policies insuring the Inventory and Equipment against loss by fire, explosion, theft and such other casualties and (ii) insurance policies insuring such Grantor, the Collateral Agent, the Trustee and the Holders against liability for personal injury and property damage relating to such Inventory and Equipment, in both cases as is normal and customary for the automotive parts industry. (b) All such insurance shall (i) provide that no cancellation, material reduction in amount or material change in coverage thereof shall be effective until at least 30 days after receipt by the Collateral Agent of written notice thereof and (ii) name the Collateral Agent as insured party (with respect to liability insurance) and, subject to the terms of the Intercreditor Agreement, as additional loss payee with respect to other insurance as its interests may appear. (c) The Company shall deliver to the Collateral Agent a report of a reputable insurance broker with respect to such insurance substantially concurrently with each delivery to the Trustee of the compliance certificate required pursuant to Section 4.08(a) of the Indenture and such -9- supplemental reports with respect thereto as the Collateral Agent may from time to time reasonably request. 5.3 Payment of Secured Obligations. Such Grantor will pay and discharge or otherwise satisfy at or before maturity or before they become delinquent, as the case may be, all taxes, assessments and governmental charges or levies imposed upon the Collateral or in respect of income or profits therefrom, as well as all claims of any kind (including, without limitation, claims for labor, materials and supplies) against or with respect to the Collateral, except that no such charge need be paid if the amount or validity thereof is currently being contested in good faith by appropriate proceedings, reserves in conformity with GAAP with respect thereto have been provided on the books of such Grantor and such proceedings would not reasonably be expected to result in the sale, forfeiture or loss of any material portion of the Collateral or any interest therein. 5.4 Maintenance of Perfected Security Interest; Further Documentation. (a) Such Grantor shall maintain the security interest created by this Agreement as a perfected security interest having at least the priority and perfection described in Section 4.2 and shall defend such security interest against the claims and demands of all Persons whomsoever, other than the holders of the First Priority Liens and other Liens permitted by the Indenture. (b) Such Grantor will furnish to the Collateral Agent and the Holders from time to time statements and schedules further identifying and describing the assets and property of such Grantor constituting Collateral and such other reports in connection therewith as the Collateral Agent may reasonably request, all in reasonable detail. (c) Subject to the priority of the First Priority Liens and subject to the terms of the Intercreditor Agreement, at any time and from time to time, upon the written request of the Collateral Agent, and at the sole expense of such Grantor, such Grantor will promptly and duly execute and deliver, and have recorded, such further instruments and documents and take such further actions as the Collateral Agent may reasonably request for the purpose of obtaining or preserving the full benefits of this Agreement and of the rights and powers herein granted, including, without limitation, (i) filing any financing or continuation statements under the Uniform Commercial Code (or other similar laws) in effect in any applicable jurisdiction with respect to the security interests created hereby and (ii) as soon as reasonably practicable following the Discharge of First Priority Claims, in the case of Investment Property, Deposit Accounts and any other relevant Collateral, taking any actions necessary to enable the Collateral Agent to obtain "control" (within the meaning of the applicable Uniform Commercial Code) with respect thereto. 5.5 Changes in Jurisdiction of Organization, Location, Name, etc. Such Grantor will not, except upon 15 days' prior written notice to the Collateral Agent and delivery to the Collateral Agent of all additional financing statements and other documents (executed where required) reasonably requested by the Collateral Agent to maintain the validity, perfection and priority of the security interests provided for herein: -10- (i) change its jurisdiction of organization or, if such Grantor does not have a jurisdiction of organization for purposes of the New York UCC, the location of its chief executive office or sole place of business from that referred to in Section 4.3; or (ii) change its name. 5.6 Notices. Such Grantor will advise the Collateral Agent promptly, in reasonable detail, of: (a) any Lien (other than First Priority Liens, security interests created hereby or Liens permitted under the Indenture) on any of the Collateral which would adversely affect the ability of the Collateral Agent to exercise any of its remedies hereunder; and (b) the occurrence of any other event which would reasonably be expected to have a material adverse effect on the aggregate value of the Collateral or on the security interests created hereby. 5.7 Investment Property. (a) Following the Discharge of First Priority Claims and subject to the terms of the Intercreditor Agreement, if such Grantor shall become entitled to receive or shall receive any stock certificate (including, without limitation, any certificate representing a stock dividend or a distribution in connection with any reclassification, increase or reduction of capital or any certificate issued in connection with any reorganization), option or rights in respect of the Capital Stock of any Issuer that would constitute Collateral hereunder, whether in addition to, in substitution of, as a conversion of, or in exchange for, any shares of the Pledged Stock, or otherwise in respect thereof, such Grantor shall accept the same as the agent of the Collateral Agent and the Holders, hold the same in trust for the Collateral Agent and the Holders and deliver the same forthwith to the Collateral Agent in the exact form received, duly indorsed by such Grantor to the Collateral Agent, if required, together with an undated stock power covering such certificate duly executed in blank by such Grantor and with, if the Collateral Agent so requests, signature guaranteed, to be held by the Collateral Agent, subject to the terms hereof, as additional collateral security for the Secured Obligations. Except as otherwise provided in the Indenture, any sums paid upon or in respect of the Investment Property that constitutes Collateral upon the liquidation or dissolution of any Issuer shall be paid over to the Collateral Agent to be held by it hereunder as additional collateral security for the Secured Obligations, and in case any distribution of capital shall be made on or in respect of such Investment Property or any property shall be distributed upon or with respect to such Investment Property pursuant to the recapitalization or reclassification of the capital of any Issuer or pursuant to the reorganization thereof, the property so distributed shall, unless otherwise subject to a perfected security interest in favor of the Collateral Agent and to the extent it would constitute Collateral hereunder, be delivered to the Collateral Agent to be held by it hereunder as additional collateral security for the Secured Obligations. If any sums of money or property so paid or distributed in respect of the Investment Property that constitutes Collateral shall be received by such Grantor, such Grantor shall, until such money or property is paid or delivered to the Collateral Agent, hold such money or property in trust for the Holders, segregated from other funds of such Grantor, as additional collateral security for the Secured Obligations. -11- (b) Following the Discharge of First Priority Claims and subject to the terms of the Intercreditor Agreement, without the prior written consent of the Collateral Agent, such Grantor will not (i) vote to enable, or take any other action to permit, any Issuer to issue any stock or other equity securities of any nature or to issue any other securities convertible into or granting the right to purchase or exchange for any stock or other equity securities of any nature of any Issuer (except pursuant to a transaction expressly permitted by the Indenture), (ii) sell, assign, transfer, exchange, or otherwise dispose of, or grant any option with respect to, the Investment Property that constitutes Collateral or Proceeds thereof (except pursuant to a transaction expressly permitted by the Indenture), (iii) create, incur or permit to exist any Lien or option in favor of, or any claim of any Person with respect to, any of the Investment Property that constitutes Collateral or Proceeds thereof, or any interest therein, except for the security interests created by this Agreement or permitted by the Indenture or (iv) enter into any agreement or undertaking restricting the right or ability of such Grantor or the Collateral Agent to sell, assign or transfer any of the Investment Property that constitutes Collateral or Proceeds thereof. (c) Following the Discharge of First Priority Claims and subject to the terms of the Intercreditor Agreement, in the case of each Grantor which is an Issuer, such Issuer agrees that (i) it will be bound by the terms of this Agreement relating to the Investment Property that constitutes Collateral and was issued by it and will comply with such terms insofar as such terms are applicable to it, (ii) it will notify the Collateral Agent promptly in writing of the occurrence of any of the events described in Section 5.7(a) with respect to the Investment Property that constitutes Collateral and was issued by it and (iii) the terms of Sections 6.3(c) and 6.7 shall apply to it, mutatis mutandis, with respect to all actions that may be required of it pursuant to Section 6.3(c) or 6.7 with respect to the Investment Property that constitutes Collateral and was issued by it. 5.8 Receivables. (a) Other than in the ordinary course of business consistent with its past practice, such Grantor will not (i) grant any extension of the time of payment of any Receivable, (ii) compromise or settle any Receivable for less than the full amount thereof, (iii) release, wholly or partially, any Person liable for the payment of any Receivable, (iv) allow any credit or discount whatsoever on any Receivable or (v) amend, supplement or modify any Receivable in any manner that could adversely affect the value thereof. (b) Such Grantor will deliver to the Collateral Agent a copy of each material demand, notice or document received by it that questions or calls into doubt the validity or enforceability of more than 5% of the aggregate amount of the then outstanding Receivables. The Collateral Agent shall furnish a copy of each such demand, notice or document to the Trustee, and the Trustee may, but shall not be required to, furnish a copy to the Holders. 5.9 Intellectual Property. (a) Such Grantor (either itself or through licensees) will (i) continue to use each material Trademark on each and every trademark class of goods applicable to its current line as reflected in its current catalogs, brochures and price lists in order to maintain such Trademark in full force free from any claim of abandonment for non-use, (ii) maintain as in the past the quality of products and services offered under such Trademark, (iii) use such Trademark with the appropriate notice of registration and all other notices and legends required by applicable law, (iv) not adopt or use any mark which is confusingly similar or a colorable imitation of such Trademark unless the Collateral Agent, for its benefit and the ratable benefit of -12- the Trustee and the Holders, shall obtain a perfected security interest in such mark (to the extent a security interest in such mark may be perfected by filing under the applicable Uniform Commercial Code, or similar law in a foreign jurisdiction, or with the US Patent and Trademark Office, or corresponding foreign office, and to the extent requested pursuant to clause (f) below) pursuant to this Agreement, and (v) not (and not permit any licensee or sublicensee thereof to) do any act or knowingly omit to do any act whereby such Trademark may become invalidated or impaired in any way. (b) Such Grantor (either itself or through licensees) will not do any act, or omit to do any act, whereby any material Patent may become forfeited, abandoned or dedicated to the public. (c) Such Grantor (either itself or through licensees) (i) will employ each material Copyright and (ii) will not (and will not permit any licensee or sublicensee thereof to) do any act or knowingly omit to do any act whereby any material portion of the Copyrights may become invalidated or otherwise impaired. Such Grantor will not (either itself or through licensees) do any act whereby any material portion of the Copyrights may fall into the public domain. (d) Such Grantor (either itself or through licensees) will not do any act that knowingly uses any material Intellectual Property to infringe the intellectual property rights of any other Person. (e) Such Grantor will notify the Collateral Agent immediately if it knows, or has reason to know, that any application or registration relating to any material Intellectual Property may become forfeited, abandoned or dedicated to the public, or of any adverse determination or development (including, without limitation, the institution of, or any such determination or development in, any proceeding in the United States Patent and Trademark Office, the United States Copyright Office or any court or tribunal in any country) regarding such Grantor's ownership of, or the validity of, any material Intellectual Property subject to such an application or registration or such Grantor's right to register the same or to own and maintain the same. The Collateral Agent shall provide a copy of such notice to the Trustee, and the Trustee may, but shall not be required to, provide a copy of such notice to the Holders. (f) Whenever such Grantor, either by itself or through any agent, employee, licensee or designee, shall file an application for the registration of any Intellectual Property with the United States Patent and Trademark Office, the United States Copyright Office or any similar office or agency in any other country or any political subdivision thereof, such Grantor shall report such filing to the Collateral Agent within five Business Days after the last day of the fiscal quarter in which such filing occurs. Such Grantor shall execute and deliver, and have recorded, any and all agreements, instruments, documents, and papers as shall be required to evidence the Collateral Agent's and the Holders' security interest in any Copyright registered with the United States Copyright Office or any Patent or Trademark registered with the United States Patent and Trademark Office, and the goodwill (if applicable) and general intangibles of such Grantor relating thereto or represented thereby. (g) Such Grantor will take all reasonable and necessary steps, including, without limitation, in any proceeding before the United States Patent and Trademark Office, the United States Copyright Office or any similar office or agency in any other country or any political -13- subdivision thereof, to maintain and pursue each application (and to obtain the relevant registration) and to maintain each registration of the material registered Intellectual Property, including, without limitation, filing of applications for renewal, affidavits of use and affidavits of incontestability. (h) In the event that any material Intellectual Property is infringed, misappropriated or diluted by a third party, such Grantor shall (i) take such actions as such Grantor shall reasonably deem appropriate under the circumstances to protect such Intellectual Property and (ii) if such Intellectual Property is of material economic value, promptly notify the Collateral Agent after it learns thereof and sue for infringement, misappropriation or dilution, to seek injunctive relief where appropriate and to recover any and all damages for such infringement, misappropriation or dilution. 5.10 Jurisdiction of Organization. At the Collateral Agent's request, each Grantor will provide its jurisdiction of organization, identification number from the jurisdiction of organization (if any), and the location of such Grantor's chief executive office or sole place of business. In addition, the Collateral Agent may request, and such Grantor shall provide, a certified charter, certificate of incorporation, or other organizational document and long form good standing certificate from each Grantor. 5.11 Commercial Tort Claims. Such Grantor will advise the Collateral Agent of such Grantor's interest in any Commercial Tort Claim in an amount in excess of $500,000 in which such Grantor believes it has rights, and such Grantor shall promptly provide the Collateral Agent with an updated Schedule 7 describing such Commercial Tort Claim or such information with respect thereto as may be required in order to attach and perfect a security interest therein in accordance with applicable law. SECTION 6. REMEDIAL PROVISIONS 6.1 Certain Matters Relating to Receivables. (a) The Collateral Agent shall have the right to make test verifications of the Receivables in any manner and through any medium that it reasonably considers advisable, and each Grantor shall furnish all such assistance and information as the Collateral Agent may require in connection with such test verifications after the occurrence of an Event of Default. At any time and from time to time, upon the Collateral Agent's request and at the expense of the relevant Grantor, such Grantor shall cause independent public accountants or others satisfactory to the Collateral Agent to furnish to the Collateral Agent reports showing reconciliations, aging and test verifications of, and trial balances for, the Receivables. (b) The Collateral Agent hereby authorizes each Grantor to collect such Grantor's Receivables, subject to the Collateral Agent's direction and control following the Discharge of First Priority Claims and subject to the terms of the Intercreditor Agreement, and following the Discharge of First Priority Claims and subject to the terms of the Intercreditor Agreement the Collateral Agent may curtail or terminate said authority at any time after the occurrence and during the continuance of an Event of Default. Following the Discharge of First Priority Claims and subject to the terms of the Intercreditor Agreement, if required by the Collateral Agent at any time after the occurrence and during the continuance of an Event of Default, any payments of -14- Receivables, when collected by any Grantor, (i) shall be forthwith (and, in any event, within two Business Days) deposited by such Grantor in the exact form received, duly indorsed by such Grantor to the Collateral Agent if required, in a Collateral Account maintained under the sole dominion and control of the Collateral Agent, subject to withdrawal by the Collateral Agent for the account of the Holders only as provided in Section 6.5, and (ii) until so turned over, shall be held by such Grantor in trust for the Collateral Agent and the Holders, segregated from other funds of such Grantor. Each such deposit of Proceeds of Receivables shall be accompanied by a report identifying in reasonable detail the nature and source of the payments included in the deposit. (c) Following the Discharge of First Priority Claims and subject to the terms of the Intercreditor Agreement, at the Collateral Agent's request, each Grantor shall deliver to the Collateral Agent all original and other documents evidencing, and relating to, the agreements and transactions which gave rise to the Receivables, including, without limitation, all original orders, invoices and shipping receipts (in each case following receipt thereof by such Grantor from the Credit Agent, if in the possession of the Credit Agent or its agent prior to the Discharge of First Priority Claims). 6.2 Communications with Obligors; Grantors Remain Liable. (a) Following the Discharge of First Priority Claims, the Collateral Agent in its own name or in the name of others may at any time after the occurrence and during the continuance of an Event of Default communicate with obligors under the Receivables and parties to any material contract of any Grantor to verify with them to the Collateral Agent's satisfaction the existence, amount and terms of any Receivables or any material contract of any Grantor. (b) Following the Discharge of First Priority Claims, upon the request of the Collateral Agent at any time after the occurrence and during the continuance of an Event of Default, each Grantor shall notify obligors on the Receivables and parties to any material contract of any Grantor that the Receivables and such contracts have been assigned to the Collateral Agent for its benefit and the ratable benefit of the Trustee and the Holders and that payments in respect thereof shall be made directly to the Collateral Agent. (c) Anything herein to the contrary notwithstanding, each Grantor shall remain liable under each of the Receivables and material contracts of any Grantor to observe and perform all the conditions and obligations to be observed and performed by it thereunder, all in accordance with the terms of any agreement giving rise thereto. Neither the Collateral Agent nor any Holder shall have any obligation or liability under any Receivable (or any agreement giving rise thereto) or any contract of any Grantor by reason of or arising out of this Agreement or the receipt by the Collateral Agent or any Holder of any payment relating thereto, nor shall the Collateral Agent or any Holder be obligated in any manner to perform any of the obligations of any Grantor under or pursuant to any Receivable (or any agreement giving rise thereto) or any contract of any Grantor, to make any payment, to make any inquiry as to the nature or the sufficiency of any payment received by it or as to the sufficiency of any performance by any party thereunder, to present or file any claim, to take any action to enforce any performance or to collect the payment of any amounts which may have been assigned to it or to which it may be entitled at any time or times. -15- 6.3 Pledged Stock. (a) Unless an Event of Default shall have occurred and be continuing and the Collateral Agent shall have given notice to the relevant Grantor of the Collateral Agent's intent to exercise its corresponding rights pursuant to Section 6.3(b), each Grantor shall be permitted to receive all cash dividends paid in respect of the Pledged Stock that constitutes Collateral and all payments made in respect of the Pledged Notes that constitutes Collateral, in each case paid in the normal course of business of the relevant Issuer and consistent with past practice, to the extent permitted in the Indenture, and to exercise all voting and corporate rights with respect to such Investment Property; provided, however, that following the Discharge of First Priority Claims, no vote shall be cast or corporate right exercised or other action taken which would impair the Collateral or which would be inconsistent with or result in any violation of any provision of the Indenture, this Agreement or any other Specified Document. (b) Following the Discharge of First Priority Claims, if an Event of Default shall occur and be continuing and the Collateral Agent shall give notice of its intent to exercise such rights to the relevant Grantor or Grantors, (i) the Collateral Agent shall have the right to receive any and all cash dividends, payments or other Proceeds paid in respect of the Investment Property that constitutes Collateral and make application thereof to the Secured Obligations in accordance with Section 6.10 of the Indenture, and (ii) any or all of the Investment Property that constitutes Collateral shall be registered in the name of the Collateral Agent or its nominee, and the Collateral Agent or its nominee may thereafter exercise (x) all voting, corporate and other rights pertaining to such Investment Property at any meeting of shareholders of the relevant Issuer or Issuers or otherwise and (y) any and all rights of conversion, exchange and subscription and any other rights, privileges or options pertaining to such Investment Property as if it were the absolute owner thereof (including, without limitation, the right to exchange at its discretion any and all of such Investment Property upon the merger, consolidation, reorganization, recapitalization or other fundamental change in the corporate structure of any Issuer, or upon the exercise by any Grantor or the Collateral Agent of any right, privilege or option pertaining to such Investment Property, and in connection therewith, the right to deposit and deliver any and all of such Investment Property with any committee, depository, transfer agent, registrar or other designated agency upon such terms and conditions as the Collateral Agent may determine), all without liability except to account for property actually received by it, but the Collateral Agent shall have no duty to any Grantor to exercise any such right, privilege or option and shall not be responsible for any failure to do so or delay in so doing. (c) Following the Discharge of First Priority Claims, each Grantor hereby authorizes and instructs each Issuer of any Investment Property pledged by such Grantor hereunder to (i) comply with any instruction received by it from the Collateral Agent in writing that (x) states that an Event of Default has occurred and is continuing and (y) is otherwise in accordance with the terms of this Agreement, without any other or further instructions from such Grantor, and each Grantor agrees that each Issuer shall be fully protected in so complying, and (ii) unless otherwise expressly permitted hereby, pay any dividends or other payments with respect to such Investment Property directly to the Collateral Agent. 6.4 Proceeds to be Turned Over To Collateral Agent. In addition to the rights of the Collateral Agent and the Holders specified in Section 6.1 with respect to payments of Receivables, following the Discharge of First Priority Claims and subject to the terms of the -16- Intercreditor Agreement, if an Event of Default shall occur and be continuing, all Proceeds received by any Grantor in respect of Collateral consisting of cash, checks and other near-cash items shall be held by such Grantor in trust for the Collateral Agent and the Holders, segregated from other funds of such Grantor, and shall, forthwith upon receipt by such Grantor, be turned over to the Collateral Agent in the exact form received by such Grantor (duly indorsed by such Grantor to the Collateral Agent, if required). Following the Discharge of First Priority Claims and subject to the terms of the Intercreditor Agreement, all Proceeds received by the Collateral Agent hereunder shall be held by the Collateral Agent in a Collateral Account maintained under its sole dominion and control. All Proceeds while held by the Collateral Agent in a Collateral Account (or by such Grantor in trust for the Collateral Agent and the Holders) shall continue to be held as collateral security for all the Secured Obligations and shall not constitute payment thereof until applied as provided in Section 6.5. 6.5 Application of Proceeds. Following the Discharge of First Priority Claims and if an Event of Default shall have occurred and be continuing, upon the direction of the Trustee (or, if a declaration of acceleration has been made and not rescinded pursuant to Section 6.02 of the Indenture, unless the Trustee directs otherwise) the Collateral Agent shall pay all (or any part of, if directed by the Trustee) Proceeds in respect of Collateral held in any Collateral Account in payment of the Secured Obligations to the Trustee for application pursuant to Section 6.10 of the Indenture. 6.6 Code and Other Remedies. Subject to the terms of the Intercreditor Agreement, if an Event of Default shall occur and be continuing, the Collateral Agent, on behalf of the Holders, may exercise, in addition to all other rights and remedies granted to them in this Agreement and in any other instrument or agreement securing, evidencing or relating to the Secured Obligations, all rights and remedies of a secured party under the New York UCC or any other applicable law. Without limiting the generality of the foregoing, the Collateral Agent, without demand of performance or other demand, presentment, protest, advertisement or notice of any kind (except any notice required by law referred to below) to or upon any Grantor or any other Person (all and each of which demands, defenses, advertisements and notices are hereby waived), may (subject to the terms of the Intercreditor Agreement) in such circumstances forthwith collect, receive, appropriate and realize upon the Collateral, or any part thereof, and/or may forthwith sell, lease, assign, give option or options to purchase, or otherwise dispose of and deliver the Collateral or any part thereof (or contract to do any of the foregoing), in one or more parcels at public or private sale or sales, at any exchange, broker's board or office of the Collateral Agent or any Holder or elsewhere upon such terms and conditions as it may deem advisable and at such prices as it may deem best, for cash or on credit or for future delivery without assumption of any credit risk. Subject to the terms of the Intercreditor Agreement, the Collateral Agent or any Holder shall have the right upon any such public sale or sales, and, to the extent permitted by law, upon any such private sale or sales, to purchase the whole or any part of the Collateral so sold, free of any right or equity of redemption in any Grantor, which right or equity is hereby waived and released. Each Grantor further agrees (subject to the terms of the Intercreditor Agreement), at the Collateral Agent's request, to assemble the Collateral and make it available to the Collateral Agent at places which the Collateral Agent shall reasonably select, whether at such Grantor's premises or elsewhere. The Collateral Agent shall apply the net proceeds of any action taken by it pursuant to this Section 6.6 in accordance with the terms of the Intercreditor Agreement and, following the Discharge of First Priority Claims, after deducting all reasonable costs and -17- expenses of every kind incurred in connection therewith or incidental to the care or safekeeping of any of the Collateral or in any way relating to the Collateral or the rights of the Collateral Agent and the Holders hereunder, including, without limitation, reasonable attorneys' fees and disbursements, to the payment in whole or in part of the Secured Obligations, in accordance with Section 6.10 of the Indenture, and only after such application and after the payment by the Collateral Agent of any other amount required by any provision of law, including, without limitation, Section 9-615(a)(3) of the New York UCC, need the Collateral Agent account for the surplus, if any, to any Grantor. To the extent permitted by applicable law, each Grantor waives all claims, damages and demands it may acquire against the Collateral Agent or any Holder arising out of the exercise by them of any rights hereunder. If any notice of a proposed sale or other disposition of Collateral shall be required by law, such notice shall be deemed reasonable and proper if given at least 10 days before such sale or other disposition. 6.7 Registration Rights. (a) Notwithstanding anything to the contrary in this Section 6.7, the provisions of this Section 6.7 are subject to the terms of the Intercreditor Agreement. (b) If the Collateral Agent shall determine to exercise its right to sell any or all of the Pledged Stock that constitutes Collateral pursuant to Section 6.6, and if requested by the Collateral Agent to have such Pledged Stock, or that portion thereof to be sold, registered under the provisions of the Securities Act, the relevant Grantor will cause the Issuer thereof to (i) execute and deliver, and cause the directors and officers of such Issuer to execute and deliver, all such instruments and documents, and do or cause to be done all such other acts as may be necessary or advisable, as requested by the Collateral Agent, to register such Pledged Stock, or that portion thereof to be sold, under the provisions of the Securities Act, (ii) use its best efforts to cause the registration statement relating thereto to become effective and to remain effective for a period of one year from the date of the first public offering of such Pledged Stock, or that portion thereof to be sold, and (iii) make all amendments thereto and/or to the related prospectus which are necessary or advisable, as requested by the Collateral Agent, all in conformity with the requirements of the Securities Act and the rules and regulations of the Securities and Exchange Commission applicable thereto. Each Grantor agrees to cause such Issuer to comply with the provisions of the securities or "Blue Sky" laws of any and all jurisdictions which the Collateral Agent shall designate and to make available to its security holders, as soon as practicable, an earnings statement (which need not be audited) which will satisfy the provisions of Section 11(a) of the Securities Act. (c) Each Grantor recognizes that the Collateral Agent may be unable to effect a public sale of any or all the Pledged Stock that constitutes Collateral, by reason of certain prohibitions contained in the Securities Act and applicable state securities laws or otherwise, and may be compelled to resort to one or more private sales thereof to a restricted group of purchasers which will be obliged to agree, among other things, to acquire such securities for their own account for investment and not with a view to the distribution or resale thereof. Each Grantor acknowledges and agrees that any such private sale may result in prices and other terms less favorable than if such sale were a public sale and, notwithstanding such circumstances, agrees that any such private sale shall be deemed to have been made in a commercially reasonable manner. The Collateral Agent shall be under no obligation to delay a sale of any of the Pledged Stock that constitutes Collateral for the period of time necessary to permit the Issuer thereof to register such -18- securities for public sale under the Securities Act, or under applicable state securities laws, even if such Issuer would agree to do so. (d) Each Grantor agrees to use its best efforts to do or cause to be done all such other acts as may be necessary to make such sale or sales of all or any portion of the Pledged Stock that constitutes Collateral pursuant to this Section 6.7 valid and binding and in compliance with any and all other applicable requirements of law. Each Grantor further agrees that a breach of any of the covenants contained in this Section 6.7 will cause irreparable injury to the Collateral Agent and the Holders, that the Collateral Agent and the Holders have no adequate remedy at law in respect of such breach and, as a consequence, that each and every covenant contained in this Section 6.7 shall be specifically enforceable against such Grantor, and such Grantor hereby waives and agrees not to assert any defenses against an action for specific performance of such covenants except for a defense that no Event of Default has occurred under the Indenture. 6.8 Deficiency. Each Grantor shall remain liable for any deficiency if the proceeds of any sale or other disposition of the Collateral are insufficient to pay its Secured Obligations and the reasonable fees and disbursements of any attorneys employed by the Collateral Agent or any Holder of the Securities to collect such deficiency. SECTION 7. THE COLLATERAL AGENT 7.1 Collateral Agent's Appointment as Attorney-in-Fact, etc. (a) Each Grantor hereby irrevocably constitutes and appoints the Collateral Agent and any officer or agent thereof, with full power of substitution, as its true and lawful attorney-in-fact with full irrevocable power and authority in the place and stead of such Grantor and in the name of such Grantor or in its own name, for the purpose of carrying out the terms of this Agreement, to take any and all appropriate action and to execute any and all documents and instruments which may be necessary or desirable to accomplish the purposes of this Agreement, and, without limiting the generality of the foregoing, each Grantor hereby gives the Collateral Agent the power and right, on behalf of such Grantor, without notice to or assent by such Grantor, to do any or all of the following: (i) following the Discharge of First Priority Claims, in the name of such Grantor or its own name, or otherwise, take possession of and indorse and collect any checks, drafts, notes, acceptances or other instruments for the payment of moneys due under any Receivable or any material contract of any Grantor or with respect to any other Collateral and file any claim or take any other action or proceeding in any court of law or equity or otherwise deemed appropriate by the Collateral Agent for the purpose of collecting any and all such moneys due under any Receivable or any material contract of any Grantor or with respect to any other Collateral whenever payable; (ii) in the case of any Intellectual Property, execute and deliver, and have recorded, any and all agreements, instruments, documents and papers as the Collateral Agent may request to evidence the Collateral Agent's and the Holders' security interest in such Intellectual Property and the goodwill (if applicable) and general intangibles of such Grantor relating thereto or represented thereby; -19- (iii) pay or discharge taxes and Liens levied or placed on or threatened against the Collateral, effect any repairs or any insurance called for by the terms of this Agreement and pay all or any part of the premiums therefor and the costs thereof; (iv) execute, in connection with any sale provided for in Section 6.6 or 6.7, any indorsements, assignments or other instruments of conveyance or transfer with respect to the Collateral; and (v) following the Discharge of First Priority Claims, (1) direct any party liable for any payment under any of the Collateral to make payment of any and all moneys due or to become due thereunder directly to the Collateral Agent or as the Collateral Agent shall direct; (2) ask or demand for, collect, and receive payment of and receipt for, any and all moneys, claims and other amounts due or to become due at any time in respect of or arising out of any Collateral; (3) sign and indorse any invoices, freight or express bills, bills of lading, storage or warehouse receipts, drafts against debtors, assignments, verifications, notices and other documents in connection with any of the Collateral; (4) commence and prosecute any suits, actions or proceedings at law or in equity in any court of competent jurisdiction to collect the Collateral or any portion thereof and to enforce any other right in respect of any Collateral; (5) defend any suit, action or proceeding brought against such Grantor with respect to any Collateral; (6) settle, compromise or adjust any such suit, action or proceeding and, in connection therewith, give such discharges or releases as the Collateral Agent may request; (7) assign any Copyright, Patent or Trademark (along with the goodwill of the business to which any such Copyright, Patent or Trademark pertains), throughout the world for such term or terms, on such conditions, and in such manner, as the Collateral Agent shall request; and (8) generally, sell, transfer, pledge and make any agreement with respect to or otherwise deal with any of the Collateral as fully and completely as though the Collateral Agent were the absolute owner thereof for all purposes, and do, at the Collateral Agent's option and such Grantor's expense, at any time, or from time to time, all acts and things which the Collateral Agent requests to protect, preserve or realize upon the Collateral and the Collateral Agent's and the Holders' security interests therein and to effect the intent of this Agreement, all as fully and effectively as such Grantor might do. Anything in this Section 7.1(a) to the contrary notwithstanding, the Collateral Agent agrees that it will not exercise any rights under the power of attorney provided for in this Section 7.1(a) unless an Event of Default shall have occurred and be continuing. (b) If any Grantor fails to perform or comply with any of its agreements contained herein, the Collateral Agent, at its option, but without any obligation so to do, may perform or comply, or otherwise cause performance or compliance, with such agreement. (c) The expenses of the Collateral Agent incurred in connection with actions undertaken as provided in this Section 7.1, from the date of payment by the Collateral Agent to the date reimbursed by the relevant Grantor, shall be payable by such Grantor to the Collateral Agent on demand. -20- (d) Each Grantor hereby ratifies all that said attorneys shall lawfully do or cause to be done by virtue hereof. All powers, authorizations and agencies contained in this Agreement are coupled with an interest and are irrevocable until this Agreement is terminated and the security interests created hereby are released. 7.2 Duty of Collateral Agent. (a) The Collateral Agent's sole duty, other than the obligations under the Intercreditor Agreement, with respect to the custody, safekeeping and physical preservation of the Collateral in its possession, under Section 9-207 of the New York UCC or otherwise, shall be to deal with it in the same manner as the Collateral Agent deals with similar property for its own account. Beyond such duty, the Collateral Agent shall have no duty as to any Collateral in its possession or control or any income thereon or as to preservation of rights against prior parties or any other rights pertaining thereto and the Collateral Agent shall not be responsible for filing any financing or continuation statements or recording any documents or instruments in any public office at any time or times or otherwise perfecting or maintaining the perfection of any security interest in the Collateral. (b) Pursuant to the Collateral Agent's appointment as Collateral Agent under the Indenture, it shall act as Collateral Agent and shall be authorized to appoint co-Collateral Agents as necessary in its sole discretion. Neither the Collateral Agent nor any of its respective officers, directors, employees or agents shall be liable for failure to demand, collect or realize upon any of the Collateral or for any delay in doing so or shall be under any obligation to sell or otherwise dispose of any Collateral upon the request of any other Person or to take any other action whatsoever with regard to the Collateral or any part thereof. The powers conferred on the Collateral Agent hereunder are solely to protect the Collateral Agent's interest in the Collateral and shall not impose any duty upon the Collateral Agent to exercise any such powers. The Collateral Agent shall be accountable only for amounts that it actually receives as a result of the exercise of such powers, and neither the Collateral Agent nor any of its officers, directors, employees or agents shall be responsible for any act or failure to act hereunder, except for its own gross negligence or willful misconduct. 7.3 Execution of Financing Statements. Pursuant to applicable law, each Grantor authorizes the Collateral Agent to file or record financing statements and other filing or recording documents or instruments with respect to the Collateral without the signature of such Grantor in such form and in such offices as the Collateral Agent determines appropriate to perfect the security interests of the Collateral Agent under this Agreement. A photographic or other reproduction of this Agreement shall be sufficient as a financing statement or other filing or recording document or instrument for filing or recording in any jurisdiction. 7.4 Authority of Collateral Agent. Each Grantor acknowledges that the rights and responsibilities of the Collateral Agent under this Agreement with respect to any action taken by the Collateral Agent or the exercise or non-exercise by the Collateral Agent of any option, voting right, request, judgment or other right or remedy provided for herein or resulting or arising out of this Agreement shall, as among the Collateral Agent, the Trustee and the Holders, be governed by the Indenture, the Intercreditor Agreement and by such other agreements with respect thereto as may exist from time to time among them, but, as between the Collateral Agent and the Grantors, the Collateral Agent shall be conclusively presumed to be acting as agent for the -21- Holders with full and valid authority so to act or refrain from acting, and no Grantor shall be under any obligation, or entitlement, to make any inquiry respecting such authority. SECTION 8. MISCELLANEOUS 8.1 Amendments in Writing. None of the terms or provisions of this Agreement may be waived, amended, supplemented or otherwise modified except in accordance with Article Nine of the Indenture. 8.2 Notices. All notices, requests and demands to or upon the Collateral Agent or any Grantor hereunder shall be effected in the manner provided for in subsection 11.02 of the Indenture; provided that any such notice, request or demand to or upon the Collateral Agent or any Guarantor shall be addressed to the Collateral Agent or such Guarantor at its notice address set forth on Schedule 1 (or such additional or different address as such Person may designate by written notice to each other such Person). 8.3 No Waiver by Course of Conduct; Cumulative Remedies. Neither the Collateral Agent nor any Holder shall by any act (except by a written instrument pursuant to Section 8.1), delay, indulgence, omission or otherwise be deemed to have waived any right or remedy hereunder or to have acquiesced in any Default or Event of Default. No failure to exercise, nor any delay in exercising, on the part of the Collateral Agent or any Holder, any right, power or privilege hereunder shall operate as a waiver thereof. No single or partial exercise of any right, power or privilege hereunder shall preclude any other or further exercise thereof or the exercise of any other right, power or privilege. A waiver by the Collateral Agent or any Holder of any right or remedy hereunder on any one occasion shall not be construed as a bar to any right or remedy which the Collateral Agent or such Holder would otherwise have on any future occasion. The rights and remedies herein provided are cumulative, may be exercised singly or concurrently and are not exclusive of any other rights or remedies provided by law. 8.4 [Intentionally Omitted]. 8.5 Successors and Assigns. This Agreement shall be binding upon the successors and assigns of each Grantor and shall inure to the benefit of the Collateral Agent and the Holders and their successors and assigns; provided that no Grantor may assign, transfer or delegate any of its rights or obligations under this Agreement without the prior written consent of the Collateral Agent. 8.6 Set-Off. Each Grantor hereby irrevocably authorizes the Collateral Agent and each Holder at any time and from time to time while an Event of Default pursuant to subsection 6.01 of the Indenture shall have occurred and be continuing, without notice to such Grantor or any other Grantor, any such notice being expressly waived by each Grantor, to set-off and appropriate and apply any and all deposits (general or special, time or demand, provisional or final), in any currency, and any other credits, indebtedness or claims, in any currency, in each case whether direct or indirect, absolute or contingent, matured or unmatured, at any time held or owing by the Collateral Agent or such Holder to or for the credit or the account of such Grantor, or any part thereof in such amounts as the Collateral Agent or such Holder may elect, against and on account of the obligations and liabilities of such Grantor to the Collateral Agent or such -22- Holder hereunder and claims of every nature and description of the Collateral Agent or such Holder against such Grantor, in any currency, whether arising hereunder, under the Indenture, any other Specified Document or otherwise, as the Collateral Agent or such Holder may elect, whether or not the Collateral Agent or any Holder has made any demand for payment and although such obligations, liabilities and claims may be contingent or unmatured. The Collateral Agent and each Holder shall notify such Grantor promptly of any such set-off and the application made by the Collateral Agent or such Holder of the proceeds thereof, provided that the failure to give such notice shall not affect the validity of such set-off and application. The rights of the Collateral Agent and each Holder under this Section 8.6 are in addition to other rights and remedies (including, without limitation, other rights of set-off) which the Collateral Agent or such Holder may have. 8.7 Counterparts. This Agreement may be executed by one or more of the parties to this Agreement on any number of separate counterparts (including by telecopy), and all of said counterparts taken together shall be deemed to constitute one and the same instrument. 8.8 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. 8.9 Section Headings. The Section headings used in this Agreement are for convenience of reference only and are not to affect the construction hereof or be taken into consideration in the interpretation hereof. 8.10 Integration. This Agreement and the other Specified Documents represent the agreement of the Grantors, the Collateral Agent and the Holders with respect to the subject matter hereof and thereof, and there are no promises, undertakings, representations or warranties by the Collateral Agent or any Holder relative to subject matter hereof and thereof not expressly set forth or referred to herein or in the other Specified Documents. 8.11 Governing Law; Submission To Jurisdiction. THIS AGREEMENT WILL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK BUT WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAW OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY. Each of the parties hereto hereby irrevocably and unconditionally: (a) submits for itself and its property in any legal action or proceeding relating to this Agreement, 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; (b) consents that any such action or proceeding may be brought in such courts and waives any objection that it may now or hereafter have to the venue of any such action or -23- 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; (c) agrees that service of process in any such action or proceeding may be effected by mailing a copy thereof by registered or certified mail (or any substantially similar form of mail), postage prepaid, to such Person at its address referred to in Section 8.2 or at such other address of which notice shall have been given pursuant thereto; (d) agrees that nothing herein shall affect the right to effect service of process in any other manner permitted by law or shall limit the right to sue in any other jurisdiction; and (e) waives, to the maximum extent not prohibited by law, any right it may have to claim or recover in any legal action or proceeding referred to in this Section any special, exemplary, punitive or consequential damages. 8.12 Acknowledgments. Each Grantor hereby acknowledges that: (a) it has been advised by counsel in the negotiation, execution and delivery of this Agreement and the other Specified Documents to which it is a party; (b) neither the Collateral Agent nor any Holder has any fiduciary relationship with or duty to any Grantor arising out of or in connection with this Agreement or any of the other Specified Documents, and the relationship between the Grantors, on the one hand, and the Collateral Agent and Holders, 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 Specified Documents or otherwise exists by virtue of the transactions contemplated hereby among the Holders or among the Grantors and the Holders. 8.13 Additional Grantors. Each Subsidiary of the Company that is required to become a party to this Agreement pursuant to subsection 4.18 of the Indenture shall become a Grantor for all purposes of this Agreement upon execution and delivery by such Subsidiary of an Assumption Agreement in the form of Annex 1 hereto. 8.14 Releases. (a) At such time as the Secured Obligations shall have been paid in full, the Collateral shall be released from the Liens created hereby, and this Agreement and all obligations (other than those expressly stated to survive such termination) of the Collateral Agent and each Grantor hereunder shall terminate, all without delivery of any instrument or performance of any act by any party, and all rights to the Collateral shall revert to the Grantors. At the request and sole expense of any Grantor following any such termination, the Collateral Agent shall deliver to such Grantor any Collateral held by the Collateral Agent hereunder, and execute and deliver to such Grantor such documents as such Grantor shall reasonably request to evidence such termination. (b) If any of the Collateral shall (i) be sold or disposed of by any Grantor in a transaction permitted by the Indenture or (ii) otherwise become subject to the release provisions set forth in Section 12.03 of the Indenture or Section 5.1 of the Intercreditor Agreement, such Collateral -24- shall be released from the Lien created hereby to the extent provided in Section 12.03 of the Indenture or Section 5.1 of the Intercreditor Agreement, as applicable, and, in connection therewith, the Collateral Agent, at the request and sole expense of the Company, shall execute and deliver to the Company all releases or other documents reasonably necessary or desirable for the release of the Lien created hereby on such Collateral. At the request and sole expense of the Company, a Grantor shall be released from its obligations hereunder and the Lien granted by such Grantor pursuant to the terms of this Agreement on the Collateral shall be released in the event that all the Capital Stock of such Grantor shall be so sold, disposed of or released; provided that the Company shall have delivered to the Collateral Agent, at least ten Business Days prior to the date of the proposed release, a written request for release identifying the relevant Grantor and the terms of the sale or other disposition in reasonable detail, including the price thereof and any expenses in connection therewith, together with a certification by the Company stating that such transaction is in compliance with the Indenture and the other Specified Documents. 8.15 Intercreditor Agreement. (a) Notwithstanding anything herein to the contrary, the lien and security interest granted to the Collateral Agent pursuant to this Agreement and the exercise of any right or remedy by the Collateral Agent hereunder are subject to the provisions of the Intercreditor Agreement. In the event of any conflict between the terms of the Intercreditor Agreement and this Agreement, the terms of the Intercreditor Agreement shall govern. (b) The Grantors acknowledge that the Intercreditor Agreement and the rights and benefits thereof (and specific references thereto herein) inure only to the benefit of the Credit Agent and the Collateral Agent and their respective successors and assigns and each of the holders of First Priority Claims and Second Priority Claims (as such terms are defined in the Intercreditor Agreement), and that no other Person, including the Grantors, shall have or be entitled to assert any rights or benefits hereunder arising under the Intercreditor Agreement or by virtue of the existence of the specific references thereto herein. (c) Until the Discharge of First Priority Claims, in the event the Credit Agent or the First Priority Lenders enter into any amendment, waiver or consent in respect of any of the First Priority Collateral Documents for the purpose of adding to, or deleting from, or waiving or consenting to any departures from any provisions of, any First Priority Collateral Document or changing in any manner the rights of the Credit Agent, the First Priority Lenders, the Company or any other Grantor thereunder, then such amendment, waiver or consent shall apply automatically to any comparable provision of this Agreement or any related instrument or document without the consent of the Collateral Agent or any Holders and without any action by the Collateral Agent or any Holders, the Company or any other Grantor, provided that such amendment, waiver or consent of such First Priority Collateral Documents conforms with the requirements of Section 5.3(b) of the Intercreditor Agreement. -25- IN WITNESS WHEREOF, each of the undersigned has caused this Collateral Agreement to be duly executed and delivered as of the date first above written. TENNECO AUTOMOTIVE INC. By: ------------------------------------------ Name: Title: TENNECO AUTOMOTIVE OPERATING COMPANY INC. By: ------------------------------------------ Name: Title: TENNECO INTERNATIONAL HOLDING CORP. By: ------------------------------------------ Name: Title: TENNECO GLOBAL HOLDINGS INC. By: ------------------------------------------ Name: Title: THE PULLMAN COMPANY By: ------------------------------------------ Name: Title: TMC TEXAS INC. By: ------------------------------------------ Name: Title: CLEVITE INDUSTRIES INC. By: ------------------------------------------ Name: Title: Acknowledged and Agreed as of the date hereof: WACHOVIA BANK, NATIONAL ASSOCIATION, as Collateral Agent By: ------------------------------------------ Name: Title: SCHEDULE 1 NOTICE ADDRESSES The notice address of all Guarantors is: [Guarantor Name] Attn: Mark A. McCollum Chief Financial Officer 500 North Field Drive Lake Forest, Illinois 60045 with a copy to: Tenneco Automotive Operating Company Inc. Attn: Timothy R. Donovan General Counsel 500 North Field Drive Lake Forest, Illinois 60045 The notice address of the Collateral Agent is: Wachovia Bank, National Association Attn: Corporate Trust Department 5847 San Felipe, Suite 1050 Houston, Texas 77057 SCHEDULE 2 DESCRIPTION OF INVESTMENT PROPERTY PART I: PLEDGED STOCK TENNECO AUTOMOTIVE INC.
ISSUED/AUTHORIZED ISSUER NO. OF SHARES CLASS OF STOCK STOCK CERTIFICATE TOTAL NO. OF SHARES ------ ------------- -------------- ----------------- ------------------- 1. Tenneco Automotive Operating Company Inc. 231 Common 9 231/250
TENNECO AUTOMOTIVE OPERATING COMPANY INC.
ISSUED/AUTHORIZED ISSUER NO. OF SHARES CLASS OF STOCK STOCK CERTIFICATE TOTAL NO. OF SHARES ------ ------------- -------------- ----------------- ------------------- 1. McPherson Strut Company Inc. (Delaware) 200 Common 3 200/200 2. Precision Modular Assembly Corp. (Delaware) 200 Common 3 200/200 3. Tenneco Asheville Inc. (Delaware) 200 Common 5 200/200 4. Tenneco Asia Inc. (Delaware) 200 Common 5 200/200 5. Tenneco Automotive RSA Company (Delaware) 200 Common 3 200/200 6. Tenneco Automotive Trading Company 1000 Common 5 1000/1000 (Delaware) 7. Tenneco Brake, Inc. (Delaware) 1000 Common 7 1000/1000 8. Tenneco Europe Limited (Delaware) 200 Common 7 200/200 9. Tenneco International Holding Corp. 40,809,036 Common 15 40,809,036/50M (Delaware) 10. The Pullman Company (Delaware) 221 Common NC-5 221/250 11. TMC Texas Inc. (Delaware) 200 Common 4 200/200 12. Walker Electronic Silencing Inc. (Delaware) 200 Common 6 200/200 13. Walker Europe Inc. (Delaware) 200 Common 7 200/200 14. Walker Manufacturing Company (Delaware) 200 Common 7 200/200
TENNECO INTERNATIONAL HOLDING CORP. (100% OWNED BY TENNECO AUTOMOTIVE OPERATING COMPANY INC.)
ISSUED/AUTHORIZED ISSUER NO. OF SHARES CLASS OF STOCK STOCK CERTIFICATE TOTAL NO. OF SHARES ------ ------------- -------------- ----------------- ------------------- 1. Tenneco Global Holdings Inc. (Delaware) 315,000 Common 3 315,000/315,000
THE PULLMAN COMPANY
ISSUED/AUTHORIZED ISSUER NO. OF SHARES CLASS OF STOCK STOCK CERTIFICATE TOTAL NO. OF SHARES ------ ------------- -------------- ----------------- ------------------- 1. Clevite Industries Inc. (Delaware) 1,000 Common NC-1 1,000/1,000 2. Peabody International Corporation (Delaware) 1,000 Common NC-1 1,000/1,000 3. Pullman Standard Inc. (Delaware) 1,000 Common NC-1 1,000/1,000
Schedule 2-2 SCHEDULE 2 DESCRIPTION OF INVESTMENT PROPERTY PART II: PLEDGED NOTES 1. Promissory Note dated January 23, 2001, issued by Gould Electronics Inc. in favor of Tenneco Automotive Operating Company Inc. in the original principal amount of $3,768,625.00.(1) 2. Promissory Note dated June 30, 1998, issued by MLB Ltd. in favor of Barasset Corp. (a subsidiary of The Pullman Company) in the original principal amount of $850,000.00.(2) - ---------- (1) To be delivered to Credit Agent at closing. (2) The Company is currently searching for this note. When found or replaced the Company will deliver to the Credit Agent or Collateral Agent, as applicable. Schedule 2-3 SCHEDULE 3 FILINGS AND OTHER ACTIONS REQUIRED TO PERFECT SECURITY INTERESTS PART I: UNIFORM COMMERCIAL CODE FILINGS
GRANTOR FILING OFFICE ------- ------------- Tenneco Automotive Inc. Delaware Tenneco Automotive Operating Company Inc. Delaware Tenneco International Holding Corp. Delaware The Pullman Company Delaware Tenneco Global Holdings Inc. Delaware Clevite Industries Inc. Delaware TMC Texas Inc. Delaware
SCHEDULE 3 PART II: OTHER ACTIONS REQUIRED TO PERFECT SECURITY INTERESTS DELIVERY OF PLEDGED STOCK* 1. Tenneco Automotive Inc. 2. McPherson Strut Company 3. Precision Modular Assembly Corp. 4. Tenneco Ashville Inc. 5. Tenneco Asia Inc. 6. Tenneco Automotive RSA Company 7. Tenneco Automotive Trading Company 8. Tenneco Brake, Inc. 9. Tenneco Europe Limited 10. Tenneco International Holding Corp. 11. Tenneco Global Holdings Inc. 12. The Pullman Company 13. Clevite Industries Inc. 14. Peabody International Corporation 15. Pullman Standard Inc. 16. TMC Texas Inc. 17. Walker Electronic Silencing Inc. 18. Walker Europe, Inc. 19. Walker Manufacturing Company DELIVERY OF PLEDGED NOTES 1. Gould Electronics Note listed on Schedule 2, Part II** FILING(S) WITH THE U.S. PATENT AND TRADEMARK OFFICE 1. Security Interest in United States Patents, dated as of June __, 2003, by Tenneco Automotive Inc., Tenneco Automotive Operating Company Inc., Tenneco International Holding Corp., Tenneco Global Holdings Inc., The Pullman Company, TMC Texas Inc. and Clevite Industries Inc., in favor of Wachovia Bank, National Association, as Collateral Agent 2. Security Interest in United States Trademarks, dated as of June __, 2003, by Tenneco Automotive Inc., Tenneco Automotive Operating Company Inc., Tenneco International Holding Corp., Tenneco Global Holdings Inc., The Pullman Company, TMC Texas Inc. - ---------- * Previously delivered to Credit Agent. ** To be delivered to Credit Agent. Schedule 3-2 and Clevite Industries Inc., in favor of Wachovia Bank, National Association, as Collateral Agent FILINGS AND OTHER ACTIONS The filings and other actions listed above are sufficient to perfect a security interest in Collateral to the extent security interests in such Collateral can be perfected by the filing of Financing Statements under Article 9 of the applicable UCC (the "Article 9 Collateral"). Additional actions may be required to perfect a security interest in Collateral other than the Article 9 Collateral. Schedule 3-3 SCHEDULE 4 LOCATION OF JURISDICTION OF ORGANIZATION AND CHIEF EXECUTIVE OFFICE
LOCATION OF CHIEF EXECUTIVE OFFICE GRANTOR JURISDICTION OF ORGANIZATION OR SOLE PLACE OF BUSINESS ------- ---------------------------- ----------------------------------- 1. Tenneco Automotive Inc. Delaware 500 North Field Drive, Lake Forest, IL 60045 2. Tenneco Automotive Operating Company Delaware 500 North Field Drive, Lake Forest, IL 60045 Inc. 3. Tenneco International Holding Corp. Delaware 500 North Field Drive, Lake Forest, IL 60045 4. Tenneco Global Holdings Inc. Delaware 500 North Field Drive, Lake Forest, IL 60045 5. The Pullman Company Delaware 500 North Field Drive, Lake Forest, IL 60045 6. TMC Texas Inc. Delaware 500 North Field Drive, Lake Forest, IL 60045 7. Clevite Industries Inc. Delaware 500 North Field Drive, Lake Forest, IL 60045
SCHEDULE 5 LOCATION OF INVENTORY AND EQUIPMENT
GRANTOR LOCATION ------- -------- 1. Tenneco Automotive Operating Company Inc. Cornhusker Warehouse 2702 Rector Road Paragould, AR 72450 2. Tenneco Automotive Operating Company Inc. 1801 High 49 B North Paragould, AR 72450 3. Tenneco Automotive Operating Company Inc. 2000 S. Bolton Road Paragould, AR 72450 4. Tenneco Automotive Operating Company Inc. 6925 Atlantic Avenue Long Beach, CA 90805 5. Tenneco Automotive Operating Company Inc. 200 McIntyre Drive Hartwell, GA 30643 6. Tenneco Automotive Operating Company Inc. 500 North Field Drive Lake Forest, IL 60045 7. Tenneco Automotive Operating Company Inc. 605 Heathrow Drive Lincolnshire, IL 60069 8. The Pullman Company 503 Weatherhead Street Clevite Industries Inc. Angola, IN 46703 9. Tenneco Automotive Operating Company Inc. 4825 Hoffman Street Elkhart, IN 46516 10. Tenneco Automotive Operating Company Inc. 1490 Gerber Street Ligonier, IN 46767 11. Tenneco Automotive Operating Company Inc. Behnke Warehouse 35 Edison Street Battle Creek, MI 49014 12. Tenneco Automotive Operating Company Inc. 3901 Willis Road (P.O. Box 157) Grass Lake, MI 49240 13. Tenneco Automotive Operating Company Inc. Hillsdale Products 20 Superior Street Hillsdale, MI 49242 14. Tenneco Automotive Operating Company Inc. 2701 North Detman Road Jackson, MI 49201 15. Tenneco Automotive Operating Company Inc. 929 Anderson Road Litchfield, MI 49252
Schedule 5-1
GRANTOR LOCATION ------- -------- 16. Tenneco Automotive Operating Company Inc. 904 Industrial Road Marshall, MI 49068 17. Tenneco Automotive Operating Company Inc. 1 International Drive Monroe, MI 48161 18. Tenneco Automotive Operating Company Inc. 13910 Lake Drive (Bolles Harbor) Monroe, MI 19. Tenneco Automotive Operating Company Inc. 6451 15 Mile Road Sterling Heights, MI 48312 20. Tenneco Automotive Operating Company Inc. 1641 Manufacturer's Drive Fenton, MO 63026 (St. Louis) 21. Tenneco Automotive Operating Company Inc. 1846 North Topping Avenue Kansas City, MO 64120 22. Tenneco Automotive Operating Company Inc. 121 Meridian Drive Cozad, NE 69130 23. Tenneco Automotive Operating Company Inc. Central Logistic Services 1850 Centennial Avenue Hastings, NE 68901 24. Tenneco Automotive Operating Company Inc. Distribution Inc. 6363 North 70th Street Lincoln, NE 25. Tenneco Automotive Operating Company Inc. 1475 280th Road Seward, NE 68434 26. The Pullman Company 33 Lockwood Road Clevite Industries Inc. Milan, OH 44846 27. The Pullman Company Route 424 (11800 State Route Clevite Industries Inc. 424) Napoleon, OH 43545 28. Tenneco Automotive Operating Company Inc. 206 Republic Street Norwalk, OH 44857 29. Tenneco Automotive Operating Company Inc. Johnstone Machinery Movers 13008 Eckel Junction Road Perrysburg, OH 43551
Schedule 5-2
GRANTOR LOCATION ------- -------- 30. Tenneco Automotive Operating Company Inc. 645 East Broad Street P.O. Box 119 Smithville, TN 37166 31. Tenneco Automotive Operating Company Inc. Goggin Warehouse - Smithville 247 Hobson Smithville, TN 37166 32. Tenneco Automotive Operating Company Inc. Turntable, Inc. 101 Moore Street Sparta, TN 38583 33. Tenneco Automotive Operating Company Inc. 3160 Abbott Lane Harrisonburg, VA 22801 34. Tenneco Automotive Operating Company Inc. 4500 Early Road Harrisonburg, VA 22801 35. Tenneco Automotive Operating Company Inc. Old Dunham Bush Building 101 Burgess Road Harrisonburg, VA 22801 36. Tenneco Automotive Operating Company Inc. Shenandoah Engineering 1401 Technology Drive Harrisonburg, VA 22802 37. Tenneco Automotive Operating Company Inc. Livia Properties 600 Hays Avenue Staunton, VA 38. Tenneco Automotive Operating Company Inc. Factory Warehouse Building 50 Lodge Lane Verona, VA 24482 39. Tenneco Automotive Operating Company Inc. 1569 D Diamond Springs Road Virginia Beach, VA 23455-3007 40. Tenneco Automotive Operating Company Inc. 10840 West Allan Road Hayward, WI 54843
Schedule 5-3 SCHEDULE 6 INTELLECTUAL PROPERTY COPYRIGHTS REGISTERED COPYRIGHTS None UNREGISTERED COPYRIGHTS The Grantors may have unregistered copyrights in various types of material prepared within the conduct of their business. These types of materials can include all written material, including but not limited to any catalogs, manuals, packaging, labels, and marketing materials for all products manufactured and sold by a Grantor, as well as pictorial, graphical and other audio-visual works, computer programs, video recordings, compilations of data, multimedia and derivative works. However, no registrations have been sought for these types of copyrightable materials, and it is not the policy of the Grantors to pursue registered copyrights for these materials. COPYRIGHT LICENSES COPYRIGHT LICENSES GRANTED BY A GRANTOR None COPYRIGHT LICENSES GRANTED TO A GRANTOR The Grantors have entered into various operational copyright licenses, such as software shrink wrap licenses, commensurate with an organization of their size. PATENTS UNITED STATES PATENTS AND PENDING PATENT APPLICATIONS See attached listing. The property listed on the attached schedule is held, according to the records of the United States Patent and Trademark Office, by the relevant Grantor either in its own name or may be registered under a prior name of such Grantor. The Company hereby warrants, represents and agrees that it will file appropriate documentation to update the records of the United States Patent and Trademark Office within two weeks following the date of this Agreement. FOREIGN PATENTS AND PENDING PATENT APPLICATIONS Any and all foreign patents and foreign patent applications, including any extensions thereof, which may be existing and owned by a Grantor either in its own name or registered under a prior name of such Grantor. Following the Discharge of First Priority Claims, at the request of the Collateral Agent, the Company will cause to be filed appropriate documentation to update the records of the foreign equivalent of the U.S. Patent and Trademark Office in the relevant jurisdiction to reflect ownership in the name of such Grantor. PATENT LICENSES PATENT LICENSES GRANTED BY ANY GRANTOR 1. Technology License Agreement between Amortiguadores, S.A. and Tenneco Automotive Operating Company Inc. dated July 15, 1993 (renewed spring 2002) (TAOC technology to Venezuelan licensee) 2. Patent and Trademark License Agreement between Tenneco Automotive Inc. and Monroe Amortisor Imalat Ve Ticaret A.S. dated February 4, 2001 (TAI technology and trademarks) 3. Grantors have entered into agreements with Original Equipment Manufacturers (OEM Agreements) which may include a paid up, non-exclusive license to certain of Grantors' technology PATENT LICENSES GRANTED TO ANY GRANTOR 1. Comprehensive Technical License Agreement by and between Tokico Ltd. and Tenneco Automotive Inc. dated January 17, 2002 (Tokico technology) 2. Memorandum of Comprehensive Technical License Agreement for Toyota "558N" (South Africa) Project dated January 17, 2002 (Tokico technology for a specified project in accordance with the Comprehensive Technical License Agreement) 3. Memorandum of Comprehensive Technical License Agreement for Toyota "380N" Camry (Australia) Project dated October 3, 2002 (Tokico technology for a specified project in accordance with the Comprehensive Technical License Agreement) 4. World-wide license agreement from Hyrad Corp. for patents and know-how relating to adjustable shock absorber technology TRADEMARKS UNITED STATES REGISTERED TRADEMARKS AND PENDING APPLICATIONS See attached listing. The property listed on the attached schedule is held, according to the records of the United States Patent and Trademark Office by the relevant Grantor either in its own name or may be registered under a prior name of such Grantor. The Company hereby warrants, represents and agrees that it will file appropriate documentation to update the records Schedule 6-2 of the United States Patent and Trademark Office within two weeks following the date of this Agreement. FOREIGN REGISTERED TRADEMARKS AND PENDING APPLICATIONS Any and all foreign trademark registrations and foreign trademark applications, including any renewals thereof, which may be existing and owned by a Grantor either in its own name or registered under a prior name of such Grantor. Following the Discharge of First Priority Claims, at the request of the Collateral Agent, the Company will cause to be filed appropriate documentation to update the records of the foreign equivalent of the U.S. Patent and Trademark Office in the relevant jurisdiction to reflect ownership in the name of such Grantor. COMMON LAW TRADEMARKS Any and all trademarks to the extent existing at Common Law which may be used by a Grantor to indicate the source of their products or services. TRADEMARK LICENSES TRADEMARK LICENSES GRANTED BY ANY GRANTOR 1. 2003 Championship Off Road Racing (CORR) Associate #2 Sponsorship Contract dated February 2, 2003 (TAOC trademarks) 2. Trademark License Agreement between Cycle Source Group LLC and Tenneco Automotive Operating Company Inc. undated (TAOC trademarks) 3. Patent and Trademark License Agreement between Tenneco Automotive Inc. and Monroe Amortisor Imalat Ve Ticaret A.S. dated February 4, 2001 (TAI technology and trademarks) TRADEMARK LICENSES GRANTED TO ANY GRANTOR 1. Agreement, dated April 11, 1988, between The Pullman Company and JPI Transportation Products Inc. (regarding the "Clevite" mark) GENERAL LICENSES The Grantors have entered into numerous and various types of intellectual property licenses with wholly-owned divisions, wholly owned subsidiaries or joint venture companies within the Grantors' organization. These agreements may allow the companies within Grantors' organization to use various of Grantors' owned intellectual property in the conduct of their business. TRADE SECRET/PROPRIETARY INFORMATION The Grantors may have trade secret and other rights in know-how and confidential or proprietary information including but not limited to, technologies in development, computer programs and Schedule 6-3 other computer software (including software systems and applications), websites, domains, domain names, user interfaces, topographies, source code, object code, algorithms, display screens, layouts, development tools, instructions, templates, evaluation software and hardware, formulae, manufacturing, engineering and other drawings and manuals, technology, processes, designs, lab journals, notebooks, schematics, data plans, blue prints, research and development reports, technical information and engineering data design and engineering specifications, customer lists and customer marketing information and similar materials all evidencing expertise in or information used in the Grantors' business and the manufacturing, marketing and sale of Grantors' products. Schedule 6-4 SCHEDULE 7 COMMERCIAL TORT CLAIMS None. Annex 1 to Collateral Agreement ASSUMPTION AGREEMENT, dated as of ____________ __, ____, made by ______________________________, a ______________ corporation (the "Additional Grantor"), in favor of WACHOVIA BANK, NATIONAL ASSOCIATION, as collateral agent (in such capacity, the "Collateral Agent") for the Holders (as defined in the Indenture described below). All capitalized terms not defined herein shall have the meaning ascribed to them in such Indenture. WITNESSETH: WHEREAS, pursuant to that certain Indenture, dated as of the date hereof (as amended, supplemented or otherwise modified from time to time, the "Indenture"), among Tenneco Automotive Inc., a Delaware corporation (the "Company"), as Issuer (such term, and all other capitalized terms used herein, as defined pursuant to Section 1.1), and Wachovia Bank, National Association, a New York banking corporation, as Trustee, the Company has duly authorized the issue of 10.25% Senior Secured Notes due 2013, Series A, and 10.25% Senior Secured Notes due 2013, Series B (as further defined in the Indenture, the "Securities"); WHEREAS, in connection with the issuance of the Securities, the Company and certain of its Subsidiaries (other than the Additional Grantor) have entered into the Collateral Agreement, dated as of June 19, 2003 (as amended, supplemented or otherwise modified from time to time, the "Collateral Agreement") in favor of the Collateral Agent for its benefit and the ratable benefit of the Trustee and the holders of the Securities; WHEREAS, the Indenture requires the Additional Grantor to become a party to the Collateral Agreement; and WHEREAS, the Additional Grantor has agreed to execute and deliver this Assumption Agreement in order to become a party to the Collateral Agreement; NOW, THEREFORE, IT IS AGREED: 1. Collateral Agreement. By executing and delivering this Assumption Agreement, the Additional Grantor, as provided in Section 8.13 of the Collateral Agreement, hereby becomes a party to the Collateral Agreement as a Grantor thereunder with the same force and effect as if originally named therein as a Grantor and, without limiting the generality of the foregoing, hereby expressly assumes all obligations and liabilities of a Grantor thereunder. The information set forth in Annex 1-A hereto is hereby added to the information set forth in the Schedules to the Collateral Agreement. The Additional Grantor hereby represents and warrants that each of the representations and warranties contained in Section 4 of the Collateral Agreement is true and correct on and as the date hereof (after giving effect to this Assumption Agreement) as if made on and as of such date. 2. Governing Law. THIS ASSUMPTION AGREEMENT WILL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK BUT WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAW OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY. IN WITNESS WHEREOF, the undersigned has caused this Assumption Agreement to be duly executed and delivered as of the date first above written. [ADDITIONAL GRANTOR] By: ------------------------------------------ Name: Title: Annex 1-A to Assumption Agreement Supplements to Schedule 1 Supplements to Schedule 2 Supplements to Schedule 3 Supplements to Schedule 4 Supplements to Schedule 5 Supplements to Schedule 6 Supplements to Schedule 7 EX-4.6(C) 7 c78654exv4w6xcy.txt REGISTRATION RIGHTS AGREEMENT REGISTRATION RIGHTS AGREEMENT This REGISTRATION RIGHTS AGREEMENT dated June 19, 2003 (the "Agreement") is entered into by and among Tenneco Automotive Inc., a Delaware corporation (the "Company"), the guarantors listed in Schedule 1 hereto (the "Guarantors"), and the several initial purchasers listed in Schedule 2 hereto (the "Initial Purchasers"), for whom J.P. Morgan Securities Inc. is acting as representative. The Company, the Guarantors and the Initial Purchasers are parties to the Purchase Agreement dated June 10, 2003 (the "Purchase Agreement"), which provides for the sale by the Company to the Initial Purchasers of $350 million aggregate principal amount of the Company's 10 1/4% Senior Secured Notes due 2013 (the "Securities"), which will be guaranteed on a senior secured basis by each of the Guarantors. As an inducement to the Initial Purchasers to enter into the Purchase Agreement, the Company and the Guarantors have agreed to provide to the Initial Purchasers and their direct and indirect transferees the registration rights set forth in this Agreement. The execution and delivery of this Agreement is a condition to the closing under the Purchase Agreement. In consideration of the foregoing, the parties hereto agree as follows: 1. Definitions. As used in this Agreement, the following terms shall have the following meanings: "Business Day" shall mean any day that is not a Saturday, Sunday or other day on which commercial banks in New York City are authorized or required by law to remain closed. "Closing Date" shall mean the Closing Date as defined in the Purchase Agreement. "Company" shall have the meaning set forth in the preamble and shall also include the Company's successors. "Exchange Act" shall mean the Securities Exchange Act of 1934 and the rules and regulations thereunder, as amended from time to time. "Exchange Dates" shall have the meaning set forth in Section 2(a)(ii) hereof. "Exchange Offer" shall mean the exchange offer by the Company and the Guarantors of Exchange Securities for Registrable Securities pursuant to Section 2(a) hereof. "Exchange Offer Registration" shall mean a registration under the Securities Act effected pursuant to Section 2(a) hereof. "Exchange Offer Registration Statement" shall mean an exchange offer registration statement on Form S-4 (or, if applicable, on another appropriate form) and all amendments and supplements to such registration statement, in each case including the Prospectus contained therein, all exhibits thereto and any document incorporated by reference therein. "Exchange Securities" shall mean senior secured notes issued by the Company and guaranteed by the Guarantors under the Indenture containing terms identical to the Securities (except that the Exchange Securities will not be subject to restrictions on transfer or to any increase in annual interest rate for failure to comply with this Agreement) and to be offered to Holders of Securities in exchange for Registrable Securities pursuant to the Exchange Offer. "Filing Date" shall mean with respect to the Shelf Registration Statement required to be filed pursuant to Section 2(b)(iii), the 60th day after the delivery of a notice pursuant to Section 2(b)(iii). "Guarantors" shall have the meaning set forth in the preamble and shall also include any Guarantor's successors. "Holders" shall mean the Initial Purchasers, for so long as they own any Registrable Securities, and each of their successors, assigns and direct and indirect transferees who become owners of Registrable Securities under the Indenture; provided that for purposes of Sections 4 and 5 of this Agreement, the term "Holders" shall include Participating Broker-Dealers. "Initial Purchasers" shall have the meaning set forth in the preamble. "Indenture" shall mean the Indenture relating to the Securities dated as of June 19, 2003 among the Company, the Guarantors and Wachovia Bank, National Association, as trustee, and as the same may be amended from time to time in accordance with the terms thereof. "Majority Holders" shall mean the Holders of a majority of the aggregate principal amount of outstanding Registrable Securities; provided that whenever the consent or approval of Holders of a specified percentage of Registrable Securities is required hereunder, Registrable Securities owned directly or indirectly by the Company or any of its affiliates shall not be counted in determining whether such consent or approval was given by the Holders of such required percentage or amount. 2 "Participating Broker-Dealers" shall have the meaning set forth in Section 2 hereof. "Person" shall mean an individual, partnership, limited liability company, corporation, trust or unincorporated organization, or a government or agency or political subdivision thereof. "Prospectus" shall mean the prospectus included in a Registration Statement, including any preliminary prospectus, and any such prospectus as amended or supplemented by any prospectus supplement, including a prospectus supplement with respect to the terms of the offering of any portion of the Registrable Securities covered by a Shelf Registration Statement, and by all other amendments and supplements to such prospectus, and in each case including any document incorporated by reference therein. "Purchase Agreement" shall have the meaning set forth in the preamble. "Registrable Securities" shall mean the Securities; provided that any Security shall cease to be a Registrable Security (i) when a Registration Statement with respect to such Security has been declared effective under the Securities Act and such Security has been exchanged or disposed of pursuant to such Registration Statement, (ii) when such Security is eligible to be sold pursuant to Rule 144(k) (or any similar provision then in force, but not Rule 144A) under the Securities Act upon the expiration of the time period referred to in such rule or (iii) when such Security ceases to be outstanding. "Registration Expenses" shall mean any and all expenses incident to performance of or compliance by the Company and the Guarantors with this Agreement, including, without limitation, (i) all SEC, stock exchange or National Association of Securities Dealers, Inc. registration and filing fees, (ii) all fees and expenses incurred in connection with compliance with state securities or blue sky laws in the United States of America (including reasonable fees and disbursements of counsel for any Underwriters or Holders in connection with blue sky qualification in the United States of America of any Exchange Securities or Registrable Securities), (iii) all expenses of any Persons in preparing or assisting in preparing, word processing, printing and distributing any Registration Statement, any Prospectus and any amendments or supplements thereto, any underwriting agreements, securities sales agreements or other similar agreements and any other documents relating to the performance of and compliance with this Agreement, (iv) all rating agency fees, (v) all fees and disbursements relating to the qualification of the Indenture under applicable securities laws, (vi) the fees and disbursements of the Trustee and its counsel, (vii) the fees and disbursements of counsel for the Company and the Guarantors and, in the case of a Shelf Registration Statement, the reasonable fees and disbursements of one counsel for the Holders (which counsel shall be selected 3 by the Majority Holders and which counsel may also be counsel for the Initial Purchasers) and (viii) the fees and disbursements of the independent public accountants of the Company and the Guarantors, including the expenses of any special audits or "comfort" letters required by or incident to the performance of and compliance with this Agreement, but excluding fees and expenses of counsel to the Underwriters (other than fees and expenses set forth in clause (ii) above) or the Holders and underwriting discounts and commissions and transfer taxes, if any, relating to the sale or disposition of Registrable Securities by a Holder. "Registration Statement" shall mean any registration statement of the Company and the Guarantors filed with the SEC under the Securities Act that covers any of the Exchange Securities or Registrable Securities pursuant to the provisions of this Agreement and all amendments and supplements to any such registration statement, including post-effective amendments, in each case including the Prospectus contained therein, all exhibits thereto and any document incorporated by reference therein. "SEC" shall mean the Securities and Exchange Commission. "Securities Act" shall mean the Securities Act of 1933, as amended from time to time. "Shelf Effectiveness Period" shall have the meaning set forth in Section 2(b) hereof. "Shelf Registration" shall mean a registration effected pursuant to Section 2(b) hereof. "Shelf Registration Statement" shall mean a "shelf" registration statement of the Company and the Guarantors filed with the SEC under the Securities Act that covers all the Registrable Securities (but no other securities unless approved by the Holders whose Registrable Securities are to be covered by such Shelf Registration Statement) on an appropriate form under Rule 415 under the Securities Act, or any similar rule that may be adopted by the SEC, and all amendments and supplements to such registration statement, including post-effective amendments, in each case including the Prospectus contained therein, all exhibits thereto and any document incorporated by reference therein. "Trust Indenture Act" shall mean the Trust Indenture Act of 1939, as amended from time to time. "Trustee" shall mean the trustee with respect to the Securities under the Indenture. 4 "Underwriter" shall have the meaning set forth in Section 3 hereof. "Underwritten Offering" shall mean an offering in which Registrable Securities are sold to an Underwriter for reoffering to the public. 2. Registration Under the Securities Act. (a) To the extent not prohibited by any applicable law or applicable interpretations of the Staff of the SEC, the Company and the Guarantors shall use their commercially reasonable efforts to (i) cause to be filed an Exchange Offer Registration Statement covering an offer to the Holders to exchange all the Registrable Securities for Exchange Securities and (ii) have such Registration Statement remain effective until 180 days after the closing of the Exchange Offer. The Company and the Guarantors shall commence the Exchange Offer promptly after the Exchange Offer Registration Statement is declared effective by the SEC and use their commercially reasonable efforts to complete the Exchange Offer not later than 60 days after such effective date. The Company and the Guarantors shall commence the Exchange Offer by mailing the related Prospectus, appropriate letters of transmittal and other accompanying documents to each Holder stating, in addition to such other disclosures as are required by applicable law, (i) that the Exchange Offer is being made pursuant to this Agreement and that all Registrable Securities validly tendered and not properly withdrawn will be accepted for exchange; (ii) the dates of acceptance for exchange (which shall be a period of at least 20 Business Days from the date such notice is mailed) (the "Exchange Dates"); (iii) that any Registrable Security not tendered will remain outstanding and continue to accrue interest but will not retain any rights under this Agreement; (iv) that any Holder electing to have a Registrable Security exchanged pursuant to the Exchange Offer will be required to surrender such Registrable Security, together with the appropriate letters of transmittal, to the institution and at the address (located in the Borough of Manhattan, The City of New York) and in the manner specified in the notice, prior to the close of business on the last Exchange Date; and (v) that any Holder will be entitled to withdraw its election, not later than the close of business on the last Exchange Date, by sending to the institution and at the address (located in the Borough of Manhattan, The City of New York) specified in the notice, a telegram, telex, facsimile transmission or letter setting forth the name of such Holder, the principal amount of Registrable Securities delivered for 5 exchange and a statement that such Holder is withdrawing its election to have such Securities exchanged. As a condition to participating in the Exchange Offer, a Holder will be required to represent to the Company and the Guarantors that (i) any Exchange Securities to be received by it will be acquired in the ordinary course of its business, (ii) at the time of commencement of the Exchange Offer it has no arrangement or understanding with any Person to participate in the distribution (within the meaning of the Securities Act) of the Exchange Securities, (iii) it is not an "affiliate" (within the meaning of Rule 405 under Securities Act) of the Company or any Guarantor and (iv) if such Holder is a broker-dealer that will receive Exchange Securities for its own account in the Exchange Offer in exchange for Securities that were acquired by such broker-dealer as a result of market-making or other trading activities (a "Participating Broker-Dealer"), then such Holder will deliver a Prospectus in connection with any resale of such Exchange Securities. As soon as practicable after the last Exchange Date, the Company and the Guarantors shall (i) accept for exchange Registrable Securities or portions thereof validly tendered and not properly withdrawn pursuant to the Exchange Offer; and (ii) deliver, or cause to be delivered, to the Trustee for cancellation all Registrable Securities or portions thereof so accepted for exchange by the Company and issue, and cause the Trustee to promptly authenticate and deliver to each Holder, Exchange Securities equal in principal amount to the principal amount of the Registrable Securities surrendered by such Holder provided that, except as may be otherwise required by the Indenture, in the case of any Registrable Securities held in global form by a depositary, authentication and delivery to such depositary of one or more Exchange Securities in global form in an equivalent principal amount thereto for the account of such Holders in accordance with the Indenture shall satisfy such authentication and delivery requirement. The Company and the Guarantors shall use their commercially reasonable efforts to complete the Exchange Offer as provided above and shall comply with the applicable requirements of the Securities Act, the Exchange Act and other applicable laws and regulations in connection with the Exchange Offer. The Exchange Offer shall not be subject to any conditions, other than (i) that the Exchange Offer does not violate any applicable law or applicable interpretations of the Staff of the SEC and (ii) no action or proceeding shall have been instituted or threatened in any court or by any governmental agency with respect to the Exchange Offer. (b) In the event that (i) the Company and the Guarantors determine that the Exchange Offer Registration provided for in Section 2(a) above is not available 6 or may not be completed as soon as practicable after the last Exchange Date because it would violate any applicable law or applicable interpretation of the Staff of the SEC, (ii) the Exchange Offer is not for any other reason completed by the 210th day after the Closing Date, or (iii) if any Initial Purchaser holds any Securities acquired by it that have, or that are reasonably likely to be determined to have, the status of an unsold allotment in an initial distribution, and any such Initial Purchaser so requests in writing on or prior to the 60th day after the consummation of the Exchange Offer, the Company and the Guarantors shall use commercially reasonable efforts to cause to be filed as soon as practicable after such determination, date or request, as the case may be, a Shelf Registration Statement providing for the sale of all the Registrable Securities by the Holders (or, in the case of clause (iii), any requesting Initial Purchaser) thereof and to have such Shelf Registration Statement declared effective by the SEC. In the event that the Company and the Guarantors are required to file a Shelf Registration Statement pursuant to clause (iii) of the preceding sentence, the Company and the Guarantors shall use commercially reasonable efforts to file and have declared effective by the SEC both an Exchange Offer Registration Statement pursuant to Section 2(a) with respect to all Registrable Securities and a Shelf Registration Statement (which may be a combined Registration Statement with the Exchange Offer Registration Statement) with respect to offers and sales of Registrable Securities held by the Initial Purchasers after completion of the Exchange Offer. Notwithstanding the foregoing, the Company and the Guarantors may delay filing a Shelf Registration Statement, and any amendment thereto, and may withhold efforts to cause such Shelf Registration Statement, and any such amendment thereto, to become effective for a period of up to 60 days, if (i) the Company determines in good faith that such Shelf Registration Statement, and any such amendment thereto, might interfere with or affect the negotiation or completion of any transaction that is being contemplated by the Company (whether or not a final decision has been made to undertake such transaction) at the time the right to delay is exercised or (ii) such Shelf Registration Statement, and any such amendment thereto, would otherwise require premature disclosure of non-public information that, in the Company's judgment, exercised reasonably and in good faith, would have a material adverse effect on or otherwise be detrimental to the Company; provided, however, the Company may only exercise such right of delay or withholding of efforts other than for purposes of avoiding its obligations under this Agreement; provided further however, that the Company may not exercise such right of delay or withholding of efforts more frequently than two times in any 12-month period and the aggregate period of any such delays or withholdings shall not exceed 60 days in any such 12-month period. The Company and the Guarantors agree to use commercially reasonable efforts to keep the Shelf Registration Statement continuously effective until all of the Registrable Securities covered thereby are eligible for resale under Rule 144(k) under the Securities Act upon the expiration of the time period referred to in such rule or such earlier 7 time when all the Registrable Securities covered by the Shelf Registration Statement have been sold pursuant to the Shelf Registration Statement (the "Shelf Effectiveness Period"). The Company and the Guarantors further agree to supplement or amend the Shelf Registration Statement and the related Prospectus if required by the rules, regulations or instructions applicable to the registration form used by the Company and the Guarantors for such Shelf Registration Statement or by the Securities Act or by any other rules and regulations thereunder for shelf registration or if reasonably requested by a Holder of Registrable Securities with respect to information relating to such Holder, and to use commercially reasonable efforts to cause any such amendment to become effective and such Shelf Registration Statement and Prospectus to become usable as soon as thereafter practicable. The Company and the Guarantors agree to furnish to the Holders of Registrable Securities covered by any such Shelf Registration Statement copies of any such supplement or amendment promptly after its being used or filed with the SEC. (c) The Company and the Guarantors shall pay all Registration Expenses in connection with the registration pursuant to Section 2(a) and Section 2(b) hereof. Each Holder shall pay all underwriting discounts and commissions and transfer taxes, if any, relating to the sale or disposition of such Holder's Registrable Securities pursuant to the Exchange Offer Registration Statement or Shelf Registration Statement. (d) An Exchange Offer Registration Statement pursuant to Section 2(a) hereof or a Shelf Registration Statement pursuant to Section 2(b) hereof will not be deemed to have become effective unless it has been declared effective by the SEC. In the event that (i) either the Exchange Offer is not completed or a Shelf Registration Statement required under Section (2)(b)(i) or (ii) hereof is not declared effective on or prior to the 210th day after the Closing Date (the "Target Registration Date") or (ii) a Shelf Registration Statement required under Section 2(b)(iii) hereof is not declared effective on or prior to the 60th day following the Filing Date (also a "Target Registration Date"), the interest rate on the Registrable Securities will be increased by (i) 0.25% per annum for the first 90-day period immediately following the applicable Target Registration Date and (ii) an additional 0.25% per annum with respect to each subsequent 90-day period, in each case until the Exchange Offer is completed or the Shelf Registration Statement, if required hereby, is declared effective by the SEC or the Securities covered thereby are eligible for resale under Rule 144(k) under the Securities Act upon the expiration of the time period referred to in such rule; provided however, that in no event shall the aggregate amount of additional interest accruing under this paragraph exceed in the aggregate 1.00% per annum. If the Shelf Registration Statement has been declared effective and thereafter either ceases to be effective or the Prospectus contained therein ceases to be usable at 8 any time during the Shelf Effectiveness Period, and such failure to remain effective or usable exists for more than 60 days (whether or not consecutive) in any 12-month period, then the interest rate on the Registrable Securities will be increased by 1.00% per annum commencing on the 61st day in such 12-month period and ending on such date that the Shelf Registration Statement has again been declared effective or the Prospectus again becomes usable. In no event shall the Company or Guarantors be obligated to pay additional interest under more than one provisions of this Section 2(d) at any one time. Upon the effectiveness of the Exchange Offer Registration Statement or the Shelf Registration Statement (in the case of clauses (i) and (ii) of the second paragraph of this Section 2(d), as applicable) or the Shelf Registration Statement which had ceased to remain effective (in the case of the penultimate paragraph of this Section 2(d)), or the Securities become eligible for sale pursuant to Rule 144(k) under the Securities Act upon the expiration of the time period referred to in such rule (in the case of the second and third paragraphs of this Section 2(d)), additional interest on the Securities as a result of such provisions (or the relevant subclause thereof), as the case may be, shall cease to accrue. (e) Without limiting the remedies available to the Initial Purchasers and the Holders, the Company and the Guarantors acknowledge that any failure by the Company or the Guarantors to comply with their obligations under Section 2(a) and Section 2(b) hereof may result in material irreparable injury to the Initial Purchasers or the Holders for which there is no adequate remedy at law, that it will not be possible to measure damages for such injuries precisely and that, in the event of any such failure, the Initial Purchasers or any Holder may obtain such relief as may be required to specifically enforce the Company's and the Guarantors' obligations under Section 2(a) and Section 2(b) hereof. (f) No Holder of Registrable Securities may include any of its Registrable Securities in any Shelf Registration if such Holder shall have failed to furnish to the Company the information with respect to such Holder and the proposed disposition specified in Items 507 and 508 (as applicable) of Regulation S-K under the Securities Act and any other applicable rules, regulations or policies of the SEC for use in connection with any Shelf Registration or Prospectus included therein. No Holder of Registrable Securities shall be entitled to additional interest pursuant to Section 2(b) if such Holder shall have failed to provide all such information. Each selling Holder as to which a Shelf Registration is being effected agrees to furnish promptly to the Company additional information to be disclosed so that the information previously furnished to the Company by such Holder does not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statement therein not misleading. 9 3. Registration Procedures. In connection with their obligations pursuant to Section 2(a) and Section 2(b) hereof, the Company and the Guarantors shall as expeditiously as possible: (a) prepare and file with the SEC a Registration Statement on the appropriate form under the Securities Act, which form (x) shall be selected by the Company and the Guarantors, (y) shall, in the case of a Shelf Registration, be available for the sale of the Registrable Securities to be included therein by the selling Holders thereof and (z) shall comply as to form in all material respects with the requirements of the applicable form and include all financial statements required by the SEC to be filed therewith; and use commercially reasonable efforts to cause such Registration Statement to become effective and remain effective for the applicable period in accordance with Section 2 hereof; (b) prepare and file with the SEC such amendments and post-effective amendments to each Registration Statement as may be necessary to keep such Registration Statement effective for the applicable period in accordance with Section 2 hereof and cause each Prospectus to be supplemented by any required prospectus supplement and, as so supplemented, to be filed pursuant to Rule 424 under the Securities Act; and keep each Prospectus current during the period described in Section 4(3) of and Rule 174 under the Securities Act that is applicable to transactions by brokers or dealers with respect to the Registrable Securities or Exchange Securities; (c) in the case of a Shelf Registration, furnish to each Holder of Registrable Securities covered thereby, to counsel for the Initial Purchasers, to counsel for such Holders and to each Underwriter of an Underwritten Offering of Registrable Securities, if any, without charge, as many copies of each Prospectus, including each preliminary Prospectus, and any amendment or supplement thereto, as may be reasonably requested in order to facilitate the sale or other disposition of the Registrable Securities covered thereunder; and the Company and the Guarantors consent to the use of such Prospectus and any amendment or supplement thereto in accordance with applicable law by each of the selling Holders of Registrable Securities and any such Underwriters in connection with the offering and sale of the Registrable Securities covered by and in the manner described in such Prospectus or any amendment or supplement thereto in accordance with applicable law; (d) use commercially reasonable efforts to register or qualify the Registrable Securities under all applicable state securities or blue sky laws of such jurisdictions in the United States of America as any Holder of Registrable Securities covered by a Registration Statement shall reasonably request in writing by the time the applicable Registration Statement is declared effective by the SEC; cooperate with the Holders in connection with any filings required to be made with the National Association of Securities 10 Dealers, Inc.; and do any and all other acts and things that may be reasonably necessary or advisable to enable each Holder to complete the disposition in each such jurisdiction of the Registrable Securities owned by such Holder; provided that neither the Company nor any Guarantor shall be required to (i) qualify as a foreign corporation or other entity or as a dealer in securities in any such jurisdiction where it would not otherwise be required to so qualify, (ii) file any general consent to service of process in any such jurisdiction or (iii) subject itself to taxation in any such jurisdiction if it is not so subject; (e) in the case of a Shelf Registration, notify each Holder of Registrable Securities covered thereby, counsel for such Holders and counsel for the Initial Purchasers promptly and, if requested by any such Holder or counsel, confirm such advice in writing (i) when a Registration Statement has become effective and when any post-effective amendment thereto has been filed and becomes effective, (ii) of any request by the SEC or any state securities authority for amendments and supplements to a Registration Statement and Prospectus or for additional information after the Registration Statement has become effective, (iii) of the issuance by the SEC or any state securities authority of any stop order suspending the effectiveness of a Registration Statement or the initiation of any proceedings for that purpose, (iv) if, between the effective date of a Registration Statement and the closing of any sale of Registrable Securities covered thereby, the representations and warranties of the Company or any Guarantor contained in any underwriting agreement, securities sales agreement or other similar agreement, if any, relating to an offering of such Registrable Securities cease to be true and correct in all material respects or if the Company or any Guarantor receives any notification with respect to the suspension of the qualification of the Registrable Securities for sale in any jurisdiction or the initiation of any proceeding for such purpose, (v) of the happening of any event during the period a Shelf Registration Statement is effective that makes any statement made in such Registration Statement or the related Prospectus untrue in any material respect or that requires the making of any changes in such Registration Statement or Prospectus in order to make the statements therein not misleading and of the delay in filing a Shelf Registration Statement, or any amendment thereto, or of the withholding of efforts to cause such Shelf Registration Statement, or any such amendment thereto, to become effective, pursuant to the third sentence of Section 2(b) and (vi) of any determination by the Company or any Guarantor that a post-effective amendment to a Registration Statement would be appropriate; provided that, in the case of clause (iv), (v) or (vi), with respect to any event, development or transaction that would permit the Company to exercise its rights of delay or withholding of efforts under the third sentence of Section 2(b), the Company shall provide written notice that, in its good faith judgment, such an event, development or transaction has occurred or is pending and that it is exercising its rights of delay or withholding of efforts pursuant to the third sentence of Section 2(b) of this Agreement; provided further that the Company 11 shall not be required to describe such event, development or transaction in the written notice provided. (f) use their commercially reasonable efforts to obtain the withdrawal of any order suspending the effectiveness of a Registration Statement at the earliest possible moment and provide immediate notice to each Holder of the withdrawal of any such order; (g) in the case of a Shelf Registration, furnish to each Holder of Registrable Securities covered thereby, without charge, at least one conformed copy of each Registration Statement and any post-effective amendment thereto (without any documents incorporated therein by reference or exhibits thereto, unless requested); (h) in the case of a Shelf Registration, cooperate with the selling Holders of Registrable Securities covered thereby to facilitate the timely preparation and delivery of certificates representing Registrable Securities to be sold and not bearing any restrictive legends and enable such Registrable Securities to be issued in such denominations and registered in such names (consistent with the provisions of the Indenture) as the selling Holders may reasonably request at least one Business Day prior to the closing of any sale of Registrable Securities; (i) subject to the third sentence of Section 2(b), in the case of a Shelf Registration, upon the occurrence of any event contemplated by Section 3(e)(v) hereof, use their commercially reasonable efforts to prepare and file with the SEC a supplement or post-effective amendment to a Registration Statement or the related Prospectus or any document incorporated therein by reference or file any other required document so that, as thereafter delivered to purchasers of the Registrable Securities, such Prospectus will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; and the Company and the Guarantors shall notify the Holders of Registrable Securities covered by such Shelf Registration to suspend use of the Prospectus as promptly as practicable after the occurrence of such an event, and such Holders hereby agree to suspend use of the Prospectus until the Company and the Guarantors have amended or supplemented the Prospectus to correct such misstatement or omission and expressly agree to maintain the information contained in such notice confidential (except that such information may be disclosed to their counsel) until it has been publicly disclosed by the Company; provided that, with respect to any event, development or transaction that would permit the Company and the Guarantors to exercise their rights of delay or withholding of efforts under the third sentence of Section 2(b), such notice shall state that, in the Company's good faith judgment, such an event, development or transaction has occurred or is pending and that it is exercising its rights of delay or withholding of efforts pursuant to the third sentence of Section 2(b) of 12 this Agreement; provided further that the Company shall not be required to describe such event, development or transaction in such notice. (j) a reasonable time prior to the filing of any Registration Statement, any Prospectus, any amendment to a Registration Statement or amendment or supplement to a Prospectus or of any document that is to be incorporated by reference into a Registration Statement or a Prospectus after initial filing of a Registration Statement, provide copies of such document to the Initial Purchasers and their counsel (and, in the case of a Shelf Registration Statement, to the Holders of Registrable Securities covered thereby and their counsel) and make such of the representatives of the Company and the Guarantors as shall be reasonably requested by the Initial Purchasers or their counsel (and, in the case of a Shelf Registration Statement, the Holders of such Registrable Securities or their counsel) available for discussion of such document; and the Company and the Guarantors shall not, at any time after initial filing of a Registration Statement, file any Prospectus, any amendment of or supplement to a Registration Statement or a Prospectus, or any document that is to be incorporated by reference into a Registration Statement or a Prospectus, of which the Initial Purchasers and their counsel (and, in the case of a Shelf Registration Statement, the Holders of Registrable Securities covered thereby and their counsel) shall not have previously been advised and furnished a copy or to which the Initial Purchasers or their counsel (and, in the case of a Shelf Registration Statement, such Holders or their counsel) shall reasonably object on a timely basis, except for any Registration Statement or amendment thereto or related Prospectus or supplement thereto (a copy of which has been previously furnished as provided in the preceding sentence) which counsel to the Company has advised the Company in writing (with a copy to the objecting Initial Purchasers or Holders, as the case may be) is required to be filed in order to comply with applicable law; (k) obtain a CUSIP number for all Exchange Securities or Registrable Securities, as the case may be, not later than the effective date of a Registration Statement; (l) cause the Indenture to be qualified under the Trust Indenture Act in connection with the registration of the Exchange Securities or Registrable Securities, as the case may be; cooperate with the Trustee and the Holders to effect such changes to the Indenture as may be required for the Indenture to be so qualified in accordance with the terms of the Trust Indenture Act; and execute, and use their reasonable best efforts to cause the Trustee to execute, all documents as may be required to effect such changes and all other forms and documents required to be filed with the SEC to enable the Indenture to be so qualified in a timely manner; (m) in the case of a Shelf Registration, make available for inspection by a representative of the Holders of the Registrable Securities covered thereby (an 13 "Inspector"), any underwriter participating in any disposition pursuant to such Shelf Registration Statement, and attorneys and accountants designated by the Holders, at reasonable times and in a reasonable manner, all pertinent financial and other records, documents and properties of the Company and the Guarantors, and cause the respective officers, directors and employees of the Company and the Guarantors to supply all information reasonably requested by any such Inspector, Underwriter, attorney or accountant in connection with a Shelf Registration Statement; provided that each such representative, Underwriter, attorney or accountant shall agree in writing that it will keep such information confidential and that it will not disclose any of the information that the Company determines, in good faith, to be confidential and notifies them is confidential unless (i) the disclosure of such information is required by law (including as necessary to avoid or correct a material misstatement or material omission in such Registration Statement or Prospectus), (ii) the release of such information is ordered pursuant to a subpoena or other order from a court of competent jurisdiction, or (iii) such information has been made generally available to the public other than by any of such persons or their affiliates; provided, however, that each such representative, underwriter, attorney or accountant shall use commercially reasonable efforts to give prior notice as soon as practicable to the Company of the potential disclosure of any information by such person pursuant to clause (i) or (ii) of this sentence in order to permit the Company to obtain a protective order (or waive the provisions of this paragraph (m)); (n) if reasonably requested by any Holder of Registrable Securities covered by a Registration Statement, promptly incorporate in a Prospectus supplement or post-effective amendment such information with respect to such Holder as such Holder reasonably requests to be included therein and make all required filings of such Prospectus supplement or such post-effective amendment as soon as the Company has received notification of the matters to be incorporated in such filing; and (o) in the case of a Shelf Registration, enter into such customary agreements and take all such other actions in connection therewith (including those requested by the Holders of a majority in principal amount of the Registrable Securities being sold) in order to expedite or facilitate the disposition of such Registrable Securities including, but not limited to, an Underwritten Offering and in such connection, (i) to the extent possible, make such representations and warranties to the Holders and any Underwriters of such Registrable Securities with respect to the business of the Company and its subsidiaries, the Registration Statement, Prospectus and documents incorporated by reference or deemed incorporated by reference, if any, in each case, in form, substance and scope as are customarily made by issuers to underwriters in underwritten offerings and confirm the same if and when requested, (ii) obtain opinions of counsel to the Company and the Guarantors (which counsel and opinions, in form, scope and substance, shall be reasonably satisfactory to the Holders and such Underwriters and their respective counsel) addressed to each selling Holder and Underwriter 14 of Registrable Securities, covering the matters customarily covered in opinions requested in underwritten offerings, (iii) obtain "comfort" letters from the independent certified public accountants of the Company and the Guarantors (and, if necessary, any other certified public accountant of any subsidiary of the Company or any Guarantor, or of any business acquired by the Company or any Guarantor for which financial statements and financial data are or are required to be included in the Registration Statement) addressed to each selling Holder and Underwriter of Registrable Securities, such letters to be in customary form and covering matters of the type customarily covered in "comfort" letters in connection with underwritten offerings and (iv) deliver such documents and certificates as may be reasonably requested by the Holders of a majority in principal amount of the Registrable Securities being sold thereunder or the Underwriters, and which are customarily delivered in underwritten offerings, to evidence the continued validity of the representations and warranties of the Company and the Guarantors made pursuant to clause (i) above and to evidence compliance with any customary conditions contained in an underwriting agreement. In the case of a Shelf Registration Statement, each Holder of Registrable Securities agrees that, upon receipt of any notice from the Company and the Guarantors of the happening of any event of the kind described in Section 3(e)(iii) or 3(e)(v) hereof, such Holder will forthwith discontinue disposition of Registrable Securities pursuant to a Registration Statement until such Holder's receipt of the copies of the supplemented or amended Prospectus contemplated by Section 3(i) hereof and, if so directed by the Company and the Guarantors, such Holder will deliver to the Company and the Guarantors all copies in its possession, other than permanent file copies then in such Holder's possession, of the Prospectus covering such Registrable Securities that is current at the time of receipt of such notice. If the Company and the Guarantors shall give any such notice to suspend the disposition of Registrable Securities pursuant to a Registration Statement, the Company and the Guarantors shall extend the period during which the Registration Statement shall be maintained effective pursuant to this Agreement by the number of days during the period from and including the date of the giving of such notice to and including the date when the Holders shall have received copies of the supplemented or amended Prospectus necessary to resume such dispositions. The Company and the Guarantors may give any such notice only twice during any 365-day period and any such suspensions shall not exceed 30 days for each suspension and there shall not be more than two suspensions in effect during any 365-day period. The Holders of Registrable Securities covered by a Shelf Registration Statement who desire to do so may sell such Registrable Securities in an Underwritten Offering. In any such Underwritten Offering, the investment banker or investment bankers and 15 manager or managers (the "Underwriters") that will administer the offering will be selected by the Majority Holders of the Registrable Securities included in such offering. 4. Participation of Broker-Dealers in Exchange Offer. (a) The Staff of the SEC has taken the position that any broker-dealer that receives Exchange Securities for its own account in the Exchange Offer in exchange for Securities that were acquired by a Participating Broker-Dealer may be deemed to be an "underwriter" within the meaning of the Securities Act and must deliver a prospectus meeting the requirements of the Securities Act in connection with any resale of such Exchange Securities. The Company and the Guarantors understand that it is the Staff's position that if the Prospectus contained in the Exchange Offer Registration Statement includes a plan of distribution containing a statement to the above effect and the means by which Participating Broker-Dealers may resell the Exchange Securities, without naming the Participating Broker-Dealers or specifying the amount of Exchange Securities owned by them, such Prospectus may be delivered by Participating Broker-Dealers to satisfy their prospectus delivery obligation under the Securities Act in connection with resales of Exchange Securities for their own accounts, so long as the Prospectus otherwise meets the requirements of the Securities Act. (b) In light of the above, and notwithstanding the other provisions of this Agreement, the Company and the Guarantors agree to amend or supplement the Prospectus contained in the Exchange Offer Registration Statement, as would otherwise be contemplated by Section 3(i), for a period of up to 180 days after the last Exchange Date (as such period may be extended pursuant to the penultimate paragraph of Section 3 of this Agreement), if reasonably requested by the Initial Purchasers or by one or more Participating Broker-Dealers, in order to expedite or facilitate the disposition of any Exchange Securities by Participating Broker-Dealers consistent with the positions of the Staff recited in Section 4(a) above. The Company and the Guarantors further agree that Participating Broker-Dealers shall be authorized to deliver such Prospectus during such period in connection with the resales contemplated by this Section 4. (c) The Initial Purchasers shall have no liability to the Company, any Guarantor or any Holder with respect to any request that they may make pursuant to Section 4(b) above. 5. Indemnification and Contribution. (a) The Company and each Guarantor, jointly and severally, agree to indemnify and hold harmless each Initial Purchaser and each Holder, their respective affiliates, directors and officers and each person, if any, who controls any Initial Purchaser or any Holder within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, from and against any and all losses, claims, damages and liabilities (including, without limitation, reasonable 16 legal fees and other expenses incurred in connection with any suit, action or proceeding or any claim asserted, as such fees and expenses are incurred), joint or several, that arise out of, or are based upon, any untrue statement or alleged untrue statement of a material fact contained in any Registration Statement or any Prospectus or any omission or alleged omission to state therein a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, except (i) insofar as such losses, claims, damages or liabilities arise out of, or are based upon, any untrue statement or omission or alleged untrue statement or omission made in reliance upon and in conformity with any information relating to any Initial Purchaser or any Holder furnished to the Company in writing by any Initial Purchaser or any selling Holder expressly for use therein or (ii) that with respect to any such untrue statement in or omission from or alleged untrue statement in or omission from any preliminary Prospectus, the indemnity provided in this Section 5(a) shall not inure to the benefit of any Holder from whom the person asserting any such loss, claim, damage or liability received Registrable Securities or Exchange Securities to the extent that such loss, claim, damage or liability results from the fact that (A) such Holder was required under the Securities Act to deliver a copy of the final Prospectus to such person at or prior to the written confirmation of the sale of Registrable Securities or Exchange Securities to such person, (B) a copy of the final Prospectus was not so sent or given to such person at or prior to the written confirmation of the sale of such Registrable Securities or Exchange Securities to such person and (C) such untrue statement in or omission from or alleged untrue statement in or omission from the preliminary Prospectus was corrected in the final Prospectus unless, in either case, such failure to deliver the final Prospectus was a result of non-compliance by the Company or any of the Guarantors with Section 2(b) or 3 hereof. In connection with any Underwritten Offering permitted by Section 3, the Company and the Guarantors, jointly and severally, will also indemnify the Underwriters, if any, selling brokers, dealers and similar securities industry professionals participating in the distribution, their respective affiliates and each Person who controls such Persons (within the meaning of the Securities Act and the Exchange Act) to the same extent as provided above with respect to the indemnification of the Holders, if requested in connection with any Registration Statement. (b) Each Holder agrees, severally and not jointly, to indemnify and hold harmless the Company, the Guarantors, the Initial Purchasers and the other selling Holders, their respective affiliates, the directors of the Company and the Guarantors, each officer of the Company and the Guarantors who signed the Registration Statement and each Person, if any, who controls the Company, the Guarantors, any Initial Purchaser and any other selling Holder within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act to the same extent as the indemnity set forth in paragraph (a) above, but only with respect to any losses, claims, damages or liabilities that arise out of, or are based upon, any untrue statement or omission or alleged untrue 17 statement or omission made in reliance upon and in conformity with any information relating to such Holder furnished to the Company in writing by such Holder expressly for use in any Registration Statement or any Prospectus. (c) If any suit, action, proceeding (including any governmental or regulatory investigation), claim or demand shall be brought or asserted against any Person in respect of which indemnification may be sought pursuant to either paragraph (a) or (b) above, such Person (the "Indemnified Person") shall promptly notify the Person against whom such indemnification may be sought (the "Indemnifying Person") in writing; provided that the failure to notify the Indemnifying Person shall not relieve it from any liability that it may have under this Section 5 except to the extent that it has been materially prejudiced (through the forfeiture of substantive rights or defenses) by such failure; and provided, further, that the failure to notify the Indemnifying Person shall not relieve it from any liability that it may have to an Indemnified Person otherwise than under this Section 5. If any such proceeding shall be brought or asserted against an Indemnified Person and it shall have notified the Indemnifying Person thereof, the Indemnifying Person shall retain counsel reasonably satisfactory to the Indemnified Person to represent the Indemnified Person and any others entitled to indemnification pursuant to this Section 5 that the Indemnifying Person may designate in such proceeding and shall pay the reasonable fees and expenses of such counsel related to such proceeding, as incurred. In any such proceeding, any Indemnified Person shall have the right to retain its own counsel, but the reasonable fees and expenses of such counsel shall be at the expense of such Indemnified Person unless (i) the Indemnifying Person and the Indemnified Person shall have mutually agreed to the contrary; (ii) the Indemnifying Person has failed within a reasonable time to retain counsel reasonably satisfactory to the Indemnified Person; (iii) the Indemnified Person shall have reasonably concluded that there may be legal defenses available to it that are different from or in addition to those available to the Indemnifying Person; or (iv) the named parties in any such proceeding (including any impleaded parties) include both the Indemnifying Person and the Indemnified Person and representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them. It is understood and agreed that the Indemnifying Person shall not, in connection with any proceeding or related proceeding in the same jurisdiction, be liable for the reasonable fees and expenses of more than one separate firm (in addition to any local counsel) for all Indemnified Persons, and that all such fees and expenses shall be reimbursed as they are incurred. Any such separate firm (x) for any Initial Purchaser, its affiliates, directors and officers and any control Persons of such Initial Purchaser shall be designated in writing by J.P. Morgan Securities Inc., (y) for any other Holders, their affiliates, directors and officers and any control Persons of such Holders shall be designated in writing by the Majority Holders and (z) in all other cases shall be designated in writing by the Company. The Indemnifying Person shall not be liable for any settlement of any proceeding effected without its written consent, but if settled with such consent or if there be a final judgment for the plaintiff, the 18 Indemnifying Person agrees to indemnify each Indemnified Person from and against any loss or liability by reason of such settlement or judgment to the extent provided herein and therein. Notwithstanding the foregoing sentence, if at any time an Indemnified Person shall have requested that an Indemnifying Person reimburse the Indemnified Person for reasonable fees and expenses of counsel as contemplated by this paragraph, the Indemnifying Person shall be liable for any settlement of any proceeding effected without its written consent if (i) such settlement is entered into more than 60 days after receipt by the Indemnifying Person of such request and (ii) the Indemnifying Person shall not have reimbursed the Indemnified Person in accordance with such request prior to the date of such settlement. No Indemnifying Person shall, without the written consent of the Indemnified Person, effect any settlement of any pending or threatened proceeding in respect of which any Indemnified Person is or could have been a party and indemnification could have been sought hereunder by such Indemnified Person, unless such settlement (A) includes an unconditional release of such Indemnified Person, in form and substance reasonably satisfactory to such Indemnified Person, from all liability on claims that are the subject matter of such proceeding and (B) does not include any statement as to or any admission of fault, culpability or a failure to act by or on behalf of any Indemnified Person. (d) If the indemnification provided for in paragraphs (a) and (b) above is unavailable to an Indemnified Person or insufficient in respect of any losses, claims, damages or liabilities referred to therein, then each Indemnifying Person under such paragraph, in lieu of indemnifying such Indemnified Person thereunder, shall contribute to the amount paid or payable by such Indemnified Person as a result of such losses, claims, damages or liabilities (i) in such proportion as is appropriate to reflect the relative benefits received by the Company and the Guarantors from the offering of the Securities and the Exchange Securities, on the one hand, and by the Holders from receiving Securities or Exchange Securities registered under the Securities Act, on the other hand, or (ii) if the allocation provided by clause (i) is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) but also the relative fault of the Company and the Guarantors on the one hand and the Holders on the other in connection with the statements or omissions that resulted in such losses, claims, damages or liabilities, as well as any other relevant equitable considerations. The relative fault of the Company and the Guarantors on the one hand and the Holders on the other shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company and the Guarantors or by the Holders and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. (e) The Company, the Guarantors and the Holders agree that it would not be just and equitable if contribution pursuant to this Section 5 were determined by 19 pro rata allocation (even if the Holders were treated as one entity for such purpose) or by any other method of allocation that does not take account of the equitable considerations referred to in paragraph (d) above. The amount paid or payable by an Indemnified Person as a result of the losses, claims, damages and liabilities referred to in paragraph (d) above shall be deemed to include, subject to the limitations set forth above, any reasonable legal or other expenses incurred by such Indemnified Person in connection with any such action or claim. Notwithstanding the provisions of this Section 5, in no event shall a Holder be required to contribute any amount in excess of the amount by which the total price at which the Securities or Exchange Securities sold by such Holder exceeds the amount of any damages that such Holder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation. (f) The remedies provided for in this Section 5 are not exclusive and shall not limit any rights or remedies that may otherwise be available to any Indemnified Person at law or in equity. (g) The indemnity and contribution provisions contained in this Section 5 shall remain operative and in full force and effect regardless of (i) any termination of this Agreement, (ii) any investigation made by or on behalf of the Initial Purchasers or any Holder, their respective affiliates or any Person controlling any Initial Purchaser or any Holder, or by or on behalf of the Company or the Guarantors, their respective affiliates or the officers or directors of or any Person controlling the Company or the Guarantors, (iii) acceptance of any of the Exchange Securities and (iv) any sale of Registrable Securities pursuant to a Shelf Registration Statement. 6. General. (a) No Inconsistent Agreements. The Company and the Guarantors, jointly and severally, represent, warrant and agree that (i) the rights granted to the Holders hereunder do not in any way conflict with and are not inconsistent with the rights granted to the holders of any other outstanding securities issued or guaranteed by the Company or any Guarantor under any other agreement and (ii) neither the Company nor any Guarantor has entered into, or on or after the date of this Agreement will enter into, any agreement that is inconsistent with the rights granted to the Holders of Registrable Securities in this Agreement or otherwise conflicts with the provisions hereof. (b) Amendments and Waivers. The provisions of this Agreement, including the provisions of this sentence, may not be amended, modified or supplemented, 20 and waivers or consents to departures from the provisions hereof may not be given unless the Company and the Guarantors have obtained the written consent of Holders of at least a majority in aggregate principal amount of the outstanding Registrable Securities affected by such amendment, modification, supplement, waiver or consent; provided that no amendment, modification, supplement, waiver or consent to any departure from the provisions of Section 5 hereof shall be effective as against any Holder of Registrable Securities unless consented to in writing by such Holder. Any amendments, modifications, supplements, waivers or consents pursuant to this Section 6(b) shall be by a writing executed by each of the parties hereto. (c) Notices. All notices and other communications provided for or permitted hereunder shall be made in writing by hand-delivery, registered first-class mail, telex, telecopier, or any courier guaranteeing overnight delivery (i) if to a Holder, at the most current address given by such Holder to the Company by means of a notice given in accordance with the provisions of this Section 6(c), which address initially is, with respect to the Initial Purchasers, the address set forth in the Purchase Agreement; (ii) if to the Company and the Guarantors, initially at the Company's address set forth in the Purchase Agreement and thereafter at such other address, notice of which is given in accordance with the provisions of this Section 6(c); and (iii) to such other persons at their respective addresses as provided in the Purchase Agreement and thereafter at such other address, notice of which is given in accordance with the provisions of this Section 6(c). All such notices and communications shall be deemed to have been duly given at the time delivered by hand, if personally delivered; five Business Days after being deposited in the mail, postage prepaid, if mailed; when answered back, if telexed; when receipt is acknowledged, if telecopied; and on the next Business Day if timely delivered to an air courier guaranteeing overnight delivery. Copies of all such notices, demands or other communications shall be concurrently delivered by the Person giving the same to the Trustee, at the address specified in the Indenture. (d) Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the successors, assigns and transferees of each of the parties, including, without limitation and without the need for an express assignment, subsequent Holders; provided that nothing herein shall be deemed to permit any assignment, transfer or other disposition of Registrable Securities in violation of the terms of the Purchase Agreement or the Indenture. If any transferee of any Holder shall acquire Registrable Securities in any manner, whether by operation of law or otherwise, such Registrable Securities shall be held subject to all the terms of this Agreement, and by taking and holding such Registrable Securities such Person shall be conclusively deemed to have agreed to be bound by and to perform all of the terms and provisions of this Agreement and such Person shall be entitled to receive the benefits hereof. The Initial Purchasers (in their capacity as Initial Purchasers) shall have no liability or obligation to the Company or the Guarantors with respect to any failure by a Holder to comply with, 21 or any breach by any Holder of, any of the obligations of such Holder under this Agreement. (e) Purchases and Sales of Securities. The Company and the Guarantors shall not, and shall use their reasonable best efforts to cause their affiliates (as defined in Rule 405 under the Securities Act) not to, purchase and then resell or otherwise transfer any Registrable Securities. (f) Third Party Beneficiaries. Each Holder shall be a third party beneficiary to the agreements made hereunder between the Company and the Guarantors, on the one hand, and the Initial Purchasers, on the other hand, and shall have the right to enforce such agreements directly to the extent it deems such enforcement necessary or advisable to protect its rights or the rights of other Holders hereunder. (g) Counterparts. This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. (h) Headings. The headings in this Agreement are for convenience of reference only, are not a part of this Agreement and shall not limit or otherwise affect the meaning hereof. (i) Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York. (j) Miscellaneous. This Agreement contains the entire agreement between the parties relating to the subject matter hereof and supersedes all oral statements and prior writings with respect thereto. If any term, provision, covenant or restriction contained in this Agreement is held by a court of competent jurisdiction to be invalid, void or unenforceable or against public policy, the remainder of the terms, provisions, covenants and restrictions contained herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated. The Company, the Guarantors and the Initial Purchasers shall endeavor in good faith negotiations to replace the invalid, void or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, void or unenforceable provisions. 22 IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above. TENNECO AUTOMOTIVE INC. By: --------------------------------------- Name: Title: Tenneco Automotive Operating Company INC. By: --------------------------------------- Name: Title: The Pullman Company By: --------------------------------------- Name: Title: Clevite Industries Inc. By: --------------------------------------- Name: Title: Tenneco Global Holdings Inc. By: --------------------------------------- Name: Title: 23 TMC Texas Inc. By: --------------------------------------- Name: Title: Tenneco International Holding Corp. By: --------------------------------------- Name: Title: Confirmed and accepted as of the date first above written: J.P. MORGAN SECURITIES INC. For itself and on behalf of the several Initial Purchasers By: ----------------------------- Authorized Signatory 24 Schedule 1 List of Subsidiary Guarantors Tenneco Automotive Operating Company Inc. Delaware The Pullman Company Delaware Clevite Industries Inc. Delaware Tenneco Global Holdings Inc. Delaware TMC Texas Inc. Delaware Tenneco International Holding Corp. Delaware Schedule 2 Initial Purchasers J.P. Morgan Securities Inc. Morgan Stanley & Co. Incorporated Banc of America Securities LLC Citigroup Global Markets Inc. Credit Suisse First Boston LLC Deutsche Bank Securities Inc. BNY Capital Markets, Inc. Comerica Securities, Inc. Commerzbank Capital Markets Corp. Scotia Capital (USA) Inc. SG Cowen Securities Corporation TD Securities Inc. EX-4.7 8 c78654exv4w7.txt INTERCREDITOR AGREEMENT INTERCREDITOR AGREEMENT INTERCREDITOR AGREEMENT, dated as of June 19, 2003, among JPMORGAN CHASE BANK, as Credit Agent, WACHOVIA BANK, NATIONAL ASSOCIATION, as Trustee and as Collateral Agent, and TENNECO AUTOMOTIVE, INC. W I T N E S S E T H WHEREAS, the Company (such term and each other capitalized term used herein having the meanings set forth in Section 1 below), certain lenders (including lenders acting as syndication agent and co-documentation agents), and JPMorgan Chase Bank, as administrative agent and collateral agent, are parties to the Credit Agreement dated as of September 30, 1999, as amended to the date hereof (as further amended, supplemented or otherwise modified from time to time in a manner consistent with the definition of "Credit Agreement" below, the "Existing Credit Agreement"); WHEREAS, the Obligations of the Company under the Credit Agreement are secured (together with certain other obligations) by various assets of the Company and certain Subsidiaries thereof; WHEREAS, the Company, certain Subsidiaries of the Company and the Trustee have entered into the Indenture dated as of June 19, 2003 (as amended, supplemented or otherwise modified from time to time, the "Indenture"), pursuant to which the Company intends to issue the Notes; WHEREAS, the Company and certain lenders under the Existing Credit Agreement have entered into the Fourth Amendment dated as of May 29, 2003 (the "Fourth Amendment"), to the Existing Credit Agreement that, among other things, permits, subject to certain terms and conditions, (a) the issuance of the Notes by the Company and (b) a second priority Lien on the Common Collateral to secure the Second Priority Claims; and WHEREAS, it is a condition precedent to the effectiveness of the Fourth Amendment that the parties hereto enter into this Agreement; NOW, THEREFORE, in consideration of the foregoing, the mutual covenants and obligations herein set forth and for other good and valuable consideration, the sufficiency and receipt of which are hereby acknowledged, the parties hereto, intending to be legally bound, hereby agree as follows: SECTION 1. (a) Definitions. As used in this Agreement, the following terms have the meanings specified below: "Agreement" means this Agreement, as amended, renewed, extended, supplemented or otherwise modified from time to time in accordance with the terms hereof. 2 "Bankruptcy Law" means Title 11 of the United States Code and any similar Federal, state or foreign law for the relief of debtors. "Business Day" means any day other than a Saturday, a Sunday or a day that is a legal holiday under the laws of the State of New York or on which banking institutions in the State of New York are required or authorized by law or other governmental action to close. "Cash Management Obligations " means, with respect to any Person, all obligations of such Person in respect of overdrafts and related liabilities owed to any other Person that arise from treasury, depositary or cash management services, including in connection with any automated clearing house transfers of funds, or any similar transactions. "Common Collateral" means all of the assets of any Grantor, whether real, personal or mixed, constituting both First Priority Collateral and Second Priority Collateral. "Company" means Tenneco Automotive Inc. "Comparable Second Priority Collateral Document" means, in relation to any Common Collateral subject to any Lien created under any First Priority Collateral Document, that Second Priority Collateral Document which creates a Lien on the same Common Collateral, granted by the same Grantor. "Credit Agent" means (i) JPMorgan Chase Bank in its capacity as collateral agent under the Existing Credit Agreement and the Loan Documents (as defined therein) and also includes its successors thereunder as collateral agent for the First Priority Lenders (or if there is more than one agent, a majority of them) under the First Priority Documents exercising substantially the same rights and powers, or if there is no acting Credit Agent under the Existing Credit Agreement, the Required Lenders or, if designated by the Credit Agent under the Existing Credit Agreement, the lead agent under any other First-Lien Credit Facility; and (ii) if the Existing Credit Agreement is no longer the Senior Credit Agreement, the financial institution then acting as lead agent or collateral agent (in its capacity as such) under the Senior Credit Agreement and the related loan documents and also includes its successors thereunder as lead agent or collateral agent for the First Priority Lenders thereunder (or if there is more than one agent, a majority of them) under such First Priority Documents exercising substantially the same rights and powers, or if there is no acting lead agent or collateral agent under the Senior Credit Agreement, First Priority Lenders thereunder holding more than 50% of the aggregate outstanding term Indebtedness and revolving credit commitments thereunder. "Credit Agreement" means the Existing Credit Agreement, together with any documents evidencing or governing any Obligations relating thereto (including, without limitation, any guarantee agreements and security documents), in each case as such agreements may be amended (including any amendment and restatement thereof), supplemented or otherwise modified from time to time, including any agreement 3 extending the maturity of, refinancing, replacing or otherwise restructuring (including increasing the amount of available borrowings thereunder (provided that such increase in borrowings is permitted by Section 4.03 of the Indenture) or adding Subsidiaries as additional borrowers or guarantors thereunder) all or any portion of the Indebtedness under such agreement or any successor or replacement agreement and whether by the same or any other agent, lender or group of lenders. Notwithstanding the foregoing, the Notes and the Indenture shall not constitute a Credit Agreement. "Credit Facilities" means one or more debt facilities (including the Credit Agreement) or commercial paper facilities providing for revolving credit loans, term loans, receivables financing (including through the sale of receivables to lenders or to special purpose entities formed to borrow from lenders against such receivables) or letters of credit, or any debt securities or other form of debt financing (including convertible or exchangeable debt instruments), in each case, as amended, supplemented, modified, extended, renewed, restated or refunded in whole or in part from time to time. "Designated Second Priority Agent" means at any time the Trustee or such other Second Priority Agent as shall be designated by all Second Priority Agents to act as Designated Second Priority Agent, as such other Second Priority Agent shall be identified in a certificate executed by all Second Priority Agents and delivered to the Administrative Agent. "Discharge of First Priority Claims" means, except to the extent otherwise provided in Section 5.6, payment in full in cash of (a) the principal of and interest and premium, if any, on all Indebtedness outstanding under the First-Lien Credit Facilities or, with respect to letters of credit outstanding thereunder, delivery of cash collateral or backstop letters of credit in respect thereof in compliance with such First-Lien Credit Facilities, as applicable, in each case after or concurrently with termination of all commitments to extend credit thereunder and (b) any other First Priority Claims that are due and payable or otherwise accrued and owing at or prior to the time such principal and interest are paid. "Existing Credit Agreement" has the meaning set forth in the recitals hereto. "First-Lien Credit Facilities" means (a) the Credit Facilities provided pursuant to the Credit Agreement and (b) any other Credit Facility, that, in the case of both clauses (a) and (b), is secured by a Lien permitted by clause (B) of Section 4.15 of the Indenture. "First Priority Cash Management Obligations" means any Cash Management Obligations secured by any Common Collateral under the same First Priority Collateral Documents that secure Obligations under the Senior Credit Agreement. "First Priority Claims" means (a) all Obligations under the Credit Agreement, (b) all Obligations under one or more First-Lien Credit Facilities (other than the Credit Facilities provided pursuant to the Credit Agreement), the Indebtedness under each of which is designated by the Company as "First Priority Claims" for purposes of the Indenture, provided that the First Priority Lenders under each First-Lien Credit Facility 4 then in effect have consented to such designation pursuant to the provisions of the First Priority Documents then in effect, (c) all other Obligations of the Company or any other Grantor under the First Priority Documents, including all First Priority Hedging Obligations and First Priority Cash Management Obligations and (d) all Future Other First-Lien Obligations. Except as provided in the last sentence of this definition, any Obligations described in the preceding sentence shall constitute First Priority Claims only to the extent such Obligations are permitted pursuant to the Indenture. First Priority Claims shall include all interest accrued or accruing (or which would, absent the commencement of an Insolvency or Liquidation Proceeding, accrue) after the commencement of an Insolvency or Liquidation Proceeding in accordance with and at the rate specified in the relevant First Priority Document whether or not the claim for such interest is allowed as a claim in such Insolvency or Liquidation Proceeding. To the extent any payment with respect to the First Priority Claims (whether by or on behalf of any Grantor, as proceeds of security, enforcement of any right of set-off or otherwise) is declared to be fraudulent or preferential in any respect, set aside or required to be paid to a debtor in possession, trustee, receiver or similar Person, then the obligation or part thereof originally intended to be satisfied shall be deemed to be reinstated and outstanding as if such payment had not occurred. Notwithstanding the foregoing the Notes and related Obligations will not constitute First Priority Claims and Collateral therefor will not constitute First Priority Collateral even if any proceeds of the Notes are used to repay Obligations under the Credit Agreement. Notwithstanding anything to the contrary contained in this definition, any Obligation under a First Priority Document (including any Cash Management Obligations or Hedging Obligations) shall constitute a "First Priority Claim" if the Credit Agent or the relevant First Priority Lender or First Priority Lenders under such First Priority Document shall have received a written representation from the Company in or in connection with such First Priority Document that such Obligation constitutes a "First Priority Claim" under and as defined in the Indenture (whether or not such Obligation is at any time determined not to have been permitted to be incurred under the Indenture). "First Priority Collateral" means all of the assets of any Grantor, whether real, personal or mixed, with respect to which a Lien is granted or held as security for any First Priority Claim. "First Priority Collateral Documents" means any agreement, document or instrument pursuant to which a Lien is granted securing any First Priority Claims or under which rights or remedies with respect to such Liens are governed. "First Priority Documents" means the Credit Agreement, the First Priority Collateral Documents, and each of the other agreements, documents and instruments (including each agreement, document or instrument providing for or evidencing a First Priority Hedging Obligation or First Priority Cash Management Obligation) providing for or evidencing any Obligation under the Credit Agreement or any other First-Lien Credit Facility or any Future Other First-Lien Obligations, and any other related document or instrument executed or delivered pursuant to any First Priority Document at any time or otherwise evidencing any First Priority Claims. 5 "First Priority Hedging Obligations" means any Hedging Obligations secured by any Common Collateral under the same First Priority Collateral Documents that secure Obligations under the Senior Credit Agreement. "First Priority Lenders" means the Persons holding First Priority Claims, including the Credit Agent. "First Priority Liens"means all Liens that secure First Priority Claims "Future Other First-Lien Obligations" means all Obligations of the Company or any other Grantor in respect of Cash Management Obligations or Hedging Obligations that are designated by the Company as "First Priority Claims" for purposes of the Indenture (other than any First Priority Cash Management Obligations and First Priority Hedging Obligations); provided that the required lenders (however denominated) under any Senior Credit Agreement then in effect have consented to such designation. "Grantors" means each of the Company and the Subsidiaries that has executed and delivered a First Priority Collateral Document or a Second Priority Collateral Document. "Hedging Obligations" means, with respect to any Person, the obligations of such Person in respect of (a) interest rate or currency swap agreements, interest rate or currency cap agreements, interest rate or currency collar agreements, or (b) other agreements or arrangements designed to protect such Person against fluctuations in interest rates and/or currency exchange rates. "Indebtedness" means and includes all Obligations that constitute "Indebtedness" within the meaning of the Indenture or the Senior Credit Agreement. "Indenture" has the meaning set forth in the recitals hereto. "Insolvency or Liquidation Proceeding" means (a) any voluntary or involuntary case or proceeding under any Bankruptcy Law with respect to any Grantor, (b) any other voluntary or involuntary insolvency, reorganization or bankruptcy case or proceeding, or any receivership, liquidation, reorganization or other similar case or proceeding with respect to any Grantor or with respect to any of their respective assets, (c) any liquidation, dissolution, reorganization or winding up of any Grantor whether voluntary or involuntary and whether or not involving insolvency or bankruptcy or (d) any assignment for the benefit of creditors or any other marshalling of assets and liabilities of any Grantor. "Lien" means, with respect to any asset, (a) any mortgage, deed of trust, lien, pledge, hypothecation, encumbrance, charge or security interest in, on or of such asset, (b) the interest of a vendor or a lessor under any conditional sale agreement, capital lease or title retention agreement (or any financing lease having substantially the same economic effect as any of the foregoing) relating to such asset and (c) in the case of securities, any purchase option, call or similar right of a third party with respect to such securities. 6 "Noteholders" means the Persons holding Notes from time to time. "Notes" means (a) the 10 1/4% Senior Secured Notes due 2013 to be issued by the Company, (b) the exchange notes issued in exchange therefor as contemplated by the Registration Rights Agreement dated as of June 19, 2003, among the Company and the Initial Purchasers (as defined therein) and (c) any additional notes issued under the Indenture by the Company, to the extent permitted by the Indenture and the Senior Credit Agreement. "Obligations" means any and all obligations with respect to the payment of (a) any principal of or interest (including interest accruing on or after the commencement of any Insolvency or Liquidation Proceeding, whether or not a claim for post-filing interest is allowed in such proceeding) or premium on any Indebtedness, including any reimbursement obligation in respect of any letter of credit, (b) any fees, indemnification obligations, damages, expense reimbursement obligations or other liabilities payable under the documentation governing any Indebtedness, (c) any obligation to post cash collateral in respect of letters of credit and any other obligations or (d) any Cash Management Obligations or Hedging Obligations. "Other Second-Lien Obligations" has the meaning set forth in the Indenture; provided that (a) no Obligations with respect to any Indebtedness shall be an "Other Second-Lien Obligation" unless such Obligation is permitted by the Senior Credit Agreement and is secured by a Lien permitted by the Senior Credit Agreement and (b) such Obligations (except for the Notes and related Obligations) are designated by the Company as "Other Second-Lien Obligations" for purposes of the Indenture. "Person" means any natural person, corporation, limited liability company, trust, joint venture, association, company, partnership, entity or other party, including any government and any political subdivision, agency or instrumentality thereof. "Pledged Collateral" means (a) the "Pledged Securities" under, and as defined in, the Second Priority Security Agreement, and (b) any other Common Collateral in the possession of the Credit Agent (or its agents or bailees), to the extent that possession thereof is necessary to perfect a Lien thereon under the Uniform Commercial Code. "Recovery" has the meaning set forth in Section 6.5 hereof. "Required Lenders" means, with respect to any amendment or modification of the Senior Credit Agreement, or any termination or waiver of any provision of the Senior Credit Agreement, or any consent or departure by the Company or any of the Subsidiaries therefrom, those First Priority Lenders the approval of which is required to approve such amendment or modification, termination or waiver or consent or departure. "Second Priority Agent" means each of the Trustee and each other Person which acts as trustee, lead agent, administrative agent or collateral agent for any Second Priority Lenders and, if any Second Priority Claims do not have a trustee, lead agent, administrative agent or collateral agent, the representative appointed by the holders of at least a majority of such Second Priority Claims. 7 "Second Priority Claims" means all Obligations in respect of the Notes or arising under the Second Priority Documents or any of them. Second Priority Claims shall include all interest accrued (or which would, absent the commencement of an Insolvency or Liquidation Proceeding, accrue) after the commencement of an Insolvency or Liquidation Proceeding in accordance with and at the rate specified in the relevant Second Priority Document whether or not the claim for such interest is allowed as a claim in such Insolvency or Liquidation Proceeding. To the extent any payment with respect to the Second Priority Claims (whether by or on behalf of any Grantor, as proceeds of security, enforcement of any right of setoff or otherwise) is declared to be fraudulent or preferential in any respect, set aside or required to be paid to a debtor in possession, trustee, receiver or similar Person, then the obligation or part thereof originally intended to be satisfied shall be deemed to be reinstated and outstanding as if such payment had not occurred. "Second Priority Collateral" means all of the assets of any Grantor, whether real, personal or mixed, with respect to which a Lien is granted or held as security for any Second Priority Claim. "Second Priority Collateral Documents" means the Second Priority Security Agreement, the Second Priority Mortgages and any other document or instrument pursuant to which a Lien is granted by any Grantor to secure any Second Priority Claims or under which rights or remedies with respect to any such Lien are governed. "Second Priority Documents" means (a) the Indenture, the Notes, the Second Priority Collateral Documents and each of the other agreements, documents or instruments evidencing or governing any Other Second-Lien Obligations and (b) any other related documents or instruments executed and delivered pursuant to any Second Priority Document described in clause (a) above evidencing or governing any Obligations thereunder. "Second Priority Lenders" means the Persons holding Second Priority Claims, including the Noteholders, the Trustee, the other Second Priority Agents, if any, and any other agent, representative or Second Priority Agent for any of the foregoing. "Second Priority Mortgages" means a collective reference to each mortgage, deed of trust, deed to secure debt and any other document or instrument under which any Lien on real property owned by any Grantor is granted to secure any Second Priority Claims or under which rights or remedies with respect to any such Liens are governed. "Second Priority Security Agreement" means the Collateral Agreement, dated as of June 19, 2003, among the Company, the other Grantors and the Trustee. "Senior Credit Agreement" means the Existing Credit Agreement; provided that if at any time a Discharge of First Priority Claims occurs with respect to the Existing Credit Agreement (without giving effect to Section 5.6), then, to the extent provided in Section 5.6, the term "Senior Credit Agreement" means the First-Lien Credit Facility designated 8 by the Company as the "Senior Credit Agreement" in accordance with such Section (it being understood that only one Senior Credit Agreement may be in effect at any time). "Subsidiary" means any "Subsidiary" of the Company, as defined in the Indenture or the Senior Credit Agreement. "Trustee" means Wachovia Bank, National Association, in its capacity as trustee under the Indenture and collateral agent under the Second Priority Collateral Documents, and also includes its successors hereunder as collateral agent or trustee for the Noteholders. "Uniform Commercial Code" or "UCC" means the Uniform Commercial Code as from time to time in effect in the State of New York. (b) Terms Generally. The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words "include", "includes" and "including" shall be deemed to be followed by the phrase "without limitation". The word "will" shall be construed to have the same meaning and effect as the word "shall". Unless the context requires otherwise (i) any definition of or reference to any agreement, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified, (ii) any reference herein to any Person shall be construed to include such Person's successors and assigns, (iii) the words "herein", "hereof" and "hereunder", and words of similar import, shall be construed to refer to this Agreement in its entirety and not to any particular provision hereof, (iv) all references herein to Sections shall be construed to refer to Sections of this Agreement and (v) the words "asset" and "property" shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts and contract rights. When used in reference to a Second Priority Agent, the phrase "applicable Second Priority Lenders" shall mean the Second Priority Lenders for whom such Second Priority Agent acts as agent, trustee or representative; the phrase "applicable Second Priority Document" means the Second Priority Documents under which such Second Priority Agent acts as agent, trustee or representative; and the phrase "applicable Second Priority Claims" means the Second Priority Claims of such Second Priority Agent and the Second Priority Lenders for whom it acts as agent, trustee or representative. SECTION 2. Lien Priorities 2.1 Subordination. Notwithstanding the date, manner or order of grant, attachment or perfection of any Liens granted to the Second Priority Agents or the Second Priority Lenders on the Common Collateral or of any Liens granted to the Credit Agent or the First Priority Lenders on the Common Collateral and notwithstanding any provision of the UCC or any other applicable law or the Second Priority Documents or the First Priority Documents or any other circumstance whatsoever, each Second Priority Agent, on behalf of itself and the applicable Second Priority Lenders, hereby agrees that: (a) any Lien on the Common Collateral securing any First Priority Claims now or hereafter held by or on behalf of the Credit Agent or any First Priority Lenders or any agent or trustee therefor shall be senior in all respects and prior 9 to any Lien on the Common Collateral securing any of the Second Priority Claims; and (b) any Lien on the Common Collateral now or hereafter held by or on behalf of any Second Priority Agent or any Second Priority Lenders or any agent or trustee therefor regardless of how acquired, whether by grant, statute, operation of law, subrogation or otherwise, shall be junior and subordinate in all respects to all Liens on the Common Collateral securing any First Priority Claims. All Liens on the Common Collateral securing any First Priority Claims shall be and remain senior in all respects and prior to all Liens on the Common Collateral securing any Second Priority Claims for all purposes, whether or not such Liens securing any First Priority Claims are subordinated to any Lien securing any other obligation of the Company, any other Grantor or any other Person. 2.2 Prohibition on Contesting Liens. Each of the Second Priority Agents, for itself and on behalf of each applicable Second Priority Lender, and the Credit Agent, for itself and on behalf of each First Priority Lender it represents, agrees that it shall not (and hereby waives any right to) contest or support any other Person in contesting, in any proceeding (including any Insolvency or Liquidation Proceeding), the priority, validity or enforceability of a Lien held by or on behalf of any of the First Priority Lenders in the First Priority Collateral or by or on behalf of any of the Second Priority Lenders in the Common Collateral, as the case may be; provided that nothing in this Agreement shall be construed to prevent or impair the rights of the Credit Agent or any First Priority Lender to enforce this Agreement, including the priority of the Liens securing the First Priority Claims as provided in Section 2.1. 2.3 No New Liens. So long as the Discharge of First Priority Claims has not occurred, (a) the parties hereto agree that, after the date hereof, if any Second Priority Agent shall hold any Lien on any assets of the Company or any other Grantor securing any Second Priority Obligations that are not also subject to the first-priority Lien of the Credit Agent under the First Priority Documents, such Second Priority Agent, upon demand by the Credit Agent or the Company, will either release such Lien or assign it to the Credit Agent as security for the First Priority Claims (and such Second Priority Agent may retain a subordinated Lien securing Second Priority Claims in accordance with this Agreement if so assigned), and (b) the Company agrees that it will not, and will not permit any Subsidiary to, grant or permit to exist any Lien on any assets of the Company or any of its Subsidiaries to secure any Second Priority Claim unless a perfected prior Lien on the same assets has been granted to secure the First Priority Claims. 2.4 Effectiveness. No First Lien Lender or Second Lien Lender shall have any rights or obligations under this Agreement unless it (or its trustee, administrative agent or collateral agent on its behalf) shall have, at the request of the then Credit Agent under the Senior Credit Agreement, executed and delivered to such Credit Agent an agreement to be bound by the provisions of this Agreement in form and at such time reasonably satisfactory to such Credit Agent, and no Obligations (other than Obligations in respect of the Existing Credit Agreement and related First Priority Documents and Obligations in respect of the Notes and related Second Priority Documents) shall be deemed First Priority Claims or Second Priority Claims unless such joinder is executed and delivered in the form requested by such Credit Agent. SECTION 3. Enforcement 3.1 Exercise of Remedies 10 (a) So long as the Discharge of First Priority Claims has not occurred, whether or not any Insolvency or Liquidation Proceeding has been commenced by or against the Company or any other Grantor, (i) the Second Priority Agents and the Second Priority Lenders will not exercise or seek to exercise any rights or remedies (including set-off) with respect to any Common Collateral, institute any action or proceeding with respect to such rights or remedies (including any action of foreclosure), contest, protest or object to any foreclosure proceeding or action brought by the Credit Agent or any First Priority Lender, the exercise of any right under any lockbox agreement, control agreement, blocked account agreement, landlord waiver or bailee's letter or similar agreement or arrangement to which any Second Priority Agent or any Second Priority Lender is a party, or any other exercise by any such Person, of any rights and remedies relating to the Common Collateral under the First Priority Documents or otherwise, or object to the forbearance by the First Priority Lenders from bringing or pursuing any foreclosure proceeding or action or any other exercise of any rights or remedies relating to the Common Collateral and (ii) the Credit Agent and the First Priority Lenders shall have the exclusive right to enforce rights, exercise remedies (including set-off and the right to credit bid their debt) and make determinations regarding the release, disposition, or restrictions with respect to the Common Collateral without any consultation with or the consent of any Second Priority Agent or any Second Priority Lender; provided, that (A) in any Insolvency or Liquidation Proceeding commenced by or against the Company or any Grantor, a Second Priority Agent may file a claim or statement of interest with respect to the Second Priority Claims, and (B) a Second Priority Agent may take any action (not adverse to the prior Liens on the Common Collateral securing the First Priority Claims, or the rights of the Credit Agent or the First Priority Lenders to exercise remedies in respect thereof) in order to preserve or protect its Lien on the Common Collateral. In exercising rights and remedies with respect to the Common Collateral, the Credit Agent and the First Priority Lenders may enforce the provisions of the First Priority Documents and exercise remedies thereunder, all in such order and in such manner as they may determine in the exercise of their sole discretion. Such exercise and enforcement shall include the rights of an agent appointed by them to sell or otherwise dispose of Common Collateral upon foreclosure, to incur expenses in connection with such sale or disposition, and to exercise all the rights and remedies of a secured lender under the Uniform Commercial Code and under the comparable law of any applicable jurisdiction and of a secured creditor under Bankruptcy Laws of any applicable jurisdiction. (b) Each Second Priority Agent, on behalf of itself and the applicable Second Priority Lenders, agrees that it will not take or receive, directly or indirectly, in cash or other property or by setoff, counterclaim or in any other manner (whether pursuant to any enforcement, collection, execution, levy or foreclosure proceeding or otherwise), any Common Collateral or any proceeds of Common Collateral, in each case in connection with the exercise of any right or remedy (including set-off) with respect to any Common Collateral (or in respect of any Common Collateral in the event of the occurrence of an Insolvency or Liquidation Proceeding with respect to a Grantor), unless and until the Discharge of First Priority Claims has occurred. Without limiting the generality of the foregoing, unless and until the Discharge of First Priority Claims has occurred, except as expressly provided in the proviso in clause (ii) of Section 3.1(a) 11 above, the sole right of the Second Priority Agents and the Second Priority Lenders with respect to the Common Collateral is to hold a Lien on the Common Collateral pursuant to the Second Priority Documents for the period and to the extent granted therein and to receive a share of the proceeds thereof, if any, after the Discharge of the First Priority Claims has occurred. (c) Subject to the proviso in clause (ii) of Section 3.1(a) above and without limiting the effect of other provisions of this Agreement, (i) each Second Priority Agent, for itself and on behalf of the applicable Second Priority Lenders, agrees that such Second Priority Agent and the applicable Second Priority Lenders will not take any action that would hinder any exercise of remedies undertaken by the Credit Agent under the First Priority Documents, including any sale, lease, exchange, transfer or other disposition of the Common Collateral, whether by foreclosure or otherwise, and (ii) each Second Priority Agent, for itself and on behalf of the applicable Second Priority Lenders, hereby waives any and all rights it or the applicable Second Priority Lenders may have as a junior lien creditor to object to the manner in which the Credit Agent or the First Priority Lenders seek to enforce or collect the First Priority Claims or the Liens granted in any of the First Priority Collateral, regardless of whether any action or failure to act by or on behalf of the Credit Agent or First Priority Lenders is adverse to the interest of the Second Priority Lenders. (d) Each Second Priority Agent, on behalf of itself and the applicable Second Priority Lenders, hereby acknowledges and agrees that no covenant, agreement or restriction contained in any Second Priority Document shall be deemed to restrict in any way the rights and remedies of the Credit Agent or the First Priority Lenders with respect to the Common Collateral as set forth in this Agreement and the First Priority Documents. 3.2 Cooperation. Subject to the proviso in clause (ii) of Section 3.1(a) above, each Second Priority Agent, on behalf of itself and the applicable Second Priority Lenders, agrees that, unless and until the Discharge of First Priority Claims has occurred, it will not commence, or join with any Person (other than the First Priority Lenders and the Credit Agent upon the request thereof) in commencing, any enforcement, collection, execution, levy or foreclosure action or proceeding with respect to any Lien held by it under any of the Second Priority Documents or otherwise. SECTION 4. Payments 4.1 Application of Proceeds. As long as the Discharge of First Priority Claims has not occurred, the Common Collateral or proceeds thereof received in connection with the sale or other disposition of, or collection on, such Common Collateral upon the exercise of remedies (or in respect of any Common Collateral in the event of the occurrence of an Insolvency or Liquidation Proceeding with respect to a Grantor), shall be applied by the Credit Agent to the First Priority Claims in such order as specified in the relevant First Priority Documents (or, if an order is not specified in the First Priority Documents, in such order determined by the Credit Agent in its sole discretion) until the Discharge of First Priority Claims has occurred. Upon the Discharge of the First Priority Claims, the Credit Agent shall deliver to 12 the Designated Second Priority Agent (or to the Company if there is no Designated Second Priority Agent at the time) or as a court of competent jurisdiction may otherwise direct any proceeds of Common Collateral held by it in the same form as received, with any necessary endorsements or as a court of competent jurisdiction may otherwise direct to be applied, if applicable, by the Designated Second Priority Agent to the Second Priority Claims in accordance with the respective rights of the respective Second Priority Agents therefor. 4.2 Payments Over. Any Common Collateral or proceeds thereof (or amounts in respect thereof) received by any Second Priority Agent or any Second Priority Lender in connection with the exercise of any right or remedy (including set-off) relating to the Common Collateral in contravention of this Agreement shall be segregated and held in trust and forthwith paid over to the Credit Agent for the benefit of the First Priority Lenders in the same form as received, with any necessary endorsements or as a court of competent jurisdiction may otherwise direct. The Credit Agent is hereby authorized to make any such endorsements as agent for any such Second Priority Agent or any such Second Priority Lender. This authorization is coupled with an interest and is irrevocable. SECTION 5. Other Agreements 5.1 Releases (a) If in connection with: (i) the exercise of the Credit Agent's remedies in respect of the Common Collateral provided for in Section 3.1, including any sale, lease, exchange, transfer or other disposition of any such Common Collateral; (ii) any sale, lease, exchange, transfer or other disposition of any Common Collateral permitted under the terms of the Senior Credit Agreement (whether or not an event of default thereunder, and as defined therein, has occurred and is continuing) and permitted or not prohibited under Section 4.12 of the Indenture (Limitation on Asset Sales); or (iii) any agreement between the Credit Agent and the Company or any other Grantor which expressly releases the Credit Agent's Lien on any portion of the Common Collateral or to release any Grantor from its obligations under its guaranty of the First Priority Claims; provided that (A) after giving effect to the release, Obligations secured by first priority Liens on the remaining Common Collateral remain outstanding (unless such Obligations are deemed paid in full by the Credit Agent and the Company) and (B) no such release shall be effective against the Second Priority Lenders under the Indenture and the Notes if an Event of Default has occurred and is continuing under the Indenture as of the time of such proposed release and written notice of the occurrence and continuation of such Event of Default is received by the Credit Agent at least one business day prior to such release until such time as such Event of Default is cured or waived unless such release is consented to by the holders of at least a majority in aggregate principal amount of the Notes at the time outstanding; 13 the Credit Agent, for itself or on behalf of any of the First Priority Lenders, releases any of its Liens on any part of the Common Collateral, the Liens, if any, of each Second Priority Agent, for itself or for the benefit of the applicable Second Priority Lenders, on such Common Collateral shall be automatically, unconditionally and simultaneously released and each Second Priority Agent, for itself or on behalf of any such applicable Second Priority Lender, promptly shall execute and deliver to the Credit Agent or such Grantor such termination statements, releases and other documents as the Credit Agent or such Grantor may request to effectively confirm such release. The Company shall promptly advise (i) each Second Priority Agent and the Credit Agent of the occurrence of an Event of Default and (ii) each Second Priority Agent of any proposed release of Common Collateral cognizable under Section 5.1(a)(iii). (b) Each Second Priority Agent, for itself and on behalf of the applicable Second Priority Lenders, hereby irrevocably constitutes and appoints the Credit Agent and any officer or agent of the Credit Agent, with full power of substitution, as its true and lawful attorney-in-fact with full irrevocable power and authority in the place and stead of such Second Priority Agent or such holder or in the Credit Agent's own name, from time to time in the Credit Agent's discretion, for the purpose of carrying out the terms of this Section 5.1, to take any and all appropriate action and to execute any and all documents and instruments which may be necessary or desirable to accomplish the purposes of this Section 5.1, including any termination statements, endorsements or other instruments of transfer or release. 5.2 Insurance. Unless and until the Discharge of First Priority Claims has occurred, the Credit Agent and the First Priority Lenders shall have the sole and exclusive right under the First Priority Documents, to the extent such a right is granted in the First Priority Documents, to adjust settlement for any insurance policy covering the Common Collateral in the event of any loss thereunder and to approve any award granted in any condemnation or similar proceeding affecting the Common Collateral. Unless and until the Discharge of First Priority Claims has occurred, all proceeds of any such policy and any such award if in respect to the Common Collateral shall be paid to the Credit Agent for the benefit of the First Priority Lenders to the extent required under the First Priority Documents and thereafter to the Designated Second Priority Agent (or to the Company is there is no Designated Second Priority Agent at the time) for the benefit of the Second Priority Lenders to the extent required under the applicable Second Priority Documents and then to the owner of the subject property or as a court of competent jurisdiction may otherwise direct. If any Second Priority Agent or any Second Priority Lender shall, at any time, receive any proceeds of any such insurance policy or any such award in contravention of this Agreement, it shall pay such proceeds over to the Credit Agent in accordance with the terms of Section 4.2. 5.3 Amendments to Second Priority Documents (a) Without the prior written consent of the Credit Agent and the Required Lenders, no Second Priority Collateral Document may be amended, supplemented or otherwise modified or entered into to the extent such amendment, supplement or modification, or the terms of any new Second Priority Collateral Document, would be prohibited by any of the terms of the First Priority Documents. Each Second Priority Agent agrees that each Second Priority Collateral Document shall 14 include the following language (or language to similar effect approved by the Credit Agent): "Notwithstanding anything herein to the contrary, the lien and security interest granted to the [Insert title of Second Priority Agent] pursuant to this Agreement and the exercise of any right or remedy by the [Insert title of Second Priority Agent] hereunder are subject to the provisions of the Intercreditor Agreement, dated as of June 19, 2003 (as amended, supplemented or otherwise modified from time to time, the "Intercreditor Agreement"), among Tenneco Automotive Inc., JPMorgan Chase Bank, as Credit Agent, and Wachovia Bank, National Association, as Trustee. In the event of any conflict between the terms of the Intercreditor Agreement and this Agreement, the terms of the Intercreditor Agreement shall govern." In addition, each Second Priority Agent agrees that each Second Priority Mortgage covering any Common Collateral shall contain such other language as the Credit Agent may reasonably request to reflect the subordination of such Second Priority Mortgage to the First Priority Collateral Document covering such Common Collateral. (b) In the event the Credit Agent or the First Priority Lenders enter into any amendment, waiver or consent in respect of any of the First Priority Collateral Documents for the purpose of adding to, or deleting from, or waiving or consenting to any departures from any provisions of, any First Priority Collateral Document or changing in any manner the rights of the Credit Agent, the First Priority Lenders, the Company or any other Grantor thereunder, then such amendment, waiver or consent shall apply automatically to any comparable provision of the Comparable Second Priority Collateral Document without the consent of any Second Priority Agent or any Second Priority Lenders and without any action by any Second Priority Agent, the Company or any other Grantor, provided, that (A) no such amendment, waiver or consent shall have the effect of removing assets subject to the Lien of the Second Priority Collateral Documents, except to the extent that a release of such Lien is permitted by Section 5.1, (B) notice of such amendment, waiver or consent shall have been given to the applicable Second Priority Agent and (C) no such amendment, waiver, or consent shall be effective to amend or waive a Comparable Second Priority Collateral Document if it shall materially adversely affect the rights of the Second Priority Lenders unless such change, waiver or modification materially adversely affects the rights of the First Priority Lenders in a like or similar manner (it being understood that amendments, waivers and consents which have the effect of adding collateral, adding remedies or enhancing the ability of the First Priority Lenders to exercise remedies or perfect security interests in collateral shall be deemed not to be materially adverse to the Second Priority). 5.4 Rights As Unsecured Creditors. Notwithstanding anything to the contrary in this Agreement, each of the Second Priority Agents and the Second Priority Lenders may exercise rights and remedies as an unsecured creditor against the Company or any Subsidiary that has guaranteed the Second Priority Obligations in accordance with the terms of the Second Priority Documents and applicable law. Nothing in this Agreement shall prohibit the receipt by any Second Priority Agent or any Second Priority Lenders of the required payments of interest, 15 premium, if any, and principal on the Second Priority Claims and related fees and expenses so long as such receipt is not the direct or indirect result of the exercise by any Second Priority Agent or any Second Priority Lender of rights or remedies as a secured creditor or enforcement in contravention of this Agreement of any Lien held by any of them (or received or paid in respect of any Common Collateral in the event of the occurrence of an Insolvency or Liquidation Proceeding with respect to a Grantor). In the event any Second Priority Agent or any Second Priority Lender becomes a judgment lien creditor in respect of Common Collateral as a result of its enforcement of its rights as an unsecured creditor, such judgment lien shall be subordinated to the Liens securing First Priority Claims on the same basis as the other Liens securing the Second Priority Claims are so subordinated to such First Priority Claims under this Agreement. Nothing in this Agreement impairs or otherwise adversely affects any rights or remedies the Credit Agent or the First Priority Lenders may have with respect to the First Priority Collateral. 5.5 Bailee for Perfection (a) The Credit Agent agrees to hold the Pledged Collateral that is part of the Common Collateral in its possession or control (or in the possession or control of its agents or bailees) as bailee for the applicable Second Priority Agents and any assignee solely for the purpose of perfecting the security interest granted in such Pledged Collateral pursuant to the Second Priority Security Documents, subject to the terms and conditions of this Section 5.5. (b) Until the Discharge of First Priority Claims has occurred, the Credit Agent shall be entitled to deal with the Pledged Collateral in accordance with the terms of the First Priority Documents as if the Liens of the Second Priority Agents under the Second Priority Collateral Documents did not exist. The rights of the Second Priority Agents shall at all times be subject to the terms of this Agreement and to the Credit Agent's rights under the First Priority Documents. (c) The Credit Agent shall have no obligation whatsoever to the Second Priority Agents or any Second Priority Lender to assure that the Pledged Collateral is genuine or owned by any of the Grantors or to preserve rights or benefits of any Person except as expressly set forth in this Section 5.5. The duties or responsibilities of the Credit Agent under this Section 5.5 shall be limited solely to holding the Pledged Collateral as bailee for the applicable Second Priority Agents for purposes of perfecting the Lien held by such Second Priority Agents. (d) The Credit Agent shall not have by reason of the Second Priority Collateral Documents or this Agreement or any other document a fiduciary relationship in respect of any Second Priority Agent or any Second Priority Lender. (e) Upon the Discharge of First Priority Claims, the Credit Agent shall deliver to the Designated Second Priority Agent (or to the Company if there is no Designated Second Priority Agent at the time) the remaining Pledged Collateral (if any) together with any necessary endorsements (or otherwise allow the Designated Second Priority Agent, if applicable, to obtain control of such Pledged Collateral) or as a court of competent jurisdiction may otherwise direct. 16 5.6 When Discharge of First Priority Claims Deemed to Not Have Occurred. If at any time after the Discharge of First Priority Claims has occurred the Company designates any other First-Lien Credit Facility to be the "Senior Credit Agreement" hereunder, then such Discharge of First Priority Claims shall automatically be deemed not to have occurred for all purposes of this Agreement (other than with respect to any actions taken prior to the date of such designation as a result of the occurrence of such first Discharge of First Priority Claims), and such other First-Lien Credit Facility shall automatically be treated as the Senior Credit Agreement for all purposes of this Agreement, including for purposes of the Lien priorities and rights in respect of Common Collateral set forth herein. Upon receipt of notice of such designation (including the identity of the new Credit Agent), the Second Priority Agent shall promptly (i) enter into such documents and agreements (including amendments or supplements to this Agreement) as the Company or such new Credit Agent shall request in order to provide to the new Credit Agent the rights of the Credit Agent contemplated hereby and (ii) deliver to the Credit Agent the Pledged Collateral together with any necessary endorsements (or otherwise allow such Credit Agent to obtain control of such Pledged Collateral). 5.7 Cooperation. Upon request of the Credit Agent from time to time, each Second Priority Agent shall promptly disclose to the Collateral Agent all information in its possession reasonably requested by the Credit Agent with respect to the Second Priority Collateral, including the identity of the Grantors and guarantors of any Second Priority Obligations and the description, location and timing of perfection of Liens purported to be created on the Second Priority Collateral to secure Second Priority Claims and shall promptly deliver to the Credit Agent copies of the Second Priority Documents and other documents relating to the Second Priority Collateral, such as Uniform Commercial Code Financing Statements and record copies of Second Priority Collateral Documents. SECTION 6. Insolvency or Liquidation Proceedings 6.1 Financing Issues. If the Company or any other Grantor shall be subject to any Insolvency or Liquidation Proceeding and the Credit Agent shall desire to permit the use of cash collateral or to permit the Company or any other Grantor to obtain financing under Section 363 or Section 364 of Title 11 of the United States Code or any similar Bankruptcy Law ("DIP Financing"), then each Second Priority Agent, on behalf of itself and the applicable Second Priority Lenders, agrees that it will raise no objection to such use of cash collateral or DIP Financing and will not request adequate protection or any other relief in connection therewith (except to the extent permitted by Section 6.3) and, to the extent the Liens securing the First Priority Claims are subordinated or pari passu with such DIP Financing, will subordinate its Liens in the Common Collateral to such DIP Financing (and all Obligations relating thereto) on the same basis as the Liens securing the Second Priority Claims are subordinated to First Priority Claims under this Agreement. 6.2 Relief from the Automatic Stay. Until the Discharge of First Priority Claims has occurred, each Second Priority Agent, on behalf of itself and the applicable Second Priority Lenders, agrees that none of them shall seek relief from the automatic stay or any other stay in any Insolvency or Liquidation Proceeding in respect of the Common Collateral, without the prior written consent of the Credit Agent and the Required Lenders. 17 6.3 Adequate Protection. Each Second Priority Agent, on behalf of itself and the applicable Second Priority Lenders, agrees that none of them shall contest (or support any other Person contesting) (a) any request by the Credit Agent or the First Priority Lenders for adequate protection or (b) any objection by the Credit Agent or the First Priority Lenders to any motion, relief, action or proceeding based on the Credit Agent or the First Priority Lenders claiming a lack of adequate protection. Notwithstanding the foregoing contained in this Section 6.3, in any Insolvency or Liquidation Proceeding, (i) if the First Priority Lenders (or any subset thereof) are granted adequate protection in the form of additional collateral in connection with any DIP Financing or use of cash collateral under Section 363 or Section 364 of Title 11 of the United States Code or any similar Bankruptcy Law, then each Second Priority Agent, on behalf of itself or any of the applicable Second Priority Lenders, may seek or request adequate protection in the form of a replacement Lien on such additional collateral, which Lien, if any, shall be subordinated to the Liens securing the First Priority Claims and such DIP Financing (and all Obligations relating thereto) on the same basis as the other Liens securing the Second Priority Claims are so subordinated to the First Priority Claims under this Agreement, and (ii) in the event a Second Priority Agent, on behalf of itself and the Second Priority Lenders, seeks or requests adequate protection and such adequate protection is granted in the form of additional collateral, then such Second Priority Agent, on behalf of itself or any of the applicable Second Priority Lenders, agrees that the Credit Agent shall also be granted a senior Lien on such additional collateral as security for the First Priority Claims and any such DIP Financing and that any Lien on such additional collateral securing the Second Priority Claims shall be subordinated to the Liens on such collateral securing the First Priority Claims and any such DIP Financing (and all Obligations relating thereto) and any other Liens granted to the First Priority Lenders as adequate protection on the same basis as the other Liens securing the Second Priority Claims are so subordinated to such First Priority Claims under this Agreement. 6.4 No Waiver. Nothing contained herein shall prohibit or in any way limit the Credit Agent or any First Priority Lender from objecting in any Insolvency or Liquidation Proceeding or otherwise to any action taken by any Second Priority Agent or any of the Second Priority Lenders, including the seeking by any Second Priority Agent or any Second Priority Lender of adequate protection (other than as allowed pursuant to Section 6.3 of this Agreement) or the asserting by any Second Priority Agent or any Second Priority Lender of any of its rights and remedies under the Second Priority Documents or otherwise. 6.5 Preference Issues. If any First Priority Lender is required in any Insolvency or Liquidation Proceeding or otherwise to turn over or otherwise pay to the estate of the Company or any other Grantor any amount (a "Recovery"), then the First Priority Claims shall be reinstated to the extent of such Recovery and the First Priority Lenders shall be entitled to receive payment in full in cash (including, in the case of any letter of credit, cash collateral therefor) with respect to all such recovered amounts. If this Agreement shall have been terminated prior to such Recovery, this Agreement shall be reinstated in full force and effect, and such prior termination shall not diminish, release, discharge, impair or otherwise affect the obligations of the parties hereto. 18 SECTION 7. Reliance; Waivers; Etc. 7.1 Reliance. The consent by the First Priority Lenders to the execution and delivery of the Second Priority Documents and the grant to any Second Priority Agent on behalf of the applicable Second Priority Lenders of a Lien on the Common Collateral and all loans and other extensions of credit made or deemed made on and after the date hereof by the First Priority Lenders to the Company or any Grantor shall be deemed to have been given and made in reliance upon this Agreement. Each Second Priority Agent, on behalf of itself and the applicable Second Priority Lenders, acknowledges that it and such Second Priority Lenders have, independently and without reliance on the Credit Agent or any First Priority Lender, and based on documents and information deemed by them appropriate, made their own credit analysis and decision to enter into the Indenture, this Agreement and the transactions contemplated hereby and thereby and they will continue to make their own credit decision in taking or not taking any action under the Indenture or this Agreement. 7.2 No Warranties or Liability. Each Second Priority Agent, on behalf of itself and the applicable Second Priority Lenders, acknowledges and agrees that each of the Credit Agent and the First Priority Lenders have made no express or implied representation or warranty, including with respect to the execution, validity, legality, completeness, collectibility or enforceability of any of the First Priority Documents, the ownership of any Common Collateral or the perfection or priority of any Liens thereon. The First Priority Lenders will be entitled to manage and supervise their respective loans and extensions of credit under the First Priority Documents as they may, in their sole discretion, deem appropriate, and the First Priority Lenders may manage their loans and extensions of credit without regard to any rights or interests that any Second Priority Agent or any of the Second Priority Lenders have in the Common Collateral or otherwise, except as otherwise provided in this Agreement. Neither the Credit Agent nor any First Priority Lender shall have any duty to any Second Priority Agent or any of the Second Priority Lenders to act or refrain from acting in a manner which allows, or results in, the occurrence or continuance of an event of default or default under any agreements with the Company or any Subsidiary thereof (including the Second Priority Documents), regardless of any knowledge thereof which they may have or be charged with. 7.3 No Waiver of Lien Priorities (a) No right of the First Priority Lenders, the Credit Agent or any of them to enforce any provision of this Agreement or any First Priority Document shall at any time in any way be prejudiced or impaired by any act or failure to act on the part of the Company or any other Grantor or by any act or failure to act by any First Priority Lender or the Credit Agent, or by any noncompliance by any Person with the terms, provisions and covenants of this Agreement, any of the First Priority Documents or any of the Second Priority Documents, regardless of any knowledge thereof which the Credit Agent or the First Priority Lenders, or any of them, may have or be otherwise charged with; (b) Without in any way limiting the generality of the foregoing paragraph, the First Priority Lenders, the Credit Agent and any of them, may, at any time and from time to time, without the consent of, or notice to, any Second Priority Agent or 19 any Second Lien Lender, without incurring any liabilities to any Second Priority Agent or any Second Lien Lender and without impairing or releasing the Lien priorities and other benefits provided in this Agreement (even if any right of subrogation or other right or remedy of any Second Priority Agent or any Second Lien Lender is affected, impaired or extinguished thereby) do any one or more of the following: (i) change the manner, place or terms of payment or change or extend the time of payment of, or amend, renew, exchange, increase or alter, the terms of any of the First Priority Claims or any Lien on any First Priority Collateral or guaranty thereof or any liability of the Company or any other Grantor, or any liability incurred directly or indirectly in respect thereof (including any increase in or extension of the First Priority Claims, without any restriction as to the amount, tenor or terms of any such increase or extension) or otherwise amend, renew, exchange, extend, modify or supplement in any manner any Liens held by the Credit Agent or any of the First Priority Lenders, the First Priority Claims or any of the First Priority Documents; (ii) sell, exchange, release, surrender, realize upon, enforce or otherwise deal with in any manner and in any order any part of the First Priority Collateral or any liability of the Company or any other Grantor to the First Priority Lenders or the Credit Agent, or any liability incurred directly or indirectly in respect thereof; (iii) settle or compromise any First Priority Claim or any other liability of the Company or any other Grantor or any security therefor or any liability incurred directly or indirectly in respect thereof and apply any sums by whomsoever paid and however realized to any liability (including the First Priority Claims) in any manner or order; (iv) subordinate the priority of the First Priority Lien held by any First Priority Lender to the priority of the First Priority Lien held by any other Lender; (v) enter into or amend any First Priority Document in order to create or acquire additional collateral for the First Priority Claims, to create and perfect security interests in and Liens on collateral and to increase and enhance the exercise of remedies thereunder and take actions in furtherance of the foregoing; and (vi) exercise or delay in or refrain from exercising any right or remedy against the Company or any security or any other Grantor or any other Person, elect any remedy and otherwise deal freely with the Company, any other Grantor or any First Priority Collateral and any security and any guarantor or any liability of the Company or any other Grantor to the First Priority Lenders or any liability incurred directly or indirectly in respect thereof. 20 (c) Each Second Priority Agent, on behalf of itself and the applicable Second Priority Lenders, also agrees that the First Priority Lenders and the Credit Agent shall have no liability to any Second Priority Agent or any Second Priority Lender, and each Second Priority Agent, on behalf of itself and the applicable Second Priority Lenders, hereby waives any claim against any First Priority Lender or the Credit Agent, arising out of any and all actions which the First Priority Lenders or the Credit Agent may take or permit or omit to take with respect to: (i) the First Priority Documents, (ii) the collection of the First Priority Claims or (iii) the foreclosure upon, or sale, liquidation or other disposition of, any First Priority Collateral. Each Second Priority Agent, on behalf of itself and the applicable Second Priority Lenders, agrees that the First Priority Lenders and the Credit Agent have no duty to them in respect of the maintenance or preservation of the First Priority Collateral, the First Priority Claims or otherwise; and (d) Each Second Priority Agent, on behalf of itself and the applicable Second Priority Lenders, agrees not to assert and hereby waives, to the fullest extent permitted by law, any right to demand, request, plead or otherwise assert or otherwise claim the benefit of, any marshalling, appraisal, valuation or other similar right that may otherwise be available under applicable law or any other similar rights a junior secured creditor may have under applicable law. 7.4 Obligations Unconditional. All rights, interests, agreements and obligations of the Credit Agent and the First Priority Lenders and the Second Priority Agents and the Second Priority Lenders, respectively, hereunder shall remain in full force and effect irrespective of: (a) any lack of validity or enforceability of any First Priority Documents or any Second Priority Documents; (b) any change in the time, manner or place of payment of, or in any other terms of, all or any of the First Priority Claims or Second Priority Claims, or any amendment or waiver or other modification, including any increase in the amount thereof, whether by course of conduct or otherwise, of the terms of the Senior Credit Agreement or any other First Priority Document or of the terms of the Indenture or any other Second Priority Document; (c) any exchange of any security interest in any Common Collateral or any other collateral, or any amendment, waiver or other modification, whether in writing or by course of conduct or otherwise, of all or any of the First Priority Claims or Second Priority Claims or any guarantee thereof; (d) the commencement of any Insolvency or Liquidation Proceeding in respect of the Company or any other Grantor; or (e) any other circumstances which otherwise might constitute a defense available to, or a discharge of, the Company or any other Grantor in respect of the First Priority Claims, or of any Second Priority Agent or any Second Priority Lender in respect of this Agreement. 21 SECTION 8. Miscellaneous 8.1 Conflicts. In the event of any conflict between the provisions of this Agreement and the provisions of the First Priority Documents or the Second Priority Documents, the provisions of this Agreement shall govern. 8.2 Continuing Nature of this Agreement; Severability. This Agreement shall continue to be effective until the Discharge of First Priority Claims shall have occurred. This is a continuing agreement of lien subordination and the First Priority Lenders may continue, at any time and without notice to any Second Priority Agent or any Second Priority Lender, to extend credit and other financial accommodations and lend monies to or for the benefit of the Company or any other Grantor constituting First Priority Claims on reliance hereof. Each Second Priority Agent, on behalf of itself and the applicable Second Priority Lenders, hereby waives any right it may have under applicable law to revoke this Agreement or any of the provisions of this Agreement. The terms of this Agreement shall survive, and shall continue in full force and effect, in any Insolvency or Liquidation Proceeding. Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall not invalidate 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. 8.3 Amendments; Waivers. No amendment, modification or waiver of any of the provisions of this Agreement by any Second Priority Agent or the Credit Agent shall be deemed to be made unless the same shall be in writing signed on behalf of the party making the same or its authorized agent and each waiver, if any, shall be a waiver only with respect to the specific instance involved and shall in no way impair the rights of the parties making such waiver or the obligations of the other parties to such party in any other respect or at any other time. The Company and other Grantors shall not have any right to consent to or approve any amendment, modification or waiver of any provision of this Agreement except to the extent their rights are directly affected. 8.4 Information Concerning Financial Condition of the Company and the Subsidiaries. (a) The Credit Agent and the First Priority Lenders, on the one hand, and the Second Priority Agents and the Second Priority Lenders, on the other hand, shall each be responsible for keeping themselves informed of (i) the financial condition of the Company and the Subsidiaries and all endorsers and/or guarantors of the Second Priority Claims or the First Priority Claims and (ii) all other circumstances bearing upon the risk of nonpayment of the Second Priority Claims or the First Priority Claims. (b) The Credit Agent and the First Priority Lenders shall have no duty to advise any Second Priority Agent or any Second Priority Lender of information known to it or them regarding such condition or any such circumstances or otherwise. In the event the Credit Agent or any of the First Priority Lenders, in its or their sole discretion, undertakes at any time or from time to time to provide any such information to any Second Priority Agent or any Second Priority Lender, it or they shall be under no obligation (i) to make, and the Credit Agent and the First Priority Lenders shall not make, any express or implied representation or warranty, including with respect to the accuracy, completeness, truthfulness or validity of any such information so provided, (ii) to provide any additional information or to provide any such 22 information on any subsequent occasion, (iii) to undertake any investigation or (iv) to disclose any information which, pursuant to accepted or reasonable commercial finance practices, such party wishes to maintain confidential or is otherwise required to maintain confidential. (c) Subject to Section 5.7, the Second Priority Agents and the Second Priority Lenders shall have no duty to advise any First Priority Agent or any First Priority Lender of information known to it or them regarding such condition or any such circumstances or otherwise. In the event any Second Priority Agent or any of the Second Priority Lenders, in its or their sole discretion, undertakes at any time or from time to time to provide any such information to any First Priority Agent or any First Priority Lender, it or they shall be under no obligation (i) to make, and the Second Priority Agents and the Second Priority Lenders shall not make, any express or implied representation or warranty, including with respect to the accuracy, completeness, truthfulness or validity of any such information so provided, (ii) to provide any additional information or to provide any such information on any subsequent occasion, (iii) to undertake any investigation or (iv) to disclose any information which, pursuant to accepted or reasonable commercial finance practices, such party wishes to maintain confidential or is otherwise required to maintain confidential. 8.5 Subrogation. Each Second Priority Agent, on behalf of itself and the applicable Second Priority Lenders, hereby waives any rights of subrogation it may acquire as a result of any payment hereunder until the Discharge of First Priority Claims has occurred. 8.6 Application of Payments. All payments received by the First Priority Lenders may be applied, reversed and reapplied, in whole or in part, to such part of the First Priority Claims as the First Priority Lenders, in their sole discretion, deem appropriate. Each Second Priority Agent, on behalf of itself and the applicable Second Priority Lenders, assents to any extension or postponement of the time of payment of the First Priority Claims or any part thereof and to any other indulgence with respect thereto, to any substitution, exchange or release of any security which may at any time secure any part of the First Priority Claims and to the addition or release of any other Person primarily or secondarily liable therefor. 8.7 Consent to Jurisdiction; Waivers. The parties hereto consent to the jurisdiction of any state or federal court located in New York, New York, and consent that all service of process may be made by registered mail directed to such party as provided in Section 8.8 below for such party. Service so made shall be deemed to be completed three days after the same shall be posted as aforesaid. The parties hereto waive any objection to any action instituted hereunder based on forum non conveniens, and any objection to the venue of any action instituted hereunder. EACH OF THE PARTIES HERETO WAIVES ANY RIGHT IT MAY HAVE TO TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED ON, OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, VERBAL OR WRITTEN STATEMENT OR ACTION OF ANY PARTY HERETO. 8.8 Notices. All notices to the Second Priority Lenders and the First Priority Lenders permitted or required under this Agreement may be sent to the applicable Second Priority Agent and the Credit Agent, respectively. Unless otherwise specifically provided herein, any notice or other communication herein required or permitted to be given shall be in writing and may be personally served, telecopied, electronically mailed or sent by courier service or U.S. 23 mail and shall be deemed to have been given when delivered in person or by courier service, upon receipt of a telecopy or electronic mail or four Business Days after deposit in the U.S. mail (registered or certified, with postage prepaid and properly addressed). For the purposes hereof, the addresses of the parties hereto shall be as set forth below each party's name on the signature pages hereto, or, as to each party, at such other address as may be designated by such party in a written notice to all of the other parties. 8.9 Further Assurances. Each Second Priority Agent, on behalf of itself and the applicable Second Priority Lenders, agrees that each of them shall take such further action and shall execute and deliver to the Credit Agent and the First Priority Lenders such additional documents and instruments (in recordable form, if requested) as the Credit Agent or the First Priority Lenders may reasonably request to effectuate the terms of and the lien priorities contemplated by this Agreement. 8.10 Governing Law. This Agreement has been delivered and accepted at and shall be deemed to have been made at New York, New York and shall be interpreted, and the rights and liabilities of the parties bound hereby determined, in accordance with the laws of the State of New York. 8.11 Binding on Successors and Assigns. This Agreement shall be binding upon the Credit Agent, the First Priority Lenders, the Second Priority Agents, the Second Priority Lenders, the Company and their respective permitted successors and assigns. 8.12 Specific Performance. The Credit Agent may demand specific performance of this Agreement. Each Second Priority Agent, on behalf of itself and the applicable Second Priority Lenders, hereby irrevocably waives any defense based on the adequacy of a remedy at law and any other defense which might be asserted to bar the remedy of specific performance in any action which may be brought by the Credit Agent. 8.13 Section Titles; Time Periods. The section titles contained in this Agreement are and shall be without substantive meaning or content of any kind whatsoever and are not a part of this Agreement. In the computation of time periods, unless otherwise specified the word "from" means "from and including" and each of the words "to" and "until" means "to but excluding" and the word "through" means "to and including". 8.14 Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be an original and all of which shall together constitute one and the same document. 8.15 Authorization. By its signature, each Person executing this Agreement on behalf of a party hereto represents and warrants to the other parties hereto that it is duly authorized to execute this Agreement. 8.16 No Third Party Beneficiaries. This Agreement and the rights and benefits hereof shall inure to the benefit of each of the parties hereto and their respective successors and assigns and shall inure to the benefit of each of the holders of First Priority Claims and Second Priority Claims. No other Person, including the Company or any other Grantor, the Company or 24 any other Grantor as debtor-in-possession or any trustee in an Insolvency or Liquidation Proceeding, shall have or be entitled to assert rights or benefits hereunder. 8.17 Effectiveness. This Agreement shall become effective when executed and delivered by the parties hereto. This Agreement shall be effective both before and after the commencement of any Insolvency or Liquidation Proceeding. All references to the Company or any other Grantor shall include the Company or any Grantor as debtor and debtor-in-possession and any receiver or trustee for the Company or any other Grantor (as the case may be) in any Insolvency or Liquidation Proceeding. 8.18 Credit Agent and Second Priority Agent. It is understood and agreed that (a) JPMorgan Chase Bank is entering into this Agreement in its capacity as Credit Agent and the provisions of Section 9 of the Existing Credit Agreement applicable to JPMorgan Chase Bank as administrative agent thereunder shall also apply to JPMorgan Chase Bank as Credit Agent hereunder, and (b) Wachovia Bank, National Association is entering in this Agreement in its capacity as Trustee (including its capacity as Collateral Agent under the Indenture and the other Second Priority Documents) and the provisions of Article 7 of the Indenture applicable to the Trustee thereunder shall also apply to the Trustee hereunder. 8.19 Designations. For purposes of the provisions hereof and the Indenture requiring the Company to designate Indebtedness for the purposes of the term "First Priority Claims", "First-Lien Credit Facilities", "Other Second-Lien Obligations" any other designations for any other purposes hereunder or under the Indenture, any such designation shall be sufficient if the relevant designation is set forth in writing, signed on behalf of the Company by an officer thereof and delivered to the Trustee and the Credit Agent. For all purposes hereof and the Indenture, the Company hereby designates the Credit Facilities provided pursuant to the Existing Credit Agreement as the First-Lien Credit Facility and any Obligations in respect of the Existing Credit Agreement as "Credit Agreement Obligations" and "First Priority Claims" under the Indenture. 25 IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first written above. Credit Agent: JPMORGAN CHASE BANK, as Credit Agent By: ------------------------------------- Name: Title: Address: 270 Park Avenue New York, New York 10017 Attention: ------------------------------ Telecopy No.: (212) 270- ---------------- Trustee: WACHOVIA BANK, NATIONAL ASSOCIATION, as Trustee By: ------------------------------------- Name: ----------------------------------- Title: ---------------------------------- Address: 5847 San Felipe Suite 1050 Houston, TX 77057 Attention: Corporate Trust Department Telecopy No.: (713) 278-4329 TENNECO AUTOMOTIVE INC. By: ------------------------------------- Name: ----------------------------------- Title: ---------------------------------- Address: 500 North Field Drive Lake Forest, Illinois 60045 Attention: ------------------------------ Telecopy No.: (847) --------------------- 26 Collateral Agent: WACHOVIA BANK, NATIONAL ASSOCIATION, as Collateral Agent By: ------------------------------------- Name: ----------------------------------- Title: ---------------------------------- Address: 5847 San Felipe Suite 1050 Houston, TX 77057 Attention: Corporate Trust Department Telecopy No.: (713) 278-4329 EX-10.26 9 c78654exv10w26.txt 2002 LONG-TERM INCENTIVE PLAN EXHIBIT 10.26 TENNECO AUTOMOTIVE INC. 2002 LONG-TERM INCENTIVE PLAN (As Amended and Restated Effective March 11, 2003) ARTICLE 1 GENERAL 1.1. Purpose. The Tenneco Automotive Inc. 2002 Long-Term Incentive Plan (the "Plan") has been established by Tenneco Automotive Inc. (the "Company") to: (i) promote the long-term success of the Company and its Subsidiaries (as defined herein); (ii) attract and retain persons eligible to participate in the Plan; (iii) motivate Participants (as defined herein), by means of appropriate incentives, to achieve long-range goals; (iv) provide incentive compensation opportunities that are competitive with those of other similar companies; (v) further identify Participants' interests with those of the Company's other stockholders through compensation that is based on the Company's common stock; and (vi) thereby promote the long-term financial interest of the Company and its Subsidiaries, including the growth in value of the Company's equity and enhancement of long-term stockholder return. 1.2. Participation. Subject to the terms and conditions of the Plan, the Committee (as defined herein) shall determine and designate, from time to time, from among the Eligible Individuals (as defined herein), including without limitation transferees of Eligible Individuals to the extent the transfer is permitted by the Plan and the applicable Award Agreement (as defined herein), those persons who will be granted one or more Awards (as defined herein) under the Plan, and thereby become "Participants" in the Plan. 1.3. Operation and Administration. The operation and administration of the Plan, including the Awards made under the Plan, shall be subject to the provisions of Article 5 (relating to operation and administration). ARTICLE 2 CERTAIN DEFINED TERMS As used in this Plan, the following terms shall have the meanings set forth or referenced below. In addition, other terms may be defined in the other Articles and Sections of this Plan, and, unless the context otherwise requires, shall have the specified meanings throughout the Plan: (a) Award. The term "Award" means any award or benefit granted under the Plan, including, without limitation, the grant of Options, SARs, Bonus Stock Awards, Stock B-1 Equivalent Unit Awards, Restricted Stock Awards, Restricted Stock Unit Awards and Performance Unit Awards. (b) Board. The term "Board" means the Board of Directors of the Company. (c) Change in Control. The term "Change in Control" shall mean any of the following events (but no event other than one of the following events): (i) any person, alone or together with any of its affiliates or associates, becoming the beneficial owner, directly or indirectly, of securities of the Company representing (A) fifteen percent (15%) or more of either the Company's then outstanding shares of common stock or the combined voting power of the Company's then outstanding securities having general voting rights, and a majority of the Incumbent Board does not approve the acquisition before the acquisition occurs, or (B) forty percent (40%) or more of either the Company's then outstanding shares of common stock or the combined voting power of the Company's then outstanding securities having general voting rights; provided, however, that, notwithstanding the foregoing, a Change in Control shall not be deemed to occur pursuant to this subparagraph (i) solely because the requisite percentage of either the Company's then outstanding shares of common stock or the combined voting power of the Company's then outstanding securities having general voting rights is acquired by one or more employee benefits plans maintained by the Tenneco Companies; or (ii) members of the Incumbent Board ceasing to constitute a majority of the Board; or (iii) the consummation of any plan of merger, consolidation, share exchange or combination between the Company and any person, including without limitation becoming a subsidiary of any other person, without members of the Incumbent Board, as constituted immediately prior to the merger, consolidation, share exchange or combination, constituting a majority of the board of directors of (A) the surviving or successor corporation of such transaction, or (B) if the surviving or successor corporation of such transaction is a majority-owned subsidiary of another corporation or corporations, the ultimate parent company of the surviving or successor corporation; or (iv) the consummation of any sale, exchange or other disposition of all or substantially all of the Company's assets without members of the Incumbent Board immediately prior to any such sale, exchange or disposition of all or substantially all of the Company's assets constituting a majority of the board of directors of (A) the corporation which holds such assets after such disposition, or (B) if such corporation is a majority-owned subsidiary of another corporation or corporations, the ultimate parent company of the corporation which holds such assets after such disposition; provided, however, that the Board may determine conclusively that any transaction does not B-2 constitute a sale, exchange or other disposition of substantially all of the Company's assets; or (v) if any person, alone or together with any of its affiliates or associates, elects or has elected during any period not exceeding 24 months, at least 25% of the members of the Board, without the approval of the Incumbent Board, and such members are comprised of persons not serving as members of the Board immediately prior to the formation of such group or the first solicitation of proxies by such person; or (vi) the Company's stockholders approving a plan of complete liquidation or dissolution of the Company. (d) Code. The term "Code" means the Internal Revenue Code of 1986, as amended. A reference to any provision of the Code shall include reference to any successor provision of the Code. (e) Common Stock. The term "Common Stock" means the Company's common stock, par value $.01 per share. (f) Covered Employee. The term "Covered Employee" means a Participant who, as of the date of vesting and/or payout of an Award, as applicable, is a "covered employee," as defined in Code section 162(m) and the regulations promulgated under Code section 162(m). (g) Effective Date. The term "Effective Date" has the meaning set forth in Section 5.1. (h) Eligible Individual. For purposes of the Plan, the term "Eligible Individual" means any employee of the Company or a Subsidiary, any consultant or other person providing services to the Company or a Subsidiary and any member of the Board; provided, however, that an incentive stock option may only be granted to an employee of the Company or a Subsidiary. (i) Fair Market Value. For purposes of determining the "Fair Market Value" of a share of Common Stock as of any date, the following rules shall apply: (i) If the principal market for the shares of Common Stock is a national securities exchange or the NASDAQ securities market, then the "Fair Market Value" as of that date shall be the average of the highest and lowest sales prices of a share of Common Stock on that date (or, if such day is not a business day, the next preceding business day) on the principal exchange or market on which the shares of Common Stock are then listed or admitted to trading. (ii) If the shares of Common Stock are not listed on a national securities exchange and the shares of Common Stock are not quoted on the NASDAQ securities market, then the "Fair Market Value" as of that date shall be the average of the highest and B-3 lowest prices of a share of Common Stock on that date (or, if such day is not a business day, the next preceding business day) as reported on the NASDAQ OTC Bulletin Board Service or by the National Quotation Bureau, Incorporated or a comparable service. (iii) If subparagraphs (i) and (ii) next above are otherwise inapplicable, then the Fair Market Value of the shares of Common Stock shall be determined in good faith by the Committee. (j) Incumbent Board. The "Incumbent Board" shall consist of the following persons: (i) the members of the Board as of the Effective Date, to the extent they continue to serve as members of the Board; and (ii) any individual who becomes a member of the Board after the Effective Date, if his or her election or nomination for election as a director is approved by a vote of at least three-quarters of the then Incumbent Board, other than a director whose initial assumption of office is in connection with an actual or threatened election contest, including but not limited to a consent solicitation, relating to the election of directors of the Company. (k) Participants. The term "Participants" has the meaning set forth in Section 1.2. (l) Performance Measure. The term "Performance Measure" means any of the following: (1) net earnings; (2) earnings per share; (3) net sales growth; (4) net income (before or after taxes); (5) net operating profit; (6) return measures (including, but not limited to, return on assets, capital, equity or sales); (7) cash flow (including, but not limited to, operating cash flow and free cash flow); (8) cash flow return on investments, which equals net cash flows divided by owner's equity; (9) earnings before or after taxes, interest, depreciation and/or amortization; (10) internal rate of return or increase in net present value; (11) dividend payments to parent; (12) gross margins; (13) gross margins minus expenses; (14) operating margin; (15) share price (including, but no limited to, growth measures and total stockholder return); (16) expense targets; (17) working capital targets relating to inventory and/or accounts receivable; (18) planning accuracy (as measured by comparing planned results to actual results); (19) comparisons to various stock market indices; (20) comparisons to the performance of other companies; (21) technological achievement; (22) customer counts; (23) customer satisfaction, quality management or customer service performance; and (24) EVA(R). For purposes of this Plan, "EVA" means the positive or negative value determined by net operating profits after taxes over a charge for capital, or any other financial measure, as determined by the Committee in its sole discretion. (EVA is a registered trademark of Stern Stewart & Co.) (m) Subsidiary. The term "Subsidiary" means any corporation, partnership, joint venture or other entity during any period in which at least a fifty percent voting or profits B-4 interest is owned, directly or indirectly, by the Company (or by any entity that is a successor to the Company), and any other business venture designated by the Committee in which the Company (or any entity that is a successor to the Company) has a significant interest, as determined in the discretion of the Committee. (n) Tenneco Companies. The term "Tenneco Companies" means the Company and any Subsidiary of which a majority of the voting common stock or capital stock is owned directly or indirectly by the Company. ARTICLE 3 OPTIONS AND SARS 3.1. Certain Definitions. (a) The grant of an "Option" entitles the Participant to purchase shares of Common Stock at an Exercise Price (as defined herein) established by the Committee. Any Option granted under this Article 3 may be either an incentive stock option (an "ISO") or a non-qualified stock option (an "NQO"), as determined in the discretion of the Committee. An "ISO" is an Option that is intended to satisfy the requirements applicable to an "incentive stock option" described in section 422(b) of the Code. An "NQO" is an Option that is not intended to be an "incentive stock option" as that term is described in section 422(b) of the Code. (b) A stock appreciation right (an "SAR") entitles the Participant to receive, in cash or shares of Common Stock (as determined in accordance with Section 5.2), value equal to (or otherwise based on) the excess of: (i) the Fair Market Value of a specified number of shares of Common Stock at the time of exercise; over (ii) an Exercise Price established by the Committee. 3.2. Exercise Price. The "Exercise Price" of each Option and SAR granted under this Article 3 shall be established by the Committee or shall be determined by a method established by the Committee at the time the Option or SAR is granted; provided, however, that the Exercise Price shall not be less than 100% of the Fair Market Value of a share of Common Stock on the date of grant (or, if greater, the par value of a share of Common Stock). 3.3. Exercise. An Option and an SAR granted under this Article 3 shall be exercisable in accordance with such terms and conditions and during such periods as may be established by the Committee; provided, however, that no Option or SAR shall be exercisable after the tenth anniversary of the date as of which such Award was granted. B-5 3.4. Payment of Option Exercise Price. The payment of the Exercise Price of an Option granted under this Article 3 shall be subject to the following: (a) Subject to the following provisions of this Section 3.4, the full Exercise Price for shares of Common Stock purchased upon the exercise of any Option shall be paid at the time of such exercise (except that, in the case of an exercise arrangement approved by the Committee and described in Section 3.4(c), payment may be made as soon as practicable after the exercise). (b) The Exercise Price shall be payable to the Company in full either: (i) in cash or its equivalent, (ii) by tendering (either by actual delivery or attestation) previously acquired shares of Common Stock having an aggregate Fair Market Value at the time of exercise equal to the total Exercise Price (provided that the shares that are tendered must have been held by the Participant for at least six (6) months prior to their tender to satisfy the Exercise Price or must have been purchased on the open market), (iii) by a combination of (i) and (ii), or (iv) by any other method approved by the Committee in its sole discretion at the time of grant and as set forth in the Award Agreement. (c) The Committee may permit a Participant to elect to pay the Exercise Price upon the exercise of an Option by irrevocably authorizing a third party to sell shares of Common Stock (or a sufficient portion of the shares of Common Stock) acquired upon exercise of the Option and remit to the Company a sufficient portion of the sale proceeds to pay the entire Exercise Price and any tax withholding resulting from such exercise. 3.5. Settlement of Award. Settlement of Options and SARs is subject to the provisions of Section 5.7. ARTICLE 4 OTHER STOCK-RELATED AWARDS 4.1. Certain Definitions. (a) A "Bonus Stock" Award is a grant of shares of Common Stock in return for previously performed services, or in return for the Participant surrendering other compensation that may be due to such Participant from the Company or a Subsidiary. (b) A "Stock Equivalent Unit" Award is a grant of a right to receive cash in an amount equal to the value of a specified number of shares of Common Stock, in the future, which may be contingent on the achievement of performance or other objectives, including without limitation continued service, during a specified period. (c) A "Performance Unit" Award is a grant of a right to receive a specified number of shares, or dollar amount of shares, of Common Stock, in the future, which is contingent on B-6 the achievement of performance or other objectives, including without limitation continued service, during a specified period. (d) A "Restricted Stock" Award is a grant of shares of Common Stock, and a "Restricted Stock Unit" Award is a grant of a right to receive a specified number of shares of Common Stock, or cash in an amount equal to the value of a specified number of shares of Common Stock, in the future, with such shares of Common Stock or right to future delivery of such shares of Common Stock or payment of cash subject to a risk of forfeiture or other restrictions that will lapse upon the achievement of one or more goals relating to completion of service by the Participant, or achievement of performance or other objectives, as determined by the Committee. 4.2. Restrictions on Awards. Each Bonus Stock Award, Stock Equivalent Unit Award, Restricted Stock Award, Restricted Stock Unit Award and Performance Unit Award shall be subject to such conditions, restrictions and contingencies as the Committee shall determine. The Committee may designate whether any such Award being granted to any Participant is intended to be "performance-based compensation" as that term is used in section 162(m) of the Code. Any such Awards designated as intended to be "performance-based compensation" shall be conditioned on the achievement of one or more Performance Measures, to the extent required by Code section 162(m). For Awards under this Section 4.2 intended to be "performance-based compensation," the grant of the Awards and the establishment of the Performance Measures shall be made during the period required under Code section 162(m). Any Performance Measure(s) may be used to measure the performance of the Company as a whole or any business unit or Subsidiary of the Company or any combination thereof, as the Committee may deem appropriate, or any such performance as compared to the performance of a group of comparator companies, or any published or special index that the Committee, in its sole discretion, deems appropriate. The Committee also has the authority to provide for accelerated vesting of any Award made under this Article 4 based on the achievement of performance goals pursuant to the Performance Measures specified herein. The Committee may provide in any such Award that any evaluation of performance may include or exclude any of the following events that occurs during a performance period: (a) asset write-downs, (b) litigation or claim judgments or settlements, (c) the effect of changes in tax laws, accounting principles, or other laws or provisions affecting reported results, (d) accruals for reorganization and restructuring programs, (e) extraordinary nonrecurring items as described in Accounting Principles Board Opinion No. 30 and/or in management's discussion and analysis of financial condition and results of operations appearing in the Company's annual report to stockholders for the applicable year, (f) acquisitions or divestitures, and (g) foreign exchange gains and losses. To the extent such inclusions or exclusions affect Awards to Covered Employees intended to qualify as "performance-based compensation," they shall be prescribed in a form that meets the requirements of Code section 162(m) for deductibility. Awards that are designed to qualify as "performance-based compensation," and that are held by Covered Employees, may not be adjusted upward (the Committee shall retain the discretion to adjust such Awards downward). In the event that applicable B-7 tax and/or securities laws change to permit Board or Committee discretion to alter the governing Performance Measures without obtaining stockholder approval of such changes, the Board and Committee shall have the discretion to make such changes without obtaining stockholder approval. In addition, in the event that the Committee determines that it is advisable to grant Awards under this Article 4 that shall not qualify as "performance-based compensation," the Committee may make such grants without satisfying the requirements of Code section 162(m). ARTICLE 5 OPERATION AND ADMINISTRATION 5.1. Effective Date. Subject to the approval of the stockholders of the Company and the provisions of Section 5.2(b), the Plan shall be effective as of March 12, 2002 (the "Effective Date"). The Plan shall be unlimited in duration and, in the event of Plan termination, shall remain in effect as long as any Awards under it are outstanding; provided, however, that no Awards may be granted under the Plan after the ten-year anniversary of the Effective Date (except for Awards granted pursuant to commitments entered into prior to such ten-year anniversary). 5.2. Plan and Other Limitations. The Awards that may be granted under the Plan shall be subject to the following: (a) The shares of Common Stock with respect to which Awards may be made under the Plan shall be shares of Common Stock currently authorized but unissued or currently held or, to the extent permitted by applicable law, subsequently acquired by the Company as treasury shares, including shares of Common Stock purchased in the open market or in private transactions. (b) Effective upon approval by the Company's stockholders of the amendment to increase by 2,000,000 (Two Million) the maximum number of shares available under the Plan (which amendment is submitted to such stockholders for their approval at the Company's 2003 Annual Meeting of Stockholders), subject to the following provisions of this Section 5.2, the maximum number of shares of Common Stock that may be delivered to Participants and their beneficiaries under the Plan shall be equal to 4,000,000 (Four Million) shares of Common Stock. In addition, effective upon approval by the Company's stockholders of the amendment to increase by 500,000 (Five-Hundred Thousand) the maximum number of shares available under the Plan (which amendment is submitted to such stockholders for their approval at the Company's 2003 Annual Meeting of Stockholders), subject to the following provisions of this Section 5.2, the maximum number of shares of Common Stock that may be delivered to Participants and their beneficiaries under the Plan pursuant to Full Value Awards (as defined below) shall be equal to 1,000,000 (One Million) B-8 shares of Common Stock. For the purposes of this Plan, "Full Value Awards" shall be Awards of Bonus Stock, Stock Equivalent Units, Performance Units, Restricted Stock or Restricted Stock Units. (c) To the extent provided by the Committee, any Award of Stock Equivalent Units, Performance Units or Restricted Stock Units may be settled in cash rather than shares of Common Stock. To the extent any shares of Common Stock covered by an Award are not delivered to a Participant or beneficiary because the Award is forfeited or canceled, or the shares of Common Stock are not delivered because the Award is settled in cash or used to satisfy the applicable tax withholding obligation, such shares of Common Stock shall not be deemed to have been delivered for purposes of determining the maximum number of shares of Common Stock available for delivery under the Plan or, if applicable, pursuant to Full Value Awards. (d) If the exercise price of any Option granted under the Plan is satisfied by tendering shares of Common Stock to the Company (by either actual delivery or by attestation), only the number of shares of Common Stock issued net of the shares of Common Stock tendered shall be deemed delivered for purposes of determining the maximum number of shares of Common Stock available for delivery under the Plan. (e) Subject to Section 5.2(f), the following additional limitations are imposed under the Plan. (i) The maximum number of shares of Common Stock that may be covered by Awards granted to any one individual pursuant to Article 3 (relating to Options and SARs) shall be 350,000 (Three Hundred Fifty Thousand) shares of Common Stock during any one calendar year period. If an Option is in tandem with an SAR, such that the exercise of the Option or SAR with respect to a share of Common Stock cancels the tandem SAR or Option right, respectively, with respect to such share, the tandem Option and SAR rights with respect to each share of Common Stock shall be counted as covering only one share of Common Stock for purposes of applying the limitations of this clause (i). (ii) For Awards granted pursuant to Article 4 that are intended to be "performance-based compensation" (as that term is used for purposes of Code section 162(m)), no more than 200,000 (Two Hundred Thousand) shares of Common Stock and, if such Awards are denominated in cash value, no more than $800,000, may be subject to such Awards granted to any one individual during any one calendar year. If, after shares have been earned, the delivery is deferred, any additional shares attributable to dividends or other amounts attributable to earnings during the deferral period shall be disregarded. Unless otherwise indicated by the Committee at the time of grant, all Awards granted pursuant to Article 4 for which the vesting or payment are B-9 conditioned on achievement of one or more Performance Measures shall be deemed to be intended to be "performance-based compensation" for the purposes of Code section 162(m). (f) In the event of a corporate transaction involving the Company (including, without limitation, any stock dividend, stock split, extraordinary cash dividend, recapitalization, reorganization, merger, consolidation, split-up, spin-off, combination or exchange of shares), the Committee may adjust the terms of the Plan and Awards to preserve the benefits or potential benefits of the Plan or the Awards. Action by the Committee with respect to the Plan or Awards under this Section 5.2(f) may include: (i) adjustment of the number and kind of shares which may be delivered under the Plan; (ii) adjustment of the number and kind of shares subject to outstanding Awards; (iii) adjustment of the Exercise Price of outstanding Options and SARs; and (iv) any other adjustments that the Committee determines to be equitable. 5.3. General Restrictions. Delivery of shares of Common Stock or other amounts under the Plan shall be subject to the following: (a) Notwithstanding any other provision of the Plan, the Company shall have no liability to deliver any shares of Common Stock under the Plan or make any other distribution of benefits under the Plan unless such delivery or distribution would comply with all applicable laws (including, without limitation, the requirements of the Securities Act of 1933, as amended), and the applicable requirements of any securities exchange or similar entity. (b) To the extent that the Plan provides for issuance of certificates to reflect the issuance of shares of Common Stock, the issuance may be effected on a non-certificated basis, to the extent not prohibited by applicable law or the applicable rules of any securities exchange. 5.4. Tax Withholding. All distributions under the Plan shall be subject to withholding of all applicable taxes, and the Committee may condition the delivery of any shares or other benefits under the Plan on satisfaction of the applicable withholding obligations. Except as otherwise provided by the Committee, such withholding obligations may be satisfied (a) through cash payment by the Participant, (b) through the surrender of shares of Common Stock which the Participant already owns, or (c) through the surrender of shares of Common Stock to which the Participant is otherwise entitled under the Plan; provided, however, that such shares of Common Stock under this paragraph (c) may be used to satisfy not more than the Company's minimum statutory withholding obligation (based on minimum statutory withholding rates for Federal and state tax purposes, including without limitation payroll taxes, that are applicable to such supplemental taxable income). 5.5. Grant and Use of Awards. In the discretion of the Committee, a Participant may be granted any Award permitted under the provisions of the Plan, and more than one Award may be B-10 granted to a Participant. Awards may be granted as alternatives to or replacement of awards granted or outstanding under the Plan, or any other plan or arrangement of the Company or a Subsidiary (including a plan or arrangement of a business or entity, all or a portion shares of common stock of which is acquired by the Company or a Subsidiary). The Committee may use available shares of Common Stock hereunder as the form of payment for compensation, grants or rights earned or due under any other compensation plans or arrangements of the Company or a Subsidiary, including the plans and arrangements of the Company or a Subsidiary assumed in business combinations. 5.6. Dividends and Dividend Equivalents. An Award (including without limitation an Option or SAR Award) may provide the Participant with the right to receive dividend payments, dividend equivalent payments or dividend equivalent units with respect to shares of Common Stock subject to the Award (both before and after the shares of Common Stock subject to the Award are earned, vested, or acquired), which payments may be either made currently or credited to an account for the Participant, and may be settled in cash or shares of Common Stock, as determined by the Committee. Any such settlements, and any such crediting of dividends or dividend equivalents or reinvestment in shares of Common Stock or Common Stock equivalents, may be subject to such conditions, restrictions and contingencies as the Committee shall establish, including the reinvestment of such credited amounts in Common Stock equivalents. 5.7. Settlement of Awards. The obligation to make payments and distributions with respect to Awards of Stock Equivalent Units, Performance Units or Restricted Stock Units may be satisfied through cash payments, the delivery of shares of Common Stock, the granting of replacement Awards, or any combination thereof as the Committee shall determine. Satisfaction of any obligations to make payments or distributions under an Award, which is sometimes referred to as "settlement" of the Award, may be subject to such conditions, restrictions and contingencies as the Committee shall determine. The Committee may permit or require the deferral of any Award payment, subject to such rules and procedures as it may establish, which may include provisions for the payment or crediting of interest or dividend equivalents, and may include converting such credits into deferred Common Stock equivalents. Each Subsidiary shall be liable for payment of cash due under the Plan with respect to any Participant to the extent that such benefits are attributable to the services rendered for that Subsidiary by the Participant. Any disputes relating to liability of a Subsidiary for cash payments shall be resolved by the Committee. 5.8. Transferability. Except as otherwise provided by the Committee, Awards under the Plan are not transferable except as designated by the Participant by will or by the laws of descent and distribution. 5.9. Form and Time of Elections. Unless otherwise specified herein, each election required or permitted to be made by any Participant or other person entitled to benefits under the Plan, and any permitted modification or revocation thereof, shall be in writing filed with the Committee B-11 at such times, in such form and subject to such restrictions and limitations, not inconsistent with the terms of the Plan, as the Committee shall require. 5.10. Agreement With Company. An Award under the Plan shall be subject to such terms and conditions, not inconsistent with the Plan, as the Committee shall, in its sole discretion, prescribe. The terms and conditions of any Award to any Participant shall be reflected in such form of written document, if any, as is determined by the Committee. A copy of such document shall be provided to the Participant, and the Committee may, but need not, require that the Participant sign a copy of such document. Such document is referred to in the Plan as an "Award Agreement" regardless of whether any Participant signature is required. 5.11. Action by Company or Subsidiary. Any action required or permitted to be taken by the Company or any Subsidiary shall be by resolution of its board of directors, or by action of one or more members of the board (including a committee of the board) who are duly authorized to act for the board, or (except to the extent prohibited by applicable law or applicable rules of any stock exchange) by a duly authorized officer of such company. 5.12. Gender and Number. Where the context admits, words in any gender shall include any other gender, words in the singular shall include the plural and the plural shall include the singular. 5.13. Limitation of Implied Rights. (a) Neither a Participant nor any other person shall, by reason of participation in the Plan, acquire any right in or title to any assets, funds or property of the Company or any Subsidiary whatsoever, including, without limitation, any specific funds, assets or other property which the Company or any Subsidiary, in its sole discretion, may set aside in anticipation of a liability under the Plan. A Participant shall have only a contractual right to the shares of Common Stock or amounts, if any, payable under the Plan, unsecured by any assets of the Company or any Subsidiary, and nothing contained in the Plan shall constitute a guarantee that the assets of the Company or any Subsidiary shall be sufficient to pay any benefits to any person. (b) The Plan does not constitute a contract of employment or continued service, and selection as a Participant will not give any participating individual the right to be retained in the employ or continued service of the Company or any Subsidiary, nor any right or claim to any benefit under the Plan, unless such right or claim has specifically accrued under the terms of the Plan. Except as otherwise provided in the Plan, no Award under the Plan shall confer upon the holder thereof any rights as a stockholder of the Company prior to the date on which the individual fulfills all conditions for receipt of such rights. B-12 5.14. Evidence. Evidence required of anyone under the Plan may be by certificate, affidavit, document or other information which the person acting on it considers pertinent and reliable, and signed, made or presented by the proper party or parties. ARTICLE 6 CHANGE IN CONTROL Subject to the provisions of Section 5.2(f) (relating to certain adjustments), upon the occurrence of a Change in Control, unless otherwise specifically prohibited under applicable laws, or by the rules and regulations of any applicable governmental agencies or national securities exchange, or unless the Committee shall otherwise provide in the Award Agreement: (a) any and all Options and SARs granted hereunder shall become immediately vested and exercisable and shall remain exercisable for the lesser of 36 months following such Change in Control or the remaining maximum term of such Award (regardless of whether the applicable Participant's employment or directorship is terminated upon or after such Change in Control); (b) any period of restriction and restrictions imposed on Restricted Stock or Restricted Stock Units granted hereunder shall lapse and each Participant holding any such Award shall be entitled to be paid in cash, within 30 days after the Change in Control, the total of the fair market value, determined as of immediately prior to such Change in Control, of any such Award which he or she held immediately prior to such Change in Control; and (c) the target payout opportunities attainable under all Bonus Stock, Stock Equivalent Unit and Performance Unit Awards granted hereunder shall be deemed to have been fully earned as of the effective date of the Change in Control (based on an assumed achievement of all relevant targeted performance goals over any applicable performance period(s)) and each Participant holding any such Award shall be entitled to be paid in cash, within 30 days after the Change in Control, the total of the fair market value, determined as of immediately prior to such Change in Control, of any such Award which he or she held immediately prior to such Change in Control. ARTICLE 7 COMMITTEE 7.1. Administration. The authority to control and manage the operation and administration of the Plan shall be vested in a committee (the "Committee") in accordance with this Article 7. The Committee shall be selected by the Board, and shall consist solely of two or more members of the Board. From and after the Effective Date, unless removed by the Board or unless said B-13 committee no longer exists, the Company's Compensation/Nominating/Governance Committee shall be the Committee for purposes of this Plan. If the Committee does not exist, or for any other reason determined by the Board, the Board may take any action under the Plan that would otherwise be the responsibility of the Committee. 7.2. Powers of Committee. The Committee's administration of the Plan shall be subject to the following: (a) Subject to the provisions of the Plan, the Committee will have the authority and discretion to select from among the Eligible Individuals those persons who shall receive Awards, to determine the time or times of receipt, to determine the types of Awards and the number of shares of Common Stock or other amounts covered by the Awards, to establish the terms, conditions, performance criteria, restrictions and other provisions of such Awards and (subject to the restrictions imposed by Article 8) to cancel or suspend Awards. (b) To the extent that the Committee determines that the restrictions imposed by the Plan preclude the achievement of the material purposes of the Awards in jurisdictions outside the United States, the Committee will have the authority and discretion to modify those restrictions as the Committee determines to be necessary or appropriate to conform to applicable requirements or practices of jurisdictions outside of the United States. (c) The Committee will have the authority and discretion to conclusively interpret the Plan, to establish, amend and rescind any rules and regulations relating to the Plan, to determine the terms and provisions of any Award Agreement made pursuant to the Plan and to make all other determinations that may be necessary or advisable for the administration of the Plan. (d) Any interpretation of the Plan by the Committee and any decision made by it under the Plan is final and binding on all persons. (e) In controlling and managing the operation and administration of the Plan, the Committee shall take action in a manner that conforms to the certificate of incorporation and by-laws of the Company, and applicable state corporate law. 7.3. Delegation by Committee. Except to the extent prohibited by applicable law or the applicable rules of a securities exchange, the Committee may allocate all or any portion of its responsibilities and powers to any one or more of its members and may delegate all or any part of its responsibilities and powers to any person or persons selected by it. Any such allocation or delegation may be revoked by the Committee at any time. 7.4. Information to be Furnished to Committee. The Company and Subsidiaries shall furnish the Committee with such data and information as it determines may be required for it to discharge its duties. The records of the Company and Subsidiaries as to an individual's employment or service, termination of employment or service, leave of absence, reemployment or B-14 recommencement of service and compensation shall be conclusive on all persons unless determined to be incorrect. Participants and other persons entitled to benefits under the Plan must furnish the Committee such evidence, data or information as the Committee considers desirable to carry out the terms of the Plan. ARTICLE 8 AMENDMENT AND TERMINATION The Board may, at any time, amend or terminate the Plan, and may amend any Award Agreement, provided that no amendment or termination may, in the absence of written consent to the change by the affected Participant (or, if the Participant is not then living, the affected beneficiary), adversely affect the rights of any Participant or beneficiary under any Award granted under the Plan prior to the date such amendment is adopted by the Board; and further provided that adjustments pursuant to Section 5.2(f) shall not be subject to the foregoing limitations of this Article 8. Notwithstanding anything herein to the contrary, (i) without the prior approval of the Company's stockholders, Options issued under the Plan will not be repriced, replaced, or regranted through cancellation, or by lowering the exercise price of a previously granted Option, and (ii) no amendment of the Plan shall be made without stockholder approval if stockholder approval is required by applicable law, regulation or stock exchange rule. ARTICLE 9 MISCELLANEOUS 9.1. Governing Law. The validity, construction and effect of the Plan, and any actions taken or relating to the Plan, shall be determined in accordance with the laws of the State of Illinois and applicable federal law. 9.2. Severability. If for any reason any provision or provisions of the Plan are determined invalid or unenforceable, the validity and effect of the other provisions of the Plan shall not be affected thereby. IN WITNESS WHEREOF, the Company has caused the Plan to be executed on its behalf by its respective officer thereunder duly authorized, on the day and year set forth below. Date: As of March 11, 2003 TENNECO AUTOMOTIVE INC. By: /s/ MARK P. FRISSORA ---------------------------------------------------- Mark P. Frissora Chairman and Chief Financial Officer B-15 EX-12 10 c78654exv12.txt COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES EXHIBIT 12 TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES COMBINED WITH 50% OWNED UNCONSOLIDATED SUBSIDIARIES COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES (UNAUDITED)
SIX MONTHS ENDED JUNE 30, --------------------- 2003 2002 ------ ------ (DOLLARS IN MILLIONS) Income (loss) before cumulative effect of change in accounting principle...................................... $ 25 $ 17 Add: Interest expense.......................................... 69 72 Amortization of interest capitalized...................... 1 -- Portion of rentals representative of the interest factor................................................. 5 5 Income tax expense (benefit).............................. 1 8 Minority Interest......................................... 3 1 Undistributed (earnings) losses of affiliated companies in which less than a 50% voting interest is owned......... 2 1 ----- ----- Earnings as defined.................................... $ 106 $ 104 ===== ===== Interest expense............................................ $ 69 $ 72 Interest capitalized........................................ 2 2 Portion of rentals representative of the interest factor.... 5 5 ----- ----- Fixed charges as defined............................... $ 76 $ 79 ===== ===== Ratio of earnings to fixed charges.......................... 1.39 1.32 ===== =====
EX-15 11 c78654exv15.txt LETTER REGARDING UNAUDITED INTERIM FIN. INFO. EXHIBIT 15 August 14, 2003 Tenneco Automotive Inc. 500 North Field Drive Lake Forest, IL 60045 We have made a review, in accordance with standards established by the American Institute of Certified Public Accountants, of the unaudited interim financial information of Tenneco Automotive Inc. and consolidated subsidiaries for the periods ended June 30, 2003 and 2002, as indicated in our report dated July 21, 2003; because we did not perform an audit, we expressed no opinion on that information. We are aware that our report referred to above, which is included in your Quarterly Report on Form 10-Q for the quarter ended June 30, 2003, is incorporated by reference in Registration Statement Nos. 333-17485, 333-30933, 333-17487, 333-41535, 333-27279, 333-23249, 333-27281, 333-41537, 333-48777, 333-76261, 333-33442, 333-33934, 333-58056 and 333-101973 on Form S-8 and Registration Statement No. 333-24291 on Form S-3. We also are aware that the aforementioned report, pursuant to Rule 436(c) under the Securities Act of 1933, is not considered a part of the Registration Statement prepared or certified by an accountant or a report prepared or certified by an accountant within the meaning of Sections 7 and 11 of that Act. DELOITTE & TOUCHE LLP Chicago, Illinois EX-31.1 12 c78654exv31w1.txt CERTIFICATION OF MARK P. FRISSORA EXHIBIT 31.1 CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT I, Mark P. Frissora, Chairman and Chief Executive Officer of Tenneco Automotive Inc., certify that: 1. I have reviewed this quarterly report on Form 10-Q of Tenneco Automotive Inc.; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f)) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. That the registrant's other certifying officers and I have disclosed, based on our most recent evaluation of the registrant's internal control over financial reporting, to the registrant's auditors and audit committee (or persons performing the equivalent functions): a) all significant deficiencies and material weaknesses in the design or operation of the internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. /s/ MARK P. FRISSORA -------------------- Dated: August 14, 2003 EX-31.2 13 c78654exv31w2.txt CERTIFICATION OF MARK A. MCCOLLUM EXHIBIT 31.2 CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT I, Mark A. McCollum, Senior Vice President and Chief Financial Officer of Tenneco Automotive Inc., certify that: 1. I have reviewed this quarterly report on Form 10-Q of Tenneco Automotive Inc.; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f)) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. That the registrant's other certifying officers and I have disclosed, based on our most recent evaluation of the registrant's internal control over financial reporting, to the registrant's auditors and audit committee (or persons performing the equivalent functions): a) all significant deficiencies and material weaknesses in the design or operation of the internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. /s/ MARK A. MCCOLLUM -------------------- Dated: August 14, 2003 EX-32 14 c78654exv32.txt SECTION 906 CERTIFICATIONS EXHIBIT 32 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the accompanying Quarterly Report on Form 10-Q of Tenneco Automotive Inc. (the "Company") for the quarter ended June 30, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), and pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, Mark P. Frissora, as Chief Executive Officer of the Company, and Mark A. McCollum, as Chief Financial Officer of the Company, hereby certify that: (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ MARK P. FRISSORA -------------------- Chief Executive Officer /s/ MARK A. MCCOLLUM -------------------- Chief Financial Officer August 14, 2003 Date This certification shall not be deemed "filed" by the Company for purposes of Section 18 of the Securities Exchange Act of 1934. In addition, this certification shall not be deemed to be incorporated by reference into any filing under the Securities Exchange Act of 1933 or the Securities Exchange Act of 1934. A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request. -----END PRIVACY-ENHANCED MESSAGE-----